Delaware
|
7370
|
86-1243837
|
||
(State or other jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer
Identification No.)
|
Nicolas H.R. Dumont
Daniel Peale
Cooley LLP
55 Hudson Yards
New York, New York 10001
Tel: (212)
479-6000
Fax: (212)
479-6275
|
Todd M. DuChene
EVP, General Counsel
Core Scientific, Inc.
106 East 6
th
Street, Suite
900-145
Austin, TX 78701
(425) 998-5300
|
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer
|
☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
• |
execute its business strategy, including monetization of services provided and expansions in and into existing and new lines of business;
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• |
realize the benefits expected from the acquisition of Blockcap, including any related synergies;
|
• |
anticipate the uncertainties inherent in the development of new business lines and business strategies;
|
• |
retain and hire necessary employees;
|
• |
anticipate the impact of the
COVID-19
pandemic, including variant strains of
COVID-19,
and its effect on business and financial conditions;
|
• |
manage risks associated with operational changes in response to the
COVID-19
pandemic, including the emergence of variant strains of
COVID-19;
|
• |
increase brand awareness;
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• |
attract, train and retain effective officers, key employees or directors;
|
• |
upgrade and maintain information technology systems;
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• |
acquire and protect intellectual property;
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• |
meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;
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• |
effectively respond to general economic and business conditions, including the price of bitcoin;
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• |
maintain the listing on, or to prevent the delisting of our securities from, Nasdaq or another national securities exchange;
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• |
obtain additional capital, including use of the debt market;
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• |
enhance future operating and financial results;
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• |
successfully execute expansion plans;
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• |
anticipate rapid technological changes;
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• |
comply with laws and regulations applicable to its business, including tax laws and laws and regulations related to data privacy and the protection of the environment;
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• |
stay abreast of modified or new laws and regulations applicable to its business or withstand the impact of any new laws and regulations related to its industry;
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• |
anticipate the impact of, and response to, new accounting standards;
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• |
anticipate the significance and timing of contractual obligations;
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• |
maintain key strategic relationships with partners and distributors;
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• |
respond to uncertainties associated with product and service development and market acceptance;
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• |
anticipate the impact of changes in U.S. federal income tax laws, including the impact on deferred tax assets;
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• |
successfully defend litigation; and
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• |
successfully deploy the proceeds from the Business Combination.
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• |
Our business is highly dependent on a small number of digital asset mining equipment suppliers.
|
• |
Our business is capital intensive, and failure to obtain the necessary capital when needed may force us to delay, limit or terminate our expansion efforts or other operations, which could have a material adverse effect on our business, financial condition and results of operations.
|
• |
We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition and results of operations.
|
• |
Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly China and other
non-Western
countries. China’s shifting position on mining activity within its borders could reduce our revenue and profitability.
|
• |
A significant portion of our assets are pledged to our senior secured noteholders. This obligation may limit our ability to obtain additional capital to grow our business and failure to repay obligations to our noteholders when due will have a material adverse effect on our business and could result in foreclosure on our assets.
|
• |
We are subject to risks associated with our need for significant electric power and the limited availability of power resources, which could have a material adverse effect on our business, financial condition and results of operations. An inability to purchase and develop additional sources of
low-cost
renewable sources of energy effectively will have a material adverse effect on our business, financial condition and results of operations.
|
• |
We plan to continue to acquire other businesses or receive offers to be acquired, which could require significant management attention, disrupt our business or dilute stockholder value.
|
• |
If we do not successfully integrate Blockcap, Blockcap’s subsidiary, RADAR, or future acquisitions or strategic partnerships that we may enter into, we may not realize the anticipated benefits of any such acquisitions or partnerships, which could have a material adverse effect on our business, financial condition and results of operations.
|
• |
We generate significant revenue from a limited number of hosting facilities in Kentucky, Georgia, North Carolina and North Dakota and a significant disruption to operations in this region could have a material adverse effect our business, financial condition and results of operations.
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• |
Our future success depends on our ability to keep pace with rapid technological changes that could make our current or future technologies less competitive or obsolete.
|
• |
The further development and acceptance of cryptographic and algorithmic protocols governing transaction validation and the issuance of, and transactions in, digital assets are subject to a variety of factors that are difficult to evaluate. The slowing or stoppage of development or acceptance of blockchain networks and digital assets would have an adverse material effect on the successful development of the mining operation and value of mined digital assets.
|
• |
Our ability to use net operating losses to offset future taxable income may be subject to limitations.
|
• |
We operate in a rapidly developing industry and have an evolving business model with a limited history of generating revenue from our services. In addition, our evolving business model increases the complexity of our business, which makes it difficult to evaluate our future business prospects and could have a material adverse effect on our business, financial condition and results of operations.
|
• |
We have experienced difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary financial products and services, which could have a material adverse effect on our business, financial condition and results of operations.
|
• |
Digital assets exchanges and other trading venues are relatively new and, in some cases, partially unregulated and may therefore be more exposed to fraud and failure.
|
• |
We may not have adequate sources of recovery if the digital assets held by us are lost, stolen or destroyed due to third-party digital asset services, which could have a material adverse effect on our business, financial condition and results of operations.
|
• |
Losses relating to our business may be uninsured, or insurance may be limited.
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• |
Diversification of our business by investing in additional digital assets, financial instruments and businesses could require significant investment or expose us to trading risks.
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• |
As more processing power is added to a network, our relative percentage of total processing power on that network is expected to decline absent significant capital investment, which has an adverse impact on our ability to generate revenue from processing transactions on that network and could have a material adverse effect on our business, financial condition and results of operations.
|
• |
Our reliance on third-party mining pool service providers for our mining revenue payouts may have a negative impact on our operations.
|
• |
Malicious actors or botnet may obtain control of more than 50% of the processing power on the Bitcoin or other network.
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• |
Digital assets are subject to extreme price volatility. The value of digital assets is dependent on a number of factors, any of which could have a material adverse effect on our business, financial condition and results of operations.
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• |
Any loss or destruction of a private key required to access a digital asset of ours is irreversible. We also may temporarily lose access to our digital assets.
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• |
The digital assets held by us are not subject to FDIC or SIPC protections.
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• |
Our interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distribute ledger technology.
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• |
We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control, which may result in material misstatements of Core’s financial statements or cause it to fail to meet its periodic reporting obligations.
|
• |
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.
|
Shares of common stock offered by us
|
14,891,667 shares of common stock, consisting of (i) 6,266,667 shares of common stock that are issuable upon exercise of the Private Placement Warrants and (ii) 8,625,000 shares of common stock that are issuable upon exercise upon the exercise of the Public Warrants. |
Shares of common stock outstanding prior to the exercise of all Warrants
|
320,124,058 (as of February 4, 2022). |
Shares of common stock outstanding assuming exercise of all Warrants
|
335,015,725 (based on the total shares outstanding as of February 4, 2022). |
Exercise price of the Public and Private Placement Warrants
|
$11.50 per share, subject to adjustment as described herein. |
Use of proceeds
|
We will receive up to an aggregate of approximately $171.3 million from the exercise of the Public and Private Placement Warrants. We expect to use the net proceeds from the exercise of the Public and Private Placement Warrants for general corporate purposes. See “
Use of Proceeds
|
Shares of common stock offered by the selling securityholders
|
We are registering the resale by the selling securityholders named in this prospectus, or their permitted transferees, an aggregate of 186,172,423 shares of common stock, consisting of: |
• |
up to 8,625,000 Founder Shares;
|
• |
up to 6,266,667 shares of common stock issuable upon exercise of the Private Placement Warrants;
|
• |
up to 91,052,355 shares of common stock (including shares issuable upon the exercise of convertible securities) held by certain affiliates of our company; and
|
• |
up to 80,228,401 shares of common stock issuable upon conversion of certain Convertible Notes.
|
Warrants offered by the selling securityholders
|
Up to 6,266,667 Private Placement Warrants. |
Redemption
|
The Public Warrants are redeemable in certain circumstances. See “
Description of Capital Stock—Public Warrants
|
Terms of the offering
|
The selling securityholders will determine when and how they will dispose of the securities registered for resale under this prospectus. |
Lock-Up
Restrictions
|
Certain of our securityholders are subject to certain restrictions on transfer until the termination of applicable
lock-up
periods. See the section titled “
Certain Relationships and Related Party
Transactions—Lock-Up
Restrictions.
|
Use of proceeds
|
We will not receive any of the proceeds from the sale of the shares of common stock or Private Placement Warrants by the selling securityholders, except with respect to amounts received by us due to the exercise of the Warrants. |
Risk factors
|
Before investing in our securities, you should carefully read and consider the information set forth in “
Risk Factors
|
Nasdaq ticker symbols
|
“CORZ” and “CORZW.” |
• |
there is a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate;
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• |
we fail to provide competitive pricing terms or effectively market them to potential customers;
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• |
we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred design features, security considerations and connectivity;
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• |
businesses decide to host internally as an alternative to the use of our services;
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• |
we fail to successfully communicate the benefits of our services to potential customers;
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• |
we are unable to strengthen awareness of our brand;
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• |
we are unable to provide services that our existing and potential customers desire; or
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• |
our customers are unable to secure an adequate supply of new generation digital asset mining equipment to host with us.
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• |
a decline in the adoption and use of bitcoin and other similar digital assets within the technology industry or a decline in value of digital assets;
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• |
increased costs of complying with existing or new government regulations applicable to digital assets and other factors;
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• |
a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space;
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• |
any transition by our customers of blockchain hosting from third-party providers like us to customer-owned and operated facilities;
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• |
the rapid development of new technologies or the adoption of new industry standards that render our or our customers’ current products and services obsolete or unmarketable and, in the case of our customers, that contribute to a downturn in their businesses, increasing the likelihood of a default under their service agreements or their becoming insolvent;
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• |
a slowdown in the growth of the Internet generally as a medium for commerce and communication;
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• |
availability of an adequate supply of new generation digital asset mining equipment to enable us to mine digital assets at scale and for customers who want to host with us to be able to do so; and
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• |
the degree of difficulty in mining digital assets and the trading price of such assets.
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• |
inability or difficulty integrating and benefiting from acquired technologies or solutions in a profitable manner, including as a result of reductions in operating income, increases in expenses, failure to achieve synergies or otherwise;
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• |
unanticipated costs or liabilities associated with Blockcap and RADAR or another acquisition or strategic partnership;
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• |
difficulty integrating the accounting systems, operations and personnel of Blockcap and RADAR;
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• |
adverse effects to our existing business relationships and clients or to Blockcap’s business relationships and clients as a result of the acquisition;
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• |
loss of key employees, particularly those of Blockcap and RADAR;
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• |
assumption of potential liabilities of Blockcap and RADAR, including regulatory noncompliance or acquired litigation, and expenses relating to contractual disputes of the acquired business for, infringement of intellectual property rights, data privacy violations or other claims;
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• |
difficulty in acquiring suitable businesses, including challenges in predicting the value an acquisition will ultimately contribute to our business; and
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• |
use of substantial portions of our available cash or assumption of additional indebtedness to consummate an acquisition.
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• |
power loss;
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• |
equipment failure;
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• |
human error or accidents;
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• |
theft, sabotage and vandalism;
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• |
failure by us or our suppliers to provide adequate service or maintain our equipment;
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• |
network connectivity downtime and fiber cuts;
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• |
service interruptions resulting from server relocation;
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• |
security breaches of our infrastructure;
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• |
improper building maintenance by us;
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• |
physical, electronic and cybersecurity breaches;
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• |
animal incursions;
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• |
fire, earthquake, hurricane, tornado, flood and other natural disasters;
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• |
extreme temperatures;
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• |
water damage;
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• |
public health emergencies; and
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• |
terrorism.
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• |
continued worldwide growth in the adoption and use of digital assets and blockchain technologies;
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• |
government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and operations of digital asset transaction processing;
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• |
changes in consumer demographics and public tastes and preferences;
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• |
the maintenance and development of the open-source software protocols or similar digital asset systems;
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• |
the availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using fiat currencies;
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• |
general economic conditions and the regulatory environment relating to digital assets; and
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• |
negative consumer perception of digital assets, including digital assets specifically and digital assets generally.
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• |
identify and acquire desirable properties that we are interested in from developers;
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• |
offer hosting services at prices below current market rates or below the prices we currently charge our customers;
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• |
bundle colocation services with other services or equipment they provide at reduced prices;
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• |
develop superior products or services, gain greater market acceptance and expand their service offerings more efficiently or rapidly;
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• |
adapt to new or emerging technologies and changes in customer requirements more quickly;
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• |
take advantage of acquisition and other opportunities more readily; and
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• |
adopt more aggressive pricing policies and devote greater resources to the promotion, marketing and sales of their services.
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• |
it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or
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• |
it is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
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• |
global digital asset supply;
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• |
global digital asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of digital assets as payment for goods and services, the security of online digital asset exchanges and digital wallets that hold digital assets, the perception that the use and holding of digital assets is safe and secure, and the regulatory restrictions on their use;
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• |
investors’ expectations with respect to the rate of inflation of fiat currencies;
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• |
investors’ expectations with respect to the rate of deflation of digital assets;
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• |
cyber theft of digital assets from online wallet providers, or news of such theft from such providers or from individuals’ online wallets;
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• |
the availability and popularity of businesses that provide digital asset-related services;
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• |
fees associated with processing a digital asset transaction;
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• |
changes in the software, software requirements or hardware requirements underlying digital assets;
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• |
changes in the rights, obligations, incentives, or rewards for the various participants in digital asset mining;
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• |
interest rates;
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• |
currency exchange rates, including the rates at which digital assets may be exchanged for fiat currencies;
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• |
fiat currency withdrawal and deposit policies on digital asset exchanges and liquidity on such exchanges;
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• |
interruptions in service or failures of major digital asset exchanges;
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• |
investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in digital assets;
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• |
momentum pricing;
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• |
monetary policies of governments, trade restrictions, currency devaluations and revaluations;
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• |
regulatory measures, if any, that affect the use of digital assets, restrict digital assets as a form of payment, or limit the purchase of digital assets;
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• |
global or regional political, economic or financial events and conditions;
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• |
expectations that the value of digital assets will change in the near or long term. A decrease in the price of a single digital asset may cause volatility in the entire digital asset industry and may affect other digital assets. For example, a security breach that affects investor or user confidence in bitcoin, ethereum, litecoin or another digital asset may affect the industry as a whole and may also cause the price of other digital assets to fluctuate; or
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• |
with respect to bitcoin, increased competition from other forms of digital assets or payments services.
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• |
price and volume fluctuations in the overall stock market from time to time;
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• |
volatility in the trading prices and trading volumes of technology stocks;
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• |
volatility in the price of bitcoin and other digital assets;
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• |
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
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• |
sales of shares of our common stock by us or our stockholders, including sales under this prospectus;
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• |
failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
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• |
the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections;
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• |
announcements by us or our competitors of new products, features, or services;
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• |
the public’s reaction to our press releases, other public announcements and filings with the SEC;
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• |
rumors and market speculation involving us or other companies in our industry;
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• |
actual or anticipated changes in our results of operations or fluctuations in our results of operations;
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• |
actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
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• |
litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;
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• |
developments or disputes concerning our intellectual property or other proprietary rights;
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• |
announced or completed acquisitions of businesses, products, services or technologies by us or our competitors;
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• |
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
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• |
changes in accounting standards, policies, guidelines, interpretations or principles;
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• |
any significant change in our management; and
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• |
general economic conditions and slow or negative growth of our markets.
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• |
the ability of our board of directors to issue one or more series of preferred stock;
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• |
advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;
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certain limitations on convening special stockholder meetings;
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limiting the persons who may call special meetings of stockholders;
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limiting the ability of stockholders to act by written consent; and
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• |
Our board of directors have the express authority to make, alter or repeal the Bylaws.
|
Bitcoin Miners in deployed
|
||||||||
Mining Equipment
|
Hash rate
(EH/s) |
Number of
Miners |
||||||
Self-miners
1
|
2.64 | 28,004 | ||||||
Hosted miners
|
4.48 | 50,994 | ||||||
|
|
|
|
|||||
Total mining equipment
|
7.12 | 78,998 | ||||||
Bitcoin Miners On Order
|
||||||||
Mining Equipment
|
Hash rate
(EH/s) |
Number of
Miners |
||||||
Self-miners1
|
12.57 | 125,661 | ||||||
Hosted miners
|
3.80 | 38,007 | ||||||
|
|
|
|
|||||
Total mining equipment
|
16.37 | 163,668 | ||||||
|
|
|
|
|||||
Total in operation and on order
|
23.49 | 242,666 | ||||||
|
|
|
|
1
|
Blockcap’s hash rate and number of miners is included in self-miners in the table above.
|
Impact to Revenue
|
||||
Driver
|
Increase in Driver
|
Decrease in Driver
|
||
Market Price of Bitcoin
|
Favorable |
Unfavorable
|
||
Difficulty
|
Unfavorable
|
Favorable | ||
Core Scientific Hash Rate
|
Favorable |
Unfavorable
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Total Revenue
|
$ | 242,688 | $ | 36,633 | $ | 60,320 | $ | 59,523 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue
|
145,193 | 31,906 | 50,928 | 48,996 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
97,495 | 4,727 | 9,392 | 10,527 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gain on legal settlements
|
(2,603 | ) | 5,814 | 5,814 | — | |||||||||||
Gain from sales of digital currency assets
|
405 | 52 | 69 | 387 | ||||||||||||
Impairment of digital currency assets
|
(12,552 | ) | (4 | ) | (4 | ) | 419 | |||||||||
Total operating expenses
|
53,409 | 16,382 | 21,598 | 23,020 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
29,336 | (5,793 | ) | (6,327 | ) | (11,687 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net
|
(43,227 | ) | (4,104 | ) | (5,879 | ) | (235 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(13,891 | ) | (9,897 | ) | (12,206 | ) | (11,922 | ) | ||||||||
Income tax benefit
|
(697 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss)
|
$ | (13,194 | ) | $ | (9,897 | ) | $ | (12,206 | ) | $ | (11,922 | ) | ||||
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
Self-Mining Hash rate (Exahash), EoP
|
2.64 | 0.12 | 0.35 | 0.08 | ||||||||||||
Adjusted EBITDA ($ Millions)
|
$ | 88.0 | $ | 3.1 | $ | 6.1 | $ | (1.9 | ) |
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Adjusted EBITDA
|
||||||||||||||||
Net income (loss)
|
$ | (13,194 | ) | $ | (9,897 | ) | $ | (12,206 | ) | $ | (11,922 | ) | ||||
Adjustments:
|
||||||||||||||||
Interest expense, net
|
34,566 | 4,104 | 5,879 | 235 | ||||||||||||
Income tax expense (benefit)
|
(697 | ) | — | — | — | |||||||||||
Depreciation and amortization
|
12,886 | 6,613 | 9,403 | 6,118 | ||||||||||||
Stock-based compensation expense
|
31,012 | 2,446 | 3,037 | 2,880 | ||||||||||||
Impairment of digital curreny assets
|
12,552 | 5 | 4 | (419 | ) | |||||||||||
Legal settlement
|
2,603 | — | — | — | ||||||||||||
Fair value adjustment on convertible note payable
|
8,661 | — | — | — | ||||||||||||
Other items
|
(388 | ) | (144 | ) | (66 | ) | 1,166 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA
|
$ | 88,001 | $ | 3,128 | $ | 6,051 | $ | (1,942 | ) | |||||||
|
|
|
|
|
|
|
|
• |
Hosting revenue from customers and related parties.
Certain Relationships and Related Party Transactions
|
• |
Equipment sales to customers and related parties.
|
• |
Digital asset mining income.
|
the secure hashing algorithm employed in solving the blocks. The diagram below provides a simple illustration of the calculation of our annual digital asset mining income.
|
1
|
Amount represents the average number of blocks mined per year, e.g., blocks are mined on average every 10 minutes, or 144 per day, 52,560 per year.
|
• |
Research and development.
|
• |
Sales and marketing.
|
• |
General and administrative.
|
Nine Months Ended
September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Total Revenue:
|
||||||||||||||||
Hosting revenue from customers
|
$ | 37,836 | $ | 28,667 | $ | 34,615 | $ | 53,492 | ||||||||
Hosting revenue from related parties
|
13,906 | 3,382 | 6,983 | 384 | ||||||||||||
Equipment sales to customers
|
84,378 | 1,987 | 11,193 | — | ||||||||||||
Equipment sales to related parties
|
29,057 | 285 | 1,402 | — | ||||||||||||
Digital asset mining income
|
77,511 | 2,312 | 6,127 | 5,647 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
242,688 | 36,633 | 60,320 | 59,523 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue
|
145,193 | 31,906 | 50,928 | 48,996 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
97,495 | 4,727 | 9,392 | 10,527 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | 5,814 | — | |||||||||||
Gain from sales of digital currency assets
|
405 | 52 | 69 | 387 | ||||||||||||
Impairment of digital currency assets
|
(12,552 | ) | (4 | ) | (4 | ) | 419 | |||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
4,231 | 4,184 | 5,271 | 5,480 | ||||||||||||
Sales and Marketing
|
2,186 | 1,401 | 1,771 | 2,833 | ||||||||||||
General and administrative
|
46,992 | 10,797 | 14,556 | 14,707 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses
|
53,409 | 16,382 | 21,598 | 23,020 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
29,336 | (5,793 | ) | (6,327 | ) | (11,687 | ) | |||||||||
Non-operating
income (expense), net:
|
||||||||||||||||
Loss on debt extinguishment
|
(8,016 | ) | (1,333 | ) | (1,333 | ) | — | |||||||||
Interest expense, net
|
(26,550 | ) | (2,683 | ) | (4,436 | ) | (235 | ) | ||||||||
Other
non-operating
expenses, net
|
(8,661 | ) | (88 | ) | (110 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net .
|
(43,227 | ) | (4,104 | ) | (5,879 | ) | (235 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(13,891 | ) | (9,897 | ) | (12,206 | ) | (11,922 | ) | ||||||||
Income tax expense
|
(697 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss)
|
$ | (13,194 | ) | $ | (9,897 | ) | $ | (12,206 | ) | $ | (11,922 | ) | ||||
|
|
|
|
|
|
|
|
Nine Months
Ended September 30, |
Year Ended
December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
Total Revenue:
|
||||||||||||||||
Hosting revenue from customers
|
16 | % | 78 | % | 57 | % | 90 | % | ||||||||
Hosting revenue from related parties
|
6 | 9 | 12 | 1 | ||||||||||||
Equipment sales to customers
|
35 | 5 | 19 | — | ||||||||||||
Equipment sales to related parties
|
12 | 1 | 2 | — | ||||||||||||
Digital asset mining income
|
32 | 6 | 10 | 9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
100 | 100 | 100 | 100 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue
|
60 | 87 | 84 | 82 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
40 | 13 | 16 | 18 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) gain on legal settlements
|
(1 | ) | 16 | 10 | — | |||||||||||
Gain from sales of digital currency assets
|
0 | 0 | 0 | 1 | ||||||||||||
Impairment of digital currency assets
|
(5 | ) | (0 | ) | 0 | 1 | ||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
2 | 11 | 9 | 9 | ||||||||||||
Sales and Marketing
|
1 | 4 | 3 | 5 | ||||||||||||
General and administrative
|
19 | 29 | 24 | 25 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses
|
22 | 45 | 36 | 39 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
17 | (16 | ) | (10 | ) | (20 | ) | |||||||||
Non-operating
income (expense), net:
|
||||||||||||||||
Loss on debt extinguishment and other
|
(3 | ) | (4 | ) | (2 | ) | — | |||||||||
Interest expense, net
|
(11 | ) | (7 | ) | (7 | ) | (0 | ) | ||||||||
Other
non-operating
expenses, net
|
(4 | ) | (0 | ) | (0 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net
|
(18 | ) | (11 | ) | (10 | ) | (0 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
(6 | ) | (27 | ) | (20 | ) | (21 | ) | ||||||||
Income tax expense
|
(0 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss)
|
(5 | )% | (27 | )% | (20 | )% | (21 | )% | ||||||||
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Total Revenue:
|
||||||||||||||||
Hosting revenue from customers
|
$ | 37,836 | $ | 28,667 | $ | 9,169 | 32 | % | ||||||||
Hosting revenue from related parties
|
13,906 | 3,382 | 10,524 | 311 | % | |||||||||||
Equipment sales to customers
|
84,378 | 1,987 | 82,391 | 4147 | % | |||||||||||
Equipment sales to related parties
|
29,057 | 285 | 28,772 | n.m. | ||||||||||||
Digital asset mining income
|
77,511 | 2,312 | 75,199 | 3253 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
$ | 242,688 | $ | 36,633 | $ | 206,055 | 562 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percentage of total revenue:
|
||||||||||||||||
Hosting revenue from customers
|
16 | % | 78 | % | ||||||||||||
Hosting revenue from related parties
|
6 | 9 | ||||||||||||||
Equipment sales to customers
|
35 | 5 | ||||||||||||||
Equipment sales to related parties
|
12 | 1 | ||||||||||||||
Digital asset mining income
|
32 | 6 | ||||||||||||||
|
|
|
|
|||||||||||||
Total Revenue
|
100 | 100 | ||||||||||||||
|
|
|
|
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cost of revenue
|
$ | 145,193 | $ | 31,906 | $ | 113,287 | 355 | % | ||||||||
Gross profit
|
97,495 | 4,727 | 92,768 | 1963 | % | |||||||||||
Gross margin
|
40 | % | 13 | % | — | 27 | % |
Nine Months
Ended September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Gain (loss) from sales of digital currency assets
|
$ | 405 | $ | 52 | $ | 353 | 679 | % | ||||||||
Percentage of total revenue
|
0 | % | 0 | % |
Nine Months Ended
September 30, |
Period to Period Change
|
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Impairment of digital currency assets
|
$ | (12,552 | ) | $ | (4 | ) | $ | (12,548 | ) | n.m. | ||||||
Percentage of total revenue
|
(5 | )% | 0 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Research and development
|
$ | 4,231 | $ | 4,184 | $ | 47 | 1 | % | ||||||||
Percentage of total revenue
|
2 | % | 11 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Sales and marketing
|
$ | 2,186 | $ | 1,401 | $ | 785 | 56 | % | ||||||||
Percentage of total revenue
|
1 | % | 4 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
General and administrative
|
$ | 46,992 | $ | 10,797 | $ | 36,195 | 335 | % | ||||||||
Percentage of total revenue
|
19 | % | 29 | % |
Nine Months Ended
September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Non-operating
income (expense), net:
|
||||||||||||||||
Loss on debt extinguishment
|
$ | (8,016 | ) | $ | (1,333 | ) | $ | (6,683 | ) | 501 | % | |||||
Interest expense, net
|
(26,550 | ) | (2,683 | ) | (23,867 | ) | 890 | % | ||||||||
Other
non-operating
expenses, net
|
(8,661 | ) | (88 | ) | (8,573 | ) | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net
|
$ | (43,227 | ) | $ | (4,104 | ) | $ | (39,123 | ) | 953 | % | |||||
|
|
|
|
|
|
|
|
For the Nine Months
Ended September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Hosting and Equipment Sales Segment
|
||||||||||||||||
Hosting revenue from customers
|
$ | 51,742 | $ | 32,049 | $ | 19,693 | 61 | % | ||||||||
Equipment sales to customers
|
113,435 | 2,272 | 111,163 | n.m. | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
165,177 | 34,321 | 130,856 | 381 | % | |||||||||||
Cost of revenue
|
131,284 | 30,308 | 100,976 | 333 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 33,893 | $ | 4,013 | $ | 29,880 | 745 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Mining Segment
|
||||||||||||||||
Digital asset mining income
|
$ | 77,511 | $ | 2,312 | $ | 75,199 | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
$ | 77,511 | 2,312 | 75,199 | n.m. | |||||||||||
Cost of revenue
|
13,909 | 1,598 | 12,311 | 770 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 63,602 | $ | 714 | $ | 62,888 | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated total revenue
|
$ | 242,688 | $ | 36,633 | $ | 206,055 | 562 | % | ||||||||
Consolidated cost of revenue
|
$ | 145,193 | $ | 31,906 | $ | 113,287 | 355 | % | ||||||||
Consolidated gross profit
|
$ | 97,495 | $ | 4,727 | $ | 92,768 | 1963 | % |
For the Nine
Months Ended September 30, |
||||||||
Customer
|
2021
|
2020
|
||||||
A
|
34 | % | n/a | |||||
B
|
21 | % | n/a | |||||
C (related party)
|
18 | % | n/a | |||||
D
|
n/a | 42 | % | |||||
E
|
n/a | 16 | % |
For the Nine Months
Ended September 30, |
Period to Period
Change |
|||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Reportable segment gross profit
|
$ | 97,495 | $ | 4,727 | $ | 92,768 | 1963 | % | ||||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | (8,417 | ) | (145 | %) | |||||||||
Gain (loss) from sales of digital currency assets
|
405 | 52 | 353 | 679 | % | |||||||||||
Impairment of digital currency assets
|
(12,552 | ) | (4 | ) | (12,548 | ) | n.m. | |||||||||
Operating expense (income):
|
||||||||||||||||
Research and development
|
4,231 | 4,184 | 47 | 1 | % | |||||||||||
Sales and marketing
|
2,186 | 1,401 | 785 | 56 | % | |||||||||||
General and administrative
|
46,992 | 10,797 | 36,195 | 335 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expense (income)
|
53,409 | 16,382 | 37,027 | 226 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss)
|
29,336 | (5,794 | ) | 35,130 | (606 | %) | ||||||||||
Other income (expense):
|
||||||||||||||||
Loss on debt extinguishment
|
(8,016 | ) | (1,333 | ) | (6,683 | ) | 501 | % | ||||||||
Interest expense, net
|
(26,550 | ) | (2,683 | ) | (23,867 | ) | 890 | % | ||||||||
Other
non-operating
expenses, net
|
(8,661 | ) | (88 | ) | (8,573 | ) | n.m. | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense)
|
(43,227 | ) | (4,104 | ) | (39,123 | ) | 953 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
$ | (13,891 | ) | $ | (9,897 | ) | $ | (3,993 | ) | 40 | % | |||||
|
|
|
|
|
|
|
|
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Total Revenue:
|
||||||||||||||||
Hosting revenue from customers
|
$ | 34,615 | $ | 53,492 | $ | (18,877 | ) | (35 | %) | |||||||
Hosting revenue from related parties
|
6,983 | 384 | 6,599 | n.m. | ||||||||||||
Equipment sales to customers
|
11,193 | — | 11,193 | — | ||||||||||||
Equipment sales to related parties
|
1,402 | — | 1,402 | — | ||||||||||||
Digital asset mining income
|
6,127 | 5,647 | 480 | 8 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue
|
$ | 60,320 | $ | 59,523 | $ | 797 | 1 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percentage of total revenue:
|
||||||||||||||||
Hosting revenue from customers
|
57 | % | 90 | % | ||||||||||||
Hosting revenue from related parties
|
12 | 1 | ||||||||||||||
Equipment sales to customers
|
19 | — | ||||||||||||||
Equipment sales to related parties
|
2 | — | ||||||||||||||
Digital asset mining income
|
10 | 9 | ||||||||||||||
|
|
|
|
|||||||||||||
Total Revenue
|
100 | 100 | ||||||||||||||
|
|
|
|
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cost of revenue
|
$ | 50,928 | $ | 48,996 | $ | 1,932 | 4 | % | ||||||||
Gross profit
|
9,392 | 10,527 | (1,135 | ) | (11 | %) | ||||||||||
Gross margin
|
16 | % | 18 | % | — | (2 | %) |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Gain (loss) on sales of digital currency assets
|
$ | 69 | $ | 387 | $ | (318 | ) | (82 | %) | |||||||
Percentage of total revenue
|
0 | % | 1 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Impairment of digital currency assets
|
$ | (4 | ) | $ | 419 | $ | (423 | ) | (101 | %) | ||||||
Percentage of total revenue
|
0 | % | 1 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Research and development
|
$ | 5,271 | $ | 5,480 | $ | (209 | ) | (4 | %) | |||||||
Percentage of total revenue
|
9 | % | 9 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Sales and marketing
|
$ | 1,771 | $ | 2,833 | $ | (1,062 | ) | (37 | %) | |||||||
Percentage of total revenue
|
3 | % | 5 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
General and administrative
|
$ | 14,556 | $ | 14,707 | $ | (151 | ) | (1 | %) | |||||||
Percentage of total revenue
|
24 | % | 25 | % |
Year Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Non-operating
income (expense), net:
|
||||||||||||||||
Loss on debt extinguishment
|
$ | (1,333 | ) | — | $ | (1,333 | ) | — | % | |||||||
Interest expense, net
|
(4,436 | ) | (235 | ) | (4,201 | ) | 1788 | % | ||||||||
Other
non-operating
expenses, net
|
(110 | ) | — | (110 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-operating
income (expense), net
|
$ | (5,879 | ) | $ | (235 | ) | $ | (5,644 | ) | 2402 | % | |||||
|
|
|
|
|
|
|
|
For the Years Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$ Change
|
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Equipment Sales and Hosting Segment
|
||||||||||||||||
Hosting revenue from customers
|
$ | 41,598 | $ | 53,876 | $ | (12,278 | ) | (23 | %) | |||||||
Equipment sales to customers
|
12,595 | — | 12,595 | n.m. | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
54,193 | 53,876 | 317 | 1 | % | |||||||||||
Cost of revenue
|
47,951 | 43,005 | 4,946 | 12 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 6,242 | $ | 10,871 | $ | (4,629 | ) | (43 | %) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Mining Segment
|
||||||||||||||||
Digital asset mining income
|
$ | 6,127 | $ | 5,647 | $ | 480 | 8 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue
|
6,127 | 5,647 | 480 | 8 | % | |||||||||||
Cost of revenue
|
2,977 | 5,991 | (3,014 | ) | (50 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
$ | 3,150 | $ | (344 | ) | $ | 3,494 | n.m | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated total revenue
|
$ | 60,320 | $ | 59,523 | $ | 797 | 1 | % | ||||||||
Consolidated cost of revenue
|
$ | 50,928 | $ | 48,996 | $ | 1,932 | 4 | % | ||||||||
Consolidated gross profit
|
$ | 9,392 | $ | 10,527 | $ | (1,135 | ) | (11 | %) |
For the Years Ended
December 31, |
Period to Period
Change |
|||||||||||||||
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Reportable segment gross profit
|
$ | 9,392 | $ | 10,527 | $ | (1,135 | ) | (11 | %) | |||||||
Gain on legal settlements
|
5,814 | — | 5,814 | n.m. | ||||||||||||
Gain (loss) from sales of digital currency assets
|
69 | 387 | (318 | ) | (82 | %) | ||||||||||
Impairment of digital currency assets
|
(4 | ) | 419 | (423 | ) | (101 | %) | |||||||||
Operating expense (income):
|
||||||||||||||||
Research and development
|
$ | 5,271 | $ | 5,480 | $ | (209 | ) | (4 | %) | |||||||
Sales and marketing
|
1,771 | 2,833 | (1,062 | ) | (37 | %) | ||||||||||
General and administrative
|
14,556 | 14,707 | (151 | ) | (1 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expense (income)
|
21,598 | 23,020 | (1,422 | ) | (6 | %) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income (loss)
|
(6,327 | ) | (11,687 | ) | 5,360 | (46 | %) | |||||||||
Other income (expense):
|
||||||||||||||||
Loss on debt extinguishment
|
(1,333 | ) | — | (1,333 | ) | n.m. | ||||||||||
Interest expense, net
|
(4,436 | ) | (235 | ) | (4,201 | ) | 1788 | % | ||||||||
Other
non-operating
expenses, net
|
(110 | ) | — | (110 | ) | n.m. | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense)
|
(5,879 | ) | (235 | ) | (5,644 | ) | 2402 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes
|
$ | (12,206 | ) | $ | (11,922 | ) | $ | (284 | ) | 2 | % | |||||
|
|
|
|
|
|
|
|
As of the
Nine Months Ended September 30, |
Period to Period
Change |
As of the Year
Ended December 31, |
Period to Period
Change |
|||||||||||||||||||||||||||||
2021
|
2020
|
$ Change
|
%
Change |
2020
|
2019
|
$
Change |
%
Change |
|||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 147,906 | $ | 6,573 | $ | 141,333 | n.m. | $ | 8,671 | $ | 6,657 | $ | 2,014 | 30 | % | |||||||||||||||||
Restricted cash
|
12,101 | 125 | 11,976 | n.m. | 50 | 250 | (200 | ) | (80 | %) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Cash, cash equiv. and restricted cash
|
$ | 160,007 | $ | 6,698 | $ | 8,721 | $ | 6,907 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
As of and for the Nine
Months Ended September 30, |
As of and for the Year
Ended December 31, |
|||||||||||||||
2021
|
2020
|
2020
|
2019
|
|||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cash, cash equivalents and restricted cash
|
$ | 160,007 | $ | 6,698 | $ | 8,721 | $ | 6,907 | ||||||||
Cash provided by (used in)
|
||||||||||||||||
Operating activities
|
(166,474 | ) | (18,462 | ) | (23,765 | ) | (832 | ) | ||||||||
Investing activities
|
(115,524 | ) | (9,228 | ) | (15,144 | ) | (37,360 | ) | ||||||||
Financing activities
|
433,284 | 27,481 | 40,723 | 28,694 | ||||||||||||
Cash, cash equivalents and restricted cash—beg. of period
|
8,721 | 6,907 | 6,907 | 16,405 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash, cash equivalents and restricted cash—end of period
|
$ | 160,007 | $ | 6,698 | $ | 8,721 | $ | 6,907 | ||||||||
|
|
|
|
|
|
|
|
Year ending December 31,
|
||||
2021
|
$ | 111 | ||
2022-2025
|
— | |||
|
|
|||
Total minimum lease payments
|
$ | 111 | ||
|
|
Year ending December 31,
|
||||
2021
|
$ | 2,467 | ||
2022
|
1,990 | |||
2023
|
271 | |||
2024
|
102 | |||
2025
|
46 | |||
|
|
|||
Total minimum lease payments
|
4,876 | |||
Less: interest
|
(467 | ) | ||
|
|
|||
Present value of net minimum lease payments
|
$ | 4,409 | ||
|
|
Year Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Expected term (years)
|
10.0 |
5.43-5.57
|
||||||
Expected volatility
|
36.26 | % | 30.59 | % | ||||
Risk-free interest rate
|
0.70 | % | 1.65 | % | ||||
Expected dividend yield
|
0.0 | % | 0.0 | % |
• |
Acting as a fraud deterrent, as digital assets recorded on a blockchain are virtually impossible to counterfeit, reverse, or modify;
|
• |
Immediate settlement;
|
• |
Elimination of counterparty risk;
|
• |
No requirement for a trusted intermediary;
|
• |
Lower transaction fees;
|
• |
Identity theft prevention;
|
• |
Universal accessibility;
|
• |
Transaction verification and confirmation processes that prevent double spending;
|
• |
Decentralized transaction processing at any time of day without any central authority (governments or financial institutions); and
|
• |
Universal value free from currency exchange rates.
|
• |
Argo Blockchain PLC;
|
• |
Bit Digital, Inc.;
|
• |
Bitcoin Investment Trust;
|
• |
Bitfarms Technologies Ltd. (formerly Blockchain Mining Ltd);
|
• |
Blockchain Industries, Inc. (formerly Omni Global Technologies, Inc.);
|
• |
Cipher Mining Inc.;
|
• |
Coinbase, Inc.;
|
• |
Digihost International, Inc.;
|
• |
DMG Blockchain Solutions Inc.;
|
• |
DPW Holdings, Inc. (through its ownership of Digital Farms Inc.);
|
• |
Greenidge Generation Holdings Inc.;
|
• |
HashChain Technology, Inc.;
|
• |
Hive Blockchain Technologies Inc.;
|
• |
Hut 8 Mining Corp.;
|
• |
Layer1 Technologies, Inc.;
|
• |
Marathon Digital Holdings, Inc.;
|
• |
MGT Capital Investments, Inc.;
|
• |
Northern Data AG;
|
• |
Overstock.com Inc.; and
|
• |
Riot Blockchain, Inc.
|
Name
|
Age
|
Position
|
||||
Executive Officers
|
||||||
Michael Levitt
|
63 |
Chief Executive Officer and
Co-Chair
of the Board of Directors
|
||||
Darin Feinstein
|
50 |
Chief Vision Officer and
Co-Chair
of the Board of Directors
|
||||
Michael Trzupek
|
51 | EVP and Chief Financial Officer | ||||
Todd M. DuChene
|
58 | EVP, General Counsel, Chief Compliance Officer and Secretary | ||||
Non-Employee
Directors
|
||||||
Jarvis Hollingsworth(1)(3)
|
59 | Director | ||||
Matt Minnis(2)(3)
|
57 | Director | ||||
Stacie Olivares(1)(2)(3)
|
47 | Director | ||||
Kneeland Youngblood(1)(2)(3)
|
66 | Director |
(1) |
Member of the Audit Committee.
|
(2) |
Member of the Compensation Committee.
|
(3) |
Member of the Nominating and Corporate Governance Committee.
|
• |
Helping the board of directors of Core oversee corporate accounting and financial reporting processes;
|
• |
Managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit the financial statements;
|
• |
Discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, the interim and
year-end
operating results;
|
• |
Developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
|
• |
Reviewing related person transactions;
|
• |
Obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; and
|
• |
Approving or, as permitted,
pre-approving,
audit and permissible
non-audit
services to be performed by the independent registered public accounting firm.
|
• |
Reviewing and approving the compensation of the chief executive officer, other executive officers and senior management;
|
• |
Administering the equity incentive plans and other benefit programs;
|
• |
Reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans,
change-of-control
|
• |
Reviewing and establishing general policies relating to compensation and benefits of the employees.
|
• |
Specific responsibilities of the nominating and corporate governance committee include:
|
• |
Identifying and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on the board of directors of Core;
|
• |
Considering and making recommendations to the board of directors regarding the composition and chairmanship of the committees of the board of directors of Core;
|
• |
Developing and making recommendations to the board of directors regarding corporate governance guidelines and matters, including in relation to corporate social responsibility; and
|
• |
Overseeing periodic evaluations of the performance of the board of directors of Core, including its individual directors and committees.
|
• |
for any transaction from which the director derives an improper personal benefit;
|
• |
for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
• |
for any unlawful payment of dividends or redemption of shares; or
|
• |
for any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
• |
Michael Levitt, Chief Executive Officer;
|
• |
Kevin Turner, former President and Chief Executive Officer;
|
• |
Michael Trzupek, Executive Vice President and Chief Financial Officer; and
|
• |
Todd M. DuChene, Executive Vice President, General Counsel, Chief Compliance Officer and Secretary.
|
Name and Principal Position
|
Year
|
Salary($)(1)
|
Stock
Awards($)(2) |
All Other
Compensation ($) |
Total($)
|
|||||||||||||||
Michael Levitt(3)
|
||||||||||||||||||||
Chief Executive Officer
|
2021 | 30,824 | (4) | 160,664,903 | — | 160,695,727 | ||||||||||||||
B. Kevin Turner(5)
|
2020 | 300,000 | 9,716,229 | 33,217 | (6) | 10,049,446 | ||||||||||||||
Former President and Chief Executive Officer
|
2021 | 121,978 | (7) | — | 153,679 | (8) | 275,721 | |||||||||||||
Michael Trzupek(9)
|
2020 | 75,000 | (10) | 13,803,152 | — | 13,878,152 | ||||||||||||||
EVP and Chief Financial Officer
|
2021 | 300,824 | 9,210,000 | — | 9,510,824 | |||||||||||||||
Todd M. DuChene
|
2020 | 300,000 | 795,049 | — | 1,095,049 | |||||||||||||||
EVP, General Counsel, Chief Compliance Officer and Secretary
|
2021 | 300,824 | 12,292,500 | 498,691 | (11) | 13,092,015 |
(1) |
Salary amounts represent actual amounts earned during the fiscal year.
|
(2) |
Amounts reported represent the aggregate grant date fair value of RSUs granted to the named executive officer during the fiscal year. The aggregate grant date fair value is based upon an estimate of Legacy Core Common Stock at the grant date. In accordance with the Financial Accounting Standard Board Accounting Standards Codification, Topic 718, or ASC Topic 718, recognition of compensation cost was deferred until consummation of the Business Combination. See Note 2 of the audited consolidated financial statements of Legacy Core included in the Prospectus for a discussion of the relevant assumptions used in calculating this amount. This amount does not reflect the actual economic value that may be realized by the named executive officer.
|
(3) |
Mr. Levitt was not one of our named executive officers for the year ended December 31, 2020, and was appointed as our Chief Executive Officer in May 2021.
|
(4) |
The salary reported for Mr. Levitt represents a
pro-rata
portion of his salary in 2021. His annualized base salary for 2021 was $60,000.
|
(5) |
Mr. Turner resigned as our President and Chief Executive Officer in May 2021.
|
(6) |
Amount shown consists of medical benefits of $32,325, and $64 group life insurance premiums and
$828 out-of-pocket
|
(7) |
The salary reported for Mr. Turner represents a
pro-rata
portion of his salary in 2021. His annualized base salary for 2021 was $300,000.
|
(8) |
Amount shown consists of $17,217 COBRA payments and $136,462 severance payment upon the termination of Mr. Turner’s employment with us.
|
(9) |
Mr. Trzupek was appointed as our Chief Financial Officer in September 2020.
|
(10) |
The salary reported for Mr. Trzupek represents a
pro-rata
portion of his salary in 2020. His annualized base salary for 2020 was $300,000.
|
(11) |
Amount shown represents $498,691 relocation expenses reimbursed by Legacy Core to Mr. DuChene.
|
Name
|
Fiscal Year
2020 Base Salary($) |
Fiscal Year
2021 Base Salary($) |
||||||
Michael Levitt
|
— | (1) | 60,000 | |||||
B. Kevin Turner
|
300,000 | 300,000 | ||||||
Michael Trzupek
|
300,000 | 300,000 | ||||||
Todd M. DuChene
|
300,000 | 300,000 |
(1) |
Mr. Levitt was not one of our named executive officers for the year ended December 31, 2020, and was appointed as our Chief Executive Officer in May 2021.
