☒
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the quarterly period ended March 31, 2024 | |||||
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)
code)
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||
| CORZ | The Nasdaq Global Select Market | |||||||||
| Warrants, each | CORZW | The Nasdaq | ||||||||
| CORZZ | The Nasdaq | |||||||||
| 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 accompanying notes are an integral part of these unaudited condensed financial statements.
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
For The Three Months Ended March 31, 2021
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| |||||||||||
The accompanying notes are an integral part
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For The 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 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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 | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
Note 1 — Description of Organization and Business Operations
Power & Digital Infrastructure Acquisition Corp. (the “Company”) is a blank check company incorporated in DelawareThis Quarterly Report on December 29, 2020. The Company was formed 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 company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
The CompanyForm 10-Q may pursue targets in any industry for purposes of consummating a Business Combination.
As of March 31, 2021, the Company had not commenced any operations. All activity for the period from December 29, 2020 (inception) through March 31, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
The Company has selected December 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, 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 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,”contain forward-looking statements within the meaning of Section 2(a)(16)27A of the Investment CompanySecurities Act of 1940,1933, as amended (the “Investment Company“Securities 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 the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution 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 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 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”). If the Company seeks stockholder approval, the Company will proceed with a Business Combination if a majority of the outstanding shares are voted by the stockholders at a stockholders’ meeting 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 assets to 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 pursuant to the tender 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 below 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 1321E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will. Forward-looking statements may be restricted from redeemingidentified by the use of words such as “aim,” “estimate,” “plan,” “project,” “forecast,” “goal,” “intend,” “will,” “expect,” “anticipate,” “believe,” “seek,” “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics, projections of market opportunity and expectations, the Company’s ability to scale and grow its shares with respect to more than an aggregate of 15%business, source clean and renewable energy, the advantages and expected growth of the Public Shares, withoutCompany and the prior consent ofCompany’s ability to source and retain talent. These statements are provided for illustrative purposes only and are based on various assumptions, whether or not identified in this Quarterly Report on Form 10-Q, and on 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 timingcurrent expectations of the Company’s obligationmanagement. These forward-looking statements are not intended to provide holdersserve, and must not be relied on by any investor, as a guarantee, an assurance, a prediction or a definitive statement of shares of Class A common stockfact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the right to have their shares redeemed in connection with a Business Combination or to redeem 100%control of the Public SharesCompany.
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”), andforward-looking statements. In addition, forward-looking statements reflect the Company’s stockholders have not amended the Certificateexpectations, plans or forecasts 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 expensesfuture events 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 Accountviews as of the date of this Quarterly Report on Form 10-Q and should not be relied upon as representing the liquidationCompany’s assessments as of any date subsequent to the Trust Account duedate of this Quarterly Report on Form 10-Q. The Company anticipates that subsequent events and developments will cause the Company’s assessments to reductionschange. However, while the Company may elect to update these forward-looking statements at some point 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 whichfuture, the Company does business, execute agreements with the Company waivingspecifically disclaims any right, title, interest or claim of any kind in orobligation to monies held in the Trust Account.
Liquidity and Capital Resources
As 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 loando so except as required under the Note of approximately $90,000 (as defined in Note 5), and the net proceeds from the consummation of the Private Placementapplicable securities laws. Accordingly, you should not held in the Trust Account. The Company fully repaid the Noteplace undue reliance 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 Uncertainties
Management 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 determinableforward-looking statements, which speak only as of the date they are made.
Note 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, 2023. prepaid expenses and other current assets on the consolidated balance sheets.Note 2 —Restatement of Previously IssuedMarch 31,
2024December 31,
2023Assets (Unaudited) Current Assets: Cash and cash equivalents $ 98,125 $ 50,409 Restricted cash 16,151 19,300 Accounts receivable 1,107 1,001 Digital assets — 2,284 Prepaid expenses and other current assets 27,937 24,022 Total Current Assets 143,320 97,016 Property, plant and equipment, net 575,969 585,431 Operating lease right-of-use assets 77,766 7,844 Intangible assets, net 2,136 2,247 Other noncurrent assets 14,777 19,618 Total Assets $ 813,968 $ 712,156 Liabilities and Stockholders’ Deficit Current Liabilities: Accounts payable $ 16,165 $ 154,751 Accrued expenses and other current liabilities 68,221 179,636 Deferred revenue 9,250 9,830 Operating lease liabilities, current portion 2,619 77 Finance lease liabilities, current portion 3,018 19,771 Notes payable, current portion 23,333 124,358 Contingent value rights, current portion 15,539 — Total Current Liabilities 138,145 488,423 Operating lease liabilities, net of current portion 69,022 1,512 Finance lease liabilities, net of current portion 1,170 35,745 Convertible and other notes payable, net of current portion 556,573 684,082 Contingent value rights, net of current portion 29,062 — Warrant liabilities 327,465 — Other noncurrent liabilities 11,040 — Total liabilities not subject to compromise 1,132,477 1,209,762 Liabilities subject to compromise — 99,335 Total Liabilities 1,132,477 1,309,097 Commitments and contingencies (Note 9) Stockholders’ Deficit: Preferred stock; $0.00001 par value; 2,000,000 shares authorized; none issued and outstanding — — Common stock; $0.00001 par value; 10,000,000 shares authorized at March 31, 2024 and December 31, 2023; 182,237 and 386,883 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 2 36 Additional paid-in capital 1,891,011 1,823,260 Accumulated deficit (2,209,522) (2,420,237) Total Stockholders’ Deficit (318,509) (596,941) Total Liabilities and Stockholders’ Deficit $ 813,968 $ 712,156 Three Months Ended March 31, 2024 2023 Revenue: Digital asset mining revenue $ 149,959 $ 98,026 Hosting revenue from customers 29,332 18,909 Hosting revenue from related parties — 3,720 Total revenue 179,291 120,655 Cost of revenue: Cost of digital asset mining 81,564 72,676 Cost of hosting services 20,081 16,198 Total cost of revenue 101,645 88,874 Gross profit 77,646 31,781 Gain from sales of digital assets 543 1,064 Impairment of digital assets — (1,056) Change in fair value of energy derivatives (2,218) — Losses on disposal of property, plant and equipment (3,820) — Operating expenses: Research and development 1,799 1,415 Sales and marketing 982 1,008 General and administrative 14,143 21,764 Total operating expenses 16,924 24,187 Operating income 55,227 7,602 Non-operating (income) expenses, net: Loss (gain) on debt extinguishment 50 (20,761) Interest expense, net 14,087 157 Reorganization items, net (111,439) 31,559 Change in fair value of warrant and contingent value rights (60,114) — Other non-operating expense (income), net 1,746 (3,069) Total non-operating (income) expenses, net (155,670) 7,886 Income (loss) before income taxes 210,897 (284) Income tax expense 206 104 Net income (loss) $ 210,691 $ (388) Net income (loss) per share (Note 12): Basic $ 0.91 $ — Diluted $ 0.78 $ — Weighted average shares outstanding: Basic 230,954 375,419 Diluted 282,531 375,419 Common Stock Additional
Paid-In CapitalAccumulated
DeficitTotal
Stockholders’
