Core Scientific, Inc./tx 10-K/A

Item 8. Financial Statements and Supplementary Data Our consolidated financial statements and the notes thereto, included in Part IV, Item 15(1)(a) herein, are incorporated by reference into this Item 8. CONSOLIDATED FINANCIAL STATEMENT TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 688) 63 Consolidated Balance Sheets 65 Consolidated Statements of Operations 66 Consolidated Statements of Comprehensive Loss 67 Consolidated Statements of Changes in Contingently Redeemable Convertible Preferred Stock and Stockholders’ Deficit 68 Consolidated Statements of Cash Flows 70 Notes to Consolidated Financial Statements 73 1 — Organization and Description of Business 73 2 — Summary of Significant Accounting Policies 74 3 — Restatement of Previously Issued Financial Statements 82 4 — Chapter 11 Filing and Emergence from Bankruptcy 85 5 — Business Combination and Restructuring 91 6 — Property, Plant, and Equipment 93 7 — Balance Sheet Components 95 8 — Leases 95 9 — Convertible and Other Notes Payable 98 10 — Contingent Value Rights and Warrant Liabilities 108 11 — Fair Value Measurements 111 12 — Commitments and Contingencies 113 13 — Stockholders' Deficit 115 14 — Income Taxes 121 15 — Net Loss Per Share 123 16 — Segment Reporting 124 17 — Related Party Transactions 128 18 — Subsequent Event 129 62 Report of Independent Registered Public Accounting Firm (PCAOB ID 688 ) To the Stockholders and Board of Directors of Core Scientific, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Core Scientific, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, changes in contingently redeemable convertible preferred stock and stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2024, based on the criteria established in internal control - integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report, dated February 26, 2025, except for the effect of the material weakness described in the third paragraph of that report, as to which the date is March 2, 2026, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weaknesses. Restatement of 2024 Financial Statements As discussed in Note 3, the accompanying financial statements as of December 31, 2024 and for the year then ended were restated to correct a misstatement relating to the Company’s accounting for property, plant, and equipment. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Digital Asset Self-Mining Revenue We identified the accounting for revenue recognition from digital asset self-mining as a critical audit matter due to the complexities involved in auditing the completeness and occurrence of this revenue recognized by the Company. During the year ended December 63 31, 2024, the Company recognized revenue from digital asset self-mining of approximately $408.7 million. The Company’s management has exercised significant judgment in its determination of how existing accounting principles generally accepted in the United States should be applied to the accounting for revenue recognized from digital asset self-mining. In addition, the accounting for digital asset self-mining revenue recognized involved certain systems and applications subject to the general controls over the information technology (“IT”) environment of the Company. The primary procedures we performed to address this critical audit matter included the following: • Evaluated and tested the design and operating effectiveness of IT general controls over the Company’s IT environment and key financially relevant systems; • Evaluated and tested the design and operating effectiveness of the financial controls pertaining to the Company’s processes for recognizing revenue from digital asset self-mining; • Performed site visitations of the facilities where the Company’s mining hardware is located, which included an observation of the physical and environmental controls and mining equipment inventory observation procedures; • On a sample basis, tested the hashing power contributed by the Company’s mining hardware; • Evaluated management’s rationale for the application of Accounting Standards Codification 606 to account for its digital assets earned, which included evaluating the provisions of the contract between the Company and the mining pool operators; • Evaluated management’s disclosures of its bitcoin activity in the financial statement footnotes; • Evaluated and tested management’s rationale and supporting documentation associated with the valuation of Bitcoin earned; • Independently confirmed certain financial and performance data directly with the mining pool operators; • Independently confirmed certain financial data directly with the Company’s third-party wallet custodian; • Compared the Company’s digital wallet and custody records to publicly available blockchain records; and • Performed certain substantive analytical procedures to determine completeness and occurrence of digital assets earned by the Company as consideration for services rendered. /s/ Marcum LLP Marcum LLP We served as the Company’s auditor from 2022 through 2025. Costa Mesa, CA February 26, 2025, except for the effects of the restatement disclosed in Note 3, as to which the date is March 2, 2026. 64 Core Scientific, Inc. Consolidated Balance Sheets (in thousands, except par value) December 31, 2024 (As Restated) December 31, 2023 Assets Current Assets: Cash and cash equivalents $ 836,197 $ 50,409 Restricted cash 783 19,300 Accounts receivable 1,025 1,001 Digital assets 23,893 2,284 Prepaid expenses and other current assets 42,064 24,022 Total Current Assets 903,962 97,016 Property, plant and equipment, net 433,473 585,431 Operating lease right-of-use assets 114,472 7,844 Other noncurrent assets 24,039 21,865 Total Assets $ 1,475,946 $ 712,156 Liabilities and Stockholders’ Deficit Current Liabilities: Accounts payable $ 19,265 $ 154,751 Accrued expenses and other current liabilities 69,230 179,636 Deferred revenue 18,134 9,830 Operating lease liabilities, current portion 9,974 77 Finance lease liabilities, current portion 1,669 19,771 Notes payable, current portion 16,290 124,358 Total Current Liabilities 134,562 488,423 Operating lease liabilities, net of current portion 97,843 1,512 Finance lease liabilities, net of current portion 3 35,745 Convertible and other notes payable, net of current portion 1,073,990 684,082 Contingent value rights 4,272 — Warrant liabilities 1,097,285 — Other noncurrent liabilities 11,040 — Total liabilities not subject to compromise 2,418,995 1,209,762 Liabilities subject to compromise — 99,335 Total Liabilities 2,418,995 1,309,097 Commitments and contingencies (Note 11) Stockholders’ Deficit: Preferred stock; $ 0.00001 par value; 2,000,000 and nil shares authorized at December 31, 2024 and December 31, 2023, respectively; none issued and outstanding at December 31, 2024 and December 31, 2023 — — Common stock; $ 0.00001 and $ 0.0001 par value at December 31, 2024 and December 31, 2023, respectively; 10,000,000 shares authorized at December 31, 2024 and December 31, 2023; 292,606 and 386,883 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 3 36 Additional paid-in capital 2,915,035 1,823,260 Accumulated deficit ( 3,858,087 ) ( 2,420,237 ) Total Stockholders’ Deficit ( 943,049 ) ( 596,941 ) Total Liabilities and Stockholders’ Deficit $ 1,475,946 $ 712,156 Certain prior year amounts have been reclassified for consistency with the current year presentation. See accompanying notes to consolidated financial statements. 65 Core Scientific, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) Year Ended December 31, 2024 (As Restated) 2023 2022 Revenue: Digital asset self-mining revenue $ 408,740 $ 390,333 $ 397,796 Digital asset hosted mining revenue from customers 77,554 102,005 130,234 Digital asset hosted mining revenue from related parties — 10,062 29,454 Equipment sales to customers — — 11,391 Equipment sales to related parties — — 71,438 HPC hosting revenue 24,378 — — Total revenue 510,672 502,400 640,313 Cost of revenue: Cost of digital asset self-mining 314,335 291,696 395,082 Cost of digital asset hosted mining services 53,558 87,245 169,717 Cost of equipment sales — — 67,114 Cost of HPC hosting services 21,709 — — Total cost of revenue 389,602 378,941 631,913 Gross profit 121,070 123,459 8,400 Change in fair value of digital assets ( 1,052 ) — — Gain from sale of digital assets — 3,893 44,298 Impairment of digital assets — ( 4,406 ) ( 231,315 ) Change in fair value of energy derivatives ( 2,757 ) ( 3,918 ) — Impairment of goodwill and other intangibles — — ( 1,059,265 ) Impairment of property, plant and equipment ( 122,869 ) — ( 590,673 ) Losses on exchange or disposal of property, plant and equipment ( 4,210 ) ( 1,956 ) ( 28,025 ) Operating expenses: Research and development 11,830 7,184 26,962 Sales and marketing 9,969 7,019 12,731 General and administrative 110,448 93,908 213,280 Total operating expenses 132,247 108,111 252,973 Operating (loss) income ( 142,065 ) 8,961 ( 2,109,553 ) Non-operating expenses (income), net: Loss (gain) on debt extinguishment 487 ( 20,065 ) 287 Interest expense, net 37,070 86,238 96,826 Change in fair value of convertible notes — — 186,853 Change in fair value of warrants and contingent value rights 1,369,157 — ( 37,937 ) Reorganization items, net ( 111,439 ) 191,122 ( 197,405 ) Other non-operating (income) expense, net ( 325 ) ( 2,530 ) 5,232 Total non-operating expenses, net 1,294,950 254,765 53,856 Loss before income taxes ( 1,437,015 ) ( 245,804 ) ( 2,163,409 ) Income tax expense (benefit) 859 683 ( 17,091 ) Net loss $ ( 1,437,874 ) $ ( 246,487 ) $ ( 2,146,318 ) Net loss per share, basic and diluted $ ( 4.87 ) $ ( 0.65 ) $ ( 6.30 ) Weighted average shares outstanding, basic and diluted 255,832 379,863 340,647 See accompanying notes to consolidated financial statements. 66 Core Scientific, Inc. Consolidated Statements of Comprehensive Loss (in thousands) Year Ended December 31, 2024 (As Restated) 2023 2022 Net loss $ ( 1,437,874 ) $ ( 246,487 ) $ ( 2,146,318 ) Other comprehensive income (loss), net of income taxes: Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $ — , $ — and $ — — — 83,579 Release to Reorganization items, net of accumulated fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $ — , $ — and $ — — — ( 72,613 ) Total other comprehensive income, net of income taxes — — 10,966 Comprehensive loss $ ( 1,437,874 ) $ ( 246,487 ) $ ( 2,135,352 ) See accompanying notes to consolidated financial statements. 67 Core Scientific, Inc. Consolidated Statements of Changes in Contingently Redeemable Convertible Preferred Stock and Stockholders’ Deficit (in thousands) Contingently Redeemable Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ (Deficit) Equity Shares Amount Shares Amount Balance at January 1, 2022 10,826 $ 44,476 271,576 $ 27 $ 1,379,581 $ ( 27,432 ) $ ( 10,966 ) $ 1,341,210 Net loss — — — — — ( 2,146,318 ) — ( 2,146,318 ) Other comprehensive income, net of income taxes — — — — — — 10,966 10,966 Stock-based compensation — — — — 182,894 — — 182,894 Exercise of stock options — — 1,321 — 3,846 — — 3,846 Restricted stock awards issued, net of shares withheld for tax withholding obligations — — 43,762 4 ( 31,650 ) — — ( 31,646 ) Restricted stock awards forfeited — — ( 2,456 ) — — — — — Exercise of convertible notes — — 197 — 1,574 — — 1,574 Cashless exercise of warrants — — 3,001 — — — — — Issuances of common stock - equity line of credit — — 13,355 1 21,200 — — 21,201 Conversion of contingently redeemable preferred stock to common stock ( 10,826 ) ( 44,476 ) 10,826 1 44,475 — — 44,476 Issuances of common stock - Merger with XPDI — — 30,778 3 163,456 — — 163,459 Issuances of common stock - financing transaction fees — — 1,285 — 2,960 — — 2,960 Issuances of common stock - vendor settlement — — 1,580 — 12,674 — — 12,674 Costs attributable to issuance of common stock and equity instruments - Merger with XPDI — — — — ( 16,642 ) — — ( 16,642 ) Balance at December 31, 2022 — — 375,225 36 1,764,368 ( 2,173,750 ) — ( 409,346 ) Net loss — — — — — ( 246,487 ) — ( 246,487 ) Stock-based compensation — — — — 58,892 — — 58,892 Exercise of stock options — — 3 — — — — — Restricted stock awards issued, net of shares withheld for tax withholding obligations — — 12,046 — — — — — Restricted stock awards forfeited — — ( 391 ) — — — — — Balance at December 31, 2023 — $ — 386,883 $ 36 $ 1,823,260 $ ( 2,420,237 ) $ — $ ( 596,941 ) 68 Core Scientific, Inc. Consolidated Statements of Changes in Contingently Redeemable Convertible Preferred Stock and Stockholders’ Deficit (cont’d) (in thousands) Contingently Redeemable Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Deficit Shares Amount Shares Amount Balance at January 1, 2024 — $ — 386,883 $ 36 $ 1,823,260 $ ( 2,420,237 ) $ — $ ( 596,941 ) Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets — — — — — 24 — 24 Balance at January 1, 2024, adjusted — — 386,883 36 1,823,260 ( 2,420,213 ) — ( 596,917 ) Net loss — — — — — ( 1,437,874 ) — ( 1,437,874 ) Stock-based compensation — — — — 52,411 — — 52,411 Cancellation of common stock in connection with emergence — — ( 386,883 ) ( 36 ) 36 — — — Issuance of new common stock in connection with emergence — — 152,576 2 296,893 — — 296,895 Issuance of new common stock under the Equity Rights Offering — — 15,649 — 55,000 — — 55,000 Issuance of new common stock for the Equity Rights Offering backstop commitment — — 2,111 — 5,475 — — 5,475 Issuance of new common stock for Bitmain obligation — — 10,735 — 27,839 — — 27,839 Conversion premium on the issuance of the New Secured Convertible Notes — — — — 33,202 — — 33,202 Issuance of warrants — — — — ( 345,856 ) — — ( 345,856 ) Exercise of stock options — — — — 9 — — 9 Restricted stock awards issued, net of tax withholding obligations — — 4,543 — ( 3,393 ) — — ( 3,393 ) Restricted stock awards forfeited — — ( 40 ) — — — — — Exercise of warrants — — 61,565 1 704,710 — — 704,711 Issuance of new common stock for New Secured Convertible Notes conversion — — 44,585 — 261,772 — — 261,772 Issuance of new common stock for PIK interest — — 882 — 3,677 — — 3,677 Balance at December 31, 2024 (As Restated) — $ — 292,606 $ 3 $ 2,915,035 $ ( 3,858,087 ) $ — $ ( 943,049 ) See accompanying notes to consolidated financial statements. 69 Core Scientific, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 (As Restated) 2023 2022 Cash flows from Operating Activities: Net loss $ ( 1,437,874 ) $ ( 246,487 ) $ ( 2,146,318 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 113,205 96,003 225,259 Losses on disposal of property, plant and equipment 4,210 1,956 28,025 Amortization of operating lease right-of-use assets 6,916 442 834 Stock-based compensation 51,924 58,892 182,894 Digital asset self-mining and shared hosting revenue ( 425,253 ) ( 407,082 ) ( 397,796 ) Proceeds from sale of digital assets generated by self-mining and shared hosting revenues 1 402,461 404,686 — 444,353 Change in fair value of digital assets 1,052 — — Impairment of digital assets — 4,406 231,315 Gain from sale of digital assets — ( 3,886 ) ( 44,298 ) Change in fair value of energy derivatives ( 2,262 ) — — Change in fair value of warrant liabilities 1,451,210 — ( 37,937 ) Change in fair value of contingent value rights ( 82,053 ) — — Change in fair value of convertible notes — — 186,853 Change in fair value of other liabilities — — 9,498 Loss (gain) on debt extinguishment 487 ( 20,065 ) 287 Loss on issuance of notes payable through settlements — 8,515 — Amortization of debt discount 3,756 752 7,135 Non-cash reorganization items ( 143,791 ) — ( 199,707 ) Non-cash PIK interest expense 3,676 — — Impairment of goodwill, other intangibles and property, plant and equipment 122,869 — 1,649,938 Provision for doubtful accounts — — 9,004 Equity line of credit expenses — — 1,668 Gain on sale of intangible assets — — ( 5,904 ) Deferred income taxes — — ( 18,521 ) Changes in operating assets and liabilities: Accounts receivable, net 659 ( 767 ) ( 7,856 ) Accounts receivable from related parties — 23 277 Deposits for equipment for sales to customers — ( 2,403 ) 50,174 Prepaid expenses and other current assets ( 20,393 ) ( 18,351 ) 51,818 Accounts payable ( 12,272 ) 118,911 26,713 Accrued expenses and other 1,880 130,382 17,229 Deferred revenue from HPC hosting services 17,785 — — Deferred revenue from hosted mining services ( 9,481 ) ( 47,807 ) 16,483 Deferred revenue from related parties — — ( 72,449 ) Other noncurrent assets and liabilities, net ( 5,815 ) ( 13,006 ) ( 3,784 ) Net cash provided by operating activities 42,896 65,114 205,187 Cash flows from Investing Activities: Purchases of property, plant and equipment ( 94,961 ) ( 16,161 ) ( 383,980 ) Proceeds from sale of Cedarvale — 13,998 — Deposits for self-mining equipment — — ( 217,677 ) Proceeds from the sale of coupons — — 10,850 Investments in internally developed software ( 231 ) ( 833 ) — Other — — 29 Net cash used in investing activities ( 95,192 ) ( 2,996 ) ( 590,778 ) Cash flows from Financing Activities: 1 Proceeds from digital assets received as noncash revenue consideration liquidated nearly immediately after receipt as a routine operating activity. 70 Principal repayments of finance leases ( 6,038 ) ( 3,658 ) ( 30,319 ) Principal payments on debt ( 304,819 ) ( 40,991 ) ( 113,290 ) Proceeds from the issuance of 3.00 % convertible senior notes, net 447,609 — — Issuance costs for 3.00 % convertible senior notes ( 2,529 ) — Proceeds from the issuance of 0.00 % convertible senior notes, net 610,156 — — Issuance costs for 0.00 % convertible senior notes ( 1,313 ) — — Proceeds from issuance of new common stock 55,000 — — Proceeds from draw from exit facility 20,000 — — Restricted stock tax holding obligations ( 3,393 ) — — Proceeds from exercise of warrants 4,885 — Proceeds from exercise of stock options 9 — 25,049 Repurchase of common shares to pay employee withholding taxes — — ( 31,646 ) Proceeds from the XPDI merger, net of transaction costs — — 195,010 Proceeds from debt, net of issuance costs — — 261,349 Net cash provided by (used in) financing activities 819,567 ( 44,649 ) 306,153 Net increase (decrease) in cash, cash equivalents and restricted cash 767,271 17,469 ( 79,438 ) Cash, cash equivalents and restricted cash—beginning of period 69,709 52,240 131,678 Cash, cash equivalents and restricted cash—end of period $ 836,980 $ 69,709 $ 52,240 Reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above: Cash and cash equivalents $ 836,197 $ 50,409 $ 15,884 Restricted cash 783 19,300 36,356 Total cash, cash equivalents and restricted cash $ 836,980 $ 69,709 $ 52,240 Supplemental disclosure of other cash flow information: Cash paid for interest $ 28,798 $ 4,708 $ 86,010 Income tax (refunds) payments $ ( 159 ) $ ( 370 ) $ 5,756 Cash paid for reorganization items $ 53,835 $ 86,539 $ — Supplemental disclosure of noncash investing and financing activities: Change in accrued capital expenditures $ 13,411 $ 2,731 $ 69,286 Reduction in plant, property, and equipment basis related to Bitmain purchase $ ( 26,101 ) $ — $ — Reclass of other current and non-current assets to plant, property, and equipment $ 6,867 $ — $ — Increase in right-of-use assets due to lease commencement $ 111,736 $ — $ — Extinguishment of convertible notes upon emergence $ ( 559,902 ) $ — $ — Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence $ ( 473,244 ) $ — $ — Cancellation of common stock in connection with emergence $ ( 36 ) $ — $ — Issuance of new common stock in connection with emergence $ 296,893 $ — $ — Issuance of new common stock for Bitmain obligation $ 27,839 $ — $ — Issuance of new common stock for the Equity Rights Offering backstop commitment $ 5,475 $ — $ — Issuance of contingent value rights $ 86,325 $ — $ — Issuance of warrants $ 345,856 $ — $ — Issuance of New Secured Convertible Notes $ 260,000 $ — $ — Issuance of Secured Notes, net of discount $ 149,520 $ — $ — Issuance of Exit Credit Agreement including $ 1.2 million paid in kind upfront fee $ 41,200 $ — $ — Issuance of miner equipment lender facility loans $ 52,947 $ — $ — Issuance of notes related to settlement $ 9,092 $ 38,547 $ — Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets $ 24 $ — $ — Payment-in-kind interest on Secured and Other Convertible Notes $ — $ — $ 31,382 Issuance of new common stock for PIK interest on New Secured Convertible Notes $ 3,677 $ — $ — Issuance of new common stock for New Secured Convertible Notes conversion $ 261,772 $ — $ — Increase in lease liability and right-of-use assets due to lease modification $ 695 $ — $ — Noncash exercise of warrants $ 39,828 $ — $ 3,001 71 Property, plant and equipment disposed of through settlements $ — $ 6,301 $ — Purchase of insurance policies financed by short-term note payable $ — $ 5,011 $ — Decrease in equipment related to debt extinguishment $ — $ 17,849 $ — Decrease in notes payable in exchange for equipment $ — $ ( 38,610 ) $ — Property, plant, and equipment obtained in exchange transaction $ — $ — $ 62,338 Certain prior year amounts have been reclassified for consistency with the current year presentation. See accompanying notes to consolidated financial statements. 72 Core Scientific, Inc. Notes to Consolidated Financial Statements 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Core Scientific, Inc. (“Core Scientific” or the “Company”) is a leader in digital infrastructure for bitcoin mining and high-performance computing. We operate dedicated, purpose-built facilities for digital asset mining and are a premier provider of digital infrastructure, software solutions and services to our third-party customers. We employ our own large fleet of computers (“miners”) to earn digital assets for our own account and we provide hosting services for large bitcoin mining customers and are in the process of allocating and converting a significant portion of our ten data centers in Alabama ( 1 ), Georgia ( 2 ), Kentucky ( 1 ), North Carolina ( 1 ), North Dakota ( 1 ), Oklahoma ( 1 ), and Texas ( 3 ) to support artificial intelligence-related workloads under a series of contracts that entail the modification of certain of our data centers to deliver hosting services for high-performance computing (“HPC”). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”). The Company has historically focused on designing, developing and operating digital infrastructure to engage in digital asset mining for its own account and providing hosting solutions for third-party digital asset miners. Beginning on March 6, 2024, we announced a series of new contractual agreements with a third-party provider of HPC operations for customers using specialized graphics processing units (“GPUs”). These new agreements leverage the Company’s existing digital infrastructure and expertise in third-party hosting solutions. We currently operate in three segments: “Digital Asset Self-Mining,” consisting of digital asset mining for our own account, “Digital Asset Hosted Mining,” consisting of our digital infrastructure and third-party hosting services for digital asset mining, and “HPC Hosting,” consisting of our digital infrastructure and third-party hosting services for client HPC operations. Prior to April 1, 2024, we operated only in the Digital Asset Self-Mining and Digital Asset Hosted Mining segments. Our digital asset hosted mining business 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. Our HPC hosting services provide colocation, facilities operations, security and other services to third-party HPC customers to support workloads for machine learning and artificial intelligence. The extension of our business into the HPC Hosting segment involves significant risk, including risks involving facility construction, supply chain and the risk of nonperformance by our single customer, as disclosed further in Part I, Item 1A. — “Risk Factors” of this Amendment. Chapter 11 Filing and Emergence from Bankruptcy On December 21, 2022, the Company and certain of its affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the United States Code (the “Bankruptcy Code”). The Chapter 11 Cases were jointly administered under Case No. 22-90341. The Debtors continued to operate their business and manage their properties as “debtors-in-possession” (“DIP”) under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. For detailed discussion about the Chapter 11 Cases, refer to Note 4 — Chapter 11 Filing and Emergence from Bankruptcy. On January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc. and its Debtor Affiliates (with Technical Modifications) (the “Plan of Reorganization”) with the Bankruptcy Court. On January 16, 2024, the Bankruptcy Court entered an order (the “Confirmation Order”) among other things, confirming the Plan of Reorganization. On January 23, 2024 (the “Effective Date”), the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy. The Company was not required to apply fresh start accounting based on the provisions of Accounting Standards Codification (“ASC”) 852, Reorganizations , since the entity’s reorganization value immediately before the date of confirmation was more than the total of all its post-petition liabilities and allowed claims. 73 Core Scientific, Inc. Notes to Consolidated Financial Statements 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the consolidated financial statements. Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Some of the more significant estimates include assumptions used in the valuation of the Company’s common shares and the determination of the grant date fair value of stock-based compensation awards for periods prior to the Business Combination (as defined in Note 5 — Business Combination and Restructuring), the valuation of digital assets, property, plant and equipment, the initial measurement of lease liabilities, stock-based compensation, the fair value of derivative liabilities, and income taxes. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from management’s estimates. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents include all cash balances and highly liquid investments with original maturities of three months or less from the date of acquisition. As of December 31, 2024, the Company had cash and cash equivalents of $ 836.2 million, substantially all of which exceeded Federal Deposit Insurance Corporation insured limits. Cash equivalents included $ 832.2 million of highly liquid money market funds, which are classified as Level 1 within the fair value hierarchy. Restricted cash consists of a deposit held at a lender’s bank in accordance with the terms of a note agreement. Accounts Receivable and Allowance for Doubtful Accounts The Company’s accounts receivable balance consists of amounts due from its hosting customers. The Company records accounts receivable at the invoiced amount less an allowance for any potentially uncollectible accounts under the current expected credit loss (“CECL”) impairment model and presents the net amount of the financial instrument expected to be collected. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model, the Company considers many factors, including the age of the balance, collection history, and current economic trends. Bad debts are written off after all collection efforts have ceased. Allowances for credit losses are recorded as a direct reduction from an asset’s amortized cost basis. Credit losses and recoveries are recorded in general and administrative expenses in the consolidated statements of operations. Recoveries of financial assets previously written off are recorded when received. For the years ended December 31, 2024, 2023 and 2022, the Company did not record any credit losses or recoveries. The Company’s allowance for doubtful accounts was nil as of December 31, 2024 and 2023. Digital Assets In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income (loss). The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024, with early adoption permitted. The Company’s digital assets are within the scope of ASU 2023-08 and the Company elected to early adopt the new standard prospectively effective January 1, 2024. The transition guidance requires a cumulative-effect adjustment as of the beginning of the 74 Core Scientific, Inc. Notes to Consolidated Financial Statements current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value. The early adoption did not have a material impact on the Company’s consolidated financial statements. As of August 19, 2024, the Company is no longer required to sell bitcoin it earns through mining within ten days of receipt as provided by the terms of the recently extinguished debt facilities (Exit Credit Agreement, the Secured Notes and the New Secured Convertible Notes). See Note 9 — Convertible and Other Notes Payable. The Company intends to optimize cash received from bitcoin mining which may entail, subject to market conditions, holding bitcoin for future sale at any particular point in time. Digital assets are classified as current assets on the Company’s Consolidated Balance Sheets, reflecting management's current intent and expectation to convert these assets to cash within the next year. The classification of digital assets is evaluated regularly, and any change in management's intent or expectations regarding the timing of conversion to cash could result in a reclassification of these assets. Sales of digital assets awarded to the Company through its self-mining activities are classified as cash flows from operating activities if sold nearly immediately. The Company does not have any off-balance sheet holdings of digital assets and does not safeguard digital assets for third parties. The Company tracks its cost basis of digital assets in accordance with the first-in-first-out method of accounting. The Company’s digital assets have active markets with observable prices and their fair value measurements are considered Level 1. The following table presents a roll-forward of total digital assets for the year ended December 31, 2024, (under the prospectively adopted ASU 2023-08 fair value model), and the year ended December 31, 2023 (in thousands): December 31, 2024 December 31, 2023 Digital assets, beginning of period $ 2,284 $ 724 Cumulative effect of ASU 2023-08, adopted January 1, 2024 24 — Digital assets, beginning of period, as adjusted 2,308 724 Digital asset self-mining revenue, net of receivables 1 409,560 389,456 Mining revenue from shared hosting 15,693 17,626 Proceeds from sales of digital assets and shared hosting ( 402,461 ) ( 404,686 ) Change in fair value of digital assets 2 ( 1,052 ) — Gain from sale of digital assets — 3,886 Impairment of digital assets — ( 4,406 ) Payment of board fee ( 89 ) ( 316 ) Other ( 66 ) — Digital assets, end of period $ 23,893 $ 2,284 1 As of December 31, 2024 and 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. 2 During the year ended December 31, 2024, sales of digital assets resulted in realized gains of $ 3.9 million and realized losses of $ 3.7 million, which is measured as the difference between the original cost basis and the disposal proceeds. The following table presents the Company’s bitcoin holdings as of December 31, 2024, (in thousands, except for quantity): Quantity Cost Basis Fair Value Bitcoin 256 $ 24,991 $ 23,893 Deposits for Equipment The Company has entered into agreements with vendors to supply equipment for its digital asset mining operations. These agreements generally require significant refundable deposits payable months in advance of delivery and additional advance payments in monthly installments thereafter. The Company classifies deposits for digital asset mining equipment based on the expected predominant source and use of the cash flows for the equipment that has been contracted for purchase. The Company expects that the predominant source and use of cash flows for digital asset mining equipment will be related to the Company’s own self-mining operations. Therefore, the Company has classified deposits for equipment as cash flows from investing activities. 75 Core Scientific, Inc. Notes to Consolidated Financial Statements Property, Plant and Equipment, Net Property, plant, and equipment includes the cost of land, buildings, and improvements for datacenter and support facilities and the Company’s corporate office space. Property and equipment further consists of computer, mining, network, electrical and other equipment, including property and equipment under finance leases. Property, plant and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are capitalized at cost and amortized over the shorter of their estimated useful lives or the lease term. Future obligations related to finance leases are presented as Finance lease liabilities, current portion and Finance lease liabilities, net of current portion in the Company’s Consolidated Balance Sheets. Depreciation expense, including amortization of assets held under finance leases, is primarily included in Cost of revenue in the Company’s Consolidated Statements of Operations. Property, plant and equipment capitalized costs include the directly identifiable costs incurred to acquire, construct, install, or otherwise prepare the asset for its intended use and to put it into service. Directly identifiable costs include construction payroll and benefits and other direct capital project costs. When management decides to abandon long-lived assets before the end of their previously estimated useful life, the Company considers whether an impairment of the related asset group has been triggered. If that asset group is no longer recoverable, an impairment is recognized for any excess of the asset group’s carrying value above its fair value. Thereafter, the estimated useful life, salvage value, and prospective depreciation of the affected assets are revised to reflect their shortened remaining useful life. The historical cost of assets, and related accumulated depreciation, are written off at the time that assets are removed from service. Leases The Company has entered into operating and finance leases for office space, data facilities, computer and networking equipment, electrical infrastructure and office equipment, with lease periods expiring through 2051.The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the term of such lease is assessed based on the commencement date on which the underlying asset is made available for the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and periods covered by early-termination options which the Company is reasonably certain of not exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and presentation over the lease term. For leases with a term exceeding 12 months, a lease liability is recognized on the Company’s consolidated balance sheets at lease commencement, reflecting the present value of its fixed payment obligations over the lease term. A corresponding right-of-use asset equal to the initial lease liability is also recognized, adjusted for any prepaid rent and initial direct costs incurred in connection with the execution of the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses rates implicit in its leasing arrangements, if readily determinable, otherwise the Company uses its incremental borrowing rate. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a similarly secured basis and term, the economic environment of the associated lease, and other information available to management. For leases with a term of 12 months or less, at commencement, and that do not include an option to purchase the underlying assets, the Company has elected the exemption to not measure and recognize an associated lease liability or right-of-use asset. For the Company’s operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. Variable lease costs are recognized as the obligation for payment is incurred and primarily consist of insurance and property tax reimbursements to the lessor. The Company addresses lease modifications that are not accounted for as separate leases at the effective date of the modification. If the terms and conditions of the lease are changed, the lease payments are adjusted accordingly and the lease liability is remeasured using a revised discount rate. Any resulting changes in the lease liability are recognized in the carrying amount of the related right-of-use asset. 76 Core Scientific, Inc. Notes to Consolidated Financial Statements Long-Lived Asset Impairments The Company tests long-lived asset groups 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 property, plant and equipment and 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. 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. Long-lived assets to be disposed of are reported at the lower of the carrying amount or estimated fair value less costs to sell. Deferred Revenue The Company records contract liabilities in Deferred revenue on the Consolidated Balance Sheets when cash payments are received in advance of performance and recognizes them as revenue when the performance obligations are satisfied. The Company’s total deferred revenue balance as of December 31, 2024 and December 31, 2023, was $ 18.1 million and $ 9.8 million, respectively. In the year ended December 31, 2024, the Company recognized $ 6.7 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year. In the year ended December 31, 2023, the Company recognized $ 21.0 million of revenue that was included in the deferred revenue balance as of the beginning of the year. Advanced payments are typically recognized in the following month for hosted mining services and are generally recognized within 30 months of license order commencement for HPC hosting services. Convertible and Other Notes Payable Convertible and other notes payable (“Notes payable”) are accounted for under ASC 470, Debt (“ASC 470”) and are presented at their carrying value, which is their remaining par or face amount net of any related unamortized premium, discount and issuance costs. Notes payable are initially recognized at their present value. When cash proceeds are received for the issuance of Notes payable, the proceeds are used to establish their present value. When cash proceeds are not received for the issuance of Notes payable, their present value is based on the consideration exchanged. This present value generally will be the Notes payable’s cash flows discounted at a market rate when it is more evident than the noncash consideration exchanged. When the present value of Notes payable on issuance varies from its par or face amount, an original discount or premium results and any related issuance costs are used to determine an effective interest rate. Original premium, discount and issuance costs are amortized using the level effective rate interest method. Amortization is recognized as a component of current interest expense. Notes payable are evaluated at issuance to determine whether or not they have features or terms which would be treated as embedded derivatives that are required to be bifurcated under ASC 815, Derivatives and Hedging (“ASC 815”). As of December 31, 2024 and 2023, Notes payable did not have any embedded derivatives required to be bifurcated. Debt Issuance Costs Debt issuance costs are capitalized and amortized over the term of the associated debt. Debt issuance costs are presented in the Company’s Consolidated Balance Sheets as a direct deduction from the carrying amount of the debt liability consistent with the debt discount. Contingent Value Rights Liabilities As described in Note 10 — Contingent Value Rights and Warrant Liabilities, on the Effective Date, pursuant to the Plan of Reorganization, the Company entered into a contingent value rights agreement (the “Contingent Value Rights Agreement”) which provides for the issuance of the contingent value rights (the “CVRs”) to certain creditors and provides for the issuance of CVRs issued to holders of allowed general unsecured claims (“GUC”) (in such capacity, the “GUC Payees”) (the “GUC CVRs”). The CVRs and GUC CVRs are equity-linked instruments which are either only cash settled or in some instances share settled at the Company’s sole discretion. The Company determined that these equity-linked instruments are not indexed to the Company’s stock and are required to be recognized as liabilities which are, initially and subsequently, measured at fair value with changes in value reflected in Net loss. 77 Core Scientific, Inc. Notes to Consolidated Financial Statements Warrant Liabilities The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is re-assessed at the end of each reporting period. Prior to the Effective Date, the Company had public warrants and private placement warrants that were recognized as derivative liabilities. Accordingly, the Company recognized the warrant instruments as liabilities at fair value and adjusted the instruments to fair value at each reporting period. The liabilities were subject to re-measurement at each balance sheet date, and any change in fair value was recognized in the Company’s Consolidated Statements of Operations and presented as Change in fair value of warrants and contingent value rights. The initial and subsequent estimated fair value of both the public warrants and private placement warrants was based on the listed price in an active market for the public warrants. As described in Note 10 — Contingent Value Rights and Warrant Liabilities, on the Effective Date, pursuant to the Plan of Reorganization, holders of the Company’s previous common stock received warrants. The warrants are equity-linked instruments. The Company determined that these equity-linked instruments are not indexed to the Company’s stock and are required to be recognized as liabilities which are, initially and subsequently, measured at fair value with changes in value reflected in Net income (loss). Revenue From Contracts With Customers - Digital Asset Self-Mining Revenue The Company recognizes revenue in accordance with ASC 606, Revenue Recognition (“ASC 606”). 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 78 Core Scientific, Inc. Notes to Consolidated Financial Statements 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 using the spot rate for Bitcoin as quoted on Coinbase Global, Inc., the Company’s principal market. 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. Revenue From Contracts With Customers - Digital Asset Hosted Mining Services The Company generates revenue from contracts with customers from digital asset hosted mining services. Prior to fiscal 2023, the “ Digital Asset Hosted Mining ” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales”, when the Company also recognized revenue from contracts with customers from sales of computer equipment, in which the Company generally recognized revenue when control of the promised equipment was transferred to customers. The Company generally recognizes revenue when the promised service is performed. Revenue excludes any amounts collected on behalf of third parties, including sales and indirect taxes. Hosting Services The Company regularly enters contracts that include hosting services, for which revenue is recognized as services are performed on a variable basis. The Company performs hosting services that enable customers to run blockchain and other high-performance computing operations. The Company’s performance obligation related to these services is satisfied over time. The Company recognizes revenue for services that are performed on a consumption basis, such as the amount of electricity used in a period, based on the customer’s use of such resources. The Company recognizes variable consumption usage hosting revenue each month as the uncertainty related to the consideration is resolved, hosting services are provided to our customers, and our customers utilize the hosting services (the customer simultaneously receives and consumes the benefits of the Company’s performance). The Company generally bills its customers in advance based on estimated consumption under the contract. The Company recognizes revenue based on actual consumption in the period and invoices adjustments in subsequent periods or retains credits toward future consumption. The term between invoicing and when payment is due typically does not exceed 30 days. Equipment Sales (Applicable to year ended December 31, 2022) The Company entered into contracts with more than one performance obligation. For example, the Company entered into contracts that include both hosting services and sales of computer equipment to those same customers, for which revenue was recognized at the point in time when control of the equipment was transferred to the customer (typically at the start of the contract period). For these contracts, revenue was recognized based on the relative standalone selling price of each performance obligation in the contract. The Company recognized revenue from sales of computer equipment to customers at the point in time when control of the equipment is transferred to the customer, which generally occurred upon deployment of the equipment. Customers made a series of deposits on equipment purchases with the final payment typically being due at least one month prior to deployment. Self-mining computer equipment that was subsequently sold to customers was recognized as Equipment Sales to Customers in the Company’s Consolidated Statements of Operations. We do not expect to enter equipment sales contracts in the future or to have any equipment sales revenue after December 31, 2022. 79 Core Scientific, Inc. Notes to Consolidated Financial Statements Revenue Recognition - HPC Hosting Revenue Our HPC hosting segment generates revenue by licensing data center space to our customer under licensing agreements. These arrangements contain lease components for the right to use data center space and nonlease components for power delivery, physical security, and maintenance services. We have elected the practical expedient available under ASC Topic 842, Leases , to combine the nonlease revenue components that have the same pattern of transfer as the related operating lease components into a single combined component. The single combined component is accounted for under ASC Topic 842 as an operating lease if the lease components are the predominant components and is accounted for under ASC Topic 606 if the nonlease components are the predominant components. The lease components are the predominant components in our current licensing arrangements and the single combined component in these arrangements are accounted for under the operating lease guidance of ASC Topic 842. We have concluded that it is probable that substantially all of the payments will be collected over the term of the arrangements and recognize the total combined component license payments under the agreements on a straight-line basis over the non-cancellable term. Straight-line license revenue represents the difference in revenue recognized during the period and the license payments due pursuant to the underlying arrangement as deferred revenue in the consolidated balance sheets. Certain arrangements include options to extend the term. These extension options are not reasonably certain to be exercised and are excluded from the lease term and calculation of lease payments at lease commencement. Certain licensing arrangements provide for variable payments for power delivery services and maintenance services on customer assets and reimbursements for lessor costs such as taxes. Payments for physical security and other routine maintenance services are included in the fixed lease payments. Power delivery services represent a stand ready obligation to make power available to the customer over the coterminous lease term and have the same pattern of transfer as the related operating lease components. Customers may request and the Company may provide maintenance services on customer assets during the coterminous lease term. Customers are charged monthly for fees incurred on these maintenance services delivered and actual power costs incurred at current utility or fuel cost rates. These payments from customers for power delivery and maintenance services are recognized as variable lease payments in accordance with the practical expedient elected. Variable lease payments are presented on a gross basis and are included in HPC hosting revenue in the Consolidated Statements of Operations. Performance Obligation Commitments The Company’s performance obligation commitments relate to digital asset hosted mining services. The Company has performance obligations associated with commitments in customer digital asset hosted mining contracts for future services that have not yet been recognized in the financial statements. As of December 31, 2024, for contracts with original terms that exceed one year (typically ranging from 15 to 24 months), we expect to recognize approximately $ 8.4 million of revenue in the future related to performance obligations associated with existing hosted mining contracts. The Company expects to recognize approximately 100 % of this amount over the next 12 months. Costs of Revenue The Company’s Cost of Digital Asset Self-Mining, Cost of Digital Asset Hosted Mining Services, and Cost of HPC Hosting Services primarily consist of p ower fees, depreciation expense, facility operations expense and employee compensation, including stock-based compensation . Cost of Equipment Sales represented costs of computer equipment sold to customers. Stock-Based Compensation Under ASC 718, Stock Compensation (“ASC 718”) estimated fair value uses a fair-value-based method. Stock-based compensation expense is measured at the grant date based on the estimated fair value of the equity award. The estimated fair value of restricted stock units (“RSUs”) with only service conditions is based on the closing market price of the Company’s common stock on the date of grant. The estimated fair value of market condition restricted stock units (“MSUs”) is estimated on the date of grant using the Monte-Carlo pricing model for each service and market condition tranche. For RSU awards with only service conditions, the estimated fair value of the equity awards is recognized as expense on a straight-line basis, less actual forfeitures as they occur, over the requisite service period for the entire award, which is generally the vesting period. For RSU awards with service and market conditions, the compensation expense is recognized for each separately vesting portion of the award, or tranche, as if it were a separate award with its own vesting and exercise conditions (i.e., on an accelerated attribution basis). The estimated fair value of each tranche is recognized as expense on a straight-line basis, less actual forfeitures as they occur, over the requisite service for the tranche. The requisite service period of each tranche is the greater of the 80 Core Scientific, Inc. Notes to Consolidated Financial Statements derived service period from the market condition or the service condition vesting period. See Note 13 — Stockholders' Deficit for more information about the service and market conditions associated with the Company’s equity awards. Research and Development The Company’s research and development expenses primarily include personnel costs associated with technology and product development and data science research. Research and development costs are expensed as incurred. Income Taxes The Company is subject to income taxes mainly in the jurisdictions in which it provides various infrastructure, technology and hosting services. The Company’s tax position requires significant judgment in order to properly evaluate and quantify tax positions and to determine the provision for income taxes. The Company uses the assets and liabilities method to account for income taxes, which requires that deferred tax assets and deferred tax liabilities be determined based on the differences between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the years in which the differences are expected to be reversed. The Company estimates its actual current tax expense, including permanent charges and benefits, and the temporary differences resulting from differing treatment of items, for tax and financial accounting purposes. The Company assesses whether it is more likely than not that its deferred tax assets will be realized by considering both positive and negative evidence. If the Company believes that recovery of these deferred tax assets is not more likely than not, the Company establishes a valuation allowance. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considered all available evidence, including recent operating results, projections of future taxable income, the reversal of taxable temporary differences, and the feasibility of tax planning strategies. GAAP sets forth a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are included within Income Tax Expense. Accrued interest and penalties are included in the related tax liability line in the Company’s Consolidated Balance Sheets. The Company adjusts its reserves for tax positions in light of changing facts and circumstances, such as the closing of a tax audit, the refinement of an estimate based on new facts or changes in tax laws. To the extent that the final tax outcome of these matters is different than the amounts recorded, the differences are recorded as adjustments to the provision for income taxes in the period in which such determination is made. The provision (benefit) for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. The Company’s future effective tax rates could be adversely affected by changes in the valuation of the Company’s deferred tax assets or liabilities, or changes in tax laws, regulations, accounting principles or interpretations thereof. In addition, the Company is subject to examination of income tax returns by various tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provisions for income taxes. 81 Core Scientific, Inc. Notes to Consolidated Financial Statements Recently Adopted Accounting Standards In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) , which will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 will be applied retrospectively and are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 as of January 1, 2024, which resulted in the disclosure of significant segment expenses in Note 16 — Segment Reporting. There was no impact to the Company’s financial position, results of operations or cash flows as a result of the adoption. In December 2023, the FASB issued ASU 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). On January 1, 2024, the Company elected to early adopt ASU 2023-08. For a discussion of the impact of this standard, see the “Digital Assets” policy within this footnote. Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) . Under this ASU, public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate).” The amendments in ASU 2023-09 will be applied on a prospective basis and are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The amendment should be applied prospectively, however, retrospective application is also permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures. There are no other new accounting pronouncements that are expected to have a significant impact on the Company’s unaudited consolidated financial statements. 3. