(Kitco News) - Core Scientific, one of the world’s largest publicly traded Bitcoin mining companies, is on the brink of insolvency according to forms filed with the United States Securities and Exchange Commission (SEC) on Oct. 26.
The company indicated that it will not be able to make payments owed to creditors in late October and early November due to the lack of operating capital in its treasury. Low Bitcoin prices, an increase in the cost of electricity and increases in the Bitcoin hash rate were cited as reasons for the cash crunch.
The firm also cited its ongoing litigation with Celsius as putting a strain on its financial resources. Core Scientific has claimed that it is losing approximately $53,000 per day to cover the increased electricity tariffs for hosting mining equipment that Celsius refuses to pay for.
Payments due in the near future include monies owed for “equipment and other financings, including its two bridge promissory notes,” the SEC filing stated.
The missed payments have the potential to lead to the creditors “electing to accelerate the principal amount of such debt, suing the Company for nonpayment or taking action with respect to collateral, where applicable,” Core Scientific added.
This could result in the mining firm defaulting on its other debts, “including its two series of convertible notes due 2025, and the potential exercise of remedies by creditors under such agreements.”
Cash flow at the company is so bad that it warned that it could run out of money within a few months.
“The Company anticipates that existing cash resources will be depleted by the end of 2022 or sooner,” the filing read. “Given the uncertainty regarding the Company’s financial condition, substantial doubt exists about the Company’s ability to continue as a going concern for a reasonable period of time.”
Core Scientific is currently in discussions with legal and financial advisers who are attempting to help the firm negotiate with creditors and potentially redesign its capital structure. The filing warned about the possibility of the firm initiating bankruptcy proceedings.
“The Company may seek alternative sources of equity or debt financing, delay capital expenditures or evaluate potential asset sales, and potentially could seek relief under the applicable bankruptcy or insolvency laws.”
The mining company warned that holders of its common stock could suffer a total loss of their investment in the event of bankruptcy proceedings.
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Also noted in the SEC filing is Core Scientific’s equity line of credit with B. Riley with the right to sell up to $100,000,000 of common stock to the financial service provider. So far, it has sold 13,354,892 shares of common stock for net proceeds of approximately $20.7 million.
Any additional proceeds from the equity line of credit will be directed towards “working capital purposes, including payment of adviser fees and expenses,” Core Scientific said. “The Company’s existing shareholders will be diluted if, and to the extent, the Company elects to further utilize the B. Riley equity line of credit.”
As of Oct. 26, the firm held 24 BTC and approximately $26.6 million in cash in its treasury, a notable decline from the 1,051 BTC and $29.5 million in cash reported on Sept. 30. Core Scientific had holdings of 8,058 BTC as of May 31.