DeficitShares Amount Balance at January 1, 2024 386,883 $ 36 $ 1,823,260 $ (2,420,237) $ (596,941) — — — 24 24 Balance at January 1, 2024, adjusted 386,883 36 1,823,260 (2,420,213) (596,917) Net income — — — 210,691 210,691 Stock-based compensation — — (1,060) — (1,060) Cancellation of common stock in connection with emergence (386,883) (36) 36 — — Issuance of new common stock in connection with emergence 152,497 2 296,494 — 296,496 Issuance of new common stock under the Equity Rights Offering 15,649 — 55,000 — 55,000 Issuance of new common stock for the Equity Rights Offering backstop commitment 2,111 — 5,475 — 5,475 Issuance of new common stock for Bitmain obligation 10,735 — 27,839 — 27,839 Conversion premium on the issuance of the New Secured Convertible Notes — — 33,202 — 33,202 Issuance of warrants — — (345,856) — (345,856) Exercise of stock options — — 9 — 9 Restricted stock awards issued, net of tax withholding obligations 1,285 — (3,388) — (3,388) Restricted stock awards forfeited (40) — — — — Balance at March 31, 2024 182,237 $ 2 $ 1,891,011 $ (2,209,522) $ (318,509) Common Stock Additional
Paid-In CapitalAccumulated
DeficitTotal
Stockholders’
Deficit Shares Amount Balance at January 1, 2023 375,225 $ 36 $ 1,764,368 $ (2,173,750) $ (409,346) Net loss — — — (388) (388) 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 $ (2,174,138) $ (397,461) Three Months Ended March 31, 2024 2023 Cash flows from Operating Activities: Net income (loss) $ 210,691 $ (388) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 28,996 20,094 Amortization of operating lease right-of-use assets 770 195 Stock-based compensation (1,060) 12,273 Digital asset mining revenue (149,959) (98,026) Loss (gain) on debt extinguishment 50 (20,761) Change in fair value of energy derivatives (797) — Change in fair value of warrant liabilities (18,390) — Change in fair value of contingent value rights (41,724) — Amortization of debt discount 660 — Losses on disposal of property, plant and equipment 3,820 — Impairment of digital assets — 1,056 Gain on sale of digital assets (543) (1,064) Non-cash reorganization items (143,791) — Changes in operating assets and liabilities: Accounts receivable, net (106) 61 Accounts receivable from related parties — 21 Digital assets 152,810 98,758 Deposits for equipment — — Prepaid expenses and other current assets (5,989) 1,152 Accounts payable (9,735) 16,408 Accrued expenses and other (10,351) (906) Deferred revenue (580) (8,629) Other noncurrent assets and liabilities, net 7,402 (302) Net cash provided by operating activities 22,174 19,942 Cash flows from Investing Activities: Purchases of property, plant and equipment (31,894) (1,539) Other (76) (330) Net cash used in investing activities (31,970) (1,869) Cash flows from Financing Activities: Proceeds from issuance of common stock 55,000 — Proceeds from draw from exit facility 20,000 — Principal repayments of finance leases (3,554) — Principal payments on debt (13,702) (1,021) Restricted stock tax holding obligations (3,390) — Proceeds from exercise of stock options 9 — Net cash provided by provided by (used in) financing activities 54,363 (1,021) Net increase in cash, cash equivalents and restricted cash 44,567 17,052 Cash, cash equivalents and restricted cash—beginning of period 69,709 52,240 Cash, cash equivalents and restricted cash—end of period $ 114,276 $ 69,292 Supplemental disclosure of other cash flow information: Cash paid for interest $ 2,811 $ 317 Income tax refunds $ (1) $ (300) Cash paid for reorganization items $ 53,835 $ — Supplemental disclosure of noncash investing and financing activities: Change in accrued capital expenditures $ (8,484) $ 45,721 Decrease in equipment related to debt extinguishment — 17,849 Decrease in notes payable in exchange for equipment — (38,610) Reduction in plant, property, and equipment basis related to Bitmain purchase (26,101) — Reclass of other current and non-current assets to plant, property, and equipment 8,890 — Decrease in right-of-use assets due to lease termination (6,560) — Increase in right-of-use assets due to lease commencement 70,690 — Increase in lease liability due to lease commencement 70,690 — Extinguishment of convertible notes upon emergence (559,902) — Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence (321,773) — Cancellation of common stock in connection with emergence (37) — Issuance of new common stock in connection with emergence 296,494 — Issuance of new common stock for Bitmain obligation 27,839 — Issuance of new common stock for the Equity Rights Offering backstop commitment 5,475 — Issuance of contingent value rights 86,325 — Issuance of warrants 345,856 — Issuance of new secured convertible notes 260,000 — Issuance of secured notes, net of discount 149,520 — Issuance of Exit Credit Agreement including $1.2 million paid in kind upfront fee 41,200 — Issuance of miner equipment lender facility loans 52,947 — Issuance of notes related to settlement 9,092 — Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets 24 — April 12, 2021,December 21, 2022, the Acting DirectorCompany and certain of its affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the 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”)”United States Code (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”“Bankruptcy Code”). The Company previously accounted forChapter 11 Cases were jointly administered under Case No. 22-90341. The Debtors continued to operate their business and manage their properties as “debtors-in-possession” (“DIP”) under the Warrants as components of equity.In further considerationjurisdiction of the guidanceBankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Emergence from Bankruptcy.815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC 815”)852, Reorganizations, since 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 fairentity’s reorganization value at inception (onimmediately before the date of confirmation is more than the Initial Public Offering)total of all its post-petition liabilities and at each reporting dateallowed claims.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 32 — 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 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 herein furnished reflect all adjustments which are, in the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for theto present a fair statement of the balances and results for the interim periods presented. OperatingAll of these adjustments are of a normal recurring nature. The interim consolidated results for the period for the three months ended March 31, 2021of operations and cash flows 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, 2023.withemerged from bankruptcy and was no longer considered debtors-in-possession under the SEC on February 19, 2021Bankruptcy Code. For detailed discussion about the Chapter 11 Cases and Februaryour emergence from bankruptcy, refer to Note 3 — Chapter 11 2021, respectively.In April 2021,Filing and Emergence from Bankruptcy.identified a misstatement in its accounting treatment for the Warrants as presented in its audited balance sheetgenerated net income of $210.7 million. The Company had unrestricted cash and cash equivalents of $98.1 million as of February 12, 2021 included in its Current Report on Form 8-K, filed February 19, 2021. The Warrants were reflectedMarch 31, 2024, compared to $50.4 million 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 $23 million increase to derivative liabilities and offsetting decrease to Class A ordinary shares subject to possible redemption to the February 12, 2021 balance sheet. There was no impact to the Company’s financial position, net losses or cash flows.Emerging Growth CompanyThe Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), 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 compensation 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.December 31, 2023. The Company has elected not to opt outhistorically generated cash primarily from the issuance of such extended transition period, which means that when a standard is issued or revisedcommon stock and it has different application dates for public or private companies,debt, through sales of digital assets received as digital asset mining revenue and through revenue from contracts with customers. As of March 31, 2024, the Company had net working capital of $5.2 million and a total stockholders’ deficit of $318.5 million.emerging growth company, canentity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024, with early adoption permitted.or revised standard ateffective January 1, 2024. The transition guidance requires a cumulative-effect adjustment as of the time private companies adoptbeginning of the new or revised standard. This may make comparisoncurrent fiscal year for any difference between the carrying amount 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 becausedigital assets and fair value. As a result of the potential differencesCompany’s early adoption, the Company recorded a $24 thousand increase to Digital assets and a $24 thousand decrease to Accumulated deficit on the Consolidated Balance Sheets as of January 1, 2024.March 31, 2024 March 31, 2023 Digital assets, beginning of period $ 2,284 $ 724 Cumulative effect of ASU 2023-08, adopted January 1, 2024 24 — Digital assets, beginning of period, as adjusted 2,308 724 149,644 98,026 Mining proceeds from shared hosting 8,371 — Proceeds from sales of digital assets (160,777) (98,384) Realized gain from sale of digital assets 543 1,064 Impairment of digital assets — (1,056) Payment of board fee (89) — Other — (374) Digital assets, end of period $ — $ — 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 the Company’s ability to continue as a going concern, the valuation of digital assets, other intangible assets and property, plant and equipment, the initial measurement of lease liabilities, the fair value of derivative liabilities, and income taxes. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from thosemanagement’s estimates.
