[Fiscal First Quarter 2024 Overview](index=1&type=section&id=Fiscal_Q1_2024_Overview) Core Scientific's Q1 2024 performance was strong, marked by significant improvements in net income, revenue, operating income, and Adjusted EBITDA [Executive Summary of Results](index=1&type=section&id=Executive_Summary_Results) Core Scientific reported strong financial results for Q1 2024, with significant improvements across key metrics including net income, total revenue, operating income, and Adjusted EBITDA compared to Q1 2023 Fiscal First Quarter 2024 Key Financial Highlights | Metric | Q1 2024 | Q1 2023 | Change | | :---------------- | :---------- | :---------- | :------- | | Net Income | $210.7 million | ($0.4 million) | +$211.1 million | | Total Revenue | $179.3 million | $120.7 million | +$58.6 million | | Operating Income | $55.2 million | $7.6 million | +$47.6 million | | Adjusted EBITDA | $88.0 million | $40.3 million | +$47.7 million | [CEO Commentary and Strategic Outlook](index=1&type=section&id=CEO_Commentary_Strategic_Outlook) CEO Adam Sullivan highlighted outstanding Q1 performance, driven by record bitcoin mining and balance sheet strengthening, emphasizing strategic infrastructure for HPC and mining expansion - Achieved outstanding Q1 results by earning **more bitcoin than any other publicly traded miner**, strengthening the balance sheet, and improving fleet efficiency with new generation miners[3](index=3&type=chunk) - Leveraging **745 megawatts of operational, high-power data center infrastructure** as a competitive advantage to build an alternative compute hosting business[3](index=3&type=chunk) - Evaluating the potential to transform **over 500 megawatts of infrastructure** for high-performance computing and plans to expand bitcoin mining hash rate while developing HPC offerings, utilizing **1.2 gigawatts of total power access**[3](index=3&type=chunk) [Key Financial and Operational Achievements](index=1&type=section&id=Key_Financial_Operational_Achievements) The company achieved significant financial and operational milestones in Q1 2024, including substantial net income, strong Adjusted EBITDA, and leading bitcoin production among North American public miners Fiscal First Quarter 2024 Financial Achievements | Metric | Q1 2024 | Q1 2023 | Change | | :-------------------------------- | :---------- | :---------- | :------- | | Net Income | $210.7 million | ($0.4 million) | +$211.1 million | | Adjusted EBITDA | $88.0 million | $40.3 million | +$47.7 million | | Total Revenue | $179.3 million | $120.7 million | +$58.6 million | | Operating Income | $55.2 million | $7.6 million | +$47.6 million | | Cash and cash equivalents (as of Mar 31, 2024) | $98.1 million | N/A | N/A | - Earned **2,825 self-mined bitcoin**, more than any other publicly listed miner in North America[4](index=4&type=chunk) - Operated total hash rate of **25.5 EH/s**, comprising **19.3 EH/s self-mining** and **6.2 EH/s hosting**[4](index=4&type=chunk) - Owned and managed approximately **745 megawatts of infrastructure**, the largest owned infrastructure footprint among publicly listed miners in North America[4](index=4&type=chunk) - Improved average actual self-mining fleet energy efficiency to **26.85 joules per terahash**[4](index=4&type=chunk) - Expanded hosting offering by delivering **16 MW of infrastructure** to a high-performance compute customer over 30 days ahead of schedule[10](index=10&type=chunk) - Completed deployment of **28,400 new S19j XP miners** and deployed the first shipment of approximately **2,500 S21 miners**[10](index=10&type=chunk) - Expanded operational infrastructure by **21 MW** at the Pecos, Texas site[10](index=10&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed_Financial_Results) This section provides an in-depth analysis of Core Scientific's Q1 2024 financial performance, covering revenue, segment results, operating expenses, net income, and Adjusted EBITDA [Total Revenue Analysis](index=2&type=section&id=Total_Revenue_Analysis) Total revenue for Q1 2024 increased significantly to $179.3 million, up $58.6 million from Q1 2023, driven by digital asset mining and hosting revenue growth Q1 2024 Total Revenue Breakdown | Revenue Type | Q1 2024 (Millions) | Q1 2023 (Millions) | Change (Millions) | | :----------------------- | :------------------- | :------------------- | :---------------- | | Total Revenue | $179.3 | $120.7 | +$58.6 | | Digital Asset Mining | $150.0 | $98.0 | +$52.0 | | Hosting | $29.3 | $22.6 | +$6.7 | [Digital Asset Mining Segment](index=2&type=section&id=Digital_Asset_Mining_Segment) The digital asset mining segment saw substantial revenue and gross profit increases in Q1 2024, driven by higher Bitcoin prices and self-mining hash rate, improving gross margin to 46% Digital Asset Mining Segment Performance | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :-------------------------- | :-------------------- | :-------------------- | | 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 % | - Digital asset mining revenue increased by **$51.9 million**, driven by a **134% increase in the price of bitcoin** and a **20% increase in self-mining hash rate**[7](index=7&type=chunk) - Bitcoin received from self-mining decreased by **34%** due to an approximate **73% increase in the global hash rate**[7](index=7&type=chunk) - Increase in digital asset mining cost of revenue primarily driven by increased depreciation expense from deploying approximately **18,000 new generation self-miners**[7](index=7&type=chunk) [Hosting Segment](index=2&type=section&id=Hosting_Segment) Hosting revenue and gross profit increased in Q1 2024, with revenue growing by $6.7 million due to new client onboarding, improving gross margin from 28% to 32% Hosting Segment Performance | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :-------------------- | :-------------------- | :-------------------- | | 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 % | - Increase in Hosting revenue of **$6.7 million** primarily due to the onboarding of new digital asset mining clients[8](index=8&type=chunk) - Partially offset by increased proceeds sharing costs of **$2.6 million** and increased depreciation expense of **$1.1 million**[8](index=8&type=chunk) [Operating Expenses](index=2&type=section&id=Operating_Expenses) Operating expenses decreased by $7.3 million in Q1 2024 to $16.9 million, mainly due to lower stock-based compensation, partially offset by higher personnel and advisor fees Operating Expenses Summary | Expense Category | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :------------------------ | :-------------------- | :-------------------- | :----------------- | | Total Operating Expenses | $16,924 | $24,187 | ($7,263) | | Research and development | $1,799 | $1,415 | +$384 | | Sales and marketing | $982 | $1,008 | ($26) | | General and administrative | $14,143 | $21,764 | ($7,621) | - Decrease of **$7.3 million** in operating expenses primarily attributable to lower stock-based compensation of **$13.3 million** due to forfeitures and no new equity awards granted in fiscal year 2023[9](index=9&type=chunk) - Partially offset by a **$3.4 million increase in personnel and related expenses** and a **$1.7 million increase in advisor fees** related to reorganization[9](index=9&type=chunk) [Net Income (Loss)](index=2&type=section&id=Net_Income_Loss) Core Scientific reported a net income of $210.7 million in Q1 2024, a significant turnaround from a net loss in Q1 2023, driven by a $143.0 million decrease in reorganization items Net Income (Loss) Summary | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :---------------- | :-------------------- | :-------------------- | :----------------- | | Net income (loss) | $210,691 | ($388) | +$211,079 | | Basic EPS | $0.91 | $0 | N/A | | Diluted EPS | $0.78 | $0 | N/A | - Net income increased by **$211.1 million**, primarily