☒
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the quarterly period ended March 31, 2023 | |||||
For the quarterly period ended March 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the transition period from to | |||||
| Delaware | 86-1243837 | |||||||||||||||
| (State or other jurisdiction of incorporation or organization) | ( |
Identification No.) | ||||||||||||||
| ||
(312) 262-5642
Registrant’s
Not Applicable
(Former name or former address, if changed since last report)
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||
| CORZQ | ||||||||||
| CRZWQ | ||||||||||
| Large accelerated filer | ☐ | Accelerated filer | |||||||||||||||
| ☒ | |||||||||||||||||
| Emerging growth company | ☒ | ||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||||||||
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
Form 10-Q
For the Quarter Ended March 31, 2021
| Page | |||||||||
i
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
UNAUDITED CONDENSED BALANCE SHEETS
| March 31, 2021 (Restated) | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | 2,054,082 | $ | - | ||||
| Prepaid expenses | 678,255 | - | ||||||
| Total current assets | 2,732,337 | - | ||||||
| Investments held in Trust Account | 345,010,287 | - | ||||||
| Deferred offering costs | - | 15,000 | ||||||
| Total Assets | $ | 347,742,624 | $ | 15,000 | ||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 86,179 | $ | - | ||||
| Accrued expenses | 692,220 | 400 | ||||||
| Franchise tax payable | 49,217 | - | ||||||
| Total current liabilities | 827,616 | 400 | ||||||
| Derivative warrant liabilities | 16,866,670 | - | ||||||
| Deferred underwriting commissions | 12,075,000 | - | ||||||
| Total liabilities | 29,769,286 | 400 | ||||||
| Commitments and Contingencies | ||||||||
| Class A common stock, $0.0001 par value; 31,317,383 shares subject to possible redemption at $10.00 per share | 312,973,330 | - | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Class A common stock, $0.0001 par value; 500,000,000 shares authorized; 3,182,617 shares issued and outstanding (excluding 31,317,383 shares subject to possible redemption) | 320 | - | ||||||
| Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and outstanding | 863 | 719 | ||||||
| Additional paid-in capital | 46,352 | 24,281 | ||||||
| Accumulated deficit | 4,952,473 | (10,400 | ) | |||||
| Total stockholders’ equity | 5,000,008 | 14,600 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 347,742,624 | $ | 15,000 | ||||
The
| March 31, 2023 | December 31, 2022 | ||||||||||
| Assets | (Unaudited) | ||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 47,487 | $ | 15,884 | |||||||
| Restricted cash | 21,805 | 36,356 | |||||||||
| Accounts receivable, net of allowance of $8,724 and $8,724, respectively | 173 | 234 | |||||||||
| Accounts receivable from related parties | 2 | 23 | |||||||||
| Digital assets | — | 724 | |||||||||
| Prepaid expenses and other current assets | 30,728 | 31,881 | |||||||||
| Total Current Assets | 100,195 | 85,102 | |||||||||
| Property, plant and equipment, net | 628,037 | 691,134 | |||||||||
| Operating lease right-of-use assets | 20,235 | 20,430 | |||||||||
| Intangible assets, net | 2,165 | 1,704 | |||||||||
| Other noncurrent assets | 9,387 | 9,316 | |||||||||
| Total Assets | $ | 760,019 | $ | 807,686 | |||||||
| Liabilities, Contingently Redeemable Preferred Stock and Stockholders’ Deficit | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | 50,352 | $ | 53,641 | |||||||
| Accrued expenses and other current liabilities | 58,596 | 17,952 | |||||||||
| Deferred revenue | 68,338 | 77,689 | |||||||||
| Deferred revenue from related parties | 1,218 | 496 | |||||||||
| Operating lease liabilities, current portion | 597 | 769 | |||||||||
| Notes payable, current portion | 35,645 | 36,242 | |||||||||
| Total Current Liabilities | 214,746 | 186,789 | |||||||||
| Operating lease liabilities, net of current portion | 1,055 | 720 | |||||||||
| Other noncurrent liabilities | 2,211 | 2,210 | |||||||||
| Total liabilities not subject to compromise | 218,012 | 189,719 | |||||||||
| Liabilities subject to compromise | 950,765 | 1,027,313 | |||||||||
| Total Liabilities | 1,168,777 | 1,217,032 | |||||||||
| Contingently redeemable preferred stock; $0.0001 par value; 2,000,000 shares authorized; — and — shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively; $— and $— total liquidation preference at March 31, 2023 and December 31, 2022, respectively | — | — | |||||||||
| Commitments and contingencies (Note 8) | |||||||||||
| Stockholders’ Deficit: | |||||||||||
| Common stock; $0.0001 par value; 10,000,000 shares authorized at both March 31, 2023 and December 31, 2022; 377,841 and 375,225 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 36 | 36 | |||||||||
| Additional paid-in capital | 1,776,641 | 1,764,368 | |||||||||
| Accumulated deficit | (2,185,435) | (2,173,750) | |||||||||
| Total Stockholders’ Deficit | (408,758) | (409,346) | |||||||||
| Total Liabilities, Contingently Redeemable Preferred Stock and Stockholders’ Deficit | $ | 760,019 | $ | 807,686 | |||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Hosting revenue from customers | $ | 18,909 | $ | 27,338 | |||||||||||||||||||
| Hosting revenue from related parties | 3,720 | 5,876 | |||||||||||||||||||||
| Equipment sales to customers | — | 416 | |||||||||||||||||||||
| Equipment sales to related parties | — | 25,889 | |||||||||||||||||||||
| Digital asset mining revenue | 98,026 | 133,000 | |||||||||||||||||||||
| Total revenue | 120,655 | 192,519 | |||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of hosting services | 18,826 | 31,231 | |||||||||||||||||||||
| Cost of equipment sales | — | 22,535 | |||||||||||||||||||||
| Cost of digital asset mining | 81,345 | 68,750 | |||||||||||||||||||||
| Total cost of revenue | 100,171 | 122,516 | |||||||||||||||||||||
| Gross profit | 20,484 | 70,003 | |||||||||||||||||||||
| Gain from sales of digital assets | 1,064 | 2,163 | |||||||||||||||||||||
| Impairment of digital assets | (1,056) | (53,985) | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 1,415 | 3,340 | |||||||||||||||||||||
| Sales and marketing | 1,008 | 1,398 | |||||||||||||||||||||
| General and administrative | 21,764 | 40,160 | |||||||||||||||||||||
| Total operating expenses | 24,187 | 44,898 | |||||||||||||||||||||
| Operating loss | (3,695) | (26,717) | |||||||||||||||||||||
| Non-operating expenses, net: | |||||||||||||||||||||||
| Gain on debt extinguishment | (20,761) | — | |||||||||||||||||||||
| Interest expense, net | 157 | 21,676 | |||||||||||||||||||||
| Fair value adjustment on convertible notes | — | 386,037 | |||||||||||||||||||||
| Fair value adjustment on derivative warrant liabilities | — | (10,275) | |||||||||||||||||||||
| Reorganization items, net | 31,559 | — | |||||||||||||||||||||
| Other non-operating (income), net | (3,069) | (357) | |||||||||||||||||||||
| Total non-operating expenses, net | 7,886 | 397,081 | |||||||||||||||||||||
| Loss before income taxes | (11,581) | (423,798) | |||||||||||||||||||||
| Income tax expense | 104 | 42,406 | |||||||||||||||||||||
| Net loss | $ | (11,685) | $ | (466,204) | |||||||||||||||||||
| Net loss per share (Note 11): | |||||||||||||||||||||||
| Basic | $ | (0.03) | $ | (1.52) | |||||||||||||||||||
| Diluted | $ | (0.03) | $ | (1.52) | |||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 375,419 | 307,475 | |||||||||||||||||||||
| Diluted | 375,419 | 307,475 | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net loss | $ | (11,685) | $ | (466,204) | |||||||||||||||||||
| Other comprehensive income, net of income taxes: | |||||||||||||||||||||||
| Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $— and $—, respectively | — | 27,164 | |||||||||||||||||||||
| Total other comprehensive income, net of income taxes | — | 27,164 | |||||||||||||||||||||
| Comprehensive loss | $ | (11,685) | $ | (439,040) | |||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 375,225 | $ | 36 | $ | 1,764,368 | $ | (2,173,750) | $ | (409,346) | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (11,685) | (11,685) | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 12,273 | — | 12,273 | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards issued, net of shares withheld for tax withholding obligations | 2,616 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | 377,841 | $ | 36 | $ | 1,776,641 | $ | (2,185,435) | $ | (408,758) | |||||||||||||||||||||||||||||||||||||||||
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The
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For Thethe Three Months Ended March 31, 2021
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance - December 31, 2020 | - | $ | - | 8,625,000 | $ | 863 | $ | 24,137 | $ | (10,400 | ) | $ | 14,600 | |||||||||||||||
| Sale of shares in initial public offering, less allocation to derivative warrant liabilities, gross | 34,500,000 | 3,450 | - | - | 331,369,051 | - | 331,372,501 | |||||||||||||||||||||
| Offering costs | - | - | - | - | (18,376,636 | ) | - | (18,376,636 | ) | |||||||||||||||||||
| Common stock subject to possible redemption | (31,297,333 | ) | (3,130 | ) | - | - | (312,970,200 | ) | - | (312,973,330 | ) | |||||||||||||||||
| Net income | - | - | - | - | - | 4,962,873 | 4,962,873 | |||||||||||||||||||||
| Balance - March 31, 2021 | 3,202,667 | $ | 320 | 8,625,000 | $ | 863 | $ | 46,352 | $ | 4,952,473 | $ | 5,000,008 | ||||||||||||||||
The2022
| Contingently Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 10,826 | $ | 44,476 | 271,576 | $ | 27 | $ | 1,379,581 | $ | (27,432) | $ | (10,966) | $ | 1,341,210 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (466,204) | — | (466,204) | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of $— income taxes | — | — | — | — | — | — | 27,164 | 27,164 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 20,573 | — | — | 20,573 | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards issued, net of shares withheld for tax withholding obligations | — | — | 6,803 | 1 | (1) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Cashless exercise of warrants | — | — | 3,001 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| 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 - 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 March 31, 2022 | — | $ | — | 324,564 | $ | 32 | $ | 1,604,116 | $ | (493,636) | $ | 16,198 | $ | 1,126,710 | ||||||||||||||||||||||||||||||||||||
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For The Three Months Ended March 31, 2021
| Cash Flows from Operating Activities: | ||||
| Net income | $ | 4,962,873 | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Change in fair value of derivative warrant liabilities | (6,160,830 | ) | ||
| Offering costs associated with derivative warrant liabilities | 777,440 | |||
| Income from investments held in Trust Account | (10,287 | ) | ||
| General and administrative expenses paid by related party under promissory note | 144 | |||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (678,255 | ) | ||
| Accrued expenses | 243,837 | |||
| Accounts payable | 86,179 | |||
| Franchise tax payable | 48,817 | |||
| Net cash used in operating activities | (730,082 | ) | ||
| Cash Flows from Investing Activities | ||||
| Cash deposited in Trust Account | (345,000,000 | ) | ||
| Net cash used in investing activities | (345,000,000 | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds received from initial public offering, gross | 345,000,000 | |||
| Proceeds received from private placement | 9,400,000 | |||
| Repayment of note payable to related party | (90,035 | ) | ||
| Offering costs paid | (6,525,801 | ) | ||
| Net cash provided by financing activities | 347,784,164 | |||
| Net change in cash | 2,054,082 | |||
| Cash - beginning of the period | - | |||
| Cash - end of the period | $ | 2,054,082 | ||
| Supplemental disclosure of noncash activities: | ||||
| Offering costs included in accrued expenses | $ | 448,383 | ||
| Offering costs included paid by related party under promissory note | $ | 89,891 | ||
| Deferred underwriting commissions in connection with the initial public offering | $ | 12,075,000 | ||
| Initial value of Class A common stock subject to possible redemption | $ | 307,196,340 | ||
| Change in value of Class A common shares subject to possible redemption | $ | 5,776,990 | ||
