Core Scientific, Inc. quarterly report, Q1 FY2021

Filing summary

Company mismatch: The supplied filing is for Power & Digital Infrastructure Acquisition Corp. (XPDI), not Core Scientific, Inc. It reports a blank-check company’s first quarter and does not provide Core Scientific operating results.

Business context and reporting period

This unaudited Form 10-Q covers the three months ended March 31, 2021. XPDI was formed to pursue a business combination, had not begun operating activities, and reported no operating revenue. It completed its IPO on February 12, 2021, raising $345.0 million gross, and concurrently raised $9.4 million from a private placement of warrants.

Financial highlights

MetricPeriod-end or Q1 value
RevenueNone; the company expected no operating revenue before a business combination
Net income$4.96 million, primarily reflecting a $6.16 million noncash gain from warrant remeasurement
Operating expenses$430,803 operating loss, including $341,986 general and administrative expense and $48,817 franchise tax expense
Cash flow$730,082 used in operations; $345.0 million used in investing to fund the trust; $347.8 million provided by financing
Cash and liquidity$2.05 million operating cash; $345.01 million in trust investments; approximately $2.2 million working capital
Liabilities$29.77 million total, including $16.87 million derivative warrant liabilities and $12.08 million deferred underwriting commissions
DebtNo working-capital loans outstanding; approximately $90,000 of sponsor borrowing was repaid in February
Equity and redeemable shares$5.00 million stockholders’ equity; $312.97 million of Class A shares classified as temporary equity and subject to possible redemption

Margins are not meaningful because XPDI had no revenue. There is no comparable prior-year operating period presented; the company was incorporated in December 2020.

Material changes, outlook, and risks

  • Following SEC staff guidance issued April 12, 2021, XPDI restated its warrant accounting: warrants are derivative liabilities measured at fair value, with changes recognized in earnings. The change did not affect cash flows. The March 31 warrant liability was $16.87 million.
  • The company identified a material weakness in internal control over financial reporting related to warrant accounting; management concluded disclosure controls were not effective as of quarter-end.
  • Management believed available working capital and potential sponsor or insider borrowing would meet needs through the earlier of a business combination or one year from filing. Such additional borrowing was not committed.
  • XPDI had until February 12, 2023 to complete a business combination, absent an extension. The target or targets generally must have aggregate fair market value of at least 80% of qualifying trust net assets, and the post-transaction company must obtain control.
  • Failure to complete a transaction by the deadline would require the company to cease operations and redeem public shares from the trust, subject to stated terms. Warrants could expire worthless.
  • Management said COVID-19 could negatively affect the company or its target search, but the impact was not determinable. The filing reported no legal proceedings and no off-balance-sheet arrangements.

Investor facts to verify

  • Confirm the intended issuer: this filing is XPDI’s, not Core Scientific’s.
  • Review the warrant restatement, valuation assumptions, and related material weakness and any remediation disclosures.
  • Verify trust funds, redemption terms, deferred underwriting fees, and the business-combination deadline and extension provisions.
  • Distinguish reported net income from operating performance: it was driven primarily by a noncash warrant fair-value gain.