driven by a **$143.0 million decrease in reorganization items, net**[10](index=10&type=chunk) - Reorganization items included a **$143.8 million gain on extinguishment of pre-emergence obligations** and lower Chapter 11 financing costs of **$11.1 million**[10](index=10&type=chunk)[11](index=11&type=chunk) - Partially offset by a **$12.8 million increase in reimbursed claimant professional fees** and a **$60.1 million mark-to-market adjustment on warrants and other contingent value rights**[11](index=11&type=chunk) [Non-GAAP Adjusted EBITDA](index=3&type=section&id=Non_GAAP_Adjusted_EBITDA) Non-GAAP Adjusted EBITDA increased by $47.7 million to $88.0 million in Q1 2024, driven by higher total revenue and decreased digital asset impairment, despite increased operating expenses Adjusted EBITDA Summary | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :-------------- | :-------------------- | :-------------------- | :----------------- | | Adjusted EBITDA | $87,996 | $40,337 | +$47,659 | - Increase driven by a **$58.6 million increase in total revenue** and a **$1.1 million decrease in impairment of digital assets**[12](index=12&type=chunk) - Partially offset by a **$4.4 million increase in cash operating expenses**, a **$4.1 million increase in cash cost of revenue**, a **$3.0 million increase in realized losses on energy derivatives**, and a **$0.5 million decrease in gain from sales of digital assets**[12](index=12&type=chunk) [Company Information](index=3&type=section&id=Company_Information) This section provides an overview of Core Scientific, details on its Q1 2024 conference call, and important disclosures regarding forward-looking statements and associated risks [About Core Scientific](index=3&type=section&id=About_Core_Scientific) Core Scientific is a leading North American bitcoin miner and hosting solutions provider, operating seven data centers and deriving most revenue from self-mining - One of the **largest bitcoin miners and hosting solutions providers** for bitcoin mining in North America[18](index=18&type=chunk) - Operates **seven data centers** in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1), and Texas (2)[18](index=18&type=chunk) - Derives the majority of its revenue from earning bitcoin for its own account (**'self-mining'**)[18](index=18&type=chunk) [Conference Call and Webcast Information](index=3&type=section&id=Conference_Call_Webcast) Core Scientific hosted a conference call and live webcast on May 8, 2024, to discuss Q1 2024 results, with access details and replay information provided - Conference call and live webcast held on **Wednesday, May 8, 2024, at 4:30 pm Eastern Time**[13](index=13&type=chunk) - Investors could dial into the call using provided telephone numbers and access code, or listen via live audio webcast on the company's Investor Relations page[14](index=14&type=chunk)[15](index=15&type=chunk) - An audio replay of the event is archived on the Investor Relations section of the Company's website and accessible via telephone for one year[17](index=17&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward_Looking_Statements) The press release includes forward-looking statements regarding future performance and growth, subject to various risks and uncertainties, with no obligation for updates - The press release contains **'forward-looking statements'** subject to risks and uncertainties that may cause actual results to differ materially from projections[20](index=20&type=chunk) - Risks include the ability to earn digital assets profitably, competitive position, capital raising, power availability, system failures, climate change, blockchain transaction methods, security breaches, economic slowdowns, internal control weaknesses, digital asset price volatility, Bitcoin halving, debt agreement requirements, SEC interpretive positions, and increasing regulation[20](index=20&type=chunk) - The company disclaims any obligation to update or revise any forward-looking statement, except as required by applicable law[20](index=20&type=chunk)[21](index=21&type=chunk) [Financial Statements](index=5&type=section&id=Financial_Statements) This section presents Core Scientific's Q1 2024 consolidated balance sheets, statements of operations, segment results, and reconciliation of non-GAAP financial measures [Consolidated Balance Sheets](index=5&type=section&id=Consolidated_Balance_Sheets) The consolidated balance sheet shows total assets increased to $813.968 million at March 31, 2024, driven by cash and operating lease assets, while total liabilities decreased Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :---------------------------------- | :--------------- | :------------------ | | Total Assets | $813,968 | $712,156 | | Total Liabilities | $1,132,477 | $1,309,097 | | Total Stockholders' Deficit | ($318,509) | ($596,941) | | Cash and cash equivalents | $98,125 | $50,409 | | Digital assets | $— | $2,284 | | Accounts payable | $16,165 | $154,751 | | Notes payable, current portion | $23,333 | $124,358 | | Warrant liabilities | $327,465 | $— | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated_Statements_of_Operations) The consolidated statements of operations show a significant turnaround to a net income of $210.691 million in Q1 2024, driven by higher revenue and positive non-operating items Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $179,291 | $120,655 | | Gross profit | $77,646 | $31,781 | | Operating income | $55,227 | $7,602 | | Non-operating (income) expenses, net | ($155,670) | $7,886 | | Net income (loss) | $210,691 | ($388) | | Net income (loss) per share: Basic | $0.91 | $— | | Net income (loss) per share: Diluted | $0.78 | $— | [Segment Results](index=7&type=section&id=Segment_Results) Both Mining and Hosting segments showed improved performance in Q1 2024, with Mining gross profit more than doubling and both segments seeing increased gross margins Segment Results (in thousands, except percentages) | Segment / Metric | Q1 2024 | Q1 2023 | | :----------------------- | :-------- | :-------- | | **Mining Segment** | | | | Digital asset mining revenue | $149,959 | $98,026 | | Mining gross profit | $68,395 | $25,350 | | Mining gross margin | 46 % | 26 % | | **Hosting Segment** | | | | Hosting revenue | $29,332 | $22,629 | | Hosting gross profit | $9,251 | $6,431 | | Hosting gross margin | 32 % | 28 % | | **Consolidated** | | | | Consolidated total revenue | $179,291 | $120,655 | | Consolidated gross profit | $77,646 | $31,781 | | Consolidated gross margin | 43 % | 26 % | [Non-GAAP Financial Measures Reconciliation](index=8&type=section&id=Non_GAAP_Financial_Measures_Reconciliation) The report reconciles Net income (loss) to Adjusted EBITDA, a non-GAAP measure, showing a significant increase to $87.996 million in Q1 2024 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | 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 | | Reorganization items, net | (111,439) | 31,559 | | Change in fair value of warrant and contingent value rights | (60,114) | — | | **Adjusted EBITDA** | **$87,996** | **$40,337** | - Adjusted EBITDA is a non-GAAP financial measure used to evaluate and compare operating results by eliminating the effect of interest, taxes, depreciation, amortization, stock-based compensation, reorganization items, and certain non-cash or non-recurring items[30](index=30&type=chunk)

Core Scientific, Inc. (NASDAQ:CORZ) Q4 2023 Earnings Conference March 12, 2024 4:30 PM ET Company Participants Steven Gitlin - SVP, Investor Relations Adam Sullivan - CEO Denise Sterling - CFO Conference Call Participants Joe Flynn - Compass Point John Todaro - Needham & Company Lucas Pipes - B. Riley Rosemary Sisson - Odeon Capital Joseph Vafi - Canaccord Genuity Kevin Dede - H.C. Wainwright Jack Chan - Imperial Capital Gregory Lewis - BTIG Darren Aftahi - ROTH MKM Josh Schimmer - Cantor Fitzgerald Operato ...