became a wholly owned subsidiary of Core Scientific Holding Co. and the stockholders of Old Core became the stockholders of Core Scientific Holding Co. In July 2021, Core Scientific Holding Co. completed the acquisition of Blockcap, Inc. (“Blockcap”), one of Old Core’s largest hosting customers. Prior to its acquisition, Blockcap had retained Core Scientific Holding Co to host in the data centers operated by Core Scientific Holding Co Blockcap’s industrial scale digital asset mining operations. On January 19, 2022, following the approval at the special meeting of the stockholders of Power & Digital Infrastructure Acquisition Corp., a Delaware corporation (“XPDI”), Core Scientific Holding Co. merged with XPDI, and XPDI Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of XPDI (“Merger Sub”), consummated the transactions contemplated under the merger agreement. In connection with the closing of the merger, XPDI changed its name from Power & Digital Infrastructure Acquisition Corp. December 31, 2022, respectively. As of March 31, to the consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022. transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to certain motions and applications intended to limit the disruption of the bankruptcy proceedings on our operations (the First Day Motions) and other motions filed with the Bankruptcy Court, the Bankruptcy Court has authorized us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to obtain DIP financing, pay employee wages and benefits, settle certain de minimis disputes and pay vendors andTheThree Months Ended March 31, 2023 2022 Cash flows from Operating Activities: Net loss $ (11,685) $ (466,204) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 20,094 42,139 Amortization of operating lease right-of-use assets 195 53 Stock-based compensation 12,273 25,797 Digital asset mining revenue (98,026) (133,000) Deferred income taxes — 33,974 Gain on debt extinguishment (20,761) — Fair value adjustment on derivative warrant liabilities — (10,275) Fair value adjustment on convertible notes — 393,888 Amortization of debt discount and debt issuance costs — 1,027 Impairment of digital assets 1,056 53,985 Changes in working capital components: Accounts receivable, net 61 1,214 Accounts receivable from related parties 21 (42) Digital assets 97,694 (3,010) Deposits for equipment for sales to customers — 62,302 Prepaid expenses and other current assets 1,152 (23,647) Accounts payable 16,408 (9,022) Accrued expenses and other 10,391 11,741 Deferred revenue (8,629) 39,798 Deferred revenue from related parties — (22,473) Other noncurrent assets and liabilities, net (302) (1,860) Net cash provided by (used in) operating activities 19,942 (3,615) Cash flows from Investing Activities: Purchases of property, plant and equipment (1,539) (133,223) Deposits for self-mining equipment — (135,873) Other (330) — Net cash used in investing activities (1,869) (269,096) Cash flows from Financing Activities: Proceeds from issuance of common stock upon Merger with XPDI, net of transaction costs — 195,010 Proceeds from debt, net of issuance costs — 82,152 Principal repayments of finance leases (1,021) (10,256) Principal payments on debt — (15,441) Net cash (used in) provided by financing activities (1,021) 251,465 Net increase (decrease) in cash, cash equivalents and restricted cash 17,052 (21,246) Cash, cash equivalents and restricted cash—beginning of period 52,240 131,678 Cash, cash equivalents and restricted cash—end of period $ 69,292 $ 110,432 Supplemental disclosure of other cash flow information: Cash paid for interest 317 20,847 Income tax payments (300) — Supplemental disclosure of noncash investing and financing activities: Accrued capital expenditures 45,721 22,510 Decrease in equipment related to debt extinguishment 17,849 — Decrease in notes payable in exchange for equipment (38,610) — areto unaudited consolidated financial statements.integral partamendment to its Certificate of these unaudited condensed financial statements.Note 1 — DescriptionIncorporation dated June 12, 2018. On August 17, 2020, Old Core engaged in a holdco restructuring to facilitate a borrowing arrangement by Old Core pursuant to which Old Core was merged with and into a wholly owned subsidiary of OrganizationCore Scientific Holding Co. and Business Operations(theto Core Scientific, Inc. (“Core Scientific” or the “Company”).blank check company incorporatedbest-in-class, large-scale operator of dedicated, purpose-built facilities for digital asset mining and a premier provider of blockchain infrastructure, software solutions and services. We mine digital assets for our own account and provide colocation hosting services for other large-scale miners at our eight operational data centers in Delaware on December 29, 2020. The Company was formedGeorgia (2), Kentucky (1), North Carolina (2), North Dakota (1) and Texas (2). We began digital asset mining in 2018 and in 2020 became one of the largest North American providers of colocation hosting services for third-party mining customers, at which time we derived almost all our revenue from third-party colocation hosting fees and the resale of digital asset mining machines. Currently, we derive the majority of our revenue from self-mining bitcoin. We are one of the largest blockchain infrastructure, digital asset mining and colocation hosting provider companies in North America, with an average hourly operating power demand of approximately 581 MW and 636 MW for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”). The Company is an emerging growth companythree months ending March 31, 2023 and as such, the Company is subject to all of the risks associated with emerging growth companies.The Company may pursue targets in any industry for purposes of consummating a Business Combination.2021, the Company2023, we had not commenced any operations. All activity for the period from December 29, 2020 (inception) through March 31, 2021 relatesapproximately 1,500 MW of contracted power capacity at our sites, including 500MW of power allocated to the Company’s formationMuskogee data center, which remains substantially undeveloped.initial public offering (the “Initial Public Offering”) described below,capacity and subsequentefficiency of our self-mining fleet and by enhancing our third-party colocation business. We intend to strategically develop the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completioninfrastructure necessary to support business growth and profitability and take advantage of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cashadjacent opportunities that leverage our mining expertise and cash equivalents from the proceeds derived from the Initial Public Offering.The Company has selectedcapabilities.31 as its fiscal year end.The Company’s sponsor is XPDI Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on February 9, 2021. On February 12, 2021,21, 2022, the Company consummated its Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including the exercise of the underwriters’ option to purchase 4,500,000 additional Units (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.2 million, of which approximately $12.1 million in deferred underwriting commissions (Note 6).Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 6,266,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, to the Sponsor and to certain qualified institutional buyers or institutional accredited investors, including certain funds and accounts managed by subsidiaries of BlackRock, Inc. (the “Anchor Investors”), generating proceeds of $9.4 million (Note 5).Upon the closing of the Initial Public Offering and the Private Placement, $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of its affiliates (collectively, the proceeds of the Private Placement was placed in a trust account (“Trust Account”“Debtors”) locatedfiled voluntary petitions (the “Chapter 11 Cases”) in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. “government securities,” withinBankruptcy Court for the meaningSouthern District of Section 2(a)(16)Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the Investment Company Act of 1940,United States Code (the “Bankruptcy Code”). The Chapter 11 Cases are jointly administered under Case No. 22-90341. The Debtors continue to operate their business and manage their properties as amended (the “Investment Company Act”“debtors-in-possession” (“DIP”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distributionjurisdiction of the Trust Account as described below.The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public OfferingBankruptcy Court and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable by us on the income earned on the trust account) at the time of the agreement to enter into the initial Business Combination. However, the Company only intends to complete a Business Combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.The Company will provide the holders (the “Public Stockholders”) of the Public Shares with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares will be recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). Ifapplicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. The Debtors have filed various “first day” motions with the Bankruptcy Court requesting customary relief, which were generally approved by the Bankruptcy Court on December 22, 2022, that have enabled the Company seeks stockholder approval,to operate in the Company will proceed with a Business Combination if a majority ofordinary course while under Chapter 11 protection. For detailed discussion about the outstanding shares are voted by the stockholders at a stockholders’ meetingChapter 11 Cases, refer to approve the Business Combination, unless applicable law, the Company’s corporate governing documents or applicable stock exchange rules require a different vote, in which case the Company will complete its Business Combination only if such requisite vote is received. The Company will not redeem the Public Shares in connection with a Business Combination in an amount that would cause its net tangible assetsNote 3 — Chapter 11 Filing and Other Related Matters.be less than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuantUnaudited Consolidated Financial Statementstender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem the Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) agreed to vote their Founder Shares (as defined belowsignificant accounting policies described in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.The Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.The holders of the Founder Shares (the “initial stockholders”) agreed not to propose an amendment to the Certificate of Incorporation (A) to modify the substance or timing of the Company’s obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with a Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (B) with respect to any other provision relating to the rights of holders of Class A common stock, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 12, 2023 (the “Combination Period”), and the Company’s stockholders have not amended the Certificate of Incorporation to extend such Combination Period, the Company will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable by us), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.The initial stockholders and Anchor Investors agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders and Anchor Investors acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement (a “Target”), reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) the lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of interest which may be withdrawn to pay taxes, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.Liquidity and Capital ResourcesAs of March 31, 2021, the Company had approximately $2.1 million in its operating bank account and working capital of approximately $2.2 million.The Company’s liquidity needs to date have been satisfied through a payment of $25,000 from the Sponsor to cover for certain offering costs in exchange for issuance of the Founder Shares (as defined in Note 5), the loan under the Note of approximately $90,000 (as defined in Note 5), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on February 15, 2021. In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Company’s officers, directors and initial stockholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 6). As of March 31, 2021, there were no amounts outstanding under any Working Capital Loans.Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of an Initial Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective Initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Initial Business Combination.Risks and UncertaintiesManagement is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations or search for a target company, the specific impact is not readily determinable as of the date of these financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.Note 2 —Restatement of Previously Issued Financial StatementsOn April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing the Company’s warrants. As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 8,625,000 redeemable warrants (the “Public Warrants”) that were included in the units issued by the Company in its initial public offering (the “Initial Public Offering”) and (ii) the 6,266,667 redeemable warrants that were issued to the Company’s sponsor in a private placement that closed concurrently with the closing of the Initial Public Offering (together with the Public Warrants, the “Warrants”). The Company previously accounted for the Warrants as components of equity.In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC 815”), the Company concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statements of Operations in the period of change.In accordance with ASC Topic 340, Other Assets and Deferred Costs, as a result of the classification of the Warrants as derivative liabilities, the Company expensed a portion of the offering costs originally recorded as a reduction in equity. The portion of offering costs that was expensed was determined based on the relative fair value of the Public Warrants and shares of Class A common stock included in the Units.The Company’s accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported cash.The following tables summarize the effect of the revision on each financial statement line item as of the date indicated: As of February 12, 2020 As Previously Restatement Reported Adjustments As Restated Balance Sheet Total assets $ 348,644,865 $ - $ 348,644,865 Liabilities and stockholders’ equity Total current liabilities $ 1,346,020 $ - $ 1,346,020 Deferred underwriting commissions 12,075,000 - 12,075,000 Derivative warrant liabilities - 23,027,500 23,027,500 Total liabilities 13,421,020 23,027,500 36,448,520 Class A common shares, $0.0001 par value; shares subject to possible redemption 330,223,840 (23,027,500 ) 307,196,340 Stockholders’ equity Prefered shares- $0.0001 par value - - - Class A common shares - $0.0001 par value 148 230 378 Class B common shares - $0.0001 par value 863 - 863 Additional paid-in-capital 5,032,602 777,210 5,809,812 Accumulated deficit (33,608 ) (777,440 ) (811,048 ) Total stockholders’ equity 5,000,005 - 5,000,005 Total liabilities and stockholders’ equity $ 348,644,865 $ - $ 348,644,865 Note 3 — Summary of Significant Accounting PoliciesThe accompanying unaudited condensedare presentedand our unaudited interim consolidated financial statements provided herein have been prepared in U.S. dollarsaccordance with the instructions for Form 10-Q. Certain information and note disclosures normally included in conformityfinancial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") for financial information andhave been condensed or omitted pursuant to the rules and regulations of the SEC. Accordingly, they do not include all ofU.S. Securities and Exchange Commission ("SEC"). However, in our opinion, the disclosures made therein are adequate to make the information and footnotes required by GAAP. Inpresented not misleading. We believe the unaudited interim financial statements furnished reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the unaudited condensedresults for the interim periods presented. Further, we believe these consolidated financial statements reflectinclude all adjustments, which include only normal recurring adjustments necessary forto fairly present the fair statement of the balances and results for the periods presented. Operatinginterim periods. The consolidated results for the periodof operations and cash flows for the three months ended March 31, 20212023, are not necessarily indicative of the consolidated results of operations and cash flows that maymight be expected through December 31, 2021.Thefor the entire year. These consolidated financial statements and the accompanying unaudited condensed financial statementsnotes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Currentour Annual Report on Form 8-K and10-K for the final prospectus filed byyear ended December 31, 2022.SEC on February 19, 2021 and February 11, 2021, respectively.In April 2021,three months ended March 31, 2023, the Company identified a misstatementaverage price of bitcoin declined to $22,877 compared to $41,299 for the three months ended March 31, 2022. At the same time the Company’s power costs in its accounting treatment for the Warrants as presented in its audited balance sheet as of February 12, 2021 included in its Current Report on Form 8-K, filed February 19, 2021. The Warrants were reflected as a component of equity as opposed to liabilities on the balance sheet. Pursuant to FASB ASC Topic 250, Accounting Changes and Error Corrections, and Staff Accounting Bulletin 99, “Materiality”) (“SAB 99”) issued by the SEC, the Company determined the impact of the error was immaterial. The impact of the error correction is reflected in the unaudited condensed financial statements contained herein which resulted in a $23Mining segment increased $29.4 million increase to derivative liabilities and offsetting decrease to Class A ordinary shares subject to possible redemptioncompared to the February 12, 2021 balance sheet. There was no impactthree months ended March 31, 2022, reflecting increases in both power usage and power rates. These factors contributed to the Company’s financial position, net losses or cash flows.Emerging Growth CompanyThe Company is an “emerging growth company,”gross profit of $20.5 million for the three months ended March 31, 2023, as definedcompared to a gross profit of $70.0 million for the three months ended March 31, 2022. In addition, as discussed in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),Note 8 — Commitments and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationContingencies, in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparisonJuly 2022, one of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible becauselargest customers filed for voluntary relief under chapter 11 of the potential differencesBankruptcy Code.accounting standards used.statementstatements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, andthe disclosure of contingent assets and liabilities at the date of the financial statement. Actualstatements, and the reported amounts of income and expenses during the reporting period. Some of the more significant estimates include assumptions used to estimate its ability to continue as a going concern, the valuation of goodwill, intangibles and property, plant and equipment, the fair value of convertible debt, and income taxes. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from thosemanagement’s estimates.
Cash, Cash Equivalents and Restricted Cash
2023 and December 31, 2022. certain circumstances. Fair value is defined as the price that would be received largest customers, Celsius Mining LLC (“Celsius”), along with its parent company and certain affiliates, filed for voluntary relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the Southern District of New York. On September 28, 2022, Celsius filed a motion in the Chapter 11 case alleging that the Company is violating the automatic stay with respect to the Master Services Agreement between Celsius and the Company (the “Celsius Agreement”). Celsius is also using its Chapter 11 proceeding to withhold payment of certain charges billed to Celsius pursuant to the Celsius Agreement. The Company strongly disagrees with the allegations made in the Celsius motion and the interpretation of the Celsius Agreement espoused therein and is vigorously defending its interests, including seeking resolution from the bankruptcy court and payment of any outstanding amounts owed under the Celsius Agreement (subject to applicable bankruptcy law in the Celsius Chapter 11 case). The parties have agreed to stay the proceedings, including the evidentiary hearing scheduled for November 18, 2022. There can be no guarantee that the bankruptcy court will rule in the Company’s favor in a timely manner or that Celsius will honor the terms of the Celsius Agreement. An adverse ruling by the bankruptcy court that provides Celsius the benefits of the Company’s hosting services without Celsius fully paying the costs of such services would have a material effect on the Company’s business, financial condition, results of operations and cash flows. As of March 31, 2023, the Company had accrued $8.7 million as an allowance against amounts due from Celsius. 4,962,873 significant accounting policies. The Company $0.5 million. LM Funding. The Company will Cash EquivalentsThe Company considerscash equivalents include all short-termcash balances and highly liquid investments with an original maturitymaturities of three months or less when purchasedfrom the date of acquisition. As of March 31, 2023 and December 31, 2022, cash equivalents included $37.3 million and $10.2 million, respectively, of highly liquid money market funds which are classified as Level 1 within the fair value hierarchy. Restricted cash consists of cash held in escrow under the Original DIP Credit Agreement and in escrow to pay for construction and development activities. As of March 31, 2023 and December 31, 2022, restricted cash of $21.8 million and $36.4 million, respectively,consisted of cash held in escrow under the Original DIP Credit Agreement.cash equivalents.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 had no cash equivalentsconsiders 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.2021.Investments Held in Trust Accountportfolioperformance obligations relate to hosting services, which are described below. The Company has performance obligations associated with commitments in customer hosting contracts for future services that have not yet been recognized in the financial statements. For contracts with original terms that exceed one year (typically ranging from 18 to 48 months), those commitments not yet recognized as of investments is comprised solelyMarch 31, 2023 and December 31, 2022, were $135.4 million and $159.6 million, respectively.U.S. government securities, withinperformance and recognizes them as revenue when the meaning set forthperformance obligations are satisfied. The Company’s current and non-current deferred revenue balance as of March 31, 2023 and December 31, 2022, was $71.8 million and $80.4 million, respectively, all from advance payments received during the periods then ended.Section 2(a)(16)the deferred revenue balance as of the Investmentbeginning of the year, primarily due to the deployment of customer equipment for which advanced payment had been received from customers prior to January 1, 2022.Act, with a maturityrecognized $36.8 million of 185 days or less, or investments in money market fundsrevenue that invest in U.S. government securities, or a combination thereof. The Company’s investments heldwas included in the Trust Accountdeferred revenue balance as of the beginning of the year, primarily due to the performance of hosting services for which advance payments had been received from customers prior to January 1, 2021.Three Months Ended March 31, 2023 Professional fees and other bankruptcy related costs $ 20,107 Debtor-in-possession financing costs 11,452 Reorganization items, net $ 31,559 March 31, 2023 December 31, 2022 Accounts payable $ 29,757 $ 20,908 Other current liabilities 19,138 64,493 Accounts payable, and other current liabilities $ 48,895 $ 85,401 Operating lease liability $ 13,475 $ 13,868 Financing lease liability 69,775 70,796 Debt subject to compromise 806,085 844,695 Accrued interest on liabilities subject to compromise 12,535 12,553 Leases, debt and accrued interest 901,870 941,912 Liabilities subject to compromise $ 950,765 $ 1,027,313 March 31, 2023 March 31, 2022 Digital assets, beginning of period $ 724 $ 234,298 Digital asset mining revenue 98,026 133,000 Proceeds from sales of digital assets (98,384) — Gain from sales of digital assets 1,064 2,163 Impairment of digital assets (1,056) (53,985) Other (374) 847 Digital assets, end of period $ — $ 316,323 trading securities. Trading securities are presentedcurrent assets on the Company’s Consolidated Balance Sheets. The Company had total digital assets of nil and $0.7 million, at March 31, 2023 and December 31, 2022, respectively.Interest Rates Maturities March 31, 2023 December 31, 2022 Kentucky note 5.0% 2023 $ 529 $ 529 NYDIG loan 11.0% - 15.0% Various — 38,573 Stockholder loan 10.0% 2023 10,000 10,000 Trinity loan 11.0% 2024 23,356 23,356 Bremer loan 5.5% 2026 18,331 18,331 Blockfi loan 9.7% - 13.1% 2023 53,913 53,913 Anchor Labs loan 12.5% 2024 25,159 25,159 Mass Mutual Barings loans 13.0% 2025 63,844 63,844 B. Riley Bridge Notes 7.0% 2023 41,777 41,777 Liberty loan 10.6% 2024 6,968 6,968 10.0% 2025 237,584 237,584 10.0% 2025 322,396 322,396 10.0% 2023 — 35,547 10.0% 2023 35,000 — Other 2,873 2,960 Notes payable, prior to reclassification to Liabilities subject to compromise 841,730 880,937 806,085 844,695 Unamortized discount and debt issuance costs — (36,456) Fair value adjustment on convertible notes — (808,148) Total notes payable, net $ 35,645 $ 36,242 sheet at fair valueissuance and PIK interest.endCompany's Chapter 11 Cases, $806.1 million and $844.7 million of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Accountoutstanding notes payable have been reclassified to Liabilities subject to compromise in the accompanying unaudited condensed statementCompany's Consolidated Balance Sheets as of operations. The estimated fair values of investments held inMarch 31, 2023 and December 31, 2022, respectively, at their expected allowed amount. Up to the Trust Account are determined using available market information.Concentration of Credit RiskFinancial instruments that potentially subjectPetition Date, the Company continued to concentrations of credit risk consist of cash accountsaccrue interest expense in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage limit of $250,000 and investments held in Trust Account.relation to these reclassified debt instruments. As of March 31, 2021,2023 and December 31, 2022, $12.5 million and $12.6 million, respectively, of accrued interest was classified as Liabilities subject to compromise.not experienced losses on these accounts and management believes the Company is not exposedright to significant risks on such accounts.Financial InstrumentsThe fair valueprepay the Convertible Notes at the minimum payoff of two times the outstanding principal amount plus accrued interest. All of the Company’sConvertible Notes, totaling $560.0 million as of March 31, 2023, are scheduled to mature on April 19, 2025, which includes $237.6 million for the principal amount of the Secured Convertible Notes which have payoff at maturity of two times the principal amount of the note plus accrued interest. The total amount that would be owed on the Secured Convertible Notes outstanding as of March 31, 2023, if held to maturity was $475.2 million.which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements” approximates the carrying amounts representedat fair value on a recurring or non-recurring basis in the balance sheet.Fair Value Measurementsfor sale ofto sell an asset or paid forto transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tierTo increase the comparability of fair value measures, the following hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:●Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;●Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and●Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.In some circumstances, the inputsvaluation methodologies used to measure fair value mightvalue:categorized within different levels ofcorroborated by observable market data.hierarchy. In those instances, the fair value measurementwhenever possible and relies on unobservable inputs only when observable market data is categorized in its entirety in the fair value hierarchy based on the lowest level input that isnot available.Derivative Warrant LiabilitiesThe Company does not use derivative instruments All transfers into and out of Level 3 are assumed to hedge exposures to cash flow, market, or foreign currency risks. 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, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging.” The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is re-assessedoccur at the endbeginning of eachthe quarterly reporting period.The 8,625,000 Public Warrantsperiod in which they occur. As of March 31, 2023 and the 6,266,667 Private Placement Warrants are recognized as derivative liabilities in accordance with FASB ASC Topic 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Stock.” Accordingly, the Company recognizes the warrant instruments as liabilities atDecember 31, 2022, there were no Level 3 financial instruments.adjusts the instrumentsequipment, and intangible assets are measured at estimated fair value on a nonrecurring basis. These assets are adjusted to fair value at each reporting period. The liabilities are subjectonly when an impairment is recognized, or the underlying asset is held for sale. Refer to re-measurement at each balance sheet date until exercised, and any change inNote 2 — Summary of Significant Accounting Policies, for more information regarding fair value is recognized in the Company’s statement of operations.considerations when measuring impairment. The estimated fair value of the Public Warrants is measuredCompany’s digital assets as of March 31, 2023 and December 31, 2022, was nil and $0.7 million, respectively.a Monte Carlo simulation. Themarket interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk. We classified the other notes payable as Level 3 financial instruments due to the considerable judgment required to develop assumptions of the Company’s standalone credit risk and the significance of those assumptions to the fair value measurement. At March 31, 2023, the estimated fair value of the Private Placement Warrants is measured at fairCompany’s other notes payable was $35.6 million and equaled the carrying value using a Black-Scholes option pricing model.Offering Costs Associated with the Initial Public OfferingOffering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of the Initial Public Offering.Class A Common Stock Subject to Possible RedemptionThe Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s controlother notes payable. At December 31, 2022, the estimated fair value and subjectcarrying value of the Company’s notes payable was $36.2 million.occurrenceminimum rent, certain leases require payment of uncertain future events. Accordingly,real estate taxes, insurance, common areaFinancial statement line item March 31, 2023 December 31, 2022 Assets: Operating lease right-of-use assets Operating lease right-of-use assets $ 20,235 $ 20,430 Finance lease right-of-use assets Property, plant and equipment, net $ 82,039 $ 84,092 Liabilities: Operating lease liabilities,
current portionOperating lease liabilities,
current portion597 $ 769 Operating lease liabilities, net
of current portionOperating lease liabilities, net
of current portion1,055 $ 720 Operating and finance lease liabilities subject to compromise Liabilities subject to compromise $ 83,250 $ 84,664 Three Months Ended March 31, Financial statement line item 2023 2022 Operating lease expense General and administrative expenses $ 390 $ 154 Short-term lease expense General and administrative expenses 365 191 Finance lease expense: Amortization of right-of-use assets Cost of revenue 3,857 9,824 Interest on lease liabilities Interest expense, net 309 2,102 Total finance lease expense 4,166 11,926 Total lease expense $ 4,921 $ 12,271 March 31, 2023 March 31, 2022 Weighted Average Remaining Lease Term (Years) Operating leases 10.7 22.1 Finance leases 2.1 2.6 Weighted Average Discount Rate Operating leases 6.5 % 6.4 % Finance leases 12.4 % 10.2 % Three Months Ended March 31, 2023 2022 Lease Payments Operating lease payments $ 337 $ 101 Finance lease payments $ 1,080 $ 12,357 Supplemental Noncash Information Finance lease right-of-use assets obtained in exchange for lease obligations $ — $ 10,557 2021, 31,317,383 shares2023, and thereafter (in thousands):Operating leases Finance leases Remaining 2023 $ 2,082 $ 37,103 2024 1,810 39,108 2025 1,866 1,862 2026 1,924 32 2027 1,985 — Thereafter 12,037 — Total lease payments 21,704 78,105 Less: imputed interest 6,577 8,330 Less: Liabilities subject to compromise 13,475 69,775 Total $ 1,652 $ — Class A common stockits debt facilities, equipment financing facilities and leases and other financings, including its two bridge promissory notes. As a result, the creditors under these debt facilities may exercise remedies following any applicable grace periods and pursuant to any confirmed plan of reorganization, including electing to accelerate the principal amount of such debt, suing the Company for nonpayment, increasing interest rates to default rates, or taking action with respect to collateral, where applicable. The Company has classified all of its finance lease liabilities as Liabilities subject to possible redemption atcompromise as of March 31, 2023 and December 31, 2022.redemptionordinary course of business. The Company accrues losses for a legal proceeding when it is probable that a loss has been incurred and the amount were presented at redemption value as temporary equity, outside of the stockholders’ equity sectionloss 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.balance sheet.Income TaxesThree Months Ended March 31, 2023 2022 Cost of revenue $ 597 $ 2,039 Research and development 442 1,882 Sales and marketing 505 458 General and administrative 10,729 21,418 Total stock-based compensation expense $ 12,273 $ 25,797 assetCompany had approximately $63.1 million of unrecognized stock-based compensation expense related to RSAs and liability methodRSUs, which is expected to be recognized over a weighted average time period of accounting for2.8 years.taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”).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 recognized fordetermined based on the estimated future tax consequences attributable to differencesdifference between the financial statement carrying amountsand tax basis of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities areas measured usingby the enacted tax rates expected to apply to taxable incomethat will be in the years in which those temporaryeffect when these differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.reverse. Valuation allowances are established, when necessary,recorded as appropriate to reduce deferred tax assets to the amount expectedconsidered likely to be realized.ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2021. Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interestexpense and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject toeffective income tax examinations by major taxing authorities since inception.Net income per common sharesNet income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 14,891,667 shares in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.The Company’s unaudited condensed statement of operations includes a presentation of income per common sharerate for common shares subject to possible redemption in a manner similar to the two-class method of income per common share. Net income per common share, basic and diluted, for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income on investments held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of common stock subject to possible redemption outstanding since original issuance.Net income per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income, adjusted for income or loss on investments held in the Trust Account attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.Non-redeemable common stock includes Founder Shares and non-redeemable shares of Class A common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on investments held in the Trust Account based on non-redeemable shares’ proportionate interest.The following table reflects the calculation of basic and diluted net income per common share: For the
Three Months
Ended
March 31,
2021 Class A Common stock subject to possible redemption Numerator: Earnings allocable to Common stock subject to possible redemption Income from investments held in Trust Account $ 9,338 Less: Company’s portion available to be withdrawn to pay taxes (9,338 ) Net income attributable $ - Denominator: Weighted average Class A common stock subject to possible redemption Basic and diluted weighted average shares outstanding 30,731,669 Basic and diluted net income per share $ - Non-Redeemable Common Stock Numerator: Net Income minus Net Earnings Net income $ Net income allocable to Class A common stock subject to possible redemption - Non-redeemable net income $ 4,962,873 Denominator: weighted average Non-redeemable common stock Basic and diluted weighted average shares outstanding, Non-redeemable common stock 10,109,776 Basic and diluted net income per share, Non-redeemable common stock $ 0.49 Recent Accounting PronouncementsIn August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statement.Note 4 — Initial Public OfferingOn February 12, 2021, the Company consummated its Initial Public Offering of 34,500,000 Units, including the exercise of the underwriters’ option to purchase 4,500,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.2 million, of which approximately $12.1 million in deferred underwriting commissions. Of the 34,500,000 Units sold, an aggregate of 2,405,700 Units were purchased by the Anchor Investors.Each Unit consists of one share of Class A common stock, and one-fourth of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 8).Note 5 — Related Party TransactionsFounder SharesOn December 31, 2020, the Sponsor paid $25,000 to cover for certain offering costs on behalf of the Company in exchange for issuance of 7,187,500 shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”). On February 9, 2021, the Company effected a share capitalization of 1,437,500 shares of Class B common stock, resulting in an aggregate of 8,625,000 shares of Class B common stock outstanding. Up to 1,125,000 Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On February 12, 2021, the underwriter fully exercised its option to purchase additional; thus, these 1,125,000 Founder Shares were no longer subject to forfeiture.In February 2021, the Sponsor agreed to sell to the Anchor Investors 1,552,500 Founder Shares and the Anchor Investors agreed to purchase from the Sponsor on the date of the initial business combination an aggregate of 1,552,500 Founder Shares for an aggregate purchase price of approximately $4,500, or approximately $0.003 per share.The initial stockholders and the Anchor Investors agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination; and (B) subsequent to the initial Business Combination (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20-trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Any permitted transferees would be subject to the same restrictions and other agreements of the initial stockholders and the Anchor Investors with respect to any Founder Shares.Private Placement WarrantsSimultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,266,667 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant, to the Sponsor and the Anchor Investors, generating proceeds of $9.4 million.Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless.The purchasers of the Private Placement Warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants (except to permitted transferees) until 30 days after the completion of the initial Business Combination.Related Party LoansOn December 31, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of the Initial Public Offering. As of February 12, 2021, the Company borrowed approximately $90,000 under the Note. On February 15, 2021, the Company repaid the Note in full.In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of March 31, 2021, the Company had no borrowings under the Working Capital Loans.Administrative Services AgreementCommencing on the date that the Company’s securities were first listed on the Nasdaq through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the Company agreed to pay affiliates of the Sponsor a total of $20,000 per month for office space, administrative and support services. During the three months ended March 31, 20212023 and 2022 were as follows:Three Months Ended March 31, 2023 2022 (in thousands, except percentages) Income tax expense $ 104 $ 42,406 Effective income tax rate (0.9) % (10.0) % incurred $40,000recorded $0.1 million of income tax expense. The Company's estimated annual effective income tax rate is (0.9)%, compared to the U.S. federal statutory rate of 21.0% due to a change in the valuation allowance 43.8%, state taxes (7.1)%, non-deductible transaction costs (58.8)% and other items 0.2%. The Company has a full valuation allowance on its net deferred tax asset as the evidence indicates that it is not more likely than not expected to realize such fees,asset.Three Months Ended March 31, 2023 2022 Net loss $ (11,685) $ (466,204) Weighted average shares outstanding - basic and diluted 375,419 307,475 Net loss per share - basic and diluted $ (0.03) $ (1.52) Three Months Ended March 31, 2023 2022 Stock options 22,724 31,942 Warrants 14,892 18,284 Restricted stock and restricted stock units 40,438 96,900 Convertible Notes 69,997 66,249 SPAC Vesting Shares 1,725 1,725 Total potentially dilutive securities 149,776 215,100 recognizedrecurring in generalnature. During 2022, our “Hosting” segment also included sales of mining equipment to customers and administrative expenses – related party,was referred to as “Hosting and Equipment Sales”. The Mining segment generates revenue from operating owned computer equipment as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for these services, the Company receives digital assets.accompanying unaudited condensed statementsummary of operations.Payments to InsidersThe Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made by us to the Sponsor, directors, officers or the Company’s or any of their affiliates.Business Combination Paymentsmay make a cash paymentexcludes certain operating expenses and other expense from the allocations to XMS Capital Partners, LLC (“XMS Capital”) or its affiliatesoperating segments.any financial advisory, placement agency or other similar investment banking servicesthe periods presented (in thousands):Three Months Ended March 31, 2023 2022 Hosting Segment Revenue: Hosting revenue $ 22,629 $ 33,214 Equipment sales — 26,305 Total revenue $ 22,629 $ 59,519 Cost of revenue: Cost of hosting services $ 18,826 $ 31,231 Cost of equipment sales — 22,535 Total cost of revenue $ 18,826 $ 53,766 Gross profit $ 3,803 $ 5,753 Mining Segment Revenue: Digital asset mining income $ 98,026 $ 133,000 Total revenue $ 98,026 $ 133,000 Cost of revenue: Cost of digital asset mining $ 81,345 $ 68,750 Total cost of revenue 81,345 68,750 Gross profit $ 16,681 $ 64,250 Consolidated Consolidated total revenue $ 120,655 $ 192,519 Consolidated cost of revenue $ 100,171 $ 122,516 Consolidated gross profit $ 20,484 $ 70,003 XMS Capital or its affiliates may provide topotentially subject the Company in connectionto concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Credit risk with its initial Business Combination, and reimburse XMS Capital or its affiliates for any out-of-pocket expenses incurred by them in connectionrespect to accounts receivable is concentrated with the performancea small number of such services.Note 6 — Commitments and ContingenciesRegistration RightsThe holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares), were entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period.customers. The Company will bearplaces its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, in order to limit the expenses incurred in connection with the filing of any such registration statements.Underwriting AgreementThe Company granted the underwriters a 45-day option from the date of the final prospectus relatingexposure to the Initial Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts and commissions. On February 12, 2021, the underwriter fully exercised its option to purchase additional Units.The underwriters did not earn any upfront underwriting commission in connection with 2,760,000 Units, including the 2,405,700 Units sold to the Anchor Investors. Except for those Units, the underwriters were entitled to an underwriting discount of $0.20 per Unit on 31,740,000 Units, or approximately $6.3 million, paid upon the closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or approximately $12.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.Risks and UncertaintiesManagement continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.Note 7 — Stockholders’ EquityPreferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.credit risk. As of March 31, 2021, there2023 and December 31, 2022, all of the Company’s fixed assets were no shareslocated in the United States. For the three months ended March 31, 2023 and 2022, 100% and 100%, respectively, of preferred stock issued or outstanding.Class A Common Stock — The Companythe Company’s revenue was generated in the United States. For the three months ended March 31, 2023 and 2022, 81% and 62%, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin, which is authorizedsubject to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share.extreme price volatility. As of March 31, 2021, there were 3,182,617 shares of Class A common stock issued2023 and outstanding, excluding 31,317,383 shares of Class A common stock subject to possible redemption.Class B Common Stock — The Company is authorized to issue 50,000,000 shares of Class B common stock with a par value of $0.0001 per share. On December 31, 2020,2022, substantially all of our digital assets were held by two third-party digital asset services.Company issued 7,187,500 sharesthree months ended March 31, 2023 and March 31, 2022, the concentration of Class B common stock to the Sponsor for an aggregate price of $25,000. On February 9, 2021, the Company effected a share capitalization of 1,437,500 shares of Class B common stock, resulting in an aggregate of 8,625,000 shares of Class B common stock outstanding. Up to an aggregate of 1,125,000 shares of Class B common stock were subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in fullcustomers comprising 10% or in part, so that the initial stockholders would collectively own 20%more of the Company’s issued and outstanding common stock aftertotal revenue are as follows:Three Months Ended March 31, Three Months Ended March 31, 2023 2022 2023 2022 Percent of total revenue: Percent of Hosting segment revenue: Customer A (related party) N/A 12 % N/A 39 % D N/A N/A N/A N/A E N/A N/A N/A N/A Initial Public Offering. On February 12, 2021, the underwriter fully exercised its optionreportable segment gross profit to purchase additional; thus, these 1,125,000 shares of Class B common stock were no longer subject to forfeiture.In January 2021, our Sponsor transferred 30,000 shares of our Class B common stock to each of our independent directors.Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders and vote together as a single class, except as required by law; provided, that, prior toincome (loss) before income taxes included in the Company’s initial Business Combination, holdersConsolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2023 2022 Reportable segment gross profit $ 20,484 $ 70,003 Gain from sales of digital assets 1,064 2,163 Impairment of digital assets (1,056) (53,985) Operating expenses: Research and development 1,415 3,340 Sales and marketing 1,008 1,398 General and administrative 21,764 40,160 Total operating expenses 24,187 44,898 Operating loss (3,695) (26,717) Non-operating expenses, net: Gain on debt extinguishment (20,761) — Interest expense, net 157 21,676 Fair value adjustment on convertible notes — 386,037 Fair value adjustment on derivative warrant liabilities — (10,275) Reorganization items, net 31,559 — Other non-operating income, net (3,069) (357) Total non-operating expenses, net 7,886 397,081 Loss before income taxes $ (11,581) $ (423,798) Class B common stock will haveCompany. For the rightthree months ended March 31, 2023 and 2022, the Company recognized hosting revenue from the contracts with these entities of $3.7 million and $5.9 million, respectively. In addition, for the three months ended March 31, 2023 and 2022, there was equipment sales revenue recognized of nil and $25.9 million to appoint allthese same various entities. A nominal amount was receivable from these entities as of March 31, 2023 and December 31, 2022.Company’s directors and remove members of the board of directorsCompany for any reason, and holders of the Class A common stock will not be entitled to vote on the appointment of directors during such time.The Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which the shares of Class B common stock will convert into shares of Class A common stock will be adjusted (unless the holdersuse of a majoritypersonal aircraft for flights taken on Company business. Fthe issued and outstanding shares of the Class B common stock agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of all shares of common stock issued and outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination.Note 8 — Derivative Warrant Liabilities2021,2023 and December 31, 2022, there was no reimbursements payable.had 8,625,000 Public Warrantsannounced that we have entered into agreements to host 17,935 bitcoin mining machines with three companies, including 6,914 units for Greenidge Generation Holdings, 10,000 units for Ault Alliance, and the 6,266,667 Private Placement Warrants outstanding.Public Warrants may only be exercised1,021 units for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company agreed that as soon as practicable, but in no event later than 20 business days after the closing of its initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the Company’s initial Business Combination and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. If the shares issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the above requirements, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger prices described below under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” and “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described below under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable (except as described below in “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”) so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, the Anchor Investors or their respective permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00:Once the warrants become exercisable, the Company may call the outstanding warrants for redemption (except as described herein with respect to the Private Placement Warrants):●in whole and not in part;●at a price of $0.01 per warrant;●upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and●if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).not redeemhost the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effectivemining units at its facilities in Dalton, Georgia, Calvert City, Kentucky and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00:Once the warrants become exercisable, the Company may redeem the outstanding warrants:●in whole and not in part;●at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of Class A common stock;●if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”); and●if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.The “fair market value” of Class A common stock shall mean the volume weighted average price of Class A common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.Note 9 — Fair Value MeasurementsThe following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.Description Quoted Prices in Active Markets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Other Unobservable Inputs
