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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2023

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File No. 000-33383

Prairie Operating Co.

(Exact name of registrant as specified in its charter)

Delaware |  | 98-0357690
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

8636 N. Classen Boulevard Oklahoma City, OK |  | 73114
(Address of principal executive offices) |  | (Zip Code)

(713) 424-4247

(Registrant’s telephone number, including area code)

Creek Road Miners, Inc.

35 E. Horizon Ridge Pkwy, Ste 110-502

Henderson, NV 89002

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class |  | Trading Symbol(s) |  | Name of each Exchange on which registered
N/A |  | N/A |  | N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ | Accelerated filer ☐
Non-accelerated filer ☒ | Smaller reporting company ☒
| Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Title of Class |  | Number of Shares Outstanding on May 9, 2023
Common Stock, $0.0001 par value |  | 167,828,942

EXPLANATORY NOTE

Prairie Operating Co. (the “Company,” “Prairie,” “we,” “us” or “our”) is filing this Amendment No. 1 (this “Amendment”) to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Original Form 10-Q”), as originally filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2023, solely to properly disclose that the Company Financial Statements as filed for said quarter were unaudited and not reviewed in compliance with SEC rules. The Company’s prior independent registered public accounting firm resigned and the Company engaged Ham, Langston & Brezina, L.L.P. (“HL&B”) as its new independent registered public accounting firm. The Company plans to amend this Form 10-Q/A after HL&B has the opportunity to complete the required review procedures as required for public companies.

Except as described above, this Amendment does not amend, modify or update the information in, or exhibits to, the Original Form 10-Q. Furthermore, this Amendment does not change any previously reported financial results nor does it reflect events occurring after the filing of the Original Form 10-Q. This Amendment should be read in conjunction with the Original Form 10-Q.

On May 3, 2023, the Company completed the previously announced merger with Prairie Operating Co., LLC, a Delaware limited liability company (“Prairie LLC”), pursuant to the terms of the Amended and Restated Agreement and Plan of Merger, dated May 3, 2023 (the “Merger Agreement”), by and among the Company, Creek Road Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”), and Prairie (the “Closing”), pursuant to which, among other things, Merger Sub merged with and into Prairie, with Prairie surviving and continuing to exist as a Delaware limited liability company and a wholly-owned subsidiary of the Company (the “Merger”). Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.”

Although this Quarterly Report on Form 10-Q is filed after the completion of the Merger, unless otherwise specifically noted herein, information set forth herein only relates to the period as of and for the quarter ended March 31, 2023 and the year ended December 31, 2022 and therefore does not include the information of Prairie for those periods. Accordingly, unless otherwise specifically noted herein, references herein to Prairie Operating Co., the Company, we, us or our refer only to the Company and its subsidiaries prior to the Merger and does not include Prairie.

TABLE OF CONTENTS

PART I | FINANCIAL INFORMATION | 2
Item 1. | Condensed Consolidated Financial Statements | 2
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 40
Item 4. | Controls and Procedures | 40
PART II | OTHER INFORMATION | 41
Item 1. | Legal Proceedings | 41
Item 1A. | Risk Factors | 41
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 41
Item 3. | Defaults Upon Senior Securities | 41
Item 4. | Mine Safety Disclosures | 41
Item 5. | Other Information | 41
Item 6. | Exhibits | 42
SIGNATURES |  | 43

1

PART 1 — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Prairie Operating Co. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited and Not Reviewed)

|  | March 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
|  |  | (unaudited and not reviewed) |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 27,020 |  |  | $ | 246,358 |
Receivable from sale of investment |  |  | — |  |  |  | 90,000 |
Prepaid expenses |  |  | 26,799 |  |  |  | 40,702 |
Deposits on mining equipment |  |  | 4,721,280 |  |  |  | 4,673,680 |
Total current assets |  |  | 4,775,099 |  |  |  | 5,050,740 |
Other assets: |  |  |  |  |  |  |  |
Property and equipment, net of accumulated depreciation of $811,792 and $747,216, respectively |  |  | 1,567,431 |  |  |  | 1,632,007 |
Deposits and other assets |  |  | 110,350 |  |  |  | 110,350 |
Total assets |  | $ | 6,452,880 |  |  | $ | 6,793,097 |
Liabilities and Stockholders’ Deficit |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 3,565,924 |  |  | $ | 3,232,855 |
Accrued interest and expenses – related parties |  |  | 3,259,997 |  |  |  | 3,055,989 |
Convertible notes payable |  |  | 1,400,000 |  |  |  | 1,400,000 |
Secured convertible debenture(s) – related party(ies) |  |  | 4,993,700 |  |  |  | 4,993,700 |
Current liabilities associated with discontinued operations |  |  | 485,712 |  |  |  | 485,712 |
Total current liabilities |  |  | 13,705,333 |  |  |  | 13,168,256 |
Non-current liabilities: |  |  |  |  |  |  |  |
SBA/PPP loans payable |  |  | 149,900 |  |  |  | 149,900 |
Total non-current liabilities |  |  | 149,900 |  |  |  | 149,900 |
Total liabilities |  |  | 13,855,233 |  |  |  | 13,318,156 |
Commitments and contingencies |  |  |  |  |  |  |  |
Stockholders’ deficit: |  |  |  |  |  |  |  |
Preferred stock; 5,000,000 shares authorized: |  |  |  |  |  |  |  |
Series A convertible preferred stock; $0.0001 par value; 500,000 shares authorized; 273,129 and 256,117 shares issued and outstanding, respectively |  |  | 27 |  |  |  | 25 |
Series B convertible preferred stock; $0.0001 par value; 20,000 shares authorized; 1,458 and 1,439 shares issued and outstanding, respectively |  |  | — |  |  |  | — |
Series C convertible preferred stock; $0.0001 par value; 15,000 shares authorized; 7,630 and 7,630 shares issued and outstanding, respectively |  |  | 1 |  |  |  | 1 |
Preferred stock value |  |  | 1 |  |  |  | 1 |
Common stock; $0.0001 par value; 100,000,000 shares authorized; 12,246,036 and 12,246,036 shares issued and outstanding, respectively |  |  | 1,224 |  |  |  | 1,224 |
Additional paid-in capital |  |  | 54,296,425 |  |  |  | 54,202,355 |
Accumulated deficit |  |  | (61,700,030 | ) |  |  | (60,728,664 | )
Total stockholders’ deficit |  |  | (7,402,353 | ) |  |  | (6,525,059 | )
Total liabilities and stockholders’ deficit |  | $ | 6,452,880 |  |  | $ | 6,793,097 |