Bankruptcy and Reorganization - The company emerged from bankruptcy on January 23, 2024, after confirming its Plan of Reorganization[18]. Bitcoin Mining Operations - As of December 31, 2023, the company had deployed approximately 209,100 bitcoin miners, consisting of approximately 158,000 self-miners and approximately 51,100 hosted miners, achieving a total hashing power of 23.2 EH/s[37]. - The company improved its average self-mining fleet energy efficiency to 27.94 joules per terahash as of December 31, 2023[36]. - The company operates seven data centers across Georgia, Kentucky, North Carolina, North Dakota, and Texas for its bitcoin mining operations[30]. - The company focuses on increasing its bitcoin mining capabilities and enhancing operational efficiencies to reduce mining costs[30]. - The company has a total contracted power capacity of 1,198 MW across various facilities, with the largest being 297 MW in Denton, Texas[41]. Bitcoin Market Performance - Bitcoin's daily exchange volume increased from $1 million in January 2017 to $510 million in December 2023[25]. - The trading price of one bitcoin ranged from a high of $44,167 in December 2023 to a low of $16,625 in January 2023[25]. - Bitcoin prices for fiscal 2023 ranged from a low of $16,625 to a high of $44,167, with an average price of $28,859[459]. - A hypothetical 10% increase or decrease in the price of bitcoin would have resulted in a net loss change of approximately $38.9 million[459]. Employee and Labor Relations - The company has 286 full-time employees as of December 31, 2023, with no labor union representation[31]. Technology and Innovation - The company has filed over 120 patent applications in technologies related to blockchain and data center management[49]. - The company has entered into agreements with Bitmain for the acquisition of 28,400 Antminer S19J XP miners and approximately 12,900 Antminer S21 miners, with deliveries scheduled from late 2023 to the first half of 2024[36]. Competitive Landscape - The company competes with numerous other bitcoin mining operations globally, focusing on efficiency and access to affordable power[42]. - The bitcoin mining industry is evolving, with new competitors and technologies potentially impacting the company's market position[47]. Regulatory Environment - The company is subject to evolving government regulations regarding digital assets, which could materially affect its operations[51]. - Environmental regulations may impose additional costs on the company, particularly related to energy sources used for bitcoin mining[56]. Commodity Price Sensitivity - A hypothetical 10% change in commodity prices would have resulted in an immaterial change in the fair value of the company's commodity-based derivatives[461].

Financial Performance - Total revenue for the three months ended September 30, 2023, was $112.9 million, a decrease of 30.6% compared to $162.6 million for the same period in 2022[164]. - Total revenue for the nine months ended September 30, 2023, was $360.5 million, down 30.6% from $519.1 million for the same period in 2022[165]. - Total revenue decreased by $49.7 million or 31%, to $112.9 million for the three months ended September 30, 2023, from $162.6 million for the same period in 2022[240]. - Total revenue for the company declined by 31% to $112.9 million in Q3 2023 from $162.6 million in Q3 2022[262]. - For the nine months ended September 30, 2023, consolidated total revenue decreased by 31% to $360.5 million compared to $519.1 million in the same period of 2022[283][287]. Operating Losses and Net Losses - Operating losses for the three months ended September 30, 2023, were $12.0 million, significantly improved from an operating loss of $401.4 million in the same period of 2022[164]. - Net losses for the three months ended September 30, 2023, were $41.1 million, compared to $434.8 million for the same period in 2022[164]. - The company had an operating income of $5.0 million for the nine months ended September 30, 2023, compared to an operating loss of $1.5 billion for the same period in 2022[165]. - Net losses for the nine months ended September 30, 2023, were $50.8 million, a significant reduction from $1.7 billion for the same period in 2022[165]. - Loss before income taxes improved by 90% to $41.0 million in Q3 2023, compared to a loss of $424.2 million in Q3 2022[262]. Adjusted EBITDA - Adjusted EBITDA for the three months ended September 30, 2023, was $27.9 million, an increase of 55.3% from $17.9 million in the same period of 2022[164]. - Adjusted EBITDA for the nine months ended September 30, 2023, was $113.0 million, compared to $170.1 million in the same period of 2022[216]. Revenue Breakdown - Total revenue primarily consists of hosting operations, equipment sales, and digital asset mining income, with hosting revenue based on electricity consumption contracts[223]. - Hosting revenue from customers decreased by $8.7 million or 24%, to $27.0 million for the three months ended September 30, 2023, from $35.7 million for the same period in 2022[241]. - Hosting revenue from related parties decreased by $6.4 million or 69%, to $2.8 million for the three months ended September 30, 2023, from $9.2 million for the same period in 2022[242]. - Digital asset mining revenue for the nine months ended September 30, 2023, was $278.1 million, while the end of period digital assets totaled $559,000[195]. - Digital asset mining revenue increased by $2.6 million or 3%, to $83.1 million for the three months ended September 30, 2023, from $80.5 million for the same period in 2022[239]. Cost and Expenses - Total cost of revenue decreased by $92.2 million or 49%, to $97.5 million for the three months ended September 30, 2023, from $189.6 million for the same period in 2022[239]. - Operating expenses decreased by $22.8 million or 46%, to $26.8 million for the three months ended September 30, 2023, from $49.6 million for the same period in 2022[239]. - Total operating expenses decreased by 46% to $26.8 million in Q3 2023 from $49.6 million in Q3 2022[262]. - Total operating expenses decreased by $132.2 million or 63%, to $78.1 million for the nine months ended September 30, 2023, from $210.4 million in 2022[271]. Impairments and Gains - The company recorded a $20.8 million gain on extinguishment of debt after transferring miners back to NYDIG, fully extinguishing the NYDIG Loan[176]. - Gain from sales of digital assets decreased by $10.7 million to $0.4 million for the three months ended September 30, 2023, from $11.0 million in the same period of 2022, with proceeds of $88.1 million against a carrying value of $88.5 million[247]. - Impairment of digital assets decreased by $7.3 million to $0.7 million for the three months ended September 30, 2023, from $8.0 million in the same period of 2022[248]. - Impairment of goodwill and other intangibles decreased by $268.5 million to nil for the three months ended September 30, 2023, from $268.5 million in the same period of 2022[249]. Cash and Liquidity - Cash and cash equivalents increased by 165% to $42.1 million as of September 30, 2023, compared to $15.9 million at the end of 2022[294]. - The company has $35.0 million of undrawn borrowing capacity under the Replacement DIP Facility as of September 30, 2023[288]. - Net cash provided by operating activities was $43.4 million for the nine months ended September 30, 2023, down from $89.2 million in the same period of 2022[297]. Market and Operational Strategy - The business strategy focuses on increasing self-mining capacity and entering strategic colocation opportunities to enhance revenue and profitability[189]. - The company faces significant competition in acquiring new miners and securing low-cost electricity, impacting its operational strategy[210]. - The cost of new mining equipment has become unpredictable due to market fluctuations, with recent declines in digital asset values leading to excess supply[208]. - The next bitcoin halvening is anticipated to occur in early 2024, reducing the mining reward from 6.25 bitcoin per block[205]. Other Notable Events - The company filed for Chapter 11 bankruptcy on December 21, 2022, and continues to operate under the jurisdiction of the Bankruptcy Court[166]. - The company remains classified as an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain reporting exemptions until February 12, 2026, or until it no longer qualifies[309][310]. - There were no material changes to critical accounting policies and estimates during the nine months ended September 30, 2023[307].