(Level 3) Assets: Investments held in Trust Account - Money market fund $ 345,010,287 $ - $ - Liabilities: Derivative warrant liabilities - Public warrants $ - $ - $ 9,660,000 Derivative warrant liabilities - Private placement warrants $ - $ - $ 7,206,670 Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. There were no transfers between levels of the fair value hierarchy during the period ended March 31, 2021.Level 1 instruments include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.The estimated fair value of the Public Warrants is measured at fair value using a Monte Carlo simulation. The estimated fair value of the Private Placement Warrants is measured at fair value using a Black-Scholes option pricing model.The estimated fair value of the Public Warrants and the Private Placement Warrants is determined using Level 3 inputs. Inherent in a Monte Carlo simulation and a Black-Scholes model are assumptions related to expected stock-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on historical and implied volatility of select peer companies. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity commensurate with the expected remaining life of the warrants. The expected term of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates: February 12,
2021 March 31,
2020 Exercise price $ 11.50 $ 11.50 Stock price $ 10.87 $ 9.74 Volatility 20.0 % 20.0 % Term 5.0 5.0 Risk-free rate 0.50 % 0.92 % The change in the fair value of derivative liabilities, measured using Level 3 inputs, for the period ended March 31, 2021 is summarized as follows:Derivative warrant liabilities at February 12, 2021 (inception) $ - Issuance of Public and Private Warrants 23,027,500 Change in fair value of derivative warrant liabilities (6,160,830 ) Derivative warrant liabilities at March 31, 2021 $ 16,866,670 Note 10 — Subsequent EventsManagement has evaluated subsequent events and transactions that occurred after the balance sheet date through the date the balance sheet was available for issuance. Based upon this review, except as noted above, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
April 3, 2023. Referencesthe “Company,“we,” “Power & Digital Infrastructure Acquisition Corp.,” “Power & Digital,“us,” “our,” “us”the “Company” or “we”“Core Scientific” refer to Power & Digital Infrastructure Acquisition Corp.Core Scientific, Inc. and its subsidiaries. The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our results of operations and financial condition. This discussion and analysis should be read together with the unaudited consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. See the sections entitled “─Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” elsewhere in this Report. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A. “Risk Factors” of the Company’s financial condition and results of operations should be readAnnual Report on Form 10-K for the fiscal year 2022.conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.Cautionary Note Regarding Forward-Looking StatementsThis Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27Amay constitute “forward-looking statements” for purposes of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Suchfederal securities laws. Forward-looking statements include, but are not limited to, possiblestatements regarding our and our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q may include statements about our ability to: combinationsconditions,includingthepriceof bitcoin;financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.OverviewWe are a blank check company incorporated in Delaware on December 29, 2020. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are an emerging growth company and, as such, we are subject to allprotection of the risks associated with emerging growth companies. Our sponsor is XPDI Sponsor LLC, a Delaware limited liability company (the “Sponsor”).The registration statement for our Initial Public Offering was declared effective on February 9, 2021. On February 12, 2021, we consummatedenvironment;Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including the exercise of the underwriters’ option to purchase 4,500,000 additional Units (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.2 million, of which approximately $12.1 million in deferred underwriting commissions.Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,266,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, to the Sponsor and to certain qualified institutional buyersbusiness or institutional accredited investors, including certain funds and accounts managed by subsidiaries of BlackRock, Inc. (the “Anchor Investors”), generating proceeds of $9.4 million.Upon the closing of the Initial Public Offering and the Private Placement, $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable by us on the income earned on the trust account) at the time of the agreement to enter into the initial Business Combination. However, we only intend to complete a Business Combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 12, 2023, (the “Combination Period”) and our stockholders have not amended the Certificate of Incorporation to extend such Combination Period, we will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable by us), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.Liquidity and Capital ResourcesAs of March 31, 2021, we had approximately $2.1 million in its operating bank account, and working capital of approximately $2.2 million.Our liquidity needs to date have been satisfied through a payment of $25,000 from the Sponsor to cover for certain offering costs in exchange for issuance of the Founder Shares (as defined below), the loan under a promissory note with our Sponsor of approximately $90,000, and the net proceeds from the consummation of the Private Placement not held in the Trust Account. We fully repaid the promissory note on February 15, 2021. In addition, in order to finance transaction costs in connection with an Initial Business Combination, our officers, directors and initial stockholders may, but are not obligated to, provide us Working Capital Loan. As of March 31, 2021, there were no amounts outstanding under any Working Capital Loans.Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.Management continues to evaluatewithstand the impact of any new laws and regulations related to its industry;COVID-19 pandemicimpact of, and response to, new accounting standards;industry and has concluded that while it is reasonably possible that the virus could have a negative effectCelsius Chapter 11 proceedings.our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinableinformation available as of the date of this Quarterly Report on Form 10-Q and the financial statements. The financialdocuments we reference in this Quarterly Report on Form 10-Q, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not includeundertake any adjustmentsobligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.might resultour actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.outcomerelevant subject. These statements are based upon information available to us as of the date of this uncertainty.ResultsQuarterly Report on Form 10-Q and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, OperationsOur entire activity since inception upall potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to March 31, 2021 was in preparationunduly rely upon these statements.formation,own account and provide colocation hosting services for other large-scale miners at our eight operational data centers in Georgia (2), Kentucky (1), North Carolina (2), North Dakota (1) and Texas (2). We began digital asset mining in 2018 and in 2020 became one of the Initial Public Offeringlargest North American providers of colocation hosting services for third-party mining customers, at which time we derived almost all our revenue from third-party colocation hosting fees and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. We will not be generating any operating revenues untilresale of digital asset mining machines. Currently, we derive the closing and completionmajority of our initial Business Combination.Forrevenue from self-mining bitcoin. We are one of the largest blockchain infrastructure, digital asset mining and colocation hosting provider companies in North America, with an average hourly operating power demand of approximately 581 MW and 636 MW for the three months endedending March 31, 2021,2023, and December 31, 2022, respectively. As of March 31, 2023, we had net incomeapproximately 1,500 MW of approximately $5.0contracted power capacity at our sites, including 500MW of power allocated to the Muskogee data center, which remains substantially undeveloped.which primarily consisted of approximately $6.2and $192.5 million of non-operating gain from changes in fair value of derivative warrant liabilities and approximately $10,000 of income from investments held in Trust Account, partially offset by approximately $382,000 of general and administrative expenses, approximately $49,000 of franchise tax expenses and a non-operating expense of approximately $777,000 related to offering costs for derivative warrant liabilities.Contractual ObligationsAdministrative Services AgreementCommencing on the effective date of the registration statement for the Initial Public Offering through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the Company agreed to pay affiliates of the Sponsor a total of $20,000 per month for office space, administrative and support services. We incurred approximately $40,000 in general and administrative expenses – related party in the accompanying unaudited condensed statements of operations for the three months ended March 31, 2021,2023 and 2022, respectively. We had an operating loss of $3.7 million and $26.7 million for the three months ended March 31, 2023 and 2022, respectively. We had a net loss of $11.7 million and a net loss of $466.2 million for the three months ended March 31, 2023 and 2022, respectively. Our Adjusted EBITDA was $28.7 million and $93.0 million for the three months ended March 31, 2023 and 2022, respectively. Adjusted EBITDA is a non-GAAP financial measure. See “such services.Registration RightsThe holdersAdjusted EBITDA.Founder Shares, Private Placement Warrants and warrants that may be issued upon conversionits affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Working Capital Loans, if any (and any shares of common stock issuable upon the exerciseTexas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the Private Placement Warrants or warrants issued upon conversionUnited States Code (the “Bankruptcy Code”). The Chapter 11 Cases are jointly administered under Case No. 22-90341. The Debtors continue to operate their business and manage their properties as “debtors-in-possession” (“DIP”) under the jurisdiction of the Working Capital LoansBankruptcy Court and upon conversionin accordance with the applicable provisions of the Founder Shares)Bankruptcy Code and orders of the Bankruptcy Court. The Debtors filed various “first day” motions with the Bankruptcy Court requesting customary relief, which were generally approved by the Bankruptcy Court on December 22, 2022, that have enabled the Company to operate in the ordinary course while under Chapter 11 protection. For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Other Related Matters to our unaudited consolidated financial statements in Item 1 of Part I of this report.were entitledwith Wilmington Savings Fund Society, FSB, as administrative agent, and the lenders from time to registration rightstime 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 a registration rights agreement signed upon(i) the consummationSecured 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 Initial Public Offering. These holders were entitlednotes 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 certain demandtime), by and “piggyback” registration rights. However,among Core Scientific, Inc. (as successor of Core Scientific Holding Co.), the registration rights agreement provides that we will not be requiredguarantors party thereto from time to effect or permit any registration or cause any registration statement to become effective until terminationtime, U.S. Bank National Association, as note agent and collateral agent, and the purchasers of the applicable lock-up period. We will bearnotes issued thereunder (the “Other Convertible Notes,” and together with the expenses incurredSecured Convertible Notes, the “Convertible Notes”).such registration statements.Underwritingremaining commitments and declare the outstanding obligations under the Replacement DIP Credit AgreementWe granted to be immediately due and payable.underwriters a 45-day option fromReplacement DIP Credit Agreement is December 22, 2023, which can be extended, under certain conditions, by an additional three months to March 22, 2024. The Replacement DIP Credit Agreement will also terminate on the date that is the earliest of the following (i) the effective date of the Plan with respect to the Borrowers (as defined in the Replacement DIP Credit Agreement) or