Core Scientific, Inc 10-Q for FY2023 Q1

Core Scientific, Inc. (CORZ)

10-Q 2023-05-15 For: 2023-03-31

Added on April 09, 2026

About this 10-Q

Core Scientific, Inc filed this 10-Q on May 15, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $120.66M; down 37.3% from $192.52M a year earlier
Net loss: $11.69M; compared with a net loss of $466.2M a year earlier
Diluted EPS: -$0.03; compared with -$1.52 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	CORZQ	OTC Markets*
Warrants, exercisable for shares of common stock	CRZWQ	OTC Markets*


		Page
Part I. Financial Information
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Operations	6
	Consolidated Statements of Comprehensive Loss	7
	Consolidated Statements of Changes in Contingently Redeemable Preferred Stock and Stockholders’ Deficit	8
	Consolidated Statements of Cash Flows	10
	Notes to the Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	52

Part II. Other Information
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signatures		55


	March 31, 2023		December 31, 2022
Assets	(Unaudited)
Current Assets:
Cash and cash equivalents	$	47,487	$	15,884
Restricted cash	21,805		36,356
Accounts receivable, net of allowance of $8,724 and $8,724, respectively	173		234
Accounts receivable from related parties	2		23

Digital assets	—		724
Prepaid expenses and other current assets	30,728		31,881
Total Current Assets	100,195		85,102
Property, plant and equipment, net	628,037		691,134
Operating lease right-of-use assets	20,235		20,430

Intangible assets, net	2,165		1,704
Other noncurrent assets	9,387		9,316
Total Assets	$	760,019	$	807,686
Liabilities, Contingently Redeemable Preferred Stock and Stockholders’ Deficit
Current Liabilities:
Accounts payable	$	50,352	$	53,641
Accrued expenses and other current liabilities	58,596		17,952
Deferred revenue	68,338		77,689
Deferred revenue from related parties	1,218		496

Operating lease liabilities, current portion	597		769

Notes payable, current portion	35,645		36,242

Total Current Liabilities	214,746		186,789
Operating lease liabilities, net of current portion	1,055		720


Other noncurrent liabilities	2,211		2,210
Total liabilities not subject to compromise	218,012		189,719
Liabilities subject to compromise	950,765		1,027,313
Total Liabilities	1,168,777		1,217,032
Contingently redeemable preferred stock; $0.0001 par value; 2,000,000 shares authorized; — and — shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively; $— and $— total liquidation preference at March 31, 2023 and December 31, 2022, respectively	—		—
Commitments and contingencies (Note 8)
Stockholders’ Deficit:
Common stock; $0.0001 par value; 10,000,000 shares authorized at both March 31, 2023 and December 31, 2022; 377,841 and 375,225 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	36		36
Additional paid-in capital	1,776,641		1,764,368
Accumulated deficit	(2,185,435)		(2,173,750)

Total Stockholders’ Deficit	(408,758)		(409,346)
Total Liabilities, Contingently Redeemable Preferred Stock and Stockholders’ Deficit	$	760,019	$	807,686


	Three Months Ended March 31,
		2023		2022
Revenue:
Hosting revenue from customers		$	18,909	$	27,338
Hosting revenue from related parties		3,720		5,876
Equipment sales to customers		—		416
Equipment sales to related parties		—		25,889
Digital asset mining revenue		98,026		133,000
Total revenue		120,655		192,519
Cost of revenue:
Cost of hosting services		18,826		31,231
Cost of equipment sales		—		22,535
Cost of digital asset mining		81,345		68,750
Total cost of revenue		100,171		122,516
Gross profit		20,484		70,003

Gain from sales of digital assets		1,064		2,163
Impairment of digital assets		(1,056)		(53,985)