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS During the preparation of the consolidated financial statements for the year ended December 31, 2025, the Company determined that property, plant and equipment was overstated as a result of the improper continued capitalization carrying values of assets committed to demolition in connection with the conversion of certain facilities from digital asset mining operations to HPC colocation infrastructure, which impacted the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2024, as well as the condensed consolidated financial statements as of and for the three and six months ended June 30, 2024, the three and nine months ended September 30, 2024, the three months ended March 31, 2025, the three and six months ended June 30, 2025, and the three and nine months ended September 30, 2025. Specifically, the carrying values of assets committed to demolition were improperly capitalized rather than being written down to fair value through the recognition of impairment charges in the periods in which the commitment to demolish was made. The Company assessed the materiality of the errors, individually and in the aggregate, and concluded that the errors were material to the previously issued consolidated financial statements and condensed consolidated financial statements set forth above and such previously issued financial statements should no longer be relied upon. As a result, the Company is restating herein its previously issued condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 and the three and nine months ended September 30, 2024, and the consolidated financial statements as of and for the year ended December 31, 2024. The cumulative impact of the errors as of December 31, 2024 resulted in an overstatement of property, plant and equipment, net of approximately $ 122.9 million and a corresponding understatement of accumulated deficit of the same amount. The restatement had no impact on revenue, cost of revenue, or income tax expense, and no impact on net cash provided by or used in operating, investing, or financing activities for any period presented, as the corrections to net loss and impairment of property, plant and equipment are 82 Core Scientific, Inc. Notes to Consolidated Financial Statements offsetting within cash flows from operating activities. There was no income tax effect as the Company maintains a full valuation allowance against its net deferred tax assets. The following tables present the impact of the restatement on the affected line items of the Company’s previously issued consolidated financial statements (in thousands, except per share amounts): Consolidated Balance Sheets June 30, 2024 (Unaudited) As Reported Adjustment As Restated Assets Property, plant and equipment, net $ 549,994 $ ( 97,261 ) $ 452,733 Total Assets 761,456 ( 97,261 ) 664,195 Liabilities and Stockholders’ Deficit Stockholders’ Deficit: Accumulated deficit ( 3,014,418 ) ( 97,261 ) ( 3,111,679 ) Total Stockholders’ Deficit ( 1,083,874 ) ( 97,261 ) ( 1,181,135 ) Total Liabilities and Stockholders’ Deficit $ 761,456 $ ( 97,261 ) $ 664,195 September 30, 2024 (Unaudited) As Reported Adjustment As Restated Assets Property, plant and equipment, net $ 550,432 $ ( 97,261 ) $ 453,171 Total Assets 921,851 ( 97,261 ) 824,590 Liabilities and Stockholders’ Deficit Stockholders’ Deficit: Accumulated deficit ( 3,469,677 ) ( 97,261 ) ( 3,566,938 ) Total Stockholders’ Deficit ( 729,395 ) ( 97,261 ) ( 826,656 ) Total Liabilities and Stockholders’ Deficit $ 921,851 $ ( 97,261 ) $ 824,590 December 31, 2024 As Reported Adjustment As Restated Assets Property, plant and equipment, net $ 556,342 $ ( 122,869 ) $ 433,473 Total Assets 1,598,815 ( 122,869 ) 1,475,946 Liabilities and Stockholders’ Deficit Stockholders’ Deficit: Accumulated deficit ( 3,735,218 ) ( 122,869 ) ( 3,858,087 ) Total Stockholders’ Deficit ( 820,180 ) ( 122,869 ) ( 943,049 ) Total Liabilities and Stockholders’ Deficit $ 1,598,815 $ ( 122,869 ) $ 1,475,946 83 Core Scientific, Inc. Notes to Consolidated Financial Statements Consolidated Statements of Operations For the Three Months Ended June 30, 2024 For the Six Months Ended June 30, 2024 As Reported Adjustment As Restated As Reported Adjustment As Restated (Unaudited) (Unaudited) (Unaudited) (Unaudited) Impairment of property, plant and equipment $ — 97,261 $ 97,261 $ — 97,261 $ 97,261 Operating loss 6,579 ( 97,261 ) ( 90,682 ) 61,806 ( 97,261 ) ( 35,455 ) Loss before income taxes ( 804,752 ) ( 97,261 ) ( 902,013 ) ( 593,855 ) ( 97,261 ) ( 691,116 ) Net loss $ ( 804,896 ) $ ( 97,261 ) $ ( 902,157 ) $ ( 594,205 ) $ ( 97,261 ) $ ( 691,466 ) Net loss per share, basic and diluted $ ( 4.51 ) $ ( 0.54 ) $ ( 5.05 ) $ ( 2.87 ) $ ( 0.47 ) $ ( 3.34 ) For the Nine Months Ended September 30, 2024 As Reported Adjustment As Restated (Unaudited) (Unaudited) Impairment of property, plant and equipment $ — $ 97,261 $ 97,261 Operating loss 20,587 ( 97,261 ) ( 76,674 ) Loss before income taxes ( 1,048,980 ) ( 97,261 ) ( 1,146,241 ) Net loss $ ( 1,049,464 ) $ ( 97,261 ) $ ( 1,146,725 ) Net loss per share, basic and diluted $ ( 3.71 ) $ ( 0.38 ) $ ( 4.09 ) For the Three Months Ended December 31, 2024 For the Year Ended December 31, 2024 As Reported Adjustment As Restated As Reported Adjustment As Restated (Unaudited) (Unaudited) Impairment of property, plant and equipment $ — $ 25,608 $ 25,608 $ — $ 122,869 $ 122,869 Operating loss ( 39,783 ) ( 25,608 ) ( 65,391 ) ( 19,196 ) ( 122,869 ) ( 142,065 ) Loss before income taxes ( 265,166 ) ( 25,608 ) ( 290,774 ) ( 1,314,146 ) ( 122,869 ) ( 1,437,015 ) Net loss $ ( 265,541 ) $ ( 25,608 ) $ ( 291,149 ) $ ( 1,315,005 ) $ ( 122,869 ) $ ( 1,437,874 ) Net loss per share, basic and diluted $ ( 0.60 ) $ ( 0.09 ) $ ( 0.69 ) $ ( 4.39 ) $ ( 0.48 ) $ ( 4.87 ) Consolidated Statements of Stockholders’ Deficit The impact of the restatement on the Company’s consolidated statements of stockholders’ deficit is limited to the effect on accumulated deficit, as reflected in the consolidated balance sheet tables above. There was no impact to additional paid-in capital, common stock, or any other component of stockholders’ deficit. Consolidated Statements of Cash Flows The restatement had no impact on net cash provided by or used in operating, investing, or financing activities for any period presented. Within operating activities, the increase in net loss was offset by a corresponding increase in impairment of property, plant and equipment, a non-cash item added back in the reconciliation of net loss to net cash provided by operating activities. 84 Core Scientific, Inc. Notes to Consolidated Financial Statements 4. CHAPTER 11 FILING AND EMERGENCE FROM BANKRUPTCY Chapter 11 On December 21, 2022 (the “Petition Date”), the Debtors filed the Chapter 11 Cases in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code. The Chapter 11 Cases are jointly administered under Case No. 22-90341. The Debtors continued to operate their business and managed their properties as DIP under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On June 20, 2023, the Debtors filed with the Bankruptcy Court (i) a proposed Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc. and its Debtor Affiliates and a related proposed form of Disclosure Statement, and on January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc. and its Affiliated Debtors (with Technical Modifications) with the Bankruptcy Court. On September 19, 2023, the Debtors, the ad hoc group of the Debtors’ secured convertible notes holders (the “Ad Hoc Noteholder Group”) and the equity committee (the “Equity Committee”) reached an agreement in principle with respect to the economic terms of the Plan of Reorganization (the “Mediated Settlement”). The Debtors, the Ad Hoc Noteholder Group and the Equity Committee continued to work and negotiate in good faith to document the Mediated Settlement, resolve certain open issues and culminating in the Plan of Reorganization. On January 16, 2024, the Bankruptcy Court entered the Confirmation Order among other things, confirming the Plan of Reorganization. On 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. See Notes 9 — Convertible and Other Notes Payable, 10 — Contingent Value Rights and Warrant Liabilities, and 13 — Stockholders' Deficit for additional information about the Company’s emergence from bankruptcy. Original DIP Credit Agreement and Restructuring Support Agreement In connection with the Chapter 11 Cases, the Debtors entered into a senior secured super-priority debtor-in-possession loan and security agreement, dated as of December 22, 2022 (the “Original DIP Credit Agreement”), with Wilmington Savings Fund Society, FSB, as administrative agent, and the lenders from time to time party thereto (collectively, the “Original DIP Lenders”). The Original DIP Lenders are also holders or affiliates, partners or investors of holders under the Company’s notes sold pursuant to (i) the Secured Convertible Note Purchase Agreement, dated as of April 19, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), by and among Core Scientific, Inc. (as successor of Core Scientific Holding Co.), the guarantors party thereto from time to time, U.S. Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder (the “Secured Convertible Notes”), and (ii) the Convertible Note Purchase Agreement, dated as of August 20, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), by and among Core Scientific, Inc. (as successor of Core Scientific Holding Co.), the guarantors party thereto from time to time, U.S. Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder (the “Other Convertible Notes,” and together with the Secured Convertible Notes, the “Convertible Notes”). Also in connection with the filing of the Chapter 11 Cases, the Company entered into a restructuring support agreement (together with all exhibits and schedules thereto, the “Restructuring Support Agreement”) with the ad hoc group of noteholders, representing more than 70 % of the 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 debtor-in- 85 Core Scientific, Inc. Notes to Consolidated Financial Statements possession facility that was entered into in connection with the filing of the Chapter 11 Cases (the “Original DIP Facility”), including payment of all fees and expenses required to be paid under the terms of the Original DIP Facility. These funds, along with ongoing cash generated from operations, were anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors. On March 1, 2023, the Bankruptcy Court entered an order approving the Replacement DIP Facility on a final basis and the terms under which the Debtors are authorized to use the cash collateral of the holders of their convertible notes (the “Final DIP Order”). On July 4, 2023, the Debtors, the Administrative Agents and the Replacement DIP Lender entered into the First Amendment to the Replacement DIP Credit Agreement. In January 2024, the Replacement DIP Facility was repaid in full and terminated on the Effective Date of the Company’s Plan of Reorganization. Federal Income Tax Consequences As of December 31, 2023, the Tax Group had net operating loss (“NOL”) carryforwards of approximately $ 330.2 million (all of which are post-2017 NOLs that are subject to an 80% taxable income limitation) and certain other tax attributes before taking into account the implementation of the Plan of Reorganization. An ownership change is not expected with the implementation of the Plan of Reorganization which would, if it occurred, limit our ability to utilize our NOL carryforwards under Sec. 382 of the Internal Revenue Code (the “Tax Code”). However, certain future equity trading activity and other actions could result in an ownership change of the Tax Group independent of the Plan of Reorganization, which could adversely affect the ability of the Debtors to utilize their tax attributes. In addition, as discussed below, in connection with and as a result of the implementation of the Plan of Reorganization, the amount of the Tax Group’s NOL carryforwards, and possibly certain other tax attributes, may be reduced. In general, the Tax Code provides that a debtor in a bankruptcy case must reduce certain of its tax attributes - such as NOL carryforwards and current year NOLs, capital loss carryforwards, tax credits, and tax basis in assets - by the amount of any cancellation of debt (“COD”) incurred pursuant to a confirmed chapter 11 plan. Based on the Plan of Reorganization, the Tax Group is expected to incur COD income for U.S. federal income tax purposes as a result of the implementation of the Plan of Reorganization and, thus, expect that the Tax Group’s NOL carryforwards or other tax attributes will be reduced as a result of any COD incurred. Sec. 163(l) generally disallows a corporate issuer's interest deductions with respect to debt instruments payable in equity of the issuer or a related party. A debt instrument is considered “payable in equity” if by the terms of the instrument, or at the option of an issuer or related party, a substantial amount of the principal or interest is (1) required to be paid in or converted into equity, or (2) determined by reference to the value of equity. In addition, debt is considered payable in equity if the overall arrangement is such that it is “reasonably expected” that the issuer will pay in or by reference to equity, even if the issuer's payment in or by reference to equity is conditioned on events outside the issuer's control. Pursuant to the current terms of certain new debts, the Debtors may pay a portion of the interest in stock and, under certain circumstances, require the conversion of such notes into stock. In addition, a holder of the respective debts may at its option convert the notes into stock. The proper application of Sec. 163(l) in the case of the new debts is subject to varying interpretations. However, based on the current terms of the new debts, the Debtors expect disallowance of deductibility of certain interest with respect to the new debts under Sec. 163(l). Settlements NYDIG Settlement On February 26, 2023, the Bankruptcy Court entered an order (the “NYDIG Order”), whereby the Debtors and NYDIG agreed that the Debtors would transfer the miners serving as collateral under the NYDIG Loan back to NYDIG over a period of several months in exchange for the full extinguishment of the NYDIG Loan. The final shipment of miners serving as collateral under the NYDIG loan occurred during the quarter ended March 31, 2023, after which the NYDIG Loan was extinguished in full and the Company recorded a $ 20.8 million Gain on debt extinguishment in the Company’s Consolidated Statements of Operations for the year ended December 31, 2023. 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 86 Core Scientific, Inc. Notes to Consolidated Financial Statements Energy Management and Consulting Services Agreement and other new agreements. Priority Power was determined to have a single aggregate allowed claim of $ 20.8 million, which was secured by a perfected mechanic’s lien. The claim was deemed paid and fully satisfied by transfer of specific equipment from the Debtors to Priority Power on the date of the Priority Power Order, thereby releasing all Priority Power liens. The satisfaction of the obligation and transfer of the equipment is a noncash transaction which occurred during the quarter ended March 31, 2023, and resulted in a gain of $ 4.9 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. City of Denton Lease Settlement On August 16, 2023, the Bankruptcy Court entered an order (the “City of Denton Order”), approving the parties’ agreement to settle all claims of City of Denton and Denton Municipal Electric (“Denton”) against the Debtors and releasing any and all liens related to the Debtors’ lease of the Denton facility in exchange for the Debtors’ execution lease cure costs totaling $ 1.5 million. There was no impact to the Consolidated Statements of Operations as a result of the satisfaction of the settlement. Huband-Mantor Construction Settlement On August 18, 2023, the Bankruptcy Court entered an order (the “HMC Order”), approving the parties’ agreement to settle all claims of Huband-Mantor Construction (“HMC”) and its subcontractors against the Debtors and releasing any and all liens in favor of HMC and its subcontractors in exchange for the Debtors’ payment of $ 2 million and the Debtors’ execution of a promissory note in favor of HMC in the principal amount of $ 15.5 million. The promissory note is secured by a mortgage of the Debtors Cottonwood 1 facility in Texas. The satisfaction of the settlement resulted in a loss of $ 8.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. See Note 9 — Convertible and Other Notes Payable for further discussion of the promissory note. Celsius Mining LLC Settlement On September 14, 2023, the Debtors and Celsius Mining LLC (“Celsius”) entered into a purchase and sale agreement, as amended, (the “PSA”) that provides, in addition to a full mutual release of claims asserted against each party in the respective bankruptcy cases, for a cash payment by Celsius to the Company of $ 14.0 million and a full and final release of all claims of Celsius against the Debtors related to the Celsius Contracts, in exchange for the Debtors’: (i) sale to Celsius of the Debtors’ Ward County, Texas bitcoin mining data center site (the “Cedarvale Facility”) and certain related assets, (ii) grant to Celsius of a perpetual, non-transferable (except as described in Section 14 of the PSA), non-exclusive limited license to use identified Company intellectual property solely as and to the extent necessary to (x) finish construction and development of the Cedarvale Facility, (y) develop and construct other mining facilities on other properties owned or leased by Celsius similar in type and scope to the Cedarvale Facility, and (z) operate all of the foregoing, (iii) assumption and assignment to Celsius of certain executory contracts, and (iv) unequivocal release of claims against Celsius asserted by the Company in connection with the Celsius Chapter 11 Cases and the Company’s Chapter 11 Cases. On November 2, 2023, the Company received the payment of $ 14.0 million from Celsius in connection with the PSA. The sale of the Cedarvale Facility resulted in a loss of $ 2.2 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. 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 9 — Convertible and Other Notes Payable for further discussion of the promissory note. J.W. Didado Electric, LLC Settlement On October 2, 2023, the Bankruptcy Court entered an order (the “J.W. Didado Order”), approving the parties’ agreement to settle all claims of W. Didado Electric, LLC (“Didado”) against the Debtors and releasing any and all liens related to the Debtors’ Muskogee datacenter in exchange for the Debtors’ execution of an unsecured promissory note in favor of Didado in the principal amount of $ 13 million to be paid over 36 months upon emergence from bankruptcy. The satisfaction of the settlement resulted in a loss of $ 0.7 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. 87 Core Scientific, Inc. Notes to Consolidated Financial Statements Trilogy LLC Settlement On October 2, 2023, the Bankruptcy Court entered an order (the “Trilogy Order”), approving the parties’ agreement to settle all claims of Trilogy LLC (“Trilogy”) against the Debtors and releasing any and all liens related to the Trilogy contracts in exchange for the Debtors’ execution of an unsecured promissory note in favor of Trilogy in the principal amount of $ 2.9 million to be paid over 30 months starting three months after the confirmation date. The satisfaction of the settlement resulted in a gain of $ 0.4 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. Harper Construction Company, Inc. Settlement On November 4, 2023, the Bankruptcy Court entered an order (the “Harper Order”), approving the parties agreement to settle all claims of Harper Construction Company, Inc (“Harper”) against the Debtors and releasing any and all liens related to the Debtors’ Muskogee datacenter in exchange for the Debtors’ execution of an unsecured promissory note in favor of Harper in the principal amount of $ 4.7 million to be paid over 30 months starting forty-five days after the emergence date. The satisfaction of the settlement resulted in a loss of $ 5.0 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. Dalton Settlement On December 29, 2023, the Bankruptcy Court entered an order (the “Dalton Settlement Agreement”), approving the parties’ agreement to settle all claims of Dalton Utilities (“Dalton”) against the Debtors including the Dalton Cure Claims in exchange for Debtors’ execution of an unsecured promissory note. As of December 31, 2023 , the Company accrued the face value of the pending settlement of $ 9.1 million as the execution of the promissory note is still pending. The satisfaction of the settlement resulted in a gain of $ 1.1 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. Maddox Settlement On January 16, 2024, the Bankruptcy Court entered an order (the “Maddox Settlement”) approving the parties’ agreement to terminate and reject all existing purchase orders and enter into a new purchase order. Pursuant to the new purchase order, the Company will pay a total purchase price of $ 2.8 million in seven equal monthly installments to Maddox Industrial Transformer LLC (“Maddox”) for 39 18 kilovolt transformers. The satisfaction of the settlement resulted in a loss of $ 1.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. Sphere 3D Corp. and Gryphon Settlement On January 16, 2024, the Bankruptcy Court entered an order (the “Core-Sphere-Gryphon Order”), granting Sphere 3D Corp (“Sphere”) an allowed $ 10 million general unsecured claim and a complete and final release of all claims of Sphere and Gryphon Digital Mining, Inc. (“Gryphon”) against the Debtors related to the hosting contracts. As part of the resolution, all miners have been returned to the client. Furthermore, the adversary proceeding was dismissed with prejudice, against both Gryphon and Sphere. The satisfaction of the settlement resulted in a gain of $ 23.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. McCarthy & Humphrey Settlement On January 18, 2024, the Bankruptcy Court entered an order (the “McCarthy Order”) approving the parties’ agreement to settle all claims and release all liens of McCarthy Building Companies, Inc. (“McCarthy”) and Humphrey & Associates, Inc. (“Humphrey”) against the Company in exchange for cash payments ($ 6.8 million to McCarthy and $ 5.6 million to Humphrey) within 90 days of emergence and promissory notes (to McCarthy in principal amount of $ 5.4 million and to Humphrey in principal amount of $ 1.4 million). However, if the Company delivers notice to McCarthy to proceed with construction activities, the Company will make the cash payments within three business days of such notice, and pay off the promissory notes in full within one business day of such notice. As the amount of the expected settlement results in amounts that are estimable and probable, the Company accrued for those liabilities as of December 31, 2023. The satisfaction of the settlement resulted in a loss of $ 4.6 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. Foundry Settlement On January 16, 2024, the Bankruptcy Court entered an order (the “Foundry Order”), granting Foundry Digital LLC (“Foundry”) an allowed $ 5.5 million general unsecured claim and a comprehensive release of all claims of Foundry against the Debtors. Concurrently, hosting contracts are assumed, and common stock in Core after emergence from bankruptcy have been confirmed as 88 Core Scientific, Inc. Notes to Consolidated Financial Statements part of the resolution. The satisfaction of the settlement resulted in a gain of $ 12.6 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023. Oklahoma Gas & Electric Settlement On January 24, 2024, the Bankruptcy Court entered an order (the “OG&E Order”), granting Oklahoma Gas & Electric Company (“OG&E”) an allowed $ 4.8 million general unsecured claim in full and final satisfaction of all claims of OG&E against the 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. Reorganization items, net and Liabilities Subject to Compromise Effective on December 21, 2022, the Company began to apply the provisions of ASC 852, Reorganizations (“ASC 852”), which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of certain financial statement line items. ASC 852 requires that the financial statements for periods including and after the filing of the Chapter 11 Cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses (including professional fees), realized gains and losses, and provisions for losses that can be directly associated with the reorganization must be reported separately as Reorganization items, net in the Consolidated Statements of Operations beginning December 21, 2022, the date of filing of the Chapter 11 Cases. As of December 31, 2023, liabilities that were affected by the Plan of Reorganization were classified as liabilities subject to compromise at the amounts expected to be allowed by the Bankruptcy Court, even if they may have been settled for lesser amounts as a result of the Plan of Reorganization or negotiations with creditors. If there was uncertainty about whether a secured claim was under secured, or would be impaired under the Plan of Reorganization, the entire amount of the claim was included with prepetition claims in liabilities subject to compromise. After the Effective Date, any resulting changes in classification were reflected in subsequent financial statements. As a result of the filing of the Chapter 11 Cases on December 21, 2022, the classification of pre-petition indebtedness was generally subject to compromise pursuant to the Plan of Reorganization. Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities were stayed. The Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors’ businesses and assets. Among other things, the Bankruptcy Court authorized the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes and critical vendors. The Debtors paid undisputed post-petition liabilities in the ordinary course of business. In addition, the Debtors rejected certain pre-petition executory contracts and unexpired leases with respect to their operations with the approval of the Bankruptcy Court. Any damages resulting from the rejection of executory contracts and unexpired leases were treated as general unsecured claims and paid in full. 89 Core Scientific, Inc. Notes to Consolidated Financial Statements Reorganization items, net incurred as a result of the Chapter 11 Cases presented separately in the accompanying Consolidated Statements of Operations were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Professional fees and other bankruptcy related costs $ 21,480 $ 92,195 $ 2,302 Negotiated settlements: Priority Power — ( 4,878 ) — ACM ELF ST LLC Lease — ( 5,003 ) — HMC — 8,269 — Trilogy — ( 385 ) — Didado — 657 — Celsius - Cedarvale PSA — 2,175 — Harper — 4,977 — McCarthy — 4,590 — Dalton 581 ( 1,122 ) — Gryphon 1 ( 23,260 ) — Foundry — ( 12,636 ) — OG&E — 4,800 — Maddox ( 2,843 ) 1,277 — Other, net ( 8 ) 14 — Total negotiated settlements ( 2,269 ) ( 20,525 ) — Satisfaction of allowed claims: Extinguishment of secured and other convertible notes ( 10,831 ) — — Extinguishment of miner equipment lender loans and leases ( 102,024 ) — — Satisfaction of general unsecured creditor claims ( 31,167 ) — — Satisfaction of cures and other claims 231 94,567 — Total satisfaction of allowed claims ( 143,791 ) 94,567 — Reimbursed claimant professional fees 12,802 — — Debtor-in-possession financing costs 339 24,885 — Write-off of debt issuance costs and original issue net discount on liabilities subject to compromise — — 3,529 (Gain) from adjustment of liabilities subject to compromise fair value to expected allowed amount — — ( 203,236 ) Reorganization items, net $ ( 111,439 ) 191,122 $ ( 197,405 ) During the year ended December 31, 2024, there were significant reorganization related gains resulting primarily from satisfaction of allowed claims under the Plan of Reorganization on the Effective Date and negotiated settlements, partially offset by professional fees and other bankruptcy related costs. These reorganization related impacts were classified as Reorganization items, net until the Effective Date. Reorganization costs incurred after the Effective Date have been classified as General and administrative expense. The accompanying Consolidated Balance Sheet as of December 31, 2023, includes amounts classified as Liabilities subject to compromise, which represented liabilities the Company estimated would be allowed as claims in the Chapter 11 Cases by the Court. These amounts represented the Company's estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases. 90 Core Scientific, Inc. Notes to Consolidated Financial Statements Liabilities subject to compromise consisted of the following (in thousands): December 31, 2023 Accounts payable $ 36,678 Accrued expenses and other current liabilities 20,300 Accounts payable, and accrued expenses and other current liabilities $ 56,978 Debt subject to compromise $ 41,777 Accrued interest on liabilities subject to compromise 580 Leases, debt and accrued interest 42,357 Liabilities subject to compromise $ 99,335 Pre-petition unsecured and secured claims which were identified as impaired and subject to compromise during the bankruptcy process were reclassified to Liabilities subject to compromise. During the year ended December 31, 2023, improvements in the Company’s condition and other developments indicated that secured claims which were initially considered subject to compromise at the beginning of the bankruptcy process and at December 31, 2022, were determined to no longer be subject to compromise as of December 31, 2023. Final determination of the value at which liabilities were settled was made when the Plan of Reorganization became effective and the Company emerged from bankruptcy. 