|
Stock Awards(1)
|
||||||||||||||||
Name
|
Grant
Date |
Vesting
Commencement Date |
Number of
Shares or Units of Stock that Have Not Vested (#) |
Market Value
of Shares or Units of Stock that Have Not Vested($)(2) |
||||||||||||
Michael Levitt(3)
|
July 2, 2021 | July 2, 2021 | 8,400,000 | (4) | 146,664,000 | |||||||||||
B. Kevin Turner(5)
|
September 21, 2018 | July 1, 2018 | 3,645,864 | (5) | 63,656,785 | |||||||||||
October 1, 2018 | July 1, 2018 | 2,187,477 | (5) | 38,193,348 | ||||||||||||
October 9, 2018 | July 1, 2018 | 729,159 | (5) | 12,731,116 | ||||||||||||
July 31, 2019 | July 1, 2019 | 500,000 | (5) | 8,730,000 | ||||||||||||
April 29, 2020 | April 30, 2020 | 1,725,000 | (5) | 30,118,500 | ||||||||||||
August 24, 2020 | August 25, 2020 | 250,000 | (5) | 4,365,000 | ||||||||||||
Michael Trzupek(6)
|
October 1, 2020 | September 21, 2020 | 2,000,000 | (4) | 34,920,000 | |||||||||||
July 9, 2021 | June 9, 2021 | 500,000 | (4) | 8,730,000 | ||||||||||||
Todd M. DuChene
|
April 1, 2019 | April 1, 2019 | 1,000,000 | (7) | 17,460,000 | |||||||||||
June 12, 2020 | June 12, 2020 | 250,000 | (4) | 4,365,000 | ||||||||||||
February 2, 2021 | January 1, 2021 | 250,000 | (4) | 4,365,000 | ||||||||||||
July 9, 2021 | June 24, 2021 | 500,000 | (4) | 8,730,000 |
(1) |
All stock awards listed in this table represent RSUs granted pursuant to the 2018 Plan, the terms of which are described below under “-
Equity Plan
|
(2) |
This column represents the fair market value of a share of Core Common Stock of $17.46 as of December 31, 2021 as determined by its board of directors, multiplied by the amount shown in the column “Stock Awards-Number of Shares or Units of Stock that Have Not Vested.”
|
(3) |
Mr. Levitt joined Core as Chief Executive Officer in May 2021.
|
(4) |
One fourth of these RSUs vest on each of the first four anniversaries of the vesting commencement date, provided that the recipient remains in continuous service with us through each vesting date, and subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Legacy Core’s equity securities.
|
(5) |
Mr. Turner resigned as Legacy Core’s President and Chief Executive Officer in May 2021. Mr. Turner’s separation agreement provides that, as of Mr. Turner’s separation date, 9,037,500 RSUs had satisfied the time-based vesting condition, but these RSUs remain subject to the transaction-based vesting condition described in Note 11 to Legacy Core’s consolidated financial statements as of and for the years ended December 31, 2020 and 2019, which are included elsewhere in the registration statement of which this prospectus forms a part. The transaction-based vesting condition must be satisfied within three years of Mr. Turner’s separation date.
|
(6) |
Mr. Trzupek joined Core as Chief Financial Officer in September 2020.
|
(7) |
One fourth of these RSUs vest on the one year anniversary of the vesting commencement date and 1/36 of the remaining RSUs vest monthly thereafter, provided that the recipient remains in continuous service with us through each vesting date, and subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Legacy Core’s equity securities.
|
• |
select the eligible individual to whom awards may be granted;
|
• |
determine whether and to what extent awards are to be granted to eligible individuals;
|
• |
determine the number of shares of common stock to be covered by each award;
|
• |
determine the terms and conditions of awards (including exercise price, purchase price, vesting schedule or acceleration thereof, and forfeiture restrictions or waiver thereof);
|
• |
determine the amount of cash to be covered by each award;
|
• |
determine whether, to what extent and under what circumstances grants of awards under the 2018 Plan are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of the 2018 Plan;
|
• |
determine whether and under what circumstances, options may be settled in cash, common stock, and/or restricted stock;
|
• |
determine whether an option is an ISO or NSO;
|
• |
determine whether to require a participant not to sell or otherwise dispose of shares acquired pursuant to the exercise of an award for a period of time as determined by the plan administrator, in its sole discretion, following the date of the acquisition of such award;
|
• |
modify, extend or renew an award; and
|
• |
determine whether, to what extent and under what circumstances to provide loans to participants in order to exercise options under the 2018 Plan.
|
• |
awards may be continued, assumed, or have new rights substituted therefore;
|
• |
the plan administrator may provide for the purchase of any awards by the Company or an Affiliate for cash;
|
• |
the plan administrator may, in its sole discretion, terminate all outstanding and unexercised options, stock appreciation rights, or any other stock-based award that provides for a Participant elected exercise; and/or
|
• |
the plan administrator may, in its sole discretion, provide for accelerated vesting or lapse of restrictions.
|
Name
|
Stock awards
($)(1) |
Total($)
|
||||||
Matthew Bishop(2)
|
95,000 | (3) | 95,000 | |||||
921,000 | (4) | 921,000 | ||||||
Jarvis Hollingsworth(5)
|
4,060,000 | (6) | 4,060,000 |
(1) |
The amount reported represents the aggregate grant date fair value of the RSUs granted during the fiscal year ended December 31, 2020 under the 2018 Plan, computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the RSUs reported in this column are set forth in Note 11 to the notes to Legacy Core’s consolidated financial statements included elsewhere in this prospectus. These amounts do not reflect the actual economic value that may be realized by the
non-employee
director. As of December 31, 2020, Mr. Bishop held 625,000 RSUs all of which are subject to forfeiture if the transaction vesting condition of the award is not met on or before March 31, 2024.
|
(2) |
Mr. Bishop was appointed to the board of directors of Legacy Core in March 2020. Prior to that, Mr. Bishop served as Legacy Core’s Chief Administrative Officer, in which capacity Mr. Bishop was paid $133,077 during 2020.
|
(3) |
During the fiscal year ended December 31, 2020, Mr. Bishop was granted 50,000 RSUs in connection with his service on the board of directors of Legacy Core. These RSUs have satisfied the time-based vesting condition on April 1, 2021, but remain subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Legacy Core’s equity securities, provided that the recipient remains in continuous service with us through such vesting date.
|
(4) |
During the fiscal year ended December 31, 2021, Mr. Bishop was granted 50,000 RSUs in connection with his service on the board of directors of Legacy Core. One fourth of these RSUs vest on each of the first four anniversaries of April 1, 2021, provided that the recipient remains in continuous service with us through each vesting date, and subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Legacy Core’s equity securities.
|
(5) |
Mr. Hollingsworth was appointed to the board of directors of Legacy Core in July 2021.
|
(6) |
During the fiscal year ended December 31, 2021, Mr. Hollingsworth was granted 250,000 RSUs in connection with his service on the board of directors of Legacy Core. One fourth of these RSUs vest on each of the first four anniversaries of July 15, 2021, provided that the recipient remains in continuous service with us through each vesting date, and subject to the earlier to occur of (i) a change of control event, and (ii) an initial public offering of Legacy Core’s equity securities.
|
1. |
Annual Board Service Retainer
:
|
a. |
All Eligible Directors: $150,000
|
b. |
Lead Director: $200,000
|
2. |
Annual Committee Chair Service Retainer
:
|
a. |
Chair of the Audit Committee: $20,000
|
b. |
Chair of the Compensation Committee: $20,000
|
c. |
Chair of the Corporate Governance and Nominating Committee: $20,000
|
3. |
Annual Committee Member Service Retainer (not applicable to Committee Chairs)
:
|
a. |
Member of the Audit Committee: $10,000
|
b. |
Member of the Compensation Committee: $10,000
|
c. |
Member of the Nominating and Corporate Governance Committee: $10,000
|
• |
the amounts involved exceeded or will exceed $120,000; and
|
• |
any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest.
|
Stockholder
|
Series A
Preferred Stock |
Total
Purchase Price |
||||||
Kevin Turner (1)
|
146,412 | $ | 999,994 | |||||
Michael Levitt (2)
|
146,412 | $ | 999,994 | |||||
MPM Life, LLC (3)
|
124,088 | $ | 847,521 | |||||
The Aber Whitcomb Trust (4)
|
124,088 | $ | 847,521 | |||||
William & Marilyn Humes Charitable Lead Annuity Trust 2017 (5)
|
29,283 | $ | 200,003 | |||||
Darin Feinstein (6)
|
124,088 | $ | 847,421 |
(1) |
Kevin Turner is Legacy Core’s former President and Chief Executive Officer, and a former member of Core’s board of directors.
|
(2) |
Michael Levitt is Core’s Chief Executive Officer and is the
Co-Chair
and a member of Core’s board of directors. 14,641 shares of Mr. Levitt’s Series A Preferred Stock holdings are held indirectly through HKM Investment LLC.
|
(3) |
Matthew Minnis, a member of Core’s board of directors, is the managing member of MPM Life, LLC.
|
(4) |
Aber Whitcomb, a former member of Legacy Core’s board of directors, is a trustee for The Aber Whitcomb Trust.
|
(5) |
William Humes, Core’s former Chief Financial Officer, is a trustee for the William & Marilyn Charitable Lead Annuity Trust 2017.
|
(6) |
Darin Feinstein is an owner of greater than 5% of Core’s capital stock through the BCV Entities (as defined below) and is the
Co-Chair
of Core’s board of directors.
|
• |
the risks, costs, and benefits to us;
|
• |
the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
|
• |
the terms of the transaction;
|
• |
the availability of other sources for comparable services or products; and
|
• |
the terms available to or from, as the case may be, unrelated third parties.
|
• |
each person known by us to be the beneficial owner of more than 5% of our common stock;
|
• |
each of our executive officers and directors; and
|
• |
all of our executive officers and directors as a group.
|
Name and Address of Beneficial Owner(1)
|
Number of
Shares |
Percentage
of Ownership |
||||||
Named Executive Officers and Directors
|
||||||||
Michael Levitt
|
22,055,357 | (2) | 6.9 | % | ||||
Chief Executive Officer and
Co-Chair
of the Board of Directors
|
||||||||
B. Kevin Turner
|
8,281,826 | (3) | 2.6 | % | ||||
Former President and Chief Executive Officer
|
||||||||
Darin Feinstein
|
40,362,498 | (4) | 12.6 | % | ||||
Chief Vision Officer and
Co-Chair
of the Board of Directors
|
||||||||
Michael Trzupek
|
— | — | ||||||
Executive Vice President and Chief Financial Officer
|
||||||||
Todd M. DuChene
|
— | — | ||||||
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
||||||||
Jarvis Hollingsworth
|
— | — | ||||||
Director
|
||||||||
Matt Minnis
|
30,711,805 | (5) | 9.6 | % | ||||
Director
|
||||||||
Stacie Olivares
|
— | — | ||||||
Director
|
||||||||
Kneeland Youngblood
|
— | — | ||||||
Director
|
||||||||
All current directors and executive officers as a group (8 individuals)
|
93,129,660 | 28.5 | % |
(1) |
Unless otherwise indicated, the business address of each of the directors, executive officers and five percent holders of Core is 106 East 6th Street, Suite
900-145,
Austin, Texas 78701.
|
(2) |
Consists of (i) 210,854 shares of Core common stock held of record by Mr. Levitt, (ii) 41,470 shares of Core common stock held of record by HKM Investment LLC (“
HKM
MJL Blockchain
|
(3) |
Consists of (i) 5,081,520 shares of Core common stock held of record by Mr. Turner and (ii) 3,200,306 shares of Core common stock issuable upon exercise of warrants within 60 days of the Closing Date held by Mr. Turner.
|
(4) |
Consists of (i) 36,965,875 shares of Core common stock held of record by Mr. Feinstein, (ii) 811,918 shares of Core common stock held of record by Red Moon 88, LLC (“
Red Moon
|
(5) |
Consists of (i) 29,111,651 shares of Core common stock held of record by MPM Life, LLC (“
MPM
|
• |
up to 8,625,000 Founder Shares;
|
• |
up to 6,266,667 shares of common stock issuable upon exercise of the Private Placement Warrants;
|
• |
up to 91,052,355 shares of common stock (including shares issuable upon the exercise of convertible securities) held by certain affiliates of our company; and
|
• |
up to 80,228,401 shares of common stock issuable upon conversion of certain Convertible Notes.
|
• |
in whole and not in part;
|
• |
at a price of $0.01 per warrant;
|
• |
upon not less than 30 days’ prior written notice of redemption to each warrantholder; and
|
• |
if, and only if, the last reported sale price of the Core common stock for any 20 trading days within a
30-trading
day period ending three (3) business days before Core sends the notice of redemption to the
|
warrantholders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “
—Public Warrants—Anti-dilution Adjustments
|
• |
in whole and not in part;
|
• |
at $0.10 per warrant;
|
• |
upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” of Core common stock except as otherwise described below;
|
• |
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “—
Public Warrants
Anti-dilution Adjustments
|
• |
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “
—Public Warrants—Anti-dilution Adjustments
|
Redemption Date
(period to expiration of warrants) |
Fair Market Value of Core Common Stock
|
|||||||||||||||||||||||||||||||||||
≤
$10.00
|
$11.00
|
$12.00
|
$13.00
|
$14.00
|
$15.00
|
$16.00
|
$17.00
|
≥
$18.00
|
||||||||||||||||||||||||||||
60 months
|
0.261 | 0.281 | 0.297 | 0.311 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
57 months
|
0.257 | 0.277 | 0.294 | 0.310 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
54 months
|
0.252 | 0.272 | 0.291 | 0.307 | 0.322 | 0.335 | 0.347 | 0.357 | 0.361 | |||||||||||||||||||||||||||
51 months
|
0.246 | 0.268 | 0.287 | 0.304 | 0.320 | 0.333 | 0.346 | 0.357 | 0.361 | |||||||||||||||||||||||||||
48 months
|
0.241 | 0.263 | 0.283 | 0.301 | 0.317 | 0.332 | 0.344 | 0.356 | 0.361 | |||||||||||||||||||||||||||
45 months
|
0.235 | 0.258 | 0.279 | 0.298 | 0.315 | 0.330 | 0.343 | 0.356 | 0.361 | |||||||||||||||||||||||||||
42 months
|
0.228 | 0.252 | 0.274 | 0.294 | 0.312 | 0.328 | 0.342 | 0.355 | 0.361 | |||||||||||||||||||||||||||
39 months
|
0.221 | 0.246 | 0.269 | 0.290 | 0.309 | 0.325 | 0.340 | 0.354 | 0.361 | |||||||||||||||||||||||||||
36 months
|
0.213 | 0.239 | 0.263 | 0.285 | 0.305 | 0.323 | 0.339 | 0.353 | 0.361 | |||||||||||||||||||||||||||
33 months
|
0.205 | 0.232 | 0.257 | 0.280 | 0.301 | 0.320 | 0.337 | 0.352 | 0.361 | |||||||||||||||||||||||||||
30 months
|
0.196 | 0.224 | 0.250 | 0.274 | 0.297 | 0.316 | 0.335 | 0.351 | 0.361 | |||||||||||||||||||||||||||
27 months
|
0.185 | 0.214 | 0.242 | 0.268 | 0.291 | 0.313 | 0.332 | 0.350 | 0.361 | |||||||||||||||||||||||||||
24 months
|
0.173 | 0.204 | 0.233 | 0.260 | 0.285 | 0.308 | 0.329 | 0.348 | 0.361 | |||||||||||||||||||||||||||
21 months
|
0.161 | 0.193 | 0.223 | 0.252 | 0.279 | 0.304 | 0.326 | 0.347 | 0.361 | |||||||||||||||||||||||||||
18 months
|
0.146 | 0.179 | 0.211 | 0.242 | 0.271 | 0.298 | 0.322 | 0.345 | 0.361 | |||||||||||||||||||||||||||
15 months
|
0.130 | 0.164 | 0.197 | 0.230 | 0.262 | 0.291 | 0.317 | 0.342 | 0.361 | |||||||||||||||||||||||||||
12 months
|
0.111 | 0.146 | 0.181 | 0.216 | 0.250 | 0.282 | 0.312 | 0.339 | 0.361 | |||||||||||||||||||||||||||
9 months
|
0.090 | 0.125 | 0.162 | 0.199 | 0.237 | 0.272 | 0.305 | 0.336 | 0.361 | |||||||||||||||||||||||||||
6 months
|
0.065 | 0.099 | 0.137 | 0.178 | 0.219 | 0.259 | 0.296 | 0.331 | 0.361 | |||||||||||||||||||||||||||
3 months
|
0.034 | 0.065 | 0.104 | 0.150 | 0.197 | 0.243 | 0.286 | 0.326 | 0.361 | |||||||||||||||||||||||||||
0 months
|
— | — | 0.042 | 0.115 | 0.179 | 0.233 | 0.281 | 0.323 | 0.361 |
• |
before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
• |
upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons
|
who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
|
• |
on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66
2
⁄
3
% of the outstanding voting stock that is not owned by the interested stockholder.
|
• |
any merger or consolidation involving the corporation and the interested stockholder;
|
• |
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
|
• |
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
|
• |
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; and
|
• |
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.
|
• |
an individual who is a citizen or resident of the United States;
|
• |
a corporation, or an entity treated as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the United States or of any state thereof or the District of Columbia;
|
• |
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
|
• |
a trust if (a) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (b) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
|
• |
the gain is effectively connected with the conduct of a trade or business by the
non-U.S.
Holder within the United States (and, if an applicable tax treaty so requires, is attributable to a U.S. permanent establishment or fixed place of business maintained by the
non-U.S.
Holder);
|
• |
the
non-U.S.
Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
|
• |
we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the
non-U.S.
Holder held our common stock or Warrants and, in the case where our common stock is regularly traded on an established securities market, (i) the
non-U.S.
Holder has owned, actually or constructively, more than 5% of our common stock at any time within the relevant period or (ii) provided that our Warrants are regularly traded on an established securities market, the
non-U.S.
Holder has owned, actually or constructively, more than 5% of our Warrants at any time within the within the relevant period. It is unclear how a
non-U.S.
Holder’s ownership of Warrants will affect the determination of whether the
non-U.S.
Holder owns more than 5% of our common stock. In addition, special rules may apply in the case of a disposition of our Warrants if our common stock is considered to be regularly traded, but our Warrants are not considered to be regularly traded. There can be no assurance that our common stock or Warrants will or will not be treated as regularly traded on an established securities market for this purpose.
|
• |
up to 8,625,000 Founder Shares;
|
• |
up to 6,266,667 shares of common stock issuable upon exercise of the Private Placement Warrants;
|
• |
up to 91,052,355 shares of common stock (including shares issuable upon the exercise of convertible securities) held by certain affiliates of our company; and
|
• |
up to 80,228,401 shares of common stock issuable upon conversion of certain Convertible Notes.
|
• |
purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;
|
• |
ordinary brokerage transactions and transactions in which the broker solicits purchasers;
|
• |
block trades in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
• |
an over-the-counter distribution in
|
• |
through trading plans entered into by a selling securityholder
pursuant to Rule 10b5-1 under the
Exchange Act, that are in place at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of their securities on the basis of parameters described in such trading plans;
|
• |
short sales;
|
• |
distribution to employees, members, limited partners or stockholders of the selling securityholders; through the writing or settlement of options or other hedging transaction, whether through an options exchange or otherwise;
|
• |
by pledge to secured debts and other obligations;
|
• |
delayed delivery arrangements;
|
• |
to or through underwriters or broker-dealers;
|
• |
in “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on a national securities exchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents;
|
• |
in privately negotiated transactions;
|
• |
in options transactions;
|
• |
through a combination of any of the above methods of sale; or
|
• |
any other method permitted pursuant to applicable law.
|
December 31, 2020
|
||||||||||||||||||||||||
Blockcap
Historical
|
Legacy
Core
Historical
|
Legacy
Core
Pro Forma
Combined
|
XPDI
Historical
|
Pro
Forma
Combined
Core
|
Pro
Forma
Equivalent
Core
|
|||||||||||||||||||
Earnings (loss) per share for the twelve months ended December 31, 2020:
|
||||||||||||||||||||||||
Net income (loss) per share (Basic and Diluted)
(1)
|
$ | (0.56 | ) | $ | (0.23 | ) | (0.60 | ) | $ | 0.00 | $ | (0.46 | ) | $ | (0.30 | ) |
(1) |
Potentially dilutive securities are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive.
|
Blockcap
(Historical)
for
the period
January 1,
2021
through
July 30,
2021
|
Legacy
Core
Historical
|
Legacy
Core
Pro Forma
Combined
|
XPDI
Historical
|
Pro
Forma
Combined
Core
|
Pro
Forma
Equivalent
Core
|
|||||||||||||||||||
Earnings per share for the nine months ended September 30, 2021:
|
||||||||||||||||||||||||
Net income (loss) per share (Basic and Diluted)
(1)
|
$ | (0.16 | ) | $ | (0.11 | ) | $ | (0.32 | ) | $ | (0.51 | ) | $ | (0.36 | ) | $ | (0.24 | ) |
(1) |
Potentially dilutive securities are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive.
|
• |
The merger, which includes the merger of XPDI and the Merger Sub with Legacy Core;
|
• |
Legacy Core’s acquisition of Blockcap (described below), including any elimination of the effect of transactions between Legacy Core and Blockcap, as required, is included in the Legacy Core historical financial statements as of and for the nine months ended September 30, 2021. The pro forma impact to the Statement of Operations had the acquisition taken place on January 1, 2020 is included as an adjustment for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020.
|
• |
The issuance by Legacy Core of secured convertible notes in April, 2021, net of the repayment of the existing Legacy Core loan (the “Silverpeak loan”) and the issuance in August and September, 2021 of unsecured convertible notes is included in the Legacy Core historical financial statements as of and for the nine months ended September 30, 2021. The pro forma impact to interest expense for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020 is included as an adjustment. Also included as pro forma adjustments is the impact of additional issuance of unsecured convertible notes during October and November of 2021.
|
• |
the historical unaudited condensed consolidated financial statements of XPDI as of and for the nine months ended September 30, 2021 and the related notes, which are included elsewhere in the registration statement of which this prospectus forms a part;
|
• |
the historical audited financial statements of XPDI as of and for the period from December 29, 2020 (inception) through December 31, 2020 and the related notes, which are included elsewhere in the registration statement of which this prospectus forms a part;
|
• |
the historical unaudited financial statements of Legacy Core as of and for the nine months ended September 30, 2021 and the related notes, which are included elsewhere in the registration statement of which this prospectus forms a part;
|
• |
the historical audited financial statements of Legacy Core as of and for the year ended December 31, 2020 and the related notes, which are included elsewhere in the registration statement of which this prospectus forms a part;
|
• |
the historical unaudited financial statements of Blockcap for the period from January 1, 2021 through the acquisition date of July 30, 2021;
|
• |
the historical audited financial statements of Blockcap as of and for the year ended December 31, 2020 and the related notes, which are included elsewhere in the registration statement of which this prospectus forms a part;
|
• |
the historical audited financial statements of RME Black 88, LLC (“RME 88”), RME Black 100 LLC (“RME 100”), RME Black 200 (“RME 200”) and BEP 888 LLC (“BEP 888”) as of and for the periods from inception through December 31, 2020 and the related notes, which are included elsewhere in the registration statement of which this prospectus forms a part; and
|
• |
other information relating to XPDI and Legacy Core contained in the registration statement of which this prospectus forms a part.
|
Share Ownership in
New
Core
|
||||||||
amounts in thousands
|
Shares
|
% of
Total
|
||||||
Legacy Core shareholders (1)
|
|
301,292
|
|
|
90.7
|
%
|
||
|
|
|
|
|||||
XPDI:
|
||||||||
XPDI Class A shares (4)
|
22,153 | 6.7 | % | |||||
XPDI Class B shares converted to Class A (2)
|
8,625 | 2.6 | % | |||||
|
|
|
|
|||||
XPDI shareholders
|
|
30,778
|
|
|
9.3
|
%
|
||
|
|
|
|
|||||
Closing Shares (3)
|
|
332,070
|
|
|
100.0
|
%
|
||
|
|
|
|
(1) |
Includes equivalent Legacy Core common shares exchanged for New Core shares using the exchange rate of 1.6001528688 consisting of:
|
a. |
Legacy Core common shares of 158,212
|
b. |
Legacy Core common shares from convertible Series A and B preferred stock of 10,826
|
c. |
Legacy Core vested warrants and options of 10,556
|
d. |
Blockcap equivalent Legacy Core common shares of 115,508
|
e. |
Blockcap equivalent Legacy Core common shares from vested RSUs of 1,956
|
f. |
Blockcap equivalent Legacy Core vested options of 4,234
|
(2) |
Includes 1,725 Class B common shares that will be converted to Class A unvested shares and will vest upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing date. The unvested shares will be excluded from pro forma earnings per share calculations because the stock price threshold contingency has not yet been met.
|
(3) |
Excludes Legacy Core and Blockcap equivalent Legacy Core common shares from unvested RSUs of 97,409 and 4,855, respectively, and 21,103 and 3,111 from unvested options, respectively, using the exchange rate of 1.6001528688 and all other potentially dilutive securities including Legacy Core options, warrants, restricted stock units and convertible notes as well as XPDI warrants. See Note 5
—
|
(4) |
Includes the impact of the redemption by XPDI shareholders of 12,347 shares of Class A common stock subject to redemption.
|
September 30, 2021
|
September 30,
2021 |
|||||||||||||||||
in thousands
|
Legacy
Core
Pro
Forma
(Note 2)
|
XPDI
(Historical)
|
Merger
Adjustments
|
Pro Forma
Combined
|
||||||||||||||
Hosting revenue from customers
|
$ | 39,914 | $ | — | $ | — | $ | 39,914 | ||||||||||
Equipment sales to customers
|
95,741 | — | — | 95,741 | ||||||||||||||
Digital asset mining income
|
149,541 | — | — | 149,541 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total revenue
|
285,196 | — | — | 285,196 | ||||||||||||||
Costs of revenue
|
136,002 | — | — | 136,002 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
149,194 | — | — | 149,194 | ||||||||||||||
(Loss) gain on legal settlements
|
(2,603 | ) | — | — | (2,603 | ) | ||||||||||||
Gain (loss) from sales of digital currency assets
|
550 | — | — | 550 | ||||||||||||||
Impairment of digital currency assets
|
(30,024 | ) | — | — | (30,024 | ) | ||||||||||||
Operating expenses:
|
||||||||||||||||||
Research and development
|
4,231 | — | — | 4,231 | ||||||||||||||
Sales and marketing
|
2,186 | — | — | 2,186 | ||||||||||||||
General and administrative
|
75,749 | 4,078 | — | 79,827 | ||||||||||||||
General and administrative-related party
|
— | 160 | — | 160 | ||||||||||||||
Franchise tax expenses
|
— | 148 | — | 148 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses
|
82,166 | 4,386 | — | 86,552 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating income
|
34,951 | (4,386 | ) | — | 30,565 | |||||||||||||
Other (expense) income:
|
||||||||||||||||||
(Loss) gain from sales of digital currency assets
|
(1,472 | ) | — | — | (1,472 | ) | ||||||||||||
(Loss) on debt from extinguishment
|
(8,016 | ) | — | — | (8,016 | ) | ||||||||||||
Change in fair value of derivative warrant liabilities
|
— | (13,904 | ) | — | (13,904 | ) | ||||||||||||
Offering costs associated with derivative warrant liabilities
|
— | (1,055 | ) | — | (1,055 | ) | ||||||||||||
Income from investments held in Trust Account
|
— | 27 | (27 | ) |
e
|
— | ||||||||||||
Other income (expense)
|
(8,661 | ) | — | — | (8,661 | ) | ||||||||||||
Interest expense, net
|
(65,767 | ) | — | — | (65,767 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total other (expense) income
|
(83,916 | ) | (14,932 | ) | (27 | ) | (98,875 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes
|
(48,965 | ) | (19,318 | ) | (27 | ) | (68,310 | ) | ||||||||||
Income tax provision (benefit)
|
5,777 | — | — | 5,777 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (54,742 | ) | $ | (19,318 | ) | $ | (27 | ) | $ | (74,087 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to common stockholders
|
$ | (54,742 | ) | $ | (19,318 | ) | $ | (27 | ) | $ | (74,087 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) per share
|
||||||||||||||||||
Common stock – Basic and Diluted
|
$ | (0.32 | ) | $ | (0.51 | ) |
a
|
$ | (0.24 | ) | ||||||||
Weighted average shares outstanding:
|
||||||||||||||||||
Basic and Diluted common stock
|
171,059 | 37,644 |
b
|
313,599 |
December 31, 2020
|
December 31,
2020 |
|||||||||||||||||
in thousands
|
Legacy
Core
Pro
Forma
(Note 2)
|
XPDI
(Historical)
|
Merger
Adjustments
|
Pro
Forma
Combined
|
||||||||||||||
Hosting revenue from customers
|
$ | 39,470 | $ | — | $ | — | $ | 39,470 | ||||||||||
Equipment sales to customers
|
11,842 | — | — | 11,842 | ||||||||||||||
Digital asset mining income
|
19,636 | — | — | 19,636 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total revenue
|
70,948 | — | — | 70,948 | ||||||||||||||
Costs of revenue
|
54,237 | — | — | 54,237 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
16,711 | — | — | 16,711 | ||||||||||||||
Gain on legal settlements
|
5,814 | — | — | 5,814 | ||||||||||||||
Gain on sale of digital assets
|
353 | — | — | 353 | ||||||||||||||
Operating expenses:
|
||||||||||||||||||
Research and development
|
5,271 | — | — | 5,271 | ||||||||||||||
Sales and marketing
|
1,771 | — | — | 1,771 | ||||||||||||||
General and administrative
|
39,190 | 10 | 2,812 |
c
|
42,012 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses
|
46,232 | 10 | 2,812 | 49,054 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating income
|
(23,354 | ) | (10 | ) | (2,812 | ) | (26,176 | ) | ||||||||||
Other (expense) income:
|
||||||||||||||||||
(Loss) on debt from extinguishment
|
(1,333 | ) | — | — | (1,333 | ) | ||||||||||||
Other income (expense)
|
(10,113 | ) | — | — | (10,113 | ) | ||||||||||||
Interest expense, net
|
(56,988 | ) | — | — | (56,988 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total other (expense) income
|
(68,434 | ) | — | — | (68,434 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes
|
(91,788 | ) | (10 | ) | (2,812 | ) | (94,610 | ) | ||||||||||
Income tax provision (benefit)
|
(134 | ) | — | — | (134 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (91,653 | ) | $ | (10 | ) | $ | (2,812 | ) | $ | (94,475 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||||
Deemed divided from common to preferred exchange
|
(10,478 | ) | — | 10,478 |
d
|
— | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to common stockholders
|
$ | (102,131 | ) | $ | (10 | ) | $ | 7,666 | $ | (94,475 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) per share
|
||||||||||||||||||
Common stock – Basic and Diluted
|
$ | (0.60 | ) | $ | — |
a
|
$ | (0.30 | ) | |||||||||
Weighted average shares outstanding:
|
||||||||||||||||||
Common stock – Basic and Diluted
|
171,059 | 7,500 |
b
|
313,599 |
• |
any anticipated synergies, operating efficiencies, tax savings, cost savings or increased costs of a public company that may be associated with the Transactions, or
|
• |
the potential purchases of mining and hosting equipment.
|
• |
The pro forma interest expense impact of the April 2021 Legacy Core issuance of $215 million of convertible notes, net of $5.6 million origination fees and the subsequent repayment of the $30 million Silverpeak loan net of prepayment penalties, the interest expense impact of the August and September Convertible Notes issuance of $205 million and the pro forma impact of the subsequent issuance in October and November 2021 of $95 million of additional Convertible Notes. It is not anticipated that the holders of the convertible notes will exercise their conversion rights as a result of the merger; and
|
• |
The acquisition of Blockcap by Legacy Core on July 30, 2021, including any elimination of the effect of transactions between Legacy Core and Blockcap, as required, is included in the Legacy Core historical financial statements as of and for the nine months ended September 30, 2021. The pro forma impact to the Statement of Operations had the acquisition taken place on January 1, 2020 is included as an adjustment for the period from January 1, 2021 through July 30, 2021 and the twelve months ended December 31, 2020. Consideration paid consisted of 72,186 Legacy Core common shares, 657 common shares from vested options settlement, 4,256 Legacy Core Restricted Stock Units and 2,393 Legacy Core Options. The portion of the fair value of the replaced Blockcap share based payments attributable to
pre-combination
service as well as the impact of the effective settlement of preexisting hosting and equipment contracts between Legacy Core and Blockcap has been included in the aggregate purchase price of $1,129.4 million.
|
Consideration
(in thousands)
|
||||
72,186 common shares valued at $16.18 per share (1) (2)
|
1,167,965 | |||
Fair value of replaced Blockcap share-based payments attributable to
pre-combination
service (3)
|
21,941 | |||
Settlement of
pre-existing
contracts (4)
|
(60,522 | ) | ||
|
|
|||
Total Consideration:
|
$ | 1,129,384 | ||
Fair value of assets acquired, and liabilities assumed:
|
||||
Cash and cash equivalents
|
$ | 704 | ||
Digital assets-Bitcoin
|
73,304 | |||
Digital assets-Ethereum
|
365 | |||
Digital assets-Bitcoin cash
|
8 | |||
Digital assets-Siacoin
|
554 | |||
Digital asset-Other
|
3,329 | |||
Other current assets
|
633 | |||
Intangible assets, net
|
2,925 | |||
Property, plant and equipment, net
|
27,089 | |||
Other noncurrent assets
|
1,293 | |||
|
|
|||
Total assets acquired
|
$
|
110,204
|
|
|
Accounts payable
|
492 | |||
Accrued expenses and other
|
22,647 | |||
Other current liabilities
|
6,408 | |||
|
|
|||
Total liabilities assumed
|
$
|
29,547
|
|
|
Total identifiable net assets
|
$
|
80,657
|
|
|
Goodwill on acquisition
|
$
|
1,048,727
|
|
(1) |
72,186 common shares represent the equivalent Legacy Core common shares issued to Blockcap shareholders as consideration for the purchase.
|
(2) |
The price per share of our common shares was estimated to be $16.18. As the Legacy Core common shares were not listed on a public marketplace, the calculation of the fair value of the common shares was subject to a greater degree of estimation. Given the absence of a public market, an estimate of the fair value of the common shares was required at the time of the Blockcap Acquisition. Objective and subjective factors were considered in determining the estimated fair value and because there is no active trading of the Legacy Core equity shares on an established securities market, an independent valuation specialist was engaged. The valuation was determined by weighting the outcomes of scenarios estimating share value based on both public company valuations and private company valuations. Both a market approach and common stock equivalency model were used to determine a range of outcomes, which were weighted based on probability to determine the result.
|
(3) |
Reflects the estimated fair value of replaced Blockcap share-based payments allocated to purchase price based on the proportion of service related to the
pre-combination
period. The fair value of the stock-based awards was determined utilizing the Black-Scholes pricing model.
|
(4) |
Blockcap had preexisting hosting and equipment with Legacy Core that were effectively settled by Legacy Core’s acquisition of Blockcap. As a result, the consideration transferred to Blockcap has been adjusted by the deferred revenue balances that were settled at the time of acquisition.
|
As of
September 30, 2021 |
||||||||||||||||
in thousands
|
Core
Scientific
(Historical)
(A) |
Convertible
Note adjustments |
Core
Scientific Pro Forma Combined |
|||||||||||||
Assets
|
||||||||||||||||
Current Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 147,906 | $ | 92,521 |
|
B
|
|
$ | 240,427 | |||||||
Restricted cash
|
12,101 | — | 12,101 | |||||||||||||
Accounts receivable, net of allowance of $620
|
602 | — | 602 | |||||||||||||
Accounts receivable from related parties
|
261 | — | 261 | |||||||||||||
Deposits for equipment
|
469,890 | — | 469,890 | |||||||||||||
Digital currency assets
|
116,233 | — | 116,233 | |||||||||||||
Other current assets
|
9,978 | — | 9,978 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total current assets
|
756,971 | 92,521 | 849,492 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Property, plant and equipment, net
|
219,795 | — | 219,795 | |||||||||||||
Goodwill
|
1,106,968 | — | 1,106,968 | |||||||||||||
Intangible assets, net
|
8,709 | — | 8,709 | |||||||||||||
Other noncurrent assets
|
14,110 | — | 14,110 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total assets
|
$ | 2,106,553 | $ | 92,521 | $ | 2,199,074 | ||||||||||
|
|
|
|
|
|
|||||||||||
Current Liabilities:
|
||||||||||||||||
Accounts payable
|
$ | 28,796 | — | $ | 28,796 | |||||||||||
Accrued expenses and other
|
35,074 | — | 35,074 | |||||||||||||
Deferred revenue
|
206,139 | — | 206,139 | |||||||||||||
Capital lease obligations, current portion
|
2,525 | — | 2,525 | |||||||||||||
Notes payable, current portion
|
25,202 | — | 25,202 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total current liabilities
|
297,736 | — | 297,736 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Capital lease obligations, net of current portion
|
1,524 | 1,524 | ||||||||||||||
Notes payable, net of current portion
|
471,930 | 95,000 |
|
B
|
|
566,930 | ||||||||||
Other noncurrent liabilities
|
1,994 | — | 1,994 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total liabilities
|
773,184 | 95,000 | 868,184 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Contingently redeemable preferred stock
|
44,476 | — | 44,476 | |||||||||||||
Stockholders’ Equity:
|
||||||||||||||||
Common stock; $0.00001 par value
|
2 | — | 2 | |||||||||||||
Additional Paid in Capital
|
1,385,381 | — | 1,385,381 | |||||||||||||
Accumulated (deficit) / Earnings
|
(87,938 | ) | (2,479 | ) |
|
B
|
|
(90,417 | ) | |||||||
Accumulated other comprehensive loss
|
(8,552 | ) | — | (8,552 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Total Stockholders’ Equity
|
1,288,893 | (2,479 | ) | 1,286,414 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total Liabilities, Redeemable Preferred
Stock, and Stockholders’ Equity
|
$ | 2,106,553 | $ | 92,521 | $ | 2,199,074 | ||||||||||
|
|
|
|
|
|
Transaction Accounting
Adjustments |
||||||||||||||||||||||||||||||||||||
in thousands
|
Core
Scientific (Historical) September 30, 2021 |
Blockcap
(Historical) for the period January 1, 2021 through July 30, 2021 |
Elimination
Adjustments |
Blockcap
Acquisition |
Convertible
Note |
Core
Scientific Pro Forma Combined |
||||||||||||||||||||||||||||||
Hosting revenue from customers
|
$ | 51,742 | $ | — | $ | (11,828 | ) |
|
e1
|
|
$ | — | — | $ | 39,914 | |||||||||||||||||||||
Equipment sales to customers
|
113,435 | — | (17,694 | ) |
|
e2
|
|
— | — | 95,741 | ||||||||||||||||||||||||||
Digital asset mining income
|
77,511 | 72,030 | — | — | — | 149,541 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total revenue
|
242,688 | 72,030 | (29,522 | ) | — | — | 285,196 | |||||||||||||||||||||||||||||
Costs of revenue
|
145,193 | 17,903 | (11,828 | ) |
|
e1
|
|
(868 | ) |
|
a
|
|
— | 136,002 | ||||||||||||||||||||||
— | — | (14,398 | ) |
|
e2
|
|
— | — | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Gross profit
|
97,495 | 54,127 | (3,296 | ) | 868 | — | 149,194 | |||||||||||||||||||||||||||||
(Loss) / gain on legal settlements
|
(2,603 | ) | — | — | — | — | (2,603 | ) | ||||||||||||||||||||||||||||
Gain on sale of digital assets
|
405 | 145 | — | — | — | 550 | ||||||||||||||||||||||||||||||
Impairment of digital currency asset
|
(12,552 | ) | (17,472 | ) | — | — | — | (30,024 | ) | |||||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||||||
Research and development
|
4,231 | — | — | — | — | 4,231 | ||||||||||||||||||||||||||||||
Sales and marketing
|
2,186 | — | — | — | — | 2,186 | ||||||||||||||||||||||||||||||
General and administrative
|
46,992 | 47,997 | — | (19,240 | ) |
|
c
|
|
— | 75,749 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total operating expenses
|
53,409 | 47,997 | — | (19,240 | ) | — | 82,166 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Operating income (loss)
|
29,336 | (11,197 | ) | (3,296 | ) | 20,108 | 34,951 | |||||||||||||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||||||||||
(Loss) on sale of assets
|
— | (1,472 | ) | — | — | — | (1,472 | ) | ||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
(8,016 | ) | — | — | — | — | (8,016 | ) | ||||||||||||||||||||||||||||
Other income (expense)
|
(8,661 | ) | — | — | — | — | (8,661 | ) | ||||||||||||||||||||||||||||
Interest (expense), net
|
(26,550 | ) | (1,717 | ) | — | — | (37,500 | ) |
|
d
|
|
(65,767 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total other (expense) income
|
(43,227 | ) | (3,189 | ) | — | — | (37,500 | ) | (83,916 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Income (loss) before income taxes
|
(13,891 | ) | (14,386 | ) | (3,296 | ) | 20,108 | (37,500 | ) | (48,965 | ) | |||||||||||||||||||||||||
Income tax provision (benefit)
|
(697 | ) | 6,474 | — | — | — | 5,777 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (13,194 | ) | $ | (20,860 | ) | $ | (3,296 | ) | $ | 20,108 | $ | (37,500 | ) | $ | (54,742 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) attributable to common stockholders
|
$ | (13,194 | ) | $ | (20,860 | ) | $ | (3,296 | ) | $ | 20,108 | $ | (37,500 | ) | $ | (54,742 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Transaction Accounting
Adjustments |
|||||||||||||||||||||||||||||||||||
in thousands
|
Core
Scientific (Historical) |
Blockcap
Pro Forma (Adjustment f) |
Elimination
Adjustments |
Blockcap
Acquisition |
Convertible
Note |
Core
Scientific Pro Forma Combined |
||||||||||||||||||||||||||||||
Hosting revenue from customers
|
$ | 41,598 | $ | — | $ | (2,128 | ) |
|
e1
|
|
$ | — | — | $ | 39,470 | |||||||||||||||||||||
Equipment sales to customers
|
12,595 | — | (753 | ) | e2 | — | — | 11,842 | ||||||||||||||||||||||||||||
Digital asset mining income
|
6,127 | 13,509 | — | — | — | 19,636 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total revenue
|
60,320 | 13,509 | (2,881 | ) | — | — | 70,948 | |||||||||||||||||||||||||||||
Costs of revenue
|
50,928 | 7,655 | (2,128 | ) |
|
e1
|
|
(1,488 | ) |
|
a
|
|
— | 54,237 | ||||||||||||||||||||||
— | — | (730 | ) |
|
e2
|
|
— | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Gross profit
|
9,392 | 5,854 | (23 | ) | 1,488 | — | 16,711 | |||||||||||||||||||||||||||||
Gain on legal settlements
|
5,814 | — | — |
|
—
|
|
— | 5,814 | ||||||||||||||||||||||||||||
Gain on sale of digital assets
|
65 | 288 | — | — | — | 353 | ||||||||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||||||
Research and development
|
5,271 | — | — | — | — | 5,271 | ||||||||||||||||||||||||||||||
Sales and marketing
|
1,771 | — | — | — | — | 1,771 | ||||||||||||||||||||||||||||||
General and administrative
|
14,556 | 7,073 | — | 17,561 |
|
b
|
|
— | 39,190 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total operating expenses
|
21,598 | 7,073 | — | 17,561 | — | 46,232 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Operating income
|
(6,327 | ) | (931 | ) | (23 | ) | (16,073 | ) | — | (23,354 | ) | |||||||||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
(1,333 | ) | — | — | — | — | (1,333 | ) | ||||||||||||||||||||||||||||
Other income (expense)
|
(110 | ) | (10,003 | ) | — | — | — | (10,113 | ) | |||||||||||||||||||||||||||
Interest (expense), net
|
(4,436 | ) | (1,198 | ) | — | — | (2,479 | ) |
|
e
|
|
(56,988 | ) | |||||||||||||||||||||||
— | — | — | — | (48,875 | ) |
|
d
|
|
— | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total other (expense) income
|
(5,879 | ) | (11,201 | ) | — | — | (51,354 | ) | (68,434 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Income (loss) before income taxes
|
(12,206 | ) | (12,132 | ) | (23 | ) | (16,073 | ) | (51,354 | ) | (91,788 | ) | ||||||||||||||||||||||||
Income tax provision (benefit)
|
— | (134 | ) | — | — | — | (134 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) and other comprehensive income (loss)
|
$ | (12,206 | ) | $ | (11,998 | ) | $ | (23 | ) | $ | (16,073 | ) | $ | (51,354 | ) | $ | (91,653 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Deemed divided from common to preferred exchange
|
(10,478 | ) | — | — | — | — | (10,478 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss) attributable to common stockholders
|
$ | (22,684 | ) | $ | (11,998 | ) | $ | (23 | ) | $ | (16,073 | ) | $ | (51,354 | ) | $ | (102,131 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
The following purchase price adjustments related to the acquisition of Blockcap by Legacy Core have been included in the Legacy Core historical balance sheet as of September 30, 2021:
|
1.
|
Changes to the Blockcap historical financials to represent the fair value changes associated with the acquisition. The resulting goodwill adjustment represents the excess of the purchase price over the aggregate fair value of the net identifiable assets acquired and liabilities assumed, including identifiable intangible assets. The goodwill is not deductible for U.S. federal income tax purposes.
|
As of July 30, 2021
|
||||||||||||||||
dollars excluding Price in thousands
|
Quantity
|
Price
|
Fair
value |
Carrying
value |
||||||||||||
Bitcoin (BTC)
|
1,747 | $ | 42,235.55 | $ | 73,805 | $ | 55,568 | |||||||||
Ethereum (ETH)
|
575 | $ | 2,466.96 | $ | 1,420 | $ | 1,263 | |||||||||
Bitcoin Cash (BCH)
|
15 | $ | 491 | $ | 7 | $ | 7 | |||||||||
Siacoin (SIA)
|
39,487,794 | $ | 0.01 | $ | 554 | $ | 384 | |||||||||
Other
|
Various | Various | $ | 2,714 | $ | 1,777 | ||||||||||
|
|
|
|
|||||||||||||
TOTAL
|
$
|
78,500
|
|
$
|
58,999
|
|
||||||||||
|
|
|
|
2.
|
The elimination of Blockcap additional paid in capital and accumulated earnings.
|
3.
|
The total consideration added to APIC as a result of the acquisition.
|
4.
|
The transaction costs associated with the Blockcap acquisition that were expensed as an adjustment to cash and retained earnings.
|
5.
|
The one-time expense Legacy Core has recorded as compensation expense in its financial statements for the period ending September 30, 2021 for the acceleration of certain equity awards of Blockcap’s CEO and others.