See notes to unaudited condensed consolidated financial statements

2

Prairie Operating Co. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited and Not Reviewed)

|  | 2023 |  |  | 2022 |
|  | Three Months Ended |
|  | March 31, |
|  | 2023 |  |  | 2022 |
|  | (unaudited and not reviewed) |  |  | (unaudited) |
Revenue: |  |  |  |  |  |
Cryptocurrency mining |  | $ | — |  |  | $ | 343,055 |
eCommerce |  |  | — |  |  |  | 42,059 |
Total revenue |  |  | — |  |  |  | 385,114 |
Operating costs and expenses: |  |  |  |  |  |  |  |
Cryptocurrency mining costs (exclusive of depreciation and amortization shown below) |  |  | 6,305 |  |  |  | 386,342 |
eCommerce costs |  |  | — |  |  |  | 17,478 |
Depreciation and amortization |  |  | 64,576 |  |  |  | 164,520 |
Stock based compensation |  |  | 170,120 |  |  |  | 1,923,105 |
General and administrative |  |  | 576,289 |  |  |  | 932,861 |
Impairment of mined cryptocurrency |  |  | — |  |  |  | 106,105 |
Total operating expenses |  |  | 817,290 |  |  |  | 3,530,411 |
Loss from operations |  |  | (817,290 | ) |  |  | (3,145,297 | )
Other income (expense): |  |  |  |  |  |  |  |
PPP loan forgiveness |  |  | — |  |  |  | 197,662 |
Interest expense |  |  | (154,076 | ) |  |  | (148,064 | )
Other income |  |  | — |  |  |  | — |
Total other income (expense) |  |  | (154,076 | ) |  |  | 49,598 |
Loss from operations before provision for income taxes |  |  | (971,366 | ) |  |  | (3,095,699 | )
Provision for income taxes |  |  | — |  |  |  | — |
Loss from continuing operations |  |  | (971,366 | ) |  |  | (3,095,699 | )
Discontinued operations: |  |  |  |  |  |  |  |
Income from discontinued operations |  |  | — |  |  |  | 6,604 |
Gain on sale of discontinued operations |  |  | — |  |  |  | — |
Net income from discontinued operations |  |  | — |  |  |  | 6,604 |
Net loss |  | $ | (971,366 | ) |  | $ | (3,089,095 | )
Dividends on preferred stock |  |  | (95,472 | ) |  |  | (99,510 | )
Earnings (loss) attributable to common stockholders |  | $ | (1,066,838 | ) |  | $ | (3,188,605 | )
Earnings (loss) per common share: |  |  |  |  |  |  |  |
Earnings (loss) per share from continuing operations, basic and diluted |  | $ | (0.09 | ) |  | $ | (0.34 | )
Earnings per share from discontinued operations, basic and diluted |  | $ | — |  |  | $ | — |
Earnings (loss) per share, basic and diluted |  | $ | (0.09 | ) |  | $ | (0.34 | )
Weighted average common shares outstanding, basic and diluted |  |  | 12,246,036 |  |  |  | 9,427,905 |

See notes to unaudited condensed consolidated financial statements

3

Prairie Operating Co. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited and Not Reviewed)

|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | (Deficit) |
|  | Series A Preferred Stock Par value $0.0001 |  |  | Series B Preferred Stock Par value $0.0001 |  |  | Series C Preferred Stock Par value $0.0001 |  |  | Common Stock Par value $0.0001 |  |  | Additional Paid In |  |  | Accumulated |  |  | Stockholders’ Equity |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | (Deficit) |
Balance, December 31, 2021 |  |  | 223,964 |  |  | $ | 22 |  |  |  | 3,720 |  |  | $ | - |  |  |  | 7,880 |  |  | $ | 1 |  |  |  | 8,191,382 |  |  | $ | 819 |  |  | $ | 51,506,854 |  |  | $ | (47,309,849 | ) |  | $ | 4,197,847 |
Warrants issued for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 109,383 |  |  |  | - |  |  |  | 109,383 |
Exercise of warrants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 600,000 |  |  |  | 60 |  |  |  | 899,940 |  |  |  | - |  |  |  | 900,000 |
Replacement warrants issued |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,608,000 |  |  |  | - |  |  |  | 1,608,000 |
Exercise of stock options |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 185,216 |  |  |  | 19 |  |  |  | (19 | ) |  |  | - |  |  |  | - |
Issuance of common stock for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 30,000 |  |  |  | 3 |  |  |  | 44,997 |  |  |  | - |  |  |  | 45,000 |
Issuance of series A preferred stock to settle compensation |  |  | 16,072 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 160,718 |  |  |  | - |  |  |  | 160,720 |
Issuance of series B preferred stock to settle liabilities |  |  | - |  |  |  | - |  |  |  | 112 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 111,459 |  |  |  | - |  |  |  | 111,459 |
Conversion of series A preferred stock to common |  |  | (20,798 | ) |  |  | (2 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,188,456 |  |  |  | 119 |  |  |  | (117 | ) |  |  | - |  |  |  | - |
Conversion of series B preferred stock to common |  |  | - |  |  |  | - |  |  |  | (1,532 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,208,751 |  |  |  | 120 |  |  |  | (120 | ) |  |  | - |  |  |  | - |
Conversion of secured convertible debenture to Common stock |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 36,000 |  |  |  | 4 |  |  |  | 6,296 |  |  |  | - |  |  |  | 6,300 |
Dividend on Series A preferred stock |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (66,763 | ) |  |  | - |  |  |  | (66,763 | )
Dividend on Series B preferred stock |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (32,837 | ) |  |  | - |  |  |  | (32,837 | )
Net loss |  |  | - |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,089,095 | ) |  |  | (3,089,095 | )
Balance, March 31, 2022 (unaudited) |  |  | 219,238 |  |  | $ | 22 |  |  |  | 2,300 |  |  | $ | - |  |  |  | 7,880 |  |  | $ | 1 |  |  |  | 11,439,805 |  |  | $ | 1,144 |  |  | $ | 54,347,791 |  |  | $ | (50,398,944 | ) |  | $ | 3,950,014 |