Performance Obligations - Hosting Segment
Cash and Cash Equivalents
Investments Held2024 and December 31, 2023, was $9.3 million and $9.8 million, respectively.
The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16)deferred revenue balance as of the Investmentbeginning of the year.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage limit of $250,000 and investments held in Trust Account.$345.9 million. As of March 31, 2021,2024, the warrants were reported at a fair value of $327.5 million in Warrant liabilities on the Consolidated Balance Sheets. During the three months ended March 31, 2024, the change in fair value of $18.4 million was included in Change in fair value of warrant and contingent value rights on the Company’s Consolidated Statements of Operations.
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Professional fees and other bankruptcy related costs | $ | 21,480 | $ | 20,107 | |||||||
| Negotiated settlements | (2,269) | — | |||||||||
| Satisfaction of allowed claims: | |||||||||||
| Extinguishment of secured and other convertible notes | (10,831) | — | |||||||||
| Extinguishment of miner equipment lender loans and leases | (102,024) | — | |||||||||
| Satisfaction of general unsecured creditor claims | (31,167) | — | |||||||||
| Satisfaction of cures and other claims | 231 | — | |||||||||
| Total satisfaction of allowed claims | (143,791) | — | |||||||||
| Reimbursed claimant professional fees | 12,802 | — | |||||||||
| Debtor-in-possession financing costs | 339 | 11,452 | |||||||||
| Reorganization items, net | $ | (111,439) | $ | 31,559 | |||||||
| December 31, 2023 | |||||
| Accounts payable | $ | 36,678 | |||
| Accrued expenses and other current liabilities | 20,300 | ||||
| Accounts payable, and accrued expenses and other current liabilities | $ | 56,978 | |||
| Debt subject to compromise | $ | 41,777 | |||
| Accrued interest on liabilities subject to compromise | 580 | ||||
| Leases, debt and accrued interest | 42,357 | ||||
| Liabilities subject to compromise | $ | 99,335 | |||
| March 31, 2024 | December 31, 2023 | Estimated Useful Lives | |||||||||||||||
Land and improvements1 | $ | 20,583 | $ | 21,852 | 20 years | ||||||||||||
| Building and improvements | 168,470 | 164,495 | 12 to 39 years | ||||||||||||||
Mining and network equipment2 | 450,921 | 441,404 | 1 to 5 years | ||||||||||||||
Electrical equipment3 | 65,006 | 64,810 | 5 to 10 years | ||||||||||||||
Other property, plant and equipment4 | 2,788 | 2,935 | 5 to 7 years | ||||||||||||||
| Total | 707,767 | 695,496 | |||||||||||||||
Less: accumulated depreciation and amortization5 | 320,394 | 293,974 | |||||||||||||||
| Total | 387,373 | 401,522 | |||||||||||||||
| Add: Construction in progress | 188,596 | 183,909 | |||||||||||||||
| Property, plant and equipment, net | $ | 575,969 | $ | 585,431 | |||||||||||||
| Financial statement line item | March 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 77,766 | $ | 7,844 | |||||||||||||||
| Finance lease right-of-use assets | Property, plant and equipment, net | $ | 9,374 | $ | 16,268 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Operating lease liabilities, current portion | Operating lease liabilities, current portion | $ | 2,619 | $ | 77 | |||||||||||||||
| Operating lease liabilities, net of current portion | Operating lease liabilities, net of current portion | $ | 69,022 | $ | 1,512 | |||||||||||||||
| Finance lease liabilities, current portion | Finance lease liabilities, current portion | $ | 3,018 | $ | 19,771 | |||||||||||||||
| Finance lease liabilities, net of current portion | Finance lease liabilities, net of current portion | $ | 1,170 | $ | 35,745 | |||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||
| Financial statement line item | 2024 | 2023 | ||||||||||||||||||
| Operating lease expense | General and administrative expenses | $ | 1,419 | $ | 390 | |||||||||||||||
| Short-term lease expense | General and administrative expenses | — | 365 | |||||||||||||||||
| Finance lease expense: | ||||||||||||||||||||
| Amortization of right-of-use assets | Cost of revenue | 334 | 3,857 | |||||||||||||||||
| Interest on lease liabilities | Interest expense, net | 1,037 | 309 | |||||||||||||||||
| Total finance lease expense | 1,371 | 4,166 | ||||||||||||||||||
| Total lease expense | $ | 2,790 | $ | 4,921 | ||||||||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| Weighted Average Remaining Lease Term (Years) | |||||||||||
| Operating leases | 7.1 | 10.7 | |||||||||
| Finance leases | 1.3 | 2.1 | |||||||||
| Weighted Average Discount Rate | |||||||||||
| Operating leases | 9.3 | % | 6.5 | % | |||||||
| Finance leases | 12.3 | % | 12.4 | % | |||||||
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Lease Payments | |||||||||||
| Operating lease payments | $ | 69 | $ | 337 | |||||||
Finance lease payments1 | $ | 4,628 | $ | 1,080 | |||||||
| Operating leases | Finance leases | ||||||||||
| Remaining 2024 | $ | 6,094 | $ | 2,781 | |||||||
| 2025 | 13,568 | 1,862 | |||||||||
| 2026 | 14,365 | 3 | |||||||||
| 2027 | 14,721 | — | |||||||||
| 2028 | 15,143 | — | |||||||||
| Thereafter | 35,997 | — | |||||||||
| Total lease payments | 99,888 | 4,646 | |||||||||
| Less: imputed interest | 28,247 | 458 | |||||||||
| Total | $ | 71,641 | $ | 4,188 | |||||||
| Stated Interest Rate | Effective Interest Rates | Maturities | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
Replacement DIP Credit Agreement1 | 10.0% | 10.0% | 2024 | $ | — | $ | 4,273 | |||||||||||||||||||
| Exit Credit Agreement | 9.0% | 9.0% | 2027 | 61,200 | — | |||||||||||||||||||||
Other Convertible Notes2 | 10.0% | 10.0% | 2025 | — | 322,396 | |||||||||||||||||||||
Secured Convertible Notes3 | 10.0% | 10.0% | 2025 | — | 237,584 | |||||||||||||||||||||
| Secured Notes | 12.5% | 12.6% | 2028 | 150,000 | — | |||||||||||||||||||||
| New Secured Convertible Notes | 6.0% - 10.0% | 10.0% | 2029 | 260,000 | — | |||||||||||||||||||||
| Miner Financing: | ||||||||||||||||||||||||||
| Blockfi loan | 9.7% - 13.1% | 10.1% - 13.1% | 2023 | — | 53,913 | |||||||||||||||||||||
| Blockfi takeback loan | 3.0% - 8.0% | 11.9% | 2029 | 47,734 | — | |||||||||||||||||||||
| Liberty/Stonebriar loan | 10.6% | 10.6% | 2024 | — | 6,968 | |||||||||||||||||||||
| Liberty/Stonebriar takeback loan | 3.0% - 8.0% | 11.9% | 2029 | 6,211 | — | |||||||||||||||||||||
| ACM note | —% | 15.0% | 2025 | 5,704 | 6,519 | |||||||||||||||||||||
| Mass Mutual Barings loans | 9.8% - 13.0% | 9.8% - 13.0% | 2025 | — | 63,844 | |||||||||||||||||||||
| Anchor Labs loan | 12.5% | 12.5% | 2024 | — | 25,159 | |||||||||||||||||||||
| Trinity loan | 11.0% | 11.0% | 2024 | — | 23,356 | |||||||||||||||||||||
| Equipment and Settlement: | ||||||||||||||||||||||||||
| Bremer loan | 5.5% | 5.5% | 2027 | 13,641 | 18,331 | |||||||||||||||||||||