|
(B) |
During April, August and September 2021, Legacy Core entered into a Convertible Note Purchase Agreement with various Purchasers (Investors) and is continuing to enter into these agreements. As of the date of this filing, Legacy Core has issued notes in the aggregate amount of $515 million with origination fees estimated at $13,332. Legacy Core elected to measure the April, August and September issuance of convertible notes at fair value and accordingly recognized $10,853 of debt issuance costs as incurred as interest expense. The pro forma adjustments reflect the same election for the additional $95,000 issuance and recognize an additional $2,479 of debt issuance cost as interest expense. The related adjustments for this transaction resulted in an increase to cash of $92,521, an increase to notes payable of $95,000 and an increase to accumulated deficit of $2,479.
|
(e1) |
Reflects the elimination of Legacy Core hosting revenue from Blockcap and the corresponding Blockcap cost of revenue.
|
(e2) |
Reflects the elimination of Legacy Core equipment sales revenue and cost of revenue sold from Blockcap.
|
(a) |
Reflects the change in the cost of revenue attributable to incremental depreciation as a result of the fair value decrease to the basis of the Blockcap mining equipment assets as a result of the acquisition. The fair value adjustment decreases the historical cost of these assets by $4.5 million on assets with an assumed useful life of three years resulting in a decrease in depreciation expense of $0.9 million and $1.5 million for the period January 1, 2021 through July 30, 2021 and for the twelve months ended December 31, 2020, respectively.
|
(b) |
Reflects incremental stock compensation expense related to the replacement of unvested Blockcap share-based payments with awards issued by Legacy Core that will be recognized over the remaining service period using the acquisition date fair value, in excess of amounts recognized historically by Blockcap for the twelve months ended December 31, 2020. The associated incremental stock compensation expense for the nine months ended September 30, 2021 is included in the Legacy Core historical statement of operations.
|
(c) |
Reflects the elimination of $19,239 of expense recognized by Blockcap in July 2021 for the acceleration of certain equity awards of its CEO and others. Because this acceleration was deemed to be in contemplation of the Merger, Legacy Core has recorded $23,294 of compensation expense for the acceleration in its financial statements for the period ending September 30, 2021, which was determined based on the fair value of the awards at the time of the Merger. This adjustment is necessary to avoid duplication of the expense attributable to the combined company related to the acceleration of the same awards.
|
(d) |
Reflects the impact to interest expense derived from removing 15% per annum interest on the $30,000 Silverpeak loan, originated in May 2020, and replacing it with 10% per annum interest on the $515,000 million convertible notes ($215,000 issued in April 2021 and the remaining $300,000 issued in August through November 2021). This adjustment resulted in:
|
a. |
a reduction of $2,625 in interest expense due to the elimination of the Silverpeak loan, an increase in interest expense of $51,500 due to the issuance of the convertible notes r a net increase in interest expense of $48,875 for the twelve months ending December 31, 2020.
|
b. |
a reduction of $1,125 in interest expense due to the elimination of the Silverpeak loan, an increase in interest expense of $38,625 due to the issuance of the convertible note for a net increase in interest expense of $37,500 for the nine months ending September 30, 2021.
|
(e) |
Reflects the
non-recurring
interest expense related to the assumption that Legacy Core will elect to measure the October through November issuance of convertible notes at fair value similarly to the April, August and September issuance of convertible notes and accordingly included $2,479 of debt issuance costs as incurred as interest expense in the pro forma adjustments.
|
(f) |
Reflects the pro forma results for Blockcap for the year ending December 31, 2020 assuming the three significant LLCs acquired by Blockcap on December 1, 2020 had been in place for the full year as follows:
|
For the year
ended December 31, 2020 |
For the periods from inception
through November 30, 2020 |
December 31, 2020
|
||||||||||||||||||||||||||
in thousands
|
Blockcap
Historical |
RME
Black 100 |
RME
Black 200 |
BEP 888
|
Acquisition
Adjustments |
Blockcap
Pro forma |
||||||||||||||||||||||
Hosting revenue from customers
|
$ | — | $ | — | $ | — | $ | — | — | $ | — | |||||||||||||||||
Equipment sales to customers
|
— | — | — | — | — | — | ||||||||||||||||||||||
Digital asset mining income
|
5,972 | 4,010 | 3,374 | 153 | — | 13,509 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenue
|
5,972 | 4,010 | 3,374 | 153 | — | 13,509 | ||||||||||||||||||||||
Costs of revenue
|
2,781 | 2,623 | 2,034 | 48 | 169 | i | 7,655 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Gross profit
|
3,191 | 1,387 | 1,340 | 105 | (169 | ) | 5,854 | |||||||||||||||||||||
Gain on legal settlements
|
— | — | — |
|
—
|
|
— | — | ||||||||||||||||||||
Gain on sale of digital assets
|
53 | 152 | 80 | 3 | — | 288 | ||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Research and development
|
— | — | — | — | — | — | ||||||||||||||||||||||
Sales and marketing
|
— | — | — | — | — | — | ||||||||||||||||||||||
General and administrative
|
2,221 | 1,559 | 1,343 | 1,950 | — | 7,073 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total operating expenses
|
2,221 | 1,559 | 1,343 | 1,950 | — | 7,073 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss)
|
1,023 | (20 | ) | 77 | (1,842 | ) | (169 | ) | (931 | ) | ||||||||||||||||||
Other (expense) income:
|
||||||||||||||||||||||||||||
(Loss) on debt from extinguishment
|
— | — | — | — | — | — | ||||||||||||||||||||||
Other income (expense)
|
(10,003 | ) | — | — | — | — | (10,003 | ) | ||||||||||||||||||||
Interest expense, net
|
(419 | ) | (414 | ) | (365 | ) | — | — | (1,198 | ) | ||||||||||||||||||
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other (expense) income
|
(10,422 | ) | (414 | ) | (365 | ) | — | — | (11,201 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) before income taxes
|
(9,399 | ) | (434 | ) | (288 | ) | (1,842 | ) | (169 | ) | (12,132 | ) | ||||||||||||||||
Income tax expense/(benefit)
|
538 | (107 | ) | (71 | ) | (453 | ) | (42 | ) | ii | (134 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss)
|
$ | (9,937 | ) | $ | (327 | ) | $ | (217 | ) | $ | (1,389 | ) | $ | (127 | ) | $ | (11,998 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
i. |
Reflects additional depreciation expense related to the acquisitions of the LLCs
|
ii. |
The combined net income before tax of the Company includes net income before tax of $ 406.5 attributable to multiple limited liability companies (of which $409.3 is included in Blockcap Historical) that are classified as partnerships for Federal income tax purposes, and as such, any partnership income or loss, specifically allocated or otherwise are subjected to tax at the individual partner level.
|
(A) |
Reflects the estimated $39,000 reduction in cash for estimated transaction related expenses. This includes $12,075 that was previously recorded as deferred underwriting commissions and was therefore reversed and $1,000 related to
non-recurring
expenses from third party consulting and other fees
|
related to the merger that were not considered direct and incremental to the offering and are therefore reflected as an adjustment to the accumulated deficit. An additional $1,812 of the $39,000 is reflected as an adjustment to the accumulated deficit to properly reflect the direct and incremental costs allocated to the XPDI liability-classified instruments that are measured at fair value through earnings. The remaining $24,113 is adjusted against additional paid in capital as direct and incremental costs of the offering. |
(B) |
Reflects the increase in cash from the release of the balance of funds equal to $221,556 from the Trust Account after payment of $123,471 for the redemption of 12,347 shares.
|
C) |
Reflects the impact to equity related to $123,471 of Trust Account funds paid to holders that redeemed 12,347 Class A redeemable shares at $10 per share for a total of $123,471.
|
D) |
Reflects the conversion of 6,452 shares of Series A Preferred Stock and 314 shares of Series B Preferred Stock redeemable preferred stock to 6,766 shares of Legacy Core common stock just prior to the merger, eliminating the preferred stock balance. Subsequent to this conversion, these shares will be exchanged for New Core common shares using the exchange rate calculated per the merger agreement.
|
(E) |
Reflects the elimination of 34,500 shares of Class A Common Stock subject to redemption. The $345,000 subject to redemption is eliminated and added to additional paid in capital.
|
(F) |
Represents the elimination of XPDI equity and accumulated earnings and the exchange of existing Legacy Core and XPDI outstanding equity instruments for New Core common stock as follows:
|
a. |
171,059 existing Class A Legacy Core shares and 6,766 shares of Legacy Core Series A and Series B convertible preferred stock, were exchanged for New Core shares using an exchange rate of 1.6001528688 per the merger agreement resulting in a total of 284,546 New Core common shares outstanding with a par value of $0.0001.
|
b. |
22,153 existing Class A XPDI shares not redeemed and 8,625 existing XPDI Class B shares into 30,778 common shares of New Core. Immediately prior to the Closing, 1,725 Class B common shares will be unvested and will vest upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing date. These unvested shares are excluded from earnings per share calculations until such time as conditions are met for vesting.
|
c. |
Removes XPDI accumulated earnings with the offsetting adjustment to paid in capital.
|
(a) |
Reflects the calculation of earnings per share, basic and diluted, of the combined companies after the conversion of equity shares into New Core shares using the adjusted net income of the combined companies. See Note 5
—
|
(b) |
Reflects the total New Core common shares outstanding at the completion of the transaction. See Note 5
—
|
(c) |
Reflects the sum of a) $1,000 related to
non-recurring
expenses from third-party consulting and other fees related to the merger that were not considered direct and incremental to the offering and therefore reflected as an operating expense and b) $1,812 related to the direct and incremental costs allocated to the XPDI liability-classified instruments that are measured at fair value through earnings, for a total adjustment of $2,812.
|
(d) |
Reflects the elimination of the dividend from common to preferred exchange. In February 2020, the Company completed an exchange of 1,096 shares of common stock that were originally issued in the
|
private placement offering from October 2018 to December 2019 for 1,802 newly issued shares of Series A Preferred Stock. The shares of common stock were retired upon reacquisition by the Company. The Company received no net proceeds from the exchange and recognized a deemed dividend of $10,478 based on the incremental fair value of the preferred stock received by the stockholders compared to the fair value of the common stock exchanged. Upon consummation of the transactions, all preferred stock was exchanged for common stock under the terms of the merger agreement, eliminating the dividend. |
(e) |
Reflects the elimination of income earned on investments in trust due to the release of trust funds to cash or the reduction in trust funds due to the redemption of redeemable stock.
|
• |
171,059 existing Class A Legacy Core shares and 6,766 Legacy Core Series A and Series B convertible preferred stock were exchanged for New Core shares using an exchange rate of 1.6001528688 per the merger agreement resulting in a total of 284,546 New Core common shares outstanding with a par value of $0.0001.
|
• |
22,153 existing Class A XPDI shares that were not redeemed and 8,625 existing XPDI Class B shares into 30,778 common shares of New Core. Immediately prior to the Closing, 1,725 Class B common shares will be unvested and will vest upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing date. These unvested shares are excluded from earnings per share calculations until such time as conditions are met for vesting.
|
in thousands
|
Existing
Shares |
Shares
just prior to exchange |
After
exchange and redemption of 12,347 shares |
|||||||||
Legacy Core common stock
|
171,059 | 177,825 | 284,546 | |||||||||
XPDI Class A redeemable shares
|
22,153 | 22,153 | 22,153 | |||||||||
XPDI Class B sponsor shares net of unvested shares
|
8,625 | 6,900 | 6,900 | |||||||||
|
|
|
|
|
|
|||||||
Total weighted average common shares—Basic and Diluted (1) and (2)
|
|
201,837
|
|
|
206,878
|
|
|
313,599
|
|
|||
|
|
|
|
|
|
|||||||
For the nine months ended September 30, 2021
|
|
|||||||||||
Pro forma net income (loss)
|
$ | (74,087 | ) | |||||||||
Pro forma EPS—Basic and diluted (1)
|
$ | (0.24 | ) | |||||||||
For the twelve months ended December, 2020
|
|
|||||||||||
Pro forma net income (loss)
|
$ | (94,475 | ) | |||||||||
Pro forma net income (loss)—Basic and Diluted (1)
|
$ | (0.30 | ) |
(1) |
Potentially dilutive securities are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive. Shares potentially dilutive with the conversion of the convertible debt were not included due to the add back of interest avoided upon conversion causing the conversion to be anti-dilutive.
|
Conversion Event
|
Discount
|
|||
On or prior to April 19, 2022
|
20 | % | ||
On or after April 19, 2022 but prior to April 19, 2023
|
25 | % | ||
On or after April 19, 2023 but prior to April 19, 2024
|
30 | % | ||
On or after April 19, 2024 but prior to April 19, 2025
|
35 | % |
(2) |
Total Legacy Core outstanding options and warrants after exchanged is 32,195 and 6,808, respectively and are anti-dilutive so not included in the calculation of diluted EPS. 14,892 XPDI warrants are anti-dilutive so not included the calculation of diluted EPS.
|
(3) |
Legacy Core outstanding RSUs are not included as these are contingently issuable shares for which the transaction condition has not yet been met. These RSUs are subject to a time-based vesting condition and a
|
transaction vesting condition. The transaction vesting condition is satisfied upon the earlier of a change in control or an initial public offering. The transaction vesting condition can be met in future years only with respect to a change in control or waiver of the condition by the Company’s board of directors and is not expected to occur, if at all, prior to expiration of the applicable
lock-up
period. In the event the transaction-based condition were to be met, including by future action of the board of directors, the unrecognized compensation expense for which the requisite service had been provided that would have been recognized was $526,064 as of September 30, 2021. Included in the total of Legacy Core’s unvested RSUs are 9,038 RSUs held by a former employee. These units have met the timebased vesting condition but similarly have not met the transaction-based vesting condition. The transaction-based vesting condition must be satisfied within three years of the former employee’s separation date or they will be forfeited. Had the transaction based vesting condition been met, unrecognized compensation expense would have been $82,674 as of June 30, 2021. This does not account for 6,912 Blockcap RSUs granted to legacy Blockcap shareholders and subject only to time-vesting conditions because the inclusion of such RSUs would be anti-dilutive.
|
Unvested Legacy Core RSUs as of September 30, 2021
|
45,793 | |||
RSUs to be granted in October 2021
|
9,777 | |||
RSUs to be reserved for future issuances
|
5,304 | |||
|
|
|||
Unvested RSUs of Legacy Core (excluding Blockcap)
|
60,874 | |||
Exchange Rate
|
1.6001528688 | |||
|
|
|||
Unvested pro forma RSUs of Legacy Core (excluding Blockcap) after applying exchange rate
|
97,409 |
POWER & DIGITAL INFRASTRUCTURE ACQUISITION CORP.
|
||||
Audited Financial Statements of Power & Digital Infrastructure Acquisition Corp. as of December 31, 2020, for the Year Ended December 31, 2020 and the Period from December 29, 2020 (inception) Through December 31, 2020
|
||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9–F-20
|
||||
Unaudited Condensed Consolidated Financial Statements of Power & Digital Infrastructure Acquisition Corp. as of and for the Nine Months Ended September 30, 2021
|
||||
F-21 | ||||
F-22 | ||||
F-23 | ||||
F-24 | ||||
F-25–F-45
|
||||
F-47 | ||||
F-48 | ||||
F-49–F-62 | ||||
CORE SCIENTIFIC HOLDING CO. AND SUBSIDIARIES
|
||||
Audited Consolidated Financial Statements of Core Scientific Holding Co. and Subsidiaries as of and for the Years Ended December 31, 2020 and 2019
|
||||
F-63 | ||||
F-64 | ||||
F-65 | ||||
F-66 | ||||
F-67 | ||||
F-68–F-98 | ||||
Consolidated Financial Statements of Core Scientific Holding Co. and Subsidiaries as of September 30, 2021 (Unaudited) and December 31, 2020 and for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
|
||||
F-99 | ||||
F-100 | ||||
F-102 | ||||
F-103 | ||||
F-104–F-127 |
Assets:
|
||||
Deferred offering costs associated with proposed public offering
|
$ | 15,000 | ||
|
|
|||
Total Assets
|
$
|
15,000
|
|
|
|
|
|||
Liabilities and Stockholder’s Equity:
|
|
|
|
|
Current liabilities:
|
||||
Accrued expenses
|
$ | 400 | ||
|
|
|||
Total current liabilities
|
400 | |||
|
|
|||
Commitments and Contingencies
|
||||
Stockholder’s 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; none issued and outstanding
|
— | |||
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and outstanding
(1)(2)
|
863 | |||
Additional
paid-in
capital
|
24,137 | |||
Accumulated deficit
|
(10,400 | ) | ||
|
|
|||
Total stockholder’s equity
|
14,600 | |||
|
|
|||
Total Liabilities and Stockholder’s Equity
|
$
|
15,000
|
|
|
|
|
(1)
|
This number includes up to 1,125,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters. (see Note 4)
|
(2)
|
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 Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share capitalization. (see Note 4, 6 and 7)
|
General and administrative expenses
|
$ | 10,400 | ||
|
|
|||
Net loss
|
$ | (10,400 | ) | |
|
|
|||
Weighted average shares outstanding, basic and diluted
(1)(2)
|
7,500,000 | |||
|
|
|||
Basic and diluted net loss per share
|
$ | (0.00 | ) | |
|
|
(1)
|
This number excludes an aggregate of up to 1,125,000 Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters. (see Note 4)
|
(2)
|
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 Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share capitalization. (see Note 4, 6 and 7)
|
Common Stock
|
Additional
Paid-In
Capital |
Accumulated
Deficit |
Total
Stockholder’s Equity |
|||||||||||||||||||||||||
Class A
|
Class B
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
Balance — December 29, 2020 (inception)
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|||||||
Issuance of Class B common stock to Sponsors
(1)(2)
|
— | — | 8,625,000 | 863 | 24,137 | — | 25,000 | |||||||||||||||||||||
Net loss
|
— | — | — | — | — | (10,400 | ) | (10,400 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance — December 31, 2020
|
|
—
|
|
$
|
—
|
|
|
8,625,000
|
|
$
|
863
|
|
$
|
24,137
|
|
$
|
(10,400
|
)
|
$
|
14,600
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This number includes up to 1,125,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters. (see Note 4)
|
(2)
|
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 Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share capitalization. (see Note 4, 6 and 7)
|
Cash Flows from Operating Activities:
|
||||
Net loss
|
$ | (10,400 | ) | |
General and administrative expenses paid by related party
|
10,000 | |||
Changes in operating assets and liabilities:
|
||||
Accrued expenses
|
$ | 400 | ||
|
|
|||
Net cash used in operating activities
|
— | |||
|
|
|||
Net change in cash
|
— | |||
Cash — beginning of the period
|
— | |||
|
|
|||
Cash — end of the period
|
$
|
—
|
|
|
|
|
|||
Supplemental disclosure of noncash activities:
|
||||
Deferred offering costs paid by Sponsor in exchange for issuance of Class B common stock
|
$ | 15,000 |
|
•
|
|
in whole and not in part;
|
|
•
|
|
at a price of $0.01 per warrant;
|
|
•
|
|
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
|
•
|
|
if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
|
|
•
|
|
in whole and not in part;
|
|
•
|
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of Class A common stock;
|
|
•
|
|
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments” ); and
|
|
•
|
|
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
|
|
September 30,
2021 |
|
|
December 31,
2020 |
|
||
|
|
(Unaudited)
|
|
|
|
|
||
Assets:
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash
|
$ | 1,598,506 | $ | — | ||||
Prepaid expenses
|
446,855 | — | ||||||
|
|
|
|
|||||
Total current assets
|
2,045,361 | — | ||||||
Investments held in Trust Account
|
345,027,247 | — | ||||||
Deferred offering costs
|
— | 15,000 | ||||||
|
|
|
|
|||||
Total Assets
|
$
|
347,072,608
|
|
$
|
15,000
|
|
||
|
|
|
|
|||||
Liabilities
, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit:
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 721,484 | $ | — | ||||
Accrued expenses
|
3,225,538 | 400 | ||||||
Franchise tax payable
|
148,395 | — | ||||||
|
|
|
|
|||||
Total current liabilities
|
4,095,417 | 400 | ||||||
Derivative warrant liabilities
|
36,931,330 | — | ||||||
Deferred underwriting commissions
|
12,075,000 | — | ||||||
|
|
|
|
|||||
Total liabilities
|
53,101,747 | 400 | ||||||
Commitments and Contingencies
|
||||||||
Class A common stock
subject to possible redemption
$0.0001 par value; 34,500,000 shares at $10.00 per share
,
|
345,000,000 | — | ||||||
Stockholders’ Equity (Deficit):
|
||||||||
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
|
— | — | ||||||
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and
outstanding as of
September 30, 2021 and December 31, 2020
|
863 | 863 | ||||||
Additional
paid-in
capital
|
— | 24,137 | ||||||
Accumulated deficit
|
(51,030,002 |
)
|
(10,400 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity (deficit)
|
(51,029,139 | ) | 14,600 | |||||
|
|
|
|
|||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity
(Deficit) |
$
|
347,072,608
|
|
$
|
15,000
|
|
||
|
|
|
|
|
|
For the
Three Months Ended September 30, 2021 |
|
|
For the
Nine Months Ended September 30, 2021 |
|
||
General and administrative expenses
|
$ | 2,387,202 |
|
$
|
4,077,585
|
|
||
General and administrative expenses — related party
|
60,000 |
|
|
160,000
|
|
|||
Franchise tax expenses
|
49,863 |
|
|
147,995
|
|
|||
|
|
|
|
|
|
|
|
|
Loss from operations
|
(2,497,065 | ) |
|
|
(4,385,580
|
)
|
||
Change in fair value of derivative warrant liabilities
|
(16,231,910 | ) |
|
|
(13,903,830
|
|
||
Offering costs associated with derivative warrant liabilities
|
— |
|
|
(1,055,577
|
)
|
|||
Income from investments held in Trust Account
|
4,440 |
|
|
27,247
|
|
|||
|
|
|
|
|
|
|||
Net
loss
|
$ | (18,724,535 | ) |
|
$
|
(19,317,740
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class A common stock
,
basic and diluted
|
|
34,500,000 |
|
|
29,192,308
|
|
||
Basic and diluted net
loss
per share, Class A common stock
|
$ | (0.43 | ) |
|
$
|
(0.51
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding of
Class B
common stock, basic and diluted
|
8,625,000 |
|
|
8,451,923
|
|
|||
Basic and diluted
net loss per share,
Class B
common stock
|
$ | (0.43 | ) |
|
$
|
(0.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
(Deficit)
|
|
||||||||||||||||
|
|
Class A
|
|
|
Class B
|
|
||||||||||||||||||||||
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
||||||||||||||||
Balance — December 31, 2020
|
|
—
|
|
$
|
—
|
|
|
8,625,000
|
|
$
|
863
|
|
$
|
24,137
|
|
$
|
(10,400
|
)
|
$
|
14,600
|
|
|||||||
Accretion of Class A common stock subject to possible redemption amount
|
— | — | — | — | (24,137 |
)
|
(31,701,862
|
)
|
(31,725,999 | ) | ||||||||||||||||||
Net income
|
— |
—
|
— | — | — | 4,962,873 | 4,962,873 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance —
March 31, 2021 (restated)
|
|
—
|
|
$
|
—
|
|
|
8,625,000
|
|
$
|
863
|
|
$
|
—
|
|
$
|
(26,749,389
|
) |
$
|
(26,748,526
|
) | |||||||
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,556,078
|
)
|
|
|
(5,556,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance —
June 30, 2021 (restated)
|
|
|
—
|
|
|
$
|
—
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
—
|
|
|
$
|
(32,305,467
|
)
|
|
$
|
(32,304,604
|
) |
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,724,535
|
)
|
|
|
(18,724,535
|
)
|
Balance — September 30, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
8,625,000
|
|
|
$
|
863
|
|
|
$
|
—
|
|
|
$
|
(51,030,002
|
)
|
|
$
|
(51,029,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
||||
Net
loss
|
$ | (19,317,740 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||
Change in fair value of derivative warrant liabilities
|
|
|
13,903,830
|
|
Offering costs associated with derivative warrant liabilities
|
1,055,577 | |||
Income from investments held in Trust Account
|
(27,247 | ) | ||
General and administrative expenses paid by related party under promissory note
|
144 | |||
Changes in operating assets and liabilities:
|
||||
Prepaid expenses
|
(446,855 | ) | ||
Accrued expenses
|
2,718,988 | |||
Accounts payable
|
721,484 | |||
Franchise tax payable
|
147,995 | |||
|
|
|||
Net cash used in operating activities
|
(1,243,824 | ) | ||
|
|
|||
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
|
(6,467,635 | ) | ||
|
|
|||
Net cash provided by financing activities
|
347,842,330 | |||
|
|
|||
Net change in cash
|
1,598,506 | |||
Cash — beginning of the period
|
— | |||
|
|
|||
Cash — end of the period
|
$
|
1,598,506
|
|
|
|
|
|||
Supplemental disclosure of noncash activities:
|
||||
Offering costs included in accrued expenses
|
$ | 506,550 | ||
Offering costs paid by related party under promissory note
|
$ | 89,891 | ||
Deferred underwriting commissions in connection with the initial public
|
$ | 12,075,000 |
As of February 12, 2021
|
As Reported,
As Restated
|
Adjustment
|
As Restated
|
|||||||||
Total assets
|
|
$
|
348,644,865
|
|
|
$
|
348,644,865
|
|
||||
Total liabilities
|
|
$
|
36,448,520
|
|
|
$
|
36,448,520
|
|
||||
Class A common stock subject to possible redemption
|
|
|
307,196,340
|
|
|
|
37,803,660
|
|
|
|
345,000,000
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class A common stock
|
|
|
378
|
|
|
|
(378
|
)
|
|
|
—
|
|
Class B common stock
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional
paid-in
capital
|
|
|
5,809,812
|
|
|
|
(5,809,812
|
)
|
|
|
—
|
|
Retained earnings (accumulated deficit)
|
|
|
(811,048
|
)
|
|
|
(31,993,470
|
)
|
|
|
(32,804,518
|
)
|
Total stockholders’ equity (deficit)
|
|
$
|
5,000,005
|
|
|
$
|
(37,803,660
|
)
|
|
$
|
(32,803,655
|
)
|
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
|
$
|
348,644,865
|
|
|
$
|
—
|
|
|
$
|
348,644,865
|
|
As of March 31, 2021
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Total assets
|
|
$
|
347,742,624
|
|
|
|
$
|
347,742,624
|
|
|||
Total liabilities
|
|
$
|
29,769,286
|
|
|
|
$
|
29,769,286
|
|
|||
Class A common stock subject to possible redemption
|
|
|
312,973,330
|
|
|
|
32,026,670
|
|
|
|
345,000,000
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class A common stock
|
|
|
320
|
|
|
|
(320
|
)
|
|
|
—
|
|
Class B common stock
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional
paid-in
capital
|
|
|
46,352
|
|
|
|
(46,352
|
)
|
|
|
—
|
|
Retained earnings (accumulated deficit)
|
|
|
4,952,473
|
|
|
|
(31,979,998
|
)
|
|
|
(27,027,525
|
)
|
Total stockholders’ equity (deficit)
|
|
$
|
5,000,008
|
|
|
$
|
(32,026,670
|
)
|
|
$
|
(27,026,662
|
)
|
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
|
$
|
347,742,624
|
|
|
$
|
—
|
|
|
$
|
347,742,624
|
|
|
||||||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Cash Flow used in Operating Activities
|
|
$
|
(798,200
|
)
|
|
$
|
—
|
|
|
$
|
(798,200
|
)
|
Cash Flows used in Investing Activities
|
|
$
|
(345,000,000
|
)
|
|
$
|
—
|
|
|
$
|
(345,000,000
|
)
|
Cash Flows provided by Financing Activities
|
|
$
|
347,842,331
|
|
|
$
|
—
|
|
|
$
|
347,842,331
|
|
Supplemental Disclosure of Noncash Financing Activities:
|
|
|
|
|||||||||
Offering costs included in accrued expenses
|
|
$
|
506,550
|
|
|
$
|
—
|
|
|
$
|
506,550
|
|
Offering costs paid by related party under promissory note
|
|
$
|
89,891
|
|
|
$
|
—
|
|
|
$
|
89,891
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
$
|
12,075,000
|
|
|
$
|
—
|
|
|
$
|
12,075,000
|
|
Initial value of Class A common stock subject to possible redemption
|
|
$
|
307,196,340
|
|
|
$
|
(307,196,340
|
)
|
|
$
|
—
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
499,050
|
|
|
$
|
(499,050
|
)
|
|
$
|
—
|
|
As of June 30, 2021
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Total assets
|
|
$
|
347,606,096
|
|
|
|
$
|
347,606,096
|
|
|||
Total liabilities
|
|
$
|
34,910,699
|
|
|
|
$
|
34,910,699
|
|
|||
Class A common stock subject to possible redemption
|
|
|
307,695,390
|
|
|
|
37,304,610
|
|
|
|
345,000,000
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class A common stock
|
|
|
373
|
|
|
|
(373
|
)
|
|
|
—
|
|
Class B common stock
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional
paid-in
capital
|
|
|
5,602,376
|
|
|
|
(5,602,376
|
)
|
|
|
—
|
|
Retained earnings (accumulated deficit)
|
|
|
(603,605
|
)
|
|
|
(31,701,861
|
)
|
|
|
(32,305,466
|
)
|
Total stockholders’ equity (deficit)
|
|
$
|
5,000,007
|
|
|
$
|
(37,304,610
|
)
|
|
$
|
(32,304,603
|
)
|
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
|
$
|
347,606,096
|
|
|
$
|
—
|
|
|
$
|
347,606,096
|
|
Form
10-Q:
Six Months Ended June 30, 2021
|
|
|||||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|||
Cash Flow used in Operating Activities
|
|
$
|
(730,082
|
)
|
|
$
|
—
|
|
|
$
|
(730,082
|
)
|
Cash Flows used in Investing Activities
|
|
$
|
(345,000,000
|
)
|
|
$
|
—
|
|
|
$
|
(345,000,000
|
)
|
Cash Flows provided by Financing Activities
|
|
$
|
347,784,164
|
|
|
$
|
—
|
|
|
$
|
347,784,164
|
|
Supplemental Disclosure of Noncash Financing Activities:
|
|
|
|
|||||||||
Offering costs included in accrued expenses
|
|
$
|
448,383
|
|
|
$
|
—
|
|
|
$
|
448,383
|
|
Offering costs paid by related party under promissory note
|
|
$
|
89,891
|
|
|
$
|
—
|
|
|
$
|
89,891
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
$
|
12,075,000
|
|
|
$
|
—
|
|
|
$
|
12,075,000
|
|
Initial value of Class A common stock subject to possible redemption
|
|
$
|
307,196,340
|
|
|
$
|
(307,196,340
|
)
|
|
$
|
—
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
5,776,990
|
|
|
$
|
(5,776,990
|
)
|
|
$
|
—
|
|
|
|
EPS for Class A common stock (redeemable)
|
|
|||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Adjusted
|
|
|||
Form
10-Q
(March 31, 2021) — three months ended March 31, 2021
|
|
|
|
|||||||||
Net income
|
|
$
|
4,962,873
|
|
|
$
|
—
|
|
|
$
|
4,962,873
|
|
Weighted average shares outstanding
|
|
|
30,731,669
|
|
|
|
3,768,331
|
|
|
|
34,500,000
|
|
Basic and diluted earnings per share
|
|
$
|
—
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
Form
10-Q
(June 30, 2021) — three months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(5,556,078
|
)
|
|
$
|
—
|
|
|
$
|
(5,556,078
|
)
|
Weighted average shares outstanding
|
|
|
31,291,533
|
|
|
|
3,208,467
|
|
|
|
34,500,000
|
|
Basic and diluted earnings per share
|
|
$
|
—
|
|
|
$
|
(0.13
|
)
|
|
$
|
(0.13
|
)
|
Form
10-Q
(June 30, 2021) — six months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(593,205
|
)
|
|
$
|
—
|
|
|
$
|
(593,205
|
)
|
Weighted average shares outstanding
|
|
|
31,098,199
|
|
|
|
3,401,801
|
|
|
|
34,500,000
|
|
Basic and diluted earnings per share
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
EPS for Class B common stock
(non-redeemable)
|
|
|||||||||
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Adjusted
|
|
|||
Form
10-Q
(March 31, 2021) — three months ended March 31, 2021
|
|
|
|
|||||||||
Net income
|
|
$
|
4,962,873
|
|
|
$
|
—
|
|
|
$
|
4,962,873
|
|
Weighted average shares outstanding
|
|
|
10,109,776
|
|
|
|
(2,009,776
|
)
|
|
|
8,100,000
|
|
Basic and diluted earnings per share
|
|
$
|
0.49
|
|
|
$
|
(0.37
|
)
|
|
$
|
0.12
|
|
Form
10-Q
(June 30, 2021) — three months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(5,556,078
|
)
|
|
$
|
—
|
|
|
$
|
(5,556,078
|
)
|
Weighted average shares outstanding
|
|
|
11,833,467
|
|
|
|
(3,208,467
|
)
|
|
|
8,625,000
|
|
Basic and diluted earnings per share
|
|
$
|
(0.47
|
)
|
|
$
|
0.34
|
|
|
$
|
(0.13
|
)
|
Form
10-Q
(June 30, 2021) — six months ended June 30, 2021
|
|
|
|
|||||||||
Net loss
|
|
$
|
(593,205
|
)
|
|
$
|
—
|
|
|
$
|
(593,205
|
)
|
Weighted average shares outstanding
|
|
|
10,976,383
|
|
|
|
(2,612,433
|
)
|
|
|
8,363,950
|
|
Basic and diluted earnings per share
|
|
$
|
(0.05
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.01
|
)
|
• |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
• |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
• |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
|
|
For the Three Months Ended
September 30, 2021 |
|
|
For the Nine Months Ended
September 30, 2021 |
|
||||||||||
|
|
Class A
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
||||
Basic and diluted net loss per common stock:
|
|
|
|
|
||||||||||||
Numerator:
|
|
|
|
|
||||||||||||
Allocation of net loss
|
|
$
|
(14,979,628
|
)
|
|
$
|
(3,744,907
|
)
|
|
$
|
(14,980,500
|
)
|
|
$
|
(4,337,240
|
)
|
Denominator:
|
|
|
|
|
||||||||||||
Basic and diluted weighted average common stock outstanding
|
|
|
34,500,000
|
|
|
|
8,625,000
|
|
|
|
29,192,308
|
|
|
|
8,451,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common stock
|
|
$
|
(0.43
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
345,000,000
|
|
Less:
|
|
|||
Fair value of Public Warrants at issuance
|
|
|
(13,627,500
|
)
|
Offering costs allocated to Class A common stock subject to possible redemption
|
|
|
(18,098,499
|
)
|
Plus:
|
|
|||
Accretion on Class A common stock subject to possible redemption amount
|
|
|
31,725,999
|
|
|
|
|
|
|
Class A common stock subject to possible redemption
|
|
$
|
345,000,000
|
|
|
|
|
|
|
•
|
|
in whole and not in part;
|
|
•
|
|
at a price of $0.01 per warrant;
|
|
•
|
|
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
|
•
|
|
if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
|
|
•
|
|
in whole and not in part;
|
|
•
|
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of Class A common stock;
|
|
•
|
|
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”); and
|
|
•
|
|
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
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
|
$ | 345,027,247 | $ | — | $ | — | ||||||
Liabilities:
|
||||||||||||
Derivative warrant liabilities — Public warrants
|
$ | 21,390,000 | $ | — | $ |
—
|
||||||
Derivative warrant liabilities — Private placement warrants
|
$ | — | $ | — | $ | 15,541,330 |
|
|
February 12,
2021 |
|
|
September 30,
2021 |
|
||
Exercise price
|
$ | 11.50 | $ | 11.50 | ||||
Stock price
|
$ | 10.87 | $ | 10.11 | ||||
Volatility
|
20.0 | % | 31.3 |
%
|
||||
Term
|
5.0 | 5.0 | ||||||
Risk-free rate
|
0.50 | % | 0.98 | % |
Derivative warrant liabilities at December 31, 2020
|
$ | — | ||
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 | ||
Transfer of Public Warrants to Level 1
|
|
|
(9,660,000
|
)
|
Change in fair value of derivative warrant liabilities
|
|
|
1,504,000
|
|
|
|
|
|
|
Derivative warrant liabilities at June 30, 2021
|
|
$
|
8,710,670
|
|
Change in fair value of derivative warrant liabilities
|
|
|
6,830,660
|
|
Derivative warrant liabilities at September 30, 2021
|
|
$
|
15,541,330
|
|
Assets:
|
||||
Current assets:
|
||||
Cash
|
$ | 2,968,065 | ||
Prepaid expenses
|
676,800 | |||
|
|
|||
Total current assets
|
3,644,865 | |||
Cash held in Trust Account
|
345,000,000 | |||
|
|
|||
Total Assets
|
$
|
348,644,865
|
|
|
|
|
|||
Liabilities and Stockholders’ Equity:
|
||||
Current liabilities:
|
||||
Accounts payable
|
$ | 687,500 | ||
Accrued expenses
|
545,021 | |||
Franchise tax payable
|
23,464 | |||
Note payable - related party
|
90,035 | |||
|
|
|||
Total current liabilities
|
1,346,020 | |||
|
|
|||
Deferred underwriting commissions
Derivative warrant liabilities
|
|
12,075,000
23,027,500
|
|
|
|
|
|||
Total liabilities
|
36,448,520 | |||
Commitments and Contingencies
|
||||
Class A common stock, $0.0001 par value; 34,500,000 shares subject to possible redemption at $10.00 per share
|
345,000,000 | |||
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;
|
— | |||
Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and outstanding
|
863 | |||
Additional paid-in capital
|
— | |||
Accumulated deficit
|
(32,804,518 | ) | ||
|
|
|||
Total stockholders’ equity
|
(32,803,655 | ) | ||
|
|
|||
Total Liabilities and Stockholders’ Equity
|
$
|
348,644,865
|
|
|
|
|
As of February 12, 2021
|
As Reported
|
Adjustment
|
As Restated
|
|||||||||
Total assets
|
$
|
348,644,865
|
|
$
|
348,644,865
|
|
||||||
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
|
|
$
|
36,448,520
|
|
||||||
Class A common stock subject to possible redemption
|
330,223,840 | 14,776,160 | 345,000,000 | |||||||||
Preferred stock
|
— | — | — | |||||||||
Class A common stock
|
148 | (148 | ) | — | ||||||||
Class B common stock
|
863 | — | 863 | |||||||||
Additional paid-in capital
|
5,032,602 | (5,032,602 | ) | — | ||||||||
Retained earnings (accumulated deficit)
|
(33,608 | ) | (32,770,910 | ) | (32,804,518 | ) | ||||||
Total stockholders’ equity (deficit)
|
$
|
5,000,005
|
|
$
|
(37,803,660
|
)
|
$
|
(32,803,655
|
)
|
|||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)
|
$
|
348,644,865
|
|
$
|
—
|
|
$
|
348,644,865
|
|
• |
in whole and not in part;
|
• |
at a price of $0.01 per warrant;
|
• |
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
• |
if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
|
• |
in whole and not in part;
|
• |
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of Class A common stock;
|
• |
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments” ); and
|
• |
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described herein under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 8,671 | $ | 6,657 | ||||
Restricted cash
|
50 | 250 | ||||||
Accounts receivable, net of allowance of $620 and $76, respectively
|
792 | 105 | ||||||
Accounts receivable from related parties
|
315 | 72 | ||||||
Deposits for equipment
|
54,818 | — | ||||||
Other current assets
|
6,273 | 3,969 | ||||||
|
|
|
|
|||||
Total Current Assets
|
70,919 | 11,053 | ||||||
|
|
|
|
|||||
Property, plant and equipment, net
|
85,244 | 81,296 | ||||||
Goodwill
|
58,241 | 58,241 | ||||||
Intangible assets, net
|
6,674 | 3,977 | ||||||
Other noncurrent assets
|
4,499 | 7,447 | ||||||
|
|
|
|
|||||
Total Assets
|
$ | 225,577 | $ | 162,014 | ||||
|
|
|
|
|||||
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 3,057 | $ | 7,503 | ||||
Accrued expenses and other
|
3,585 | 1,916 | ||||||
Deferred revenue
|
44,843 | 7,834 | ||||||
Capital lease obligations, current portion
|
2,146 | 1,571 | ||||||
Notes payable, current portion
|
16,016 | 648 | ||||||
|
|
|
|
|||||
Total Current Liabilities
|
69,647 | 19,472 | ||||||
|
|
|
|
|||||
Capital lease obligations, net of current portion
|
2,263 | 3,183 | ||||||
Notes payable, net of current portion
|
19,864 | 2,092 | ||||||
Other noncurrent liabilities
|
103 | 1,412 | ||||||
|
|
|
|
|||||
Total Liabilities
|
91,877 | 26,159 | ||||||
|
|
|
|
|||||
Contingently redeemable convertible preferred stock; $0.00001 par value; 50,000 shares authorized; 6,766 and 4,421 shares issued and outstanding at December 31, 2020 and 2019; $45,164 and $30,195 total liquidation preference at December 31, 2020 and 2019
|
44,476 | 29,526 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ Equity:
|
||||||||
Common stock; $0.00001 par value; 200,000 shares authorized; 98,607 and 99,141 shares issued and outstanding at December 31, 2020 and 2019
|
1 | 1 | ||||||
Additional
paid-in
capital
|
163,967 | 168,866 | ||||||
Accumulated deficit
|
(74,744 | ) | (62,538 | ) | ||||
|
|
|
|
|||||
Total Stockholders’ Equity
|
89,224 | 106,329 | ||||||
|
|
|
|
|||||
Total Liabilities, Contingently Redeemable Convertible Preferred Stock and Stockholders’ Equity
|
$ | 225,577 | $ | 162,014 | ||||
|
|
|
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Hosting revenue from customers
|
$ | 34,615 | $ | 53,492 | ||||
Hosting revenue from related parties
|
6,983 | 384 | ||||||
Equipment sales to customers
|
11,193 | — | ||||||
Equipment sales to related parties
|
1,402 | — | ||||||
Digital asset mining income
|
6,127 | 5,647 | ||||||
|
|
|
|
|||||
Total revenue
|
60,320 | 59,523 | ||||||
Costs of revenue
|
50,928 | 48,996 | ||||||
|
|
|
|
|||||
Gross profit
|
9,392 | 10,527 | ||||||
Gain on legal settlements
|
5,814 | — | ||||||
Gain from sales of digital currency assets
|
65 | 806 | ||||||
Operating expense:
|
||||||||
Research and development
|
5,271 | 5,480 | ||||||
Sales and marketing
|
1,771 | 2,833 | ||||||
General and administrative
|
14,556 | 14,707 | ||||||
|
|
|
|
|||||
Total operating expense
|
21,598 | 23,020 | ||||||
|
|
|
|
|||||
Operating loss
|
(6,327 | ) | (11,687 | ) | ||||
|
|
|
|
|||||
Non-operating
income (expense), net:
|
||||||||
Loss on debt extinguishment
|
(1,333 | ) | — | |||||
Interest expense, net
|
(4,436 | ) | (235 | ) | ||||
Other
non-operating
expenses, net
|
(110 | ) | — | |||||
|
|
|
|
|||||
Total
non-operating
income (expense), net
|
(5,879 | ) | (235 | ) | ||||
|
|
|
|
|||||
Loss before income taxes
|
(12,206 | ) | (11,922 | ) | ||||
Income tax expense
|
— | — | ||||||
|
|
|
|
|||||
Net loss and comprehensive loss
|
$ | (12,206 | ) | $ | (11,922 | ) | ||
|
|
|
|
|||||
Deemed dividend from common to preferred exchange
|
(10,478 | ) | — | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders
|
$ | (22,684 | ) | $ | (11,922 | ) | ||
|
|
|
|
|||||
Net loss attributable to common stockholders per share (Note 13):
|
||||||||
Basic and diluted
|
$ | (0.23 | ) | $ | (0.12 | ) | ||
|
|
|
|
|||||
Weighted average shares outstanding:
|
||||||||
Basic and diluted
|
98,492 | 98,684 | ||||||
|
|
|
|
Contingently Redeemable
Convertible Preferred Stock |
Common Stock
|
Additional
Paid-In Capital
|
Accumulated
Deficit |
Total
Stockholders’ Equity |
||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Amount
|
Amount
|
Amount
|
||||||||||||||||||||||||
Balance at December 31, 2018
|
— | $ | — |
|
98,531 | $ | 1 | $ | 161,365 | $ | (50,616 | ) | $ | 110,750 | ||||||||||||||||
Net loss
|
|
(11,922 | ) | (11,922 | ) | |||||||||||||||||||||||||
Stock-based compensation
|
|
50 | — | 3,100 | 3,100 | |||||||||||||||||||||||||
Issuances of Series A contingently redeemable convertible preferred stock
|
4,421 | 29,526 |
|
|||||||||||||||||||||||||||
Issuances of common stock
|
|
560 | — | 4,401 | 4,401 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2019
|
4,421 | $ | 29,526 | 99,141 | $ | 1 | $ | 168,866 | $ | (62,538 | ) | $ | 106,329 | |||||||||||||||||
Net loss
|
(12,206 | ) | (12,206 | ) | ||||||||||||||||||||||||||
Stock-based compensation
|
3,037 | 3,037 | ||||||||||||||||||||||||||||
Exchange of common stock for Series A contingently redeemable convertible preferred stock
|
1,802 | 12,308 | (1,096 | ) | — | (12,308 | ) | (12,308 | ) | |||||||||||||||||||||
Issuances of common stock- asset acquisition
|
562 | — | 1,967 | 1,967 | ||||||||||||||||||||||||||
Issuances of Series A contingently redeemable convertible preferred stock
|
229 | 1,545 | ||||||||||||||||||||||||||||
Issuances of Series B contingently redeemable convertible preferred stock
|
314 | 1,097 | ||||||||||||||||||||||||||||
Issuances of common stock warrants and options
|
2,405 | 2,405 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2020
|
6,766 | $ | 44,476 | 98,607 | $ | 1 | $ | 163,967 | $ | (74,744 | ) | $ | 89,224 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Cash flows from Operating Activities:
|
||||||||
Net loss
|
$ | (12,206 | ) | $ | (11,922 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
9,403 | 6,118 | ||||||
Stock-based compensation
|
3,037 | 2,880 | ||||||
Digital asset mining income
|
(6,127 | ) | (5,647 | ) | ||||
Amortization of debt discount and debt issuance costs
|
1,300 | — | ||||||
Impairments of long-lived assets
|
— | 932 | ||||||
Losses on disposals of property, plant and equipment
|
2 | 621 | ||||||
Loss on debt extinguishment
|
1,333 | — | ||||||
Provision for doubtful accounts
|
616 | 14 | ||||||
Changes in working capital:
|
||||||||
Accounts receivable, net
|
(1,303 | ) | (11 | ) | ||||
Accounts receivable from related parties
|
(243 | ) | (72 | ) | ||||
Digital currency assets
|
6,094 | 6,497 | ||||||
Deposits for equipment
|
(54,736 | ) | — | |||||
Other current assets
|
(2,353 | ) | (1,603 | ) | ||||
Accounts payable
|
(1,770 | ) | 1,398 | |||||
Accrued expenses and other
|
1,625 | 266 | ||||||
Deferred revenue
|
30,009 | (911 | ) | |||||
Other noncurrent assets and liabilities, net
|
1,554 | 608 | ||||||
|
|
|
|
|||||
Net cash used in operating activities
|
(23,765 | ) | (832 | ) | ||||
|
|
|
|
|||||
Cash flows from Investing Activities:
|
||||||||
Purchases of property, plant and equipment
|
(13,668 | ) | (37,412 | ) | ||||
Proceeds from sales of property, plant and equipment
|
92 | 160 | ||||||
Acquisition of intangible assets and other
|
(1,568 | ) | (108 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(15,144 | ) | (37,360 | ) | ||||
|
|
|
|
|||||
Cash flows from Financing Activities:
|
||||||||
Proceeds from issuances of preferred stock
|
2,642 | 29,526 | ||||||
Issuances of debt
|
45,178 | — | ||||||
Principal payments on debt
|
(7,097 | ) | (832 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities
|
40,723 | 28,694 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash, cash equivalents, and restricted cash
|
1,814 | (9,498 | ) | |||||
Cash, cash equivalents and restricted cash - beginning of year
|
6,907 | 16,405 | ||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash - end of year
|
$ | 8,721 | $ | 6,907 | ||||
|
|
|
|
|||||
Supplemental disclosure of other cash flow information:
|
||||||||
Cash paid for interest
|
$ | 2,903 | $ | 336 | ||||
Supplemental disclosure of noncash investing and financing activities:
|
||||||||
Acquisition:
|
||||||||
Fair value of assets acquired
|
$ | 3,359 | $ | — | ||||
Fair value of common stock issued as consideration
|
1,966 | — | ||||||
Accrued capital expenditures
|
$ | 2,544 | $ | 3,341 | ||||
Increase in notes payable for acquisition of property, plant and equipment
|
$ | 19,882 | $ | — | ||||
Decrease in notes payable in exchange for equipment
|
$ | 7,000 | $ | — | ||||
Property, plant and equipment acquired under capital leases
|
$ | 1,486 | $ | 4,957 | ||||
Common stock issuances for acquisition of long-lived assets
|
$ | — | $ | 3,825 |
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
• |
Owning and operating datacenter facilities in the U.S. to provide colocation and hosting services for artificial intelligence (“AI”) and distributed ledger technology, also commonly known as blockchain;
|
• |
Owning and operating computer equipment used to process transactions conducted on one or more blockchain networks in exchange for transaction processing fees rewarded in digital currency assets, commonly referred to as mining;
|
• |
Developing AI and blockchain-based platforms and applications, including infrastructure management, security technologies, mining optimization, and record keeping;
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Cash and cash equivalents
|
$ | 8,671 | $ | 6,657 | ||||
Restricted Cash
|
50 | 250 | ||||||
|
|
|
|
|||||
Total cash, cash equivalents and restricted cash
|
$ | 8,721 | $ | 6,907 | ||||
|
|
|
|
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Customer
|
||||||||
A
|
26 | % | N/A | |||||
B
|
N/A | 92 | % |
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Customer
|
||||||||
B
|
24 | % | 74 | % | ||||
C
|
13 | % | N/A |
3.
|
ASSET ACQUISITIONS
|
4.
|
OTHER ASSETS
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Prepaid expenses
|
$ | 1,212 | $ | 2,702 | ||||
Security deposits
|
2,230 | 972 | ||||||
Customer contract asset
|
— | 110 | ||||||
Other
|
2,831 | 185 | ||||||
|
|
|
|
|||||
Total other current assets
|
$ | 6,273 | $ | 3,969 | ||||
|
|
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Security deposits
|
$ | 1,150 | $ | 1,246 | ||||
Utility construction contributions
|
3,000 | 5,348 | ||||||
Deferred income taxes
|
— | 535 | ||||||
Customer contract asset and other
|
349 | 318 | ||||||
|
|
|
|
|||||
Total other noncurrent assets
|
$ | 4,499 | $ | 7,447 | ||||
|
|
|
|
5.