|  | Series A Preferred Stock Par value $0.0001 |  |  | Series B Preferred Stock Par value $0.0001 |  |  | Series C Preferred Stock Par value $0.0001 |  |  | Common Stock Par value $0.0001 |  |  | Additional Paid In |  |  | Accumulated |  |  | Stockholders’ Equity |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | (Deficit) |
Balance, December 31, 2022 |  |  | 256,117 |  |  | $ | 25 |  |  |  | 1,439 |  |  | $ | - |  |  |  | 7,630 |  |  | $ | 1 |  |  |  | 12,246,036 |  |  | $ | 1,224 |  |  | $ | 54,202,355 |  |  | $ | (60,728,664 | ) |  | $ | (6,525,059 | )
Issuance of series A preferred stock to settle compensation |  |  | 17,012 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 170,118 |  |  |  | - |  |  |  | 170,120 |
Issuance of series B preferred stock to settle liabilities |  |  | - |  |  |  | - |  |  |  | 19 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 19,424 |  |  |  | - |  |  |  | 19,424 |
Dividend on Series A preferred stock |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (75,784 | ) |  |  | - |  |  |  | (75,784 | )
Dividend on Series B preferred stock |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (19,688 | ) |  |  | - |  |  |  | (19,688 | )
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (971,366 | ) |  |  | (971,366 | )
Balance, March 31, 2023 (unaudited and not reviewed) |  |  | 273,129 |  |  | $ | 27 |  |  |  | 1,458 |  |  | $ | - |  |  |  | 7,630 |  |  | $ | 1 |  |  |  | 12,246,036 |  |  | $ | 1,224 |  |  | $ | 54,296,425 |  |  | $ | (61,700,030 | ) |  | $ | (7,402,353 | )

See notes to unaudited condensed consolidated financial statements

4

Prairie Operating Co. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited and Not Reviewed)

|  | 2023 |  |  | 2022 |
|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |
|  | (unaudited and not reviewed) |  |  | (unaudited) |
Cash flow from operating activities: |  |  |  |  |  |  |  |
Net loss |  | $ | (971,366 | ) |  | $ | (3,089,095 | )
Adjustment to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 64,576 |  |  |  | 164,520 |
Amortization of lease right |  |  | — |  |  |  | (148 | )
Stock based compensation |  |  | 170,120 |  |  |  | 1,923,105 |
Impairment of cryptocurrency |  |  | — |  |  |  | 106,105 |
PPP loan forgiveness |  |  | — |  |  |  | (197,662 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | — |  |  |  | 307 |
Receivable from sale of investment |  |  | 90,000 |  |  |  | — |
Prepaid expenses |  |  | 13,903 |  |  |  | (56,414 | )
Inventory |  |  | — |  |  |  | 1,906 |
Cryptocurrency, net of mining fees |  |  | — |  |  |  | (336,187 | )
Accounts payable and accrued expenses |  |  | 556,501 |  |  |  | 446,413 |
Accrued and unpaid dividends on preferred stock |  |  | (95,472 | ) |  |  | (99,600 | )
Liabilities associated with discontinued operations |  |  | — |  |  |  | (8,384 | )
Net cash used in operating activities |  |  | (171,738 | ) |  |  | (1,145,134 | )
Cash flow from investing activities: |  |  |  |  |  |  |  |
Deposits on mining equipment, net |  |  | (47,600 | ) |  |  | 707,810 |
Purchase of property and equipment |  |  | — |  |  |  | (2,111,932 | )
Net cash used in investing activities |  |  | (47,600 | ) |  |  | (1,404,122 | )
Cash flow from financing activities: |  |  |  |  |  |  |  |
Proceeds from the exercise of warrants |  |  | — |  |  |  | 900,000 |
Paydown of SBA/PPP loans payable |  |  | — |  |  |  | (14,033 | )
Net cash provided by financing activities |  |  | — |  |  |  | 885,967 |
Net decrease in cash and cash equivalents |  |  | (219,338 | ) |  |  | (1,663,289 | )
Cash and cash equivalents, beginning of period |  |  | 246,358 |  |  |  | 2,785,188 |
Cash and cash equivalents, end of period |  | $ | 27,020 |  |  | $ | 1,121,899 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |
Cash paid for income taxes |  | $ | — |  |  | $ | — |
Cash paid for interest |  | $ | — |  |  | $ | — |
Supplemental disclosures of noncash investing and financing activity: |  |  |  |  |  |  |  |
Issuance of series A preferred stock to settle accrued liabilities and compensation |  | $ | 170,120 |  |  | $ | 160,720 |
Issuance of series B preferred stock to settle accrued liabilities |  | $ | 19,424 |  |  | $ | 111,459 |
Dividends on preferred stock |  | $ | 95,472 |  |  | $ | — |
Conversion of preferred stock to common stock |  | $ | — |  |  | $ | 239 |
Conversion of secured convertible debentures to common stock |  | $ | — |  |  | $ | 6,300 |

See notes to unaudited condensed consolidated financial statements

5

Prairie Operating Co. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2023

(Unaudited and Not Reviewed)

Note 1. Organization, Nature of Business and Basis of Presentation

Organization

On May 3, 2023, we changed our name from Creek Road Miners, Inc. to Prairie Operating Co. (the “Company,” “we,” “us” or “our”) in connection with the Merger (as defined below). The Company was incorporated in Delaware on May 2, 2001. Prior to cryptocurrency mining operations that began in October 2021, the Company produced live and virtual pop culture conventions and events and sold a gelatin machine and related consumables that were discontinued in 2021. In addition, the Company operated an eCommerce site selling pop culture memorabilia that was discontinued on June 30, 2022 (known collectively as “legacy operations”).

The Merger Agreement and Related Transactions

On May 3, 2023, Prairie Operating Co., a Delaware corporation formerly named Creek Road Miners, Inc. (the “Company”), completed its previously announced merger with Prairie Operating Co., LLC, a Delaware limited liability company (“Prairie LLC”), pursuant to the terms of the Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023 (the “Merger Agreement,” and the closing thereunder, the “Closing”), by and among the Company, Creek Road Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”), and Prairie LLC, pursuant to which, among other things, Merger Sub merged with and into Prairie LLC, with Prairie LLC surviving and continuing to exist as a Delaware limited liability company and a wholly-owned subsidiary of the Company (the “Merger”). Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.” The Company continues to trade under the current ticker symbol “CRKR” and expects to commence trading on the OTCQB under the new name and ticker symbol “PROP” once FINRA processes the Company’s pending Rule 10b-17 action request pursuant to FINRA Rule 6490.