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-40046 Core Scientific, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorpo ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company, operating as a Debtor-in-Possession, reported a significantly reduced net loss and positive operating cash flow in Q1 2023, despite decreases in total assets and liabilities Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $47,487 | $15,884 | | Total Current Assets | $100,195 | $85,102 | | Property, plant and equipment, net | $628,037 | $691,134 | | **Total Assets** | **$760,019** | **$807,686** | | **Liabilities & Stockholders' Deficit** | | | | Total Current Liabilities | $214,746 | $186,789 | | Liabilities subject to compromise | $950,765 | $1,027,313 | | **Total Liabilities** | **$1,168,777** | **$1,217,032** | | Total Stockholders' Deficit | ($408,758) | ($409,346) | Consolidated Statement of Operations Highlights (Unaudited) | Account | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total revenue | $120,655 | $192,519 | | Gross profit | $20,484 | $70,003 | | Operating loss | ($3,695) | ($26,717) | | Gain on debt extinguishment | ($20,761) | $— | | Reorganization items, net | $31,559 | $— | | **Net loss** | **($11,685)** | **($466,204)** | | **Net loss per share (Basic & Diluted)** | **($0.03)** | **($1.52)** | Consolidated Statement of Cash Flows Highlights (Unaudited) | Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $19,942 | ($3,615) | | Net cash used in investing activities | ($1,869) | ($269,096) | | Net cash (used in) provided by financing activities | ($1,021) | $251,465 | | **Net increase (decrease) in cash** | **$17,052** | **($21,246)** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Operating under Chapter 11, the company experienced significant revenue decline and gross margin contraction in Q1 2023, securing DIP financing while facing substantial doubt about its going concern ability [Recent Developments and Chapter 11 Filing](index=34&type=section&id=MD%26A_Recent_Developments) The company filed for Chapter 11 bankruptcy, secured a $70 million replacement DIP facility, and settled significant claims with NYDIG and Priority Power - The company and certain affiliates filed for Chapter 11 bankruptcy protection on **December 21, 2022**, and continue to operate as "debtors-in-possession"[139](index=139&type=chunk) - On **February 27, 2023**, the company entered into a replacement Senior Secured Super-Priority Debtor-in-Possession (DIP) facility for up to **$70 million** to fund operations and restructuring[144](index=144&type=chunk)[145](index=145&type=chunk) - The company settled with NYDIG by transferring miners back to them, resulting in the full extinguishment of the NYDIG loan and a **$20.8 million gain** on debt extinguishment in Q1 2023[149](index=149&type=chunk) - A settlement with Priority Power was reached, satisfying a **$20.8 million** secured claim through the transfer of specific equipment, resulting in no gain or loss[150](index=150&type=chunk) [Business Model and Operations](index=37&type=section&id=MD%26A_Business_Model) Core Scientific operates "Mining" and "Hosting" segments, deploying 207,000 bitcoin miners with a total hash rate of 21.8 EH/s and an average operating power demand of 581 MW - The company operates two segments: "Mining" (digital asset mining for its own account) and "Hosting" (blockchain infrastructure and third-party hosting)[156](index=156&type=chunk) - As of March 31, 2023, the company had an average hourly operating power demand of approximately **581 MW** and **1,500 MW** of contracted power capacity[155](index=155&type=chunk) Bitcoin Miners in Operation as of March 31, 2023 | Mining Equipment | Hash rate (EH/s) | Number of Miners (in thousands) | | :--- | :--- | :--- | | Self-miners | 16.1 | 155.0 | | Hosted miners | 5.7 | 52.0 | | **Total** | **21.8** | **207.0** | [Results of Operations](index=47&type=section&id=MD%26A_Results_of_Operations) Q1 2023 saw a 37% revenue decrease and gross margin contraction, but significantly reduced operating and non-operating expenses led to a substantially improved net loss Revenue Breakdown (Q1 2023 vs Q1 2022) | Revenue Source | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Hosting Revenue | $22,629 | $33,214 | (31)% | | Equipment Sales | $0 | $26,305 | (100)% | | Digital Asset Mining Revenue | $98,026 | $133,000 | (26)% | | **Total Revenue** | **$120,655** | **$192,519** | **(37)%** | - The decrease in digital asset mining revenue was driven by a **45% decrease** in the average price of bitcoin (**$22,877** in Q1 2023 vs **$41,299** in Q1 2022), partially offset by a **94% increase** in the company's self-mining hash rate[207](index=207&type=chunk) - Gross profit fell **71%** to **$20.5 million** in Q1 2023 from **$70.0 million** in Q1 2022, with gross margin decreasing to **17%** from **36%** in the prior year period[201](index=201&type=chunk)[208](index=208&type=chunk) - Total operating expenses decreased by **46%** to **$24.2 million**, primarily due to lower stock-based compensation and reduced professional fees[201](index=201&type=chunk)[213](index=213&type=chunk) - Non-operating expenses decreased by **$389.2 million**, mainly because Q1 2022 included a **$386.0 million** adverse fair value adjustment on convertible notes, while Q1 2023 included **$31.6 million** in new reorganization costs[215](index=215&type=chunk) [Segment Performance](index=52&type=section&id=MD%26A_Segment_Performance) In Q1 2023, the Hosting segment's gross margin improved despite lower profit, while the Mining segment experienced a significant decline in gross profit and margin due to increased power costs and lower bitcoin prices Segment Gross Profit (Q1 2023 vs Q1 2022) | Segment | Q1 2023 Gross Profit (in thousands) | Q1 2022 Gross Profit (in thousands) | Change (%) | Q1 2023 Margin (%) | Q1 2022 Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Hosting | $3,803 | $5,753 | (34)% | 17% | 10% | | Mining | $16,681 | $64,250 | (74)% | 17% | 48% | | **Consolidated** | **$20,484** | **$70,003** | **(71)%** | **17%** | **36%** | - The Hosting segment's gross margin improved to **17%** in Q1 2023 from **10%** in Q1 2022, despite a decrease in gross profit, largely due to the absence of lower-margin equipment sales that were present in the 2022 period[220](index=220&type=chunk) - The Mining segment's gross margin fell sharply to **17%** from **48%** year-over-year, driven by increased power rates and a **45% decrease** in the average price per bitcoin mined[221](index=221&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=MD%26A_Liquidity%20and%20Capital%20Resources) Post-Chapter 11, the company's liquidity is supported