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
December 31,
|
||||||||||||
2020
|
2019
|
Estimated Useful Lives
|
||||||||||
Land and improvements
|
$ | 5,458 | $ | 5,258 |
20 years
(1)
|
|||||||
Building and improvements
|
46,811 | 43,407 | 12 to 39 years | |||||||||
Computer, mining and network equipment
(2)
|
20,270 | 19,247 | 1 to 5 years | |||||||||
Electrical equipment
(3)
|
24,681 | 24,259 | 10 years | |||||||||
Other property, plant and equipment
(4)
|
1,243 | 1,499 | 5 to 7 years | |||||||||
|
|
|
|
|||||||||
Total
|
98,463 | 93,670 | ||||||||||
Less accumulated depreciation and amortization
(5)
|
(13,219 | ) | (12,374 | ) | ||||||||
|
|
|
|
|||||||||
Property, plant and equipment, net
|
$ | 85,244 | $ | 81,296 | ||||||||
|
|
|
|
(1)
|
Estimated useful life of improvements. Land is not depreciated.
|
(2)
|
Includes capital lease assets of $3,277 and $2,951 at December 31, 2020 and 2019, respectively.
|
(3)
|
Includes capital lease assets of $2,588 and $2,588 at December 31, 2020 and 2019, respectively.
|
(4)
|
Includes capital lease assets of $432 and $0 at December 31, 2020 and 2019, respectively.
|
(5)
|
Includes accumulated amortization for assets under capital leases of $1,762 and $290 at December 31, 2020 and 2019, respectively.
|
6.
|
INTANGIBLE ASSETS, NET
|
December 31, 2020
|
||||||||||||||||
Gross
|
Accumulated
Amortization |
Net
Carrying Amount |
Estimated
Useful
Lives |
|||||||||||||
Acquired software
|
$ | 7,318 | $ | (954 | ) | $ | 6,364 |
5-8 years
|
||||||||
Patents
|
260 | (4 | ) | 256 | 20 years | |||||||||||
Trademarks
|
59 | (5 | ) | 54 | 8 years | |||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets, net
|
$ | 7,637 | $ | (963 | ) | $ | 6,674 | |||||||||
|
|
|
|
|
|
December 31, 2019
|
||||||||||||||||
Gross
|
Accumulated
Amortization |
Net
Carrying Amount |
Estimated
Useful
Lives |
|||||||||||||
Acquired software
|
$ | 3,959 | $ | (124 | ) | $ | 3,835 | 8 years | ||||||||
Patents
|
111 | (2 | ) | 109 | 20 years | |||||||||||
Trademarks
|
34 | (1 | ) | 33 | 8 years | |||||||||||
|
|
|
|
|
|
|||||||||||
Total intangible assets, net
|
$ | 4,104 | $ | (127 | ) | $ | 3,977 | |||||||||
|
|
|
|
|
|
7.
|
ACCRUED EXPENSES AND OTHER
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Accrued expenses and other
|
$ | 936 | $ | 1,058 | ||||
Accrued taxes
|
1,645 | 847 | ||||||
Other current liabilities
|
1,004 | 11 | ||||||
|
|
|
|
|||||
Total accrued expenses and other
|
$ | 3,585 | $ | 1,916 | ||||
|
|
|
|
8.
|
NOTES PAYABLE
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Georgia note
|
$ | 581 | $ | 773 | ||||
Kentucky note
|
1,511 | 1,967 | ||||||
PPP note
|
2,154 | — | ||||||
Silverpeak note
|
22,260 | — | ||||||
Genesis note
|
4,648 | — | ||||||
NYDIG note
|
718 | — | ||||||
Celsius note
|
6,842 | — | ||||||
|
|
|
|
|||||
Total
|
38,714 | 2,740 | ||||||
|
|
|
|
|||||
Unamortized discount and debt issuance costs
|
(2,834 | ) | — | |||||
|
|
|
|
|||||
Total notes payable, net
|
$ | 35,880 | $ | 2,740 | ||||
|
|
|
|
Year ending December 31,
|
||||
2021
|
$ | 16,016 | ||
2022
|
6,743 | |||
2023
|
15,955 | |||
|
|
|||
Total notes payable
|
$ | 38,714 | ||
|
|
9.
|
CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED STOCK
|
December 31, 2020
|
||||||||||||||||||||
Shares
Authorized |
Shares
Issued and Outstanding |
Issuance
Price per Share |
Net Proceeds
|
Liquidation
preference |
||||||||||||||||
Contingently Redeemable Convertible Preferred Stock:
|
||||||||||||||||||||
Series A
|
14,641 | 6,452 | $ | 6.83 | $ | 31,070 | $ | 44,064 | ||||||||||||
Series B
|
14,327 | 314 | 3.50 | 1,097 | 1,100 | |||||||||||||||
Undesignated
|
21,032 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total contingently redeemable convertible preferred stock
|
50,000 | 6,766 | $ | 32,167 | $ | 45,164 | ||||||||||||||
|
|
|
|
|
|
|
|
December 31, 2019
|
||||||||||||||||||||
Shares
Authorized |
Shares
Issued and Outstanding |
Issuance Price
per Share |
Net Proceeds
|
Liquidation
preference |
||||||||||||||||
Contingently Redeemable Convertible Preferred Stock:
|
||||||||||||||||||||
Series A
|
14,641 | 4,421 | $ | 6.83 | $ | 29,526 | $ | 30,195 | ||||||||||||
Undesignated
|
35,359 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total contingently redeemable convertible preferred stock
|
50,000 | 4,421 | $ | 29,526 | $ | 30,195 | ||||||||||||||
|
|
|
|
|
|
|
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
Year ending December 31,
|
||||
2021
|
$ | 111 | ||
2022 - 2025
|
— | |||
|
|
|||
Total minimum lease payments
|
$ | 111 | ||
|
|
Year ending December 31,
|
||||
2021
|
$ | 2,467 | ||
2022
|
1,990 | |||
2023
|
271 | |||
2024
|
102 | |||
2025
|
46 | |||
|
|
|||
Total minimum lease payments
|
4,876 | |||
Less: interest
|
(467 | ) | ||
|
|
|||
Present value of net minimum lease payments
|
$ | 4,409 | ||
|
|
11.
|
STOCKHOLDERS’ EQUITY
|
Options outstanding
|
2,530 | |||
Restricted stock units and awards outstanding
|
37,946 | |||
Available for future stock option and restricted stock units and grants
|
12,024 | |||
|
|
|||
Total outstanding and reserved for future issuance
|
52,500 | |||
|
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Dividend yield
|
0.00 | % | 0.00 | % | ||||
Expected volatility
|
36.26 | % | 30.59 | % | ||||
Risk-free interest rate
|
0.70 | % | 1.65 | % | ||||
Expected life (years)
|
10.00 | 5.51 |
Number of
Shares |
Weighted-
Average Exercise Price |
Weighted-Average
Remaining Contractual Term (in years) |
Aggregate
Intrinsic Value |
|||||||||||||
Options outstanding - December 31, 2018
|
1,880 | $ | 11.23 | |||||||||||||
Granted
|
350 | 6.83 | ||||||||||||||
Exercised
|
— | — | ||||||||||||||
Forfeited
|
— | — | ||||||||||||||
|
|
|
|
|||||||||||||
Options outstanding - December 31, 2019
|
2,230 | 10.54 | ||||||||||||||
Granted
|
300 | 1 | ||||||||||||||
Exercised
|
— | — | ||||||||||||||
Forfeited
|
— | — | ||||||||||||||
|
|
|
|
|||||||||||||
Options outstanding - December 31, 2020
|
2,530 | $ | 9.41 | 8.08 | $ | 3,959 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and expected to vest as of December 31, 2020
|
2,530 | $ | 9.41 | 8.08 | $ | 3,959 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and exercisable as of December 31, 2020
|
1,159 | $ | 7.54 | 8.43 | $ | 3,704 | ||||||||||
|
|
|
|
|
|
|
|
• |
Over a
4-year
service period, or
|
• |
Over a
4-year
service period and upon either i) completion of an initial public offering of the Company’s common stock, or ii) upon consummation of a transaction resulting in a change in control of the Company.
|
Number of
Shares |
Weighted-Average
Grant Date Fair Value |
|||||||
Unvested - December 31, 2018
|
28,412 | $ | 11.23 | |||||
Granted
|
13,065 | 6.83 | ||||||
Vested
|
— | — | ||||||
Forfeited
|
(6,430 | ) | 10.42 | |||||
|
|
|
|
|||||
Unvested - December 31, 2019
|
35,047 | $ | 9.39 | |||||
Granted
|
8,056 | 4.46 | ||||||
Vested
|
(802 | ) | 11.23 | |||||
Forfeited
|
(5,157 | ) | 6.83 | |||||
|
|
|
|
|||||
Unvested - December 31, 2020
|
37,144 | $ | 8.55 | |||||
|
|
|
|
12.
|
INCOME TAXES
|
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
U.S. federal statutory income tax benefit applied to loss before income taxes
|
$ | (2,563 | ) | $ | (2,525 | ) | ||
State income taxes, net of federal benefit
|
(410 | ) | (429 | ) | ||||
Valuation allowance
|
1,106 | 2,835 | ||||||
Deferred tax adjustments
|
1,827 | — | ||||||
Other permanent items
|
40 | 119 | ||||||
|
|
|
|
|||||
Total income tax expense
|
$ | — | $ | — | ||||
|
|
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss
|
$ | 10,674 | $ | 8,438 | ||||
Interest expense limitation
|
137 | 177 | ||||||
Allowance for doubtful accounts
|
151 | 19 | ||||||
Vacation pay accrual
|
8 | 104 | ||||||
Stock-based compensation
|
3,579 | 2,943 | ||||||
Unrealized capital loss
|
548 | 499 | ||||||
Impairment loss
|
61 | 141 | ||||||
Debt extinguishment loss
|
406 | — | ||||||
Intangibles (other than goodwill)
|
3,015 | 3,069 | ||||||
|
|
|
|
|||||
Gross deferred tax assets
|
18,579 | 15,390 | ||||||
Valuation allowance
|
(15,961 | ) | (14,855 | ) | ||||
|
|
|
|
|||||
Deferred tax assets, net of valuation allowance
|
2,618 | 535 | ||||||
|
|
|
|
|||||
Deferred tax liabilities:
|
||||||||
Property, plant and equipment, net
|
(2,618 | ) | (535 | ) | ||||
|
|
|
|
|||||
Deferred tax liabilities, net
|
(2,618 | ) | (535 | ) | ||||
|
|
|
|
|||||
Total net deferred tax assets
|
$ | — | $ | — | ||||
|
|
|
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Beginning Balance
|
$ | 14,855 | $ | 11,689 | ||||
Change related to current net operating losses
|
2,238 | 2,835 | ||||||
Net change related to generation of tax attributes
|
695 | 331 | ||||||
Change related to deferred tax adjustments
|
(1,827 | ) | — | |||||
|
|
|
|
|||||
Ending Balance
|
$ | 15,961 | $ | 14,855 | ||||
|
|
|
|
13.
|
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Net loss
|
$ | (12,206 | ) | $ | (11,922 | ) | ||
Deemed dividend
|
(10,478 | ) | — | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders (numerator)
|
$ | (22,684 | ) | $ | (11,922 | ) | ||
Weighted average common shares outstanding – basic and diluted (denominator)
|
98,492 | 98,684 | ||||||
Net loss per share – basic and diluted
|
$ | (0.23 | ) | $ | (0.12 | ) |
December 31,
|
||||||||
2020
|
2019
|
|||||||
Stock options
|
2,530 | 2,230 | ||||||
Preferred stock
|
6,766 | 4,421 | ||||||
Warrants
|
4,135 | 150 | ||||||
Restricted stock
|
37,946 | 35,047 | ||||||
|
|
|
|
|||||
Total potentially anti-dilutive shares
|
51,377 | 41,848 | ||||||
|
|
|
|
14.
|
SEGMENT REPORTING
|
For the Years Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Equipment Sales and Hosting Segment
|
||||||||
Hosting revenue
|
$ | 41,598 | $ | 53,876 | ||||
Equipment sales
|
12,595 | — | ||||||
|
|
|
|
|||||
Total revenue
|
54,193 | 53,876 | ||||||
Cost of revenue
|
47,951 | 43,005 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 6,242 | $ | 10,871 | ||||
Mining Segment
|
||||||||
Digital asset mining income
|
$ | 6,127 | $ | 5,647 | ||||
|
|
|
|
|||||
Total revenue
|
6,127 | 5,647 | ||||||
Cost of revenue
|
2,977 | 5,991 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 3,150 | $ | (344 | ) | |||
Consolidated total revenue
|
$ | 60,320 | $ | 59,523 | ||||
Consolidated cost of revenue
|
$ | 50,928 | $ | 48,996 | ||||
Consolidated gross profit
|
$ | 9,392 | $ | 10,527 |
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Reportable segment gross profit
|
9,392 | 10,527 | ||||||
Gain on legal settlement
|
5,814 | — | ||||||
Gain from sales of digital currency assets
|
65 | 806 | ||||||
Operating expense (income):
|
||||||||
Research and development
|
5,271 | 5,480 | ||||||
Sales and marketing
|
1,771 | 2,833 | ||||||
General and administrative
|
14,556 | 14,707 | ||||||
|
|
|
|
|||||
Total operating expense (income)
|
21,598 | 23,020 | ||||||
|
|
|
|
|||||
Operating loss
|
(6,327 | ) | (11,687 | ) |
For the Years Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Non-operating
income (expense), net:
|
||||||||
Loss on debt extinguishment and other
|
(1,333 | ) | — | |||||
Interest expense, net
|
(4,436 | ) | (235 | ) | ||||
Other
non-operating
expenses, net
|
(110 | ) | — | |||||
|
|
|
|
|||||
Total
non-operating
income (expense), net
|
(5,879 | ) | (235 | ) | ||||
|
|
|
|
|||||
Loss before income taxes
|
(12,206 | ) | (11,922 | ) | ||||
|
|
|
|
15.
|
RELATED-PARTY TRANSACTIONS
|
16.
|
SUBSEQUENT EVENTS
|
September 30,
2021 |
December 31,
2020 |
|||||||
Restated
(Unaudited)
|
||||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 147,906 | $ | 8,671 | ||||
Restricted cash
|
12,101 | 50 | ||||||
Accounts receivable
|
602 | 792 | ||||||
Accounts receivable from related parties
|
261 | 315 | ||||||
Deposits for equipment
|
469,890 | 54,818 | ||||||
Digital currency assets
|
116,233 | 63 | ||||||
Other current assets
|
9,978 | 6,210 | ||||||
|
|
|
|
|||||
Total Current Assets
|
756,971 | 70,919 | ||||||
|
|
|
|
|||||
Property, plant and equipment, net
|
219,795 | 85,244 | ||||||
Goodwill
|
1,106,968 | 58,241 | ||||||
Intangible assets, net
|
8,709 | 6,674 | ||||||
Other noncurrent assets
|
14,110 | 4,499 | ||||||
|
|
|
|
|||||
Total Assets
|
$ | 2,106,553 | $ | 225,577 | ||||
|
|
|
|
|||||
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 28,796 | $ | 3,057 | ||||
Accrued expenses and other
|
35,074 | 3,585 | ||||||
Deferred revenue
|
74,855 | 38,113 | ||||||
Deferred revenue from related parties
|
131,284 | 6,730 | ||||||
Capital lease obligations, current portion
|
2,525 | 2,146 | ||||||
Notes payable, current portion
|
25,202 | 16,016 | ||||||
|
|
|
|
|||||
Total Current Liabilities
|
297,736 | 69,647 | ||||||
|
|
|
|
|||||
Capital lease obligations, net of current portion
|
1,524 | 2,263 | ||||||
Notes payable, net of current portion (includes $442,834 and $- at fair value)
|
471,930 | 19,864 | ||||||
Other noncurrent liabilities
|
1,994 | 103 | ||||||
|
|
|
|
|||||
Total Liabilities
|
773,184 | 91,877 | ||||||
|
|
|
|
|||||
Contingently redeemable preferred stock; $0.00001 par value; 50,000 shares authorized; 6,766 shares issued and outstanding at September 30, 2021 and December 31, 2020
|
44,476 | 44,476 | ||||||
Commitments and contingencies (Note 6)
|
||||||||
Stockholders’ Equity:
|
||||||||
Common stock; $0.00001 par value; 200,000 shares authorized; 170,818 and 98,607 shares issued and outstanding at September 30, 2021 and December 31, 2020
|
2 | 1 | ||||||
Additional paid-in capital
|
1,385,381 | 163,967 | ||||||
Accumulated deficit
|
(87,938 | ) | (74,744 | ) | ||||
|
|
|
|
|||||
Accumulated other comprehensive loss
|
(8,552 | ) | — | |||||
Total Stockholders’ Equity
|
1,288,893 | 89,224 | ||||||
|
|
|
|
|||||
Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
|
$ | 2,106,553 | $ | 225,577 | ||||
|
|
|
|
Nine Months Ended September 30,
|
||||||||
2021
|
2020
|
|||||||
Restated
|
||||||||
Total evenue:
|
||||||||
Hosting revenue from customers
|
$ | 37,836 | $ | 28,667 | ||||
Hosting revenue from related parties
|
13,906 | 3,382 | ||||||
Equipment sales to customers
|
84,378 | 1,987 | ||||||
Equipment sales to related parties
|
29,057 | 285 | ||||||
Digital asset mining income
|
77,511 | 2,312 | ||||||
|
|
|
|
|||||
Total revenue
|
242,688 | 36,633 | ||||||
|
|
|
|
|||||
Costs of revenue:
|
||||||||
Cost of hosting services
|
48,956 | 28,185 | ||||||
Cost of equipment sales
|
82,328 | 2,123 | ||||||
Cost of digital asset mining
|
13,909 | 1,598 | ||||||
|
|
|
|
|||||
Total costs of revenue
|
145,193 | 31,906 | ||||||
|
|
|
|
|||||
Gross profit
|
97,495 | 4,727 | ||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | |||||
Gain from sales of digital currency assets
|
405 | 52 | ||||||
Impairment of digital currency assets
|
(12,552 | ) | (5 | ) | ||||
Operating expenses:
|
||||||||
Research and development
|
4,231 | 4,183 | ||||||
Sales and marketing
|
2,186 | 1,401 | ||||||
General and administrative
|
46,992 | 10,797 | ||||||
|
|
|
|
|||||
Total operating expenses
|
53,409 | 16,381 | ||||||
|
|
|
|
|||||
Operating income (loss)
|
29,336 | (5,793 | ) | |||||
Non-operating expenses,
net:
|
||||||||
Loss on debt from extinguishment
|
8,016 | 1,333 | ||||||
Interest expense, net
|
26,550 | 2,683 | ||||||
Other non-operating expense,
net
|
8,661 | 88 | ||||||
|
|
|
|
|||||
Total non-operating expense,
net
|
43,227 | 4,104 | ||||||
|
|
|
|
|||||
Loss before income taxes
|
(13,891 | ) | (9,897 | ) | ||||
Income tax expense
|
(697 | ) | — | |||||
|
|
|
|
|||||
Net loss
|
(13,194 | ) | (9,897 | ) | ||||
|
|
|
|
|||||
Deemed dividend from common to preferred exchange
|
— | (10,478 | ) | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders
|
$ | (13,194 | ) | $ | (20,375 | ) | ||
|
|
|
|
|||||
Net loss per share (Note 8):
|
||||||||
Basic
|
$ | (0.11 | ) | $ | (0.21 | ) | ||
|
|
|
|
|||||
Diluted
|
$ | (0.11 | ) | $ | (0.21 | ) | ||
|
|
|
|
|||||
Weighted average shares outstanding:
|
||||||||
Basic
|
115,482 | 98,453 | ||||||
|
|
|
|
|||||
Diluted
|
115,482 | 98,453 | ||||||
|
|
|
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Restated
|
||||||||
Net loss
|
$ | (13,194 | ) | $ | (9,897 | ) | ||
Other comprehensive loss, net of income taxes:
|
||||||||
Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $— and $—
|
(8,552 | ) | — | |||||
|
|
|
|
|||||
Total other comprehensive loss, net of income taxes
|
(8,552 | ) | — | |||||
Comprehensive loss
|
$ | (21,746 | ) | $ | (9,897 | ) | ||
|
|
|
|
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, 2020
|
6,766 | $ | 44,476 |
|
98,607 | $ | 1 | $ | 163,967 | $ | (74,744 | ) | $ | — | $ | 89,224 | ||||||||||||||||||||||||
Net loss (restated)
|
— | — |
|
— | — | — | (13,194 | ) | — | (13,194 | ) | |||||||||||||||||||||||||||||
Stock-based compensation
|
— | — |
|
— | — | 31,012 | — | — | 31,012 | |||||||||||||||||||||||||||||||
Accumulated other comprehensive loss (restated)
|
— | — |
|
— | — | — | — | (8,552 | ) | (8,552 | ) | |||||||||||||||||||||||||||||
Issuances of common stock- business combination
|
— | — |
|
72,186 | 1 | 1,189,906 | — | — | 1,189,907 | |||||||||||||||||||||||||||||||
Issuances of common stock warrants and options
|
— | — |
|
25 | — | 496 | — | — | 496 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Balance at September 30, 2021 (restated)
|
6,766 | $ | 44,476 |
|
170,818 | $ | 2 | $ | 1,385,381 | $ | (87,938 | ) | $ | (8,552 | ) | $ | 1,288,893 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Balance at December 31, 2019
|
4,421 | $ | 29,526 |
|
99,141 | $ | 1 | $ | 168,866 | $ | (62,538 | ) | $ | — | $ | 106,329 | ||||||||||||||||||||||||
Net loss
|
— | — |
|
— | — | — | (9,897 | ) | — | (9,897 | ) | |||||||||||||||||||||||||||||
Stock-based compensation
|
— | — |
|
— | — | 2,446 | — | — | 2,446 | |||||||||||||||||||||||||||||||
Exchange of common stock for Series A contingently redeemable convertible preferred stock
|
1,802 | 12,308 |
|
(1,096 | ) | — | (12,308 | ) | — | — | (12,308 | ) | ||||||||||||||||||||||||||||
Issuances of Series A contingently redeemable convertible preferred stock
|
229 | 1,545 |
|
— | — | — | — | — | — | |||||||||||||||||||||||||||||||
Issuances of Series B contingently redeemable convertible preferred stock
|
314 | 1,097 |
|
— | — | — | — | — | — | |||||||||||||||||||||||||||||||
Issuances of common stock- asset acquisition
|
— | — |
|
562 | — | 2,405 | — | — | 2,405 | |||||||||||||||||||||||||||||||
Issuances of common stock warrants and options
|
— | — |
|
— | — | 1,967 | — | — | 1,967 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Balance at September 30, 2020
|
6,766 | $ | 44,476 |
|
98,607 | $ | 1 | $ | 163,376 | $ | (72,435 | ) | $ | — | $ | 90,942 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Restated
|
||||||||
Cash flows from Operating Activities:
|
||||||||
Net loss
|
$ | (13,194 | ) | $ | (9,897 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
12,886 | 6,613 | ||||||
Stock-based compensation
|
31,012 | 2,446 | ||||||
Digital asset mining income
|
(77,511 | ) | (2,312 | ) | ||||
Deferred income taxes
|
3,604 | — | ||||||
Loss on legal settlements
|
2,603 | — | ||||||
Loss on debt extinguishment
|
8,016 | 1,333 | ||||||
Fair value adjustment on convertible notes
|
15,937 | — | ||||||
Amortization of debt discount and debt issuance costs
|
1,024 | 858 | ||||||
Losses on disposals of property, plant and equipment
|
17 | (92 | ) | |||||
Impairments of digital currency assets
|
12,552 | 5 | ||||||
Provision for doubtful accounts
|
— | (4 | ) | |||||
Changes in working capital components:
|
||||||||
Accounts receivable, net
|
(6,641 | ) | (3,415 | ) | ||||
Accounts receivable from related parties
|
55 | (1,903 | ) | |||||
Digital currency assets
|
27,316 | 2,314 | ||||||
Deposits for equipment
|
(414,771 | ) | (19,846 | ) | ||||
Other current assets
|
970 | (360 | ) | |||||
Accounts payable
|
(35,132 | ) | (790 | ) | ||||
Accrued expenses and other
|
17,945 | 1,330 | ||||||
Deferred revenue
|
254,530 | 5,878 | ||||||
Other noncurrent assets and liabilities, net
|
(7,692 | ) | (620 | ) | ||||
|
|
|
|
|||||
Net cash used in operating activities
|
(166,474 | ) | (18,462 | ) | ||||
|
|
|
|
|||||
Cash flows from Investing Activities:
|
||||||||
Purchases of property, plant and equipment
|
(116,074 | ) | (7,970 | ) | ||||
Cash acquired in business combination
|
704 | — | ||||||
Proceeds from sales of property, plant and equipment
|
— | 92 | ||||||
Other
|
(154 | ) | (1,350 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(115,524 | ) | (9,228 | ) | ||||
|
|
|
|
|||||
Cash flows from Financing Activities:
|
||||||||
Proceeds from issuances of common stock options and warrants
|
496 | 2,642 | ||||||
Issuances of debt
|
475,301 | 30,658 | ||||||
Principal payments on debt
|
(42,513 | ) | (5,819 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities
|
433,284 | 27,481 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash, cash equivalents, and restricted cash
|
151,286 | (209 | ) | |||||
Cash, cash equivalents and restricted cash—beginning of period
|
8,721 | 6,907 | ||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash—end of period
|
$ | 160,007 | $ | 6,698 | ||||
|
|
|
|
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
• |
Owning and operating datacenter facilities in the U.S. to provide colocation and hosting services for distributed ledger technology, also commonly known as blockchain;
|
• |
Owning and operating computer equipment used to process transactions conducted on one or more blockchain networks in exchange for transaction processing fees rewarded in digital currency assets, commonly referred to as mining;
|
• |
Developing blockchain-based platforms and applications, including infrastructure management, security technologies, mining optimization, and recordkeeping;
|
2.
|
RESTATEMENT OF PREVIOUSLY-ISSUED FINANCIAL STATEMENTS
|
Consolidated Balance Sheets
|
September 30, 2021
|
|||||||||||
Reported
|
Adjustment
|
Restated
|
||||||||||
Assets:
|
||||||||||||
Digital currency assets
|
$ | 115,856 | $ | 377 | $ | 116,233 | ||||||
Total Current Assets
|
$ | 756,594 | $ | 377 | $ | 756,971 | ||||||
Goodwill
|
$ | 1,106,015 | $ | 953 | $ | 1,106,968 | ||||||
Total Assets
|
$ | 2,105,223 | $ | 1,330 | $ | 2,106,553 | ||||||
Liabilities:
|
||||||||||||
Accounts payable
|
$ | 28,689 | $ | 107 | $ | 28,796 | ||||||
Accrued expenses and other
|
$ | 33,849 | $ | 1,225 | $ | 35,074 | ||||||
Total Current Liabilities
|
$ | 296,404 | $ | 1,332 | $ | 297,736 | ||||||
Notes payable, net of current portion
|
$ | 467,662 | $ | 4,268 | $ | 471,930 | ||||||
Total Liabilities
|
$ | 767,584 | $ | 5,600 | $ | 773,184 | ||||||
Stockholders’ Equity:
|
||||||||||||
Accumulated deficit
|
$ | (92,220 | ) | $ | 4,282 | $ | (87,938 | ) | ||||
Accumulated other comprehensive loss
|
$ | — | $ | (8,552 | ) | $ | (8,552 | ) | ||||
Total Stockholders’ Equity
|
$ | 1,293,163 | $ | (4,270 | ) | $ | 1,288,893 | |||||
Notes payable, net of current portion at fair value
|
$ | 438,566 | $ | 4,268 | $ | 442,834 |
Consolidated Statements of Operations
|
Nine Months Ended September 30, 2021
|
|||||||||||
Reported
|
Adjustment
|
Restated
|
||||||||||
Interest expense, net
|
$ | 26,806 | $ | (256 | ) | $ | 26,550 | |||||
Other non-operating expense,
net
|
$ | 12,945 | $ | (4,284 | ) | $ | 8,661 | |||||
Total non-operating expense,
net
|
$ | 47,767 | $ | (4,540 | ) | $ | 43,227 | |||||
Loss before income taxes
|
$ | (18,431 | ) | $ | 4,540 | $ | (13,891 | ) | ||||
Income tax (benefit)
|
$ | (955 | ) | $ | 258 | $ | (697 | ) | ||||
Net loss
|
$ | (17,476 | ) | $ | 4,282 | $ | (13,194 | ) | ||||
Net loss per share (Note 9):
|
||||||||||||
Basic
|
$ | (0.15 | ) | $ | 0.04 | $ | (0.11 | ) | ||||
Diluted
|
$ | (0.15 | ) | $ | 0.04 | $ | (0.11 | ) |
Consolidated Statements of Other Comprehensive Loss
|
Nine Months Ended September 30, 2021
|
|||||||||||
Reported
|
Adjustment
|
Restated
|
||||||||||
Net loss
|
$ | (17,476 | ) | $ | 4,282 | $ | (13,194 | ) | ||||
Other comprehensive loss, net of income taxes:
|
||||||||||||
Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $— and $—
|
— | (8,552 | ) | (8,552 | ) | |||||||
|
|
|
|
|
|
|||||||
Comprehensive loss
|
$ | (17,476 | ) | $ | (4,270 | ) | $ | (21,746 | ) | |||
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
Nine Months Ended September 30, 2021
|
|||||||||||
Reported
|
Adjustment
|
Restated
|
||||||||||
Cash flows from Operating Activities:
|
||||||||||||
Net loss
|
$ | (17,476 | ) | $ | 4,282 | $ | (13,194 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||||||
Fair value adjustment on convertible notes
|
$ | 20,221 | $ | (4,284 | ) | $ | 15,937 | |||||
Changes in working capital components:
|
||||||||||||
Accrued expenses and other
|
$ | 17,943 | $ | 2 | $ | 17,945 |
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Reported
|
Adjustment
|
Restated
|
Fair value hierarchy
|
||||||||||||||||||||
Principal
|
Level 1
|
Level 2
|
Level 3
|
Fair value
|
||||||||||||||||
Convertible notes:
|
||||||||||||||||||||
April 19, 2021
1
|
$ | 96,068 | $ | — | $ | — | $ | 97,618 | $ | 97,618 | ||||||||||
April 21, 2021
1
|
5,060 | — | — | 5,480 | 5,480 | |||||||||||||||
April 23, 2021
1
|
45,540 | — | — | 49,314 | 49,314 | |||||||||||||||
April 26, 2021
1
|
76,912 | — | — | 83,215 | 83,215 | |||||||||||||||
August 20, 2021 notes
2
|
50,250 | — | — | 49,508 | 49,508 | |||||||||||||||
September 10, 2021
2
|
16,000 | — | — | 15,910 | 15,910 | |||||||||||||||
September 23, 2021
2
|
75,530 | — | 75,530 | — | 75,530 | |||||||||||||||
September 24, 2021
2
|
59,604 | — | 59,604 | — | 59,604 | |||||||||||||||
September 27, 2021
2
|
1,961 | — | 1,961 | — | 1,961 | |||||||||||||||
Accrued PIK interest
1,2,3
|
— | — | 4,694 | — | 4,694 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total convertible notes
|
$ | 420,925 | $ | — | $ | 141,789 | $ | 301,045 | $ | 442,834 | ||||||||||
|
|
|
|
|
|
|
|
|
|
1
|
Secured convertible notes (includes principal balance at issuance and PIK interest) which considers the minimum payoff at maturity of two times the face value of the note plus accrued interest.
|
2
|
Unsecured convertible notes which considers the minimum payoff at maturity of one times the face value of the note plus accrued interest.
|
3
|
Represents PIK interest accrued as of September 30, 2021 which will be recorded as additional principal for each respective convertible note on October 1, 2021.
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Balance at December 31, 2020
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Convertible notes issued (including PIK principal recorded)
|
— | 420,925 | — | 420,925 | ||||||||||||
Transfers to level 3
|
— | (283,830 | ) | 283,830 | — | |||||||||||
Change in fair value from inception
|
— | 4,694 | 17,215 | 21,909 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2021
|
$ | — | $ | 141,789 | $ | 301,045 | $ | 442,834 | ||||||||
|
|
|
|
|
|
|
|
Fair value
|
Unobservable
Input |
Low
|
High
|
Weighted
Average
1
|
||||||||||||||
Convertible notes (Level 3)
|
$ | 301,045 | Probability of financing event | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Expected term (years) | 0.25 | 0.75 | 0.28 | |||||||||||||||
Volatility | 39.8 | % | 40.2 | % | 39.8 | % | ||||||||||||
Negotiation discount | 44.6 | % | 54.0 | % | 52.0 | % |
1
|
Weighted average based on the fair value of convertible notes. In addition, expected term and volatility are also weighted based on 95% probability of a SPAC merger occurring and 5% probability of a qualified financing occurring.
|
(in thousands)
|
Financial statement line item
|
Nine months ended
September 30, 2021
|
||||
Cash interest payments
|
Interest expense, net | $ | 4,850 | |||
Payment-in-kind (PIK) interest
|
Interest expense, net | 7,274 | ||||
Instrument specific credit risk
|
Accumulated other comprehensive loss |
8,552 | ||||
Other fair value adjustments
|
Other non-operating expense, net | 8,663 | ||||
|
|
|||||
Total fair value adjustments
|
$ | 29,339 | ||||
Debt issuance costs
|
Interest expense, net | $ | 10,664 |
(in thousands)
|
September 30
2021 |
December 31
2020 |
||||||
Bitcoin (BTC)
|
$ | 109,871 | $ | 51 | ||||
Ethereum (ETH)
|
1,834 | — | ||||||
Siacoin (SC)
|
945 | — | ||||||
Other
|
3,583 | 12 | ||||||
|
|
|
|
|||||
Total digital currencies
|
$ | 116,233 | $ | 63 | ||||
|
|
|
|
4.
|
ACQUISITIONS
|
Consideration
(in thousands)
|
||||
72.2 million common shares valued at $16.18 per share
1,2
|
$ | 1,167,965 | ||
Fair value of replaced Blockcap share-based payments attributable to
pre-combination
service
3
|
21,941 | |||
Settlement of preexisting services contracts
4
|
(60,522 | ) | ||
|
|
|||
Total Consideration:
|
$ | 1,129,384 | ||
Fair value of assets acquired, and liabilities assumed:
|
||||
Cash and cash equivalents
|
$ | 704 | ||
Digital assets-Bitcoin
|
73,304 | |||
Digital assets-Ethereum
|
365 | |||
Digital assets-Bitcoin cash
|
8 | |||
Digital assets-Siacoin
|
554 | |||
Digital assets-Other
|
3,329 | |||
Other current assets
|
633 | |||
Intangible assets, net
|
2,925 | |||
Property, plant and equipment, net
|
27,089 | |||
Other noncurrent assets
|
1,293 | |||
|
|
|||
Total assets acquired
|
|
110,204
|
|
|
Accounts payable
|
492 | |||
Accrued expenses and other
|
22,647 | |||
Other current liabilities
|
6,408 | |||
Deferred tax liability
|
— | |||
|
|
|||
Total liabilities assumed
|
$
|
29,547
|
|
|
Total identifiable net assets
|
$
|
80,657
|
|
|
Goodwill on acquisition
|
$
|
1,048,727
|
|
1 |
72.2 million common shares represent the equivalent Core Scientific common shares issued to Blockcap shareholders as consideration for the purchase.
|
2 |
The price per share of our common shares was estimated to be $16.18. As the Core Scientific common shares were not listed on a public marketplace, the calculation of the fair value of the common shares was subject to a greater degree of estimation. Given the absence of a public market, an estimate of the fair value of the common shares was required at the time of the Blockcap Acquisition. the Company’s and subjective factors were considered in determining the estimated fair value and because there is no active trading of the Core Scientific equity shares on an established securities market, an independent valuation specialist was engaged. The valuation was determined by weighting the outcomes of scenarios estimating share value based on both public company valuations and private company valuations. Both a market approach and common stock equivalency model were used to determine a range of outcomes, which were weighted based on probability to determine the result.
|
3 |
Reflects the estimated fair value of replaced Blockcap share-based payments allocated to purchase price based on the proportion of service related to the
pre-combination
services.
|
4 |
Blockcap had preexisting hosting and equipment contracts with the Company that were effectively settled by the Company’s acquisition of Blockcap. As a result, the consideration transferred to Blockcap has been adjusted by the deferred revenue balances that were settled at the time of acquisition.
|
(in thousands)
|
Goodwill
|
|||
Balance as of December 31, 2020
|
$ | 58,241 | ||
Acquisitions
|
1,048,727 | |||
|
|
|||
Balance as of September 30, 2021
|
$ | 1,106,968 | ||
|
|
Nine Months Ended
September 30, |
||||||||
(in thousands)
|
2021
|
2020
|
||||||
Total revenues
|
$ | 285,196 | $ | 38,645 | ||||
Operating income (loss)
|
$ | 34,951 | $ | (4,024 | ) |
• |
Transaction costs of $1.9 million are assumed to have occurred on the pro forma close date of January 1, 2020, and are recognized as if incurred in the first quarter of 2020;
|
• |
Tangible and intangible assets are assumed to be recorded at their estimated fair values as of January 1, 2020 and are depreciated or amortized over their estimated useful lives; and
|
• |
Accounting policies of Blockcap are conformed to those of Core Scientific including depreciation for mining equipment.
|
• |
Share-based compensation awards of Blockcap for which the performance condition of the award is assumed to be probable of being met as of January 1, 2020 and expensed as they are earned based on the service condition.
|
• |
The elimination of $19,239 of expense recognized by Blockcap in July 2021 for the acceleration of certain equity awards of its CEO and others. Because this acceleration was deemed to be in contemplation of the Merger, Core Scientific has recorded $23,294 of compensation expense for the acceleration in its financial statements for the period ending September 30, 2021, which was determined based on the fair value of the awards at the time of the Merger. This adjustment is necessary to avoid duplication of the expense attributable to the combined company related to the acceleration of the same awards.
|
5.
|
NOTES PAYABLE
|
(in thousands)
|
September 30
2021 |
December 31
2020 |
||||||
Georgia note
|
$ | 430 | $ | 581 | ||||
Kentucky note
|
1,154 | 1,511 | ||||||
PPP loan
|
— | 2,154 | ||||||
Silverpeak loan
|
— | 22,260 | ||||||
Stockholder loan
|
10,000 | — | ||||||
Genesis loan
|
2,015 | 4,648 | ||||||
Celsius loan
|
— | 6,842 | ||||||
NYDIG loan
|
40,510 | 718 | ||||||
Trinity loan
|
1,000 | — | ||||||
Convertible notes
|
420,925 | — | ||||||
Other
|
304 | — | ||||||
|
|
|
|
|||||
Total
|
476,338 | 38,714 | ||||||
Unamortized discount and debt issuance costs
|
(1,115 | ) | (2,834 | ) | ||||
Fair value adjustments to convertible notes
|
21,909 | — | ||||||
|
|
|
|
|||||
Total notes payable, net
|
$ | 497,132 | $ | 35,880 | ||||
|
|
|
|
6.
|
CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED STOCK
|
7.
|
COMMITMENTS AND CONTINGENCIES
|
8.
|
INCOME TAXES
|
9.
|
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Net loss
|
$ | (13,194 | ) | $ | (9,897 | ) | ||
Deemed dividend from common to preferred exchange
|
— | (10,478 | ) | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders
|
$ | (13,194 | ) | $ | (20,375 | ) | ||
Weighted average shares outstanding - basic
|
115,482 | 98,453 | ||||||
Add: Dilutive share-based compensation awards
|
— | — | ||||||
|
|
|
|
|||||
Weighted average shares outstanding - diluted
|
115,482 | 98,453 | ||||||
Net income (loss) per share - basic
|
$ | (0.11 | ) | $ | (0.21 | ) | ||
Net income (loss) per share - diluted
|
$ | (0.11 | ) | $ | (0.21 | ) |
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Stock options
|
7,320 | 7,320 | ||||||
Preferred stock
|
6,766 | 6,766 | ||||||
Warrants
|
4,255 | 4,255 | ||||||
Restricted stock
|
50,901 | 37,512 | ||||||
|
|
|
|
|||||
Total potentially dilutive shares
|
69,242 | 55,853 | ||||||
|
|
|
|
10.
|
SEGMENT REPORTING
|
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Equipment Sales and Hosting Segment
|
||||||||
Hosting revenue from customers
|
$ | 51,742 | $ | 32,049 | ||||
Equipment sales to customers
|
113,435 | 2,272 | ||||||
|
|
|
|
|||||
Total revenue
|
165,177 | 34,321 | ||||||
Cost of revenue
|
131,284 | 30,308 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 33,893 | $ | 4,013 | ||||
Mining Segment
|
||||||||
Digital asset mining income
|
$ | 77,511 | $ | 2,312 | ||||
|
|
|
|
|||||
Total revenue
|
77,511 | 2,312 | ||||||
Cost of revenue
|
13,909 | 1,598 | ||||||
|
|
|
|
|||||
Gross profit
|
$ | 63,602 | $ | 714 | ||||
Consolidated total revenue
|
$ | 242,688 | $ | 36,633 | ||||
Consolidated cost of revenue
|
$ | 145,193 | $ | 31,906 | ||||
Consolidated gross profit
|
$ | 97,495 | $ | 4,727 |
Nine Months
Ended September 30, |
||||||||
2021
|
2020
|
|||||||
Customer
|
||||||||
A
|
34 | % | N/A | |||||
B
|
21 | % | N/A | |||||
Blockcap
|
18 | % | N/A | |||||
C
|
N/A | 42 | % | |||||
D
|
N/A | 16 | % |
Nine Months Ended
September 30, |
||||||||
2021
|
2020
|
|||||||
Gross profit
|
97,495 | 4,727 | ||||||
(Loss) gain on legal settlements
|
(2,603 | ) | 5,814 | |||||
Gain from sales of digital currency assets
|
405 | 52 | ||||||
Impairment of digital currency assets
|
(12,552 | ) | (5 | ) | ||||
Operating expenses:
|
||||||||
Research and development
|
4,231 | 4,183 | ||||||
Sales and marketing
|
2,186 | 1,401 | ||||||
General and administrative
|
46,992 | 10,797 | ||||||
|
|
|
|
|||||
Total operating expenses
|
53,409 | 16,381 | ||||||
|
|
|
|
|||||
Operating income (loss)
|
29,336 | (5,793 | ) | |||||
Non-operating expenses,
net:
|
||||||||
Loss on debt from extinguishment
|
8,016 | 1,333 | ||||||
Interest expense, net
|
26,550 | 2,683 | ||||||
Other non-operating (income)
expense, net
|
8,661 | 88 | ||||||
|
|
|
|
|||||
Total non-operating expense,
net
|
43,227 | 4,104 | ||||||
|
|
|
|
|||||
Income (loss) before income taxes
|
$ | (13,891 | ) | (9,897 | ) |
11.