Prior to the consummation of the Merger, the Company effectuated a series of restructuring transactions in the following order: (i) the Company’s Series A preferred stock, par value $0.0001 per share (“Series A Preferred Stock”), Series B preferred stock, par value $0.0001 per share (“Series B Preferred Stock”), and Series C preferred stock, par value $0.0001 per share (“Series C Preferred Stock”), plus accrued dividends, were converted, in the aggregate, into 76,251,018 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”); (ii) the Company’s 12% senior secured convertible debentures (the “Original Debentures”), plus accrued but unpaid interest and a 30% premium, were exchanged, in the aggregate, for (a) 12% amended and restated senior secured convertible debentures in the principal amount of $1,000,000 in substantially the same form as their respective Original Debentures, (b) shares of Common Stock and (c) shares of Series D Preferred Stock, and such Series D Preferred Stock shall automatically convert into shares of Common Stock at a price of $0.175 per share immediately after the shares of Common Stock is listed or quoted for trading on the NYSE American securities exchange (or any successor thereto) or any other national securities exchange; (iii) accrued fees payable to the Company’s board of directors (the “Board”) in the amount of $110,250 were converted into 630,000 shares of Common Stock; (iv) accrued consulting fees of the Company in the amount of $318,750 payable to Bristol Capital Advisors, LLC (“Bristol Capital”) were converted into 1,821,429 shares of Common Stock; and (v) all amounts payable pursuant to certain convertible promissory notes were converted into an aggregate of 6,608,220 shares of Common Stock.

Prior to the Closing, all of the Company’s then existing warrants to purchase shares of Common Stock and Series B Preferred Stock and options to purchase shares of Common Stock were cancelled and retired and ceased to exist without the payment of any consideration to the holders thereof.

At the effective time of the Merger, membership interests in Prairie LLC were converted into the right to receive each member’s pro rata share of 65,647,676 shares of Common Stock (the “Merger Consideration”).

In addition, the Company consummated the previously announced purchase of oil and gas leases, including all of Exok, Inc.’s, an Oklahoma corporation (“Exok”), right, title and interest in, to and under certain undeveloped oil and gas leases located in Weld County, Colorado, together with certain other associated assets, data and records, consisting of approximately 3,157 net mineral acres in, on and under approximately 4,494 gross acres from Exok for $3,000,000 pursuant to the Amended and Restated Purchase and Sale Agreement, dated as of May 3, 2023, by and among the Company, Prairie LLC and Exok (the “Exok Transaction”).

To fund the Exok Transaction, the Company received an aggregate of $17.3 million in proceeds from a number of investors (the “PIPE Investors”), and the PIPE Investors were issued Series D preferred stock, par value $0.0001 per share (“Series D Preferred Stock”), with a stated value of $1,000 per share and convertible into shares of Common Stock at a price of $0.175 per share, and 100% warrant coverage for each of Series A warrants to purchase shares of Common Stock (the “Series A Warrants”) and Series B warrants to purchase shares of Common Stock (the “Series B Warrants” and together with the Series A Warrants, the “PIPE Warrants”), in a private placement pursuant to securities purchase agreements entered into with each PIPE Investor (collectively, the “Securities Purchase Agreements”).

6

Nature of Business

Cryptocurrency Mining

We generate substantially all our revenue through cryptocurrency we earn through our mining activities. We have historically mined and held Bitcoin exclusively, which we may sell to fund our operating and capital expenditures. Our mining operations commenced on October 24, 2021. We use special cryptocurrency mining computers (known as “miners”) to solve complex cryptographic algorithms to support the Bitcoin blockchain and, in return, receive Bitcoin as our reward. Miners measure their processing power, which is known as “hashing” power, in terms of the number of hashing algorithms solved (or “hashes”) per second, which is the miner’s “hash rate.” We participate in mining pools that pool the resources of groups of miners and split cryptocurrency rewards earned according to the “hashing” capacity each miner contributes to the mining pool. Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

Mining Equipment

All of our miners were manufactured by Bitmain, and incorporate application-specific integrated circuit (ASIC) chips specialized to solve blocks on the Bitcoin blockchains using the 256-bit secure hashing algorithm (SHA-256) in return for Bitcoin cryptocurrency rewards. As of March 31, 2023, we had 510 Bitmain S19J Pro miners with 51.0 Ph/s of hashing capacity and 270 Bitmain S19 miners with 24.3 Ph/s of hashing capacity.

On December 17, 2021 the Company entered into a Non-Fixed Price Sales and Purchase Agreement (the “Bitmain Agreement”) with Bitmain Technologies Limited (“Bitmain”) for 600 Bitmain S19XP miners with a reference price of approximately $11,250 per miner. The miners have a total of 84 Ph/s of hashing capacity and an initial estimated purchase commitment of $6,762,000 (the “total reference price”), subject to price adjustments and related offsets, including potential adjustments related to the market price of miners. The final adjusted price under the contract was $4,016,600 as of March 31, 2023, and the Company has made payments of $4,016,600 (classified as deposits on mining equipment) to Bitmain pursuant to the Bitmain Agreement as of such date.

As of March 31, 2023, none of the 600 miners purchased from Bitmain have been delivered to the Company, and will remain undelivered until all fees are paid to ship the miners from the Bitmain facility to the Company.

Mining Results

The Company measures its operations by the number and U.S. Dollar (US$) value of the cryptocurrency rewards it earns from its cryptocurrency mining activities. The following table presents additional information regarding our cryptocurrency mining operations:

Schedule of Cryptocurrency Mining Operations

|  | Quantity of Bitcoin |  |  | US$ Amounts |
Balance September 30, 2021 |  |  | — |  |  | $ | — |
Revenue recognized from cryptocurrency mined |  |  | 6.7 |  |  |  | 369,804 |
Mining pool operating fees |  |  | (0.1 | ) |  |  | (7,398 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (59,752 | )
Balance December 31, 2021 |  |  | 6.6 |  |  | $ | 302,654 |
Revenue recognized from cryptocurrency mined |  |  | 8.3 |  |  |  | 343,055 |
Mining pool operating fees |  |  | (0.2 | ) |  |  | (6,868 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (106,105 | )
Balance March 31, 2022 |  |  | 14.7 |  |  | $ | 532,736 |
Revenue recognized from cryptocurrency mined |  |  | 4.6 |  |  |  | 166,592 |
Mining pool operating fees |  |  | (0.1 | ) |  |  | (3,428 | )
Proceeds from the sale of cryptocurrency |  |  | (18.9 | ) |  |  | (564,205 | )
Realized loss on the sale of cryptocurrency |  |  | — |  |  |  | (131,075 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (34 | )
Balance June 30, 2022 (1) |  |  | 0.3 |  |  | $ | 586 |
Revenue recognized from cryptocurrency mined |  |  | 0.3 |  |  |  | 7,955 |
Mining pool operating fees |  |  | — |  |  |  | (156 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (1,035 | )
Balance September 30, 2022 (1) |  |  | 0.6 |  |  | $ | 7,350 |
Revenue recognized from cryptocurrency mined |  |  | — |  |  |  | — |
Mining pool operating fees |  |  | — |  |  |  | — |
Proceeds from the sale of cryptocurrency |  |  | (0.6 | ) |  |  | (11,203 | )
Realized gain on the sale of cryptocurrency |  |  | — |  |  |  | 3,853 |
Balance December 31, 2022 |  |  | — |  |  | $ | — |
Balance beginning |  |  | — |  |  | $ | — |
Revenue recognized from cryptocurrency mined |  |  | — |  |  |  | — |
Mining pool operating fees |  |  | — |  |  |  | — |
Proceeds from the sale of cryptocurrency |  |  | — |  |  |  | — |
Realized gain on the sale of cryptocurrency |  |  | — |  |  |  | — |
Balance March 31, 2023 (1) |  |  | — |  |  | $ | — |
Balance ending |  |  | - |  |  | $ | - |

| (1) | Since June 30, 2022 the Company is neither receiving meaningful cryptocurrency awards nor generating meaningful revenue from cryptocurrency mining.

7

Factors Affecting Profitability

Our business is heavily dependent on the market price of Bitcoin. The prices of cryptocurrencies, specifically Bitcoin, have experienced substantial volatility. Further affecting the industry, and particularly for the Bitcoin blockchain, the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For Bitcoin the reward was initially set at 50 Bitcoin currency rewards per block. The Bitcoin blockchain has undergone halving three times since its inception as follows: (1) on November 28, 2012 at block 210,000; (2) on July 9, 2016 at block 420,000; and (3) on May 11, 2020 at block 630,000, when the reward was reduced to its current level of 6.25 Bitcoin per block. The next halving for the Bitcoin blockchain is anticipated to occur in March 2024 at block 840,000, when the reward will be reduced to 3.125 Bitcoin per block. This process will reoccur until the total amount of Bitcoin currency rewards issued reaches 21 million and the theoretical supply of new Bitcoin is exhausted. Many factors influence the price of Bitcoin, and potential increases or decreases in prices in advance of, or following, a future halving is unknown.

We have historically mined and held Bitcoin exclusively, which we may sell to fund our operating and capital expenditures. Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

Our business is heavily dependent on the market price of Bitcoin, which has experienced substantial volatility and has recently dropped to its lowest price since December 2020. As of March 31, 2023 the market price of Bitcoin was $28,478, which reflects a decrease of approximately 31% since the beginning of 2022, and a decrease of approximately 58% from its all-time high of approximately $67,000. The price movements result in decreased cryptocurrency mining revenue which has had a material adverse effect on our business and financial results.

Government Regulation

Cryptocurrency is increasingly becoming subject to governmental regulation, both in the U.S. and internationally. State and local regulations also may apply to our activities and other activities in which we may participate in the future. Numerous regulatory bodies have shown an interest in regulating blockchain or cryptocurrency activities. For example, on March 9, 2022 President Biden signed an executive order on cryptocurrencies. While the executive order does not mandate any specific regulations, it instructs various federal agencies to consider potential regulatory measures, including the evaluation of the creation of a U.S. Central Bank digital currency. Future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability. As the regulatory and legal environment evolves, we may become subject to new laws and regulation which may affect our mining and other activities. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

8

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Note 2. Going Concern Analysis

Historically, we have relied upon cash from financing activities to fund substantially all of the cash requirements of our activities and have incurred significant losses and experienced negative cash flow. The Company had net losses from continuing operations of $971,366, and $3,095,699, for the three months ended March 31, 2023 and 2022, respectively. We cannot predict if we will be profitable. We may continue to incur losses for an indeterminate period of time and may be unable to achieve profitability. An extended period of losses and negative cash flow may prevent us from successfully operating and expanding our business. We may be unable to achieve or sustain profitability on a quarterly or annual basis. On March 31, 2023, we had cash and cash equivalents of $27,020, a working capital deficit of approximately $9 million, and an accumulated deficit of approximately $62 million. Upon closing of the Merger and related transactions on May 3, 2023, we received proceeds from the issuance of preferred stock of $17.3 million. A majority of these proceeds remain within the Company after the Merger and related transactions for use in our business.

The assessment of the liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company can meet its obligations and has adequate liquidity to operate. Significant assumptions used in the Company’s forecasted model of liquidity in the next 12 months include its current cash position, inclusive of the impacts from the Merger and related transactions, and its ability to manage spending. Based on an assessment of these factors, management believes that the Company will have adequate liquidity for its operations for at least the next 12 months. Therefore, management’s conclusion is that substantial doubt is not raised as to the Company’s ability to continue as a going concern.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the matters discussed herein.

Note 3. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

These estimates and assumptions include estimates for reserves of uncollectible accounts, accruals for potential liabilities, assumptions made in valuing equity instruments issued for services or acquisitions, and realization of deferred tax assets.

9

Reclassification

Certain prior period amounts have been reclassified to conform to current period presentation.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company does not anticipate incurring any losses related to these credit risks.

Cryptocurrency

Cryptocurrency (Bitcoin) is included in current assets in the accompanying consolidated balance sheets. The classification of cryptocurrencies as a current asset has been made after the Company’s consideration of the significant consistent daily trading volume on readily available cryptocurrency exchanges and the absence of limitations or restrictions on Company’s ability to sell Bitcoin. Cryptocurrencies awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy disclosed below. Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Cryptocurrencies awarded to the Company through its mining activities are included within operating activities on the accompanying consolidated statements of cash flows.

Impairment of Long-Lived Assets

Long-lived assets are comprised of intangible assets and property and equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An estimate of undiscounted future cash flows produced by the asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists, pursuant to the provisions of FASB ASC 360-10 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows and fundamental analysis. The Company reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.