5. BUSINESS COMBINATION AND RESTRUCTURING Merger Agreement In 2021, Power & Digital Infrastructure Acquisition Corp., a Delaware corporation (“XPDI”), entered into that certain Agreement and Plan of Reorganization and Merger, dated as of July 20, 2021, as amended on October 1, 2021, and as further amended on December 29, 2021, by and among Core Scientific Holding Co., XPDI Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of XPDI (“Merger Sub”) and XPDI (the “Merger Agreement”). XPDI’s stockholders approved the transactions (collectively, the “Merger” or “Business Combination”) contemplated by the Merger Agreement at a special meeting of stockholders held on January 19, 2022 (the “Special Meeting”). Pursuant to the terms of (a) the Merger Agreement and (b) that certain Agreement and Plan of Merger, dated as of October 1, 2021, as amended on January 14, 2022, by and among XPDI, Core Scientific Holding Co., XPDI Merger Sub 3, LLC, a Delaware limited liability company and wholly owned subsidiary of XPDI (“Merger Sub 3”), and Blockcap, Inc., a Nevada corporation and wholly owned subsidiary of Core Scientific (“Blockcap”), the Business Combination was effected by (i) the merger of Merger Sub with and into Core Scientific (the “First Merger”), which occurred on January 19, 2022 (the “Closing Date”), with Core Scientific surviving the First Merger as a wholly owned subsidiary of XPDI, (ii) the merger of Core Scientific with and into XPDI (the “Second Merger”), which occurred on January 20, 2022, with XPDI surviving the Second Merger, and (iii) following the closing of the Second Merger on January 20, 2022, the merger of Blockcap with and into Merger Sub 3 (the “Third Merger”), with Merger Sub 3 surviving the Third Merger as a wholly owned subsidiary of XPDI under the name “Core Scientific Acquired Mining LLC.” Immediately prior to the effective time of the First Merger (such effective time of the First Merger, the “Effective Time”), XPDI filed a Second Amended and Restated Certificate of Incorporation (the “Post-Combination Charter”) with the Secretary of State of the State of Delaware pursuant to which XPDI changed its name from “Power & Digital Infrastructure Acquisition Corp.” to “Core Scientific, Inc.” (hereinafter referred to as the “Company”) and redesignated its Class A common stock, par value $ 0.0001 per share (“XPDI Class A Common Stock”), and Class B common stock, par value $ 0.0001 per share (“XPDI Class B Common Stock”), as common stock, par value $ 0.0001 , of the Company (“New Core Common Stock”). The Exchange Ratio (as defined in the Merger Agreement) was 1.60015286880 of a share of New Core Common Stock per fully-diluted share of Legacy Core. In connection with the Special Meeting and the Business Combination, holders of 12.3 million of the 34.5 million then-outstanding shares of XPDI Class A Common Stock exercised their right to redeem their shares for cash at a redemption price of approximately $ 10.00 per share, for an aggregate redemption amount of $ 123.5 million. 91 Core Scientific, Inc. Notes to Consolidated Financial Statements The Business Combination provided gross proceeds of approximately $ 221.6 million from the XPDI trust account, resulting in approximately $ 201.0 million in net cash proceeds to Core Scientific, after the payment of transaction expenses, which is presented within proceeds from issuance of common stock, net of transaction costs on the consolidated statements of cash flows. Following the Business Combination, Legacy Core stockholders owned 90.7 %, former XPDI public stockholders owned 6.7 % and XPDI’s sponsor owned 2.6 % of the issued and outstanding shares of New Core Common Stock, excluding the impact of unvested restricted stock units and options. The proceeds from the Business Combination were used to fund mining equipment purchases and infrastructure build-out. The Business Combination is accounted for as a reverse recapitalization with the Company being the accounting acquirer. A reverse recapitalization does not result in a new basis of accounting. Accordingly, the reverse recapitalization was treated as the equivalent of Core Scientific Holding Co. issuing stock for the net assets of XPDI, accompanied by a recapitalization. The net assets of XPDI are stated at historical costs, with no goodwill or other intangible assets recorded. The Company identified $ 18.6 million of direct and incremental transaction costs, which consist of legal, accounting, and other professional services directly related to the Business Combination, of which $ 7.9 million were recognized during the year ended December 31, 2022. These transaction costs have been allocated to all instruments assumed or issued in the Business Combination on a relative fair value basis as of the date of the Business Combination. Transaction costs of $ 16.6 million have been allocated to equity-classified instruments and recognized as an adjustment to additional paid-in capital within total stockholders’ (deficit) equity. The cash outflows related to these costs have been netted against the proceeds from the issuance of New Core Common Stock upon the Business Combination with XPDI within financing activities on the Company’s consolidated statement of cash flows. Transaction costs of $ 2.0 million have been allocated to liability-classified instruments that are measured at fair value through earnings and have been recognized as a charge within general and administrative expenses for the year ended December 31, 2022. Immediately prior to the Effective Time, each share of Series A convertible preferred stock, par value $ 0.0001 , of Legacy Core automatically converted into one share of New Core Common Stock, and each share of Series B convertible preferred stock, par value $ 0.0001 , of Legacy Core automatically converted into one share of New Core Common Stock. In addition, immediately prior to the Effective Time, each share of XPDI Class B Common Stock automatically converted into one share of New Core Common Stock. 1.7 million shares (“SPAC Vesting Shares”) are subject to vesting conditions, and will vest i) upon the date on which New Core Common Stock’s volume-weighted average price is greater than $ 12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing Date or ii) upon any change in control of the Company, or a sale of substantially all of the Company’s assets that results in a change of control that is consummated within five years of the Closing Date that results in a price per share paid to the holders of the Company’s Common Stock equal to or in excess of $ 12.50 per share. As a result of the Business Combination, all of XPDI’s Class A Common Stock and Class B Common Stock automatically converted into shares of New Core Common Stock on a one -for-one basis. XPDI’s 8.6 million public warrants issued in its initial public offering (the “Public Warrants”) and 6.3 million warrants issued in connection with private placement at the time of XPDI’s initial public offering (the “Private Placement Warrants”) became warrants for New Core Common Stock. All share-based compensation awards were converted into comparable equity awards that are settled or exercisable for shares of New Core Common Stock. As a result, each stock option and warrant was converted into an option or warrant to purchase shares of New Core Common Stock based on an exchange ratio of 1.60015286880 . Each award of the Company’s restricted stock units (“RSUs”) was converted into RSUs of New Core based on an exchange ratio of 1.60015286880 . Each convertible note was convertible into New Core Common Stock in accordance with the terms of such convertible promissory note; provided, however, that with respect to outstanding convertible promissory notes for which Core Scientific received a duly executed exercise of conversion in accordance with such convertible promissory note, exercising the right of such holder to convert such convertible promissory note subject to and conditioned upon the occurrence of the Effective Time, the outstanding principal amount and accrued interest as of the Effective Time with respect to such convertible promissory note was converted into shares of New Core Common Stock, equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Core Scientific Common Stock issuable upon the conversion of such convertible promissory note in accordance with such convertible promissory note immediately prior to the Effective Time and (ii) the Exchange Ratio. Restructuring Activities During the second quarter of fiscal 2022, market conditions led management to evaluate its operations and refocus its efforts and resources on the core activities of its hosting and mining segments. Management initiated a plan to exit certain activities, 92 Core Scientific, Inc. Notes to Consolidated Financial Statements technologies and ancillary businesses, and to reduce portions of the Company’s workforce including those acquired through Blockcap’s acquisition of RADAR. Management completed the restructuring plan in October 2022 and all expected costs of the restructuring plan were recognized as of December 31, 2022. Cash severance and related payments under the Company’s ongoing severance policy of $ 0.9 million were paid as compensation for the year ended December 31, 2022. In addition to the cash restructuring charges, $ 1.0 million of stock-based compensation was paid in severance during the year ended December 31, 2022. Total cash and stock-based restructuring charges of $ 2.3 million were recognized in general and administrative expenses for the year ended December 31, 2022. As a result of exiting Blockchain Technologies during the second quarter of 2022, $ 2.0 million of intangible assets ceased to be used. Additionally, the Company determined that $ 2.5 million of software intangible assets that were previously acquired from Stax Digital LLC would no longer be used as a result of current and planned software upgrades. Consequently, the Company recorded an impairment of other intangible assets of $ 4.5 million for the year ended December 31, 2022, which is presented within impairment of goodwill and other intangibles on the Company’s Consolidated Statements of Operations. Goodwill associated with these activities was included in the goodwill impairment charge of $ 1.05 billion for the year ended December 31, 2022, of which $ 996.5 million was related to the Digital Asset Self-Mining reporting unit and $ 58.2 million was related to the Equipment Sales and Digital Asset Hosted Mining reporting unit. 6. PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment, net as of December 31, 2024 and December 31, 2023 consist of the following (in thousands): December 31, 2024 (As Restated) December 31, 2023 Estimated Useful Lives Land and improvements 1 $ 17,215 $ 21,852 20 years Building and improvements 186,267 164,495 12 to 39 years Mining and network equipment 2 413,296 441,404 3 to 5 years Electrical equipment 3 74,077 64,810 5 to 15 years Other property, plant and equipment 4 2,764 2,935 5 to 7 years Total 693,619 695,496 Less: accumulated depreciation and amortization 5 372,112 293,974 Total 321,507 401,522 Add: Construction in progress 111,966 183,909 Property, plant and equipment, net $ 433,473 $ 585,431 1 Estimated useful life of improvements. Land is not depreciated. 2 Includes finance lease assets of nil and $ 46.6 million at December 31, 2024 and 2023, respectively. 3 Includes finance lease assets of $ 8.5 million and $ 12.7 million at December 31, 2024 and 2023, respectively. 4 Includes finance lease assets of $ 0.4 million and $ 0.4 million at December 31, 2024 and 2023, respectively. 5 Includes accumulated amortization for assets under finance leases of $ 3.0 million and $ 43.4 million at December 31, 2024 and 2023, respectively. Depreciation expense, including amortization of finance lease assets, for the years ended December 31, 2024, 2023 and 2022, was $ 112.3 million, $ 95.7 million and $ 224.1 million, respectively. During the year ended December 31, 2024, the Company recognized an impairment charge of $ 122.9 million related to property, plant and equipment committed to demolition in connection with the conversion of data center facilities from digital asset mining to high-density colocation operations. These charges represent the excess of the carrying value of the identified assets over their estimated fair value. The fair value measurement date is the date on which the commitment to demolish is made, which generally coincides with the execution of a colocation customer contract and commitment to site redevelopment plans. Fair value was determined using a market approach based on estimated salvage and scrap proceeds for the affected assets, which were determined to be nominal. These are non-recurring Level 3 fair value measurements, and the significant unobservable input is the estimated salvage and scrap value of the affected assets, which was determined to be nominal. These charges are presented as impairment of property, plant and equipment in the Consolidated Statements of Operations. There were no other indicators of impairment of long-lived asset groups for the years ended December 31, 2024 and 2023. 93 Core Scientific, Inc. Notes to Consolidated Financial Statements During the year ended December 31, 2022, the Company’s operating performance and liquidity continued to be severely impacted by the prolonged decrease in the price of bitcoin, the increase in electricity costs, the increase in the global Bitcoin network hash rate and an increase in additional operating costs related to these factors. Additionally, primary and secondary market prices for application-specific integrated circuit (“ASIC”) miners of the type used by the Company in its business operations had decreased significantly from previous levels. During the quarter ended September 30, 2022, the Company evaluated whether the estimated future undiscounted cash flows from the operation of its data center facilities would recover the carrying value of the property, plant and equipment located at the sites and used in site operations, including the Company’s deployed mining equipment. Based on this evaluation, the Company determined that the carrying value of the property, plant and equipment at the Cedarvale, Texas facility site may no longer be fully recoverable by the cash flows of the site. The Company measured the amount of impairment at the Cedarvale facility site as the difference between the carrying amount of the site asset group of $ 119.8 million and the estimated fair value of the site asset group of $ 60.5 million, resulting in an impairment of the facility site’s property, plant and equipment of $ 59.3 million for the year ended December 31, 2022. During the quarter ended December 31, 2022, the Company evaluated whether the estimated future undiscounted cash flows from its operations would recover the carrying value of the property, plant and equipment asset groups located at the sites and used in site operations, including the Company’s deployed mining equipment. Based on this evaluation, the Company determined that the carrying value of its entire fleet of mining equipment and the other property, plant and equipment at the Cedarvale and Cottonwood, Texas facility sites may no longer be fully recoverable by the cash flows of those asset groups. The Company measured the amount of impairment of its fleet of mining equipment as the difference between their carrying amount of $ 668.5 million and their estimated fair value of $ 176.3 million resulting in an impairment of the fleet of mining equipment of $ 492.2 million. The Company measured the amount of impairment of its other property, plant and equipment at the Cedarvale and Cottonwood, Texas facility sites as the difference between their carrying amount of $ 174.3 million and their estimated fair value of $ 135.1 million resulting in an impairment of the other site property, plant and equipment of $ 39.2 million. During the year ended December 31, 2022, the Company recognized impairments to property, plant and equipment of $ 590.7 million. The Company’s analysis involved the use of a combination and corroboration of cost and market approaches. The cost approach has been used to estimate the fair value of some buildings, improvements, electrical equipment and other tangible assets used in combination with other assets. The cost approach was also used to corroborate certain estimates made using the market approach. Significant assumptions used in the cost approach include reproduction and replacement costs, useful service life, and orderly liquidation values. The cost approach utilizes useful service life and other estimates developed by the Company to determine fair value, which are unobservable Level 3 inputs. The market approach has been used to estimate the fair value of the Company’s ASIC miners, network equipment, real estate, and other of its buildings, improvements, electrical equipment and other tangible assets. The market approach was also used to corroborate certain estimates made using the cost approach. Valuations using the market approach are derived from manufacturer and secondary market pricing sources and, when available, comparable secondary market transactions. Significant judgment in using the market approach includes the selection of comparable assets based on the most relevant attributes of the evaluated asset, a selection of and modifications to transactions according to comparable use, size, geography and other traits, and the use of broker indications of relative market price metrics. The market approach utilizes comparable use, relative efficiency and other estimates developed by the Company to determine fair value, which are unobservable Level 3 inputs. Unobservable Level 3 inputs are used to measure fair value to the extent that relevant observable inputs are not available. The Company developed its estimates using the best information available at the time. 94 Core Scientific, Inc. Notes to Consolidated Financial Statements 7. BALANCE SHEET COMPONENTS Accrued expenses and other current liabilities as of December 31, 2024 and 2023, consist of the following (in thousands): December 31, 2024 2023 Accrued compensation $ 34,184 $ 593 Accrued liabilities 249 38,288 Accrued capital expenditures 12,106 416 Accrued interest 5,101 94,311 Other current liabilities 17,590 46,028 Total accrued expenses and other current liabilities $ 69,230 $ 179,636 1 Certain prior year amounts have been reclassified for consistency with the current year presentation. Accrued liabilities includes expenses related audit fees and security services. In 2023, accrued liabilities also included expenses related to settlements. Other current liabilities represents purchases of miners, taxes payable, energy costs, and other operating costs. 8. LEASES Lessee Accounting In February 2024, the Company entered into a lease agreement for a data center in Austin, Texas with a current operating capacity of 20 MW (the “Austin Lease”). The Austin Lease term is eight years . As of December 31, 2024, total future lease payments were expected to be approximately $ 91.2 million. In September 2024, the Company entered into a lease agreement by and between the Company and Aubix, LLC (the "Aubix Lease") for approximately 5.7 acres of land, including a 40,000 square foot building that the Company intends to use for its HPC hosting operations. The Aubix Lease commenced in November 2024 when the Company began occupancy of the leased space. The term of the Aubix Lease is 10 years from the commencement date. The Company has the right to extend the term of the Aubix Lease up to an additional 15 years in 5 year increments. At lease inception, total future minimum lease payments related to the Aubix Lease were approximately $ 43.5 million. In November 2024, the Company entered into a lease amendment with The City of Denton (the "Denton Lease Amendment") for additional land and access to power. The Denton Lease Amendment created an additional right-of-use asset and was recorded as a new operating lease. The term of the Denton Lease Amendment is 25 years. At lease inception, total future minimum lease payments related to the Denton Lease Amendment were $ 17.6 million. The components of operating and finance leases are presented on the Company’s Consolidated Balance Sheets as follows (in thousands): Financial statement line item December 31, 2024 December 31, 2023 Assets: Operating lease right-of-use assets Operating lease right-of-use assets $ 114,472 $ 7,844 Finance lease right-of-use assets Property, plant and equipment, net $ 5,873 $ 16,268 Liabilities: Operating lease liabilities, current portion Operating lease liabilities, current portion $ 9,974 $ 77 Operating lease liabilities, net of current portion Operating lease liabilities, net of current portion $ 97,843 $ 1,512 Finance lease liabilities, current portion Finance lease liabilities, current portion $ 1,669 $ 19,771 Finance lease liabilities, net of current portion Finance lease liabilities, net of current portion $ 3 $ 35,745 95 Core Scientific, Inc. Notes to Consolidated Financial Statements Supplemental disclosure of noncash investing and financing activities in the Company’s Consolidated Statements of Cash Flows includes a decrease in lease liability due to lease satisfactions on the Effective Date of $ 50.7 million presented in Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence for the year ended December 31, 2024. The components of lease expense were as follows (in thousands): Year Ended December 31, Financial statement line item 2024 2023 2022 Operating lease expense Cost of HPC hosting services $ 10,274 $ — $ — Operating lease expense Cost of digital asset self-mining 413 — — Operating lease expense Cost of digital asset hosted mining services 87 — — Operating lease expense General and administrative expenses 2,129 1,024 1,937 Short-term lease expense General and administrative expenses 383 — 24 Variable lease expense Cost of HPC hosting services 1,455 — — Finance lease expense: Amortization of right-of-use assets Cost of digital asset self-mining 1,106 11,424 31,372 Interest on lease liabilities Interest expense, net 1,200 1,787 7,080 Total finance lease expense 2,306 13,211 38,452 Total lease expense $ 17,047 $ 14,235 $ 40,413 Information relating to the lease term and discount rate is as follows: December 31, 2024 December 31, 2023 Weighted Average Remaining Lease Term (Years) Operating leases 8.5 16.7 Finance leases 0.7 2.2 Weighted Average Discount Rate Operating leases 8.5 % 11.7 % Finance leases 12.5 % 12.9 % Information relating to lease payments is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Lease Payments Operating cash flows from operating leases $ 16,328 $ 956 $ 726 Operating cash flows from finance leases $ 1,856 $ 964 $ 8,873 Financing cash flows from finance leases $ 6,038 $ 3,495 $ 27,868 1 Approximately $ 4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization. Of the $ 7.9 million of finance lease payments made during the year ended December 31, 2024, $ 4.4 million related to cure payments from emergence on the Effective Date. 96 Core Scientific, Inc. Notes to Consolidated Financial Statements The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at December 31, 2024, and thereafter (in thousands): Operating leases Finance leases 2025 $ 18,589 $ 1,750 2026 19,000 3 2027 19,423 — 2028 19,859 — 2029 20,358 — Thereafter 54,309 — Total lease payments 151,538 1,753 Less: imputed interest 43,721 81 Total $ 107,817 $ 1,672 Lessor Accounting We generate revenue by leasing property to a customer under licensing agreements. The manner in which we recognize these transactions in our financial statements is described in Note 2 — Summary of Significant Accounting Policies, Revenue Recognition — HPC Hosting Segment . There was no lease revenue during the years ended December 31, 2023 and 2022. The components of lease revenue were as follows (in thousands): Year Ended December 31, 2024 Lease Revenue Operating lease revenue $ 17,498 Variable lease revenue 6,880 Total lease revenue $ 24,378 The following table represents the maturity analysis of operating lease payments expected to be received at December 31, 2024, and thereafter (in thousands): Operating leases 2025 $ 23,254 2026 23,952 2027 24,670 2028 25,410 2029 26,173 Thereafter 33,747 Total $ 157,206 97 Core Scientific, Inc. Notes to Consolidated Financial Statements 9. CONVERTIBLE AND OTHER NOTES PAYABLE Notes payable as of December 31, 2024 and 2023, consists of the following (in thousands): Stated Interest Rate Effective Interest Rates Maturities December 31, 2024 December 31, 2023 Replacement DIP Credit Agreement 1 10.0 % 10.0 % 2024 $ — $ 4,273 Other Convertible Notes 2 10.0 % 10.0 % 2025 — 322,396 Secured Convertible Notes 2 10.0 % 10.0 % 2025 — 237,584 2029 Convertible Notes 3.0 % 3.7 % 2029 460,000 — 2031 Convertible Notes — % 0.4 % 2031 625,000 — Miner Financing: Blockfi loan 9.7 % - 13.1 % 10.1 % - 13.1 % 2023 — 53,913 Liberty/Stonebriar loan 10.6 % 10.6 % 2024 — 6,968 ACM note — % 15.0 % 2025 3,023 6,519 Mass Mutual Barings loans 9.8 % - 13.0 % 9.8 % - 13.0 % 2025 — 63,844 Anchor Labs loan 12.5 % 12.5 % 2024 — 25,159 Trinity loan 11.0 % 11.0 % 2024 — 23,356 Equipment and Settlement: Bremer loan 5.5 % 5.5 % 2027 10,669 18,331 HMC note 5.0 % 15.0 % 2026 9,042 14,208 Didado note 5.0 % 15.0 % 2027 8,964 13,000 Harper note 5.0 % 15.0 % 2026 3,119 4,678 Trilogy note 5.0 % 15.0 % 2026 2,107 2,927 Unsecured: B. Riley Bridge Notes 7.0 % 7.0 % 2023 — 41,777 Other: First Insurance note 7.6 % 7.6 % 2024 — 2,538 Stockholder loan 10.0 % 20.0 % 2023 — 10,000 Kentucky Note 5.0 % 5.0 % 2023 — 529 Other 5.0 % - 7.7 % 7.1 % - 15.0 % 2024 - 2025 129 2,453 Notes payable, prior to reclassification to Liabilities subject to compromise 1,122,053 854,453 Less: Notes payable in Liabilities subject to compromise 3 — 41,777 Less: Unamortized discounts - post-petition 31,773 4,236 Total notes payable, net 1,090,280 808,440 Less: current maturities 16,290 124,358 Convertible and other notes payable, net of current portion $ 1,073,990 $ 684,082 1 Replacement DIP Credit Agreement, see Note 4 — Chapter 11 Filing and Emergence from Bankruptcy for further information. 2 Other Convertible Notes and Secured Convertible Notes included principal balances at issuance and PIK interest. 3 In connection with the Company's Chapter 11 Cases, $ 41.8 million of outstanding notes payable were reclassified to Liabilities subject to compromise in the Company's Consolidated Balance Sheets as of December 31, 2023, at their expected allowed amount. Up to the Petition Date, the Company continued to accrue interest expense in relation to these reclassified debt instruments. As of December 31, 2023, $ 0.6 million of accrued interest was classified as Liabilities subject to compromise. 98 Core Scientific, Inc. Notes to Consolidated Financial Statements Maturities on convertible and other notes payable, gross of unamortized discounts, are as follows (in thousands): Convertible Notes Other Notes Payable 2025 $ — $ 17,708 2026 — 13,047 2027 — 6,297 2028 — — 2029 460,000 — Thereafter 625,000 — Total $ 1,085,000 $ 37,052 0.00 % Convertible Senior Notes due 2031 On December 5, 2024, the Company issued $ 625.0 million aggregate principal amount of 0.00 % Convertible Senior Notes due 2031 (the "2031 Convertible Notes"). The 2031 Convertible Notes mature on June 15, 2031, unless earlier converted, redeemed, or repurchased. Noteholders may convert their 2031 Convertible Notes at their option only upon the occurrence of certain events, including if the Company’s common stock price exceeds 130 % of the conversion price for a specified period or upon certain corporate events. The Company may redeem the 2031 Convertible Notes, in whole or in part, at its option on or after June 22, 2028, subject to certain conditions. Noteholders may require the Company to repurchase their 2031 Convertible Notes upon the occurrence of a “Fundamental Change” (as defined in the 2031 Convertible Notes Indenture) or on December 15, 2027. The 2031 Convertible Notes Indenture includes customary provisions relating to Events of Default, including payment defaults and certain bankruptcy or insolvency events. The initial conversion rate is 44.4587 shares of common stock per $1,000 principal amount of 2031 Convertible Notes (equivalent to an initial conversion price of approximately $ 22.49 per share). The conversion rate is subject to adjustment upon the occurrence of certain events. The net proceeds from the offering were approximately $ 608.7 million, after deducting the initial purchasers’ discounts and commissions and the Company’s estimated offering expenses. The Company will recognize interest expense on the 2031 Convertible Notes using the effective interest method over the term of the notes. The Company intends to use the net proceeds for general corporate purposes. 