Operating expenses:
Research and development		1,415		3,340
Sales and marketing		1,008		1,398
General and administrative		21,764		40,160
Total operating expenses		24,187		44,898
Operating loss		(3,695)		(26,717)
Non-operating expenses, net:
Gain on debt extinguishment		(20,761)		—
Interest expense, net		157		21,676
Fair value adjustment on convertible notes		—		386,037
Fair value adjustment on derivative warrant liabilities		—		(10,275)
Reorganization items, net		31,559		—
Other non-operating (income), net		(3,069)		(357)
Total non-operating expenses, net		7,886		397,081
Loss before income taxes		(11,581)		(423,798)
Income tax expense		104		42,406
Net loss		$	(11,685)	$	(466,204)


Net loss per share (Note 11):
Basic		$	(0.03)	$	(1.52)
Diluted		$	(0.03)	$	(1.52)
Weighted average shares outstanding:
Basic		375,419		307,475
Diluted		375,419		307,475


	Three Months Ended March 31,
		2023		2022
Net loss		$	(11,685)	$	(466,204)
Other comprehensive income, net of income taxes:
Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $— and $—, respectively		—		27,164
Total other comprehensive income, net of income taxes		—		27,164
Comprehensive loss		$	(11,685)	$	(439,040)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to


	Common Stock		Additional Paid-In Capital			Accumulated Deficit				Total Stockholders’ Deficit
		Shares			Amount
Balance at December 31, 2022		375,225	$	36		$	1,764,368	$	(2,173,750)		$	(409,346)
Net loss		—	—			—		(11,685)			(11,685)

Stock-based compensation		—	—			12,273		—			12,273

Restricted stock awards issued, net of shares withheld for tax withholding obligations		2,616	—			—		—			—





Balance at March 31, 2023		377,841	$	36		$	1,776,641	$	(2,185,435)		$	(408,758)


	Contingently Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount

























Balance at December 31, 2021	10,826	$	44,476	271,576	$	27	$	1,379,581	$	(27,432)	$	(10,966)	$	1,341,210
Net loss	—	—		—	—		—		(466,204)		—		(466,204)
Other comprehensive income, net of $— income taxes	—	—		—	—		—		—		27,164		27,164
Stock-based compensation	—	—		—	—		20,573		—		—		20,573

Restricted stock awards issued, net of shares withheld for tax withholding obligations	—	—		6,803	1		(1)		—		—		—


Cashless exercise of warrants	—	—		3,001	—		—		—		—		—

Conversion of contingently redeemable preferred stock to common stock	(10,826)	(44,476)		10,826	1		44,475		—		—		44,476
Issuances of common stock - Merger with XPDI	—	—		30,778	3		163,456		—		—		163,459

Issuances of common stock - vendor settlement	—	—		1,580	—		12,674		—		—		12,674
Costs attributable to issuance of common stock and equity instruments - Merger with XPDI	—	—		—	—		(16,642)		—		—		(16,642)
Balance at March 31, 2022	—	$	—	324,564	$	32	$	1,604,116	$	(493,636)	$	16,198	$	1,126,710


	Three Months Ended March 31,
	2023
Professional fees and other bankruptcy related costs	$	20,107
Debtor-in-possession financing costs	11,452
Reorganization items, net	$	31,559


	March 31, 2023		December 31, 2022
Accounts payable	$	29,757	$	20,908
Other current liabilities	19,138		64,493
Accounts payable, and other current liabilities	$	48,895	$	85,401

Operating lease liability	$	13,475	$	13,868
Financing lease liability	69,775		70,796
Debt subject to compromise	806,085		844,695
Accrued interest on liabilities subject to compromise	12,535		12,553
Leases, debt and accrued interest	901,870		941,912
Liabilities subject to compromise	$	950,765	$	1,027,313


	March 31, 2023		March 31, 2022
Digital assets, beginning of period	$	724	$	234,298
Digital asset mining revenue	98,026		133,000
Proceeds from sales of digital assets	(98,384)		—
Gain from sales of digital assets	1,064		2,163
Impairment of digital assets	(1,056)		(53,985)
Other	(374)		847
Digital assets, end of period	$	—	$	316,323


	Interest Rates	Maturities	March 31, 2023		December 31, 2022
Kentucky note	5.0%	2023	$	529	$	529