Property and equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of 3 to 9 years. Leasehold improvements are amortized over the shorter of the useful lives of the related assets, or the lease term. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals are included in the consolidated statements of operations.

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Leases

The Company accounts for leases in accordance with the provisions of ASC 842, Leases. This standard requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease.

10

We determine if an arrangement contains a lease at inception. Right of use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:

| ● | identify the contract with a customer;
| ● | identify the performance obligations in the contract;
| ● | determine the transaction price;
| ● | allocate the transaction price to performance obligations in the contract; and
| ● | recognize revenue as the performance obligation is satisfied.

The Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues) for successfully adding a block to the blockchain. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the market rate of the related cryptocurrency at the time of receipt. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

Cryptocurrency Mining Costs

The Company’s cryptocurrency mining costs consist primarily of direct costs of earning Bitcoin related to mining operations, including mining pool fees, natural gas costs, turbine rental costs, and mobile data center rental costs, but exclude depreciation and amortization, which are separately stated in the Company’s consolidated statements of operations.

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Reverse Stock Split

We implemented a 1-for-20 reverse stock split of our outstanding shares of common stock that was effective on January 23, 2020. Unless otherwise noted, all share and related option, warrant, and convertible security information presented has been retroactively adjusted to reflect the reduced number of shares, and the increase in the share price which resulted from this action.

Stock-Based Compensation

The Company periodically issues stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic 718 of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of stock option and warrant awards to employees and directors on the date of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations. We estimate the fair value of restricted stock awards to employees and directors using the market price of our common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations.

Income taxes

We account for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Discontinued Operations

On August 6, 2021, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Informa. Pursuant to the Asset Purchase Agreement, Creek Road Miners Corp. (formerly known as Kick the Can Corp.) sold, transferred, and assigned certain assets, properties, and rights to Informa related to the business of operating and producing live pop culture events. The Company released deferred revenue and other liabilities totaling $722,429 and recognized other income of this amount.

On September 15, 2021, the Company sold our wholly owned subsidiary which contained our Jevo assets and all rights to our Jevo operations for $1,500,000 and recognized a gain on the transaction of approximately $1,130,740.

The related assets and liabilities associated with the discontinued operations in our consolidated balance sheets for the three months ended March 31, 2023 and year ended December 31, 2022, are classified as discontinued operations. Additionally, the financial results associated with discontinued operations in our consolidated statement of operations for the three months ended March 31, 2023 and 2022, are classified as discontinued operations.

Earnings (Loss) Per Common Share

Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period. Potential common shares are excluded from the computation when their effect is antidilutive. Basic and diluted earnings (loss) attributable to common stockholders is the same for the three months ended March 31, 2023 and 2022, because the Company has only incurred losses and all potentially dilutive securities are anti-dilutive. Potentially dilutive securities that were not included in the computation of diluted earnings (loss) attributable to common stockholders at March 31, 2023 because their inclusion would be anti-dilutive are as follows:

Schedule of Anti-dilutive Securities Excluded from Earnings Per Share

Potentially Dilutive Security |  | Quantity |  |  | Stated Value Per Share (1) |  |  | Total Value or Stated Value |  |  | Assumed Conversion Price (1) |  |  | Resulting Common Shares |
Common stock options |  |  | 259,250 |  |  | $ | — |  |  | $ | — |  |  |  | — |  |  |  | 259,250 |
Common stock warrants |  |  | 21,984,266 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 21,984,266 |
Series A preferred stock |  |  | 273,129 |  |  |  | 10 |  |  |  | 2,731,290 |  |  |  | 0.175 |  |  |  | 15,607,371 |
Series B preferred stock |  |  | 1,458 |  |  |  | 1,080 |  |  |  | 1,574,640 |  |  |  | 0.500 |  |  |  | 3,149,280 |
Series C preferred stock |  |  | 7,630 |  |  |  | 1,111 |  |  |  | 8,476,930 |  |  |  | 0.500 |  |  |  | 16,953,860 |
Series B preferred stock warrants |  |  | 5,000 |  |  |  | 1,080 |  |  |  | 5,400,000 |  |  |  | 0.500 |  |  |  | 10,800,000 |
Secured convertible debentures – related parties |  |  | — |  |  |  | — |  |  |  | 4,993,700 |  |  |  | 0.175 |  |  |  | 28,535,429 |
Convertible notes payable |  |  | — |  |  |  | — |  |  |  | 1,400,000 |  |  |  | 0.500 |  |  |  | 2,800,000 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 100,089,456 |

(1) |  | As of March 31, 2023

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Related Parties

The Company follows ASC 850-10, Related Parties, for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, the related parties include: (a) affiliates of the Company (“affiliate” means, with respect to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”)); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Note 4. Deposits on Mining Equipment

Deposits on mining equipment, consisted of the following:

Schedule of Mining Equipment

|  | Cryptocurrency Miners |  |  | Mobile Data Centers |  |  | Total |
Balance December 31, 2021 |  | $ | 7,089,000 |  |  | $ | 524,230 |  |  | $ | 7,613,230 |
Deposits on equipment during the period |  |  | 1,602,300 |  |  |  | 530,430 |  |  |  | 2,132,730 |
Equipment delivered during the period |  |  | (4,722,300 | ) |  |  | (349,980 | ) |  |  | (5,072,280 | )
Balance December 31, 2022 |  | $ | 3,969,000 |  |  | $ | 704,680 |  |  | $ | 4,673,680 |
Balance beginning |  | $ | 3,969,000 |  |  | $ | 704,680 |  |  | $ | 4,673,680 |
Deposits on equipment during the period |  |  | 47,600 |  |  |  | — |  |  |  | 47,600 |
Equipment delivered during the period |  |  | — |  |  |  | — |  |  |  | — |
Balance March 31, 2023 |  | $ | 4,016,600 |  |  | $ | 704,680 |  |  | $ | 4,721,280 |
Balance ending |  | $ | 4,016,600 |  |  | $ | 704,680 |  |  | $ | 4,721,280 |

All of our miners were manufactured by Bitmain, and incorporate application-specific integrated circuit (ASIC) chips specialized to solve blocks on the Bitcoin blockchains using the 256-bit secure hashing algorithm (SHA-256) in return for Bitcoin cryptocurrency rewards. As of March 31, 2023, we had 510 Bitmain S19J Pro miners with 51.0 Ph/s of hashing capacity and 270 Bitmain S19 miners with 24.3 Ph/s of hashing capacity.