any other Debtor; (ii) the consummation of any sale or other disposition of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code; (iii) the date of the acceleration of the Loans and the termination of the Commitments (whether automatically, or upon any Event of Default or as otherwise provided in the Replacement DIP Credit Agreement); and (iv) conversion of the Chapter 11 Cases into cases under chapter 7 of the Bankruptcy Code.prospectus relatingbasis 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”).Initial Public OfferingMuskogee data center which remains substantially undeveloped. Our existing completed facilities leverage our specialized construction proficiency by employing high-density, low-cost engineering and power designs. We continually evaluate our mining performance, including our ability to purchase upaccess additional megawatts of electric power and to 4,500,000expand our total self-mining and customer and related party hosting hash rates. We may explore additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discountsmining facilities and commissions. On February 12, 2021, the underwriter fully exercised its option to purchase additional Units.The underwriters did not earn any upfront underwriting commissionmining arrangements in connection with 2,760,000 Units, includingour short-, medium- and long-term strategic planning.2,405,700 Units soldsale of consumption-based contracts for our hosting services which are recurring in nature. During 2022, our “Hosting” segment also included sales of mining equipment to customers, and was referred to as “Hosting and Equipment Sales”. The Mining segment generates revenue from operating owned computer equipment as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for these services, we receive digital assets.Bitcoin Miners in Operation as of March 31, 2023 Mining Equipment Hash rate (EH/s) Number of Miners Self-miners 16.1 155.0 Hosted miners 5.7 52.0 Total mining equipment 21.8 207.0 Bitcoin Miners in Operation as of December 31, 2022 Mining Equipment Hash rate (EH/s) Number of Miners Self-miners 15.7 153.0 Hosted miners 8.0 81.0 Total mining equipment 23.7 234.0 Anchor Investors. Exceptcustomers.those Units, the underwritersthree months ended March 31, 2023 and 2022, were entitledas follows (in thousands):March 31, 2023 March 31, 2022 Digital assets, beginning of period $ 724 $ 234,298 Digital asset mining revenue 98,026 133,000 Proceeds from sales of digital assets (98,384) — Gain from sales of digital assets 1,064 2,163 Impairment of digital assets (1,056) (53,985) Other (374) 847 Digital assets, end of period $ — $ 316,323 an underwriting discountthe rate at which it is capable of $0.20 persolving such computations. The original equipment used for mining bitcoin utilized the Central Processing Unit sold(“CPU”) of a computer to mine various forms of digital assets. Due to performance limitations, CPU mining was rapidly replaced by the Graphics Processing Unit (“GPU”), which offers significant performance advantages over CPUs. General purpose chipsets like CPUs and GPUs have since been replaced as the standard in the Initial Public Offering on 31,740,000 Units, or approximately $6.3 million, paid uponmining industry by ASIC chips such as thoseclosingminers we and our customers use to mine bitcoin. These ASIC chips are designed specifically to maximize the rate of hashing operations.Initial Public Offering. An additional fee of $0.35 per Unit soldprocessing speed at which a mining computer operates in the Initial Public Offering, or approximately $12.1 millionits attempt to secure a specific digital asset. A participant in the aggregate, will be payablea blockchain network’s mining function has a hash rate equivalent to the underwriters for deferred underwriting commissions. The deferred fee will become payabletotal of all its miners seeking to mine a specific digital asset. System-wide, the total network hash rate reflects the sum total of all miners seeking to mine each specific type of digital asset. A participant’s higher total hash rate relative to the underwriters fromsystem-wide total hash rate generally results in a corresponding higher success rate in digital asset rewards over time as compared to mining participants with relatively lower total hash rates.amounts heldrelative market price for a digital asset, such as bitcoin, increases, more users are incentivized to mine for that digital asset, which increases the network’s overall hash rate. As a result, a mining participant must increase its total hash rate in order to maintain its relative possibility of solving a block on the Trust Account solelynetwork blockchain. Achieving greater hash rate power by deploying increasingly sophisticated miners in ever greater quantities has become one of the eventbitcoin mining industry’s great sources of competition. Our goal is to deploy a powerful fleet of self- and hosted-miners, while operating as energy-efficiently as possible.the Company completes a Business Combination,high or low prices may have little or no relationship to identifiable market forces, may be subject to the termsrapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting. Bitcoin (as well as other digital assets) may have value based on various factors, including their acceptance as a means of the underwriting agreement.Critical Accounting PoliciesThis management’s discussionexchange by consumers and analysis ofothers, scarcity, and market demand.Impact to Revenue Driver Increase in Driver Decrease in Driver Market Price of Bitcoin Favorable Unfavorable Difficulty Unfavorable Favorable Core Scientific Hash Rate Favorable Unfavorable iswith dedicated data centers. The Company competes with other enterprises that focus all or a portion of their activities on mining activities at scale. We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining low-cost electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry.statements,results, we use the following business metrics and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions. For a definition of these key business metrics, see the sections titled “Self-Mining Hash Rate” and “Adjusted EBITDA” (below).Three Months Ended March 31, 2023 2022 Self-Mining Hash rate (Exahash per second) 16.1 8.3 Three Months Ended March 31, 2023 2022 Adjusted EBITDA (in millions) $ 28.7 $ 93.0 beenincluded Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic and financial planning.America. Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because not all companies calculate this measure in the same fashion. You should review the reconciliation of net loss to Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.preparationfollowing table presents a reconciliation of net loss to Adjusted EBITDA for the three months ended March 31, 2023 and 2022, (in thousands):Three Months Ended March 31, 2023 2022 Adjusted EBITDA Net loss $ (11,685) $ (466,204) Adjustments: Interest expense, net 157 21,676 Income tax expense 104 42,406 Depreciation and amortization 20,094 42,139 Gain on debt extinguishment (20,761) — Stock-based compensation expense 12,273 25,797 Fair value adjustment on derivative warrant liabilities — (10,275) Fair value adjustment on convertible notes — 386,037 Gain from sales of digital assets (1,064) (2,163) Impairment of digital assets 1,056 53,985 Reorganization items, net 31,559 — Non-cash and other items (3,069) (357) Adjusted EBITDA $ 28,664 $ 93,041 Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage Revenue: (in thousands, except percentages) Hosting revenue from customers $ 18,909 $ 27,338 $ (8,429) (31) % Hosting revenue from related parties 3,720 5,876 (2,156) (37) % Equipment sales to customers — 416 (416) NM Equipment sales to related parties — 25,889 (25,889) NM Digital asset mining revenue 98,026 133,000 (34,974) (26) % Total revenue 120,655 192,519 (71,864) (37) % Cost of revenue: Cost of hosting services 18,826 31,231 (12,405) (40) % Cost of equipment sales — 22,535 (22,535) NM Cost of digital asset mining 81,345 68,750 12,595 18 % Total cost of revenue 100,171 122,516 (22,345) (18) % Gross profit 20,484 70,003 (49,519) (71) % Gain from sales of digital assets 1,064 2,163 (1,099) (51) % Impairment of digital assets (1,056) (53,985) 52,929 NM Operating expenses: Research and development 1,415 3,340 (1,925) (58) % Sales and marketing 1,008 1,398 (390) (28) % General and administrative 21,764 40,160 (18,396) (46) % Total operating expenses 24,187 44,898 (20,711) (46) % Operating loss (3,695) (26,717) 23,022 NM Non-operating expenses, net: Gain on debt extinguishment (20,761) — (20,761) NM Interest expense, net 157 21,676 (21,519) (99) % Fair value adjustment on convertible notes — 386,037 (386,037) NM Fair value adjustment on derivative warrant liabilities — (10,275) 10,275 NM Reorganization items, net 31,559 — 31,559 NM Other non-operating income, net (3,069) (357) (2,712) NM Total non-operating expenses, net 7,886 397,081 (389,195) (98) % Loss before income taxes (11,581) (423,798) 412,217 NM Income tax expense 104 42,406 (42,302) (100) % Net loss $ (11,685) $ (466,204) $ 454,519 NM Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage Revenue: (in thousands, except percentages) Hosting revenue from customers $ 18,909 $ 27,338 $ (8,429) (31) % Hosting revenue from related parties 3,720 5,876 (2,156) (37) % Equipment sales to customers — 416 (416) NM Equipment sales to related parties — 25,889 (25,889) NM Digital asset mining revenue 98,026 133,000 (34,974) (26) % Total revenue $ 120,655 $ 192,519 $ (71,864) (37) % Percentage of total revenue: Hosting revenue from customers 16 % 14 % Hosting revenue from related parties 3 % 3 % Equipment sales to customers — % — % Equipment sales to related parties — % 13 % Digital asset mining revenue 81 % 70 % Total revenue 100 % 100 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Cost of revenue $ 100,171 $ 122,516 $ (22,345) (18) % Gross profit 20,484 70,003 (49,519) (71) % Gross margin 17 % 36 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Gain from sales of digital assets $ 1,064 $ 2,163 $ (1,099) (51) % Percentage of total revenue 1 % 1 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Impairment of digital assets $ (1,056) $ (53,985) $ 52,929 NM Percentage of total revenue (1) % (28) % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Research and development $ 1,415 $ 3,340 $ (1,925) (58) % Percentage of total revenue 1 % 2 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Sales and marketing $ 1,008 $ 1,398 $ (390) (28) % Percentage of total revenue 1 % 1 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) General and administrative $ 21,764 $ 40,160 $ (18,396) (46) % Percentage of total revenue 18 % 21 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage Non-operating expenses, net: (in thousands, except percentages) Gain on debt extinguishment $ (20,761) $ — $ (20,761) NM Interest expense, net 157 21,676 (21,519) (99) % Fair value adjustment on convertible notes — 386,037 (386,037) NM Fair value adjustment on derivative warrant liabilities — (10,275) 10,275 NM Reorganization items, net 31,559 — 31,559 NM Other non-operating income, net (3,069) (357) (2,712) NM Total non-operating expenses, net $ 7,886 $ 397,081 $ (389,195) (98) % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Income tax expense $ 104 $ 42,406 $ (42,302) (100) % Percentage of total revenue — % 22 % Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage Hosting Segment (in thousands, except percentages) Revenue: Hosting revenue $ 22,629 $ 33,214 $ (10,585) (32)% Equipment sales — 26,305 (26,305) NM Total revenue 22,629 59,519 (36,890) (62)% Cost of revenue: Cost of hosting services 18,826 31,231 (12,405) (40)% Cost of equipment sales — 22,535 (22,535) NM Total cost of revenue $ 18,826 $ 53,766 $ (34,940) (65)% Gross profit $ 3,803 $ 5,753 $ (1,950) (34)% Hosting Margin 17% 10% Mining Segment Digital asset mining revenue $ 98,026 $ 133,000 $ (34,974) (26)% Total revenue 98,026 133,000 (34,974) (26)% Cost of revenue 81,345 68,750 12,595 18% Gross profit $ 16,681 $ 64,250 $ (47,569) (74)% Mining Margin 17% 48% Consolidated Consolidated total revenue $ 120,655 $ 192,519 $ (71,864) (37)% Consolidated cost of revenue $ 100,171 $ 122,516 $ (22,345) (18)% Consolidated gross profit $ 20,484 $ 70,003 $ (49,519) (71)% Three Months Ended March 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Reportable segment gross profit $ 20,484 $ 70,003 $ (49,519) (71)% Gain from sales of digital assets 1,064 2,163 (1,099) (51)% Impairment of digital assets (1,056) (53,985) 52,929 NM Operating expenses: Research and development 1,415 3,340 (1,925) (58)% Sales and marketing 1,008 1,398 (390) (28)% General and administrative 21,764 40,160 (18,396) (46)% Total operating expenses 24,187 44,898 (20,711) (46)% Operating loss (3,695) (26,717) 23,022 NM Non-operating expenses, net: Gain on debt extinguishment (20,761) — (20,761) NM Interest expense, net 157 21,676 (21,519) (99)% Fair value adjustment on derivative warrant liabilities — (10,275) 10,275 NM Fair value adjustment on convertible notes — 386,037 (386,037) NM