| HMC note | 5.0% | 15.0% | 2026 | 13,347 | 14,208 | |||||||||||||||||||||
| Didado note | 5.0% | 15.0% | 2027 | 12,294 | 13,000 | |||||||||||||||||||||
| Dalton note | 5.0% | 5.0% | 2024 | 4,547 | — | |||||||||||||||||||||
| Harper note | 5.0% | 15.0% | 2026 | 4,522 | 4,678 | |||||||||||||||||||||
| Trilogy note | 5.0% | 15.0% | 2026 | 2,927 | 2,927 | |||||||||||||||||||||
| Unsecured: | ||||||||||||||||||||||||||
| B. Riley Bridge Notes | 7.0% | 7.0% | 2023 | — | 41,777 | |||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||
| First Insurance note | 7.6% | 7.6% | 2024 | 640 | 2,538 | |||||||||||||||||||||
| Stockholder loan | 10.0% | 20.0% | 2023 | — | 10,000 | |||||||||||||||||||||
| Kentucky Note | 5.0% | 5.0% | 2023 | — | 529 | |||||||||||||||||||||
| Other | 5.0% - 7.7% | 7.1% - 15.0% | 2024 - 2025 | 1,246 | 2,453 | |||||||||||||||||||||
| Notes payable, prior to reclassification to Liabilities subject to compromise | 584,013 | 854,453 | ||||||||||||||||||||||||
Less: Notes payable in Liabilities subject to compromise4 | — | 41,777 | ||||||||||||||||||||||||
| Less: Unamortized discounts - post-petition | 4,107 | 4,236 | ||||||||||||||||||||||||
| Total notes payable, net | 579,906 | 808,440 | ||||||||||||||||||||||||
| Less: current maturities | 23,333 | 124,358 | ||||||||||||||||||||||||
| Convertible and other notes payable, net of current portion | $ | 556,573 | $ | 684,082 | ||||||||||||||||||||||
Financial Instruments
certificates, notes or other instruments or documents evidencing indebtedness or obligations of, or interests in, the Debtors that are specifically reinstated pursuant to the Plan of Reorganization) were cancelled, and the duties and obligations of all parties thereto were deemed satisfied in full, canceled, released, discharged, and of no force or effect.
| Principal Balance on the Effective Date | |||||
| Exit Credit Agreement | $ | 61,200 | |||
| Secured Notes Indenture | $ | 150,000 | |||
| New Secured Convertible Notes Indenture | $ | 260,000 | |||
| Miner Equipment Lender Agreements | $ | 52,947 | |||
Fair Value Measurements
certain circumstances. Fair value is defined as the price that would be received for 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:
In some circumstances, the inputsvaluation methodologies used to measure fair value:
Derivative Warrant Liabilities
energy forward purchase contract.
The 8,625,000 Public Warrants and the 6,266,667 Private Placement Warrants are recognized as derivative liabilities in accordance with FASB ASC Topic 815-40, “Derivatives815 initially and Hedging – Contracts in Entity’s Own Stock.” Accordingly, the Company recognizes 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 issubsequently measured at fair value using a Monte Carlo simulation. The estimated fairwith changes in value ofreflected in Net income (loss). When these instruments were recognized on the Private Placement Warrants is measured at fair value using a Black-Scholes option pricing model.
Offering Costs Associated with the Initial Public Offering
Offering 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 Redemption
The 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 eventsEffective Date, observable market data was not solely within the Company’s control) are classified as temporary equity.available. 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 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 the Company’s balance sheet.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary 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. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest 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 to income tax examinations by major taxing authorities since inception.
Net income per common shares
Net 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 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 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 | $ | 4,962,873 | ||
| 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 Pronouncements
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 January2024 observable Level 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 Offering
On 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 Transactions
Founder Shares
On 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 optionmarket data 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 Warrants
Simultaneously 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 Loans
On 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 Agreement
Commencing 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, 2021 the Company incurred $40,000 of such fees, which are recognized in general and administrative expenses – related party, in the accompanying unaudited condensed statement of operations.
Payments to Insiders
The 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 Payments
The Company may make a cash payment to XMS Capital Partners, LLC (“XMS Capital”) or its affiliates for any financial advisory, placement agency or other similar investment banking services that XMS Capital or its affiliates may provide to the Company, in connection with its initial Business Combination, and reimburse XMS Capital or its affiliates for any out-of-pocket expenses incurred by them in connection with the performance of such services.
Note 6 — Commitments and Contingencies
Registration Rights
The 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. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the final prospectus relating 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 Uncertainties
Management 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’ Equity
Preferred 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. As of March 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of March 31, 2021, there were 3,182,617 shares of Class A common stock issued 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, the Company issued 7,187,500 shares 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 full or in part, so that the initial stockholders would collectively own 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On February 12, 2021, the underwriter fully exercised its option 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 to the Company’s initial Business Combination, holders of the Class B common stock will have the right to appoint all of the Company’s directors and remove members of the board of directors 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 holders of a majority of the 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 Liabilities
As of March 31, 2021, the Company had 8,625,000 Public Warrants and the 6,266,667 Private Placement Warrants outstanding.
Public Warrants may only be exercised 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 fundingCVRs and Warrants.