3.00 % Convertible Senior Notes due 2029 On August 19, 2024, the Company issued $ 460.0 million aggregate principal amount of 3.00 % Convertible Senior Notes due 2029 (the "2029 Convertible Notes"). The 2029 Convertible Notes mature on September 1, 2029, unless earlier converted, redeemed, or repurchased. Noteholders may convert their 2029 Convertible Notes at their option only upon the occurrence of certain events, including if the Company’s common stock price exceeds 130 % of the conversion price for a specified period or upon certain corporate events. The Company may redeem the 2029 Convertible Notes, in whole or in part, at its option on or after September 7, 2027, subject to certain conditions. Noteholders may require the Company to repurchase their 2029 Convertible Notes upon the occurrence of a “Fundamental Change” (as defined in the 2029 Convertible Notes Indenture). The 2029 Convertible Notes Indenture includes customary provisions relating to Events of Default, including payment defaults and certain bankruptcy or insolvency events. The initial conversion rate is 90.9256 shares of common stock per $1,000 principal amount of 2029 Convertible Notes (equivalent to an initial conversion price of approximately $ 11.00 per share). The conversion rate is subject to adjustment upon the occurrence of certain events. The net proceeds from the offering were approximately $ 447.6 million, after deducting after deducting the initial purchasers’ discounts and commissions and the Company’s estimated offering expenses. The Company will recognize interest expense on the 2029 Convertible Notes using the effective interest method over the term of the notes. 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. The Company intends to use the remaining net proceeds from the 2029 Convertible Notes Offering for general corporate purposes. Miner Equipment Lender Agreements (BlockFi and Stonebriar) On September 6, 2024, the Company paid $ 49.6 million to repay the BlockFi facility in full, of which $ 0.7 million was paid for interest. On October 2, 2024, the Company paid $ 6.5 million to repay the Stonebriar facility in full, of which $ 0.1 million was paid for interest. Below is a description of the Miner Equipment Lender Agreements prior to their repayment. 99 Core Scientific, Inc. Notes to Consolidated Financial Statements On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into separate New Miner Equipment Lender Agreements (Election 2) with each holder of an Allowed Miner Equipment Lender Secured Claim that was a Settling Miner Equipment Lender that elected on its ballot to receive and was receiving the Miner Equipment Lender Treatment Election 2 (the “Election 2 Miner Equipment Facility Lenders”), in each case, in the principal amount of eighty percent ( 80 %) of each applicable Holders’ Allowed Miner Equipment Lender Claim as of the Effective Date (the “Miner Equipment Lender Facility”). The maturity date on the Miner Equipment Lender Facility was January 23, 2029. Loans issued under the Miner Equipment Lender Facility accrued interest (1) from the Effective Date to and including the second anniversary of the Effective Date, (x) if the Company did not deliver an Election Notice (as defined below), at a rate of 13.0 % per annum and was payable 3.0 % in cash interest and 10.0 % paid-in-kind, and (y) if the Company delivered a written notice to the Election 2 Miner Equipment Facility Lenders five (5) business days prior to the due date of any interest payment during this period (an “Election Notice”), the Company could elect to have interest accrue at either (a) 12.0 % per annum, payable 5.0 % in cash and 7.0 % paid-in-kind or (ii) 8.0 % per annum, payable in cash and (2) following the second anniversary of the Effective Date, at a rate of 10.0 % per annum, payable in cash. Upon the occurrence and during the continuance of an Event of Default (as such term is defined in the New Miner Equipment Lender Agreements (Election 2)), the obligations under the Miner Equipment Lender Facility could, at the option of the Election 2 Miner Equipment Facility Lenders, accrue interest at a rate equal to an additional 2.0 % per annum over the rate otherwise applicable, with such interest being payable in cash on demand. Loans issued under the Miner Equipment Lender Facility were secured by a first-priority, duly-perfected and validly enforceable lien on (i) the collateral securing each Election 2 Miner Equipment Facility Lenders’ existing equipment loan/lease and (ii) new, non-financed miners acquired by the Company after the Effective Date, in an aggregate amount of up to $ 18.2 million (collectively, the “Equipment Priority Collateral”). On the Effective Date, under the terms of the Plan of Reorganization, each Miner Equipment Facility Lender entered into a separate intercreditor agreement with the Secured Convertible Notes Agent, the Secured Notes Agent and the Exit Agent (as defined in the Plan of Reorganization) with respect to the Equipment Priority Collateral. The present value of the Miner Equipment Lender Facility’s cash flows were estimated to be equal to its par amount, therefore no discount or premium was recorded on issuance. The Miner Equipment Lender Facility contained customary covenants, representations and warranties. Previous Indebtedness Extinguished During Fiscal 2024 Emergence The Replacement DIP Facility provided for a non-amortizing super-priority senior secured term loan facility in an aggregate principal amount not to exceed $ 70 million. Under the Replacement DIP Facility, (i) $ 35 million was made available following Bankruptcy Court approval of the interim debtor-in-possession order and (ii) $ 35 million was made available following Bankruptcy Court approval of the final debtor-in-possession order on March 1, 2023. Loans under the Replacement DIP Facility bore interest at a rate of 10 %, which was payable in kind in arrears on the first day of each calendar month. On January 4, 2024, the Company pre-paid the outstanding balance of $ 4.5 million on the Replacement DIP Facility provided by B. Riley Financial, the Company’s DIP lender. The $ 4.5 million payment included exit fees of approximately $ 0.2 million. The Replacement DIP Facility was terminated on the Effective Date. On January 24, 2024, the Company entered into a settlement agreement with Dalton Utilities which resulted in the issuance of an unsecured promissory note with a principal amount of $ 9.1 million dated December 29, 2023. The note bore interest at a contractual rate of 5.0 % per annum and matured on May 2, 2024. On the Effective Date, the obligations of the Company under the Company’s 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. 100 Core Scientific, Inc. Notes to Consolidated Financial Statements Extinguishments On the Effective Date, the holders of Secured and Other Convertible Notes received Secured Notes Indenture, New Secured Convertible Notes Indenture, New Common Stock and CVRs. Certain holders of New Secured Convertible Notes also funded and received the Exit Credit Agreement. The exchange and underlying agreements were executed contemporaneously and in contemplation of each other and were analyzed on a combined basis under ASC 470. The Company determined that extinguishment accounting was applicable, as the debt terms in the exchange are substantially different: (a) the present value of the cash flows of the new and remaining instruments differ by more than 10%, (b) the fair value of the conversion option changed by more than 10% of the carrying amount of the original instruments, and (c) a substantive conversion feature was added to the debt terms. The gain on extinguishment is reported in Reorganization items, net. Two previous miner equipment lender loans were exchanged for Miner Equipment Lender Agreements. The Company determined that extinguishment accounting was applicable, as the loans had original maturities near the exchange on the Effective Date. The remaining miner equipment lender loans and leases were exchanged for New Common Stock. The Company determined that extinguishment accounting was applicable, as the remaining miner equipment lender loans and leases were settled by the issuance of equity-classified shares. The gain on extinguishment is reported in Reorganization items, net. Issuances On the Effective Date, pursuant to the Plan of Reorganization, the Company issued the following debt instruments, which are defined and described in further detail below (in thousands): Principal Balance on the Effective Date Exit Credit Agreement $ 61,200 Secured Notes Indenture $ 150,000 New Secured Convertible Notes Indenture $ 260,000 Miner Equipment Lender Agreements $ 52,947 In addition, approximately $ 15.0 million of debt was reinstated pursuant to the Plan of Reorganization. Exit Credit Agreement Below is a description of the Exit Credit Agreement prior to its repayment in full on August 19, 2024. There is currently no outstanding Exit Credit Agreement. On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into a credit and guaranty agreement, dated as of January 23, 2024 (the “Exit Credit Agreement”), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Wilmington Trust, National Association, as administrative agent and collateral agent, consisting of an $ 80 million first-lien credit facility with certain holders of the Company’s Convertible Notes (in such capacity, the “Exit Lenders”) equal to (i) a $ 40 million term loan comprised of (x) a $ 20 million initial term loan and (y) a $ 20 million delayed-draw term loan and (ii) a $ 40 million roll-up of the outstanding balance of the Convertible Notes (the “Exit Facility”). The maturity date of the Exit Facility was January 23, 2027. From the Effective Date, cash borrowings under the Exit Facility bore interest at 9.0 % per annum, payable on the first business day of each Fiscal Quarter (as defined in the Exit Credit Agreement), commencing on April 1, 2024. The Exit Facility amortized in equal quarterly installments of $ 1.25 million beginning on January 1, 2026. Upon the occurrence and during the continuance of an Event of Default (as such term is defined in the Exit Credit Agreement), the obligations under the Exit Facility automatically bore interest at a rate equal to an additional 2.0 % per annum over the rate otherwise applicable, with such interest being payable in cash on each interest payment date (unless the administrative agent demands prior payment). At issuance, the Company identified embedded features in the Exit Facility and evaluated them for potential bifurcation in accordance with ASC 815-15. The identified embedded features were determined to be clearly and closely related to the debt host and not subject to bifurcation. 101 Core Scientific, Inc. Notes to Consolidated Financial Statements The present value of the Exit Facility’s cash flows were estimated to be equal to its par amount, therefore no discount or premium was recorded on issuance. Obligations under the Exit Credit Agreement were secured by a valid and perfected lien and security interest on substantially all assets and property of the Company and the guarantors thereof, including a first-priority lien on all new, unencumbered miner equipment purchased by the Company or any subsidiary thereof other than the following, which were each secured by a second priority lien on, (i) Equipment Priority Collateral (as defined below) and (ii) future financed equipment. Obligations under the Exit Credit Agreement were guaranteed by all direct and indirect subsidiaries of the Company. The Exit Facility provided for affirmative, negative and financial covenants, that, among other things, limited the ability of the Company and, in certain cases, certain of the Company’s subsidiaries, to incur more indebtedness; pay dividends, redeem stock or make other distributions; make investments; grant or permit certain liens; transfer or sell assets; merge or consolidate; and enter into certain transactions with our affiliates. The Exit Facility also imposed financial maintenance covenants in the form of a maximum leverage ratio and minimum liquidity requirements. The Exit Facility contained certain events of default, including, without limitation, nonpayment of principal, nonpayment of interest, fees or other obligations after three business days, bankruptcy events of the Company or any of its subsidiaries and certain changes of control. Secured Notes Indenture Below is a description of the Secured Notes (as defined below) prior to their repayment in full on August 19, 2024. There are currently no outstanding Secured Notes. On the Effective Date, under the terms of the Plan of Reorganization, the Company issued $ 150.0 million aggregate principal amount of senior secured notes due 2028 (the “Secured Notes”) pursuant to a secured notes indenture (the “Secured Notes Indenture”) among (i) the Company, as the issuer, (ii) the guarantors named therein and (iii) Wilmington Trust, National Association, as trustee and collateral agent (the “Secured Notes Agent”). The maturity date of the Secured Notes was January 23, 2028. The Secured Notes bore interest at a rate of 12.5 % per annum, payable on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2024. There was no amortization on the Secured Notes prior to maturity. The Secured Notes were secured by a valid and perfected second lien and security interest on substantially all assets of the Company and the guarantors thereof, which liens were junior in priority to liens securing the Exit Facility and were subject to the terms of the New Intercreditor Agreement. The Secured Notes were guaranteed by all direct and indirect subsidiaries of the Company. The Company was entitled to prepay the notes prior to maturity. If the notes were prepaid after the first year (including in the event that the notes are accelerated), or if the notes were not paid when due at the stated maturity, the Company was required to pay a premium on the outstanding principal amount equal to: (a) 1.00 % of the aggregate principal amount of the notes then outstanding, if the notes were prepaid on or after the first anniversary of the Issue Date (as such term is defined in the Secured Notes Indenture) and prior to the second anniversary of the Issue Date, (b) 2.00 % of the aggregate principal amount of the notes then outstanding, if the notes were prepaid on or after the second anniversary of the Issue Date and prior to the third anniversary of the Issue Date and (c) 3.00 % of the aggregate principal amount of the notes then outstanding, if the notes were prepaid on or after the third anniversary of the Issue Date or if the notes were not paid when due at maturity, in each case whether such payment was made before or after an event of default or an acceleration (including any acceleration as a result of an insolvency proceeding) of all or part of the notes. No prepayment premium shall be applicable in connection with any prepayment, repayment or refinancing that occurs prior to the first anniversary of the Issue Date. At issuance, the Company identified embedded features in the Secured Notes and evaluated them for potential bifurcation in accordance with ASC 815-15. The identified embedded features were determined to be clearly and closely related to the debt host and not subject to bifurcation. The present value of the Secured Notes’ cash flows at issuance were estimated to be $ 149.5 million, the discount was amortized to result in recognition of a level effective interest rate. The Secured Notes Indenture contained affirmative and negative covenants consistent with those in the Exit Facility and the New Secured Convertible Notes Indenture (as defined below) that, among other things, limited the ability of the Company and, in certain cases, certain of the Company’s subsidiaries to incur more indebtedness; pay dividends, redeem stock or make other 102 Core Scientific, Inc. Notes to Consolidated Financial Statements distributions; make investments; grant or permit certain liens; transfer or sell assets; merge or consolidate; and enter into certain transactions with its affiliates. The Secured Notes Indenture contained certain events of default, including, without limitation, nonpayment of principal, nonpayment of fees, interest or other obligations after three business days, violations of the covenants (subject, in the case of certain affirmative covenants, to certain grace periods), and bankruptcy events of the Company or any of its subsidiaries. New Secured Convertible Notes Indenture; Interest Payment and Mandatory Conversion The New Secured Convertible Notes (as defined below) were mandatorily converted as of July 10, 2024 and are no longer outstanding. On the Effective Date, under the terms of the Plan of Reorganization, the Company issued $ 260.0 million aggregate principal amount of secured convertible notes due 2029 (the “New Secured Convertible Notes”) pursuant to a secured convertible notes indenture (the “New Secured Convertible Notes Indenture”) among (i) Core Scientific, Inc., as the issuer, (ii) the guarantors party thereto and (iii) Wilmington Trust, National Association, as trustee and as collateral agent for the New Secured Convertible Notes (in such capacity, the “Secured Convertible Notes Agent”). The New Secured Convertible Notes were issued to holders of the Company’s Convertible Notes. The maturity date of the New Secured Convertible Notes was January 23, 2029. The New Secured Convertible Notes bore interest payable quarterly on March 15, June 15, September 15 and December 15, beginning on June 15, 2024, at the Company’s option, (i) in cash at a rate of 10.0 % per annum, or (ii) in cash at a rate of 6.0 % of per annum and in stock at a rate of 6.0 % of per annum (the “Cash/PIK Interest”); provided that the payable-in-stock portion of the Cash/PIK Interest was payable in New Common Stock using a price equal to the volume weighted average price of the New Common Stock for the 20 consecutive trading day period immediately preceding the date that was three business days prior to the applicable interest payment date. The Company exercised its option to make the June 15, 2024 interest payment 6 % in cash for approximately $ 6.0 million and 6 % in stock and issued 881,610 shares of its New Common Stock to the holders of the New Secured Convertible Notes on that date for total interest expense of approximately $ 9.8 million. Prior to the mandatory conversion on July 10, 2024, $ 26.4 million of New Secured Convertible Notes including interest were voluntarily converted for 4.5 million shares of New Common Stock. On July 5, 2024, the mandatory conversion feature of the New Secured Convertible Notes pursuant to the Indenture, dated as of January 23, 2024 (the “Indenture”), by and among the Company, as issuer, Wilmington Trust, National Association (“Wilmington Trust”), as trustee and collateral agent, and the other parties thereto, was triggered when the trading price of the Company’s New Common Stock on a daily volume weighted average basis (“VWAP”) exceeded the applicable threshold specified in the Indenture for the 20 th consecutive trading day. In connection with the mandatory conversion of the Notes, which took place on July 10, 2024, each registered holder of the New Secured Convertible Notes was entitled to receive (1) a number of shares of the Company’s New Common Stock equal to the aggregate principal amount of his, her or its notes outstanding, divided by the conversion price of $ 5.8317 (not including fractional shares), and (2) an amount of cash equal to the number of the resulting fractional shares, multiplied by the closing trading price of the Company’s New Common Stock on July 9, 2024. Following the mandatory conversion of the New Secured Convertible Notes, 40.1 million shares of the Company’s New Common Stock in the aggregate were issued in exchange for $ 233.6 million aggregate principal amount of the New Secured Convertible Notes. Description of the New Secured Convertible Notes Indenture Prior to the Mandatory Conversion Below is a description of the New Secured Convertible Notes prior to their mandatory conversion on July 10, 2024. There are currently no outstanding New Secured Convertible Notes. The New Secured Convertible Notes were secured by a valid and perfected third lien and security interest on substantially all assets of the Company and the guarantors thereof, and which liens were junior in priority to liens securing the Exit Facility and Secured Notes and were subject to the terms of the New Intercreditor Agreement. The New Secured Convertible Notes were guaranteed by all direct and indirect subsidiaries of the Company. Upon the occurrence of a Fundamental Change (as such term is defined in the New Secured Convertible Notes Indenture), the holders of the New Secured Convertible Notes had the right to require the Company to purchase all or any portion of such holder’s New Secured Convertible Notes at the principal amount thereof plus accrued interest to the repurchase date. Holders could elect to convert the New Secured Convertible Notes into shares of New Common Stock at any time prior to maturity at an initial conversion rate of 171.48 shares of New Common Stock per $1,000 principal amount of New Secured Convertible Notes (equal to a conversion price of $ 5.8317 per share of New Common Stock), which the Company could deliver in cash, New Common Stock or a combination 103 Core Scientific, Inc. Notes to Consolidated Financial Statements thereof. The conversion price was subject to anti-dilution adjustments upon (among other triggering events) the occurrence of certain dilutive transactions, including share dividends, splits, combinations and reclassification. The New Secured Convertible Notes also automatically converted into New Common Stock if the volume weighted average price for each day for any 20 consecutive trading days was greater than or equal to 133.6 % of the as-adjusted conversion price of $ 7.79 . At issuance, the Company identified embedded features in the New Secured Convertible Notes and evaluated them for potential bifurcation in accordance with ASC 815-15. The conversion feature was determined to be indexed to the Company’s own stock and would be classified in equity if it were freestanding meeting a scope exception from derivative accounting under ASC 815. The other identified embedded features were determined to be clearly and closely related to the debt host and not subject to bifurcation. Convertible debt instruments not specifically addressed in other GAAP are accounted for in accordance with ASC 470-20. Under that guidance a substantial premium is presumed to attributable to the conversion feature. A conversion feature which is not bifurcated as a derivative is initially recognized in equity as additional paid-in capital. The New Secured Convertible Notes were estimated to have a present value of $ 293.2 million on issuance. $ 260.0 million was initially recognized as debt and $ 33.2 million was initially recognized as additional paid-in capital. Under the relevant guidance, neither balance was subject to recognition of recurring remeasurements. The New Secured Convertible Notes Indenture contained affirmative and negative covenants consistent with those in the Exit Facility and the Secured Notes Indenture that, among other things, limited the ability of the Company and, in certain cases, certain of the Company’s subsidiaries to incur more indebtedness; pay dividends, redeem stock or make other distributions; make investments; grant or permit certain liens; transfer or sell assets; merge or consolidate; and enter into certain transactions with its affiliates. The New Secured Convertible Notes Indenture contained certain events of default, including, without limitation, nonpayment of principal, nonpayment of interest, fees or other obligations after three business days, and bankruptcy events of the Company or any of its subsidiaries. Kentucky Note —In December 2018, the Company entered into a five-year secured promissory note agreement for $ 2.4 million in connection with the acquisition of property in Kentucky for datacenter development (“Kentucky note”). The note bore interest at a rate per annum of 5 % and the Company was required to make monthly payments of principal and interest. Interest expense on the note was recognized based on an effective interest rate of 5 %. The loan was secured by the underlying property purchased. NYDIG Loan —In October 2020, the Company entered into a master equipment finance agreement with NYDIG and received a loan of $ 0.8 million to finance the Company’s acquisition of blockchain computing equipment. In March 2021, the Company received $ 3.8 million of additional loans under the master equipment finance agreement with NYDIG to finance the Company’s acquisition of blockchain computing equipment. The loans bore an interest rate of 15 % and had a term of 24 months from issuance. Interest expense on the loans was recognized based on an effective interest rate of 16 %. The loans were secured by the blockchain computing equipment financed by the loans. In May 2021, the Company received $ 13.4 million of additional loans under the master equipment finance agreement with NYDIG to finance the Company’s acquisition of blockchain computing equipment that bore an interest rate of 14.25 % and had a term of 24 months from issuance. Interest expense on the loans issued in May 2021 was recognized based on an effective interest rate of 17 %. In July 2021, the Company received blockchain computing equipment from NYDIG (which had been concurrently acquired by NYDIG from Blockcap in exchange for settlement of Blockcap’s debt with NYDIG) in exchange for $ 26.1 million of additional loans under the master equipment finance agreement with NYDIG that bore an interest rate of 14.25 % and had a term of 24 months from issuance. Interest expense on the loans issued in July 2021 was recognized based on an effective interest rate of 16 %. In November 2021, the Company received blockchain computing equipment from NYDIG in exchange for $ 33.4 million of additional loans under the master equipment finance agreement with NYDIG that bore an interest rate of 11 % and had a term of 24 months from issuance. Interest expense on the loans issued in November 2021 was recognized based on an effective interest rate of 11 %. As discussed in Note 4 — Chapter 11 Filing and Emergence from Bankruptcy, under the NYDIG Order, the final shipment of miners that served as collateral under the NYDIG loan occurred during the quarter ended March 31, 2023, after which the NYDIG Loan was extinguished in full and the Company recorded a $ 20.8 million Gain on extinguishment of debt in the Company’s Consolidated Statements of Operations. 