Reorganization items, net 31,559 — 31,559 NM Other non-operating income, net (3,069) (357) (2,712) 760% Total non-operating expenses, net 7,886 397,081 (389,195) NM Loss before income taxes $ (11,581) $ (423,798) $ 412,217 NM statements requiresadvisers, to assist the Company in managing the Chapter 11 Cases and developing, confirming, and consummating a Chapter 11 plan of reorganization or alternative restructuring transaction.March 31, December 31, Period over Period Change 2023 2022 Dollar Percentage (in thousands, except percentages) Cash and cash equivalents $ 47,487 $ 15,884 $ 31,603 199 % Restricted cash 21,805 36,356 (14,551) (40) % Total cash, cash equivalents and restricted cash $ 69,292 $ 52,240 $ 17,052 33 % Three Months Ended March 31, 2023 2022 (in thousands) Cash, cash equivalents and restricted cash – beg. of period $ 52,240 $ 131,678 Net cash provided by (used in) Operating activities 19,942 (3,615) Investing activities (1,869) (269,096) Financing activities (1,021) 251,465 Cash, cash equivalents and restricted cash - end of period $ 69,292 $ 110,432 and judgmentsabout the effect of matters that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate ourare inherently uncertain. These estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimatesare developed based on historical experience known trends and events and various other factorsassumptions that we believe to be reasonable under the circumstances,circumstances. Critical accounting estimates are accounting estimates where the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company has identified the following as its critical accounting policies:Derivative Warrant LiabilitiesWe do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates allnature of the Company’s financial instruments, including issued stock purchase warrants,estimates are material due to determine ifthe levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such instruments are derivatives or contain features that qualify as embedded derivatives, pursuantmatters to Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging.” 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.The 8,625,000 warrants issued in the Initial Public Offering (“Public Warrants”)change and the 6,266,667 Private Placement Warrants are recognized as derivative liabilitiesimpact of the estimates on financial condition or operating performance is material.FASB ASC Topic 815-40, “DerivativesU.S. GAAP requires us to make estimates and Hedging – Contractsassumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. There have been no material changes to the critical accounting policies and estimates during the three months ended March 31, 2023, as compared to those disclosed in Entity’s Own Stock.our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Accordingly,audited consolidated financial statements and the Company recognizesaccompanying notes included in our Annual Report on Form 10-K for the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The estimated fair value of the Public Warrants is measured at fair value using a Monte Carlo simulation. The estimated fair value of the Private Placement Warrants is measured at fair value using a Black-Scholes option pricing model.Class A common shares subject to possible redemptionWe account for its Class A common stock subject to possible redemption in accordancefiscal year ended December 31, 2022, which was filed with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2021, 31,317,383 shares of Class A common stock subject to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.Net income per common sharesNet income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. We have not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 14,891,667 shares in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.The Company’s unaudited condensed statement of operations includes a presentation of income per common share for common shares subject to possible redemption in a manner similar to the two-class method of income per common share. Net income per common share, basic and diluted, for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of incomeSEC on investments held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of common stock subject to possible redemption outstanding since original issuance.Net income per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income, adjusted for income or loss on investments held in the Trust Account attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.Non-redeemable common stock includes Founder Shares and non-redeemable shares of Class A common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on investments held in the Trust Account based on non-redeemable shares’ proportionate interest.In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoptionthe ASU did not impact the Company’s financial position, results of operations or cash flows.Management does not believe that any other recently issued, but not yet effective,new accounting standards if currently adopted would have a material effectrelevant to our business, refer to Note 2─Summary of Significant Accounting Policies to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on the accompanying financial statement.Off-Balance Sheet ArrangementsAs of March 31, 2021, we did not have any off-balance sheet arrangementsForm 10-Q.Item 303(a)(4)(ii) of Regulation S-K.JOBS ActThethe Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”) contains provisions that, among other things, relaxor the JOBS Act. We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions for qualifying public companies. We qualify asup to five years or until we are no longer an emerging growth company, whichever is earlier. In addition, the JOBS Act provides that an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing tocan delay the adoption ofadopting new or revised accounting standards and as a result, we may not comply with new or revised accountinguntil those standards onapply to private companies. We have elected to use the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result,extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting pronouncements as of publicstandards.effective dates.Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth inunder the JOBS Act if, as an “emerging growth company,”until the earliest of (a) February 12, 2026, the fifth anniversary of XPDI’s initial public offering, (b) the last date of our fiscal year in which we choosehave a total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide alla “large accelerated filer” under the rules of the compensation disclosure that may be requiredSEC with at least $700.0 million of non-emerging growth public companies underoutstanding securities held by non-affiliates or (d) the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted bydate on which we have issued more than $1.0 billion in non-convertible debt securities during the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect toadverse effect on the market risk to which we are exposed.
period covered by this quarterly report.Under the supervision andmanagement, includingChief Executive Officer and our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness ofChief Financial Officer, have evaluated our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act. Act of 1934, as amended) prior to the filing of this quarterly report.thisthat evaluation, our principal executive officerChief Executive Officer and principal financial officerour Chief Financial Officer have concluded that, duringas of the end of the period covered by this quarterly report, certain of our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2023, due solely to the following material weakness in our internal control over financial reporting as described below in “Changes in Internal Control Over Financial Reporting.” In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.Material WeaknessA material weakness is a deficiency, or a combination of deficiencies,weaknesses in internal control over financial reportingreporting.that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Statement”). In the Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrantsfinancially relevant systems were also determined to be classifiedineffective as liabilities on the SPAC’s balance sheet as opposed to equity. In light of the Statement, the Company’s management reevaluated the terms of the Warrants, and determined that the Warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in earnings each reporting period. As a result of this reevaluation, management identified a material weakness in oursuch deficiency.controlcontrols over financial reporting relateddid not operate effectively at all times to ensure transactions were recorded timely and in accordance with GAAP. Appropriate segregation of duties was also not maintained at all times during the accounting for the Warrants.ThereourCore Scientific, Inc.’s internal control over financial reporting that occurred during(as defined in Rules 13a-15(f) and 15d-15(f) under the fiscal quarter ended March 31, 2021 covered by this Quarterly Report on Form 10-QExchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.reporting.reporting, primarily through:• increasing the depth and experience within our accounting and finance organization; • enhancing the communication and coordination among our accounting and financial reporting department and expanded cross-functional involvement and input into period-end disclosures; and • implementing additional internal reporting procedures, including enhancing the analytical procedures used to assess period-end balances, to add depth to our review process and improve our segregation of duties.
During the quarter ended March 31, 2023, we continued to assess the design of existing controls and implement new controls as needed to remediate the previously identified material weakness. We have yet to complete the testing and evaluation of the design and operating effectiveness of controls which are actively in process.
PARTOTHER INFORMATIONOther InformationItem 1.Legal Proceedings
None.
As of the date of this Quarterly Report on Form 10-Q, there
We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this Quarterly Report on Form 10-Q, we identified a material weakness in our internal control over financial reporting related to the accounting for the Warrants we issued in connection with our initial public offering. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of March 31, 2021 with respect to financial reporting relating to the Warrants.
Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3 or Form S-4, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can give no assurance that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Our Warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.
On April 12, 2021, the staff of the SEC issued the Statement, which focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our Warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our 8,625,000 Public Warrants and 6,266,667 Private Placement Warrants, and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our consolidated balance sheet as of March 31, 2021 contained elsewhere in this Quarterly Report are derivative liabilities related to embedded features contained within our Warrants. Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.
Item 2. Unregistered Sales |
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private PlacementEquity Securities and Use of 6,266,667 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant, to the Sponsor and the Anchor Investors, generating proceeds of $9.4 million.
In connection with the Initial Public Offering, our Sponsor had agreed to loan us an aggregate of up to $300,000 pursuant to a promissory note. This loan is non-interest bearing and payable on the consummation of the Initial Public Offering. We borrowed approximately $90,000 under a promissory note and fully repaid the promissory note on February 15, 2021.
Of the gross proceeds received from the Initial Public Offering and the full exercise of the option to purchase additional Shares, $345,000,000 was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the Private Placement are invested in U.S. government treasury bills with a maturity of 180 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of approximately $7.1 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $12.1 million in underwriting discounts and commissions.
None.
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| 101.SCH | XBRL Taxonomy Extension Schema | X | ||||||||||
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| †† | Certain of the exhibits and schedules to these exhibits have been omitted in accordance with Regulation S-K Item 601(a)(5). The registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC | ||||
SIGNATURE
CORE SCIENTIFIC, INC. | |||||||||
| Date: May 12, 2023 | |||||||||
| Denise Sterling | |||||||||
| Chief | |||||||||
| (Duly Authorized Officer & Principal Financial Officer) | |||||||||
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