by cash from operations and DIP financing, with $69.3 million in total cash and $35.0 million undrawn capacity, deemed sufficient for 12 months contingent on reorganization - Primary sources of liquidity are cash flows from operations, cash on hand, and proceeds from the Debtor-in-Possession (DIP) financing facilities[223](index=223&type=chunk) Cash Position | Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $47,487 | $15,884 | | Restricted cash | $21,805 | $36,356 | | **Total cash, cash equivalents and restricted cash** | **$69,292** | **$52,240** | - Net cash provided by operating activities was **$19.9 million** for Q1 2023, a significant improvement from the **$3.6 million** used in Q1 2022[232](index=232&type=chunk) - Net cash used in investing activities plummeted to **$1.9 million** in Q1 2023 from **$269.1 million** in Q1 2022, reflecting a sharp reduction in capital expenditures for equipment and facilities[233](index=233&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is bitcoin price volatility, directly impacting revenue and digital asset values, with no bitcoin held as of March 31, 2023 - The company's main market risk is the price volatility of bitcoin, which directly affects revenue and the value of digital assets held[254](index=254&type=chunk) - As of March 31, 2023, the company held **no bitcoin**, compared to **43.55 bitcoin** with a carrying value of **$0.7 million** as of December 31, 2022[254](index=254&type=chunk) - Digital assets are tested for impairment daily, and any impairment loss establishes a new cost basis, with subsequent reversals of impairment losses not permitted[255](index=255&type=chunk) [Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2023[258](index=258&type=chunk) - The ineffectiveness is due to material weaknesses in internal control over financial reporting, including issues with IT change management, user access controls, and segregation of duties[261](index=261&type=chunk) - Ongoing remediation efforts include increasing the experience of the accounting team, enhancing communication, and implementing additional internal reporting and review procedures[260](index=260&type=chunk)[262](index=262&type=chunk) [Part II. Other Information](index=53&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings arising from the normal course of business, with pre-Chapter 11 claims automatically stayed by bankruptcy proceedings - Litigation and claims against the company that arose before the bankruptcy filing on **December 21, 2022**, are automatically stayed pursuant to the Bankruptcy Code[264](index=264&type=chunk) [Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year 2022[265](index=265&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) None reported for the period - None[266](index=266&type=chunk) [Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported for the period - None[267](index=267&type=chunk) [Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) None reported for the period - None[268](index=268&type=chunk) [Other Information](index=53&type=section&id=Item%205.%20Other%20Information) None reported for the period - None[269](index=269&type=chunk) [Exhibits](index=54&type=section&id=Item%206.%20Exhibits) The report lists exhibits filed, including merger agreements incorporated by reference, corporate governance documents, DIP credit agreements, and CEO/CFO certifications pursuant to the Sarbanes-Oxley Act - Key exhibits filed include the Replacement DIP Credit Agreement and certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[271](index=271&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ___________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR Delaware 86-1243837 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 210 Barton Springs Road Suite 300 Austin Texas (Address of Principal Executive Offices) 78704 Commission file number 001-40046 ☐ ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended September 30, 2022, reveal significant distress, marked by a dramatic decline in assets and equity, a $1.71 billion net loss, and a critical 'Going Concern' warning due to depleted cash and declining bitcoin prices Consolidated Balance Sheets Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2022 ($ in million) | December 31, 2021 ($ in million) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $29.5 | $117.9 | -75.0% | | Digital assets | $19.7 | $234.3 | -91.6% | | Property, plant and equipment, net | $1,156.4 | $597.3 | +93.6% | | Goodwill | $0.0 | $1,055.8 | -100.0% | | **Total Assets** | **$1,404.0** | **$2,438.9** | **-42.4%** | | Notes payable, current portion | $977.6 | $76.0 | +1186.4% | | **Total Liabilities** | **$1,331.0** | **$1,053.2** | **+26.4%** | | **Total Stockholders' Equity** | **$73.0** | **$1,341.2** | **-94.6%** | - Total assets decreased by **42.4%** from December 31, 2021, primarily due to a complete impairment of goodwill (**$1.06 billion**) and a **91.6%** drop in the value of digital assets held. Total liabilities increased by **26.4%**, while stockholders' equity plummeted by **94.6%**, reflecting the significant net losses incurred during the period[11](index=11&type=chunk) - A significant portion of notes payable, totaling **$977.6 million**, has been classified as current liabilities as of September 30, 2022, up from just **$76.0 million** at year-end 2021. This reclassification reflects the high probability that the debt will become due within one year, signaling severe liquidity pressure[11](index=11&type=chunk)[105](index=105&type=chunk) Consolidated Statements of Operations Statement of Operations Summary (Unaudited) | Metric ($ in million) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$162.6** | **$113.1** | **$519.1** | **$242.7** | | Total cost of revenue | $189.6 | $54.7 | $463.4 | $145.2 | | **Gross (loss) profit** | **($27.1)** | **$58.4** | **$55.6** | **$97.5** | | Impairment of goodwill and other intangibles | ($268.5) | $0.0 | ($1,059.3) | $0.0 | | Impairment of property, plant and equipment | ($59.3) | $0.0 | ($59.3) | $0.0 | | Impairment of digital assets | ($8.0) | ($12.6) | ($212.2) | ($12.6) | | **Operating (loss) income** | **($401.4)** | **$4.8** | **($1,473.5)** | **$29.3** | | **Net loss** | **($434.8)** | **($16.6)** | **($1,711.5)** | **($13.2)** | | **Net loss per share (Basic & Diluted)** | **($1.23)** | **($0.07)** | **($5.38)** | **($0.07)** | - For the nine months ended September 30, 2022, the company reported a net loss of over **$1.71 billion**, a stark contrast to the **$13.2 million** net loss in the same period of 2021. This was primarily driven by massive non-cash impairment charges totaling over **$1.33 billion** for goodwill, digital assets, and property, plant, and equipment[13](index=13&type=chunk) - In Q3 2022, the company swung to a gross loss of **$27.1 million** from a gross profit of **$58.4 million** in Q3 2021. This was caused by the cost of revenue (**$189.6 million**) significantly exceeding total revenue (**$162.6 million**), driven by higher costs for digital asset mining[13](index=13&type=chunk) Consolidated Statements of Cash Flows Consolidated Cash Flow Summary (Unaudited) | Metric ($ in million) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $89.2 | ($166.5) | | Net cash used in investing activities | ($451.3) | ($115.5) | | Net cash provided by financing activities | $268.1 | $433.3 | | **Net (decrease) increase in cash** | **($94.0)** | **$151.3** | | Cash, cash equivalents and restricted cash—end of period | $37.6 | $160.0 | - Despite a massive net loss, operating activities provided **$89.2 million** in cash for the first