NYDIG loan	11.0% - 15.0%	Various	—		38,573
Stockholder loan	10.0%	2023	10,000		10,000
Trinity loan	11.0%	2024	23,356		23,356
Bremer loan	5.5%	2026	18,331		18,331
Blockfi loan	9.7% - 13.1%	2023	53,913		53,913
Anchor Labs loan	12.5%	2024	25,159		25,159
Mass Mutual Barings loans	13.0%	2025	63,844		63,844
B. Riley Bridge Notes	7.0%	2023	41,777		41,777
Liberty loan	10.6%	2024	6,968		6,968
Secured Convertible Notes1	10.0%	2025	237,584		237,584
Other Convertible Notes2	10.0%	2025	322,396		322,396
Original DIP Credit Agreement3	10.0%	2023	—		35,547
Replacement DIP Credit Agreement4	10.0%	2023	35,000		—
Other			2,873		2,960
Notes payable, prior to reclassification to Liabilities subject to compromise			841,730		880,937
Less: Notes payable in Liabilities subject to compromise5			806,085		844,695
Unamortized discount and debt issuance costs			—		(36,456)
Fair value adjustment on convertible notes			—		(808,148)
Total notes payable, net			$	35,645	$	36,242


	Financial statement line item	March 31, 2023		December 31, 2022
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	20,235	$	20,430
Finance lease right-of-use assets	Property, plant and equipment, net	$	82,039	$	84,092
Liabilities:
Operating lease liabilities, current portion	Operating lease liabilities, current portion	597		$	769
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	1,055		$	720


Operating and finance lease liabilities subject to compromise	Liabilities subject to compromise	$	83,250	$	84,664


	March 31, 2023		March 31, 2022
Weighted Average Remaining Lease Term (Years)
Operating leases	10.7		22.1
Finance leases	2.1		2.6
Weighted Average Discount Rate
Operating leases	6.5	%	6.4	%
Finance leases	12.4	%	10.2	%


	Three Months Ended March 31,
		2023	2022
Stock options		22,724	31,942
Warrants		14,892	18,284
Restricted stock and restricted stock units		40,438	96,900
Convertible Notes		69,997	66,249
SPAC Vesting Shares		1,725	1,725
Total potentially dilutive securities		149,776	215,100


	Bitcoin Miners in Operation as of March 31, 2023
Mining Equipment	Hash rate (EH/s)	Number of Miners
Self-miners	16.1	155.0
Hosted miners	5.7	52.0
Total mining equipment	21.8	207.0


	Bitcoin Miners in Operation as of December 31, 2022
Mining Equipment	Hash rate (EH/s)	Number of Miners
Self-miners	15.7	153.0
Hosted miners	8.0	81.0
Total mining equipment	23.7	234.0


	Operating leases		Finance leases
Remaining 2023	$	2,082	$	37,103
2024	1,810		39,108
2025	1,866		1,862
2026	1,924		32
2027	1,985		—
Thereafter	12,037		—
Total lease payments	21,704		78,105
Less: imputed interest	6,577		8,330
Less: Liabilities subject to compromise	13,475		69,775
Total	$	1,652	$	—


	Three Months Ended March 31,				Period over Period Change
	2023		2022		Dollar		Percentage
Revenue:	(in thousands, except percentages)
Hosting revenue from customers	$	18,909	$	27,338	$	(8,429)	(31)	%
Hosting revenue from related parties	3,720		5,876		(2,156)		(37)	%
Equipment sales to customers	—		416		(416)		NM
Equipment sales to related parties	—		25,889		(25,889)		NM
Digital asset mining revenue	98,026		133,000		(34,974)		(26)	%
Total revenue	120,655		192,519		(71,864)		(37)	%
Cost of revenue:
Cost of hosting services	18,826		31,231		(12,405)		(40)	%
Cost of equipment sales	—		22,535		(22,535)		NM
Cost of digital asset mining	81,345		68,750		12,595		18	%
Total cost of revenue	100,171		122,516		(22,345)		(18)	%
Gross profit	20,484		70,003		(49,519)		(71)	%

Gain from sales of digital assets	1,064		2,163		(1,099)		(51)	%
Impairment of digital assets	(1,056)		(53,985)		52,929		NM