|
RELATED-PARTY TRANSACTIONS
|
12.
|
SUBSEQUENT EVENTS
|
2020
|
2019
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash
|
$ | 8,756,697 | — | |||||
Digital assets
|
2,404,047 | — | ||||||
Digital assets receivable
|
50,979 | — | ||||||
Prepaid expenses
|
1,664,186 | — | ||||||
|
|
|
|
|||||
Total current assets
|
12,875,909 | — | ||||||
Deposits on mining equipment assets
|
5,087,685 | — | ||||||
Mining equipment assets, net
|
16,715,171 | — | ||||||
Goodwill
|
21,171,370 | — | ||||||
|
|
|
|
|||||
Total assets
|
$ | 55,850,135 | — | |||||
|
|
|
|
|||||
Liabilities and stockholders’ equity
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$ | 60,556 | $ | 609 | ||||
Loans payable
|
7,992,455 | — | ||||||
Due to related parties
|
41,884 | — | ||||||
Common shares issuable
|
6,204,202 | — | ||||||
Taxes payable
|
115,564 | — | ||||||
|
|
|
|
|||||
Total current liabilities
|
14,414,661 | 609 | ||||||
Long term liabilities
|
||||||||
Deferred tax liability
|
1,125,495 | — | ||||||
|
|
|
|
|||||
Total liabilities
|
15,540,156 | 609 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 15) | ||||||||
Stockholders’ equity (deficit)
|
||||||||
Common stock, $0.00001 par value; 400,000,000 shares authorized; 121,909,000 and nil shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
1,219 | — | ||||||
Additional
paid-in
capital
|
50,246,144 | — | ||||||
Accumulated deficit
|
(9,937,384 | ) | (609 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity (deficit)
|
40,309,979 | (609 | ) | |||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity
|
$ | 55,850,135 | — | |||||
|
|
|
|
2020
|
2019
|
|||||||
Revenue
|
||||||||
Digital assets mined
|
$ | 5,972,142 | — | |||||
Cost of Revenue
|
||||||||
Hosting costs
|
2,128,211 | — | ||||||
Depreciation
|
652,765 | — | ||||||
|
|
|
|
|||||
Total cost of revenue
|
2,780,976 | — | ||||||
Gross profit
|
3,191,166 | — | ||||||
Operating expenses
|
||||||||
Share-based compensation
|
1,992,000 | — | ||||||
Management and professional fees
|
104,162 | — | ||||||
Office and administration
|
125,028 | 609 | ||||||
|
|
|
|
|||||
Total operating expenses
|
2,221,190 | 609 | ||||||
Operating income (loss)
|
969,976 | (609 | ) | |||||
Other expenses
|
||||||||
Share-based merger expense
|
10,002,974 | — | ||||||
Interest expense
|
419,121 | — | ||||||
Gain on sale of digital assets
|
(53,518 | ) | ||||||
|
|
|
|
|||||
Total other expenses, net
|
10,368,577 | — | ||||||
Net loss before tax
|
(9,398,601 | ) | (609 | ) | ||||
Income tax expense
|
$ | 538,174 | — | |||||
|
|
|
|
|||||
Net loss
|
$ | (9,936,775 | ) | $ | (609 | ) | ||
|
|
|
|
|||||
Basic and diluted net loss per share
|
($0.46 | ) | $ | nil | ||||
Weighted average number of shares outstanding:
|
||||||||
Basic and diluted
|
21,587,741 | — |
Number of
shares |
Common
stock |
Additional paid
in capital |
Accumulated
deficit |
Total
|
||||||||||||||||
February 19, 2019
|
— | — | — | — | — | |||||||||||||||
Net loss
|
— | — | — | $ | (609 | ) | $ | (609 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2019
|
— | — | — | $ | (609 | ) | $ | (609 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common shares issued in connection with reverse merger (note 3)
|
43,688,944 | $ | 437 | $ | 12,718,245 | — | 12,718,682 | |||||||||||||
Common shares issued in connection with Business Combinations (note 4)
|
71,037,695 | 710 | 34,097,596 | — | 34,098,306 | |||||||||||||||
Common shares issued in connection with asset acquisition (note 5)
|
7,182,361 | 72 | 3,430,303 | — | 3,430,375 | |||||||||||||||
Net loss
|
— | — | (9,936,775 | ) | (9,936,775 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2020
|
121,909,000 | $ | 1,219 | $ | 50,246,144 | $ | (9,937,384 | ) | $ | 40,309,979 | ||||||||||
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
|||||||
Operating activities
|
|
|||||||
Net loss
|
$ | (9,936,775 | ) | $ | (609 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities Digital assets mined
|
(5,972,142 | ) | — | |||||
Gain on sale of digital assets
|
(53,518 | ) | — | |||||
Depreciation
|
652,765 | — | ||||||
Income taxes
|
538,174 | — | ||||||
Share-based compensation
|
1,992,000 | |||||||
Share-based merger expense
|
10,002,974 | — | ||||||
Digital assets receivable
|
(28,579 | ) | — | |||||
Changes in operating assets and liabilities
|
||||||||
Prepaid expenses
|
(246,332 | ) | — | |||||
Accounts payable and accrued liabilities
|
(217,325 | ) | 609 | |||||
|
|
|
|
|||||
Net cash used in operating activities
|
(3,268,758 | ) | — | |||||
Investing activities
|
||||||||
Purchase of mining equipment assets
|
(3,064,216 | ) | — | |||||
Deposits made on mining equipment assets
|
(2,364,135 | ) | ||||||
Sales of digital assets
|
4,615,466 | |||||||
Advances from related parties
|
436,823 | |||||||
Advances to related parties
|
(498,613 | ) | — | |||||
Cash received on acquisition of RME Black 100 (Note 4(a))
|
266,490 | — | ||||||
Cash received on acquisition of RME Black 200 (Note 4(b))
|
152,264 | — | ||||||
Cash received on acquisition of BEP 888 (Note 4(c))
|
794,445 | — | ||||||
Cash received on acquisition of BEP 999 (Note 5)
|
1,150,000 | — | ||||||
Proceeds from BEP 999 subscriptions receivable
|
2,450,000 | — | ||||||
|
|
|
|
|||||
Net cash provided by investing activities
|
3,938,524 | — | ||||||
Financing activities
|
||||||||
Founders’ initial contributions
|
723,921 | — | ||||||
Cash received for common shares issuable
|
6,204,202 | |||||||
Repayments of loan payable
|
(1,338,721 | ) | — | |||||
Proceeds from loan payable
|
2,497,529 | — | ||||||
|
|
|
|
|||||
Net cash provided by financing activities
|
8,086,931 | — | ||||||
|
|
|
|
|||||
Net increase in cash
|
8,756,697 | — | ||||||
Cash, beginning of year
|
— | — | ||||||
|
|
|
|
|||||
Cash, end of year
|
$ | 8,756,697 | $ | — | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information
|
||||||||
Cash paid for interest
|
$ | 415,686 | ||||||
|
|
|||||||
Cash paid for taxes
|
$ | — | ||||||
|
|
1.
|
Organization and description of business
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Use of estimates
|
d) |
Fair Value Measurements
|
• |
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
e) |
Cash
|
f) |
Digital assets
|
g) |
Digital assets receivable
|
h) |
Mining equipment assets
|
i) |
Business combinations and asset acquisitions
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Deferred taxes
|
n) |
Stock compensation
|
o) |
Income Taxes
|
p) |
Loss per common share
|
q) |
Segment reporting
|
r) |
Recently issued and adopted accounting pronouncements
|
3.
|
Reverse merger
|
4.
|
Business combinations
|
a) |
RME Black 100
|
Consideration:
|
||||
30,708,776 common shares valued at $0.48 per share
|
$ | 14,740,213 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 266,490 | ||
Digital assets
|
450,412 | |||
Digital assets receivable
|
10,557 | |||
Prepaid expenses
|
675,323 | |||
Due from related parties
|
26,628 | |||
Mining equipment assets
|
6,852,352 | |||
Accrued liabilities
|
(7,655 | ) | ||
Loan payable
|
(3,292,973 | ) | ||
Deferred tax liability
|
($ | 336,725 | ) | |
|
|
|||
Total identifiable net assets
|
$ | 4,644,409 | ||
|
|
|||
Goodwill on acquisition, not deductible for income tax purposes
|
$ | 10,095,804 | ||
|
|
b) |
RME Black 200
|
Consideration:
|
||||
26,827,730 common shares valued at $0.48 per share
|
$ | 12,877,310 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 152,264 | ||
Digital assets
|
461,788 | |||
Digital assets receivable
|
10,789 | |||
Prepaid expenses
|
674,256 | |||
Due from related parties
|
16,958 | |||
Mining equipment assets
|
6,841,524 | |||
Accrued liabilities
|
(5,770 | ) | ||
Investor draws payable
|
(18,519 | ) | ||
Due to related parties
|
(27,626 | ) | ||
Loan payable
|
(3,540,673 | ) | ||
Deferred tax liability
|
($ | 336,193 | ) | |
|
|
|||
Total identifiable net assets
|
$ | 4,228,798 | ||
|
|
|||
Goodwill on acquisition, not deductible for income tax purposes
|
$ | 8,648,512 | ||
|
|
c) |
BEP 888
|
Consideration:
|
||||
13,501,189 common shares valued at $0.48 per share
|
$ | 6,480,571 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 794,445 | ||
Digital assets
|
81,653 | |||
Digital assets receivable
|
1,052 | |||
Prepaid expenses
|
68,277 | |||
Deposits on mining equipment assets
|
2,723,550 | |||
Mining equipment assets
|
609,842 | |||
Due to related parties
|
(195,336 | ) | ||
Deferred tax liability
|
($ | 29,967 | ) | |
|
|
|||
Total identifiable net assets
|
$ | 4,053,516 | ||
|
|
|||
Goodwill on acquisition, not deductible for income tax purposes
|
$ | 2,427,055 | ||
|
|
5.
|
Asset acquisition
|
Purchase price:
|
||||
7,182,361 common shares
|
$ | 3,430,375 | ||
|
|
|||
Fair value of assets acquired and liabilities assumed:
|
||||
Cash
|
$ | 1,150,000 | ||
Subscription receivable from shareholders
|
2,450,000 | |||
Due to related parties
|
(169,625 | ) | ||
|
|
|||
Total identifiable net assets
|
$ | 3,430,375 | ||
|
|
6.
|
Digital assets
|
Bitcoin
|
||||
Opening balance as of January 1, 2020
|
— | |||
Revenue from Bitcoin mined
|
$ | 5,972,142 | ||
Bitcoin acquired through the business combinations
|
993,853 | |||
Bitcoin sold
|
(4,561,948 | ) | ||
|
|
|||
End balance as of December 31, 2020
|
$ | 2,404,047 | ||
|
|
7.
|
Digital assets receivable
|
8.
|
Prepaid expenses
|
December 31,
2020 |
December 31,
2019 |
|||||||
Prepaid hosting fees (see note 13)
|
$ | 1,622,349 | — | |||||
Other prepaid expenses
|
41,837 | — | ||||||
|
|
|
|
|||||
Total
|
$ | 1,664,186 | — | |||||
|
|
|
|
9.
|
Mining equipment assets
|
Cost
|
||||
Balance, January 1, 2019
|
|
—
|
|
|
Additions
|
|
—
|
|
|
|
|
|||
Balance December 1, 2019
|
|
—
|
|
|
|
|
|||
Additions
|
$ | 3,064,216 | ||
Mining equipment assets acquired through the business combinations
|
14,303,720 | |||
|
|
|||
Balance December 31, 2020
|
$
|
17,367,936
|
|
|
|
|
|||
Accumulated depreciation
|
||||
Balance, January 1, 2019
|
|
—
|
|
|
Additions
|
|
—
|
|
|
|
|
|||
Balance December 31, 2019
|
|
—
|
|
|
|
|
|||
Additions
|
$ | 652,765 | ||
Balance December 31, 2020
|
$
|
652,765
|
|
|
|
|
|||
Net Book value
|
||||
Cost
|
$ | 17,367,936 | ||
Accumulated depreciation
|
(652,765 | ) | ||
|
|
|||
Mining equipment assets, net December 31, 2020
|
$ | 16,715,171 | ||
|
|
10.
|
Accounts payable and accrued liabilities
|
December 31, 2020
|
||||
Accounts payable
|
$ | 10,167 | ||
Accrued liabilities
|
50,389 | |||
|
|
|||
Total
|
$ | 60,556 | ||
|
|
11.
|
Loans payable
|
12.
|
Stockholders’ equity
|
a) |
Authorized
|
b) |
Issued and outstanding
|
i. |
The Company received $723,458 in connection with its initial formation. As a result of the Transaction, the issuance of the 43,688,944 shares of common stock has been presented on the statement of stockholders’ equity to show the retroactive effect of that issuance. The Company also incurred charges of $11,995,224 in connection with a portion of the share issuance being made to individuals with no prior ownership in the entities. (see note 3)
|
ii. |
The Company issued 71,037,695 shares through the business combinations (see note 4).
|
iii. |
The Company entered into subscription agreements for the issuance of 7,182,361 shares through the asset acquisition (see note 5).
|
13.
|
Related party transactions
|
14.
|
Income taxes
|
Current
|
2020
|
2019
|
||||||
Federal
|
$ | 98,626 | — | |||||
State
|
16,938 | — | ||||||
|
|
|
|
|||||
Total current
|
$ | 115,564 | — | |||||
|
|
|
|
Deferred
|
2020
|
2019
|
||||||
Federal
|
$ | 360,668 | — | |||||
State
|
61,942 | — | ||||||
|
|
|
|
|||||
Total deferred
|
422,610 | — | ||||||
|
|
|
|
|||||
Total income tax expense from continuing operations
|
$ | 538,174 | — | |||||
|
|
|
|
2020
|
2019
|
|||||||
(609 | ||||||||
|
|
|||||||
US federal statutory income tax benefit applied to loss before income taxes
|
$ | (1,973,706 | ) | — | ||||
State income taxes, net of federal benefit
|
(338,552 | ) | — | |||||
RME 88
pre-merger
income
|
(100,793 | ) | — | |||||
Transaction expense
|
2,951,225 | — | ||||||
|
|
|
|
|||||
Income tax provision
|
$ | 538,174 | — | |||||
|
|
|
|
2020
|
2019
|
|||||||
Computer servers
|
($ | 742,391 | ) | — | ||||
Prepaid expenses
|
(383,104 | ) | — | |||||
|
|
|
|
|||||
Total deferred tax liabilities
|
($ | 1,125,495 | ) | — | ||||
|
|
|
|
15.
|
Commitments
|
Year ended
|
Year ended
|
|||||||
December 31, 2020
|
December 31, 2019
|
|||||||
Within one year
|
$ | 20,251,566 | — | |||||
Later than one year but not later than five years
|
$ | 66,727,201 | — | |||||
|
|
|
|
|||||
Total
|
$ | 86,978,767 | — | |||||
|
|
|
|
16.
|
Subsequent events
|
Options granted
|
Exercise Price
|
Vesting period
|
Expiration Date
|
Quantity
|
||||||||||||
January 2021
|
$ | 2.25 | Immediate |
Jan-28
|
15,000 | |||||||||||
January 2021
|
$ | 2.25 | 4 years |
Jan-28
|
4,295,000 | |||||||||||
February 2021
|
$ | 2.25 | Immediate |
Feb-28
|
20,000 | |||||||||||
January 2021
|
$ | 3.15 | 4 years |
Jan-28
|
1,360,000 | |||||||||||
March 2021
|
$ | 6.00 | 4 years |
Mar-28
|
565,000 | |||||||||||
March 2021
|
$ | 10.95 | 4 years |
Mar-28
|
1,940,000 | |||||||||||
April 2021
|
$ | 10.95 | 4 years |
Apr-28
|
250,000 | |||||||||||
May 2021
|
$ | 10.95 | 4 years |
May-28
|
170,000 | |||||||||||
June 2021
|
$ | 10.95 | 4 years |
Jun-28
|
250,000 | |||||||||||
July 2021
|
$ | 10.95 | Immediate |
Jul-28
|
196,466 | |||||||||||
|
|
|||||||||||||||
9,061,466 | ||||||||||||||||
|
|
|||||||||||||||
Forfeited | (650,000 | ) | ||||||||||||||
|
|
|||||||||||||||
Total | 8,411,466 | |||||||||||||||
|
|
Shares granted
|
Vesting period
|
Quantity
|
||||||
May 2021
|
4 years | 100,000 | ||||||
June 2021
|
4 years | 1,200,000 | ||||||
June 2021
|
4 years | 1,775,000 | ||||||
June 2021
|
4 years | 25,000 | ||||||
June 2021
|
4 years | 20,000 | ||||||
July 2021
|
4 years | 4,985,000 | ||||||
July 2021
|
Immediate | 30,000 | ||||||
July 2021
|
Immediate | 253,534 | ||||||
|
|
|||||||
8,388,534 | ||||||||
|
|
a) |
On February 11, 2021, the Company entered into an office lease in Dallas, TX effective as of April 1, 2021 for a term of 37 months. Expected rent and operating costs were expected to be approximately $268,000 per year.
|
b) |
On March 16, 2021, the Company entered into an office lease in Austin, TX effective as of May 1, 2021 for a term of 6 months at a cost of $38,000 per month.
|
As of
|
||||||||
June 30,
2021
|
December 31,
2020
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash
|
$ | 552 | $ | 8,757 | ||||
Digital assets
|
43,884 | 2,404 | ||||||
Digital assets receivable
|
74 | 51 | ||||||
Taxes receivable
|
115 | — | ||||||
Prepaid expenses
|
4,039 | 1,664 | ||||||
|
|
|
|
|||||
Total Current Assets
|
48,664 | 12,876 | ||||||
|
|
|
|
|||||
Deposits on mining equipment assets
|
78,071 | 5,087 | ||||||
Property, plant, and equipment, net
|
55,318 | 16,715 | ||||||
Goodwill
|
21,172 | 21,172 | ||||||
|
|
|
|
|||||
Total Assets
|
$ | 203,225 | $ | 55,850 | ||||
|
|
|
|
|||||
Liabilities and Stockholders’ Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$ | 220 | $ | 61 | ||||
Equipment purchase payable
|
21,313 | — | ||||||
Lease termination payable
|
102 | — | ||||||
Accrued interest
|
190 | — | ||||||
Accrued interest, related party
|
83 | — | ||||||
Notes payable
|
24,455 | — | ||||||
Notes payable, related party
|
16,146 | 7,992 | ||||||
Due to related parties
|
97 | 42 | ||||||
Common shares issuable
|
— | 6,204 | ||||||
Taxes payable
|
— | 116 | ||||||
|
|
|
|
|||||
Total Current Liabilities
|
62,606 | 14,415 | ||||||
|
|
|
|
|||||
Deferred tax liability
|
9,903 | 1,125 | ||||||
|
|
|
|
|||||
Total Liabilities
|
72,509 | 15,540 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 6)
|
||||||||
Stockholders’ Equity:
|
||||||||
Common stock; $0.00001 par value; 400,000 shares authorized; 138,078 and 121,909 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
|
1 | 1 | ||||||
Additional paid-in capital
|
131,681 | 50,246 | ||||||
Accumulated deficit
|
(966 | ) | (9,937 | ) | ||||
|
|
|
|
|||||
Total Stockholders’ Equity
|
130,716 | 40,310 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
$ | 203,225 | $ | 55,850 | ||||
|
|
|
|
For the Six Months Ended
June 30,
|
||||||||
2021
|
2020
|
|||||||
Digital asset mining
|
$
|
59,390
|
|
|
208
|
|
||
|
|
|
|
|||||
Total revenue
|
|
59,390
|
|
|
208
|
|
||
Costs of revenue
|
||||||||
Hosting costs
|
|
9,468
|
|
|
117
|
|
||
Depreciation
|
|
4,340
|
|
|
22
|
|
||
|
|
|
|
|||||
Total costs of revenue
|
|
13,808
|
|
|
139
|
|
||
|
|
|
|
|||||
Gross profit
|
|
45,582
|
|
|
69
|
|
||
Operating expenses:
|
||||||||
Wage, benefits, and contractor costs
|
|
7,218
|
|
|
2
|
|
||
Amortization
|
|
60
|
|
|
—
|
|
||
General and administrative
|
|
1,006
|
|
|
—
|
|
||
Loss on impairment of assets
|
|
17,607
|
|
|
—
|
|
||
|
|
|
|
|||||
Total operating expenses
|
|
25,891
|
|
|
2
|
|
||
|
|
|
|
|||||
Operating profit
|
|
19,691
|
|
|
67
|
|
||
|
|
|
|
|||||
Non-operating income (expense), net:
|
||||||||
Gain on sale of digital assets
|
|
145
|
|
|
10
|
|
||
Interest expense
|
|
(2,204
|
)
|
|
—
|
|
||
Loss on termination of lease
|
|
(81
|
)
|
|
—
|
|
||
Miscellaneous income
|
|
135
|
|
|
—
|
|
||
|
|
|
|
|||||
Total non-operating income (expense), net
|
|
(2,005
|
)
|
|
10
|
|
||
|
|
|
|
|||||
Income before income taxes
|
|
17,686
|
|
|
77
|
|
||
Income tax expense
|
|
8,715
|
|
|
-
|
|
||
|
|
|
|
|||||
Net income
|
|
8,971
|
|
|
77
|
|
||
|
|
|
|
|||||
Net income per share:
|
||||||||
Basic
|
$
|
0.07
|
|
$
|
—
|
|
||
|
|
|
|
|||||
Diluted
|
$
|
0.07
|
|
$
|
—
|
|
||
|
|
|
|
|||||
Weighted average shares outstanding:
|
||||||||
Basic
|
|
133,826
|
|
|
—
|
|
||
|
|
|
|
|||||
Diluted
|
|
133,855
|
|
|
—
|
|
||
|
|
|
|
Common Stock
|
Additional Paid-In
Capital |
Accumulated
Deficit |
Total
Stockholders’ Equity |
|||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||
Balance at January 1, 2021
|
121,909 | $ | 1 | $ | 50,246 | $ | (9,937 | ) | $ | 40,310 | ||||||||||
Net income
|
— | — | — | 8,971 | 8,971 | |||||||||||||||
Issuance of common stock for cash and digital assets
|
15,840 | — | 73,719 | — | 73,719 | |||||||||||||||
Repurchase of shares
|
(3,426 | ) | — | — | — | — | ||||||||||||||
Conversion of note payable into common shares
|
635 | — | 2,000 | — | 2,000 | |||||||||||||||
Stock-based compensation from issuance of restricted shares
|
3,120 | — | 1,153 | 1,153 | ||||||||||||||||
Stock-based compensation from issuance of stock options
|
— | — | 4,563 | — | 4,563 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2021
|
138,078 | $ | 1 | $ | 131,681 | ($ | 966 | ) | $ | 130,716 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Common Stock
|
Additional
Paid-In Capital
|
Retained
Earnings (Accumulated Deficit) |
Total
Stockholders’ Equity |
|||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||
Balance at January 1, 2020
|
— | — | $ | — | $ | (1 | ) | $ | (1 | ) | ||||||||||
Net income
|
— | — | — | 77 | 77 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2020
|
— | — | — | 76 | $ | 76 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from Operating Activities:
|
||||||||
Net income
|
$ | 8,971 | 77 | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
4,400 | 22 | ||||||
Stock-based compensation
|
5,716 | — | ||||||
Digital asset mining
|
(59,390 | ) | (208 | ) | ||||
Deferred income taxes
|
8,778 | — | ||||||
Gain on sale of digital assets
|
(145 | ) | (10 | ) | ||||
Loss on impairment of digital assets
|
17,607 | — | ||||||
Loss on termination of lease
|
81 | — | ||||||
Changes in working capital components:
|
||||||||
Prepaid expenses
|
(2,398 | ) | — | |||||
Lease liability
|
9 | — | ||||||
Income taxes payable
|
(231 | ) | — | |||||
Net charges paid through related parties
|
55 | 2 | ||||||
Accrued interest
|
190 | — | ||||||
Accrued interest, related party
|
83 | — | ||||||
Accounts payable and accrued expenses
|
159 | 19 | ||||||
|
|
|
|
|||||
Net cash used in operating activities
|
(16,115 | ) | (98 | ) | ||||
|
|
|
|
|||||
Cash flows from Investing Activities:
|
||||||||
Deposits on mining equipment assets
|
(88,303 | ) | — | |||||
Purchase of property, plant, and equipment
|
(6,335 | ) | (3,064 | ) | ||||
Proceeds from sale of digital assets
|
871 | 213 | ||||||
|
|
|
|
|||||
Net cash used in investing activities
|
(93,767 | ) | (2,851 | ) | ||||
|
|
|
|
|||||
Cash flows from Financing Activities:
|
||||||||
Proceeds from issuances of common stock, net
|
67,068 | — | ||||||
Advances from related parties
|
— | 723 | ||||||
Proceeds from notes payable
|
24,455 | 2,498 | ||||||
Proceeds from notes payable, related party
|
16,146 | — | ||||||
Amounts due from related parties
|
— | (63 | ) | |||||
Repayment of notes payable
|
(5,992 | ) | — | |||||
|
|
|
|
|||||
Net cash provided by financing activities
|
101,677 | 3,158 | ||||||
|
|
|
|
|||||
(Decrease) increase in cash
|
(8,205 | ) | 209 | |||||
Cash - beginning of period
|
8,757 | — | ||||||
|
|
|
|
|||||
Cash - end of period
|
$ | 552 | 209 | |||||
|
|
|
|
|||||
Cash paid for interest
|
$ | 1,931 | — | |||||
Cash paid for taxes
|
$ | 168 | — | |||||
Supplemental disclosure of noncash investing and financing activities:
|
||||||||
Digital assets received for common shares issued
|
$ | 445 | — | |||||
Conversion of notes payable to common shares
|
$ | 2,000 | — | |||||
Issuance of common shares to settle shares issuable
|
$ | 6,204 | — | |||||
Reclassification of miner deposits to fixed assets
|
$ | 15,319 | — | |||||
Equipment purchase payable
|
$ | 21,313 | — | |||||
Recognition of right of use asset and liability
|
$ | 439 | — |
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
3.
|
DIGITAL ASSETS
|
As of
|
||||||||
June 30
|
December 31
|
|||||||
2021
|
2020
|
|||||||
Opening balance
|
$ | 2,404 | $ | — | ||||
Revenue from digital asset mining
|
59,390 | 5,972 | ||||||
Digital assets acquired through business combinations
|
— | 994 | ||||||
Digital assets acquired through issuance of shares
|
445 | — | ||||||
Net digital asset receivable change in revenue
|
(23 | ) | — | |||||
Digital assets sold
|
(726 | ) | (4,562 | ) | ||||
Impairment of digital assets
|
(17,606 | ) | — | |||||
|
|
|
|
|||||
Ending balance
|
$ | 43,884 | $ | 2,404 | ||||
|
|
|
|
4.
|
PROPERTY, PLANT AND EQUIPMENT
|
Cost
|
||||
Balance January 1, 2021
|
$ | 17,368 | ||
Additions: mining equipment assets
|
42,889 | |||
Additions: Office equipment
|
79 | |||
Disposal of furniture
|
(25 | ) | ||
|
|
|||
Balance June 30, 2021
|
$ | 60,311 | ||
|
|
|||
Accumulated depreciation
|
||||
Balance January 1, 2021
|
$ | 653 | ||
Additions: mining equipment assets
|
4,340 | |||
|
|
|||
Balance June 30, 2021
|
$ | 4,993 | ||
|
|
|||
Net Book Value
|
||||
Cost
|
$ | 60,311 | ||
Accumulated depreciation
|
(4,993 | ) | ||
|
|
|||
Balance June 30, 2021
|
$ | 55,318 | ||
|
|
5.
|
NOTES PAYABLE
|
As of
|
||||||||
June 30
|
December 31
|
|||||||
2021
|
2020
|
|||||||
Foundry
|
$ | — | $ | 7,992 | ||||
|
|
|
|
|||||
NYDIG repurchase agreement
|
24,455 | — | ||||||
|
|
|
|
|||||
Core Scientific promissory note
|
16,146 | — | ||||||
|
|
|
|
|||||
Total notes payable, net
|
$ | 40,601 | $ | 7,992 | ||||
|
|
|
|
6.
|
COMMITMENTS AND CONTINGENCIES
|
As of,
|
||||||||
June 30
|
June 30
|
|||||||
2021
|
2020
|
|||||||
Within one year
|
$ | 39,377 | $ | 2,646 | ||||
|
|
|
|
|||||
Later than one year but not later than five years
|
163,076 | 7,095 | ||||||
|
|
|
|
|||||
Total
|
$ | 202,453 | $ | 9,741 | ||||
|
|
|
|
7.
|
STOCKHOLDERS’ EQUITY
|
Number of options
|
Weighted average
exercise price
|
|||||||
Unvested at January 1, 2021
|
— | — | ||||||
Granted
|
10,615,000 | 4.73 | ||||||
Vested
|
(35,000 | ) | 2.25 | |||||
Forfeited
|
(1,900,000 | ) | 2.25 | |||||
Cancelled
|
(250,000 | ) | 3.15 | |||||
|
|
|
|
|||||
Unvested at June 30, 2021
|
8,430,000 | 5.33 | ||||||
|
|
|
|
For the six months
ended June 30, |
||||||||
2021
|
2020
|
|||||||
Net income attributable to common stockholders
|
$ | 8,971 | $ | 77 | ||||
Weighted average common shares outstanding - basic
|
133,826 | — | ||||||
Net income per share – basic
|
$ | 0.07 | $ | — | ||||
Weighted average common shares outstanding – diluted
|
133,855 | — | ||||||
Net income per share – diluted
|
$ | 0.07 | $ | — |
8.
|
INCOME TAXES
|
9.
|
RELATED-PARTY TRANSACTIONS
|
10.
|
SUBSEQUENT EVENTS
|
Options Granted
|
Exercise Price
|
Vesting Period
|
Expiration Date
|
Quantity
|
||||||||||||
July 2021
|
$0.74 | Immediate |
|
December
2028 |
|
287,637 | ||||||||||
July 2021
|
$0.74 | Immediate |
|
September
2029 |
|
6,403 | ||||||||||
July 2021
|
$1.16 | Immediate | July 2030 | 341,111 | ||||||||||||
|
|
|||||||||||||||
Total
|
|
635,151
|
|
|||||||||||||
|
|
Restricted Stock
Units Granted
|
Vesting Period
|
Vesting Notes
|
Expiration Date
|
Quantity
|
||||||||||||
July 2021
|
4 | N/A | 4,985,000 | |||||||||||||
July 2021
|
Immediate | N/A | 283,534 | |||||||||||||
|
|
|||||||||||||||
Total
|
|
5,268,534
|
|
|||||||||||||
|
|
Options Granted
|
Exercise Price
|
Vesting Period
|
Expiration Date
|
Quantity
|
||||||||||||
July 2021
|
$10.95 | Immediate |
|
July
2028 |
|
196,466 | ||||||||||
|
|
|||||||||||||||
Total
|
|
196,466
|
|
|||||||||||||
|
|
Options Granted
|
Exercise Price
|
Vesting Period
|
Forfeiture Date
|
Quantity
|
||||||||||||
April 2021
|
$10.95 | 4 | July 2021 | 250,000 | ||||||||||||
Total
|
|
250,000
|
|
|||||||||||||
|
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 794,445 | ||
Digital assets
|
74,790 | |||
Digital assets receivable
|
1,052 | |||
Prepaid expenses
|
68,277 | |||
|
|
|||
Total current assets
|
938,564 | |||
Deposits on mining equipment assets
|
2,723,550 | |||
Mining equipment assets
|
538,701 | |||
|
|
|||
Total assets
|
$ | 4,200,815 | ||
|
|
|||
Liabilities and members’ equity
|
||||
Current liabilities
|
||||
Due to related parties
|
$ | 195,336 | ||
|
|
|||
Total liabilities
|
195,336 | |||
Commitments and Contingencies (Note 9)
|
||||
Members’ equity
|
||||
Ownership interests
|
5,847,143 | |||
Accumulated deficit
|
(1,841,664 | ) | ||
|
|
|||
Total members’ equity
|
4,005,479 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 4,200,815 | ||
|
|
Revenue
|
||||
Digital assets mined
|
$ | 152,672 | ||
Cost of revenue
|
||||
Hosting costs
|
40,023 | |||
Depreciation
|
7,653 | |||
|
|
|||
Total cost of revenue
|
47,676 | |||
Gross profit
|
104,996 | |||
Operating expenses
|
||||
Management and
start-up
fees
|
193,960 | |||
Compensation expense from ownership interests
|
1,754,143 | |||
Administrative expenses
|
1,630 | |||
|
|
|||
Total operating expenses
|
1,949,733 | |||
Operating loss
|
$ | (1,844,737 | ) | |
Other income
|
||||
Gain on sale of digital assets
|
3,073 | |||
|
|
|||
Net loss
|
$ | (1,841,664 | ) | |
|
|
Ownership
units
|
Ownership
interests
|
Accumulated
deficit
|
Total
|
|||||||||||||
June 1, 2020
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
||||
Issuance of ownership units to managing member
|
30 | 1,754,143 | — | 1,754,143 | ||||||||||||
Issuance of ownership units for cash
|
70 | 4,093,000 | — | 4,093,000 | ||||||||||||
Net loss
|
— | — | (1,841,664 | ) | (1,841,664 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 5,847,143 | $ | (1,841,664 | ) | $ | 4,005,479 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (1,841,664 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities
|
||||
Digital assets mined
|
(152,672 | ) | ||
Compensation expense from ownership interests
|
1,754,143 | |||
Gain on sale of digital assets
|
(3,073 | ) | ||
Digital assets receivable
|
(1,052 | ) | ||
Depreciation
|
7,653 | |||
Net changes in working capital
|
||||
Prepaid expenses
|
(68,276 | ) | ||
Due to related parties
|
193,960 | |||
|
|
|||
Net cash used in operating activities
|
(110,981 | ) | ||
Investing activities
|
||||
Sales of digital assets
|
80,955 | |||
Deposits on mining equipment assets
|
(2,723,550 | ) | ||
Purchase of mining equipment assets
|
(546,354 | ) | ||
|
|
|||
Net cash used in investing activities
|
(3,188,949 | ) | ||
Financing activities
|
||||
Proceeds from private placements
|
4,093,000 | |||
Advances from related parties
|
1,375 | |||
|
|
|||
Net cash provided by financing activities
|
4,094,375 | |||
|
|
|||
Net increase in cash
|
794,445 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 794,445 | ||
|
|
Supplemental disclosure of cash flow information | ||||
Cash paid for interest
|
$ | — | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Fair value measurements
|
• |
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2 — Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
f) |
Cash
|
g) |
Digital assets
|
h) |
Digital assets receivable
|
i) |
Mining equipment assets
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Segment reporting
|
n) |
Stock Compensation
|
o) |
Income Taxes
|
3.
|
Digital assets
|
Bitcoin
|
2020
|
|||
Opening balance at June 1, 2020
|
$ | — | ||
Revenue from Bitcoin mined
|
152,672 | |||
Bitcoin sold
|
(77,882 | ) | ||
|
|
|||
Ending balance as of November 30, 2020
|
$ | 74,790 | ||
|
|
4.
|
Digital assets receivable
|
5.
|
Prepaid expenses
|
November 30,
2020 |
||||
Prepaid hosting fees (see note 7)
|
$ | 68,277 | ||
|
|
|||
Total
|
$ | 68,277 | ||
|
|
6.
|
Mining equipment assets
|
Cost
|
||||
Additions
|
$ | 546,354 | ||
|
|
|||
Balance November 30, 2020
|
$ | 546,354 | ||
|
|
|||
Accumulated depreciation
|
||||
Additions
|
$ | 7,653 | ||
|
|
|||
Balance November 30, 2020
|
$ | 7,653 | ||
|
|
|||
Net Book value
|
||||
Cost
|
$ | 546,354 | ||
Accumulated depreciation
|
($ | 7,653 | ) | |
|
|
|||
Mining equipment assets, net November 30, 2020
|
$ | 538,701 | ||
|
|
7.
|
Due to related parties
|
8.
|
Members’ equity
|
i. |
On June 1, 2020, the Company issued 30 membership units to the managing member to which a charge of $1,754,143 was recorded against compensation expense.
|
ii. |
Between August 26, 2020 and November 9, 2020, the Company raised a total of $4,093,000 in exchange for a total of 70 ownership units.
|
9.
|
Commitments
|
As of
November 30, 2020 |
||||
Within one year
|
$ | 3,233,516 | ||
Later than one year but not later than five years
|
$ | 9,548,122 | ||
|
|
|||
Total
|
$ | 12,781,638 | ||
|
|
10.
|
Subsequent events
|
Opinion
|
on the Financial Statements
|
Basis
|
for Opinion
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 1,150,000 | ||
|
|
|||
Total assets
|
$ | 1,150,000 | ||
|
|
|||
Liabilities and members’ equity
|
||||
Current liabilities
|
||||
Due to related parties
|
$ | 169,625 | ||
|
|
|||
Total liabilities
|
169,625 | |||
Members’ equity
|
||||
Ownership interests
|
3,600,000 | |||
Investors’ equity receivable
|
(2,450,000 | ) | ||
Accumulated deficit
|
(169,625 | ) | ||
|
|
|||
Total members’ equity
|
980,375 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 1,150,000 | ||
|
|
Ownership
units
|
Ownership
interests
|
Accumulated
deficit
|
Total
|
|||||||||||||
November 5, 2020
|
|
—
|
|
$ | — | $ | — | $ | — | |||||||
Issuance of ownership units to managing member
|
30 | — | — | — | ||||||||||||
Issuance of ownership units for cash
|
70 | 3,600,000 | — | 3,600,000 | ||||||||||||
Investors equity receivable
|
— | (2,450,000 | ) | — | (2,450,000 | ) | ||||||||||
Net loss
|
— | — | (169,625 | ) | (169,625 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 2,692,857 | $ | (169,625 | ) | $ | 980,375 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (169,625 | ) | |
Due to related parties
|
169,200 | |||
|
|
|||
Net cash used in operating activities
|
(425 | ) | ||
Financing activities
|
||||
Proceeds from private placements
|
1,150,000 | |||
Advances from related parties
|
425 | |||
|
|
|||
Net cash provided by financing activities
|
1,150,425 | |||
Net increase in cash
|
1,150,000 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 1,150,000 | ||
|
|
|||
Supplemental disclosure of cash flow information | ||||
Cash paid for interest
|
$ | — | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Cash
|
f) |
Income Tax
|
3.
|
Due to related parties
|
4.
|
Members’ equity
|
i. |
In connection with the initial formation and capital raising efforts, the Company issued 30 ownership units to the managing member for no consideration. On December 1, 2020, in connection with the amendment and exchange agreement with Blockcap, Inc., the managing member forfeited these units.
|
ii. |
Between November 22, 2020 and November 30, 2020, the Company issued 70 ownership units for $3,600,000 of which $2,450,000 was outstanding as of November 30, 2020. The outstanding amount was assigned to, and collected by, Blockcap, Inc. in December 2020 (note 5).
|
5.
|
Subsequent events
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 266,490 | ||
Digital assets
|
436,370 | |||
Digital assets receivable
|
10,557 | |||
Due from related parties
|
26,628 | |||
Prepaid expenses
|
675,323 | |||
|
|
|||
Total current assets
|
1,415,368 | |||
Mining equipment assets
|
5,708,446 | |||
|
|
|||
Total assets
|
$ | 7,123,814 | ||
|
|
|||
Liabilities and members’ equity
|
||||
Current liabilities
|
||||
Accrued interest
|
$ | 7,655 | ||
Loan payable
|
3,292,973 | |||
|
|
|||
Total liabilities
|
3,300,628 | |||
Commitments and contingencies (Note 10)
|
||||
Members’ equity
|
||||
Ownership interests
|
4,257,140 | |||
Accumulated deficit
|
(433,954 | ) | ||
|
|
|||
Total members’ equity
|
3,823,186 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 7,123,814 | ||
|
|
2020
|
||||
Revenue
|
||||
Digital assets mined
|
$ | 4,010,167 | ||
Cost of Revenue
|
||||
Hosting costs
|
1,959,327 | |||
Depreciation
|
663,773 | |||
|
|
|||
Total cost of revenue
|
2,623,100 | |||
Gross profit
|
1,387,067 | |||
Operating Expenses
|
||||
Management and professional fees
|
64,389 | |||
Compensation expense from ownership interests
|
1,307,143 | |||
Management and
start-up
fees
|
143,350 | |||
Office and administration fees
|
44,263 | |||
|
|
|||
Total operating expenses
|
1,559,145 | |||
Operating loss
|
($ | 172,078 | ) | |
Other expenses
|
||||
Interest expense
|
414,070 | |||
Gain on sale of digital assets
|
(152,194 | ) | ||
|
|
|||
Total other expenses, net
|
$ | 261,876 | ||
Net loss
|
($ | 433,954 | ) | |
|
|
Ownership
units
|
Ownership
interests
|
Accumulated
deficit |
Total
|
|||||||||||||
April 16, 2020
|
— | $ | — | $ | — | $ | — | |||||||||
Issuance of ownership units to managing member
|
30 | 1,307,143 | — | 1,307,143 | ||||||||||||
Issuance of ownership units for cash
|
70 | 3,050,000 | — | 3,050,000 | ||||||||||||
Members draws
|
— | (100,003 | ) | — | (100,003 | ) | ||||||||||
Net loss
|
— | — | (433,954 | ) | (433,954 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 4,257,140 | ($ | 433,954 | ) | $ | 3,823,186 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (433,954 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities
|
||||
Digital asset mined
|
(4,010,167 | ) | ||
Compensation expense from ownership interests
|
1,307,143 | |||
Gain on sale of digital assets
|
(152,194 | ) | ||
Digital assets receivable
|
(10,557 | ) | ||
Depreciation
|
663,773 | |||
Net changes in working capital
|
||||
Prepaid expenses
|
(675,323 | ) | ||
Accrued liabilities
|
7,655 | |||
|
|
|||
Net cash used in operating activities
|
(3,303,624 | ) | ||
Investing activities
|
||||
Sales of digital assets
|
3,725,991 | |||
Advances to related parties
|
(313,967 | ) | ||
Purchase of mining equipment assets
|
(6,372,219 | ) | ||
|
|
|||
Net cash used in investing activities
|
(2,960,195 | ) | ||
Financing activities
|
|
|||
Proceeds from private placements
|
3,050,000 | |||
Members draws
|
(100,003 | ) | ||
Payments received from related parties
|
287,339 | |||
Repayments of loan payable
|
(1,266,528 | ) | ||
Finance draw on loan payable
|
4,559,501 | |||
|
|
|||
Net cash provided by financing activities
|
6,530,309 | |||
|
|
|||
Net increase in cash
|
266,490 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 266,490 | ||
|
|
|||
Supplemental disclosure of cash flow information
|
||||
Cash paid for interest
|
$ | 406,414 | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Fair value measurements
|
• |
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2—Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3—Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
f) |
Cash
|
g) |
Digital assets
|
h) |
Digital assets receivable
|
i) |
Mining equipment assets
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Segment reporting
|
n) |
Stock compensation
|
o) |
Income taxes
|
3.
|
Digital assets
|
Bitcoin
|
2020
|
|||
Opening balance at April 16, 2020
|
$ | — | ||
Revenue from Bitcoin mined
|
4,010,167 | |||
Bitcoin sold
|
(3,573,797 | ) | ||
|
|
|||
Ending balance as of November 30, 2020
|
$ | 436,370 |
4.
|
Digital assets receivable
|
5.
|
Prepaid expenses
|
November 30, 2020
|
||||
Prepaid hosting fees (see note 9)
|
$ | 675,323 | ||
|
|
|||
Total
|
$ | 675,323 |
6.
|
Mining equipment assets
|
Cost
|
||||
Additions
|
$ | 6,372,219 | ||
|
|
|||
Balance November 30, 2020
|
$ | 6,372,219 | ||
|
|
|||
Accumulated depreciation
|
||||
Additions
|
$ | 663,773 | ||
|
|
|||
Balance November 30, 2020
|
$ | 663,773 | ||
|
|
|||
Net Book value
|
||||
Cost
|
$ | 6,372,219 | ||
Accumulated depreciation
|
(663,773 | ) | ||
|
|
|||
Net mining equipment assets, November 30, 2020
|
$ | 5,708,446 | ||
|
|
7.
|
Loan payable
|
8.
|
Members’ equity
|
i. |
On April 16, 2020, the Company issued 30 ownership units to the managing to which a charge of $1,307,143 was recorded against compensation expense.
|
ii. |
Between April 20, 2020 and May 8, 2020, the Company raised a total of $3,050,000 in exchange for a total of 70 ownership units.
|
iii. |
During the period ended November 30, 2020, members withdrew total funds amounting to $100,003 of their initial investment.
|
9.
|
Related party transactions
|
10.
|
Commitments
|
As of November 30,
2020
|
||||
Within one year
|
$ | 5,361,399 | ||
Later than one year but not later than five years
|
$ | 13,850,281 | ||
|
|
|||
Total
|
$ | 19,211,680 | ||
|
|
11.