104 Core Scientific, Inc. Notes to Consolidated Financial Statements Stockholder Loan —In January 2021, the Company borrowed $ 10.0 million from a stockholder for the purchase of blockchain computing equipment. The loan bore interest at 10 % per annum over a two-year term. The loan was issued with a warrant to purchase 0.2 million shares of common stock at an exercise price of $ 4.21 per share. The warrant had a two-year term. The Company allocated proceeds of $ 9.5 million to the notes and $ 0.5 million to the warrants on a relative fair value basis. Interest expense on the loan was recognized based on an effective interest rate of 20 %. The loan was secured by the blockchain computing equipment financed by the loan. Trinity Loan —In August 2021, the Company entered into a $ 30.0 million master equipment finance facility agreement with Trinity Capital Inc. (“Trinity”) to finance the Company’s acquisition of blockchain computing equipment and received a loan of $ 1.0 million at close. The loan had a term of 36 months from issuance. Interest expense on the loan was recognized based on an effective interest rate of 11.0 %. In November and December 2021, the Company borrowed $ 14.0 million and $ 5.0 million, respectively. The remaining balance of $ 10.0 million was drawn in February 2022. The loan was secured by the blockchain computing equipment financed by the loan. Bremer Loan —In October 2021, the Company entered into a lending agreement with Bremer Bank, National Association to borrow up to $ 16.2 million in two tranches through May 22, 2022, for the purchase of blockchain mining equipment and for improvements to data center and infrastructure. In December 2021, the Company entered into an additional term loan to borrow up to $ 9.6 million. The Company borrowed $ 15.2 million in October through December 2021. The Company borrowed an additional $ 4.8 million in January through March 2022. In April 2022, the Company borrowed an additional $ 0.7 million from Bremer to finance the construction of our North Dakota facility. The loans bore interest at 5.5 % annually and were due at the earlier of the date of sale of the underlying mining equipment or 60 months from issuance. Interest expense on the loans was recognized based on an effective interest rate of 5.6 %. The loans required the Company to maintain the following financial covenants: (1) a minimum debt service coverage ratio (defined in the agreement as EBITDA divided by scheduled principal and interest payments) of not less than 1.2 :1, measured annually beginning December 31, 2022; and (2) a fixed charge coverage ratio (defined in the agreement as EBITDA minus net distributions divided by scheduled principal and interest payments) of 1 :1, measured annually beginning December 31, 2022. The loans were secured by a first priority security interest in certain of the assets financed by the loans. Additionally, an interest buydown agreement was made between Grand Forks Growth Fund and the Bank of North Dakota acting on behalf of the PACE Program for the purpose of a buydown on the interest for certain of the Company’s loans financed through Bremer Bank. The total amount of interest buydown over the term of the loan was $ 0.8 million. In order to receive the interest buydown incentive, the Company had to (a) continue operation in the jurisdiction for a minimum of five years from the benefit date, (b) employ 13 new full-time employees within two years of receiving the incentive and continue to keep them employed for the duration of the agreement and (c) continue to make debt payments and no event of default should occur. If the Company discontinued operation in the jurisdiction within the next five years , it was obligated to repay the incentive back to the Bank of North Dakota. If after two years , the Company did not employ 13 new full-time employees, the interest buydown would be prorated to reflect any partial fulfillment and the Company, at a minimum, was required to pay back the value of the incentive to the Bank of North Dakota. For the years ended December 31, 2023, 2022 and 2021, there was no interest buydown. Blockfi Loan —In December 2021, the Company entered into two lending agreements with Blockfi Lending, LLC to borrow up to $ 110.0 million for the purchase of blockchain mining equipment. The first agreement consisted of $ 10.0 million and bore interest at 9.7 % with a term of 24 months from issuance. Interest expense on the loans issued in December 2021 was recognized based on an effective interest rate of 10.1 %. The second agreement consisted of $ 100.0 million and bore interest at 13.1 % with a term of 24 months from issuance. The Company borrowed the first tranche totaling $ 60.0 million across the two loans in December 2021 and borrowed the second tranche of $ 20.0 million in January 2022. The remaining $ 30.0 million expired unused in March 2022. Interest expense on the loans issued in December 2021 was recognized based on an effective interest rate of 13.1 %. The loans were secured by a first priority security interest in certain of the assets financed by the loans. Anchor Labs Loan —In March 2022, the Company entered into a $ 20.0 million equipment loan and security agreement with Anchorage Lending CA, LLC. (“Anchor Labs”) to finance the Company’s purchase of blockchain computing equipment. The Company borrowed $ 20.0 million in March 2022. The loan had a term of 24 months from issuance. Interest expense on the loan was recognized based on an effective interest rate of 12.5 %. In May 2022, the Company entered into a $ 11.7 million equipment loan and security agreement with Anchor Labs to finance the Company’s purchase of blockchain computing equipment. The Company borrowed $ 11.7 million in May 2022. The loan had a term of 24 months from issuance. Interest expense on the loan was recognized based on an effective interest rate of 12.5 %. The loans were secured by a first priority security interest in certain of the assets financed by the loans. Mass Mutual Barings Loans —In March 2022, the Company entered into a $ 100.0 million equipment loan and security agreement with Barings BDC, Inc., Barings Capital Investment Corporation and Barings Private Credit Corp. (“Mass Mutual 105 Core Scientific, Inc. Notes to Consolidated Financial Statements Barings”) to finance the Company’s purchase of blockchain computing equipment. The Company borrowed the first tranche of $ 30.0 million in March 2022 and borrowed the second tranche of $ 39.6 million in April 2022. On June 30, 2022, the remaining $ 30.4 million funding commitment expired unused. The loans under the agreement had a term of 36 months from issuance. Interest expense on the loans was recognized based on an effective interest rate of 9.8 %. The loans were secured by certain blockchain computing equipment. In August 2022, the Company amended the Mass Mutual Barings loans to defer principal payments for a period of six months beginning with payments due in August 2022. The amendments resulted in no change to the term of the loans and the remaining principal would amortize over the remaining life of the loans beginning in February 2023. The amendments also required an additional amount of blockchain computing equipment to be provided as collateral. Interest expense on the amended loans was recognized based on an effective interest rate of 13.0 %. In August 2022, the Company issued 0.3 million shares of Common Stock to Mass Mutual Barings as an amendment fee. B. Riley Bridge Notes —In April 2022, the Company entered into a $ 60.0 million bridge promissory note with B. Riley Commercial Capital, LLC and a $ 15.0 million bridge promissory note with an affiliate of B. Riley Commercial Capital, LLC (the “Bridge Notes”) maturing in December 2022. Interest expense on the Bridge Notes was recognized based on an effective interest rate of 7.0 %. In August 2022, the Company amended the Bridge Notes to, among other things, extend the maturity date to June 2023 (the “Amended Bridge Notes”). Under the terms of the modified agreement, $ 37.5 million of principal payments previously due in the second half of 2022 were now due in the first half of 2023. The Amended Bridge Notes required the proceeds of (i) any equity issuances (other than issuances consummated for purposes of making tax payments in connection with the vesting of restricted stock and restricted stock units and equity line of credit under the Equity Line of Credit discussed in Note 13 — Stockholders' Deficit (“ELOC”) sales), (ii) any secured debt incurred on or after April 7, 2022 (other than purchase money debt) in excess of $ 500 million and (iii) any ELOC sales in an amount equal to 25 % of the net cash proceeds received from any such ELOC sale, in each case, to be applied by us to repay the outstanding principal amount of the Amended Bridge Notes. On August 1, 2022, the Company issued a total of 0.4 million shares of Common Stock to B. Riley Securities, Inc., an affiliate of B. Riley Commercial Capital, in satisfaction of an advisory fee for providing advisory services to the Company in connection with entering into the Amended Bridge Notes. Liberty Loan —In April 2022, the Company entered into an $ 11.0 million equipment finance agreement with Liberty Commercial Finance LLC (“Liberty”) to finance the Company’s purchase of blockchain computing equipment. The Company borrowed $ 11.0 million in April 2022. The loan had a term of 24 months from issuance. Interest expense on the loan was recognized based on an effective interest rate of 10.6 %. The loans were secured by a first priority security interest in the equipment purchased. HMC Note - In August 2023, in addition to a cash payment of $ 2 million, the Company entered into a $ 15.5 million secured promissory note agreement with Huband-Mantor Construction, Inc (the “HMC note”) in connection with its settlement and release from all claims. The note bears interest at a contractual rate per annum of 5.0 % and has a term of 36 months from issuance, The Company was required to make monthly payments of principal and interest. Interest expense on the note was recognized based on an effective interest rate of 15.0 %. The loan was secured by a security interest in the underlying property leased. ACM Financing - In September 2023, the Company entered into a $ 7.5 million equipment finance agreement with ACM ELF ST LLC (the “ACM Loan”) in settlement and satisfaction of a previous equipment finance agreement. The finance agreement has a term of 26 months from issuance. Interest expense on the finance agreement was recognized based on an effective rate of 15.0 %. The finance agreement was secured by a security interest in the underlying equipment. First Insurance Loan - In August 2023, the Company entered into an unsecured $ 5.0 million Insurance Premium Financing Agreement with First Insurance Funding, a Division of Lake Forest Bank & Trust Company (the “First Insurance loan”) to finance the renewal premium of property insurance policies. Under the agreement, a down payment was paid in the amount of $ 2.1 million, and the Company will pay the balance in eight monthly installments commencing on September 24, 2023. The contractual annual percentage interest rate was 0 %. Interest expense on the note was recognized based on an effective interest rate of 7.6 % Replacement DIP Credit Agreement - On July 4, 2023, the Debtors, the Administrative Agent and the Replacement DIP Lenders entered into a First Amendment to the Replacement DIP Credit Agreement (the “First Amendment”). The First Amendment, among other things, provided (i) that the Debtors may make certain transfers or payments in connection with settlements of certain third-party claims as described in the First Amendment and (ii) for a reduction in the excess cash threshold amount to the sum of $ 40.0 million and an amount (which shall not be less than zero ) equal to $ 5.0 million less the amount of any payments on account of prepetition claims, liens or cure costs made by any Obligor after June 30, 2023. This excess cash threshold amount reduction resulted 106 Core Scientific, Inc. Notes to Consolidated Financial Statements in the Debtors making additional mandatory prepayments of $ 28.9 million under the Replacement DIP Credit Agreement during the year ended December 31, 2023. Trilogy Note - As discussed in Note 4 — Chapter 11 Filing and Emergence from Bankruptcy, the Company entered into a settlement agreement with Trilogy LLC which resulted in the issuance of an unsecured Promissory note (the “Trilogy Note”) with a principal amount of $ 2.9 million dated October 6, 2023. The note bears interest at a contractual rate per annum of 5.0 % and has a term of 30 months from issuance. The Company was required to make monthly payments of principal and interest with interest being recognized using an effective interest rate of 15.0 %. Didado Note - As discussed in Note 4 — Chapter 11 Filing and Emergence from Bankruptcy, the Company entered into a settlement agreement with J.W. Didado Electric, LLC, (“Didado”) which resulted in the issuance of an unsecured Promissory note (the “Didado Note”) with a principal amount of $ 13.0 million dated October 6, 2023. The note bears interest at a contractual rate per annum of 5.0 % and has a term of 36 months from issuance. The Company was required to make monthly payments of principal and interest with interest being recognized using an effective interest rate of 15.0 %. Harper Note - As discussed in Note 4 — Chapter 11 Filing and Emergence from Bankruptcy, the Company entered into a settlement agreement with Harper Construction Company, Inc, (“Harper”) which resulted in the issuance of an unsecured Promissory note (the “Harper Note”) with a principal amount of $ 4.7 million dated November 9, 2023. The note bears interest at a contractual rate per annum of 5.0 % and has a term of 30 months from issuance. The Company was required to make monthly payments of principal and interest with interest being recognized using an effective interest rate of 15.0 %. Convertible Notes - The Company had elected to measure its Convertible Notes at fair value prior to the Petition Date and accordingly recognized $ 13.1 million of debt issuance costs as incurred at the time of issuance within interest expense, net in the Company’s Consolidated Statements of Operations for the year ended December 31, 2022. The Company presented changes in fair value of the Convertible Notes during the periods prior to the Petition Date as follows: (1) the 10 % contractual rate of interest on the convertible notes (consisting of 4 % cash interest and 6 % PIK interest) was presented as interest expense, net on the Consolidated Statements of Operations; (2) changes in fair value attributable to the Company’s own credit risk were presented within Accumulated other comprehensive loss on the Company’s Consolidated Balance Sheets and as a component of Other comprehensive income (loss) on the Consolidated Statements of Comprehensive Loss; and (3) other fair value changes were presented within Non-operating expenses, net on the Consolidated Statements of Operations. The fair value option was not available to liabilities subject to compromise as they are recorded at their expected allowed amount. At the Petition Date, the accumulated fair value adjustment on the Convertible Notes was $ 130.3 million and the Accumulated other comprehensive loss related to changes in fair value attributable to the Company’s own credit risk was $ 72.6 million. These amounts were derecognized for a gain of $ 202.9 million reported in Reorganization items, net when the Convertible Notes were reclassified as Liabilities subject to compromise during the year ended December 31, 2022. The fair value of the Company’s Convertible Notes as of December 31, 2021, included the effect of a negotiation discount, which was a calibration adjustment that reflected the illiquidity of the instruments and the Company's negotiating position. Since the transaction was an orderly transaction, the Company deemed that the fair value equaled the transaction price at initial recognition. However, the closing of the merger of XPDI (which represented the occurrence of a qualified financing event as defined by the terms of the notes) in January 2022 resulted in the elimination of the negotiation discount along with other changes in fair value resulted in a significant increase in the fair value of the convertible notes (excluding interest expense and instrument-specific credit risk) for the year up until the Petition Date. 107 Core Scientific, Inc. Notes to Consolidated Financial Statements The Convertible Notes did not have any fair value adjustments or recognized debt issuance costs in fiscal 2023. The following summarizes the fair value adjustments and debt issuance costs recognized on the Convertible Notes for the year ended December 31, 2022 (in thousands): Year Ended December 31, Financial statement line item 2022 Cash interest payments Interest expense, net $ 21,581 Payment-in-kind (PIK) interest Interest expense, net 31,550 Instrument-specific credit risk Other comprehensive income, net of income taxes ( 83,579 ) Other fair value adjustments Fair value adjustment on convertible notes ( 103,274 ) Reclass to Reorganization items, net Reorganization items, net 202,900 Total fair value adjustments $ 69,178 Debt issuance costs Reorganization items, net $ 2,788 The principal amount of the Convertible Notes as of December 31, 2023, reflected the proceeds received plus any PIK interest added to the principal balance of the notes. Upon the closing of the Merger Agreement with XPDI in January 2022, the conversion price for the Convertible Notes became fixed at 80 % of the financing price ($ 8.00 per share of common stock) and the holders now had the right to convert at any time until maturity. At maturity, any Secured Convertible Notes not converted would be owed two times the original face value plus accrued interest; any other Convertible Notes (other than the Secured Convertible Notes) not converted would be owed the original face value plus accrued interest. In addition, at any time (both before and after the merger with XPDI), the Company had the right to prepay the Secured Convertible Notes at the minimum payoff of two times the outstanding face value plus accrued interest and for other Convertible Notes the outstanding face value plus accrued interest. All of the Convertible Notes, totaling $ 560.0 million as of December 31, 2023, were scheduled to mature on April 19, 2025, which included $ 237.6 million for the face value of the Secured Convertible Notes which had payoff at maturity of two times the face value of the note plus accrued interest. The total amount that would be owed on the Secured Convertible Notes outstanding as of December 31, 2023, if held to maturity was $ 475.2 million. The total amount that would be owed on the Convertible Notes if prepaid as of December 31, 2023, was $ 797.6 million. 10. CONTINGENT VALUE RIGHTS AND WARRANT LIABILITIES Contingent Value Rights Agreement On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into the Contingent Value Rights Agreement and recorded the liabilities at fair value as of the Effective Date. Pursuant to the Contingent Value Rights Agreement, the Company issued 51,783,625 CVRs to holders of the Company’s Convertible Notes who received New Common Stock (in such capacity, the “Payees”) in an aggregate amount of 51,783,625 shares of New Common Stock (the “Corresponding New Common Stock”). The CVRs require the Company to make payments to each Payee, of: • (i) at the first testing date, cash equal to such Payee’s pro rata share (the “Year 1 Contingent Payment Obligation”) of the lesser of (a) $ 43,333,333.33 and (b) the difference between (1) $ 260,000,000 and (2) the fair market value of the Corresponding New Common Stock (the “First Anniversary Payment Amount”); provided that the Year 1 Contingent Payment Obligation will be extinguished if the fair market value of the Corresponding New Common Stock is equal to or in excess of $ 260,000,000 with respect to the first testing date; as of December 31, 2024, the fair market value of the Corresponding New Common Stock was in excess of $ 260,000,000 . On January 23, 2025, the first testing date, the fair market value of the Corresponding New Common Stock was in excess of $ 260,000,000 and the Year 1 Contingent Payment Obligation was extinguished. • (ii) at the second testing date, cash or New Common Stock (or a combination of cash and New Common Stock), in the Company’s sole discretion, equal to such Payee’s pro rata share (the “Year 2 Contingent Payment Obligation”) of the lesser of (a) $ 43,333,333.33 and (b) the difference between (1) $ 260,000,000 minus the First Anniversary Payment Amount and (2) the fair market value of the Corresponding New Common Stock (the “Second Anniversary Payment Amount”); provided that the Year 2 Contingent Payment Obligation will be extinguished if the fair market value of the Corresponding New Common Stock is equal to or in excess of $ 260,000,000 minus the First Anniversary Payment Amount, if any, with respect to the second testing date; and 108 Core Scientific, Inc. Notes to Consolidated Financial Statements • (iii) at the third testing date, cash or New Common Stock (or a combination of cash and New Common Stock), in the Company’s sole discretion, equal to such Payee’s pro rata share (the “Year 3 Contingent Payment Obligation”) of the lesser of (a) $ 43,333,333.33 and (b) the difference between (1) $ 260,000,000 minus the sum of the First Anniversary Payment Amount and the Second Anniversary Payment Amount and (2) the fair market value of the Corresponding New Common Stock (the “Third Anniversary Payment Amount”); provided that the Year 3 Contingent Payment Obligation will be extinguished if the fair market value of the Corresponding New Common Stock is equal to or in excess of $ 260,000,000 minus (1) the First Anniversary Payment amount, if any and (2) the Second Anniversary Payment Amount, if any, with respect to the third testing date. GUC Contingent Value Rights and Extinguishment On the Effective Date, pursuant to the Plan of Reorganization, the Company issued (i) 20,335,491 shares of New Common Stock to holders of allowed general unsecured claims (the “GUC Equity Distribution”) and (ii) GUC CVRs to holders of allowed general unsecured claims. The terms of the GUC CVRs provided that unless the value of the GUC Equity Distribution, as implied by the volume weighted average (“VWAP”) of the closing price during any 20 trading days over any consecutive 30 trading day period during the period beginning on the Effective Date and ending on the date 18 months following the Effective Date (the “ GUC CVR Testing Period”), is equal to or in excess of the GUC Equity Distribution at Plan Value, the Company would be required to pay to each GUC Payee New Common Stock in an amount equal to the lesser of (i) such GUC Payee’s pro rata share of the New Common Stock with an aggregate value, based on Plan Value, of $ 7,100,000 and (ii) the difference between (a) the GUC Equity Distribution at Plan Value and (b) the value of the GUC Equity Distribution as implied by the volume weighted average of the closing price of the GUC Equity Distribution during the 60 trading days prior to the GUC CVR Testing Date. On July 1, 2024, the GUC 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. Derivative Warrant Liabilities As of December 31, 2023, the Company had 14.9 million warrants outstanding, including: (a) 8.6 million Public Warrants and (b) 6.3 million Private Placement Warrants issued to XPDI Sponsor LLC (“Sponsor”) and certain institutional investors (“Anchor Investors”). All of these warrants were cancelled without any payment therefore pursuant to the Plan of Reorganization. Prior to the warrants’ cancellation under the Plan of Reorganization, each Public Warrant and Private Placement Warrant were exercisable 30 days following the Closing Date of the XPDI Merger for one share of common stock at an exercise price of $ 11.50 per share for the five years from the Closing Date (January 19, 2027). Redemption of Private Placement Warrants The Private Placement Warrants were also cancelled without payment pursuant to the Plan of Reorganization. The terms of redemption of the Private Placement Warrants were identical in all respects to those for the Public Warrants except that, so long as they are held by the Sponsor, Anchor Investors or their permitted transferees they were not redeemable, except when the price per share of common stock equaled or exceeded $ 10.00 . If the Private Placement Warrants were held by someone other than the Sponsor, the Anchor Investors or their respective permitted transferees, the Private Placement Warrants were redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Effect of Chapter 11 Filing As discussed in Note 4 — Chapter 11 Filing and Emergence from Bankruptcy, liabilities that may be affected by the Plan of Reorganization must be classified as liabilities subject to compromise at the amounts expected to be allowed by the Bankruptcy Court. The warrants were classified as liabilities subject to compromise at their expected allowed amount of zero as of December 31, 2023. Their fair value of $ 0.3 million was derecognized as a gain in Reorganization items, net in the Company’s Consolidated Statements of Operations for the year ended December 31, 2022. 109 Core Scientific, Inc. Notes to Consolidated Financial Statements Warrant Agreement On the Effective Date and pursuant to the Plan of Reorganization and the Confirmation Order, the Company entered into a warrant agreement (the “Warrant Agreement”) providing for the issuance of 98,313,313 warrants, each exercisable for one share of New Common Stock at an exercise price of $ 6.81 per share (the “Tranche 1 Warrants”) and (ii) an aggregate of 81,927,898 warrants, each exercisable for one share of New Common Stock at an exercise price of $ 0.01 per share (the “Tranche 2 Warrants” and, together with the Tranche 1 Warrants, the “Warrants”). Pursuant to the Plan of Reorganization, holders of the Company’s previous common stock received, for each share of the Company’s previous stock held, 0.253244 Tranche 1 Warrants and 0.211037 Tranche 2 Warrants. Each whole Tranche 1 Warrant entitles the registered holder to purchase one whole share of New Common Stock at an exercise price of $ 6.81 per share (the “Tranche 1 Exercise Price”). Each whole Tranche 2 Warrant entitles the registered holder to purchase one whole share of New Common Stock at an exercise price of $ 0.01 per share at any time following the time the volume weighted average price per share of New Common Stock equals or exceeds $ 8.72 per share on each trading day for 20 consecutive trading days (the “Triggering Event”), which event occurred on July 11, 2024. The Tranche 1 and Tranche 2 Exercise Prices are subject to adjustment for specific events as set forth in the Warrant Agreement. The Tranche 1 Warrants will expire on January 23, 2027, and the Tranche 2 Warrants will expire on January 23, 2029, each at 5:00 p.m., New York City time, or earlier upon the occurrence of certain events as set forth in the Warrant Agreement. The Warrant Agreement provides that the Warrant Agreement, with respect to the Tranche 1 Warrants or Tranche 2 Warrants, may be amended with the prior written consent of holders holding a majority of the shares then issuable upon exercise of the Tranche 1 Warrants or Tranche 2 Warrants then outstanding, as applicable; provided, however, that any amendment or supplement to the Warrant Agreement that would reasonably be expected to materially and adversely affect any right of a holder of Warrants shall require the written consent of such holder. In addition, the consent of each holder of Warrants affected shall be required for any amendment pursuant to which the applicable exercise price would be increased, the number of shares issuable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided in the Warrant Agreement) or the applicable expiration date would be revised to an earlier date; provided, however, that the Company and the Warrant Agent may amend the Warrant Agreement without the consent of holders of Warrants to (i) to cure any ambiguity; (ii) correct any defective provision; or (iii) make any other provisions with respect to matters or questions arising under the Warrant Agreement as long as the new provisions do not adversely affect (other than a de minimis adverse effect) the interest of holders of Warrants. The Warrants may be exercised upon prior written notice of such election, payment of the applicable exercise price (together with any applicable taxes and governmental charges) and, with respect to Warrants held through the book-entry facilities of the Depository (as defined in the Warrant Agreement), surrender of the warrant certificate on or prior to the settlement date. The Tranche 2 Warrants may be exercised on a cashless basis, pursuant to which the holder shall be entitled to receive a number of shares of New Common Stock equal to one share of New Common Stock multiplied by a fraction equal to (x) the fair market value (as of the business day immediately preceding the date on which the exercise notice was delivered) of one share of New Common Stock, minus the applicable exercise price, divided by (y) such fair market value. Holders of Warrants do not have the rights or privileges of holders of New Common Stock or any voting rights until they exercise their Warrants and receive shares of New Common Stock. After the issuance of shares of New Common Stock upon exercise of the Warrants, each holder will be entitled to the same rights as holders of New Common Stock. Pursuant to the Warrant Agreement, holders of Warrants may exercise their Warrants only for a whole number of shares of New Common Stock. If, upon exercise, a holder would be entitled to receive a fractional interest in a share, such fractional interest will be rounded to the next higher whole number of the number of shares of New Common Stock to be issued to the holder. Effective January 24, 2024, the Tranche 1 Warrants and Tranche 2 Warrants began trading on the Nasdaq Global Select Market under the symbols “CORZW” and “CORZZ,” respectively. During the year ended December 31, 2024, 0.6 million Tranche 1 Warrants were exercised, which resulted in cash receipts of $ 4.4 million. The Tranche 2 Warrants became exercisable as of the close of trading on July 11, 2024, when the daily volume weighted average trading price of the Company’s New Common Stock exceeded $ 8.72 per share for the 20 th consecutive trading day pursuant to the Warrant Agreement. During the year ended December 31, 2024, 60.9 million Tranche 2 Warrants were exercised, which resulted in cash receipts of $ 0.6 million. 