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):
The Company will not redeem 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 effective 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:
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 Measurements
The following table presents information about the Company’s assets and liabilities that areCompany's derivatives 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 1,2024 (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||
| Fair value hierarchy | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||||||||||||||||
| Energy derivatives liability: | |||||||||||||||||||||||||||||
| Energy derivatives | $ | — | $ | 1,465 | $ | — | $ | 1,465 | |||||||||||||||||||||
| Total energy derivatives liability | — | 1,465 | — | 1,465 | |||||||||||||||||||||||||
| Contingent value rights liabilities: | |||||||||||||||||||||||||||||
| Contingent value rights | 41,427 | — | — | 41,427 | |||||||||||||||||||||||||
| GUC contingent value rights | — | — | 3,174 | 3,174 | |||||||||||||||||||||||||
| Total contingent value rights liabilities | 41,427 | — | 3,174 | 44,601 | |||||||||||||||||||||||||
| Warrants liability: | |||||||||||||||||||||||||||||
| Warrants | 327,465 | — | — | 327,465 | |||||||||||||||||||||||||
| Total warrants liability | 327,465 | — | — | 327,465 | |||||||||||||||||||||||||
| Total liabilities measured at fair value on a recurring basis | $ | 368,892 | $ | — | $ | 3,174 | $ | 372,066 | |||||||||||||||||||||
Level 1 instruments include investments in mutual funds invested in government securities. Recurring Fair Value Measurements
the energy forward purchase contract on the Company’s Consolidated Balance Sheets (in thousands):
| Fair Value (Level 2) | ||||||||||||||
| Financial statement line item | March 31, 2024 | December 31, 2023 | ||||||||||||
| Energy forward purchase contract | Accrued expenses and other current liabilities | $ | 1,465 | $ | 2,262 | |||||||||
| Three Months Ended March 31, | ||||||||||||||
| Financial statement line item | 2024 | 2023 | ||||||||||||
| Energy forward purchase contract | Change in fair value of energy derivatives | $ | (2,218) | $ | — | |||||||||
GUC CVRs (Level 3) | |||||
| Balance at December 31, 2023 | $ | — | |||
| Issuances | 3,950 | ||||
| Unrealized gains | (776) | ||||
| Balance at March 31, 2024 | $ | 3,174 | |||
The estimated fair value of the Public Warrants and the Private Placement Warrants is determined using Level 3 inputs. Inherentsimulated Company stock price paths in a Monte Carlo simulation and a Black-Scholesmodel. The inputs into the simulation model are assumptions relatedsimilar to expected stock-price volatility, expected term, risk-free interest ratethose used in Black-Scholes option models. They include the Company’s stock price and dividend yield.yield, risk-free rate, term and estimated volatility. The Company estimatesestimated volatility is considered to be a significant unobservable input into 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 onsimulation model. At March 31, 2024, the valuation date for a maturity commensurate withtechnique has not changed during the expected remaining life ofperiod since 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.
Effective Date.
| 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 inused to measure the fair value of derivative liabilities,GUC CVRs as of March 31, 2024 (dollars in thousands):
| Fair value | Unobservable Input | Measure | |||||||||||||||||||||||||||
| GUC contingent value rights | $ | 3,174 | Estimated Volatility | 120.0 | % | ||||||||||||||||||||||||
| 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 Events
Management 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,2024, the Company did not identifygrant any subsequent events thatstock options, RSUs or RSAs.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Cost of revenue | $ | 959 | $ | 597 | |||||||||||||||||||
| Research and development | 204 | 442 | |||||||||||||||||||||
| Sales and marketing | 421 | 505 | |||||||||||||||||||||
| General and administrative | (2,644) | 10,729 | |||||||||||||||||||||
Total stock-based compensation expense1 | $ | (1,060) | $ | 12,273 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Income tax expense | $ | 206 | $ | 104 | |||||||||||||||||||
| Effective income tax rate | 0.1 | % | (36.6) | % | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income (loss) | $ | 210,691 | (388) | ||||||||||||||||||||
| Add: Interest expense related to convertible notes, net of tax | 8,392 | — | |||||||||||||||||||||
| Diluted net income (loss) | $ | 219,083 | $ | (388) | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average shares outstanding - basic | 230,954 | 375,419 | |||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Convertible notes | 50,738 | — | |||||||||||||||||||||
| Restricted stock units | 839 | — | |||||||||||||||||||||
| Weighted average shares outstanding - diluted | 282,531 | 375,419 | |||||||||||||||||||||
| Net income (loss) per share - basic | $ | 0.91 | $ | — | |||||||||||||||||||
| Net income (loss) per share - diluted | $ | 0.78 | $ | — | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Stock options | 1,172 | 22,724 | |||||||||||||||||||||
| Tranche 1 Warrants | 98,313 | 14,892 | |||||||||||||||||||||
| Restricted stock and restricted stock units | 1,040 | 40,438 | |||||||||||||||||||||
| Convertible Notes | — | 69,997 | |||||||||||||||||||||
| SPAC Vesting Shares | — | 1,725 | |||||||||||||||||||||
| Total potentially dilutive securities | 100,525 | 149,776 | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Mining Segment | (in thousands, except percentages) | ||||||||||||||||||||||
| Digital asset mining revenue | $ | 149,959 | $ | 98,026 | |||||||||||||||||||
| Cost of digital asset mining | 81,564 | 72,676 | |||||||||||||||||||||
| Mining gross profit | $ | 68,395 | $ | 25,350 | |||||||||||||||||||
| Mining gross margin | 46 | % | 26 | % | |||||||||||||||||||
| Hosting Segment | |||||||||||||||||||||||
| Hosting revenue | $ | 29,332 | $ | 22,629 | |||||||||||||||||||
| Cost of hosting services | 20,081 | 16,198 | |||||||||||||||||||||
| Hosting gross profit | $ | 9,251 | $ | 6,431 | |||||||||||||||||||
| Hosting gross margin | 32 | % | 28 | % | |||||||||||||||||||
| Consolidated | |||||||||||||||||||||||
| $ | 179,291 | $ | 120,655 | ||||||||||||||||||||
| Consolidated cost of revenue | $ | 101,645 | $ | 88,874 | |||||||||||||||||||
| Consolidated gross profit | $ | 77,646 | $ | 31,781 | |||||||||||||||||||
| Consolidated gross margin | 43 | % | 26 | % | |||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Percent of Mining segment revenue: | Percent of Hosting segment revenue: | ||||||||||||||||||||||
| Customer | |||||||||||||||||||||||
| G | 100 | % | 100 | % | N/A | N/A | |||||||||||||||||
| F | N/A | N/A | 52 | % | N/A | ||||||||||||||||||
| H | N/A | N/A | 25 | % | N/A | ||||||||||||||||||
| I | N/A | N/A | 10 | % | N/A | ||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Reportable segment gross profit | $ | 77,646 | $ | 31,781 | |||||||||||||||||||
| Gain from sales of digital assets | 543 | 1,064 | |||||||||||||||||||||
| Impairment of digital assets | — | (1,056) | |||||||||||||||||||||
| Change in fair value of energy derivatives | (2,218) | — | |||||||||||||||||||||
| Losses on disposal of property, plant and equipment | (3,820) | — | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 1,799 | 1,415 | |||||||||||||||||||||
| Sales and marketing | 982 | 1,008 | |||||||||||||||||||||
| General and administrative | 14,143 | 21,764 | |||||||||||||||||||||
| Total operating expenses | 16,924 | 24,187 | |||||||||||||||||||||
| Operating income | 55,227 | 7,602 | |||||||||||||||||||||
| Non-operating (income) expenses, net: | |||||||||||||||||||||||
| Loss (gain) on debt extinguishment | 50 | (20,761) | |||||||||||||||||||||
| Interest expense, net | 14,087 | 157 | |||||||||||||||||||||
| Reorganization items, net | (111,439) | 31,559 | |||||||||||||||||||||
| Change in fair value of warrant and contingent value rights | (60,114) | — | |||||||||||||||||||||
| Other non-operating expense (income), net | 1,746 | (3,069) | |||||||||||||||||||||
| Total non-operating (income) expenses, net | (155,670) | 7,886 | |||||||||||||||||||||
| Income (loss) before income taxes | $ | 210,897 | $ | (284) | |||||||||||||||||||