|
Subsequent events
|
2020
|
||||
Assets
|
||||
Current assets
|
||||
Cash
|
$ | 152,264 | ||
Digital assets
|
447,397 | |||
Digital assets receivable
|
10,789 | |||
Prepaid expenses
|
674,256 | |||
Due from related parties
|
16,958 | |||
|
|
|||
Total current assets
|
1,301,664 | |||
Mining equipment assets
|
5,760,051 | |||
|
|
|||
Total assets
|
$ | 7,061,715 |
|
|
|
|
|||
Liabilities and equity
|
||||
Current liabilities
|
||||
Accrued liabilities
|
$ | 5,770 | ||
Members’ draws payable
|
18,519 | |||
Due to related parties
|
27,626 | |||
Loan payable
|
3,540,673 | |||
|
|
|||
Total liabilities
|
3,592,588 | |||
Commitments and contingencies (note 10)
|
||||
Members’ equity
|
||||
Ownership interests
|
3,757,140 | |||
Accumulated deficit
|
(288,013 | ) | ||
|
|
|||
Total members’ equity
|
3,469,127 | |||
|
|
|||
Total liabilities and members’ equity
|
$ | 7,061,715 | ||
|
|
2020
|
||||
Revenue
|
||||
Digital assets mined
|
$ | 3,373,890 | ||
Cost of Revenue
|
||||
Hosting costs
|
1,510,439 | |||
Depreciation
|
523,641 | |||
|
|
|||
Total cost of revenue
|
2,034,080 | |||
Gross Profit
|
1,339,810 | |||
Operating expenses
|
||||
Professional fees
|
5,000 | |||
Compensation expense from ownership interests
|
1,157,143 | |||
Management and
start-up
fees
|
165,908 | |||
Office and administration fees
|
14,914 | |||
|
|
|||
Total operating expenses
|
1,342,965 | |||
Operating loss
|
(3,155 | ) | ||
Other expenses
|
||||
Interest expense
|
365,457 | |||
Gain on sale of digital assets
|
(80,599 | ) | ||
|
|
|||
Total other expenses, net
|
284,858 | |||
Net loss
|
$
|
(288,013
|
)
|
Ownership
units |
Ownership
interests |
Accumulated
deficit |
Total
|
|||||||||||||
April 27, 2020
|
— | $ | — | $ | — | $ | — | |||||||||
Issuance of ownership units to managing member
|
30 | 1,157,143 | — | 1,157,143 | ||||||||||||
Issuance of ownership units for cash
|
70 | 2,700,000 | — | 2,700,000 | ||||||||||||
Members draws
|
— | (100,003 | ) | — | (100,003 | ) | ||||||||||
Net loss
|
— | — | (288,013 | ) | (288,013 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
November 30, 2020
|
100 | $ | 3,757,140 | $ | (288,013 | ) | $ | 3,469,127 | ||||||||
|
|
|
|
|
|
|
|
2020
|
||||
Operating activities
|
||||
Net loss
|
$ | (288,013 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities
|
||||
Digital asset mined
|
(3,373,890 | ) | ||
Compensation expense from ownership interests
|
1,157,143 | |||
Gain on sale of digital assets
|
(80,599 | ) | ||
Digital assets receivable
|
(10,789 | ) | ||
Depreciation
|
523,641 | |||
Net changes in working capital
|
||||
Prepaid expenses
|
(674,256 | ) | ||
Members draws payable
|
18,519 | |||
Accrued liabilities
|
5,770 | |||
|
|
|||
Net cash used in operating activities
|
(2,722,474 | ) | ||
Investing activities
|
||||
Advances to related parties
|
(463,911 | ) | ||
Purchase of mining equipment assets
|
(6,283,692 | ) | ||
Sale of digital assets
|
3,007,092 | |||
|
|
|||
Net cash used in investing activities
|
(3,740,511 | ) | ||
Financing activities
|
||||
Proceeds from private placements
|
2,700,000 | |||
Members draws
|
(100,003 | ) | ||
Advances from related parties
|
474,579 | |||
Repayments of loan payable
|
(1,011,621 | ) | ||
Finance draw on loan payable
|
4,552,294 | |||
|
|
|||
Net cash provided by financing activities
|
6,615,249 | |||
|
|
|||
Net increase in cash
|
152,264 | |||
Cash, beginning of period
|
— | |||
|
|
|||
Cash, end of period
|
$ | 152,264 | ||
|
|
|||
Supplemental disclosure of cash flow information
|
||||
Cash paid for interest
|
$ | 359,687 | ||
|
|
|||
Cash paid for taxes
|
$ | — | ||
|
|
|||
Supplemental disclosure of noncash investing activities
|
||||
Digital assets used to pay finance and management fees
|
$ | 233,487 |
1.
|
Nature of operations
|
2.
|
Summary of significant accounting policies
|
a) |
Basis of presentation
|
b) |
COVID-19
|
c) |
Recently issued and adopted accounting pronouncements
|
d) |
Use of estimates
|
e) |
Fair value measurements
|
• |
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
|
• |
Level 2 — Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
• |
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
f) |
Cash
|
g) |
Digital assets
|
h) |
Digital assets receivable
|
i) |
Mining equipment assets
|
j) |
Revenue from contracts with customers
|
• |
Identification of the contract with a customer
|
• |
Identification of the performance obligations in the contract
|
• |
Determination of the transaction price
|
• |
Allocation of the transaction price to the performance obligations in the contract
|
• |
Recognition of revenue when, or as, the performance obligations are satisfied
|
k) |
Cost of Revenue
|
l) |
Depreciation
|
m) |
Segment reporting
|
n) |
Stock compensation
|
o) |
Income Tax
|
3.
|
Digital assets
|
Bitcoin
|
2020
|
|||
Opening balance at April 27, 2020
|
$ | — | ||
Revenue from Bitcoin mined
|
3,373,890 | |||
Bitcoin sold
|
(2,926,493 | ) | ||
|
|
|||
Ending balance as of November 30, 2020
|
$ | 447,397 | ||
|
|
4.
|
Digital assets receivable
|
5.
|
Prepaid expenses
|
November 30,
2020 |
||||
Prepaid hosting fees (see note 9)
|
$ | 674,256 | ||
|
|
|||
Total
|
$ | 674,256 | ||
|
|
6.
|
Mining equipment assets
|
Cost
|
||||
Additions
|
$ | 6,283,692 | ||
|
|
|||
Balance November 30, 2020
|
$ | 6,283,692 | ||
|
|
Accumulated depreciation
|
||||
Additions
|
$ | 523,641 | ||
|
|
|||
Balance November 30, 2020
|
$ | 523,641 | ||
|
|
Net Book value
|
||||
Cost
|
$ | 6,283,692 | ||
Accumulated depreciation
|
($ | 523,641 | ) | |
|
|
|||
Net mining equipment assets, November 30, 2020
|
$ | 5,760,051 | ||
|
|
7.
|
Loan payable
|
8.
|
Members’ equity
|
i. |
On April 27, 2020, the Company issued 30 ownership units to the managing member to which a charge of $1,157,143 was recorded against compensation expense.
|
ii. |
Between April 27, 2020 and May 15, 2020, the Company raised a total of $2,700,000 in exchange for a total of 70 ownership units.
|
iii. |
On November 25, 2020 members withdrew $100,003 of their initial investment of which $18,519 remained payable as of November 30, 2020.
|
9.
|
Related party transactions
|
10.
|
Commitments
|
As of
November 30, 2020 |
||||
Within one year
|
$ | 4,898,297 | ||
Later than one year but not later than five years
|
$ | 12,653,934 | ||
|
|
|||
Total
|
$ | 17,552,231 | ||
|
|
11.
|
Subsequent events
|
Amount
|
||||
SEC registration fee
|
$ | 167,747.78 | ||
Accountants’ fees and expenses
|
100,000.00 | |||
Legal fees and expenses
|
200,000.00 | |||
Printing fees
|
90,000.00 | |||
Miscellaneous
|
50,000.00 | |||
Total expenses
|
$ | 607,747.78 |
(a) |
Exhibits.
|
Incorporated by Reference
|
||||||||||||||||||
Exhibit
|
Description
|
Schedule/
Form |
File
Number |
Exhibits
|
Filing
Date |
|||||||||||||
23.7* | Consent of independent registered public accounting firm of RME Black 200, LLC. | |||||||||||||||||
23.8** | Consent of Cooley LLP (included in Exhibit 5.1). | |||||||||||||||||
24.1* | Power of Attorney (included on signature page). | |||||||||||||||||
101.INS | Inline XBRL Instance Document. | |||||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. | |||||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||||||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||||||||||||
107* | Filing Fee Table |
* |
Filed herewith.
|
** |
To be filed by amendment.
|
# |
Indicates a management contract or compensatory plan, contract or arrangement.
|
† |
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.
|
+ |
Portions of this Exhibit (indicated with [***]) have been omitted as the Registrant has determined that (i) the omitted information is not material and (ii) the omitted information would likely cause competitive harm to the Registrant if publicly disclosed.
|
(a) |
The undersigned registrant hereby undertakes as follows:
|
(1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
(i) |
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
|
(ii) |
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent posteffective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
|
represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; |
(iii) |
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
(2) |
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
(3) |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
(4) |
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
(5) |
That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or our securities provided by or on behalf of the undersigned registrant; and
|
(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
(b) |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the undersigned pursuant to the foregoing provisions, or otherwise, the undersigned has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the undersigned of expenses incurred or paid by a director, officer or controlling person of the undersigned in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the undersigned will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
|
CORE SCIENTIFIC, INC.
|
||
By: |
/s/ Michael Levitt
|
|
Michael Levitt | ||
Chief Executive Officer and
Co-Chair
of the Board of Directors
|
Signature | Title | Date | ||
/s/ Michael Levitt
|
Chief Executive Officer and | February 8, 2022 | ||
Michael Levitt |
Co-Chair
of the Board
(
Principal Executive Officer
|
|||
/s/ Michael Trzupek
|
Executive Vice President and | February 8, 2022 | ||
Michael Trzupek |
Chief Financial Officer
(
Principal Financial Officer
|
|||
/s/ Brian Neville
|
Chief Accounting Officer | February 8, 2022 | ||
Brian Neville |
(
Principal Accounting
Officer
|
|||
/s/ Darin Feinstein
|
Chief Vision Officer and
Co-Chair
of the
|
February 8, 2022 | ||
Darin Feinstein | Board | |||
/s/ Jarvis Hollingsworth
|
Director | February 8, 2022 | ||
Jarvis Hollingsworth |
Signature | Title | Date | ||
/s/ Matt Minnis
|
Director | February 8, 2022 | ||
Matt Minnis | ||||
/s/ Stacie Olivares
|
Director | February 8, 2022 | ||
Stacie Olivares | ||||
/s/ Kneeland Youngblood
|
Director | February 8, 2022 | ||
Kneeland Youngblood |
Exhibit 4.5
EXECUTION VERSION
SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT (this Agreement) is made as of April 19, 2021, by and among Core Scientific Holding Co., a Delaware corporation (the Company), the Guarantors from time to time party hereto, the persons and entities named on the Schedule of Purchasers under the header Initial Purchasers attached hereto as Schedule 2 (individually, an Initial Purchaser and collectively, the Initial Purchasers), each Additional Purchaser from time to time party hereto and U.S. Bank National Association, as note agent (in such capacity, the Note Agent) and as collateral agent for the Secured Parties (in such capacity, the Collateral Agent and, together with the Note Agent, the Agents).
RECITALS
WHEREAS, the Company desires (i) to issue and to sell to the Initial Purchasers, and the Initial Purchasers have agreed to purchase from the Company, on the Initial Closing Date, senior secured convertible promissory notes substantially in the form attached hereto as Exhibit A (each, an Initial Note and collectively, the Initial Notes) and (ii) to issue and to sell to Additional Purchasers on Additional Closing Dates senior secured convertible promissory notes substantially in the form attached hereto as Exhibit A (each, an Additional Note and collectively, the Additional Notes and the Initial Notes, together with the Initial Notes, the Notes), in an aggregate principal amount for all such Notes of up to $215,000,000 on the terms, and subject to the conditions, specified herein; and
WHEREAS, to induce the Purchasers to purchase the Notes, the Note Parties have agreed to execute and deliver, contemporaneously with the issuance, sale and purchase of the Initial Notes on the Initial Closing Date, (i) a Guaranty, pursuant to which each Guarantor will guarantee the Obligations of the Company under the Notes and (ii) a Security Agreement, pursuant to which the Note Parties will grant to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in the Note Parties assets to secure the Obligations or their respective Guaranteed Obligations (as applicable).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the representations, warranties, covenants and conditions set forth below, which represent integral components of the transactions contemplated hereby and shall be fully enforceable by the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Note Parties, the Collateral Agent and each Purchaser, intending to be legally bound, hereby agree as follows:
1. |
DEFINITIONS. |
As used herein, the following terms shall have the meanings set forth below.
(a) Act means the Securities Exchange Act of 1934, as amended.
1
EXECUTION VERSION
(b) Additional Closing Date has the meaning ascribed thereto in Section 4.2.
(c) Additional Note has the meaning ascribed thereto in Section 2.1.
(d) Additional Purchaser has the meaning ascribed thereto in Section 4.2.
(e) Administrative Questionnaire means an Administrative Questionnaire substantially in the form attached hereto as Exhibit G.
(f) Agent-Related Person means the Note Agent and the Collateral Agent, together with their affiliates, officers, directors, employees, agents and attorneys-in-fact of the Agents and their affiliates.
(g) Agents has the meaning ascribed to such term in the preamble to this Agreement.
(h) Asset Disposition means any sale, lease, license, transfer, assignment or other disposition (whether by a single transaction or through series of transactions, and including by means of a merger, consolidation, amalgamation or similar transaction) by the Company or any of its Subsidiaries of any asset or property.
(i) Business Day means a day other than a Saturday, Sunday or other day on which commercial banks in the City of New York or the Principal Office are authorized or required to close.
(j) Capital Lease means any lease of any property by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.
(k) Capital Lease Obligations means, with respect to any Person, all obligations of such Person under Capital Leases.
(l) Capital Stock means (a) any capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest or other equivalent, participation or securities (whether voting or non-voting, whether preferred, common or otherwise, whether certificated or uncertificated, and however designated), and (b) any option, warrant, security, appreciation right, profits interests or other right directly or indirectly convertible into or exercisable or exchangeable for, or otherwise to acquire directly or indirectly, any capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest, participation or security described in clause (a) above (excluding the Notes and any other Indebtedness convertible or exchangeable into any such capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest, participation or security described in clause (a) above unless and to the extent converted or exchanged).
(m) Charter Documents means (i) the articles or certificate of incorporation or formation (as applicable), (ii) the by-laws, operating agreement or limited liability company agreement (as applicable) and (iii) other similar organizational and governing documents of any Person, as amended, restated, supplemented or otherwise modified from time to time.
2
EXECUTION VERSION
(n) Closing Date means the Initial Closing Date or each Additional Closing Date, as the context may require.
(o) Collateral means the Collateral as defined in the Security Agreement and.
(p) Collateral Agent has the meaning ascribed to such term in the preamble to this Agreement.
(q) Collateral Documents means, collectively, the Security Agreement, the Intellectual Property Security Agreements and each other agreement or writing pursuant to which the Note Parties purport to pledge or grant a security interest in any property or assets securing the Obligations or the Guaranteed Obligations, in each case, as amended, restated, supplemented or otherwise modified from time to time.
(r) Company Covered Persons means those persons specified in Rule 506(d)(1) promulgated under the Act; provided, however, that Company Covered Persons do not include (a) any Holder or (b) any person or entity that is deemed to be an affiliated issuer of the Company solely as a result of the relationship between the Company and any Holder.
(s) Contractual Obligations means as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument or arrangement (whether in writing or otherwise) to which such Person is a party or by which it or any of such Persons property is bound.
(t) Conversion Event has the meaning ascribed to such term in the Notes.
(u) Conversion Securities has the meaning ascribed to such term in Section 5.3.
(v) Default means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
(w) Disqualified Capital Stock means any Capital Stock issued by any Person that (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable by such Person at the option of the holder thereof, in whole or in part (other than in connection with an asset sale, change of control or similar event) or (c) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Capital Stock described in this definition, on or prior to, in the case of clause (a), (b) or (c), ninety (90) days after the Maturity Date (as defined in the Notes).
(x) Environmental Laws means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, Licenses, concessions, grants, franchises, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on
3
EXECUTION VERSION
human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water, air or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof, including, without limitation, the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq. (CWA), the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq. (RCRA) and the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (CERCLA).
(y) ERISA means the Employee Retirement Income Security Act of 1974.
(z) ERISA Affiliate means, any person that for purposes of Title I or Title IV of ERISA or Section 412 of the Internal Revenue Code would be deemed at any relevant time to be a single employer or otherwise aggregated with the Company or any of its Subsidiaries under Section 414(b), 414(c), 414(m) or 414(o) of the Internal Revenue Code or Section 4001 of ERISA.
(aa) Event of Default has the meaning ascribed thereto in the Notes.
(bb) Excluded Subsidiary means (i) any Subsidiary that is not a wholly-owned Subsidiary, (ii) any Subsidiary that is not a Material Subsidiary and (iii) any Subsidiary that is (a) a Foreign Subsidiary (as defined in the Security Agreement), (b) a CFC Holdco (as defined in the Security Agreement) or (c) a Subsidiary of a CFC or a CFC Holdco (as defined in the Security Agreement); provided that notwithstanding the foregoing clauses (i) through (iii), the Company may in its sole discretion designate any Excluded Subsidiary as a Guarantor.
(cc) Existing Credit Agreement means that certain Credit and Guaranty Agreement, dated as of May 19, 2020, by and among the Company, Core Scientific, Inc., as borrower, the Subsidiaries (as defined therein) of Core Scientific, Inc. from time to time party thereto, the lenders from time to time party thereto and Silverpeak Credit Partners LP, as administrative agent and as collateral agent.
(dd) GAAP means the United States generally accepted accounting principles in effect as of the date of determination thereof. GAAP will be deemed to treat operating leases and Capital Leases in a manner consistent with the treatment under GAAP as in effect prior to the issuance by the Financial Accounting Standards Board on February 25, 2016 of Accounting Standards Update No. 2016-02.
(ee) Governmental Authority means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
(ff) Guarantee of or by any Person (the guarantor) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
4
EXECUTION VERSION
guaranteeing any Indebtedness or other obligation of any other Person (the primary obligor) in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.
(gg) Guaranteed Obligations has the meaning ascribed thereto in the Guaranty.
(hh) Guarantor means each Subsidiary of the Company party to the Guaranty and each other Subsidiary of a Note Party that becomes a Guarantor under the Note Documents pursuant to Section 6.10.
(ii) Guaranty means the Guaranty, dated as the date hereof, made by the Guarantors in favor of the Collateral Agent, substantially in the form attached hereto as Exhibit C, (as amended, restated, supplemented and/or otherwise modified from time to time).
(jj) Hazardous Materials means (i) any hazardous substance, as defined by CERCLA, (ii) any hazardous waste, as defined by RCRA, (iii) any petroleum product, (iv) any pollutant, as defined by the CWA, or (v) contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law.
(kk) Holders means the holders of the Notes, including the Purchasers. Holder means any of the Holders, individually.
(ll) Indebtedness as applied to any Person, means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables and accounts payable incurred in the ordinary course of business and any deferred compensation, earn-out, purchase price adjustment or other deferred purchase price obligation which is contingently payable based on the achievement of future financial performance); (d) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (e) all obligations in respect of Capital Leases of such Person, (f) all obligations, contingent or otherwise, of such Person in respect of letters of credit, bankers acceptances or similar extensions of credit, (g) all Guarantees of such Person of
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Indebtedness of other Persons that would count as a liability on the balance sheet of such person in accordance with the GAAP, (h) all Indebtedness of a third party secured by any Lien on any property or asset owned or held by such Person, whether or not such Indebtedness has been assumed by such Person, (i) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Disqualified Capital Stock of such Person and (j) all monetary obligations under any receivables factoring, receivables sales, receivable securitization or similar transactions or other Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.
(mm) Initial Closing Date means April 19, 2021.
(nn) Initial Note has the meaning ascribed thereto in Section 2.1.
(oo) Initial Purchaser has the meaning ascribed thereto in the preamble to this Agreement.
(pp) Intellectual Property means all intellectual and similar property of a Person, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software and databases.
(qq) Intellectual Property License has the meaning assigned thereto in the Security Agreement.
(rr) Intellectual Property Security Agreement means the Intellectual Property Security Agreement, dated as the date hereof, made by Core Scientific, Inc. in favor of the Collateral Agent, substantially in the form attached hereto as Exhibit E (as amended, restated, supplemented and/or otherwise modified from time to time).
(ss) Intercreditor Agreement has the meaning ascribed thereto in Section 7.1(a).
(tt) Ledger shall have the meaning ascribed thereto in the Notes.
(uu) Licenses means all licenses, permits, authorizations, determinations, and registrations issued by any Governmental Authority to the Company or any Subsidiary in connection with the conduct of its business.
(vv) Lien means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.
(ww) Material Adverse Effect means, individually or in the aggregate, (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of the Company and its Subsidiaries taken as a whole; (b) a material
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impairment of the rights and remedies of the Collateral Agent or the Purchasers under the Note Documents, or of the ability of the Note Parties to perform its obligations under the Note Documents; (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Note Parties of any Note Document; or (d) a material adverse effect on the Liens in favor of the Collateral Agent (for the benefit of the Secured Parties) on the Collateral or the priority of such Liens.
(xx) Material Subsidiary mean each Subsidiary which, as of the most recent fiscal quarter of the Company, for the period of four consecutive fiscal quarters of the Company then last ended (taken as one accounting period) in respect of which financial statements were (or were required to be) delivered pursuant to Sections 6.1(a) or (b), as applicable (a Test Period), had Total Assets as of the last day of such Test Period that were in excess of 10% of the Total Assets of the Company and its Subsidiaries as of such date.
(yy) Multiemployer Plan means any multiemployer plan as defined in Section 4001(a)(3) of ERISA, which is contributed to by (or to which there is or may be an obligation to contribute of) the Company, any of its Subsidiaries or an ERISA Affiliate, and each such plan for the five-year period immediately following the latest date on which the Company, any of its Subsidiaries or an ERISA Affiliate contributed to or had an obligation to contribute to such plan.
(zz) Note or Notes has the meaning ascribed thereto in the recital to this Agreement.
(aaa) Note Documents means, collectively, this Agreement, each Note, the Guaranty, each Collateral Document, the fee schedule delivered from the Agents to the Company in connection with this Agreement, any Intercreditor Agreement, and any other document, agreement or instrument which has or will be executed by or for the benefit of the Secured Parties in connection with such agreements and the transactions described therein, each as may be amended, restated, supplemented/and or otherwise modified from time to time.
(bbb) Note Party or Note Parties means, individually and collectively, the Company and the Guarantors.
(ccc) Obligations means all advances to, and debts, liabilities (including without limitation (x) prepayment premiums (if any) and other premiums payable under the Notes (any), including all or any portion of the Covenant Amendment Repayment Amount (as defined in the Notes) or the Repayment Amount (as defined in the Notes), if applicable, (y) accrued and unpaid interest and (z) capitalized interest), obligations, fees, expenses, indemnities, covenants and duties of, the Note Parties arising under any Note Document or otherwise with respect to any Note, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Note Parties of any proceeding under any debtor relief laws naming any Note Party as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims or allowable in such proceeding.
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EXECUTION VERSION
(ddd) OFAC means the U.S. Department of the Treasurys Office of Foreign Assets Control.
(eee) PBGC mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor thereto).
(fff) Plan means any employee benefit plan as defined in Section 3 of ERISA (other than a Multiemployer Plan) maintained or contributed to by any Note Party or any ERISA Affiliate or to which a Note Party or any ERISA Affiliate has or may have an obligation to contribute, and each such plan that is subject to Title IV of ERISA for the five-year period immediately following the latest date on which a Note Party or any ERISA Affiliate maintained, contributed to or had an obligation to contribute to (or is deemed under Section 4069 of ERISA to have maintained or contributed to or to have had an obligation to contribute to, or otherwise to have liability with respect to) such plan.
(ggg) Permitted Lien means:
(i) Liens in favor of Collateral Agent for the benefit of Secured Parties granted pursuant to the Note Documents;
(ii) Liens set forth on Schedule 5.17 existing as of the Initial Closing Date;
(iii) Liens for taxes if obligations with respect to such taxes either (i) are not due and payable, (ii) are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and adequate reserves have been made in accordance with GAAP or (iii) could not reasonably be excepted to have a Material Adverse Effect;
(iv) statutory Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by Law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by the Employee Retirement Income Security Act of 1974), in each case incurred in the ordinary course of business (i) for amounts not yet overdue, or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five (5) days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;
(v) Liens incurred in the ordinary course of business in connection with workers compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other indebtedness), so long as (x) no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof and (y) adequate reserves required by GAAP shall have been set aside therefor;
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EXECUTION VERSION
(vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not have a Material Adverse Effect;
(vii) any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder;
(viii) Liens solely on any cash earnest money deposits made by the Company in connection with any letter of intent or purchase agreement permitted hereunder;
(ix) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;
(x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods used in the ordinary course of business;
(xi) any zoning or similar Law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
(xii) licenses of patents, trademarks and other Intellectual Property rights granted by the Company in the ordinary course of business;
(xiii) Liens securing obligations of the Company incurred under leases (but not securing indebtedness for borrowed money) in the form of cash deposits made in the ordinary course of business;
(xiv) Liens arising in favor of depository institutions as a result of set-off rights or otherwise securing obligations owed to such depository institution in connection with bank services provided to the Company or its Subsidiaries;
(xv) Liens on cash deposits securing obligations owed to an issuer of a letter of credit at the request of the Company of any of its Subsidiaries;
(xvi) Liens on any assets of the Note Parties securing any Indebtedness, including Capital Lease Obligations, incurred to finance the acquisition of any fixed or capital assets (including any real property assets) so long as such Liens encumber only the assets acquired or financed with the proceeds of such Indebtedness and do not attach to any other assets of any Note Party;
(xvii) Liens on cash deposit accounts and cash and cash equivalents delivered or pledged to secure letters of credit;
(xviii) Liens on Indebtedness permitted to be incurred in reliance on Section 7.01(a); and
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EXECUTION VERSION
(xix) Liens arising from judgments for the payment of money in circumstances not constituting an Event of Default.
(hhh) Permitted Transferees means, as to any Purchaser that is a limited or general partnership or a trust, to its partners (whether general or limited, including retired partners) or beneficiaries and to affiliated partnerships managed by the same management company or managing (general) partner or by an entity which directly or indirectly controls, is controlled by, or is under common control with, such management company or managing or general partner, or member (or retired member) of such Purchaser in accordance with limited liability company interests.
(iii) Person (regardless of whether capitalized) means any natural person, entity, or association, including without limitation any corporation, partnership, limited partnership, limited liability company, government (or agency or subdivision thereof), trust, joint venture, or proprietorship.
(jjj) Principal Office means the Note Agents office, address or bank account as from time to time designated in writing by the Note Agent to the Company and each Holder, which shall initially be the office designated on the Note Agents signature page to this Agreement.
(kkk) Pro Rata Share means, as to any Secured Party at any time, the ratio at such time of (x) the aggregate principal amount of the Notes held by such Secured Party to (y) the aggregate outstanding principal amount of all Notes issued hereunder.
(lll) Purchasers means the Initial Purchasers and/or the Additional Purchaser, as the context may require (and Purchaser means any one of them).
(mmm) Reportable Event means any of the events set forth in Section 4043(c) of ERISA with respect to a Plan, other than those events as to which the thirty-day notice period is waived under subsection .22, .23, .25, .27, .28, .29, .30, .31, .32, .34, or .35 of PBGC Regulation Section 4043.
(nnn) Required Holders means Holders representing more than fifty percent (50%) of the aggregate outstanding principal amount of the Notes (including all accrued PIK Interest) issued pursuant to this Agreement at the relevant time of reference.
(ooo) Requirements of Law means as to any Person, provisions of the Charter Documents of such Person, or any law, treaty, code, rule, regulation, right, privilege, qualification, License or franchise, or any determination of an arbitrator or a court or other Governmental Authority, in each case applicable to such Person or any of such Persons property or to which such Person or any of such Persons property is subject or pertaining to any or all of the transactions contemplated or referred to in the Note Documents, including, but not limited to the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act and comparable state laws, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the CAN-SPAM Act, the Electronic Fund Transfer Act, the U.S. Card Act, and any similar laws and regulations in Canada, including federal and provincial laws.
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EXECUTION VERSION
(ppp) Responsible Officer means the chief financial officer, general counsel, secretary, controller or other authorized officer of the Note Parties set forth on an incumbency certificate delivered to the Collateral Agent from time to time.
(qqq) Restricted Payment means as to any Person (i) any dividend or other distribution (whether in cash, Capital Stock or other property) with respect to or on account of any shares of any Capital Stock of such Person or (ii) any payment by such Person on account of the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any Capital Stock of such Person or any claim respecting the purchase or sale of any Capital Stock of such Person.
(rrr) Sanctioned Entity means (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.
(sss) Sanctioned Person means a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.
(ttt) Secured Debt Cap has the meaning ascribed thereto in Section 7.1(a).
(uuu) Secured Parties means the Purchasers, Holders, the Agents, and their respective successors and permitted assigns.
(vvv) Securities has the meaning ascribed thereto in Section 8.1.
(www) Security Agreement means the Security Agreement, dated as the date hereof, made by the Note Parties in favor of the Collateral Agent, substantially in the form attached hereto as Exhibit D (as amended, restated, supplemented and/or otherwise modified from time to time).
(xxx) Single Employer Plan shall mean any Plan that is covered by Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, other than a Multiemployer Plan, that is maintained or contributed to by the Company or any Commonly Controlled Entity or to which the Company or a Commonly Controlled Entity has or may have an obligation to contribute, and such plan for the six-year period immediately following the latest date on which the Company or a Commonly Controlled Entity maintained, contributed to or had an obligation to contribute to (or is deemed under Section 4069 of ERISA to have maintained or contributed to or to have had an obligation to contribute to, or otherwise to have liability with respect to) such plan. For the purposes of this definition, Commonly Controlled Entity means a person or an entity, whether or not incorporated, that is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group that includes the Company and that is treated as a single employer under Section 414 of the Code.
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EXECUTION VERSION
(yyy) Solvent means, with respect to any Person, that such Person (i) owns and will own assets the fair saleable value of which are greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it, (ii) has capital that is not unreasonably small in relation to its business as presently conducted or after giving effect to any contemplated transaction and (iii) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
(zzz) Subsidiary means, with respect to any Person, any other Person of which an aggregate of more than fifty percent (50%) of the outstanding Capital Stock having ordinary voting power to elect a majority of the board of directors of such other Person is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or a combination thereof, or with respect to which any such Person has the right to vote or designate the vote of more than fifty percent (50%) of such Capital Stock whether by proxy, agreement, operation of law or otherwise. Unless the context otherwise requires, each reference to a Subsidiary shall mean a Subsidiary of the Company.
(aaaa) Taxes means any present or future United States federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp occupation, premium, windfall profits, environmental (including taxes under former Code §59A), customs duties, capital stock, franchise profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on-minimum, estimated, or other taxes, levies, assessments, fees or other charges imposed by any Governmental Authority, including any interest, penalty, or addition thereto, whether disputed or not.
(bbbb) Total Assets shall mean the total assets of the Company and its Subsidiaries on a consolidated basis, as shown on the applicable consolidated balance sheet of the Company and its Subsidiaries and computed in accordance with GAAP. Total Assets shall be calculated after giving effect to the transaction giving rise to the need to calculate Total Assets.
(cccc) UCC means Uniform Commercial Code.
(dddd) Unfunded Pension Liability of any Plan means the amount, if any, by which the value of the accumulated plan benefits under the Plan, determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions).
(eeee) Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect
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EXECUTION VERSION
thereof, by (ii) the number of years (calculated to the nearest one-twelfth (1/12th)) that will elapse between such date and the making of such payment by (b) the then outstanding principal amount of such Indebtedness.
2. |
TERMS OF THE SECURED CONVERTIBLE PROMISSORY NOTES. |
2.1 The Initial Notes. Subject to the satisfaction (or waiver in accordance with Section 10.9) of the conditions precedent set forth in Section 4.1, the Company shall issue and sell to each Initial Purchaser, and each Initial Purchaser shall purchase from the Company, an Initial Note on the Initial Closing Date in a principal amount equal to the amount opposite such Initial Purchasers name set forth in the Schedule of Purchasers under the header Initial Purchasers attached hereto as Schedule 2. By no later than 11:00 a.m. (New York time) on the Initial Closing Date (i) each Initial Purchaser shall wire transfer same day funds in U.S. dollars, at the Note Agents Principal Office, in the amount of such Initial Purchasers Initial Note and (ii) the Company shall issue and deliver to each such Initial Purchaser an Initial Note in favor of such Initial Purchaser payable in the principal amount of such Initial Purchasers Initial Note.
2.2 The Additional Notes.
(a) Subject to the satisfaction (or waiver in accordance with Section 10.9) of the conditions precedent set forth in Section 4.2, at any time and from time to time after the Initial Closing Date, the Company shall issue and sell to each Person that executes a counterpart signature page to this Agreement in the form attached hereto as Exhibit B (individually, an Additional Purchaser and collectively, the Additional Purchasers), and each such Additional Purchaser shall purchase from the Company, an Additional Note in a principal amount to be mutually agreed between such Additional Purchaser and the Company. Each additional issuance, sale and purchase of Additional Notes as provided in this Section 2.2 shall take place on a date to be mutually agreed by the Company and such Additional Purchaser (each, an Additional Closing Date); provided that (i) each Additional Closing Date shall have occurred on or prior to April 26, 2021, (ii) all issuances, sales and purchases of Additional Notes on an Additional Closing Date shall be made on substantially identical terms and conditions as the Initial Notes, shall, to the extent permitted by law, be fungible for tax purposes with the Initial Notes and may only be amended pursuant to Section 10.9; (iii) the purchase price of each Additional Note shall be increased by the PIK Interest (as defined in the Note) and Cash Interest (as defined in the Note) that has accrued since the Initial Closing Date on the Initial Notes (it being understood and agreed that interest on all the Notes shall accrue PIK Interest and be payable on the same dates) and (iv) in no event shall the initial aggregate principal amount of all Notes issued hereunder exceed $215,000,000.
(b) Any Additional Notes issued, sold and purchased pursuant to this Section 2.2 shall be deemed to be Notes for all purposes under this Agreement. By no later than 11:00 a.m. (New York time) on an Additional Closing Date (i) each Additional Purchaser shall wire transfer same day funds in U.S. dollars, at the Note Agents Principal Office, in the amount of such Additional Purchasers Additional Note and (ii) the Company shall issue and deliver to each such Additional Purchaser an Additional Note in favor of such Additional Purchaser payable in the principal amount of such Additional Purchasers Additional Note. The Schedule of Purchasers may be amended by the Company without the consent of the Purchasers to include any Additional Purchasers upon the execution by such Additional Purchasers of a counterpart signature page hereto in the form attached hereto as Exhibit B.
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EXECUTION VERSION
3. |
SECURITY. |
To secure the performance and payment in full of the Obligations and the Guaranteed Obligations (as applicable), each Note Party has granted to the Collateral Agent, for the benefit of the Secured Parties, a first-priority Lien on the Collateral (subject to Permitted Liens) pursuant to the Security Agreement.
4. |
CONDITIONS PRECEDENT TO EACH CLOSING DATE |
4.1 Conditions Precedent to the Initial Closing Date
The obligation of the Company to issue and to sell, and of each Initial Purchaser to purchase, Initial Notes the Initial Closing Date are subject to the satisfaction (or waiver in accordance with Section 10.9) of the following conditions precedent on or prior to the Initial Closing Date:
(a) receipt by each Purchaser of counterparts to this Agreement, the Notes, the Guaranty, the Security Agreement, any Intellectual Property Security Agreement and each other Collateral Document required to be delivered on the Initial Closing Date, each duly executed by each party thereto;
(b) receipt by each Purchaser of evidence that the Existing Credit Agreement have been or concurrently with the Initial Closing Date will be terminated, all amounts owing thereunder have been or concurrently with the Initial Closing Date will be paid in full and all guarantees thereunder have been or concurrently with the Initial Closing Date will be released;
(c) receipt by each Purchaser of a certificate signed by a Responsible Officer of each Note Party attaching (i) true, correct and complete copies of the Charter Documents of each Note Party as in effect on the Initial Closing Date, certified, with respect to the Charter Documents set forth in clause (ii) of the definition thereof, as of a recent date by the Secretary of State of the state of incorporation or organization (as applicable) of such Note Party, (ii) a certificate of good standing of each Note Party, certified as of a recent date by the Secretary of State of the state of incorporation or organization (as applicable) of such Note Party, (iii) the names of the Responsible Officers of each Note Party authorized to sign the Note Documents and their true signatures and (iv) true, correct and complete copy of resolutions duly adopted by the board of directors or similar governing body of each Note Party authorizing the execution, delivery and performance of this Agreement and the other Note Documents;
(d) receipt by each Purchaser of a certificate of solvency, executed by the chief financial officer (or equivalent) of the Company, substantially in the form attached hereto as Exhibit F;
(e) receipt by each Purchaser of a certificate signed by a Responsible Officer of the Company certifying that the condition specified in clause (l) has been satisfied;
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EXECUTION VERSION
(f) receipt by each Purchaser of the results of customary tax, judgment lien, intellectual property and UCC lien searches with respect to each Note Party, dated a recent date prior to the Initial Closing Date;
(g) the Purchasers and the Agents shall have received an opinion of Cooley LLP, counsel to the Company, in form and substance reasonably satisfactory to the Purchasers;
(h) the filing of a financing statement with respect to each Note Party adequately covering the Collateral in a form appropriate for filing under the UCC in the UCC filing office applicable to each such Note Party;
(i) all authorizations, consents, approvals or permits, if any, of any governmental authority or regulatory body that are required in connection with the lawful issuance and sale of the Notes pursuant to this Agreement shall have been duly obtained and shall be effective on and as of the Initial Closing Date;
(j) there shall be no claim, action, suit, investigation, litigation or proceeding, pending or, to the knowledge of the Company and its Subsidiaries, threatened, in any court or before any governmental authority with respect to the Note Documents or any transactions contemplated thereby or hereby;
(k) the representations and warranties made pursuant to Section 5 hereof shall be true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of the Initial Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of such earlier date;
(l) immediately before and after giving effect to the issuance of the Initial Notes on the Initial Closing Date, no Event of Default shall exist;
(m) the Company shall have paid all outstanding fees and expenses of the Agents, Shipman & Goodwin LLP, counsel to the Agents, and as otherwise required pursuant to Section 10(a);
(n) receipt by the Company and the Note Agent of an Administrative Questionnaire and executed copies of IRS Form W-9 or appropriate IRS Form W-8, as applicable, as well as any reasonably necessary supporting information, certifying that payments to the Initial Purchasers under Initial Notes are exempt from U.S. federal withholding Tax; and
(o) the Company shall have delivered to the Purchasers such other documents and instruments relating to the transactions contemplated by this Agreement as the Purchasers or their counsel may reasonably request (which request shall have been made no later than 3 days prior to the Initial Closing Date).
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EXECUTION VERSION
4.2 Conditions Precedent to each Additional Closing Date. The obligation of the Company to issue and to sell, and of each Additional Purchaser to purchase, Additional Notes on an Additional Closing Date are subject to the satisfaction (or waiver in accordance with Section 10.8) of the following conditions precedent on or prior to each such Additional Closing Date:
(a) each Additional Purchaser shall have received copies of each of the documents set forth in clauses (a) through (h) and clause (o) of Section 4.1 delivered to the Initial Purchasers on the Initial Closing Date;
(b) the representations and warranties made pursuant to Section 5 hereof shall be true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of the applicable Additional Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (or if a representation or warranties is qualified by materiality or material adverse effect, in all respects) on and as of such earlier date;
(c) immediately before and after giving effect to the issuance of Additional Notes on the applicable Additional Closing Date, no Event of Default (as defined in the Notes) shall exist; and
(d) receipt by the Company and the Note Agent of an Administrative Questionnaire and of executed copies of IRS Form W-9 or appropriate IRS Form W-8, as applicable, as well as any reasonably necessary supporting information, certifying that payments to the Additional Purchasers under Additional Notes are exempt from U.S. federal withholding Tax.
5. |
REPRESENTATIONS AND WARRANTIES OF THE NOTE PARTIES |
Each Note Party hereby represents and warrants to each Initial Purchaser and the Agents as of the Initial Closing Date and to each Additional Purchaser and the Agents as of the applicable Additional Closing Date as follows:
5.1 Organization, Good Standing and Qualification.
(a) Organization; Good Standing; Qualification. Each Note Party and each of its Subsidiaries: (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) has all requisite corporate or limited liability company power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (iii) is duly qualified as a foreign entity, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, and (iv) has the corporate or limited liability company power and authority to execute, deliver and perform its obligations under each Note Document to which it is or will be a party and to borrow hereunder. Each Note Partys present name, former names within the last five (5)
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years (if any), owned and leased locations, place of formation, tax identification number and organizational identification number are correctly set forth in Schedule 5.1 hereto, as may be updated by the Company from time to time in a written notice provided to the Collateral Agent after the Initial Closing Date.
(b) Collateral. Except for the Liens granted under the Security Agreement, each Note Party is the sole legal and equitable owner of each item of Collateral in which it purports to grant a security interest under the Security Agreement, having good and marketable title thereto, free and clear of any and all Liens except for Permitted Liens and, upon filing of UCC financing statements in the UCC filing office applicable to such Note Party, the Collateral Agent shall have a perfected security interest in the Collateral, which such security interest shall be senior to all other Liens (other than Permitted Liens) to the extent the same can be perfect by filing.
5.2 Corporate Power; No Contravention. The execution, delivery and performance by the Company and each Subsidiary of each Note Document to which it is or will be a party and the consummation of the transactions contemplated hereby: (a) have been duly authorized by all necessary corporate or limited liability company action; (b) do not and will not contravene or violate the terms of the Charter Documents of the Company or any of its Subsidiaries or any amendment thereto or any material Requirement of Law applicable to the Company or such Subsidiary or the Companys or such Subsidiarys assets, business or properties; (c) do not and will not (i) conflict with, contravene, result in any violation or breach of or default under any material Contractual Obligation of the Company or such Subsidiary (with or without the giving of notice or the lapse of time or both) other than any right to consent, which consents have been obtained, (ii) create in any other Person a right or claim of termination or amendment of any material Contractual Obligation of the Company or such Subsidiary, or (iii) require modification, acceleration or cancellation of any material Contractual Obligation of the Company or such Subsidiary; and (d) do not and will not result in the creation of any Lien (or obligation to create a Lien) against any property, asset or business of the Company or such Subsidiary (other than those securing the Notes).
5.3 Authorization. All corporate action on the part of the Company, its Subsidiaries and their respective directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company and its Subsidiaries and the performance of the Companys obligations hereunder, including the issuance and delivery of the Notes and the reservation of the equity securities issuable upon conversion of the Notes (collectively, the Conversion Securities) has been taken or will be taken prior to the issuance of such Conversion Securities. This Agreement and the Note Documents, when executed and delivered by the Note Parties, shall constitute valid and binding obligations of the Note Parties enforceable in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency, the relief of debtors and general principles of equity and, with respect to rights to indemnity, subject to federal and state securities laws. The Conversion Securities, when issued in compliance with the provisions of this Agreement or the Notes will be validly issued, fully paid and nonassessable and free of any Liens and issued in compliance with all applicable federal and state securities laws.
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5.4 Governmental Consents. All consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any Governmental Authority, required on the part of the Note Parties in connection with the valid execution and delivery of this Agreement and the other Note Documents, the offer, sale or issuance of the Notes and the Conversion Securities issuable upon conversion of the Notes and the consummation of any other transaction contemplated hereby shall have been obtained and will be effective on the Initial Closing Date.
5.5 Compliance with Laws.
(a) No Note Party is in violation of any Requirements of Law, any applicable statute, rule, regulation, order or restriction of any domestic government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties, which violation of which would materially and adversely affect the business, assets, liabilities, financial condition or operations of the Note Parties (individually and in the aggregate).
(b) Neither the Company nor any of its Subsidiaries is registered or required to register as an investment company or a company controlled by an investment company under the Investment Company Act of 1940, as amended. Neither the Company nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). The Company and each of its Subsidiaries has complied in all material respects with applicable provisions of the Federal Fair Labor Standards Act. Neither the Company nor any of its Subsidiaries is a holding company or an affiliate of a holding company or a subsidiary company of a holding company as each term is defined and used in the Public Utility Holding Company Act of 2005. Neither the Companys nor any of its Subsidiaries properties or assets has been used by the Company or such Subsidiary or, to Companys knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. The Company and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted, except to the extent that the failure to obtain, make or give any of the foregoing would not reasonably be expected to have a Material Adverse Effect.
(c) Neither the Company nor any Subsidiary (i) is a Sanctioned Person, (ii) has any assets in Sanctioned Entities, or (iii) derives any operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of the Notes will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.
(d) The Company and its Subsidiaries are in compliance, in all material respects, with any United States Requirements of Law relating to terrorism, sanctions or money laundering (the Anti-Terrorism Laws), including the United States Executive Order No. 13224 on Terrorist Financing (the Anti-Terrorism Order) and the Patriot Act. No part of the proceeds of any Note will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended or any other Anti-Terrorism Law.
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(e) No Note Party and no Subsidiary of any Note Party (i) is listed in the annex to, or is otherwise subject to the provisions of, the Anti-Terrorism Order, (ii) is owned or controlled by, or acting for or on behalf of, any person listed in the annex to, or is otherwise subject to the provisions of, the Anti-Terrorism Order or (iii) commits, threatens or conspires to commit or supports terrorism as defined in the Anti-Terrorism Order.
(f) None of the funds to be provided under this Agreement will be used, directly or indirectly, (i) for any activities in violation of any applicable anti-money laundering, economic sanctions and anti-bribery laws and regulations laws and regulations or (ii) for any payment to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.6 Compliance with Other Instruments. The Company is not in violation or default of any term of its articles of incorporation, or of any provision of any mortgage, indenture or contract to which it is a party and by which it is bound or of any judgment, decree, order or writ, other than such violation(s) that would not have a Material Adverse Effect on the Company. The execution, delivery and performance of this Agreement and the other Note Documents, and the consummation of the transactions contemplated hereby and thereby will not result in any material violation or be in conflict with, or constitute, with or without the passage of time and giving of notice, either a default under any such material provision, instrument, judgment, decree, order or writ or an event that results in the creation of any material Lien upon any assets of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its material assets or properties. Without limiting the foregoing, the Company has obtained all waivers reasonably necessary with respect to any preemptive rights, rights of first refusal or similar rights, including any notice or offering periods provided for as part of any such rights, in order for the Company to consummate the transactions contemplated hereunder without any third party obtaining any rights to cause the Company to offer or issue any securities of the Company as a result of the consummation of the transactions contemplated hereunder.
5.7 Solvency. As of the Initial Closing Date both immediately before and after giving effect to the transactions contemplated by the Note Documents, the Company is individually, and the Company and its Subsidiaries on a consolidated basis are, Solvent.
5.8 Offering. The offer, issue, and sale of the Notes and the Conversion Securities are and will be exempt from the registration and prospectus delivery requirements of the Act, and no qualification under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder is required in connection with, the issuance of the Notes and the Conversion Securities.
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5.9 No Bad Actor Disqualification. The Company has exercised reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the bad actor disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Act (Disqualification Events). To the Companys knowledge, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(e) under the Act.