110 Core Scientific, Inc. Notes to Consolidated Financial Statements 11. FAIR VALUE MEASUREMENTS The Company measures certain assets and liabilities at fair value on a recurring or non-recurring basis in certain circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The Company uses observable market data when determining fair value whenever possible and relies on unobservable inputs only when observable market data is not available. Recurring Fair Value Measurements Prior to the Petition Date, the Public Warrants and Private Placement Warrants were recognized as derivative liabilities in accordance with ASC 815, Derivatives and Hedging . Accordingly, the Company recognized the warrant instruments as liabilities at fair value and adjusted the instruments to fair value at each reporting period. The liabilities were subject to remeasurement at each balance sheet date until exercised, and any change in fair value were recognized in the Company’s Consolidated Statements of Operations. The initial and subsequent fair value estimates of the Public Warrants and Private Placement Warrants are based on the listed price in an active market for such warrants. After the Petition Date, the Public Warrants and Private Placement Warrants were transferred to Liabilities subject to compromise at the expected allowed amount of zero dollars. A gain of $ 0.3 million from the derecognition of the prior fair value is reported in Reorganization items, net for the year ended December 31, 2022. The Company had elected prior to the Petition Date to measure its Convertible Notes at fair value on a recurring basis because the Company believed it better reflected the underlying economics of the Convertible Notes, which contain multiple embedded derivative features. The fair value of the Company’s convertible notes payable is determined using a market approach based on observable market prices for similar securities when available. Prior to the three months ended June 30, 2022, when observable market data was not available, the Company used an as-converted value plus risk put option model that included certain unobservable inputs that were significant to the fair value measurement such as probability of a financing event occurring (e.g., a SPAC merger or qualified financing), expected term, volatility and the negotiation discount. The fair value of the Secured Convertible Notes considered the minimum payoff at maturity of two times the face value of the note plus accrued interest, as well as the opportunity for appreciation if the value of the Company's stock increased 60 % or more relative to the pricing at the financing event (since the conversion price is set at 80 % of the stock price at the financing event, a stock price appreciation of 60 % would match the minimum payoff of two times the face value plus accrued interest). The fair value of the Other Convertible Notes considered the minimum payoff at maturity of one times the face value of the note plus accrued interest, as well as the opportunity for appreciation if the value of the Company's stock were to fall no more than 20 % relative to the pricing at the financing event (since the conversion price is set at 80 % of the stock price at the financing event, a stock price decline of 20 % would match the minimum payoff of one times the face value plus accrued interest). Upon the closing of the Merger Agreement with XPDI in January 2022, the conversion price for the Convertible Notes became fixed at 80 % of the financing price ($ 8.00 per share of common stock) and the holders now have the right to convert at any time until maturity. Due to the occurrence of the SPAC merger and the subsequent significant decline in the Company’s stock price below the conversion price, the fair value of the Company’s convertible notes beginning with the three months ended June 30, 2022 was determined using a discounted cash flow model that considered the principal and interest payments, including the minimum payoff at maturity of two times the face value of the note plus accrued interest for the Secured Convertible Notes and the value of the call option that includes certain unobservable inputs that may be significant to the fair value measurement such as expected term and volatility of the call option. The CVRs, GUC CVRs and Warrants are recognized as derivative liabilities in accordance with ASC 815 and are initially and subsequently measured at fair value with changes in fair value reflected in Net loss. When these instruments were recognized on the 111 Core Scientific, Inc. Notes to Consolidated Financial Statements Effective Date, observable market data was not available. As of December 31, 2024, observable Level 1 market data was available for the CVRs and Warrants. On the Effective Date, the CVRs and GUC CVRs were recognized at their fair value of $ 86.3 million. During the year ended December 31, 2024, a decrease in fair value of $ 82.1 million was included in Change in fair value of warrant and contingent value rights on the Company’s Consolidated Statements of Operations. On the Effective Date, the warrants were recognized at their fair value of $ 345.9 million. During the year ended December 31, 2024, an increase in fair value of $ 1.45 billion was included in Change in fair value of warrant and contingent value rights on the Company’s Consolidated Statements of Operations. The following presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 (in thousands): Fair Value Hierarchy Level 1 Level 2 Level 3 Fair value Assets: Cash and cash equivalents Money market funds $ 832,213 $ — $ — $ 832,213 Digital assets 23,893 — — 23,893 Total assets measured at fair value on a recurring basis $ 856,106 $ — $ — $ 856,106 Liabilities: Contingent value rights $ 4,272 $ — $ — $ 4,272 Warrants 1,097,285 — — 1,097,285 Total liabilities measured at fair value on a recurring basis $ 1,101,557 $ — $ — $ 1,101,557 Level 2 Recurring Fair Value Measurements In October 2023, the Company entered into an energy forward purchase contract to fix a specified component of the energy price related to forecasted energy purchases at the Cottonwood 1 facility from November 1, 2023 through May 31, 2024 (the “Energy Derivatives”). The energy forward purchase contract is not designated as a hedging instrument for accounting. The Energy Derivatives are recognized as derivatives in accordance with ASC 815 initially and subsequently measured at fair value with changes in value reflected in Netloss. The Company measures the fair value of its energy forward purchase contract using the discounted cash flow model and uses Intercontinental Exchange forward curves and risk-free rates as observable market inputs. The following table summarizes the fair value of the energy forward purchase contract on the Company’s Consolidated Balance Sheets (in thousands): Fair Value (Level 2) Financial statement line item December 31, 2024 December 31, 2023 Energy forward purchase contract Accrued expenses and other current liabilities $ — $ 2,262 112 Core Scientific, Inc. Notes to Consolidated Financial Statements The Company recorded the following losses related to the energy forward purchase contract on the Company’s Consolidated Statements of Operations (in thousands): Year Ended December 31, Financial statement line item 2024 2023 Energy forward purchase contract Change in fair value of energy derivatives $ ( 2,757 ) $ ( 3,918 ) Nonrecurring Fair Value Measurements The Company’s non-financial assets, including property, plant and equipment, and intangible assets (other than digital assets) are measured at estimated fair value on a nonrecurring basis and are adjusted only upon impairment or when held for sale. Prior to the adoption of ASU 2023-08, digital assets were subject to nonrecurring fair value adjustments only when impairment was recognized. Refer to Note 2 — Summary of Significant Accounting Policies and Note 6 — Property, Plant, and Equipment, for more information regarding fair value considerations when measuring impairment. No non-financial assets were classified as Level 3 as of December 31, 2024 or December 31, 2023. The Company’s financial instruments, that are not subject to recurring fair value measurements, include cash and cash equivalents (other than money market funds), restricted cash, accounts receivable, accounts payable, leases, notes payable and certain accrued expenses and other liabilities. Except for the 2029 Convertible Notes and 2031 Convertible Notes, the carrying amount of these financial instruments materially approximate their fair values. As of December 31, 2024, the fair value of the 2029 Convertible Notes and 2031 Convertible Notes using Level 1 active market price was $ 703.1 million and $ 615.8 million, respectively. 12. COMMITMENTS AND CONTINGENCIES Commitments 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. 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. Purported Shareholder Class Action (“Pang”) On November 14, 2022, Plaintiff Mei Pang filed a purported class-action complaint against Core Scientific, Inc., its former chief executive officer, Michael Levitt, and others in the United States District Court, Western District (Austin) of Texas asserting that the Company violated the Securities and Exchange Act by allegedly failing to disclose to investors that among other things the Company was vulnerable to litigation given its decision to pass power costs to its customers, that certain clients had breached their contracts, and that this impacted the Company’s profitability and ability to continue as a going concern. The complaint seeks monetary damages. Core filed a notice of suggestion of bankruptcy stating that its petition for bankruptcy—filed on December 21, 2022—operates as a stay to the continuation of this matter. Plaintiff subsequently withdrew its claims against Core. A lead plaintiff was appointed in April 2023 and proofs of claim were filed in the Company’s Chapter 11 Cases. After the Company filed its motion to dismiss and a subsequent motion for consideration with respect to remaining claims not dismissed, all remaining claims in the complaint against the individual defendants were subsequently dismissed without prejudice in April 2024. 113 Core Scientific, Inc. Notes to Consolidated Financial Statements On December 7, 2023, the United States Bankruptcy Court for the Southern District of Texas in Houston, sustained the Company’s objection to the filed class proof of claim without prejudice to re-file a proof of claim on an individual basis by December 20, 2023; and denied plaintiff’s Motion for Class Treatment under Fed. R. Bankr. P. 7023. No individual proof of claim was filed by any of the class representatives of the purported class action by December 20, 2023, and a separately filed objection to confirmation of Debtors’ Fourth Amended Chapter 11 Plan and Disclosure Statement was overruled by the Bankruptcy Court on January 16, 2024. On January 29, 2024, plaintiff filed a notice of appeal of the order confirming the Company’s Plan of Reorganization. On June 7, 2024, Plaintiff refiled its complaint asserting that the individual defendants violated the Securities Exchange Act by allegedly failing to disclose to investors that among other things the Company failed to disclose known trends or uncertainties that would have an impact on the Company’s financial performance. The Company’s motion to dismiss the refiled complaint is pending with the United States District Court in Austin, Texas. Purported Shareholder Class Action (“Ihle”) On July 24, 2023, Plaintiff Brad Ihle filed a purported class action complaint against certain officers and directors of Power & Digital Infrastructure Acquisition Corp. (the former name of the current corporate entity operating our business, or “XPDI”) and XMS Sponsor LLC et al, in the Court of Chancery State of Delaware. The complaint alleges breach of fiduciary duties arising out of the merger of XPDI and the entity that conducted our business operations prior to the merger (“Legacy Core”) and the marketing and solicitation of shareholders pursuant to that merger agreement dated July 20, 2021. Certain of the defendants have notified the Company of their intention to seek defense and indemnification in this matter pursuant to Delaware law and the Company’s bylaws. Employment Claim On September 30, 2022, Harlin Dean, a former executive of Blockcap, Inc. (n/k/a Core Scientific Acquired Mining, LLC) sent a demand letter to the Company, seeking approximately $ 9.8 million. Along with the demand letter, Mr. Dean enclosed a complaint that had been filed in the 419 th Judicial District Court, Travis County, Texas, which asserted the following causes of action: (1) breach of employment agreement; (2) quantum meruit; (3) promissory estoppel; (4) conversion; (5) declaratory relief; (6) equitable relief/specific performance; (7) imposition of constructive trust; (8) accounting; and (9) attorneys’ fees and costs. According to Mr. Dean, the Company failed to honor the terms of his employment agreement upon his resignation. Following the Company’s filing of the Chapter 11 Cases, Mr. Dean filed proofs of claim in the Chapter 11 Cases alleging the Company breached Mr. Dean’s employment agreement and various equity award agreements. Mr. Dean seeks a total recovery of approximately $ 8 million. The Debtors filed an objection to Mr. Dean’s proofs of claim on September 19, 2023. Mr. Dean filed a reply in support of his claim and moved for summary judgment on October 19. As a general unsecured creditor under the Plan of Reorganization, any amount determined to be owed to plaintiff will be paid in common shares of the Company as provided in the Plan of Reorganization. On January 24, 2025, the Company reached a settlement with Mr. Dean for $ 2.8 million and agreed to issue 561,866 shares of common stock to resolve the matter. The shares issued in settlement were drawn from the shares of New Common Stock held in reserve for disputed claims as described in Note 13 — Stockholders' Deficit and do not represent a new issuance of shares. Contract Claims GEM Mining 1, LLC, GEM Mining 2, LLC, GEM Mining 2B, LLC, and GEM Mining 4, LLC (together “GEM”) have filed proofs of claim in the Chapter 11 Cases alleging the Company breached its hosting agreements with GEM and are seeking to recover approximately $ 4.1 million. The Debtors filed an initial objection to GEM’s proofs of claim on May 4, 2023, and filed a supplemental objection on May 6, 2023. GEM filed a response in opposition to Debtors’ objections on September 6, 2023. Additionally, GEM 1 and GEM 4 filed proofs of claim in the Chapter 11 Case asserting approximately $ 8 million in rejection damages. The Debtors are currently preparing an objection to these claims along with a reply to GEM’s response to the Debtors’ earlier filed objections. As a general unsecured creditor under the Plan of Reorganization, any amount determined to be owed to plaintiff will be paid in common shares of the Company as provided in the Plan of Reorganization. On January 28, 2025, the Company reached a settlement with GEM for $ 4.0 million and agreed to issue 817,775 shares of common stock to resolve the matter. The shares issued in settlement were drawn from the shares of New Common Stock held in reserve for disputed claims as described in Note 13 — Stockholders' Deficit and do not represent a new issuance of shares. 114 Core Scientific, Inc. Notes to Consolidated Financial Statements As of December 31, 2024 and December 31, 2023, there were no other material loss contingency accruals for legal matters. Leases —See Note 8 — Leases for additional information. 13. STOCKHOLDERS' DEFICIT Pre-emergence from Bankruptcy Authorized Capital As of December 31, 2023, the Company was authorized to issue 10.0 billion shares of common stock, $ 0.0001 par value. The holders of the Company’s common stock were entitled to one vote per share. As a result of the Business Combination, all of XPDI’s Class A Common Stock and Class B Common Stock automatically converted into 30.8 million shares of Core common stock on a one -for-one basis. XPDI’s 8.6 million public warrants issued in its initial public offering (the “Public Warrants”) and 6.3 million warrants issued in connection with private placement at the time of XPDI’s initial public offering (the “Private Placement Warrants”) became warrants for Core common stock. Following the Business Combination with XPDI, each share of common stock or warrant was converted to shares of Core common stock or a warrant to purchase shares of Core common stock based on an exchange ratio of 1.60015286880 . Equity Line of Credit In July 2022, the Company entered into a common stock purchase agreement (the “Equity Line of Credit”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with B. Riley. Pursuant to the Equity Line of Credit, the Company had the right to sell to B. Riley, up to $ 100.0 million of shares of the Company’s common stock, par value $ 0.0001 per share (the “ELOC Common Stock”), subject to certain limitations and conditions set forth in the Equity Line of Credit, from time to time during the term of the Equity Line of Credit. Sales of ELOC Common Stock pursuant to the Equity Line of Credit, and the timing of any sales, were solely at the Company’s option, and the Company was under no obligation to sell any securities to B. Riley under the Equity Line of Credit. The Equity Line of Credit was terminated as a result of the Plan of Reorganization and the obligations of the parties under the Equity Line of Credit were extinguished. As consideration for B. Riley’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the Equity Line of Credit, upon execution of the Equity Line of Credit in July 2022, the Company issued 0.6 million shares to B. Riley with a fair value of $ 1.1 million at issuance which was recorded within other non-operating expenses, net on the Company’s Consolidated Statements of Operations and presented as equity line of credit expenses on the Consolidated Statements of Cash Flows. In addition, the Company reimbursed $ 0.1 million of reasonable legal fees and disbursements of B. Riley’s legal counsel in connection with the transactions contemplated by the Equity Line of Credit and the Registration Rights Agreement. During the year ended December 31, 2022, the Company issued 13.4 million shares under the Equity Line of Credit for a total sales price to B. Riley of $ 20.7 million is net of $ 0.6 million for the fixed 3.0 % discount to the VWAP described above which was recorded within other non-operating expenses, net on the Company’s Consolidated Statements of Operations and presented as equity line of credit expenses on the Consolidated Statements of Cash Flows. During the year ended December 31, 2023, the Company did not issue any shares under the Equity Line of Credit. No shares of common stock were available to be issued under the Equity Line of Credit as of December 31, 2023, and the Equity Line of Credit was terminated as a result of the Plan of Reorganization. Warrant Exercises In March 2020, the Company issued warrants to the Company’s President and Chief Executive Officer and a member of the Board of Directors to purchase up to 6.4 million shares of the Company’s common stock at an exercise price of $ 0.84 per share (as amended). In March 2022, a warrant holder exercised their warrant to purchase 3.2 million shares in a cashless exercise resulting in 2.9 million net shares issued to the warrant holder after withholding 0.3 million shares for the exercise price. In March 2020, the Company issued warrants to service providers in exchange for services provided related to the issuance of Series A Convertible Preferred Stock. The warrants were for an aggregate of 0.2 million shares at an exercise price of $ 4.27 per share. 115 Core Scientific, Inc. Notes to Consolidated Financial Statements During the year ended December 31, 2022, 4.4 million of the warrants were exercised in a cashless exercise resulting in 3.0 million net shares issued to the warrant holders. There were no warrant exercises during the year ended December 31, 2023. Convertible Note Exercises As discussed in Note 9 — Convertible and Other Notes Payable, the Company issued $ 514.8 million of Convertible Notes in 2021 along with issuing an additional $ 31.4 million from issuance through December 31, 2022, as payment-in-kind interest on convertible notes outstanding. The Convertible Notes became convertible into common shares at the option of the holder at a conversion price equal to $ 8.00 per share upon the closing of the Merger Agreement with XPDI in January 2022. During the year ended December 31, 2022, $ 1.6 million of Convertible Notes were exercised resulting in 0.2 million shares issued to the holders of the Convertible Notes that were exercised. There were no exercises of Convertible Notes during the year ended December 31, 2023. SPAC Vesting Shares 1.7 million common shares are subject to vesting requirements, as described further in Note 5 — Business Combination and Restructuring. These contingently issuable shares do not require future service in order to vest and do not result in stock-based compensation expense. The SPAC Vesting Shares are accounted for as an equity contract, and meet the criteria for equity classification. The Company has recorded the SPAC Vesting Shares within additional paid-in capital on the Company’s Consolidated Balance Sheets as of December 31, 2023. Vendor Settlement In March 2022, the Company issued 1.6 million shares of the Company’s common stock related to a vendor liability that had been assumed by the Company in July 2021 as part of the Blockcap acquisition. In addition, the vendor liability required settlement in cash based on the difference between the weighted average of the closing price of the Company’s common stock for each day there was a closing price during the thirty consecutive days immediately prior to the expiration of the lockup period (defined in the agreement as 180 days from the date from the closing of the XPDI merger) and the $ 21.3 million contractual amount of the liability. During the year ended December 31, 2022, we recorded $ 9.5 million, within Other non-operating expenses, net on the Consolidated Statements of Operations related to changes in the fair value of the vendor liability. There were no changes in the fair value of the vendor liability during the year ended December 31, 2023. As of December 31, 2023, the fair value of the liability of $ 18.1 million was recorded within Liabilities subject to compromise on the Consolidated Balance Sheets. Equity Incentive Plans At the Special Meeting in connection with the XPDI Merger, the stockholders of XPDI approved the Core Scientific, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). Awards granted under the 2021 Plan may be incentive stock options (subject to satisfaction of applicable statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock and stock units, performance awards and other cash-based or stock-based awards. Awards granted under the 2021 Plan are subject to a minimum vesting period of at least one year commencing from the date of grant. Additionally, options granted under the plan must expire within ten years of the grant date and must be granted with exercise prices of no less than the fair value of the common stock on the grant date, as determined by the Company’s Board of Directors. Following the consummation of the Business Combination, the Company expects that its Board of Directors will make grants of awards under the 2021 Plan to eligible participants. The maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan is 45.0 million shares. As of the Effective date of the Plan of Reorganization, the Company no longer grants equity incentive awards under the 2021 Plan. Equity Rights Offering On November 20, 2023, the Company commenced an equity rights offering (the “Equity Rights Offering”) of common shares of the reorganized Company (the “ERO Shares”) in an aggregate amount of $ 55 million. On the Effective Date, the Company issued 15,648,896 shares on account of the Equity Rights Offering in exchange for the cash proceeds. Also, on November 16, 2023, the Company entered into an agreement (the “Backstop Commitment Letter”) with the parties named therein (the “Commitment Parties”), pursuant to which the Commitment Parties agreed to severally and not jointly backstop $ 37.1 million of the Equity Rights Offering (the “Backstop Commitment”), subject to the terms and conditions of the Backstop Commitment Letter. The subscription period for the ERO expired on January 5, 2024. The Equity Rights Offering was oversubscribed and the aggregate subscriptions (including over subscriptions) exceeded the number of ERO Shares offered to be purchased as part of the Equity Rights Offering. The results of the 116 Core Scientific, Inc. Notes to Consolidated Financial Statements Equity Rights Offering rendered the previously arranged Backstop Commitment unnecessary, however, on the Effective Date, the Company issued 2,111,178 New Common Stock shares on account of the underlying backstop fee associated with the Backstop Commitment. Emergence from Bankruptcy As disclosed in Note 1 — Organization and Description of Business, on December 21, 2022, the Debtors filed the Chapter 11 Cases in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code. On January 15, 2024, the Debtors filed with the Bankruptcy Court the Plan of Reorganization, and on January 16, 2024, the Bankruptcy Court entered the Confirmation Order. On the Effective Date, the Plan of Reorganization became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases. On the Effective Date, in connection with the effectiveness of, and pursuant to the terms of, the Plan of Reorganization and the Confirmation Order, the Company’s common stock outstanding immediately before the Effective Date was canceled and is of no further force or effect, and the new organizational documents of the Company became effective, authorizing the issuance of shares of common stock, par value $ 0.00001 per share (the “New Common Stock”). In accordance with the foregoing, on the Effective Date, the Company, as reorganized on the Effective Date and in accordance with the Plan of Reorganization, issued the: (i) New Common Stock, (ii) Warrants, (iii) CVRs, (iv) New Secured Convertible Notes, (v) Secured Notes and (vi) the GUC CVRs (each, as defined below). Such securities, rights, or interests were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) provided by section 1145 of the Bankruptcy Code. On the Effective Date, all equity interests in the Company that existed immediately prior to the Effective Date were cancelled, including the Company’s then-existing common stock and warrants, and the Company issued or caused to be issued the New Common Stock in accordance with the terms of the Plan of Reorganization. On the Effective Date, pursuant to the Plan of Reorganization, the Company issued or held in reserve as issuable: • 176,266,782 shares of New Common Stock; • 