as cloud computing, as well as machine learning and artificial intelligence. We Net income (loss). References“Power & Digital Infrastructure Acquisition Corp.,“Core Scientific,” “Power & Digital,” “our,” “us” or “we”“Core” refer to Power & Digital Infrastructure Acquisition Corp. Core Scientific, Inc. and its subsidiaries.discussionManagement's Discussion and analysisAnalysis of Financial Condition and Results of Operations (“MD&A”) is intended to promote understanding of the Company’s financial condition and results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, theour unaudited condensedconsolidated financial statements and the notes thereto contained elsewhereaccompanying Notes to Unaudited Financial Statements (Part I, Item 1 of this Form 10-Q) as well as the financial and other information included in this report. Certain information containedour Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024. This section generally discusses the results of operations for the quarter ended March 31, 2024 compared to March 31, 2023.set forth below includescontains 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 27A of the Securities Act of 1933,uncertainties, 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 andwell as assumptions about us that, mayif they never materialize or prove incorrect, could cause our actual results levels of activity, performance or achievements to bediffer materially different from any future results, levels of activity, performance or achievementsthose 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. Such statements include, but are not limited to, possible business combinations and the 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 mightcould cause or contribute to such a discrepancydifferences include, but are not limited to, those describedidentified below, and those discussed in the section titled “Risk Factors” under Part I, Item 1A in our other SEC filings.OverviewWe are a blank check company incorporated in DelawareAnnual Report on December 29, 2020. We were formedForm 10-K for the purposeyear ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024.effectingdedicated, purpose-built facilities for digital asset mining and a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”premier provider of digital infrastructure, software solutions and services to assist our customers in transforming energy into high-value compute. We employ our own large fleet of computers (“miners”), primarily manufactured by Bitmain Technologies Limited (“Bitmain”), to produce bitcoin for our own account and provide hosting services for large bitcoin mining and Graphics Processing Unit (“GPU”) cloud compute customers at our seven operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (2). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”). We are an emerging growth companybegan digital asset mining at scale in 2018 and as such, we are subject to allin 2020 became one of the risks associated with emerging growth companies. Our sponsor is XPDI Sponsor LLC, a Delaware limited liability company (the “Sponsor”).The registration statementlargest North American providers of hosting services primarily for our Initial Public Offering was declared effective on February 9, 2021. On February 12, 2021, we 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 coststhird-party mining customers. We had an average hourly operating power demand 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 placement660 megawatts (“Private Placement”MW”) 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.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 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 our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.Results of OperationsOur entire activity since inception up to March 31, 2021 was in preparation for our formation, the Initial Public Offering and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.For the three months ended March 31, 2021, we had net income of approximately $5.0 million, which primarily consisted of approximately $6.2 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, 2021,2024. We had secured approximately 1,198 MW of contracted power capacity at our sites as of March 31, 2024. We also owned and managed the largest infrastructure asset base of publicly listed miners in North America of 745 MW and improved our average self-mining fleet energy efficiency to 26.85 joules per terahash.such services.RegistrationAdjusted EBITDA.The holders and Warrant Liabilities and 10 — Stockholders' Deficit to our consolidated financial statements in Item 1 of Founder Shares, Private Placement Warrants and warrantsPart I of this Quarterly Report on Form 10-Q.issued upon conversionoffset by a rise in the price of Working Capital Loans, if any (and any sharesbitcoin due to fewer miners after the halving event.common stock issuable uponblockchain solutions and leader in transforming energy into high-value compute with high efficiency at scale, we believe that we are well positioned to serve customers in a rapidly expanding market for digital asset mining and blockchain solutions. We believe that the exerciseadoption and mainstream use of bitcoin and the blockchain technology on which it is based has accelerated the demand for bitcoin and other digital currencies. Further, as noted in the “Strategic Investments” section below, we believe that opportunities for growth exist in various applications of our data centers for third party customers focused on cloud computing as well as machine learning and artificial intelligence.Private Placement Warrants or warrants issued upon conversionlargest owner operators of infrastructure for digital asset mining in North America, we focus primarily on mining bitcoin and selling the Working Capital Loansbitcoin generated for cash and upon conversionactivities directly related to growing our mining capabilities (increasing the number of bitcoin mined) and enhancing efficiencies in our operations (reducing our cost to mine).Our rapidly growing digital asset mining operation is focused on the Founder Shares), were entitledgeneration of digital assets by solving complex cryptographic algorithms to registration rights pursuantvalidate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Our digital asset self-mining activity competes with myriad mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a registration rights agreement signed upon the consummationdigital asset. The terms of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement providesour debt agreements currently require that we will not be requiredsell our digital assets as we receive them, and we typically use the proceeds to effectfund our growth strategies or permit any registration or cause any registration statementfor general corporate purposes.become effective until terminationdeliver best-in-class uptime and, ultimately, increasing mining rewards to us and our customers. We continually evaluate our mining performance, including our ability to access additional megawatts of the applicable lock-up period. We will bear the expenses incurredelectric power and to expand our total self-mining and customer and related party hosting hash rates. In addition to exploring additional mining facilities and mining arrangements, we may also explore additional uses of our current and future data centers to take advantage of high value compute in connection with our short-, medium- and long-term strategic planning.filingcapacity and efficiency of anyour self-mining fleet and by enhancing our third-party hosting business. We intend to strategically develop the infrastructure necessary to support business growth and profitability and pursue adjacent high-value compute opportunities that lever our mining expertise and capabilities. For example, in February 2024, we entered into a multi-year lease agreement for a data center in Austin, Texas with a current operating capacity of 12 MW (the “Austin Lease”) within which to perform colocation hosting services for CoreWeave, Inc. to supply up to 16 MW of data center infrastructure to support its GPU cloud compute workloads. We expect this facility to be operational in the second fiscal quarter of 2024.registration statements.Underwriting Agreementgrantedintend to look for opportunities to expand our business into these areas using our knowledge, expertise and existing infrastructure where favorable market opportunities exist.underwritersform of bitcoin. Our Hosting operation segment generates revenue through the sale of electricity-based consumption contracts for our hosting services, which are recurring in nature.45-day option fromcombined exahash of 4.08 or 28,400 miners, all of which have been delivered as of March 31, 2024. The second agreement was for the acquisition of Antminer S21 miners with a combined exahash of 2.52 or approximately 12,900 miners. As of March 31, 2024, the Company had received approximately 4,790 miners. The remaining miners were received in April 2024. As of the reporting date of this Quarterly Report on Form 10-Q, we have completed all 2024 payments due on miners ordered for deployment this year.final prospectus relatingtotal number of self- and hosted miners in operation as of March 31, 2024 and December 31, 2023 (miners in thousands):Bitcoin Miners in Operation as of March 31, 2024 Mining Equipment Hash rate (EH/s) Number of Miners Self-miners 19.3 172.8 