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On December 17, 2021 the Company entered into a Non-Fixed Price Sales and Purchase Agreement (the “Bitmain Agreement”) with Bitmain Technologies Limited (“Bitmain”) for 600 Bitmain S19XP miners with a reference price of approximately $11,250 per miner. The miners have a total of 84 Ph/s of hashing capacity and an initial estimated purchase commitment of $6,762,000 (the “total reference price”), subject to price adjustments and related offsets, including potential adjustments related to the market price of miners. The final adjusted price under the contract was $4,016,600 as of March 31, 2023, and the Company has made payments of $4,016,600 (classified as deposits on mining equipment) to Bitmain pursuant to the Bitmain Agreement as of such date.

As of March 31, 2023, none of the 600 miners purchased from Bitmain have been delivered to the Company, and will remain undelivered until all fees are paid to ship the miners from the Bitmain facility to the Company.

Note 5. Cryptocurrency

The Company measures its operations by the number and U.S. Dollar (US$) value of the cryptocurrency rewards it earns from its cryptocurrency mining activities. The Company recognized impairments, or write downs, of cryptocurrency (Bitcoin) rewards to the lowest fair market value of Bitcoin from the time the reward was earned through the end of the reporting period. The impairments amounted to $0 and $106,105 for the three months ended March 31, 2023 and March 31, 2022, respectively. If the subsequent market price of Bitcoin increases, the asset balance will not be adjusted for the increase. The following table presents additional information regarding our cryptocurrency mining operations:

Schedule of Additional Information of Cryptocurrency Mining Operations

|  |  | Quantity of Bitcoin |  |  |  | US $ Amounts |
Balance December 31, 2021 |  |  | 6.6 |  |  | $ | 302,654 |
Revenue recognized from cryptocurrency mined |  |  | 8.3 |  |  |  | 343,055 |
Mining pool operating fees |  |  | (0.2 | ) |  |  | (6,868 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (106,105 | )
Balance March 31, 2022 |  |  | 14.7 |  |  | $ | 532,736 |
Revenue recognized from cryptocurrency mined |  |  | 4.6 |  |  |  | 166,592 |
Mining pool operating fees |  |  | (0.1 | ) |  |  | (3,428 | )
Proceeds from the sale of cryptocurrency |  |  | (18.9 | ) |  |  | (564,205 | )
Realized loss on the sale of cryptocurrency |  |  | — |  |  |  | (131,075 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (34 | )
Balance June 30, 2022 (1) |  |  | 0.3 |  |  | $ | 586 |
Revenue recognized from cryptocurrency mined |  |  | 0.3 |  |  |  | 7,955 |
Mining pool operating fees |  |  | — |  |  |  | (156 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (1,035 | )
Balance September 30, 2022 |  |  | 0.6 |  |  | $ | 7,350 |
Revenue recognized from cryptocurrency mined |  |  | — |  |  |  | — |
Mining pool operating fees |  |  | — |  |  |  | — |
Proceeds from the sale of cryptocurrency |  |  | (0.6 | ) |  |  | (11,203 | )
Realized gain on the sale of cryptocurrency |  |  | — |  |  |  | 3,853 |
Balance December 31, 2022 |  |  | — |  |  | $ | — |
Balance beginning |  |  | — |  |  | $ | — |
Revenue recognized from cryptocurrency mined |  |  | — |  |  |  | — |
Mining pool operating fees |  |  | — |  |  |  | — |
Proceeds from the sale of cryptocurrency |  |  | — |  |  |  | — |
Realized gain on the sale of cryptocurrency |  |  | — |  |  |  | — |
Balance March 31, 2023 |  |  | — |  |  | $ | — |
Balance ending |  |  | — |  |  | $ | — |

| (1) | Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

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Note 6. Property and Equipment

Property and equipment, excluding those associated with discontinued operations, stated at cost, less accumulated depreciation and amortization, consisted of the following:

Schedule of Property and Equipment

|  | March 31, 2023 |  |  | December 31, 2022 |
Cryptocurrency miners |  | $ | 2,152,970 |  |  | $ | 2,152,970 |
Mobile data center |  |  | 219,372 |  |  |  | 219,372 |
Computer equipment |  |  | 6,881 |  |  |  | 6,881 |
Total |  |  | 2,379,223 |  |  |  | 2,379,223 |
Less accumulated depreciation |  |  | (811,792 | ) |  |  | (747,216 | )
Net, Property and equipment |  | $ | 1,567,431 |  |  | $ | 1,632,007 |

Depreciation expense, excluding that associated with discontinued operations, for the three months ended March 31, 2023 and 2022 amounted to $64,576 and $164,520, respectively.

All of our miners were manufactured by Bitmain, and incorporate application-specific integrated circuit (ASIC) chips specialized to solve blocks on the Bitcoin blockchains using the 256-bit secure hashing algorithm (SHA-256) in return for Bitcoin cryptocurrency rewards. As of March 31, 2023, we had 510 Bitmain S19J Pro miners with 51.0 Ph/s of hashing capacity and 270 Bitmain S19 miners with 24.3 Ph/s of hashing capacity.

Note 7. Amounts Due to Related Parties

Amounts due to related parties as of March 31, 2023 consisted of the following:

Schedule of Due to Related Parties

|  | Bristol Capital, LLC |  |  | Bristol Investment Fund, Ltd. |  |  | Barlock 2019 Fund, LP |  |  | Total |
Accrued interest and expenses |  | $ | 375,000 |  |  | $ | 1,899,074 |  |  | $ | 985,923 |  |  | $ | 3,259,997 |
Current secured convertible debenture |  |  | — |  |  |  | 2,496,850 |  |  |  | 2,496,850 |  |  |  | 4,993,700 |
Total |  | $ | 375,000 |  |  | $ | 4,395,924 |  |  | $ | 3,482,773 |  |  | $ | 8,253,697 |

Amounts due to related parties as of December 31, 2022 consisted of the following:

|  | Bristol Capital, LLC |  |  | Bristol Investment Fund, Ltd. |  |  | Barlock 2019 Fund, LP |  |  | Total |
Accrued interest and expenses |  | $ | 318,750 |  |  | $ | 1,825,195 |  |  | $ | 912,044 |  |  | $ | 3,055,989 |
Current secured convertible debenture |  |  | — |  |  |  | 2,496,850 |  |  |  | 2,496,850 |  |  |  | 4,993,700 |
Total |  | $ | 318,750 |  |  | $ | 4,322,045 |  |  | $ | 3,408,894 |  |  | $ | 8,049,689 |

As of March 31, 2023, the secured convertible debentures with an aggregate principal amount of $4,993,700, comprised of a secured convertible debenture with a principal amount of $2,496,850 held by Bristol Investment Fund and a secured convertible debenture with a principal amount of $2,496,850 held by Barlock 2019 Fund, LP, were convertible into an aggregate of 28,535,429 shares of common stock (exclusive of any accrued and unpaid interest), using a conversion price of $0.175.