4,725,091 shares of New Common Stock held in reserve for disputed claims; • 180,241,211 Warrants, composed of 98,313,313 Tranche 1 Warrants and 81,927,898 Tranche 2 Warrants; • 51,783,625 CVRs; and • GUC CVRs. The 4,725,091 shares of New Common Stock held in reserve for disputed claims will be distributed in settlement of previously disputed claims which become allowed by the Bankruptcy Court. On the one-year anniversary from the Effective Date, or at such earlier date as all disputed claims are considered resolved, any reserved shares not distributed in settlement of previously disputed claims which become allowed will be issued to holders of the common stock immediately prior to the Effective Date. As these shares will be issued and only the recipient is contingent, the Company accounts for these shares as outstanding in its Consolidated Balance Sheets and in the Basic and Diluted Weighted average shares outstanding in its Consolidated Statements of Operations. Shares estimated by the Company to be issued to disputed claims are included in the gain on satisfaction of the GUC claims reported in Reorganization items, net. New Common Stock and Preferred Stock The Company is authorized to issue 10,000,000,000 shares of New Common Stock and 2,000,000,000 shares of preferred stock (the “Preferred Stock”), each having a par value of $ 0.00001 per share. The rights and preferences of the New Common Stock shall at all times be subject to the rights of the Preferred Stock as may be set forth in one or more certificates of designations filed with the Secretary of State of the State of Delaware from time to time in accordance with the Delaware General Corporation Law and the Charter. The Charter authorized the Board of Directors to provide for the issuance of a share or shares of Preferred Stock in one or more series and to fix for each such series (i) the number of shares constituting such series and the designation of such series, (ii) the voting powers (if any) of the shares of such series, (iii) the powers, preferences, and relative, participating, optional or other special rights of the shares of each such series, and (iv) the qualifications, limitations, and restrictions thereof. The authority of the Board of Directors 117 Core Scientific, Inc. Notes to Consolidated Financial Statements with respect to the Preferred Stock shall include, but not be limited to, determination of (i) the number of shares constituting any series, (ii) the dividend rate or rates on the shares of any series, (iii) the voting rights, if any, of such series and the number of votes per share, (iv) conversion privileges, (v) whether the shares of any series shall be redeemable, (vi) whether any series shall have a sinking fund for the redemption or purchase of shares of such series, (vii) the rights of the shares in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company and (viii) any other powers, preferences, rights, qualifications, limitations and restrictions of any series. Incentive Plan In accordance with the Plan of Reorganization, the Company adopted an equity-based management incentive plan on April 26, 2024 (the “Incentive Plan”). The Incentive Plan provides for the grant of non-qualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance awards, dividend equivalent rights and other stock-based awards. The Incentive Plan provides for grants of up to 40,000,000 shares of the Company’s Common Stock in respect of awards, subject to adjustment as provided in the Incentive Plan, and limits the aggregate compensation that may be paid to the Company’s non-employee directors in respect of any single fiscal year (including awards under the Incentive Plan) to a total of $ 800,000 . The form of outstanding grants under the Incentive Plan currently includes RSUs and MSUs. The participants in the Incentive Plan, the timing and allocations of the awards to participants, and the other terms and conditions of such awards (including, but not limited to, vesting, exercise prices, base values, hurdles, forfeiture, repurchase rights and transferability) is determined by the Compensation Committee of the Board of Directors in its discretion, as plan administrator. Under the Incentive Plan, certain executives have been granted MSUs which are subject to the achievement of market-based share price goals and the executives’ continued service until the relevant vesting date. The number of shares which vest as of the end of each measurement period on each vesting date are conditioned on the highest 20 -day volume weighted average price of the Company's share price achieved during the tranche’s measurement vesting period since grant. The MSU vesting schedule is proportionate over a three-year service period where such proportions are identified as tranches with separate service conditions and measurement periods for the market conditions. If certain market-based share price goals are not met during certain tranche measurement periods, the ability to satisfy such goals apply in subsequent measurement periods and permit vesting if such market conditions are then met (and the service conditions are then satisfied). The following table presents additional information relating to each MSU award: 118 Core Scientific, Inc. Notes to Consolidated Financial Statements Share Price Goal Incremental Units Tranche Cumulative Units December 31, 2024 Vesting: $ 3.14 144,041 144,041 $ 5.00 144,041 288,082 $ 8.00 144,041 432,123 $ 10.00 144,041 576,164 $ 12.00 144,041 720,205 $ 14.00 144,041 864,246 December 31, 2025 Vesting: $ 3.14 144,041 144,041 $ 5.00 144,041 288,082 $ 8.00 144,041 432,123 $ 10.00 144,041 576,164 $ 12.00 144,041 720,205 $ 14.00 144,041 864,246 December 31, 2026 Vesting: $ 3.14 144,041 144,041 $ 5.00 144,041 288,082 $ 8.00 144,041 432,123 $ 10.00 144,041 576,164 $ 12.00 144,041 720,205 $ 14.00 144,041 864,246 Stock-Based Compensation Stock Options —Stock options granted under the 2018 Plan were granted at a price per share not less than the fair value at the date of grant. Options granted vest over 4 years and are exercisable for up to 10 years. No stock options were granted during the years ended December 31, 2024, and 2023. Determining the fair value of stock options at the grant date required judgment, including estimating the expected term, expected volatility, risk-free interest rate, and expected dividends. Expected Term — The Company’s expected term was determined using the simplified method and represents the midpoint between the vesting period and the contractual term of the awards. Expected Volatility —The Company’s volatility factor was estimated using comparable public company volatility for similar terms. Risk-Free Interest Rate— The Company based the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield currently available on US Treasury zero coupon issues with an equivalent remaining term. Where the expected term of the Company’s stock-based awards did not correspond with the term for which an interest rate was quoted, the Company performed a straight-line interpolation to determine the rate from the available term maturities. Expected Dividends — The Company has no history of paying cash dividends and has no present intention to pay common stock cash dividends in the future; as a result, the expected dividend yield was — % for the stock options that were granted. 119 Core Scientific, Inc. Notes to Consolidated Financial Statements A summary of stock option activity for the year ended December 31, 2024, is as follows (amounts in thousands, except per share amounts): Number of Shares Weighted- Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Options outstanding - December 31, 2023 22,575 8.88 6.9 $ — Cancellation of common stock in connection with emergence ( 22,575 ) 8.88 Issuance of new common stock in connection with emergence 2,257 88.84 Options outstanding - Effective Date 2,257 88.84 Granted — — Exercised — — Forfeited or cancelled ( 1,888 ) 94.09 Expired — — Options outstanding - December 31, 2024 369 $ 62.12 3.6 $ 372 Options expected to vest as of December 31, 2024 — $ 127.39 3.2 $ — Options exercisable as of December 31, 2024 369 $ 61.61 3.6 $ 372 No options were granted or vested during the years ended December 31, 2024 and 2023. As of December 31, 2024, total unrecognized stock-based compensation expense related to unvested stock options was immaterial . Restricted Stock Units — RSUs granted in 2024 generally vest over a 3-year service period. Market Condition Restricted Stock Units — See Incentive Plan above for the vesting conditions of the Market condition restricted stock units (“MSUs”). A summary of RSU and MSU activity for the year ended December 31, 2024, is as follows (amounts in thousands, except per share amounts): Restricted Stock Units Market Condition Restricted Stock Units Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Unvested - December 31, 2023 38,358 2.69 — — Cancellation of common stock in connection with emergence ( 38,358 ) 2.69 — — Issuance of new common stock in connection with emergence 3,836 26.93 — — Unvested - Effective Date 3,836 26.93 — — Granted 20,914 6.70 2,843 6.07 Vested ( 3,857 ) 15.71 ( 879 ) 6.11 Forfeited ( 2,552 ) 16.42 ( 236 ) 3.99 Unvested - December 31, 2024 18,341 $ 7.68 1,728 $ 6.11 As of December 31, 2024, the Company had approximately $ 111.7 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over a weighted average time period of 2.4 years, and an additional $ 7.4 million of unrecognized stock-based compensation expense related to MSUs for which some or all of the requisite service has been provided 120 Core Scientific, Inc. Notes to Consolidated Financial Statements under the service conditions but had market conditions that had not yet been achieved. The unrecognized stock-based compensation expense related to MSUs is expected to be recognized over a weighted average time period of 2.0 years. Stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022, is included in the Company’s Consolidated Statements of Operations as follows (in thousands): Year Ended December 31, 2024 2023 2022 Cost of revenue $ 7,950 $ 5,050 $ 25,779 Research and development 2,810 1,337 22,093 Sales and marketing 5,846 4,929 9,401 General and administrative 35,318 47,576 125,621 Stock-based compensation expense, net of amounts capitalized 51,924 58,892 182,894 Capitalized stock-based compensation 1 487 — — Total stock-based compensation cost $ 52,411 $ 58,892 $ 182,894 1 Represents the amounts of stock-based compensation capitalized to property, plant, and equipment. 14. INCOME TAXES Current income tax expense represents the amount expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized. The Company had $ 0.9 million and $ 0.7 million of income tax expense, and $ 17.1 million of income tax benefit for the years ended December 31, 2024, 2023 and 2022, respectively. The income tax expense and effective income tax rate for the years ended December 31, 2024, 2023 and 2022 were as follows: Year Ended December 31, 2024 2023 2022 Current tax: Federal $ — $ — $ 74 State 859 683 1,356 Total current tax 859 683 1,430 Deferred tax: Federal — — ( 18,532 ) State — — 11 Total deferred tax — — ( 18,521 ) Total income tax expense (benefit) $ 859 $ 683 $ ( 17,091 ) 121 Core Scientific, Inc. Notes to Consolidated Financial Statements The reconciliation between the U.S. statutory tax rate and the Company’s effective tax is presented as follows (in thousands): Year Ended December 31, 2024 (As Restated) 2023 2022 U.S. federal statutory income tax benefit applied to loss before income taxes $ ( 301,774 ) $ ( 51,619 ) $ ( 454,316 ) State income taxes, net of federal benefit 5,746 12,325 ( 31,667 ) Stock compensation 14,319 16,578 4,789 Non-deductible interest 2,875 11,659 11,366 Fair value adjustment - convertible notes 287,523 — ( 10,942 ) Reorganization costs 1,508 40,572 — Non-deductible expenses — — 288 Valuation allowance ( 9,500 ) ( 29,195 ) 241,892 Goodwill impairment — — 221,499 Other permanent items 162 363 — Total income tax expense (benefit) $ 859 $ 683 $ ( 17,091 ) The Company’s deferred tax assets and liabilities are detailed as follows (in thousands): Year Ended December 31, 2024 (As Restated) 2023 2022 Deferred tax assets: Net operating loss carryforward $ 70,530 $ 73,272 $ 79,729 Capital loss carryforward 48,007 50,313 52,765 Deferred interest carryforward 23,858 18,438 11,289 Research tax credit carryforward 1,005 483 404 Reserves and accruals 4,773 2,440 4,248 Stock-based compensation 6,705 17,614 16,917 Derivatives 228 — — Property, plant and equipment, net 48,586 53,334 75,349 Digital asset impairment loss — 6 — Debt extinguishment loss — 2,446 2,561 Intangibles (other than goodwill) 2,266 2,660 2,301 Leases 23,455 2,099 7,062 Capitalized research and development expenses 4,872 4,226 801 Other 470 6 169 Gross deferred tax assets 234,755 227,337 253,595 Valuation allowance ( 209,852 ) ( 219,515 ) ( 248,710 ) Deferred tax assets, net of valuation allowance 24,903 7,822 4,885 Deferred tax liabilities: Deferred settlement — ( 6,031 ) — Operating lease ROU assets ( 24,903 ) ( 1,791 ) ( 4,885 ) Deferred tax liabilities, net ( 24,903 ) ( 7,822 ) ( 4,885 ) Total net deferred tax assets (liabilities) $ — $ — $ — 122 Core Scientific, Inc. Notes to Consolidated Financial Statements The changes in the Company’s valuation allowance were as follows (in thousands): Year Ended December 31, 2024 (As Restated) 2023 2022 Beginning Balance $ 219,515 $ 248,710 $ 6,781 Change related to current net operating losses and impairments 16,612 ( 561 ) 241,892 Change related to deferred tax adjustments ( 2,488 ) ( 37,485 ) 37 Change related to prior period adjustments 6,409 8,851 — Change related to restructuring ( 30,196 ) — — Ending Balance $ 209,852 $ 219,515 $ 248,710 Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. The assessment regarding whether a valuation allowance is required on deferred tax assets considers the evaluation of both positive and negative evidence when concluding whether it is more likely than not that deferred tax assets are realizable. After reviewing the positive and negative evidence available, the Company has recorded a valuation allowance of $ 209.9 million. The valuation allowance primarily relates to deferred tax assets for fixed assets, deferred interest carryforwards, net operating loss carryforwards and capital loss carryforwards. As of December 31, 2024, the Company has federal and state net operating loss carryforwards in the amount of $ 312.4 million and $ 128.1 million, respectively. As of December 31, 2023, the Company had federal and state net operating loss carryforwards in the amount of $ 330.2 million and $ 106.6 million, respectively. The federal net operating loss can be carried forward indefinitely, however the utilization of the federal net operating loss for a tax year is equal to the lesser of (1) the aggregate of the net operating loss carryovers to such year, plus the net operating carrybacks to such tax year, or (2) 80% of taxable income determined without regard to the deduction. The Company's state net operating loss carryforwards expiration periods range from 2035 to indefinite. As of December 31, 2024, the Company had U.S. federal and state capital loss carryforwards of $ 220.7 million and $ 42.4 million, respectively. The capital loss carryforwards begin to expire in 2027. In addition, the Company's net operating loss may be subject to utilization limitations due to changes of control, as defined by tax law under Internal Revenue Code Sections 382. Similar provisions may subject the capital loss carryforwards to utilization limitation. At December 31, 2024 and 2023, the Company had an unrecognized tax benefit of $ 0.6 million and $ 0.3 million, respectively. Accrued interest and penalties related to unrecognized tax benefits are recorded as income tax expense. The Company continues to believe its positions are supportable; however, due to uncertainties in any tax audit outcome, the Company's estimates of the ultimate settlement of uncertain tax positions may change and the actual tax benefits may differ from the estimates. The Company files income tax returns in the U.S. federal and various state jurisdictions. The Company’s 2020 through 2024 tax years are subject to U.S. federal and state examination. 15. NET LOSS PER SHARE Basic earnings per share (“EPS”) is measured as the income or loss available to common stockholders divided by the weighted average common shares outstanding for the period. Upon exercise of the Tranche 2 Warrants, shares are issuable for little or no consideration, sometimes referred to as “penny warrants”. Under ASC 260-10-45-13, those issuable shares are considered outstanding in the computation of basic EPS whether or not related warrants have been exercised. At December 31, 2024, approximately 21.1 million shares of common stock remain issuable upon the exercise of the Tranche 2 Warrants and are included in the number of outstanding shares used for the computation of basic EPS for the year then ended. Additionally, the basic EPS numerator includes an adjustment to eliminate the changes in fair value that have been recognized in Net loss from the close of trading on July 11, 2024 through December 31, 2024, the period in which the Tranche 2 Warrants were exercisable and therefore included in weighted average share calculations. Changes in fair value from Emergence through the close of trading on July 11, 2024 remain in Net loss for the year ended December 31, 2024. Diluted EPS includes and presents the dilutive effect on EPS from the potential issuance of shares from unvested restricted stock units, conversion of convertible securities, or the exercise of options and/or warrants. The potentially dilutive effect of 123 Core Scientific, Inc. Notes to Consolidated Financial Statements convertible securities are calculated using the if-converted method. The potentially dilutive effect of options or warrants are computed using the treasury stock method. When potentially dilutive securities have an anti-dilutive effect (i.e., increase income per share or decrease loss per share), they are excluded from the diluted EPS calculation. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted loss per share (in thousands, except per share amounts): Year Ended December 31, 2024 (As Restated) 2023 2022 Numerator: Net loss $ ( 1,437,874 ) $ ( 246,487 ) $ ( 2,146,318 ) Add: Change in fair value of Tranche 2 Warrants 192,585 — — Basic and diluted net loss $ ( 1,245,289 ) $ ( 246,487 ) $ ( 2,146,318 ) Denominator: Weighted average shares outstanding - basic and diluted 255,832 379,863 340,647 Net loss per share - basic and diluted $ ( 4.87 ) $ ( 0.65 ) $ ( 6.30 ) Pote ntially dilutive securities include securities excluded from the calculation of diluted EPS because to do so would be anti-dilutive. Shares which may be issued from potentially dilutive securities are as follows (in thousands): Year Ended December 31, 2024 2023 2022 Stock options 369 22,575 23,915 Tranche 1 Warrants 97,673 — — Restricted stock units 18,341 38,358 45,217 Market condition restricted stock units 1,728 — — Warrants — 14,892 18,311 Convertible Notes 69,611 69,998 69,998 SPAC Vesting Shares — 1,725 1,725 Total shares issuable from potentially dilutive securities 187,722 147,548 159,166 16. SEGMENT REPORTING The Company’s operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics and have similar business activities. The Company now has three operating segments: “Digital Asset Self-Mining”, consisting of performing digital asset mining for its 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 operations. The Company’s HPC operations met the criteria to be considered a new segment during the second quarter of 2024. The Digital Asset Self-Mining segment generates revenue from operating owned digital infrastructure and computer equipment as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for these services, the Company receives digital assets. The Digital Asset Hosted Mining business generates revenue through the sale of consumption-based contracts for its digital asset hosted mining services which are recurring in nature. The HPC Hosting business generates revenue through licensing agreements and orders with licensees that include fixed and variable payments on a recurring basis. The Company’s Chief Executive Officer is the chief operating decision maker (“CODM”). The CODM uses gross profit to evaluate performance and allocate resources. Gross profit is used to evaluate actual results against expectations, which are based on comparable prior results, current budget, and current forecast. Gross profit is also used in deciding how profits and cash flows will be reinvested or otherwise deployed. The Company adopted ASU 2023-07 on January 1, 2024. The most significant provision was for the Company to disclose significant segment expenses that are regularly provided to the CODM. Power fees, depreciation expense, employee compensation and facility operations expense were determined to be significant segment expenses. The CODM does not 124 Core Scientific, Inc. Notes to Consolidated Financial Statements evaluate performance or allocate resources based on segment asset or liability information; accordingly, the Company has not presented a measure of assets by segment. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company excludes certain operating expenses and other expenses from the allocations to operating segments. 125 Core Scientific, Inc. Notes to Consolidated Financial Statements The following table presents revenue and gross profit by reportable segment for the periods presented (in thousands): Year Ended December 31, 2024 2023 2022 Digital Asset Self-Mining Segment (in thousands, except percentages) Digital asset self-mining revenue $ 408,740 $ 390,333 $ 397,796 Cost of digital asset self-mining: Power fees 160,833 165,848 144,117 Depreciation expense 108,499 88,628 212,944 Employee compensation 26,129 16,853 23,574 Facility operations expense 13,274 14,055 9,554 Other segment items 5,600 6,312 4,893 Total cost of digital asset self-mining 314,335 291,696 $ 395,082 Digital Asset Self-Mining gross profit $ 94,405 $ 98,637 $ 2,714 Digital Asset Self-Mining gross margin 23 % 25 % 1 % Digital Asset Hosted Mining Segment Digital asset hosted mining revenue from customers $ 77,554 $ 112,067 $ 242,517 Cost of digital asset hosted mining services: Power fees 35,408 62,366 125,859 Depreciation expense 3,604 6,806 10,630 Employee compensation 4,933 6,337 20,587 Facility operations expense 2,765 5,285 8,344 Other segment items 6,848 6,451 71,411 Total cost of digital asset hosted mining services 53,558 87,245 $ 236,831 Digital Asset Hosted Mining gross profit $ 23,996 $ 24,822 $ 5,686 Digital Asset Hosted Mining gross margin 31 % 22 % 2 % HPC Hosting Segment HPC hosting revenue: License fees $ 17,498 $ — $ — Maintenance and other 73 — — Licensing revenue 17,571 — — Power fees passed through to customer 6,807 — — Total HPC hosting revenue 24,378 — — Cost of HPC hosting services: Depreciation expense 3 — — Employee compensation 2,514 — — Facility operations expense 11,907 — — Other segment items 478 — — Cost of licensing revenue 14,902 — — Power fees passed through to customer 6,807 — — Total cost of HPC hosting services 21,709 — — HPC Hosting gross profit $ 2,669 $ — $ — HPC Hosting licensing gross margin 15 % — % — % HPC Hosting gross margin 11 % — % — % Consolidated Consolidated total revenue $ 510,672 $ 502,400 $ 640,313 Consolidated cost of revenue $ 389,602 $ 378,941 $ 631,913 Consolidated gross profit $ 121,070 $ 123,459 $ 8,400 Consolidated gross margin 24 % 25 % 1 % 126 Core Scientific, Inc. Notes to Consolidated Financial Statements Concentrations of Revenue and Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Credit risk with respect to accounts receivable is concentrated with a small number of customers. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, in order to limit the exposure to credit risk. As of December 31, 2024 and December 31, 2023, all of the Company’s fixed assets were located in the United States. For the years ended December 31, 2024, 2023 and 2022, all of the Company’s revenue was generated in the United States. For the years ended December 31, 2024, 2023 and 2022, 80 %, 78 % and 62 %, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin from one customer. As of December 31, 2024 and 2023, substantially all of our digital assets were held by one third-party digital asset service. For the years ended December 31, 2024, 2023 and 2022, the concentration of customers comprising 10% or more of the Company’s Digital Asset Self-Mining, Digital Asset Hosted Mining, and HPC Hosting segment revenue were as follows: Year Ended December 31, Year Ended December 31, Year Ended December 31, 2024 2023 2022 2024 2023 2022 2024 2023 2022 Percent of Digital Asset Self-Mining segment revenue: Percent of Digital Asset Hosted Mining segment revenue: Percent of HPC Hosting segment revenue: Customer E (related party) N/A N/A N/A N/A N/A 38 % N/A N/A N/A F 1 N/A N/A N/A 61 % 49 % N/A N/A N/A N/A G 100 % 100 % 100 % N/A N/A N/A N/A N/A N/A H N/A N/A N/A 21 % 15 % N/A N/A N/A N/A J N/A N/A N/A N/A N/A N/A 100 % N/A N/A 1 On the Effective Date, Customer F became a minority shareholder of the Company. 127 Core Scientific, Inc. Notes to Consolidated Financial Statements A reconciliation of the reportable segment gross profit to loss before income taxes included in the Company’s Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 , is as follows (in thousands): Year Ended December 31, 2024 (As Restated) 2023 2022 Reportable segment gross profit $ 121,070 $ 123,459 $ 8,400 Change in fair value of digital assets ( 1,052 ) — — Gain from sale of digital assets — 3,893 44,298 Impairment of digital assets — ( 4,406 ) ( 231,315 ) Change in fair value of energy derivatives ( 2,757 ) ( 3,918 ) — Impairment of goodwill and other intangibles — — ( 1,059,265 ) Impairment of property, plant and equipment ( 122,869 ) — ( 590,673 ) Losses on exchange or disposal of property, plant and equipment ( 4,210 ) ( 1,956 ) ( 28,025 ) Operating expenses: Research and development 11,830 7,184 26,962 Sales and marketing 9,969 7,019 12,731 General and administrative 110,448 93,908 213,280 Total operating expenses 132,247 108,111 252,973 Operating (loss) income ( 142,065 ) 8,961 ( 2,109,553 ) Non-operating expenses (income), net: Loss (gain) on debt extinguishment 487 ( 20,065 ) 287 Interest expense, net 37,070 86,238 96,826 Fair value adjustment on 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 (income) expense, net ( 325 ) ( 2,530 ) 5,232 Total non-operating expenses, net 1,294,950 254,765 53,856 Loss before income taxes $ ( 1,437,015 ) $ ( 245,804 ) $ ( 2,163,409 ) 17. RELATED PARTY TRANSACTIONS In the ordinary course of business, the Company from time to time has entered into various transactions with related parties. The Company previously had agreements to provide digital asset hosted services to various entities that are managed and invested in by individuals that were directors and executives of the Company. For the years ended December 31, 2023 and 2022, the Company recognized digital asset hosted revenue from the contracts with these entities of $ 10.1 million and $ 29.5 million , respectively. In addition, for the years ended December 31, 2023 and 2022, there was equipment sales revenue recognized of nil and $ 71.4 million to these same various ent ities. There were no such transactions during the year ended December 31, 2024. Receivables from these entities were nil as of December 31, 2024 and 2023. During the year ended December 31, 2022, the Company reimbursed its former chief executive officer, and its co-founder and director, for use of a personal aircraft for flights taken on Company business. The Company did not make such reimbursements in fiscal 2024 and 2023. For the year ended December 31, 2022, the Company incurred reimburseme nts of $ 1.9 million . Nominal amounts were payable at December 31, 2023. 128 Core Scientific, Inc. Notes to Consolidated Financial Statements 18. SUBSEQUENT EVENT On February 26, 2025, the Company announced a new agreement with CoreWeave to deliver an additional 70 MW of infrastructure at the Company’s Denton, Texas facility. Under the terms of this agreement, the Company is contractually committed to approximately $ 104 million in capital expenditures. 129