Hosted miners 6.2 51.1 Total mining equipment 25.5 223.9 Bitcoin Miners in Operation as of December 31, 2023 Mining Equipment Hash rate (EH/s) Number of Miners Self-miners 16.9 158.0 Hosted miners 6.3 51.1 Total mining equipment 23.2 209.1 March 31, 2024 March 31, 2023 Digital assets, beginning of period $ 2,284 $ 724 24 — Digital assets, beginning of period, as adjusted 2,308 724 149,644 98,026 Mining proceeds from shared hosting 8,371 — Proceeds from sales of digital assets (160,777) (98,384) Realized gain from sale of digital assets 543 1,064 Impairment of digital assets — (1,056) Payment of board fee (89) — Other — (374) Digital assets, end of period $ — $ — Initial Public Offeringrate at which it is capable of solving such computations. The equipment originally employed for mining bitcoin used the Central Processing Unit (“CPU”) of a computer to purchase upmine various forms of digital assets. Due to 4,500,000 additional Unitsperformance limitations, CPU mining was rapidly replaced by the GPU, which offers significant performance advantages over CPUs. General purpose chipsets like CPUs and GPUs have since been replaced as the standard in the mining industry by ASIC chips such as those found in the miners we and our customers use to cover over-allotments, if any,mine bitcoin (although they continue to have uses in other industries). These ASIC chips are designed specifically to maximize the rate of hashing operations.the Initial Public Offering price, less underwriting discounts and commissions. On February 12, 2021, the underwriter fully exercisedwhich a mining computer operates in its optionattempt to purchase additional Units.The underwriters did not earn any upfront underwriting commissionsecure a specific digital asset. A participant in connection with 2,760,000 Units, including the 2,405,700 Units solda blockchain network’s mining function has a hash rate equivalent to the Anchor Investors. Excepttotal 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 system-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.those Units,a digital asset, such as bitcoin, increases, more users are incentivized to mine for that digital asset, which increases the underwriters were entitlednetwork’s overall hash rate. As a result, a mining participant must increase its total hash rate in order to an underwriting discountmaintain its relative possibility of $0.20 per Unit soldsolving a block on the network blockchain. Achieving greater hash rate power by deploying increasingly sophisticated miners in the Initial Public Offering on 31,740,000 Units, or approximately $6.3 million, paid upon the closingever greater quantities has become one of the Initial Public Offering. An additional feebitcoin mining industry’s great sources of $0.35 per Unit sold incompetition. Our goal is to deploy a powerful fleet of self- and hosted-miners, while operating as energy-efficiently as possible.Initial Public Offering,spot price of bitcoin, as well as other digital assets. The prices of digital assets, specifically bitcoin, have experienced substantial volatility, meaning that high or approximately $12.1 million in the aggregate, willlow prices may have little or no relationship to 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 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.operationsoperations. Over time, we have observed a positive trend in the total market capitalization of digital assets, which suggests increased adoption. However, historical trends are not indicative of future adoption, and it is basedpossible that the adoption of digital assets and blockchain technology may slow, take longer to develop, or never be broadly adopted, which would negatively impact our business and operating results.Impact to Revenue Driver Increase in Driver Decrease in Driver Market Price of Bitcoin Favorable Unfavorable Core Scientific Hash Rate Favorable Unfavorable Difficulty Unfavorable Favorable Transaction Fees Favorable Unfavorable 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).March 31, 2024 2023 Self-Mining Hash rate (Exahash per second) 19.3 16.1 Three Months Ended March 31, 2024 2023 Adjusted EBITDA (in millions) $ 88.0 $ 40.3 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 income (loss) to Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.preparationfollowing table presents a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended March 31, 2024 and 2023, (in thousands):Three Months Ended March 31, 2024 Adjusted EBITDA Net income (loss) $ 210,691 $ (388) Adjustments: Interest expense, net 14,087 157 Income tax expense 206 104 Depreciation and amortization 28,996 20,094 Stock-based compensation expense (1,060) 12,273 Unrealized fair value adjustment on energy derivatives (797) — Losses on disposal of property, plant and equipment 3,820 — Advisor fees 1,687 — Loss (gain) on debt extinguishment 50 (20,761) Reorganization items, net (111,439) 31,559 Change in fair value of warrant and contingent value rights (60,114) — Other non-operating expenses (income), net 1,746 (3,069) Other 123 368 Adjusted EBITDA $ 87,996 $ 40,337 statements requiresreporting and tax bases of existing assets and liabilities. These differences are measured using the enacted tax rates that are expected to be in effect when these differences are anticipated to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized.Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage Revenue: (in thousands, except percentages) Digital asset mining revenue $ 149,959 $ 98,026 $ 51,933 53 % Hosting revenue from customers 29,332 18,909 10,423 55 % Hosting revenue from related parties — 3,720 (3,720) NM Total revenue 179,291 120,655 58,636 49 % Cost of revenue: Cost of digital asset mining 81,564 72,676 8,888 12% Cost of hosting services 20,081 16,198 3,883 24% Total cost of revenue 101,645 88,874 12,771 14% Gross profit 77,646 31,781 45,865 144% Gain from sales of digital assets 543 1,064 (521) (49)% Impairment of digital assets — (1,056) 1,056 NM Change in fair value of energy derivatives (2,218) — (2,218) NM Losses on disposal of property, plant and equipment (3,820) — (3,820) NM Operating expenses: Research and development 1,799 1,415 384 27% Sales and marketing 982 1,008 (26) (3)% General and administrative 14,143 21,764 (7,621) (35)% Total operating expenses 16,924 24,187 (7,263) (30)% Operating income 55,227 7,602 47,625 NM Non-operating (income) expenses, net: Loss (gain) on debt extinguishment 50 (20,761) 20,811 NM Interest expense, net 14,087 157 13,930 NM Reorganization items, net (111,439) 31,559 (142,998) NM Change in fair value of warrant and contingent value rights (60,114) — (60,114) NM Other non-operating expense (income), net 1,746 (3,069) 4,815 NM Total non-operating (income) expenses, net (155,670) 7,886 (163,556) NM Income (loss) before income taxes 210,897 (284) 211,181 NM Income tax expense 206 104 102 98% Net income (loss) $ 210,691 $ (388) $ 211,079 NM Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage Revenue: (in thousands, except percentages) Digital asset mining revenue $ 149,959 $ 98,026 $ 51,933 53 % Hosting revenue from customers 29,332 18,909 10,423 55 % Hosting revenue from related parties — 3,720 (3,720) NM Total revenue $ 179,291 $ 120,655 $ 58,636 49 % Percentage of total revenue: Digital asset mining revenue 84 % 81 % Hosting revenue from customers 16 % 16 % Hosting revenue from related parties — % 3 % Total revenue 100 % 100 % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Cost of revenue $ 101,645 $ 88,874 $ 12,771 14 % Gross profit 77,646 31,781 45,865 144 % Gross margin 43 % 26 % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Gain from sales of digital assets $ 543 $ 1,064 $ (521) (49)% Percentage of total revenue — % 1 % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Impairment of digital assets $ — $ (1,056) $ 1,056 NM Percentage of total revenue — % (1) % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Change in fair value of energy derivatives $ (2,218) $ — $ (2,218) NM Percentage of total revenue (1) % — % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Losses on disposal of property, plant and equipment $ (3,820) $ — $ (3,820) NM Percentage of total revenue (2) % — % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage Operating expenses: (in thousands, except percentages) Research and development $ 1,799 $ 1,415 $ 384 27 % Sales and marketing 982 1,008 (26) (3) % General and administrative 14,143 21,764 (7,621) (35) % Total operating expenses $ 16,924 $ 24,187 $ (7,263) (30) % Percentage of total revenue 9 % 20 % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage Non-operating (income) expenses, net: (in thousands, except percentages) Loss (gain) on debt extinguishment $ 50 $ (20,761) $ 20,811 NM Interest expense, net 14,087 157 13,930 NM Reorganization items, net (111,439) 31,559 (142,998) NM Change in fair value of warrant and contingent value