nine months of 2022, largely due to significant non-cash expenses like impairment and depreciation being added back. This is a reversal from the **$166.5 million** cash used in the same period of 2021[21](index=21&type=chunk) - Investing activities used **$451.3 million**, a significant increase from the prior year, primarily for purchases of property, plant, and equipment (**$243.8 million**) and deposits for self-mining equipment (**$217.7 million**)[21](index=21&type=chunk) - Financing activities provided **$268.1 million**, mainly from stock issuances (**$210.5 million**, including proceeds from the XPDI merger) and new debt (**$216.2 million**), offset by debt and lease repayments[21](index=21&type=chunk) Notes to the Consolidated Financial Statements - **Going Concern Warning:** Management has substantial doubt about the company's ability to continue as a going concern through November 2023. Existing cash resources are expected to be depleted by the end of 2022 or sooner due to declining bitcoin prices, increased power costs, and significant indebtedness[39](index=39&type=chunk) - **Debt Defaults and Restructuring:** In October 2022, the company decided not to make payments on several debt facilities. It has engaged legal and financial advisors to explore strategic alternatives, including restructuring its capital structure or potentially seeking bankruptcy protection[40](index=40&type=chunk)[42](index=42&type=chunk) - **Massive Asset Impairments:** The company recorded total impairment charges of **$1.12 billion** for the nine months ended Sep 30, 2022, including a **$1.05 billion** impairment of goodwill and other intangibles, a **$212.2 million** impairment of digital assets, and a **$59.3 million** impairment of property, plant, and equipment[89](index=89&type=chunk)[157](index=157&type=chunk)[162](index=162&type=chunk) - **Celsius Bankruptcy:** One of the company's largest customers, Celsius Mining LLC, filed for Chapter 11 bankruptcy. Celsius is withholding payments and has alleged the company is violating the automatic stay. An adverse ruling could materially impact Core Scientific's business and cash flows. The company has accrued a **$5.2 million** allowance against amounts due from Celsius[181](index=181&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management confirms severe operational and liquidity challenges due to declining bitcoin prices and rising costs, with cash depletion expected by year-end 2022, leading to substantial doubt about going concern and exploration of restructuring or bankruptcy - The company's operating performance and liquidity have been severely impacted by the prolonged decrease in the price of bitcoin, increased electricity costs, and a higher global bitcoin network hash rate[274](index=274&type=chunk) - Management anticipates that existing cash resources will be depleted by the end of 2022 or sooner, which raises substantial doubt about the company's ability to continue as a going concern[278](index=278&type=chunk)[279](index=279&type=chunk) - In October 2022, the company stopped making payments on several debt and financing facilities and has hired strategic advisors to explore restructuring, raising capital, or potential bankruptcy[274](index=274&type=chunk)[276](index=276&type=chunk) Key Financial Metrics Comparison | Metric ($ in millions) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Total Revenue | $519.1 | $242.7 | | Operating Loss / (Income) | ($1,470.0) | $29.3 | | Net Loss | ($1,710.0) | ($13.2) | | Adjusted EBITDA | $169.7 | $88.0 | Results of Operations Revenue Breakdown - Nine Months Ended Sep 30 | Revenue Source ($ in million) | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Hosting revenue (customers & related parties) | $117.1 | $51.7 | +126% | | Equipment sales (customers & related parties) | $78.7 | $113.4 | -31% | | Digital asset mining revenue | $323.3 | $77.5 | +317% | | **Total Revenue** | **$519.1** | **$242.7** | **+114%** | - For the nine months ended Sep 30, 2022, total revenue increased **114%** year-over-year, driven by a **317%** surge in digital asset mining revenue due to a significant increase in the company's self-mining hash rate (from **2.64 EH/s** to **13.0 EH/s**). This was partially offset by a **17%** decrease in the average price of bitcoin[372](index=372&type=chunk) - Cost of revenue for the nine-month period increased **219%** to **$463.4 million**, outpacing revenue growth. The increase was driven by higher depreciation (**$143.6 million**), power costs (**$145.9 million**), and personnel/facilities costs (**$47.1 million**) associated with the expanded mining operations[373](index=373&type=chunk) - The company recorded impairment charges of **$1.06 billion** for goodwill and other intangibles, **$212.2 million** for digital assets, and **$59.3 million** for property, plant, and equipment during the first nine months of 2022, reflecting the sharp decline in market conditions and asset values[378](index=378&type=chunk)[376](index=376&type=chunk)[380](index=380&type=chunk) Liquidity and Capital Resources - The company's primary sources of liquidity have been equity sales, debt, and cash from operations. However, existing cash is expected to be depleted by the end of 2022 or sooner[394](index=394&type=chunk) - As of September 30, 2022, the company had **$29.5 million** in cash and cash equivalents, a significant decrease from **$117.9 million** at the end of 2021[397](index=397&type=chunk) - In October 2022, the company chose not to make payments on several debt facilities. This action, combined with the severe liquidity constraints, has led management to explore strategic alternatives, including restructuring or bankruptcy, as there is substantial doubt about its ability to continue as a going concern[394](index=394&type=chunk)[395](index=395&type=chunk)[406](index=406&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company, as a smaller reporting company, is not required to provide the detailed quantitative and qualitative disclosures about market risk that are typically required for larger filers - As a smaller reporting company, Core Scientific is exempt from providing detailed disclosures about market risk under this item[443](index=443&type=chunk) [Item 4. Controls and Procedures](index=88&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of September 30, 2022, due to material weaknesses in internal control over financial reporting, including inadequate resources and segregation of duties, with remediation efforts ongoing - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the reporting period[446](index=446&type=chunk) - The ineffectiveness is due to material weaknesses in internal control over financial reporting, specifically related to: inadequate technical accounting resources, poor cross-functional processes, and a lack of segregation of duties for journal entries and digital asset custody[446](index=446&type=chunk) - Remediation efforts are underway, including hiring more experienced staff and enhancing internal procedures, but were not completed or tested as of the reporting date[447](index=447&type=chunk)[449](index=449&type=chunk) [Part II. Other Information](index=89&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=89&type=section&id=Item%201.