5.10 Litigation. There are no legal actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Note Party, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority against or affecting the Company or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (b) there is no injunction, writ, temporary restraining order, decree or any order or determination of any nature by any arbitrator, court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of the Note Documents or which relates to the assets or the business of the Company or its Subsidiaries; and (c) there is no litigation, claim, audit, dispute, review, proceeding or investigation currently pending or threatened in writing against the Company or its Subsidiaries for any violation or alleged violation of any Requirements of Law, and neither the Company nor any Subsidiary has received written notice of any threat of any suit, action, claim, dispute, investigation, review or other proceeding pursuant to or involving any Requirements of Law.
5.11 Taxes.
(a) Except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Company and each of its Subsidiaries has timely filed all United States federal and state income and other material tax returns that it was required to file, in each case with due regard for any extension of time within which to file such tax return. Except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, all Taxes due and payable by the Company or its Subsidiaries have been paid, in each case with due regard for any extension of time within which to file such tax return, other than any Taxes the amount or validity of which is being actively contested by Company or its Subsidiaries in good faith and by appropriate proceedings and with respect to which adequate reserves or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. There are no Liens, other than Permitted Liens, on any of the assets of the Company or its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax. To the knowledge of the Company, no claim has been made by a Governmental Authority in a jurisdiction where the Company and its Subsidiaries do not file tax returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction that could reasonably be expected to have a Material Adverse Effect.
(b) There is no action, suit, proceeding, investigation, examination, audit, or claim now pending or, to the knowledge of the Company, threatened in writing by any Governmental Authority regarding any Taxes relating to the Company or its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
5.12 Financial Condition. The Note Parties have furnished the Purchasers with true, correct and complete copies of (i) the audited consolidated balance sheets of the Company and
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its Subsidiaries as of December 31, 2018 and 2019 and the related consolidated statements of income or operations, shareholders equity and cash flows for each such fiscal year and (ii) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2020 and the related consolidated statements of income or operations and cash flows for such fiscal year (collectively, the Financial Statements). The Financial Statements fairly present, in all material respects, the financial position of the Company and its Subsidiaries on a consolidated basis, as of the respective dates thereof, and the results of operations and cash flows thereof, as of the respective dates or for the respective periods set forth therein, and are in conformity with the past historical practices of the Note Parties, with GAAP consistently applied during the periods involved. As of the dates of the Financial Statements, neither the Company nor any Subsidiary had any known obligation, Indebtedness or liability (whether accrued, absolute, contingent or otherwise, and whether due or to become due), which was not reflected or reserved against in the balance sheets which are part of the Financial Statements, except for those incurred in the ordinary course of business and which are fully reflected on the books of account of the Company or its Subsidiaries, as applicable.
5.13 Subsidiaries. Except as set forth on Schedule 5.13, the Company does not have any Subsidiaries.
5.14 Capitalization. As of the Initial Closing Date, without giving effect to the transactions contemplated hereby and in the other Note Documents, the outstanding capitalization of the Company and its Subsidiaries is as set forth on Schedule 5.14. All of the issued and outstanding Capital Stock of the Company has been, and Capital Stock of the Company issuable upon the exercise of outstanding securities when issued will be, duly authorized and validly issued and are fully paid and nonassessable. All outstanding Capital Stock of the Companys Subsidiaries are 100% owned by the Company or one of its Subsidiaries free and clear of all Liens other than Permitted Liens. Except as set forth in the Charter Documents (as in effect on the Initial Closing Date), the issuance of the foregoing Capital Stock is not and has not been subject to preemptive rights in favor of any Person other than such rights that have been waived and will not result in the issuance of any additional Capital Stock of the Company or the triggering of any down-round or similar rights contained in any options warrants, debentures or other securities or agreements of the Company or any of its Subsidiaries. On the Initial Closing Date, except as set forth on Schedule 5.14, there are no outstanding securities convertible into or exchangeable for Capital Stock of the Company or any of its Subsidiaries or options, warrants or other rights to purchase or subscribe for Capital Stock of the Company or any of its Subsidiaries, or contracts, commitments, agreements, understandings or arrangements of any kind to which the Company or any of its Subsidiaries is a party relating to the issuance of any Capital Stock of the Company or any of its Subsidiaries, or any such convertible or exchangeable securities or any such options, warrants or rights. On the Initial Closing Date, except as set forth on Schedule 5.14, neither the Company nor any of its Subsidiaries has any obligation, whether mandatory or at the option of any other Person, at any time to redeem or repurchase any Capital Stock of the Company or any of its Subsidiaries, pursuant to the terms of their respective Charter Documents or otherwise. All securities of the Company and its Subsidiaries (including all shares of the Companys common stock, securities, options and warrants to purchase shares of the Companys common stock (both outstanding as well as those that are no longer outstanding)), have been and were issued and granted pursuant to an exception from the Act and otherwise in compliance, in all material respects, with all securities and other applicable laws.
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5.15 Private Offering. No form of general solicitation or general advertising was used by the Company or its Subsidiaries or their respective representatives in connection with the offer or sale of the Notes to the Purchasers pursuant to this Agreement.
5.16 Brokers, Finders or Similar Fees. Except as set forth in that certain Engagement Letter by and between the Company and GreensLedge Capital Markets LLC, dated on or about of April 19, 2021, there are no brokerage commissions, finders fees or similar fees or commissions payable by the Company or its Subsidiaries in connection with the transactions based on any agreement, arrangement or understanding with the Company or its Subsidiaries or any action taken by the Company or its Subsidiaries. Notwithstanding the foregoing or any other provision herein, no Purchaser shall be liable for any brokerage commission, finders fees or similar fees or commissions.
5.17 Indebtedness. Schedule 5.17 lists the amount of all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under this Agreement) that is in existence immediately before the Initial Closing Date and will remain outstanding after the Initial Closing Date.
6. |
AFFIRMATIVE COVENANTS OF THE NOTE PARTIES |
Each Note Party shall, and shall cause each of its Subsidiaries to:
6.1 Reporting Obligations. Deliver to the Note Agent (for prompt distribution to the Purchasers as specified in the applicable Administrative Questionnaire (or as otherwise specified by a Purchaser to the Note Agent in writing from time to time)):
(a) as soon as available, but not later than 150 days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheets of the Company and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income or operations, shareholders equity and cash flows for such fiscal year, in each case, prepared in accordance with GAAP, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by a report of any Big Four or, upon Required Holders written consent (not to be unreasonably withheld), any other independent certified public accounting firm, which report shall contain an unqualified opinion (without any (A) going concern or like qualification or exception, (B) qualification or exception as to the scope of such audit, or (C) qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment to such item (except in the case of clauses (A) and (B) above as it relates to the Obligations during the last twelve months before the Maturity Date)), stating that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; and
(b) as soon as available, but not later than 45 after the end of each fiscal quarter of each fiscal year (other than the fourth fiscal quarter), the unaudited consolidated balance sheets of the Company and its Subsidiaries as at the end of such fiscal quarter and the
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related unaudited consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, all certified on behalf of the Company by a Responsible Officer of the Company as being complete and correct and fairly presenting, in all material respects, the financial position and the results of operations of the Company and its Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosures.
(c) promptly, and in any event within three (3) Business Days after the Company or any other Note Party becomes aware of or has knowledge of any event or condition that constitutes a Default or Event of Default, provide written notice of such event or condition and a statement of the curative action that the Company proposes to take with respect thereto.
Delivery of any reports, information and documents under this Section 6.2, as well as any other reports, information and documents pursuant to this Agreement, to the Note Agent is for informational purposes only and the Note Agents receipt of the same shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Companys compliance with any of its covenants hereunder (as to which the Note Agent is entitled to rely exclusively on certificates of a Responsible Officer of the Company). The Note Agent shall have no responsibility or liability for the filing, timeliness or content of any report required under this Section 6.2 or any other reports, information and documents required under this Agreement.
6.2 Taxes and Claims.
(a) Timely file complete and correct United States federal and state income and applicable foreign, state and local tax returns required by law, in each case with due regard for any extension of time within which to file such tax returns, and pay when due all Taxes in each case, except to the extent that the failure to so file or pay could not reasonably be expected to have a Material Adverse Effect; provided that the Company and its Subsidiaries shall not be required to pay any such Taxes which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP, which deferment of payment is permissible so long as no Lien, other than a Permitted Lien has been entered and the Companys and its Subsidiaries title to, and its and their right to use, its and their respective Properties are not materially adversely affected thereby.
(b) Pay all stamp, court or documentary, intangible, recording, filing or similar Taxes, if any, that arise solely in connection with the issuance of the Notes except to the extent such Taxes arise as a result of a transfer of a Note to a person other than the initial Holder of the Notes. The obligations of the Company under this Section 6.2(b) shall survive the payment of the Obligations and the termination of the Note Documents.
6.3 Insurance.
(a) Maintain with reputable insurance companies insurance in such amounts and covering such risks as is consistent with sound business practice, including, without limitation, property and casualty insurance on all of its property, general liability insurance, workers compensation insurance and business interruption insurance. Each Note Party will, and will cause each of its Subsidiaries to, furnish to the Collateral Agent upon reasonable request full information as to the insurance carried by it.
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(b) At all times keep its property which is subject to the Lien of the Collateral Agent insured in favor of the Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance. At or prior to the Closing Date, the Company shall furnish certificates of insurance issued on applicable ACORD Forms with respect to property and liability insurance for the Company. Each Note Party will, and will cause each of its Subsidiaries to, notify the Collateral Agent and the Purchasers, promptly, upon receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy.
(c) If the Company shall fail to maintain all insurance in accordance with this Section 6.3 or to timely pay or cause to be paid the premium(s) on any such insurance, or if the Company shall fail to deliver all certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance or pay such premiums, and the Company agrees to reimburse the Purchasers, on demand, for all costs and expenses relating thereto.
6.4 Compliance with Laws. Comply with any and all Requirements of Law to which it may be subject including, without limitation, all Environmental Laws, and obtain any and all Licenses necessary to the ownership of its property or to the conduct of its businesses, except, in each case, where failure to do so could not reasonably be expected to have a Material Adverse Effect. Each Note Party will, and will cause each of its Subsidiaries to, timely satisfy all material assessments, fines, costs and penalties imposed by any Governmental Authority against such Person or any property of such Person except to the extent such assessments, fines, costs, or penalties are being contested in good faith by appropriate proceedings and for which the Company or such Subsidiary has set aside on its books adequate reserves in accordance with GAAP.
6.5 Maintenance of Properties. Do all things necessary to maintain, preserve, protect and keep its property (other than property that is obsolete, surplus, or no longer used or useful in the ordinary conduct of its business) in good repair, working order and condition (ordinary wear and tear and casualty and condemnation excepted), make all necessary and proper repairs, renewals and replacements such that its business can be carried on in connection therewith and be properly conducted at all times and pay and discharge when due the cost of repairs and maintenance to its property, and pay all rentals when due for all real estate leased by such Person.
6.6 Employee Benefit Plans. (a) Keep in full force and effect any and all Plans which are presently in existence or may, from time to time, come into existence under ERISA and not withdraw from any such Plans, unless such withdrawal can be effected or such Plans can be terminated without material liability to the Company or its Subsidiaries, (b) make contributions to all such Plans in a timely manner and in a sufficient amount to comply in all material respects with the standards of ERISA, including, without limitation, the minimum funding standards of ERISA, (c) comply in all material respects with all requirements of ERISA, (d) notify the Purchasers promptly upon receipt by the Company or any Subsidiary of any notice
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concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the termination of any such Plans by the PBGC or the appointment of a trustee to administer such Plans, (c) promptly advise the Purchasers of the occurrence of any Reportable Event or non-exempt prohibited transaction (as defined in ERISA) with respect to any such Plans of which Company becomes aware, and (f) amend any Plan that is intended to be qualified within the meaning of Section 401 of the Code to the extent necessary to keep the Plan qualified and to cause the Plan to be administered and operated in a manner that does not cause the Plan to lose its qualified status.
6.7 Environmental. Use and operate all of its facilities and Properties in material compliance with all Environmental Laws, keep all necessary Licenses in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws.
6.8 Intellectual Property.
(a) Each Note Party will take the steps described in this Section 6.8 with respect to all new or acquired Intellectual Property to which the Company or any Guarantor is now or later becomes entitled that is necessary in the conduct of such Persons business. The Company acknowledges and agrees that the Secured Parties shall have no duties with respect to any Intellectual Property or Licenses of the Company or its Subsidiaries.
(b) The Note Parties shall have the duty, with respect to Intellectual Property that is necessary in the conduct of such Persons business (i) to prosecute diligently any trademark application or service mark application that is part of the trademarks pending as of the date hereof or hereafter, (ii) to prosecute diligently any patent application that is part of the patents pending as of the date hereof or hereafter, and (iii) to take all reasonable and necessary action to preserve and maintain all of the Note Parties trademarks, patents, copyrights, Licenses, and its rights therein, including paying all maintenance fees and filing of applications for renewal, affidavits of use, and affidavits of non-contestability, except in the case of clauses (i) and (ii), where the Company, in its reasonable opinion, determines that the costs for engaging in such prosecution activities exceeds the likely benefit of continued prosecution and, except in the of case (iii), where the Company, in its reasonable opinion, determines that the costs of preserving and maintaining exceeds the value the Company obtains from such preservation and maintenance. Each Note Party will require all employees, consultants, and contractors of such Note Party who were involved in the creation or development of such Intellectual Property to sign agreements containing assignment to the Company or such Guarantor of Intellectual Property rights created or developed and obligations of confidentiality. No Note Party shall abandon any Intellectual Property or License that is necessary in the conduct of the Companys or such Guarantors business.
(c) Each Note Party will (i) promptly file, at such Note Partys sole cost and expense, any application to register any Intellectual Property with the United States Patent and Trademark Office or the United States Copyright Office if such registration is necessary in connection with the conduct of such Note Partys business, (ii) concurrently with the delivery of financial statements pursuant to Sections 6.1(a) or (b), deliver supplements to Schedule 4(c) to the Security Agreement and any other documents reasonably necessary for the Collateral Agent to
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record its security interest in such Intellectual Property with the United States Patent and Trademark Office or the United States Copyright Office and (iii) promptly after the delivery of the documents required by clause (ii) above, upon the reasonable request of the Collateral Agent, execute and deliver in favor of the Collateral Agent one or more Intellectual Property Security Agreements to further evidence the Purchasers Lien on such Note Partys Intellectual Property.
6.9 Use of Proceeds. Use the proceeds of the Notes (i) to fund the purchase of certain equipment and other capital assets, (ii) to prepay in full all amounts owing under the Existing Credit Agreement, (iii) to pay any fees and expenses incurred by the Company in connection with the transactions contemplated hereby and (iv) for general corporate purposes not in violation of any applicable laws. The Company shall not use any proceeds of the sale of the Notes hereunder to, directly or indirectly, purchase or carry any margin stock (as defined in Regulation U) or to extend credit to others for the purpose of purchasing or carrying any margin stock, in either case, in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.
6.10 Subsidiaries. If any Note Party creates, forms or acquires any Subsidiary (other than an Excluded Subsidiary) on or after the date of this Agreement, such Note Party will, and will cause such Subsidiary to, (a) within 30 days (which 30 days may be extended by the Collateral Agent at the direction of the Required Holders) of the creation, formation or acquisition of such new Subsidiary, cause such Subsidiary to join the Guaranty as a Guarantor and the Security Agreement as a Grantor and (b) take all such actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 4.1(c) and 4.1(g) or that are necessary or desirable to protect, evidence or perfect the security interest of the Collateral Agent in a manner similar to the Liens and assets granted by the existing Note parties under the existing Collateral Documents either by executing and delivering to the Collateral Agent a counterpart or supplement to the existing Collateral Documents or such new documents as are necessary or desirable to evidence, grant or perfect a first priority lien in such assets in favor of Collateral Agent, for the benefit of Secured Parties (including, without limitation, any pledges of Capital Stock (other than with respect to Excluded Property (as defined in the Security Agreement)). The Agents shall be authorized to execute and deliver such documents upon receipt of a certificate from a Responsible Officer of the Borrower stating that such documents are authorized or permitted under the Note Documents.
6.11 Piggyback Registration Rights. The Company shall provide the Holders of the Notes with customary piggyback registration rights (with respect to the shares of Common Stock issued upon conversion of the Notes) on all registration statements of the Company, subject to the right, however, of the Company and its underwriters to reduce the number of shares proposed to be registered at the underwriters discretion.
6.12 Further Assurances. Each Note Party will take any action reasonably requested by any Holder in order to effectuate the purposes and terms contained in this Agreement or any other Note Document.
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7. |
NEGATIVE COVENANTS OF THE NOTE PARTIES |
Each Note Party shall not, and shall cause each of its Subsidiaries not to:
7.1 Liens, Restricted Payments and Dispositions. Prior to the occurrence of a Conversion Event, so long as the Obligations remain outstanding:
(a) Liens. Create, assume or suffer to exist any Liens on any assets of the Note Parties securing debt for borrowed money in excess of an amount at any time outstanding equal to the greater of (x) the sum of (I) the aggregate principal amount of the Notes at any time outstanding (disregarding, for the purposes of this clause (I) any and all PIK Interest (as defined in the Notes) that has been added to the aggregate principal amount of the Notes) plus (II) $50,000,000 and (y) $265,000,000 (such clause (y), the Secured Debt Cap); provided that (x) in no event shall the aggregate principal amount of the Notes at any time outstanding (disregarding, for the purposes of this proviso any and all PIK Interest (as defined in the Notes) that has been added to the aggregate principal amount of the Notes) exceed at any time $215,000,000, (y) the Collateral Agent and the authorized representative with respect to any Indebtedness that is secured on a pari passu basis with the Liens on the Collateral securing the Obligations that is permitted to be secured in reliance on this clause (a) shall have entered into an intercreditor agreement providing for equal and ratable lien priority and perfection for the holders and providers of such Indebtedness at the direction of and in form and substance reasonably satisfactory to Required Holders (the Intercreditor Agreement) and (z) notwithstanding the foregoing, the Note Parties shall be permitted to any incur letters of credit and any Indebtedness, including Capital Lease Obligations, incurred to finance the acquisition of any fixed or capital assets (including, for the avoidance of doubt, any real property assets) so long as such Liens shall encumber only the assets acquired or financed with the proceeds of such Indebtedness (or, in the case of any letters of credit, cash collateral) and do not attach to any other assets of any Note Party, which letters of credit and Indebtedness set forth in this clause (z) shall, for the avoidance of doubt, be excluded from the calculation of the Secured Debt Cap.
(b) Restricted Payments.
(i) Pay or make any Restricted Payment to its direct or indirect equityholders; provided that, the foregoing shall not restrict or prohibit any Subsidiary from paying or making any Restricted Payments, directly or indirectly, to the Company, and shall not restrict or prohibit any Restricted Payments, directly or indirectly, from the Company to its direct or indirect equityholders at such times and in such amounts as are necessary to permit:
(1) such equityholder (A) to pay general administrative costs and expenses (including audit and tax fees payable to third party auditors and tax advisors, customary compensation and reasonable costs and expenses of the board of directors or similar managing body of such entity incurred in the ordinary course of business, and franchise taxes and other fees, taxes and expenses required to maintain such entitys existence), (B) to discharge its, its Subsidiaries and its direct and indirect owners income tax liabilities and (C) in the case that the Company is treated as a flow-through entity for U.S. income tax purposes, its direct and indirect owners to discharge their respective U.S. federal, state and local and non-U.S. income tax obligations associated with their ownership of the Company, in each case, so long the amount of any such Restricted Payment is applied for such purpose; and
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(2) (x) purchases or cash payments in lieu of fractional shares of Capital Stock arising out of stock dividends, splits, combinations or conversions of Capital Stock in the ordinary course of business and (y) purchases or cash payments in lieu of fractional shares upon conversion of the Notes.
(ii) From and after the occurrence of a Conversion Event, any Restricted Payments made or paid to the direct or indirect equityholders of the Company (other than the Restricted Payments of the type referred to in the proviso to clause (i) above) shall also be made or paid to the Holders in accordance with their Pro Rata Share of the Notes on an as-converted basis as if such Notes had been converted pursuant to their terms at the time of the applicable Restricted Payment.
(c) Asset Dispositions. Consummate any Asset Dispositions; provided that the foregoing shall not restrict or prohibit (A) sales of inventory in the ordinary course of business; (B) the use of cash or Cash Equivalents in a manner not prohibited by the Note Documents; (C) licenses, sublicenses, leases or subleases granted to third parties in the ordinary course of business not interfering with the business of the Company and its Subsidiaries and which do not materially impair the value of the property so licensed, sublicensed, leased or subleased; (D) dispositions of obsolete, damaged, surplus or worn-out or no longer used or useful equipment; (E) the lapse, abandonment or other dispositions of Intellectual Property that is, in the reasonable business judgment of the Company, no longer economically practicable or commercially desirable to maintain; (F) dispositions by (1) any Subsidiary to the Company, (2) the Company to any Note Party, (3) any Subsidiary to any Note Party or (4) any Subsidiary that is not a Note Party to any other Subsidiary that is not a Note Party; (G) dispositions resulting from any casualty or property losses or condemnation or similar proceeding of, any property or asset of the Company or any of its Subsidiaries; (H) the sale or other disposition of any assets or property of the Company not constituting Collateral; (I) any Asset Disposition so long as such Asset Disposition is made for fair market value; (J) any individual Asset Disposition so long as the consideration therefor does not exceed $1,000,000; and (K) any other Asset Dispositions to a non-affiliated third party so long as the aggregate consideration therefor does not exceed $10,000,000 per fiscal year; provided, further, that notwithstanding the foregoing, any Asset Disposition described in the foregoing clause (K) shall be permissible notwithstanding the fact that the counterparty is an affiliate or a Subsidiary of the Company so long as such Asset Disposition is on fair and reasonable terms no less favorable to the Company or such affiliate or Subsidiary than would be obtainable on comparable arms length transaction with a non-affiliated third party.
7.2 Issuances of Equity. Except to the extent permitted by Section 7.1(c), no Subsidiary of the Company shall issue or sell Capital Stock in such Subsidiary.
7.3 Modifications of Charter Documents. The Company will not permit, and will cause each of its Subsidiaries not to permit, such Persons Charter Documents to be amended or modified in any way that could reasonably be expected to materially or adversely affect the interests of the Holders in their capacity as Secured Parties (and not, for the avoidance of doubt, as holders of Capital Stock of the Company).
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7.4 Compensation or Credit Support. Other than (x) to consenting or approving Holders in connection with a consent or amendment in accordance with Section 10.9 to the extent all Holders are afforded an opportunity to enter into such consent or amendment or (y) in connection with the issuance of warrants to non-consenting Holders pursuant to Section 1(b)(i)(1) of the Notes, the Company shall not enter into any arrangement with any Holder for the purposes of providing additional compensation (in the form of interest, fees or otherwise) or credit support (in the form of additional collateral or otherwise) to such Holder in connection with the Notes without providing such additional compensation or credit support for the ratable benefit of all Holders.
8. |
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS |
Each Initial Purchaser hereby represents and warrants as of the Initial Closing Date, and each Additional Purchaser hereby represents and warrants as of the applicable Additional Closing Date as follows:
8.1 Purchase for Own Account. Each Purchaser represents that it is acquiring a Note and the Conversion Securities (collectively, the Securities) solely for its own account and beneficial interest for investment and not for sale or with a view to distribution of the Securities or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention.
8.2 Information and Sophistication. Without lessening or obviating the representations and warranties of the Note Parties set forth in Section 5 hereof or in any other Note Document or the right of such Purchaser to rely thereon, each Purchaser hereby: (i) acknowledges that it has received all the information it has requested from the Company and it considers necessary or appropriate for deciding whether to acquire the Securities, (ii) represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and to obtain any additional information necessary to verify the accuracy of the information given the Purchaser, and (iii) further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.
8.3 Ability to Bear Economic Risk. Each Purchaser acknowledges that investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
8.4 Further Limitations on Disposition. Without in any way limiting the representations set forth above, each Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
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(b) the Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Act or any applicable state securities laws, provided that no such opinion shall be required for dispositions in compliance with Rule 144, except in unusual circumstances.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by such Purchaser to Permitted Transferees, or transfers by gift, will or intestate succession to any spouse or lineal descendants or ancestors of any Purchaser who is an individual, if all transferees agree in writing to be subject to the terms hereof to the same extent as if they were Purchasers hereunder
8.5 Accredited Investor Status. Each Purchaser is an accredited investor as such term is defined in Rule 501 under the Act.
8.6 No Bad Actor Disqualification. Each Holder represents and warrants that neither (A) such Holder nor (B) any entity that controls such Holder or is under the control of, or under common control with, such Holder, is subject to any Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Act and disclosed in writing in reasonable detail to the Company. Each Holder represents that such Holder has exercised reasonable care to determine the accuracy of the representation made by such Holder in this paragraph, and agrees to notify the Company if such Holder becomes aware of any fact that makes the representation given by such Holder hereunder inaccurate.
8.7 Foreign Investors. If a Holder is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the Code)), such Holder hereby represents that he, she or it has satisfied itself as to the full observance of the laws of the Holders jurisdiction in connection with any invitation to subscribe for the Securities or any use of its Note, including (A) the legal requirements within the Holders jurisdiction for the purchase of the Securities, (B) any foreign exchange restrictions applicable to such purchase, (C) any governmental or other consents that may need to be obtained, and (D) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities. The Holders subscription, payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Holders jurisdiction.
8.8 Forward-Looking Statements. With respect to any forecasts, projections of results and other forward-looking statements and information provided to a Holder, such Holder acknowledges that such statements were prepared based upon assumptions deemed reasonable by the Company at the time of preparation. There is no assurance that such statements will prove accurate, and the Company has no obligation to update such statements.
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8.9 GreensLedge as Placement Agent. Each Purchaser represents, acknowledges and agrees that: (A) GreensLedge Capital Markets LLC (GreensLedge) has acted as the Companys placement agent for the Securities, (B) such Purchaser is not relying on the advice or recommendations of GreensLedge (including any affiliate, agent, advisor or representative thereof) in connection with such Purchasers purchase of Securities, (C) GreensLedge is not acting as an underwriter or initial purchaser with respect to any Securities, (D) GreensLedge has no responsibility with respect to any marketing or other disclosure documents relating to the Securities (or the completeness of any thereof) furnished to such Purchaser, (E) GreensLedge has not made, and will not make, any representation or warranty with respect to the Company or any Securities (and such Purchaser will not rely on any statements made by GreensLedge, orally or in writing, to the contrary) and (F) GreensLedge and/or any affiliate or employee thereof may purchase or otherwise invest in the Securities.
8.10 Further Assurances. Each Purchaser agrees and covenants that at any time and from time to time it will promptly execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Agreement and to comply with state or federal securities laws or other regulatory approvals.
9. |
THE AGENTS |
9.1 Appointment and Authorization of the Agents. Each Purchaser hereby irrevocably appoints, designates and authorizes the Note Agent to act as the note agent under the Note Documents and the Collateral Agent to act as the collateral agent under the Note Documents and to act as the agent of (and to hold any security interest created by any Note Document for and on behalf of or on trust for) such Purchaser for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by the Company to secure any of the Obligations, and to take such other action on its behalf in accordance with the provisions of this Agreement and each other Note Document and to exercise such powers and perform such duties, in each case as are expressly delegated to the Agents by the terms of this Agreement or any other Note Document, together with such powers and discretion as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Note Document, the Agents shall have no duties or responsibilities, except those expressly set forth herein, nor shall the Agents have or be deemed to have any fiduciary relationship with any Purchaser or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Note Document or otherwise exist against the Agents. Without limiting the generality of the foregoing sentence, the use of the term agent herein and in the other Note Documents with reference to the Agents is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. Without limiting the generality of the foregoing, the Purchasers hereby expressly authorize the Collateral Agent to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Note Documents and acknowledge and agree that any such action by Collateral Agent shall bind the Purchasers. Whether or not expressly stated in any Note Document, the rights, privileges and
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immunities of the Agents shall be automatically incorporated by reference therein. Whether or not a party thereto, the Agents shall be express third party beneficiaries of the Notes, including without limitation the payment waterfall set forth therein.
9.2 Liability of Agents. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Note Document or the transactions contemplated hereby, or (b) be responsible in any manner to any Purchaser for any recital, statement, representation or warranty made by the Company or any officer thereof, contained herein or in any other Note Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Note Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Note Document, or the creation, perfection, maintenance of perfection or priority of any Lien or security interest created or purported to be created under the Note Documents, the convertibility of the Notes and the validity or the sufficiency of the Equity Securities (as defined in the Note), or for any failure of the Company or any other party (other than Agents) to any Note Document to perform its obligations hereunder or thereunder, except to the extent such loss resulted from the gross negligence or willful misconduct of such Agent-Related Person, as determined by a final nonappealable order of a court of competent jurisdiction. The Note Agent shall have no obligation to monitor the Ledger in the absence of being providing such by the Company in accordance with the terms of the Notes, and may, in its sole discretion either: (i) conclusively rely on the Ledger most-recently delivered to it, (ii) conclusively rely on a statement by a Holder as to the outstanding principal amount of Notes held by it, or (iii) refrain from taking any action until the Note Agent receives a current Ledger from the Company. No Agent-Related Person shall be under any obligation to any Purchaser or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Note Document, or to inspect the properties, books or records of the Company or any affiliate thereof.
The Agents shall not have any duties or obligations except those expressly set forth in the Note Documents. Without limiting the generality of the foregoing, (i) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing and (ii) the Agents shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that Collateral Agent is instructed in writing to exercise by the Required Holders (or such other requisite number or percentage of Holders as provided in Section 10.9).
In no event shall the Agents be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, epidemics, pandemics, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility, it being understood that the Agents shall use reasonable best efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
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9.3 Reliance by the Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, facsimile or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agents. The Agents shall be fully justified in failing or refusing to take any action under any Note Document unless it shall first receive such advice or concurrence of the Required Holders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Holders against any and all loss, liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Note Document in accordance with a request or consent of the Required Holders (or such greater number of Holders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the of the same; provided that the Agents shall not be required to take any action that, in its opinion or in the opinion of its counsel, may expose the Agents to liability or that is contrary to any Note Document or applicable law.
9.4 Notice of Default. The Agents shall not be deemed to have knowledge or notice of the occurrence of any Event of Default, unless the Agents shall have received written notice from a Purchaser referring to this Agreement, describing such Event of Default and stating that such notice is a notice of event of default. The Agents shall take such action with respect to any Event of Default as may be directed by the Required Holders in accordance with the terms of the Notes; provided that unless and until the Agents has received any such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Holders.
9.5 Agents Reimbursement. Each of the Holders severally agrees to reimburse the Agents, in accordance with such Holders Pro Rata Share, for any reasonable and documented out-of-pocket expenses not reimbursed by the Company (without limiting the obligation of the Company to make such reimbursement pursuant to Section 10.10): (a) for which the Agents are entitled to reimbursement by the Company under this Agreement or any Note Document and (b) after the occurrence and during the continuance of an Event of Default, for any other reasonable and documented expenses incurred by the Agents on the Holders behalf in connection with the enforcement of the Holders rights under this Agreement or any Note Document; provided, however, that (x) the Agents shall not be reimbursed for any such expenses arising as a result of its gross negligence or willful misconduct, as determined by a final nonappealable order of a court of competent jurisdiction and (y) in the event that the Company reimburses the Agents for any such reasonable and documented out-of-pocket expenses, any corresponding amounts previously reimbursed by the Holders to the Agents will be promptly returned to such Holders in accordance with their Pro Rata Share.
9.6 Indemnification. Each of the Holders shall severally indemnify the Agents and their officers, directors, employees, agents, attorneys, accountants, consultants and controlling Persons (to the extent not reimbursed by or on behalf of the Company pursuant to Section 10.10 and without limiting the obligations of the Company to do so), in accordance with their
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respective Pro Rata Share, from and against any and all liabilities, obligations, damages, penalties, actions, judgments, suits, losses (including accrued and unpaid Agents fees), and reasonable and documented costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Agents or such Persons relating to or arising out of this Agreement, any Note Document, the transactions contemplated hereby or thereby, or any action taken or omitted by the Agents in connection with any of the foregoing; provided, however, that the foregoing shall not extend to actions or omissions to the extent arising from gross negligence or willful misconduct of the Agents, as determined by a final nonappealable order of a court of competent jurisdiction.. The Agents shall not be under any obligation to exercise any of the rights or powers vested in it by this Agreement at the request, order or direction of any of the Holders, pursuant to any provision of this Agreement, unless the Required Holders shall have offered (and, if requested, provided) to the Agents security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred by it therein or thereby. The undertaking in this Section 9.6 shall survive the payment of all other Obligations and the resignation of the Agents.
9.7 Collateral Matters. The Purchasers irrevocably agree that any Lien on any property granted to or held by the Collateral Agent under any Note Document for the benefit of the Secured Parties shall be automatically released (i) upon payment in full of all Obligations (it being understood and agreed that the conversion in full of a Note by a Holder shall be deemed, for purposes of this Section 9.6, to be a repayment of the entire outstanding principal amount (including all capitalized interest) of such Note together with any unpaid accrued interest thereon on the date of such conversion), (ii) subject to Section 10.9, if the release of such Lien is approved, authorized or ratified in writing by the Purchasers or (iii) upon the sale, transfer or other disposition of any Collateral that is not prohibited by the Note Documents. Upon request by the Collateral Agent at any time, the Purchasers will confirm in writing the Collateral Agents authority to release particular types or items of property. In each case as specified in this Section 9.7, the Collateral Agent will promptly (and each Purchaser irrevocably authorizes the Collateral Agent to), at the Companys expense, execute and deliver to the Company such documents as the Company may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Note Documents. In connection with any such release, the Collateral Agent shall be entitled to a certificate of a Responsible Officer of the Company stating that such release is authorized and permitted by the Note Documents, upon which the Collateral Agent may conclusively rely. Each party to this Agreement acknowledges and agrees that the Agents shall not have an obligation to file financing statements, amendments to financing statements, or continuation statements, or to perfect or maintain the perfection of the Collateral Agents Lien on the Collateral.
9.8 Successor Agents. The Agents may resign as Agents upon fifteen (15) days notice to the Holders. If an Agent resigns under this Agreement, the Holders shall unanimously appoint a successor representative for the Holders. If no successor representative is appointed prior to the effective date of the resignation of the Agent, the resigning Agent may appoint, after consulting with the Holders and the Company, a successor agent. Upon the acceptance of its appointment as successor representative hereunder, such successor representative shall succeed to all the rights, powers and duties of the retiring Agent, the term Agents shall mean such successor representative and the retiring Agents appointment, powers and duties as Agents shall be terminated. After any retiring Agents resignation hereunder as Agent, the provisions of this Section 9 and Section 10 shall inure to its benefit as to any actions taken or omitted to be taken
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by it while it was Agent under this Agreement. If no successor representative has accepted appointment as Agent by the date which is fifteen (15) days following a retiring Agents notice of resignation, the retiring Agents resignation shall nevertheless thereupon become effective and the Holders shall perform all of the duties of the Agents hereunder until such time, if any, as the Holders appoint a successor representative as provided for above.
9.9 Intercreditor Agreement. The Collateral Agent is hereby authorized to enter into an Intercreditor Agreement pursuant to Section 7.1(a), and the parties hereto acknowledge that such Intercreditor Agreement is binding upon them. Each Secured Party hereby (a) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement, (b) authorizes and instructs the Collateral Agent, without any further consent of such Secured Party, to enter into the Intercreditor Agreement provided by the Company and accompanied by the certificate specified in Section 7.1(a) and to subject the Liens on the Collateral securing the Obligations to the provisions thereof and (c) authorizes and instructs the Collateral Agent to execute and deliver on behalf of the Secured Creditors any amendment (or amendment and restatement) or modification to the Intercreditor Agreement to provide for the incurrence of any Indebtedness permitted hereunder or such other amendments as the Required Holders may specify in writing to the Collateral Agent.
10. |
MISCELLANEOUS |
10.1 Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, expressed or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
10.2 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
10.3 JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OTHER NOTE DOCUMENT AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE COLLATERAL AGENT, ANY PURCHASER OR ANY HOLDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
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JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE COLLATERAL AGENT, ANY PURCHASER, ANY HOLDER OR ANY OF THEIR AFFILIATES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN THE BOROUGH OF NEW YORK, NEW YORK.
10.4 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE PURCHASERS, THE HOLDERS AND THE COLLATERAL AGENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
10.5 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of this Agreement shall be interpreted as if such provision were so excluded, and (c) the balance of this Agreement shall be enforceable in accordance with its terms.
10.6 Counterparts. This Agreement may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute a single contract. Any counterpart of a signature page to this Agreement may be delivered by facsimile, electronic mail (including .pdf or .tif) or by means of an electronic signature complying with the U.S. federal ESIGN Act of 2000 or the New York Electronic Signature and Records Act or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes to the fullest extent permitted by applicable law. The Note Documents and all notices, approvals, consents, requests and any communications hereunder must be in writing (provided that any such communication sent to Agents hereunder must be in the form of a document that is signed manually or by way of a digital signature provided by DocuSign (or such other digital signature provider as specified in writing to the Agents by the authorized representative), in English. The Company agrees to assume all risks arising out of the use of using digital signatures and electronic methods to submit communications to the Note Agent, including without limitation the risk of the Note Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties.
10.7 Headings; Interpretation. Paragraph headings used in this Agreement are included for convenience of reference only and will not modify the provisions that they precede or affect the interpretation of this Agreement or any other Note Document. The term including shall be interpreted to mean including but not limited to. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
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10.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient (and if not, then on the next Business Day), (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Notices to the Agents shall be effective upon actual receipt thereof. All communications shall be sent, if to the Note Parties, at the address set forth on the signature page of the Company, if to the Agents, at the address set forth on the signature page thereof, and, if to a Purchaser, at the address(es) set forth on the Schedule of Purchasers attached hereto as Schedule 2 or at such other address(es) as the Company or Purchaser may designate by ten (10) days advance written notice to the other parties hereto. Except where notice is specifically required by this Agreement, no notice to or demand on the Company or any of its Subsidiaries in any case shall entitle the Company or any of its Subsidiaries to any other or further notice or demand in similar or other circumstances.
10.9 Amendments; Waiver. Any term of the Notes and this Agreement may be amended or waived with the written consent of the Company and the Required Holders; provided, that without the consent of each Holder, no amendment, modification, termination, or consent shall be effective if the effect thereof would (a) extend the scheduled final maturity of any Note held by any non-consenting Holder, (b) waive, reduce or postpone any scheduled repayment (but not prepayment) with respect to the Note held by any non-consenting Holder; (c) reduce the rate of interest or amount of any fees payable under any Note held by any non-consenting Holder; (d) extend the time for payment of any interest or fees payable under any Note held by any non-consenting Holder; (e) reduce the principal amount of any Note held by any non-consenting Holder; (f) amend, modify, terminate or waive any provision of this Section 10.9; (g) amend the definition of Required Holders; (h) release all or substantially all of the Collateral securing any Note held by any non-consenting Holder except as expressly provided in the Note Documents, (i) subordinate the Collateral Agents Liens on Collateral except as expressly provided in the Note Documents; (j) release any Guarantor except as expressly provided in the Note Documents or (k) consent to the assignment or transfer by the Company of any of its rights and obligations under any Note Document held by any non-consenting Holder. No amendment affecting the rights, privileges and immunities of the Agents shall be effective without the consent of such Agent.
10.10 Expenses and Indemnification.
(a) Solely to the extent the Initial Closing Date occurs (with respect to any Initial Purchaser), the Company shall pay all reasonable and documented out-of-pocket costs and expenses (including reasonable and documented attorneys fees and expenses) incurred by such Initial Purchasers in connection with the preparation, execution and delivery of this Agreement and the other Note Documents, in an amount not to exceed $100,000 in the aggregate. The Company shall pay all reasonable and documented out-of-pocket costs and expenses of the Agents (including reasonable and documented fees, expenses and disbursements of its outside counsel) relating to the negotiation, preparation and execution of the Note Documents, review of other documents (including for purposes of due diligence review) in connection with the transactions contemplated hereby and any amendments and waivers hereto or thereto. In
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EXECUTION VERSION
addition, the Company agrees to promptly pay in full after the occurrence of an Event of Default, all costs and expenses (including, without limitation, reasonable and documented fees and disbursements of counsel, agents and professional advisers) incurred by the Holders or the Agents in enforcing any obligations of or in collecting any payments due hereunder or under the Notes by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a workout, or any insolvency or bankruptcy proceedings.
(b) In addition to the payment of expenses pursuant to Section 10.10(a), the Company (as Indemnitor) agrees to indemnify, pay and hold the Purchasers, the Holders and the Agents, and the officers, directors, employees, agents, and affiliates of the Purchasers, the Holders and the Agents (collectively called the Indemnitees) harmless from and against any and all other liabilities, costs, expenses, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees) in connection with any investigative, administrative or judicial proceeding commenced or threatened (excluding claims among Indemnitees (other than claims against an Agent acting in its capacity as such) and, with the exception of claims arising out of otherwise indemnifiable matters (e.g., actions to enforce the indemnification rights provided hereunder), and excluding claims between the Company and an Indemnitee), whether or not such Indemnitee shall be designated a party thereto, which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement, the Notes, the Note Documents or the other documents related to the transactions contemplated hereby (including, without limitation, the existence or exercise of any security rights with respect to the Collateral in accordance with the Security Agreement), the Purchasers agreement to purchase the Notes or the use or intended use of the proceeds of any of the proceeds thereof to the Company (the Indemnified Liabilities); provided, that the Indemnitor shall not have any obligation to an Indemnitee hereunder with respect to an Indemnified Liability to the extent that such Indemnified Liability arises from the gross negligence or willful misconduct of that Indemnitee as determined by a final nonappealable order of a court of competent jurisdiction. Each Indemnitee shall give the Indemnitor prompt written notice of any claim that might give rise to Indemnified Liabilities setting forth a description of those elements of such claim of which such Indemnitee has knowledge; provided, that any failure to give such notice shall not affect the obligations of the Indemnitor unless (and then solely to the extent) such Indemnitor is not aware of such claim and is materially prejudiced. The Indemnitor shall have the right at any time during which such claim is pending to select counsel to defend and control the defense thereof and settle any claims for which it is responsible for indemnification hereunder (provided that the Indemnitor will not settle any such claim without (i) the appropriate Indemnitees prior written consent, which consent shall not be unreasonably withheld or (ii) obtaining an unconditional release of the appropriate Indemnitee from all claims arising out of or in any way relating to the circumstances involving such claim) so long as in any such event the Indemnitor shall have stated in a writing delivered to the Indemnitee that, as between the Indemnitor and the Indemnitee, the Indemnitor is responsible to the Indemnitee with respect to such claim to the extent and subject to the limitations set forth herein; provided, that the Indemnitor shall not be entitled to control the defense of any claim in the event that in the reasonable opinion of counsel for the Indemnitee, there are one or more material defenses available to the Indemnitee which are not available to the Indemnitor, in which case the Indemnitee may retain separate counsel and the
38
EXECUTION VERSION
Company will pay the reasonable fees and expenses of such counsel (including the reasonable fees and expenses of counsel to such Indemnitee incurred in evaluating whether such a conflict exists); provided further, that with respect to any claim as to which the Indemnitee is controlling the defense, the Indemnitor will not be liable to any Indemnitee for any settlement of any claim pursuant to this Section 10.10(b) that is effected without its prior written consent, which consent shall not be unreasonably withheld. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 10.10(b) may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. The obligations of each of the parties under this Section 10.10 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement, the resignation or removal of any Agent and the termination of this Agreement.
(c) (c) To the extent permitted by applicable law, none of the parties hereto shall assert, and each of the parties hereto hereby waives, any claim against the other parties (including their respective Affiliates, partners, stockholders, members, directors, officers, agents, employees and controlling persons), on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated hereunder, any Note Document, the Notes or the use of the proceeds thereof; provided that nothing contained in this Section 10.10(c) shall limit the Notes Parties indemnification and reimbursement obligations to the extent set forth in this Agreement.
10.11 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to each Purchaser, upon any breach or default of the Company under this Agreement or any other Note Document shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a Purchaser of any breach or default under this Agreement, or any waiver by such Purchaser of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to such Purchaser, shall be cumulative and not alternative.
10.12 Waiver of Conflicts. Each party to this Note acknowledges that Cooley LLP (Cooley), outside general counsel to the Company, has in the past performed and is or may now or in the future represent the Holders or the Holders affiliates in matters unrelated to the transactions contemplated by this Note (the Note Financing), including representation of the Holders or the Holders affiliates in matters of a similar nature to the Note Financing. The applicable rules of professional conduct require that Cooley inform the parties hereunder of this representation and obtain their consent. Cooley has served as outside general counsel to the Company and has negotiated the terms of the Note Financing solely on behalf of the Company. The Company and the Holders hereby (i) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation, including disclosure of the
39
EXECUTION VERSION
reasonably foreseeable adverse consequences of such representation; (ii) acknowledge that with respect to the Note Financing, Cooley has represented solely the Company, and not any Holder or any stockholder, board member or employee of the Company or director, stockholder or employee of the Holder; and (iii) gives the Holders informed consent to Cooleys representation of the Company in the Note Financing.
10.13 Obligations Several. The Purchasers obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.
10.14 Survival of Representations and Warranties. All of the representations and warranties made by the Note Parties and their Subsidiaries herein shall survive the execution and delivery of this Agreement, any investigation by or on behalf of any Purchaser, acceptance of the Notes and payment therefor, or termination of this Agreement
10.15 Entire Agreement. This Agreement and the other Note Documents constitute the entire contract among the parties hereto regarding to the subject matters addressed herein and supersede any and all previous agreements, negotiations, and discussions, oral or written, by the parties regarding the subject matters addressed herein.
10.16 Withholding. The Company shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold under the Code, or any Tax law, with respect to the making of such payment. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made. If a payment is payable (in whole or in part) in consideration other than cash and if the cash portion of any such payment is insufficient to satisfy all required Tax withholding obligations, the Company shall retain an amount of the non-cash consideration otherwise payable equal in value to the amount required to satisfy any applicable withholding taxes (as reasonably determined by the Company).
10.17 PATRIOT ACT. The Agents hereby notify the Company that pursuant to the requirements of the PATRIOT Act, the Company may be required to obtain, verify and record information that identifies the Company, its subsidiaries and the Guarantors, including their respective names, addresses and other information that will allow the Agent to identify, the Company, its subsidiaries and the Guarantors in accordance with the PATRIOT Act.
