Business context and reporting period
Entity clarification: Despite the request metadata, this filing is for Power & Digital Infrastructure Acquisition Corp. (XPDI), a special-purpose acquisition company (SPAC), not Core Scientific, Inc. It covers the quarter ended September 30, 2021. XPDI had no operating business or revenue; its activities were formation, its February 2021 IPO, and pursuing a business combination.
On July 20, 2021, XPDI agreed to combine with Core Scientific Holding Co. The proposed transaction contemplated a $4.0 billion equity value for Core Scientific and remained subject to completion. The filing does not report Core Scientific’s operating results.
Financial results and position
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 / period-end |
|---|---|---|
| Revenue | None | None |
| Net loss | $18.7 million | $19.3 million |
| Loss per share, Class A and Class B | $0.43 | $0.51 |
| Operating loss | $2.5 million | $4.4 million |
| Cash from operations | Not separately reported | $(1.2) million |
| Cash and equivalents | $1.6 million at September 30 | |
| Trust Account investments | $345.0 million at September 30 | |
| Current liabilities / working capital | $4.1 million current liabilities; approximately $1.9 million working capital deficit | |
| Debt | No Working Capital Loans outstanding; approximately $90,000 sponsor note had been repaid in February |
Quarterly net loss was driven chiefly by a $16.2 million non-operating loss from the change in fair value of derivative warrant liabilities, alongside $2.5 million of operating losses. Nine-month net loss included a $13.9 million warrant fair-value loss. These noncash valuation changes materially affected reported earnings. No meaningful operating margin comparison is available because XPDI had no revenue.
For the nine-month period, financing activities provided $347.8 million, largely from the IPO and private placement; $345.0 million was deposited into the Trust Account. Cash and cash equivalents increased from zero to $1.6 million.
Material changes and unusual items
- XPDI restated previously filed financial statements, including its February 2021 balance sheet and first- and second-quarter 2021 filings. It reclassified all 34.5 million redeemable Class A shares as temporary equity and recorded accretion to redemption value. The restatement increased accumulated deficit by approximately $32.0 million at IPO and reclassified shares out of permanent equity; it did not change total assets or liabilities.
- Disclosure controls and procedures were deemed ineffective at September 30 due to a material weakness in accounting for complex features of Class A shares and warrants. The weakness resulted in the restatement and could lead to further material misstatements.
- Derivative warrant liabilities were $36.9 million at quarter-end. The filing’s reported earnings were sensitive to changes in warrant fair value.
- XPDI had $12.1 million of deferred underwriting commissions, payable from Trust Account funds only if a business combination closes. Advisory agreements also provided for payments upon closing; the filing describes up to $2.05 million under agreements with four advisers and separately cites $1.15 million for agreements with two advisers.
Outlook, risks and contingencies
- XPDI had until February 12, 2023 to complete a business combination, absent an extension; otherwise, it would wind up and redeem public shares using Trust Account funds, subject to the stated terms.
- Management said the $1.6 million operating cash balance and working capital deficit raised substantial doubt about XPDI’s ability to continue as a going concern through the earlier of a business combination or required liquidation. Additional financing might be needed, but sponsors and other potential lenders were not obligated to provide it.
- The proposed Core Scientific transaction required shareholder approvals and other closing conditions. Core Scientific holders representing more than a majority of its voting power had agreed to support it; XPDI sponsor and Class B holders also agreed to vote in favor.
- Management noted that COVID-19 and new variants could adversely affect the company’s financial position, operations, or search for a target, but the impact was not determinable.
- The filing reports no legal proceedings and no off-balance-sheet arrangements as of September 30, 2021. It provides no operating forecast or revenue guidance.
Investor facts to verify
- Confirm the filing issuer: this is XPDI’s 10-Q, not Core Scientific’s operating-company 10-Q.
- Check the status and final terms, financing, approvals, and closing conditions of the proposed Core Scientific transaction.
- Review the restatement disclosures and remediation of the material weakness in financial reporting controls.
- Assess XPDI’s limited operating cash, going-concern warning, and ability to fund transaction costs outside the Trust Account.
- Understand redemption rights, warrant terms and valuation volatility, and transaction-contingent underwriting and advisory fees.