Operating expenses:
Research and development	1,415		3,340		(1,925)		(58)	%
Sales and marketing	1,008		1,398		(390)		(28)	%
General and administrative	21,764		40,160		(18,396)		(46)	%
Total operating expenses	24,187		44,898		(20,711)		(46)	%
Operating loss	(3,695)		(26,717)		23,022		NM
Non-operating expenses, net:
Gain on debt extinguishment	(20,761)		—		(20,761)		NM
Interest expense, net	157		21,676		(21,519)		(99)	%
Fair value adjustment on convertible notes	—		386,037		(386,037)		NM
Fair value adjustment on derivative warrant liabilities	—		(10,275)		10,275		NM
Reorganization items, net	31,559		—		31,559		NM
Other non-operating income, net	(3,069)		(357)		(2,712)		NM
Total non-operating expenses, net	7,886		397,081		(389,195)		(98)	%
Loss before income taxes	(11,581)		(423,798)		412,217		NM
Income tax expense	104		42,406		(42,302)		(100)	%
Net loss	$	(11,685)	$	(466,204)	$	454,519	NM


	March 31,		December 31,		Period over Period Change
	2023		2022		Dollar		Percentage
	(in thousands, except percentages)
Cash and cash equivalents	$	47,487	$	15,884	$	31,603	199	%
Restricted cash	21,805		36,356		(14,551)		(40)	%
Total cash, cash equivalents and restricted cash	$	69,292	$	52,240	$	17,052	33	%


			•			increasing the depth and experience within our accounting and finance organization;
			•			enhancing the communication and coordination among our accounting and financial reporting department and expanded cross-functional involvement and input into period-end disclosures; and
			•			implementing additional internal reporting procedures, including enhancing the analytical procedures used to assess period-end balances, to add depth to our review process and improve our segregation of duties.


Exhibit No.	Exhibit Description	Filed Herewith
2.1††	Agreement and Plan of Merger and Reorganization by and among Power & Digital Infrastructure Acquisition Corp., XPDI Merger Sub Inc., XPDI Merger Sub 2, LLC, and Core Scientific Holding Co. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No, 001-40046), filed with the SEC on July 21, 2021).
2.2††	First Amendment to Agreement and Plan of Merger and Reorganization by and among Power & Digital Infrastructure Acquisition Corp., XPDI Merger Sub Inc., XPDI Merger Sub 2, LLC, and Core Scientific Holding Co. (incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form S-4/A filed with the SEC on October 4, 2021).
2.3††	Second Amendment to Agreement and Plan of Merger and Reorganization, by and among Power & Digital Infrastructure Acquisition Corp., XPDI Merger Sub Inc., and Core Scientific Holding Co. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 30, 2021).
3.1	Second Amended and Restated Certificate of Incorporation of Core Scientific, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 24, 2022).
3.2	Amended and Restated Bylaws of Core Scientific, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 24, 2022).
10.1	Commitment Letter, dated as of January 29, 2023, by and between Core Scientific, Inc. and B. Riley Commercial Capital LLC (incorporated by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K (File No.: 001-40046), filed with the SEC on February 7, 2023).
10.2	Replacement DIP Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.: 001-40046), filed with the SEC on March 2, 2023).
31.1	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.	X
104	Cover Page Interactive Data File (the cover page XBRL tags)


††			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.


	CORE SCIENTIFIC, INC.

Date: May 12, 2023	By:	/s/ Denise Sterling
		Denise Sterling
		Chief Financial Officer
		(Duly Authorized Officer & Principal Financial Officer)


1.			I have reviewed this Quarterly Report on Form 10-Q of Core Scientific, Inc.;


2.			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.			The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


			(a)			Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


			(b)			Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
			(c)			Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


			(d)			Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


			(a)			All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


			(b)			Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



/s/ Michael Levitt
Michael Levitt
Chief Executive Officer
(Principal Executive Officer)


Date: May 12, 2023	By:	/s/ Mike Levitt
		Mike Levitt
		Chief Executive Officer and Director
		(Principal Executive Officer)