[Signature pages follow]
40
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
COMPANY: | ||
CORE SCIENTIFIC HOLDING CO. | ||
By: |
/s/ Michael Trzupek |
|
Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
Address for notices: | ||
Attention: Michael Trzupek, Chief Financial Officer | ||
Email: | ||
Copy to: | ||
Todd DuChene, General Counsel | ||
Email: | ||
In each case, with a copy (which shall not constitute notice) to: | ||
Cooley LLP | ||
1299 Pennsylvania AVE, NW | ||
Suite 700 | ||
Washington, DC 20004 | ||
Attention: Mike Tollini | ||
Email: mtollini@cooley.com |
GUARANTORS: | ||
CORE SCIENTIFIC, INC. | ||
By: |
/s/ Michael Trzupek |
|
Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
AMERICAN PROPERTY ACQUISITION, LLC | ||
By: Core Scientific, Inc., its sole member | ||
By: |
/s/ Michael Trzupek |
|
Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
AMERICAN PROPERTY ACQUISITIONS I, LLC | ||
By: American Property Acquisition, LLC, its sole member | ||
By: Core Scientific, Inc., its sole member | ||
By: |
/s/ Michael Trzupek |
|
Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
AMERICAN PROPERTY ACQUISITIONS VII, LLC | ||
By: American Property Acquisition, LLC, its sole member | ||
By: Core Scientific, Inc., its sole member | ||
By: |
/s/ Michael Trzupek |
|
Name: Michael Trzupek | ||
Title: Chief Financial Officer |
U.S. BANK NATIONAL ASSOCIATION, AS NOTE AGENT | ||
By: |
/s/ Joshua A. Hahn |
|
Name: Joshua A. Hahn | ||
Title: Vice President | ||
Address for notices: | ||
U.S. Bank National Association | ||
West Side Flats | ||
60 Livingston Avenue | ||
EP-MN-WS3C | ||
St. Paul, MN 55107 | ||
Attention: Joshua Hahn (Core Sciences) | ||
In each case, with a copy (which shall not constitute notice) to: | ||
Shipman & Goodwin LLP | ||
One Constitution Plaza | ||
Hartford, CT 06103 | ||
Attn: Nathan Plotkin (Core Scientific) |
U.S. BANK NATIONAL ASSOCIATION, AS COLLATERAL AGENT | ||
By: |
/s/ Joshua A. Hahn |
|
Name: Joshua A. Hahn | ||
Title: Vice President | ||
Address for notices: | ||
U.S. Bank National Association | ||
West Side Flats | ||
60 Livingston Avenue | ||
EP-MN-WS3C | ||
St. Paul, MN 55107 | ||
Attention: Joshua Hahn (Core Sciences) | ||
In each case, with a copy (which shall not constitute notice) to: | ||
Shipman & Goodwin LLP | ||
One Constitution Plaza | ||
Hartford, CT 06103 | ||
Attn: Nathan Plotkin (Core Scientific) |
PURCHASER: | ||
By: |
/s/ Roni Cohen-Pavon |
|
Name: Roni Cohen-Pavon | ||
Title: Chief Revenue Officer, Celsius Network Ltd. |
PURCHASER: | ||
KENSICO ASSOCIATES, L.P. | ||
By: Kensico Capital Management Corp, its Investment Manager | ||
By: |
/s/ Israel Friedman |
|
Name: Israel Friedman | ||
Title: General Counsel & CCO |
PURCHASER: | ||
KENSICO OFFSHORE FUND MASTER, LTD | ||
By: Kensico Capital Management Corp, its Investment Manager | ||
By: |
/s/ Israel Friedman |
|
Name: Israel Friedman | ||
Title: General Counsel & CCO |
PURCHASER: | ||
By: |
/s/ William Guthy |
|
Name: William Guthy | ||
Title: Trustee of the William R. Guthy Separate Property Trust |
PURCHASER: | ||
By: |
/s/ Ken Wormser |
|
Name: Ken Wormser |
PURCHASER: | ||
THE KIMMEL FAMILY FOUNDATION | ||
By: |
/s/ Adam Kimmel |
|
Name: Adam Kimmel | ||
Title: Director |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO TACTICAL VALUE SPN INVESTMENTS LP By: Apollo Tactical Value SPN Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO CENTRE STREET PARTNERSHIP, LP By: Apollo Centre Street Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO MOULTRIE CREDIT FUND, L.P. By: Apollo Moultrie Credit Fund Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO LINCOLN FIXED INVOME FUND, L.P. By: Apollo Lincoln Fixed Income Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO CENTRE STREET PARTNERSHIP, LP By: Apollo Centre Street Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO TACTICAL VALUE SPN INVESTMENTS LP By: Apollo Tactical Value SPN Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO LINCOLN FIXED INCOME FUND, L.P. By: Apollo Lincoln Fixed Income Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO MOULTRIE CREDIT FUND, L.P. By: Apollo Moultrie Credit Fund Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
ICG CORESCI HOLDINGS, LP | ||
By: |
/s/ Robert Edelstein |
|
Name: Robert Edelstein | ||
Title: Authorized Person |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
The Michael O. Johnson Revocable Trust | ||
By: |
/s/ Michael O. Johnson |
|
Name: Michael O. Johnson | ||
Title: Trustee |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
IBEX PARTNERS (CORE) LP | ||
By: Ibex GP LLC, its General Partner | ||
By: |
/s/ Brian T. Abrams |
|
Name: Brian T. Abrams | ||
Title: President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
ICG CORESCI HOLDINGS, LP | ||
By: |
/s/ Robert Edelstein |
|
Name: Robert Edelstein | ||
Title: Authorized Person |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
GREENSLEDGE MERCHANT HOLDINGS LLC | ||
By: |
/s/ Ken Wormser |
|
Name: Ken Wormser | ||
Title: Managing Partner |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO CENTRE STREET PARTNERSHIP, LP | ||
By: Apollo Centre Street Management, LLC, its investment manager |
||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO TACTICAL VALUE SPN, INVESTMENTS LP | ||
By: Apollo Tactical Value SPN Management, LLC, | ||
its investment manager | ||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO MOULTRIE CREDIT FUND, L.P. | ||
By: Apollo Moultrie Credit Fund Management, LLC, its investment manager | ||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
APOLLO LINCOLN FIXED INCOME FUND, L.P. | ||
By: Apollo Lincoln Fixed Income Management, LLC, its investment manager | ||
By: |
/s/ Joseph D. Glatt |
|
Name: Joseph D. Glatt | ||
Title: Vice President |
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of April 21, 2021.
The undersigned hereby confirms that, upon execution of this signature page, it hereby agrees to be bound by all of the terms, provisions and conditions contained herein and is hereby joined as an Additional Purchaser and a Purchaser hereunder. | ||
ADDITIONAL PURCHASER: | ||
BIRCH GROVE CREDIT STRATEGIES MASTER FUND LP | ||
By: |
/s/ Todd A. Berry |
|
Name: Todd A. Berry | ||
Title: Authorized Signatory |
SCHEDULE 2
SCHEDULE OF PURCHASERS
SCHEDULE 5.1
NOTE PARTIES
SCHEDULE 5.13
SUBSIDIARIES
SCHEDULE 5.14
CAPITALIZATION
SCHEDULE 5.17
INDEBTEDNESS
EXECUTION VERSION
EXHIBIT A
FORM OF SECURED CONVERTIBLE PROMISSORY NOTE
(see attached)
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR UNDER THE SECURITIES LAWS OF ANY STATES IN THE UNITED STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT PURSUANT TO SECTION 5(C) HEREOF AND AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (WITHIN THE MEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE)). UPON WRITTEN REQUEST, THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE THE FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE AND (3) THE YIELD TO MATURITY OF THE NOTE. HOLDERS SHOULD CONTACT THE CHIEF FINANCIAL OFFICER OF THE COMPANY AT 2800 NORTHUP WAY SUITE 220 BELLEVUE, WA 98004.
[FORM OF] SECURED CONVERTIBLE PROMISSORY NOTE
Note Series: | 2021 Secured Convertible Promissory Notes | |||
Date of Note: | April 19, 2021 | |||
Initial Principal Amount of Note: | $[__], plus any PIK Interest that has accrued and been capitalized pursuant to the terms of this Note |
For value received CORE SCIENTIFIC HOLDING CO., a Delaware corporation (the Company), promises to pay to the undersigned holder or such partys successors or permitted assigns (the Holder) the principal amount set forth above with interest to accrue on such outstanding principal amount at a rate of 10% per annum, 4% of which shall be payable in cash (Cash Interest) and 6% of which shall be payable in kind by capitalizing such interest payment and increasing the outstanding principal amount of this Note by the amount thereof (PIK Interest). Interest shall accrue on the outstanding principal amount of this Note commencing on (and including) the date of original issuance thereof (or the most recent interest payment date) and continuing until the earlier to occur of (x) the date this Note is repaid or
2
prepaid in full and (y) the date this Note is converted in full by the Holder pursuant to Section 2 hereof. Cash Interest shall be due and payable and PIK Interest shall be capitalized quarterly in arrears on the first day of each fiscal quarter, commencing on July 1, 2021. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed. This Note shall be automatically deemed to include any accrued PIK Interest thereon and the Company shall not be obligated to issue any subsequent Notes reflecting PIK Interest. This Note is one of the Notes issued pursuant to the Purchase Agreement. All capitalized terms used but not otherwise defined in this Note will have the same meanings in this Note as in the Purchase Agreement referred to below.
The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder, by the acceptance of this Note, agrees:
2. |
BASIC TERMS. |
(a) Series of Notes. This secured convertible promissory note (this Note) is issued as part of a series of notes designated by the Note Series above (collectively, the Notes), having an initial aggregate principal amount of up to $215,000,000 and issued pursuant to, and to those persons and entities (collectively, the Holders) party, as Purchasers, to, that certain Purchase Agreement, dated as of even date herewith (as amended, restated, supplemented and/or otherwise modified from time to time, the Purchase Agreement), by and among the Company, each Purchaser party thereto, U.S. Bank National Association, as Note Agent, and U.S. Bank National Association, as Collateral Agent for the Secured Parties. The Company shall maintain a ledger of all Holders (Ledger), which shall include all PIK Interest accrued and capitalized, and which shall be available (i) promptly upon request to the Agents and the Holder, (ii) promptly after any transfer or assignment of any Note, (iii) promptly upon conversion of any Note and (iv) on the tenth business day prior to any interest payment date.
(b) Payments.
(i) Voluntary Prepayments.
(A) Prior to the occurrence of a Conversion Event, subject to the expiration of any applicable lockup period set forth under any lockup agreement to which the Holder, the Company and the Companys underwriters are a party, in the event that, following written request by the Company, the Holder does not timely consent to an amendment to the Purchase Agreement to increase the Secured Debt Cap, the Company may, upon ten (10) Business Days prior written notice (which may be included in such written request) to any such non-consenting Holder (which notice may be conditioned or rescinded upon such events as may be specified in such notice) prepay all or any portion of each Note held by any non-consenting Holder in an amount equal to the sum of (A) the outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of the Note being prepaid at such time and (B) all accrued unpaid Cash Interest on such outstanding principal amount at such time (such amount, the Covenant Amendment Repayment Amount). In addition to paying the Covenant Amendment Repayment Amount, the Company shall issue to each such non-consenting Holder a warrant that will entitle the Holder to acquire, upon a Conversion Event, the number of shares of Equity Securities (or Common Stock in the event of a
3
Change of Control) equal to the quotient of (A) the principal amount of each Note being prepaid, divided by (B) the Applicable Conversion Price (which shall be determined, for the avoidance of doubt, on the date of the consummation of such Conversion Event). The per share exercise price for such warrants shall be the Applicable Conversion Price (which shall be determined, for the avoidance of doubt, on the date of the consummation of such Conversion Event).
(B) On or after the occurrence of an Offering, subject to and following the expiration of any applicable lockup period set forth under any lockup agreement to which the Holder, the Company and the Companys underwriters are a party, and unless otherwise converted in full or in part pursuant to Section 2 hereof (including following delivery of the Companys notice referred to in this subsection (b)(i)(2)), the Company may at any time, upon ten (10) Business Days prior written notice to the Holder and the Note Agent (which notice may be conditioned or rescinded upon such events as may be specified in such notice) prepay all or any portion of this Note in an amount equal to (x) the outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note being prepaid at such time, together with all accrued unpaid Cash Interest on such outstanding principal amount at such time multiplied by (y) 200% (such amount, the Repayment Amount).
(ii) Repayment. Unless otherwise prepaid by the Company pursuant to Section 1(b)(i) or converted in full pursuant to Section 2 hereof, this Note shall be repaid in full on the earlier to occur of (x) April 19, 2025 (the Maturity Date), in an amount equal to the Repayment Amount, and (y) acceleration by the Holders representing at least twenty-five percent (25%) of the aggregate outstanding principal amount of the Notes issued pursuant to the Purchase Agreement at such time after the occurrence of an Event of Default in accordance with the terms hereof, in an amount equal to the outstanding principal (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note, plus all unpaid accrued Cash Interest thereon.
(iii) Payments Generally.
(A) This Note and the other Notes issued pursuant to the Purchase Agreement are pari passu in right of payment and all payments (other than conversion) under this Note and such other Notes shall be made in accordance with each Holders Pro Rata Share. All payments shall be applied first, to the payment of expenses due under this Note and the other Note Documents to the Agents, second, to the payment of expenses due under this Note and the other Note Documents to the Holders, third, unpaid accrued interest of this Note and fourth, if the amount of payment exceeds the amount of all such expenses and accrued interest, to the payment of outstanding principal (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note. The conversion of this Note by the Holder pursuant to the terms hereof shall be deemed to be a repayment of the full outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of such Note together with any unpaid accrued Cash Interest thereon on the date of such conversion.
(B) All payments to be made by the Company shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff, except with
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respect to Taxes required to be deducted and/or withheld under applicable law. All payments (other than by means of conversion pursuant to the terms of the Notes), including any prepayments, of interest and principal to be made by the Company hereunder shall be made by the Company to the Note Agent, in cash, for the account of the respective Holders to which such payment is owed, at the applicable Notes Agents Principal Office for payment and in same day funds not later than 11:00 a.m. on the date specified herein. The Notes Agent will promptly distribute to each Holder its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to each Holder at the address specified in the Holders Administrative Questionnaire (or at such other address as the Holder may indicate in writing to the Note Agent from time to time). All payments received by the Notes Agent after 11:00 a.m. may (at the sole discretion of the Notes Agent) in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(C) If any payment to be made by the Company shall come due on a day other than a Business Day, any interest shall be payable, and any PIK Interest shall be capitalized, on the next succeeding Business Day without additional interest accruing thereon.
(D) Whenever any payment received by the Notes Agent under this Agreement or any of the other Notes Documents is insufficient to pay in full all amounts due and payable to the Notes Agent and the Holders under or in respect of this Agreement and the other Notes Documents on any date, such payment shall be distributed by the Notes Agent and applied by the Notes Agent and the Holders in the order of priority set forth in Section 1(b)(iii)(1). If the Notes Agent receives funds for application to the Obligations of the Company under or in respect of the Notes Documents under circumstances for which the Notes Documents do not specify the manner in which such funds are to be applied, the Notes Agent may, but shall not be obligated to, elect to distribute such funds to the Holders in accordance with the Holders Pro Rata Share of such of the outstanding Notes or other Obligations then owing to the Holder.
(iv) Withholding. Notwithstanding anything to the contrary herein, the Company shall be entitled to deduct and withhold from the consideration otherwise payable under the Note such amounts as it is required to deduct and withhold under the Code, or any other tax law, with respect to the making of such payment. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Note as having been paid to the Person in respect of whom such deduction and withholding was made. If a payment is payable (in whole or in part) in consideration other than cash and if the cash portion of any such payment is insufficient to satisfy all required tax withholding obligations, the Company shall retain an amount of the non-cash consideration otherwise payable equal in value to the amount required to satisfy any applicable withholding taxes (as reasonably determined by the Company.
3. |
CONVERSION. |
(a) Conversion upon an Offering. In the event that the Company (i) issues and sells shares of its equity securities (Equity Securities) to investors (the Investors) in a private offering or placement with total gross proceeds to the Company of at least $50,000,000 (excluding the conversion of the Notes or other convertible securities issued for capital raising purposes (e.g., Simple Agreements for Future Equity)) or (ii) issues and sells Equity Securities to
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Investors in an underwritten public offering pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Act or under equivalent securities laws and regulations of any other jurisdiction (including, for the avoidance of doubt, any transaction involving a special purpose acquisition corporation, a SPAC), (iii) the Company lists its Common Stock other than shares of Common Stock not eligible for resale under Rule 144 under the Securities Act) on a national securities exchange by means of an effective registration statement on Form S-1 filed by the Company with the SEC that registers shares of existing capital stock of the Company for resale, as approved by the Companys board of directors, or (iv) the listing of the Companys Equity Securities on any stock exchange (the occurrence of each event set forth in clauses (i) through (iv) above, an Offering and, together with the occurrence of a Change of Control as provided in Section 2(b) below, each, a Conversion Event), in each case, while this Note remains outstanding, the Holder shall have the right at any time and from time to time during the period commencing on the date of consummation of such Offering until the Maturity Date, to convert, in whole or in part, the outstanding principal amount (including all accrued PIK Interest not already added to the principal amount of this Note) of this Note, together with all unpaid accrued Cash Interest thereon, into Equity Securities of the Company at a conversion price equal to the Applicable Conversion Price (as defined below) (which shall be determined, for the avoidance of doubt, on the date of the consummation of such Offering). The issuance of Equity Securities by the Company pursuant to the conversion of this Note shall be upon and subject to the same terms and conditions (other than as otherwise set forth herein) applicable to Equity Securities sold in the applicable Offering.
(b) Conversion upon a Change of Control. In the event the Company consummates a Change of Control (as defined below) while this Note remains outstanding, the Company shall repay the outstanding principal amount of this Note in an amount equal to the Repayment Amount; provided, however, that upon the written election of the Holder made not less than five (5) days prior to the Change of Control, the Company shall convert the outstanding principal amount of this Note (including all accrued PIK Interest not already added to the principal amount of this Note) and any unpaid accrued Cash Interest into common stock of the Company (Common Stock) at a conversion price equal to the Applicable Conversion Price (which shall be determined, for the avoidance of doubt, on the date of consummation of such Change of Control) (assuming conversion of all securities convertible into Common Stock and exercise of all outstanding options and warrants, but excluding the shares of equity securities of the Company issuable upon the conversion of Notes or other convertible securities issued for capital raising purposes (e.g., Simple Agreements for Future Equity)). The Company shall give the Holder and the Note Agent written notice of any Change of Control at least ten (10) Business Days prior to the consummation thereof, which notice will contain the material terms and conditions (including price and form of consideration) of the Change of Control, the identity of the parties to the Change of Control and the intended date of the Change of Control.
For purposes of this Note, (i) a Change of Control means, at any time, any Person or group other than the Permitted Holders (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors of the Company; (ii) Permitted Holders means each of BCV 55 LLC, BCV 66 LLC, BCV 77 LLC and each of their respective Affiliates; (iii) Fair Market Value Per Common Share means the cash and/or the value of the property, rights or
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securities to be paid or distributed per share of Common Stock of the Company to the holders of Common Stock of the Company pursuant to a Change of Control or a SPAC (with the value of such property, rights or securities being determined in good faith by the board of directors of the Company); and (iv) the Applicable Conversion Price means a conversion price equal to (a) 80% of either (x) the cash price paid per share for Equity Securities of the Company by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or prior to April 19, 2022, (b) 75% of either (x) the cash price paid per share for Equity Securities of the Company by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or after April 19, 2022 but prior to April 19, 2023, (c) 70% of either (x) the cash price paid per share for Equity Securities of the Company by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or after April 19, 2023 but prior to April 19, 2024 and (d) 65% of either (x) the cash price paid per share for Equity Securities of the Company by the Investors in an Offering (other than a SPAC) or (y) the Fair Market Value Per Common Share in a Change of Control or a SPAC, as applicable, if the Conversion Event occurs on or after April 19, 2024 but prior to April 19, 2025.
(c) Procedure for Conversion. Upon the conversion in whole or in part of this Note into Equity Securities or Common Stock of the Company (as applicable), the Holder shall surrender this Note to the Company and deliver to the Company any documentation reasonably required by the Company (including, in the case of an Offering, all financing documents executed by the Investors in connection with such Offering). The Company shall not be required to issue or deliver the Equity Securities or Common Stock of the Company (as applicable) into which this Note may convert until the Holder has surrendered this Note to the Company and delivered to the Company any such documentation. The Company shall, as soon as practicable after the surrender of this Note and delivery to the Company of such documentation deliver to the Holder (i) a certificate or certificates for the number of shares of Equity Securities or Common Stock of the Company (as applicable) into which this Note is convertible in whole or in part, rounded downward to the nearest whole share and cash for the amounts not so converted as a result of the above-referenced downward rounding, registered in the name of such Investor or registered nominee or assignee and (ii) to the extent the Holder has converted only a portion of the outstanding principal amount of this Note, a replacement Note for the outstanding principal amount of this Note not converted. Upon the conversion in full or in part of this Note into Equity Securities or Common Stock of the Company (as applicable) pursuant to the terms hereof, in lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall pay the Holder cash equal to such fraction multiplied by the price at which this Note converts. Upon conversion of this Note in full or in part and payment of cash representing any fractional share pursuant to this Section 2(c), the Company shall be forever released from all its obligations and liabilities under this Note and this Note shall be deemed of no further force or effect, whether or not the original of this Note has been delivered to the Company for cancellation.
(d) Taxes. The Company shall pay any and all stamp, stock transfer, stock issuance and other similar taxes that may be payable in respect of any issuance or delivery of shares of Equity Securities or Common Stock of the Company (as applicable) upon conversion
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of this Note pursuant to this Section 2. The Company shall not, however, be required to pay any income, capital gains or similar tax of the recipient of Equity Securities or Common Stock of the Company (as applicable) or any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Equity Securities or Common Stock of the Company (as applicable) in a name other than that in which this Note so converted was registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.
4. |
SECURED NOTE. |
To secure the performance and payment in full of the Obligations, the Company has granted to the Collateral Agent, for the benefit of the Secured Parties, a first-priority Lien on the Collateral (subject to Permitted Liens) pursuant to the Security Agreement.
5. |
EVENTS OF DEFAULT. |
If there shall be any Event of Default (as defined below) hereunder, at the option and upon the declaration of the Holders representing at least twenty-five percent (25%) of the aggregate outstanding principal amount of the Notes issued pursuant to the Purchase Agreement at such time and upon written notice to the Company (which election and notice shall not be required in the case of an Event of Default under subsection (v) or (vi) below), this Note shall accelerate and all principal (including all accrued PIK Interest not already added to the principal amount of this Note) and all unpaid accrued Cash Interest shall automatically become immediately due and payable. The occurrence of any one or more of the following shall constitute an Event of Default:
(i) the Company fails to pay to the Holder (i) the principal of this Note as and when due or (ii) within five (5) Business Days after the same becomes due any Cash Interest on this Note or any fees or any other Obligations;
(ii) any representation or warranty made or deemed made by or on behalf of the Company or any of its Subsidiaries to the Holder under or in connection with the Note Documents or any certificate or information delivered in connection therewith shall be materially false when made;
(iii) the Company and its Subsidiaries fail to observe or perform any term, covenant, or provision contained in Section 7 of the Purchase Agreement and such non-observance or non-performance shall not have been remedied or waived within thirty (30) days after the earlier of (i) the Company becoming aware of such non-observance or non-compliance or (ii) receipt by the Company of notice from a Holder of such non-observance or non-compliance;
(iv) the Company and its Subsidiaries fail to observe or perform any other term, covenant or provision contained in the Purchase Agreement (other than those specified elsewhere in this Section 4) or any other Note Document and such non-observance or non-performance shall not have been remedied or waived within thirty (30) days after the earlier of (i) the Company becoming aware of such non-observance or non-compliance or (ii) receipt by the Company of notice from a Holder of such non-observance or non-compliance;
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(v) the Company or any Material Subsidiary shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing;
(vi) proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or any of its Material Subsidiaries, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or any of its Material Subsidiaries, if any, or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced, or an order for relief shall be entered in any such proceeding, or such proceeding shall not be dismissed or discharged within 60 days of commencement;
(vii) the Company fails to pay when due any principal of or interest on or any other amount payable in respect of, or breaches or defaults under any other term of, any mortgage, indenture, agreement or other instrument under which there may be outstanding any Indebtedness in an aggregate principal amount of in excess of $10,000,000, in each case, beyond the grace period, if any, if the effect of such non-payment, breach or default is to cause such Indebtedness to become or be declared due and payable (or subject to a compulsory repurchase or redemption) prior to its stated maturity;
(viii) any court, government, or Governmental Authority shall condemn, seize or otherwise appropriate, or take custody or control of, all or any material portion of the property of the Company and its Subsidiaries, taken as a whole;
(ix) one or more judgments or orders for the payment of money in excess of $10,000,000 (or the equivalent thereof in currencies other than U.S. dollars) in the aggregate shall be entered or filed against the Company or any of its Subsidiaries and shall remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30) consecutive days;
(x) (i) the occurrence of a Reportable Event with respect to any Plan, (ii) the filing of a notice of intent to terminate a Plan by the Company, any ERISA Affiliate or any Subsidiary, the institution of proceedings to terminate a Plan by the PBGC or any other Person; (iii) the withdrawal in a complete withdrawal or a partial withdrawal as defined in Sections 4203 and 4205, respectively, of ERISA by the Company, any ERISA Affiliate or any Subsidiary of the Company from any Multiemployer Plan, (iv) the incurrence of any material increase in the contingent liability of the Company or any of its Subsidiaries with respect to any employee welfare benefit plan as defined in Section 3(1) of ERISA which covers retired
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employees and its beneficiaries or (v) the Unfunded Liabilities of all Single Employer Plans shall exceed (in the aggregate) $10,000,000, in each such case which, either individually or in the aggregate, would be reasonably expected to result in liability to any Note Party in excess of $10,000,000;
(xi) The institution by the Company, any ERISA Affiliate or any Subsidiary of steps to terminate any Plan if, in order to effectuate such termination, the Company, such ERISA Affiliate or such Subsidiary, as the case may be, would be required to make a contribution to such Plan, or would incur a liability or obligation to such Plan, in excess of $10,000,000, or the institution by the PBGC of steps to terminate any Plan, which would reasonably be expected to result in material liability to any Note Party;
(xii) The Company or any Material Subsidiary shall (i) be the subject of any proceeding pertaining to the release by the Company, any such Material Subsidiary or any other Person of any Hazardous Material into the environment or (ii) violate any Environmental Law, which, in either case could reasonably be expected to have a Material Adverse Effect;
(xiii) Any Collateral Document shall for any reason fail to create a valid and perfected first priority (subject to any Permitted Liens) security interest in any collateral purported to be covered thereby, except as permitted by the terms of any Collateral Document, or any Collateral Document shall fail to remain in full force or effect (other than in accordance with the terms hereof or thereof) or any action taken by the Company or any Subsidiary shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document;
(xiv) any subordination or intercreditor agreement relating to any Indebtedness of any Note Party subordinated to the Obligations, or any subordination provisions of any note or other document running to the benefit of the Secured Parties in respect of such Indebtedness, shall cease for any reason to be in full force and effect other than in accordance with the terms hereof or thereof or any Note Party or any of their Subsidiaries shall so assert in writing; or
(xv) The Note Parties shall be enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of the business of the Note Parties, taken as a whole.
6. |
MISCELLANEOUS PROVISIONS. |
(a) Waivers. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.
(b) Further Assurances. The Holder agrees and covenants that at any time and from time to time the Holder will promptly execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Note and to comply with state or federal securities laws or other regulatory approvals.
(c) Transfers of Notes. Subject to the Companys prior written consent (not to be unreasonably withheld or delayed) and to the extent permitted by applicable law, this Note
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may be transferred only upon its surrender to the Company for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new Note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of the Companys obligation to pay such interest and principal. Upon the effectiveness of any transfer pursuant to this Section 5(c) the Company shall provide an updated Ledger to the Note Agent. Any transfer of this Note in contravention of this Section 5(c) shall be void and the Company shall be entitled to continue to treat the Holder as the holder of this Note for all purposes under the Note Documents. The Company shall at all times maintain a book-entry system, which shall reflect ownership of this Note and interests therein. This Note is intended to be in registered form for United States federal tax purposes.
(d) Market Standoff. To the extent requested by the Company or an underwriter of securities of the Company, each Holder and any permitted transferee thereof shall not, without the prior written consent of the underwriters in an underwritten public offering pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Act or under equivalent securities laws and regulations of any other jurisdiction, offer, sell, make any short sale of, grant or sell any option for the purchase of, lend, pledge, otherwise transfer or dispose of (directly or indirectly), enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership (whether any such transaction is described above or is to be settled by delivery of Securities or other securities, in cash, or otherwise), any Securities or other shares of stock of the Company then owned by such Holder or any transferee thereof, or enter into an agreement to do any of the foregoing, for up to 180 days following the consummation of any such offering. For purposes of this paragraph, Company includes the Company or any other direct or indirect parent entity of the Company into which the Company merges or consolidates. The Company may place restrictive legends on the certificates representing the shares subject to this paragraph and may impose stop transfer instructions with respect to the Securities and such other shares of stock of each Holder and any transferee thereof (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Each Holder and any transferee thereof shall enter into any agreement reasonably required by the underwriters for such an offering to implement the foregoing within any reasonable timeframe so requested. The underwriters for any such offering are intended third party beneficiaries of this paragraph and shall have the right, power and authority to enforce the provisions of this paragraph as though they were parties hereto. The provisions of this paragraph shall survive any conversion and/or repayment of this Note.
(e) Waiver of Statutory Information Rights. Prior to the conversion in full of this Note, the Holder, on behalf of the Holder and all beneficial owners of the Securities now or hereafter owned by the Holder (a Beneficial Owner), acknowledges and agrees that that neither the Holder nor any of the Beneficial Owners will have any right to receive any information from the Company by virtue of ownership of any of the Securities. Without limiting the foregoing, prior to the conversion in full of this Note, to the fullest extent permitted by law, the Holder hereby unconditionally and irrevocably waives all rights under Section 220 of the Delaware General Corporation Law and all such similar information and/or inspection rights that
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may be provided under the law of any jurisdiction, or any federal, state or foreign regulation, that are, or may become, applicable to the Company or the Companys capital stock (the Inspection Rights) on behalf of the Holder and all Beneficial Owners. The Holder, on behalf of the Holder and all Beneficial Owners, hereby covenants and agrees that neither the Holder nor any Beneficial Owner shall directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights. The Holder hereby further warrants and represents that the Holder has reviewed this waiver with its legal counsel, and that the Holder knowingly and voluntarily waives its rights otherwise provided by Section 220 of the Delaware General Corporation Law (or under similar rights under other applicable law). Notwithstanding the foregoing, Beneficial Owners that were issued Equity Securities other than by way of a conversion in connection with an Offering will not be subject to this Section 5(e). The terms of this Section 5(e) shall survive any repayment of this Note.
(f) Amendment and Waiver. This Note and any term hereof may only be amended, waived or modified in accordance with Section 10.9 of the Purchase Agreement. Upon the effectuation of such amendment, waiver or modification with the consent of the Required Holders or each Holder, as applicable, in conformance with Section 10.9 of the Purchase Agreement, such amendment, waiver or modification shall be effective as to, and binding against the Holders of, all of the Notes, and the Company shall promptly give written notice thereof to the Holder if the Holder has not previously consented to such amendment, waiver or modification in writing; provided that the failure to give such notice shall not affect the validity of such amendment, waiver or modification.
(g) Binding Agreement. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Note, expressed or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Note, except as expressly provided in this Note.
(h) Counterparts. This Note may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute a single contract. Any counterpart of a signature page to this Note may be delivered by facsimile, electronic mail (including .pdf or .tif) or by means of an electronic signature complying with the Electronic Signatures in Global and National Commerce Act, the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes to the fullest extent permitted by applicable law.
(i) Headings; Interpretation. Paragraph headings used in this Note are included for convenience of reference only and will not modify the provisions that they precede or affect the interpretation of this Note or any other Note Document. The term including shall be interpreted to mean including but not limited to.
(j) Notices. All communications and notices required or permitted to be given hereunder shall be delivered in accordance with Section 10.8 of the Purchase Agreement.
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(k) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
(l) Expenses, Etc. This Note is subject to the provisions of Section 10.3 (Jurisdiction and Venue), Section 10.4 (Waiver of Jury Trial) and Section 10.10 (Expenses and Indemnification) of the Purchase Agreement, which are by this reference incorporated herein in full, mutatis mutandis.
(m) Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to each Holder, upon any breach or default of the Company under this Note or any Note shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a Holder of any breach or default under this Note, or any waiver by such Holder of any provisions or conditions of this Note must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Note, or by law or otherwise afforded to such Holder, shall be cumulative and not alternative.
(n) Entire Agreement. This Note and the other Note Documents constitute the entire contract among the parties hereto regarding to the subject matters addressed herein and supersede any and all previous agreements, negotiations, and discussions, oral or written, by the parties regarding the subject matters addressed herein.
(o) Exculpation among Holders. The Holder acknowledges that the Holder is not relying on any person, firm or corporation, other than the Company and its officers and board members, in making its investment or decision to invest in the Company.
(p) Brokers Fees. Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any brokers or finders fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this subsection being untrue.
(q) Repayment Amounts. The parties hereto hereby acknowledge and agree that payment of any Repayment Amount or the Covenant Amendment Repayment Amount hereunder constitutes liquidated damages and not a penalty, the actual amount of damages to the Holder or profits lost by the Holder as a result of a prepayment or conversion of this Note would be impracticable and extremely difficult to ascertain and the Repayment Amount or the Covenant Amendment Repayment Amount hereunder is part of an arms length transaction between sophisticated parties represented by counsel and is bargained for consideration provided
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for and agreed to by mutual agreement of the Company and the Holder. THE NOTE PARTIES EXPRESSLY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE REPAYMENT AMOUNT TO THE EXTENT SUCH REPAYMENT AMOUNT IS DUE AND PAYABLE IN ACCORDANCE WITH THIS NOTE. The Note Parties expressly agree that: (i) the Repayment Amount or the Covenant Amendment Repayment Amount, as applicable, shall be payable notwithstanding the then prevailing market rates at the time payment is made; (ii) the Note Parties shall be estopped hereafter from claiming differently than as agreed to in this paragraph; and (iii) their agreement to pay the Repayment Amount or the Covenant Amendment Repayment Amount, as applicable, is a material inducement to the Holder to purchase the Note.
(r) Tax Forms. Prior to the date hereof, the Holder (and, in the event any Person becomes an assignee or participant in respect of this Note, prior to the date such Person becomes such an assignee or participant) shall have delivered to the Company executed copies of Internal Revenue Service (IRS) Form W-9 or appropriate IRS Form W-8, as applicable, as well as any reasonably necessary supporting information, certifying that any payments to such Holder (or assignee or participant) under this Note are exempt from U.S. federal withholding tax. The Holder (and assignee or participant) further agrees that if any such form or certification expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company in writing of its legal inability to do so
(s) Calculations. The Company shall be responsible for making all calculations with respect to this Note, including, without limitation, accrued interest (including PIK Interest), the Fair Market Value Per Common Share, Applicable Conversion Price, and the Covenant Amendment Repayment Amount, and shall forward such calculations to the Agents and the Holder upon request.
[Signature pages follow]
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EXECUTION VERSION
IN WITNESS WHEREOF, the parties hereto have executed this Note as of the date first written above.
COMPANY: | ||
CORE SCIENTIFIC HOLDING CO. | ||
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SIGNATURE PAGE TO CORE SCIENTIFIC HOLDING CO. CONVERTIBLE PROMISSORY NOTE
EXECUTION VERSION
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SIGNATURE PAGE TO CORE SCIENTIFIC HOLDING CO. CONVERTIBLE PROMISSORY NOTE
EXECUTION VERSION
EXHIBIT B
FORM OF COUNTERPART SIGNATURE PAGE
EXECUTION VERSION
EXHIBIT C
FORM OF GUARANTEE
(see attached)
EXECUTION VERSION
EXHIBIT D
FORM OF SECURITY AGREEMENT
(see attached)
EXECUTION VERSION
EXHIBIT E
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
(see attached)
EXECUTION VERSION
EXHIBIT F
FORM OF SOLVENCY CERTIFICATE
(see attached)
EXECUTION VERSION
EXHIBIT G
FORM OF ADMINISTRATIVE QUESTIONNAIRE
Exhibit 4.6
EXECUTION VERSION
FIRST AMENDMENT TO SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT (this First Amendment) is made as of April 22, 2021, by and among Core Scientific Holding Co., a Delaware corporation (the Company), the Guarantors party hereto, the Purchaser party hereto and U.S. Bank National Association, as note agent and as collateral agent for the Secured Parties (in such capacities, the Agents).
RECITALS
WHEREAS, the Company has entered into that certain Secured Convertible Note Purchase Agreement, dated as of April 19, 2021 (as amended, restated, supplemented and/or otherwise modified from time to time, the Purchase Agreement; capitalized terms used but not otherwise defined herein having the meanings ascribed thereto therein), by and among the Company, the Guarantors from time to time party thereto, the Purchasers from time to time party thereto and the Agents; and
WHEREAS, the Company desires to amend, and the Purchaser party hereto constituting the Required Holders has agree to amend, the Purchase Agreement, on the terms set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, the parties hereto, intending to be legally bound, hereby agree as follows:
1. AMENDMENT. Effective as of the First Amendment Effective Date (as defined below), the Purchase Agreement is hereby amended by amending and restating clause (i) to the proviso appearing in Section 2.2(a) thereof as follows: (i) each Additional Closing Date shall have occurred on or about April 26, 2021, but in any event, not later than April 30, 2021.
2. CONDITIONS PRECEDENT. This First Amendment shall become effective on the date (the First Amendment Effective Date) on which the Company shall have received counterparts of this First Amendment duly executed by each party hereto.
3. MISCELLANEOUS.
3.1 Effect of Agreement. Except as set forth expressly herein, all terms of the Purchase Agreement, as amended hereby, and the other Note Documents shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of the parties hereto. This Amendment shall constitute a Note Document for all purposes of the Purchase Agreement.
3.2 Entire Agreement. This Note and the other Note Documents constitute the entire contract among the parties hereto regarding to the subject matters addressed herein and supersede any and all previous agreements, negotiations, and discussions, oral or written, by the parties regarding the subject matters addressed herein.
3.3 Successors and Assigns. The terms and conditions of this First Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.
3.4 Expenses, Governing Law, Etc. This First Amendment is subject to the provisions of Section 10.2 (Governing Law), Section 10.3 (Jurisdiction and Venue), Section 10.4 (Waiver of Jury Trial) and Section 10.10(a) (Expenses and Indemnification) of the Purchase Agreement, which are by this reference incorporated herein in full, mutatis mutandis. U.S. Bank National Association is entering into this First Amendment solely in its capacity as Note Agent and Collateral Agent pursuant to the direction from the Required Holders. In acting hereunder, the Agents shall be entitled to all of the rights, privileges and immunities of the Agents in acting hereunder, including without limitation the obligations of the Holders pursuant to Section 9.3 and Section 9.6 of the Purchase Agreement.
3.5 Counterparts. This First Amendment may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute a single contract. Any counterpart of a signature page to this First Amendment may be delivered by facsimile, electronic mail (including .pdf or .tif) or by means of an electronic signature complying with the Electronic Signatures in Global and National Commerce Act, the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes to the fullest extent permitted by applicable law. The Note Parties agree to assume all risks arising out of the use of using digital signatures and electronic methods to submit communications to the Note Agent, including without limitation the risk of the Note Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first written above.
CORE SCIENTIFIC HOLDING CO. | ||
By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
CORE SCIENTIFIC, INC. | ||
By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
AMERICAN PROPERTY ACQUISITION, LLC | ||
BY: CORE SCIENTIFIC, INC., ITS SOLE MEMBER | ||
By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
AMERICAN PROPERTY ACQUISITIONS I, LLC | ||
BY: AMERICAN PROPERTY ACQUISITION, LLC, ITS SOLE MEMBER | ||
BY: CORE SCIENTIFIC, INC., ITS SOLE MEMBER | ||
By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek | ||
Title: Chief Financial Officer | ||
AMERICAN PROPERTY ACQUISITIONS VII, LLC | ||
BY: AMERICAN PROPERTY ACQUISITION, LLC, ITS SOLE MEMBER | ||
BY: CORE SCIENTIFIC, INC., ITS SOLE MEMBER | ||
By: |
/s/ Michael Trzupek |
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Name: Michael Trzupek | ||
Title: Chief Financial Officer |
U.S. BANK NATIONAL ASSOCIATION, AS NOTE AGENT AND AS COLLATERAL AGENT | ||
By: |
/s/ Joshua Hahn |
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Name: Joshua Hahn | ||
Title: Authorized Signatory |
CELSIUS CORE LLC | ||
By: |
/s/ Ron Deutsch |
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Name: Ron Deutsch | ||
Title: Chief Revenue Officer |
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Core Scientific, Inc. (f/k/a Power & Digital Infrastructure Acquisition Corp.) on Form S-1 of our reports:
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Dated January 8, 2021, except for Note 7, as to which the date is February 11, 2021, which includes an explanatory paragraph as to the Companys ability to continue as a going concern, with respect to our audit of the financial statements of Power & Digital Infrastructure Acquisition Corp. (now known as Core Scientific Inc.) as of December 31, 2020 and for the period from December 29, 2020 (inception) through December 31, 2020, which report appears in the Prospectus, which is part of this Registration Statement. |
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Dated February 19, 2021 except for Note 1, 2, 3, 7 and 8, which are dated December 10, 2021, which includes a restatement paragraph and an explanatory paragraph as to the Companys ability to continue as a going concern, with respect to our audit of the financial statements of Power & Digital Infrastructure Acquisition Corp. (now known as Core Scientific Inc.) as of February 12, 2021, which report appears in the Prospectus, which is part of this Registration Statement. |
We also consent to the reference to our Firm under the heading Experts in such Prospectus.
/s/ Marcum LLP
Marcum LLP
New York, NY
February 8, 2022
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our report dated August 11, 2021, with respect to the consolidated financial statements of Core Scientific Holding Co. included in the Registration Statement (Form S-1) and related Prospectus of Core Scientific, Inc. for the registration of up to 186,172,423 shares of its common stock, up to 14,891,667 shares of its common stock issuable upon exercise of warrants, and up to 6,266,667 warrants to purchase common stock.
/s/ Ernst & Young LLP
Seattle, Washington
February 8, 2022
Exhibit 23.3
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Core Scientific, Inc. on Form S-1 of our report dated July 30, 2021, with respect to our audits of the financial statements of Blockcap, Inc. as of December 31, 2020 and 2019, for the year ended December 31, 2020 and for the period from February 19, 2019 (inception) through December 31, 2019, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
February 8, 2022
Exhibit 23.4
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Core Scientific, Inc. on Form S-1 of our report dated July 30, 2021, with respect to our audits of the financial statements of BEP 888, LLC as of November 30, 2020, and for the period from June 1, 2020 (inception) through November 30, 2020, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
February 8, 2022
Exhibit 23.5
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Core Scientific, Inc. on Form S-1 of our report dated July 30, 2021, with respect to our audits of the financial statements of BEP 999, LLC as of November 30, 2020, and for the period from November 5, 2020 (inception) through November 30, 2020, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
February 8, 2022
Exhibit 23.6
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Core Scientific, Inc. on Form S-1 of our report dated July 30, 2021, with respect to our audits of the financial statements of RME Black 100, LLC as of November 30, 2020, and for the period from April 16, 2020 (inception) through November 30, 2020, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
February 8, 2022
Exhibit 23.7
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT
We consent to the inclusion in this Registration Statement of Core Scientific, Inc. on Form S-1 of our report dated July 30, 2021, with respect to our audits of the financial statements of RME Black 200, LLC as of November 30, 2020, and for the period from April 27, 2020 (inception) through November 30, 2020, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading Experts in such Prospectus.
/s/ Marcum LLP
Marcum LLP
Los Angeles, CA
February 8, 2022
Exhibit 107
Calculation of Filing Fee Tables
Form S-1
(Form Type)
Core Scientific, Inc.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
Security
Type |
Security Class Title |
Fee
Calculation or Carry Forward Rule |
Amount
Registered(1) |
Proposed
Maximum Offering Price Per Unit |
Maximum Aggregate
Offering Price |
Fee Rate |
Amount of
Registration Fee |
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Fees to Be Paid | Equity | Common Stock, par value $0.0001 per share | 457(o) | 14,891,667(2) | $9.00(5) | $134,025,003.00 | 0.0000927 | $12,424.12(5) | ||||||||
Fees to Be Paid | Equity | Common Stock, par value $0.0001 per share | 457(o) | 186,172,423(3) | $9.00(5) | $1,675,551,807.00 | 0.0000927 | $155,323.66(5) | ||||||||
Fees to Be Paid | Equity | Warrants to purchase shares of common stock | 457(i) | 6,266,667(4) | | | | (6) | ||||||||
Total Offering Amounts | $1,809,576,810.00 | |||||||||||||||
Total Fees Previously Paid | | |||||||||||||||
Total Fee Offsets | | |||||||||||||||
Net Fee Due | $167,747.78 |
(1) |
In the event of a stock split, stock dividend or other similar transaction involving the registrants common stock, in order to prevent dilution, the number of shares of common stock registered hereby shall be automatically increased to cover the additional shares of common stock in accordance with Rule 416(a) under the Securities Act. |
(2) |
Consists of (i) 6,266,667 shares of common stock issuable upon the exercise of warrants issued to the XPDI Sponsor LLC and certain funds and accounts managed by subsidiaries of BlackRock, Inc. in a private placement (the Private Placement Warrants) and (ii) 8,625,000 shares of common stock issuable upon the exercise of warrants included in the publicly sold units (the Public Warrants) to purchase common stock, in each case at an exercise price of $11.50 per share. |
(3) |
Consists of (i) 8,625,000 Founder Shares issued in a private placement in connection with the initial public offering of XPDI, (ii) up to 6,266,667 shares of common stock issuable upon exercise of the Private Placement Warrants, (iii) up to 91,052,355 shares of common stock (including shares issuable upon the exercise of convertible securities) held by certain affiliates of our company and (iv) up to 80,228,401 shares of common stock issuable upon conversion of certain Convertible Notes. |
(4) |
Represents the resale of 6,266,667 Private Placement Warrants. |
(5) |
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act. The price per share and aggregate offering price are based on the average of the high and low prices of the Registrants common stock on February 3, 2022, as reported on the Nasdaq Stock Market. |
(6) |
In accordance with Rule 457(i), the entire registration fee for the Private Placement Warrants is allocated to the shares of common stock underlying the Private Placement Warrants, and no separate fee is payable for the Private Placement Warrants. |