%20Legal%20Proceedings) The company faces multiple significant legal proceedings, including disputes with bankrupt customer Celsius, arbitration for $35 million in prepayments, a construction contract lawsuit, and a class action alleging securities law violations - The company is in a dispute with Celsius Mining LLC, one of its largest customers, which filed for Chapter 11 bankruptcy and is withholding payments. An adverse ruling could materially harm the company's financial condition[450](index=450&type=chunk) - In November 2022, Sphere 3D Corp. filed for arbitration, alleging breach of contract and seeking the return of ~**$35 million** in prepayments for hosting services[451](index=451&type=chunk) - In November 2022, McCarthy Building Companies, Inc. filed a complaint for breach of contract related to alleged non-payment for construction services[452](index=452&type=chunk) - A putative class action lawsuit was filed in November 2022, alleging the company violated the Securities Exchange Act by failing to disclose its vulnerability to litigation and other issues affecting its ability to continue as a going concern[453](index=453&type=chunk) [Item 1A. Risk Factors](index=90&type=section&id=Item%201A.%20Risk%20Factors) Key risks include substantial doubt about going concern, severe liquidity constraints, high indebtedness, dependence on volatile bitcoin prices, customer concentration, and internal control weaknesses, with potential for bankruptcy or total loss for stockholders - **Going Concern and Liquidity Risk:** There is substantial doubt about the company's ability to continue as a going concern, with cash expected to be depleted by the end of 2022. An investment is highly speculative, and stockholders could suffer a total loss[457](index=457&type=chunk)[700](index=700&type=chunk)[701](index=701&type=chunk) - **Indebtedness and Default Risk:** The company has a substantial level of debt (over **$1 billion**) and has already defaulted on payments in October 2022. This could lead to acceleration of debt and trigger cross-defaults, potentially forcing the company into bankruptcy[457](index=457&type=chunk)[702](index=702&type=chunk)[706](index=706&type=chunk) - **Dependence on Bitcoin Price:** The company's financial health is highly dependent on the price of bitcoin. If prices are not sufficiently high to cover the costs of mining (including high energy costs), its business and financial condition will be materially and adversely affected[457](index=457&type=chunk)[469](index=469&type=chunk) - **Customer Concentration and Bankruptcy Risk:** A significant portion of revenue comes from a small number of customers. The bankruptcy of a key customer, Celsius, poses a material risk to revenue and cash flows[457](index=457&type=chunk)[485](index=485&type=chunk)[487](index=487&type=chunk) - **Internal Control Weaknesses:** The company has identified material weaknesses in its internal control over financial reporting, which may result in material misstatements of its financial statements or failure to meet reporting obligations[459](index=459&type=chunk)[667](index=667&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=135&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter, the company issued unregistered common stock to B. Riley as commitment and advisory fees for its Equity Line of Credit and Amended Bridge Notes, relying on Securities Act exemptions - On July 20, 2022, the company issued **573,381 shares** of common stock to B. Riley as a commitment fee for the Equity Line of Credit[727](index=727&type=chunk) - On August 1, 2022, the company issued **386,697 shares** of common stock to B. Riley Commercial Capital as an advisory fee for the Amended Bridge Notes[728](index=728&type=chunk) - These issuances were made in reliance upon exemptions from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D[729](index=729&type=chunk) [Item 3. Defaults Upon Senior Securities](index=135&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period covered by this report - None reported for the period[730](index=730&type=chunk) [Item 4. Mine Safety Disclosures](index=135&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None reported[731](index=731&type=chunk) [Item 5. Other Information](index=135&type=section&id=Item%205.%20Other%20Information) The company reported no other information under this item - None reported[732](index=732&type=chunk) [Item 6. Exhibits](index=136&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Bridge Promissory Notes with B. Riley, certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, and XBRL data files - Lists filed exhibits, including debt agreements and Sarbanes-Oxley certifications[734](index=734&type=chunk)

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Core Scientific, Inc. as of June 30, 2022, reflect a significant net loss due to impairment charges despite revenue growth from expanded mining operations [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2022, shows a significant reduction in total assets and stockholders' equity, primarily due to goodwill impairment and decreased digital asset holdings, while liabilities increased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $128,542 | $117,871 | +$10,671 | | Digital assets | $40,664 | $234,298 | -$193,634 | | Goodwill | $266,038 | $1,055,760 | -$789,722 | | Total Assets | $1,845,158 | $2,438,864 | -$593,706 | | Notes payable, net | $1,069,997 | $728,209 | +$341,788 | | Total Liabilities | $1,428,706 | $1,053,178 | +$375,528 | | Total Stockholders' Equity | $416,452 | $1,341,210 | -$924,758 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss of **$810.5 million** in Q2 2022 and **$1.28 billion** in H1 2022, primarily due to significant goodwill and digital asset impairments despite revenue growth Q2 2022 vs Q2 2021 Performance (in thousands, except per share) | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $163,972 | $75,303 | +118% | | Gross Profit | $12,717 | $24,538 | -48% | | Impairment of goodwill | ($790,753) | $0 | NM | | Impairment of digital assets | ($150,213) | $0 | NM | | Operating (Loss) Income | ($1,045,383) | $15,526 | NM | | Net (Loss) Income | ($810,475) | ($3,414) | NM | | Diluted EPS | ($2.49) | ($0.02) | NM | H1 2022 vs H1 2021 Performance (in thousands, except per share) | Metric | H1 2022 | H1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $356,491 | $129,549 | +175% | | Gross Profit | $82,720 | $39,071 | +112% | | Impairment of goodwill | ($790,753) | $0 | NM | | Impairment of digital assets | ($204,198) | $0 | NM | | Operating (Loss) Income | ($1,072,100) | $24,552 | NM | | Net (Loss) Income | ($1,276,679) | $3,435 | NM | | Diluted EPS | ($4.04) | $0.02 | NM | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly improved to **$141.3 million** in H1 2022, while investing activities surged to **$445.6 million** for expansion, funded by **$313.2 million** from financing Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $141,273 | ($121,331) | | Net cash used in investing activities | ($445,640) | ($39,217) | | Net cash provided by financing activities | $313,169 | $210,198 | | **Net increase in cash** | **$8,802** | **$49,650** | [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail the January 2022 merger, significant goodwill and digital asset impairments, complex debt structure, and subsequent events including new financing and a major customer's bankruptcy - The company completed its merger with Power & Digital Infrastructure Acquisition Corp. (XPDI) on January 19, 2022, accounted for as a reverse recapitalization, providing net cash proceeds of approximately **$195.0 million**[22](index=22&type=chunk)[27](index=27&type=chunk) - A goodwill impairment charge of **$788.7 million** was recorded for the Mining reporting unit as of June 30, 2022, due to a decline in the company's stock price and the market value of bitcoin[79](index=79&type=chunk)[81](index=81&type=chunk) - Impairment of digital assets