rights (60,114) — (60,114) NM Other non-operating expense (income), net 1,746 (3,069) 4,815 NM Total non-operating (income) expenses, net $ (155,670) $ 7,886 $ (163,556) NM Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Income tax expense $ 206 $ 104 $ 102 98 % Percentage of total revenue — % — % Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage Mining Segment (in thousands, except percentages) Digital asset mining revenue $ 149,959 $ 98,026 $ 51,933 53 % Cost of digital asset mining 81,564 72,676 8,888 12 % Mining gross profit $ 68,395 $ 25,350 $ 43,045 NM Mining gross margin 46 % 26% Hosting Segment Hosting revenue $ 29,332 $ 22,629 $ 6,703 30 % Cost of hosting services 20,081 16,198 3,883 24 % Hosting gross profit $ 9,251 $ 6,431 $ 2,820 44 % Hosting gross margin 32 % 28 % Consolidated Consolidated total revenue $ 179,291 $ 120,655 $ 58,636 49 % Consolidated cost of revenue $ 101,645 $ 88,874 $ 12,771 14 % Consolidated gross profit $ 77,646 $ 31,781 $ 45,865 144% Consolidated gross margin 43% 26% Three Months Ended March 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Reportable segment gross profit $ 77,646 $ 31,781 $ 45,865 144% Gain from sales of digital assets 543 1,064 (521) (49) % Impairment of digital assets — (1,056) 1,056 NM Change in fair value of energy derivatives (2,218) — (2,218) NM Losses on exchange or disposal of property, plant and equipment (3,820) — (3,820) NM Operating expenses: Research and development 1,799 1,415 384 27 % Sales and marketing 982 1,008 (26) (3) % General and administrative 14,143 21,764 (7,621) (35) % Total operating expenses 16,924 24,187 (7,263) (30) % Operating income 55,227 7,602 47,625 NM Non-operating (income) expenses, net: Loss (gain) on debt extinguishment 50 (20,761) 20,811 NM Interest expense, net 14,087 157 13,930 NM Reorganization items, net (111,439) 31,559 (142,998) NM Change in fair value of warrant and contingent value rights (60,114) — (60,114) NM Other non-operating expense (income), net 1,746 (3,069) 4,815 NM Total non-operating (income) expenses, net (155,670) 7,886 (163,556) NM Income (loss) before income taxes $ 210,897 $ (284) $ 211,181 NM March 31, December 31, Period over Period Change 2024 2023 Dollar Percentage (in thousands, except percentages) Cash and cash equivalents $ 98,125 $ 50,409 $ 47,716 95 % Restricted cash 16,151 19,300 (3,149) (16) % Total cash, cash equivalents and restricted cash $ 114,276 $ 69,709 $ 44,567 64 % Three Months Ended March 31, 2024 2023 (in thousands) Cash, cash equivalents and restricted cash – beg. of period $ 69,709 $ 52,240 Net cash provided by (used in) Operating activities 22,174 19,942 Investing activities (31,970) (1,869) Financing activities 54,363 (1,021) Cash, cash equivalents and restricted cash - end of period $ 114,276 $ 69,292 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 areresultsnature of which form the basisestimates are material due to the levels of subjectivity and judgment necessary to account for making judgments abouthighly uncertain matters or the carrying valuessusceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.liabilities thatliabilities. Except for the accounting and estimates relating to the issuance of Convertible and Other Notes Payable, Contingent Value Rights Obligations and Warrant Liabilities, as discussed below, there have been no material changes to the critical accounting policies and estimates during the three months ended March 31, 2024, as compared to those disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” audited consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 13, 2024.readily apparentreceived for the issuance of Notes payable their present value is based on the consideration exchanged. This present value generally will be the Notes payable’s cash flows discounted at a market rate when it is more evident than the consideration received. When the present value of Notes payable on issuance varies from other sources. Actualits par or face amount, an original discount or premium 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 all of the Company’s financial instruments, including issued stock purchase warrants,and along with any related issuance costs are used to determine if such instrumentsan effective interest rate. Original premium, discount and issuance costs are derivativesamortized using the level effective rate interest method. Amortization is recognized as a component of current interest expense.containnot they have features that qualifyor terms which would be treated as embedded derivatives that are required to be bifurcated under ASC 815, Derivatives and Hedging (ASC 815). At December 31, 2023 and March 31, 2024 Notes payable did not have any embedded derivatives required to be bifurcated.Financial Accounting Standards Board’sthe Plan of Reorganization, the Company entered into a contingent value rights agreement which provides for the issuance of the CVR to certain creditors and provides for the issuance of CVRs issued to holders of allowed general unsecured claims (“FASB”GUC”) Accounting Standards Codification (“ASC”(in such capacity, the “GUC Payees”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”(the “GUC CVRs”). The CVRs and FASB ASC Topic 815, “DerivativesGUC CVRs are equity-linked instruments which are either only cash settled or in some instances share settled at the Company’s sole discretion. The Company determined that these equity-linked instruments are not indexed to the Company’s stock and Hedging.” The classification of derivative instruments, including whether such instruments shouldare required to be classifiedrecognized 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”)which are, initially 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 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 issubsequently, measured at fair value using a Monte Carlo simulation. The estimated fairwith changes in value reflected in Net income (loss).Private Placement Warrants isCompany’s previous common stock received warrants. The warrants are equity-linked instruments. The Company determined that these equity-linked instruments are not indexed to the Company’s stock and are required to be recognized as liabilities which are, initially and subsequently, measured at fair value 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 redemptionwith changes in accordance with the guidancevalue reflected 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.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 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.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 executivequalifying 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,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our systemuntil the earliest of internal controls over financial reporting pursuant to Section 404, (ii) provide all(1) the last day of the compensation disclosure that may be required of non-emerging growth public companies underfiscal year (a) following February 12, 2026, the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by 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 comparisonsfifth anniversary of the CEO’s compensationdate of the first sale of common equity securities of the Company in a registered offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to median employee compensation. These exemptions will apply forbe a period of five years followinglarge accelerated filer, which means the completionmarket value of our Initial Public Offeringcommon stock that is held by non-affiliates meets or untilexceeds $700.0 million as of the prior June 30th and (2) the date on which 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 to the market risk to which we are exposed.
year.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, 2024, 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 documentation and coordination among our accounting and financial reporting department and expanded cross-functional involvement and input into period-end disclosures; • 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; and • developing IT general controls to manage access and program changes across our key systems.
During the quarter ended March 31, 2024, 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
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.
Simultaneously with
Inin 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.
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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 upon its request. | ||||
| # | Certain information has been omitted from this filing pursuant to Item 601(a)(6) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC | ||||
| + | Indicates a management contract or compensatory plan. | ||||
SIGNATURE
CORE SCIENTIFIC, INC. | ||||||||
| Date: May 8, 2024 | By: | /s/ Denise Sterling | ||||||
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