totaled **$204.2 million** for the six months ended June 30, 2022, driven by the decline in cryptocurrency prices[146](index=146&type=chunk) - Subsequent to quarter-end, in July 2022, the company entered into a **$100 million** committed equity financing agreement with B. Riley, amended bridge notes in August 2022, and is navigating the Chapter 11 bankruptcy of major customer Celsius in July 2022[224](index=224&type=chunk)[235](index=235&type=chunk)[239](index=239&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant revenue growth from expanded self-mining operations, overshadowed by market headwinds, substantial impairment charges, compressed margins, and ongoing liquidity challenges [Results of Operations](index=68&type=section&id=Results%20of%20Operations) Q2 2022 saw **118%** total revenue growth driven by a **920%** surge in digital asset mining revenue, but gross profit declined **48%** due to higher costs and non-cash impairments led to a **$1.05 billion** operating loss - Digital asset mining revenue increased by **$99.1 million (920%)** in Q2 2022 compared to Q2 2021, driven by a significant increase in self-mining hash rate to **10.30 EH/s** from **0.45 EH/s**, partially offset by a **30%** decrease in the average price of bitcoin[314](index=314&type=chunk) - Cost of revenue increased **198%** YoY in Q2 2022, primarily due to a **$45.9 million** increase in power consumption costs, a **$46.3 million** increase in depreciation, and a **$16.9 million** increase in stock-based compensation within cost of revenue[315](index=315&type=chunk) - Operating expenses for Q2 2022 increased to **$115.9 million** from **$9.0 million** in Q2 2021, largely due to a significant increase in stock-based compensation (**$108.9 million** vs **$2.1 million**) following an RSU amendment[257](index=257&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk) [Segment Performance](index=73&type=section&id=Segment%20Performance) The Equipment Sales and Hosting segment reported a gross loss and negative margin in Q2 2022, while the Mining segment's gross margin dramatically compressed to **14%** from **80%** due to higher costs and lower bitcoin prices Segment Gross Profit and Margin (Q2 2022 vs Q2 2021) | Segment | Gross Profit (Loss) Q2 2022 | Gross Profit Q2 2021 | Margin Q2 2022 | Margin Q2 2021 | | :--- | :--- | :--- | :--- | :--- | | Equipment Sales and Hosting | ($3,055) | $15,888 | (6)% | 25% | | Mining | $15,772 | $8,650 | 14% | 80% | - The decrease in the Hosting Margin was primarily due to lower margins on equipment sales and an increase in stock-based compensation expense[330](index=330&type=chunk) - The decrease in the Mining Margin was primarily due to an increase in power rates, higher depreciation, increased stock-based compensation, and a **30%** decrease in the average price per bitcoin mined[331](index=331&type=chunk) [Liquidity and Capital Resources](index=82&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, the company held **$140.5 million** in cash and equivalents, relying on external financing due to market conditions, but believes existing resources and future funding will meet needs for the next 12 months - The company had **$128.5 million** in cash and cash equivalents and **$11.9 million** in restricted cash as of June 30, 2022[362](index=362&type=chunk) - As of June 30, 2022, the company had outstanding purchase obligations for blockchain mining equipment totaling approximately **$192.4 million**, with remaining payments of **$61.6 million**[167](index=167&type=chunk) - The company believes its existing cash, together with cash from operations and funding from debt or equity, will be sufficient to meet its needs for at least the next 12 months, but may need to seek additional financing[372](index=372&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Core Scientific is not required to provide the information for this item - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required under this item[395](index=395&type=chunk) [Controls and Procedures](index=88&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2022, due to material weaknesses in internal control over financial reporting, including inadequate resources and segregation of duties, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the reporting period[398](index=398&type=chunk) - Material weaknesses were identified related to inadequate technical accounting resources, poor cross-functional communication, lack of segregation of duties for journal entries, and insufficient controls over digital asset custody[398](index=398&type=chunk) - Remediation efforts include hiring more experienced accounting staff, enhancing communication, and implementing new internal reporting procedures to improve review and segregation of duties[399](index=399&type=chunk)[401](index=401&type=chunk) Part II. Other Information [Legal Proceedings](index=89&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any litigation that it believes would have a material adverse effect on its business, financial condition, or results of operations - The company states it is not presently a party to any litigation that would have a material adverse effect on its business[402](index=402&type=chunk) [Risk Factors](index=90&type=section&id=Item%201A.%20Risk%20Factors) The company faces extensive risks, including high dependency on volatile bitcoin prices, significant capital intensity, supplier concentration, customer bankruptcy, power costs, regulatory uncertainties, and identified material weaknesses in internal controls - The business is highly dependent on the price of bitcoin; if prices are not sufficiently high, results of operations could be materially and adversely affected[405](index=405&type=chunk)[417](index=417&type=chunk) - The business is capital intensive and requires significant electric power, where failure to obtain necessary capital or low-cost power could limit expansion and harm operations[405](index=405&type=chunk)[409](index=409&type=chunk)[438](index=438&type=chunk) - The company has identified material weaknesses in its internal control over financial reporting, which may result in material misstatements of financial statements[407](index=407&type=chunk)[604](index=604&type=chunk) - The company faces customer concentration risk, and the July 2022 bankruptcy filing of Celsius, one of its two largest customers, could materially affect business and cash flows[432](index=432&type=chunk)[434](index=434&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=150&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In July and August 2022, the company issued **960,078** shares of common stock to B. Riley and affiliates as commitment and advisory fees for a new equity purchase agreement and amended bridge notes, relying on registration exemptions - In July 2022, **573,381** shares were issued to B. Riley as a commitment fee for a **$100 million** common stock purchase agreement[652](index=652&type=chunk) - In August 2022, **386,697** shares were issued to a B. Riley affiliate as an advisory fee for amending bridge notes[653](index=653&type=chunk)

Core Scientific, Inc. (NASDAQ:CORZ) Q2 2022 Earnings Conference Call August 11, 2022 4:30 PM ET Company Participants Steven Gitlin – Senior Vice President-Investor Relations Mike Levitt – Chief Executive Officer Denise Sterling – Chief Financial Officer Conference Call Participants Lucas Pipes – B. Riley Chris Brendler – D.A. Davidson Stephen Glagola – Cowen Kevin Dede – H.C. Wainwright Steven Gitlin Good afternoon, ladies and gentlemen, and welcome to Core Scientific’s Second Quarter Fiscal Year 2022 Earni ...