Note 8. Related Party Transactions

The Company has entered into transactions with the following related parties:

Related Party: Bristol Capital, LLC

Bristol Capital, LLC (“Bristol Capital”) is managed by Paul L. Kessler. Mr. Kessler served as Executive Chairman of the Company from December 29, 2016, through November 24, 2020, when Mr. Kessler resigned his position, but continued to serve as member of the Board of Directors. On December 1, 2021, Mr. Kessler was again appointed Executive Chairman of the Company.

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Consulting Agreement

On December 29, 2016, the Company entered into a Consulting Services Agreement with Bristol Capital. Pursuant to the Consulting Agreement, Mr. Kessler agreed to serve as Executive Chairman of the Company. The initial term of the Agreement is from December 29, 2016 through March 28, 2017. The term of the Consulting Agreement will be automatically extended for additional terms of 90-day periods, unless either the Company or Bristol Capital gives prior written notice of non-renewal to the other party no later than thirty (30) days prior to the expiration of the then current term. Upon the execution of the agreement the Company granted Bristol Capital options to purchase up to an aggregate of 30,000 shares of the Company’s common stock at an exercise price of $0.25 per share, as amended.

During the term, the Company will pay Bristol Capital, as amended, a monthly fee $18,750 payable in cash or preferred stock, at the Company’s election. In addition, Bristol Capital may receive an annual bonus in an amount and under terms determined by the Compensation Committee of the Board and approved by the Board in its sole and absolute discretion. The Company shall also, in association with the uplisting of the Company’s common stock to a national exchange, issue to Bristol Capital (i) shares of common stock equal to 5% of the fully diluted shares of common stock of the Company, calculated with the inclusion of Bristol Capital’s equity stock holdings and shares issuable upon conversion of convertible instruments, preferred stock, options, and warrants; and (ii) a one-time non-accountable expense reimbursement of $200,000.

On November 22, 2018, the Company agreed to issue 202,022 shares of preferred stock for settlement of $496,875 due under the consulting agreement as of October 31, 2018.

On August 3, 2020, the Company cancelled the 202,022 shares of preferred stock previously determined to be issued, and issued 49,688 shares of Series A preferred stock for the settlement of the previous outstanding amount due. In addition, on August 3, 2020, the Company issued 38,438 shares of Series A preferred stock for the settlement of $384,375 due under the consulting agreement as of July 31, 2020.

On March 1, 2021, the Company issued 22,500 shares of Series A preferred stock to Bristol Capital for the settlement of $225,000 due under the consulting agreement as of July 31, 2021.

During the three months ended March 31, 2023 and 2022, the Company incurred expenses of approximately $56,250, for each period for consulting services provided by Bristol Capital. As of March 31, 2023 and December 31, 2022, the amount accrued to Bristol Capital for consulting services was $375,000 and $318,750, respectively.

Non-Accountable Expense Reimbursement

On September 7, 2021, Bristol Capital received a one-time non-accountable expense reimbursement of $200,000 in consideration for significant efforts and diligence in negotiating and structuring investment transactions.

Reimbursement of Legal Fees

In January 2022, Bristol Capital was reimbursed for $12,040 in legal fees.

Related Party: Bristol Capital Advisors, LLC

Bristol Capital Advisors, LLC (“Bristol Capital Advisors”) is managed by Paul L. Kessler.

Operating Sublease

On June 16, 2016, the Company entered into a Standard Multi-Tenant Sublease with Bristol Capital Advisors. The leased premises are owned by an unrelated third party and Bristol Capital Advisors passes the lease costs down to the Company. The term of the Sublease is for 5 years and 3 months beginning on July 1, 2016, with monthly payments of approximately $8,000. During the year ended December 31, 2022 and 2021, the Company paid lease obligations of $0 and $83,054, respectively, under the Sublease. On September 30, 2021, the lease term ended, and the Company vacated the premises.

Related Party: Bristol Investment Fund, Ltd.

Bristol Investment Fund, Ltd. (“Bristol Investment Fund”) is managed by Bristol Capital Advisors, which in turn is managed by Paul L. Kessler.

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Securities Purchase Agreement – December 2016

On December 1, 2016, the Company entered into the Purchase Agreement with Bristol Investment Fund, pursuant to which the Company sold to Bristol Investment Fund, for a cash purchase price of $2,500,000, securities comprising of: (i) a secured convertible debenture, (ii) Series A common stock purchase warrants, and (iii) Series B common stock purchase warrants. Pursuant to the Purchase Agreement, the Company paid $25,000 to Bristol Investment Fund and issued 25,000 shares of Common Stock with a grant date fair value of $85,000 to Bristol Investment Fund to cover legal fees. The Company recorded as a debt discount of $25,791 related to the cash paid and the relative fair value of the shares issued for legal fees.

(i) Secured Convertible Debenture

On December 1, 2016, the Company issued the Bristol Convertible Debenture with an initial principal balance of $2,500,000, and a maturity date of December 30, 2018. The Bristol Convertible Debenture will accrue interest on the aggregate unconverted and then outstanding principal amount at the rate of 12% per annum. Interest is payable quarterly on (i) January 1, April 1, July 1 and October 1, beginning on January 1, 2017, (ii) on each date the purchaser converts, in whole or in part, the Bristol Convertible Debenture into common stock (as to that principal amount then being converted), and (iii) on the day that is 20 days following the Company’s notice to redeem some or all of the of the outstanding principal of the Bristol Convertible Debenture (only as to that principal amount then being redeemed) and on the maturity date. Interest may be paid in cash, common stock, or a combination thereof at the sole discretion of the Company.

The Bristol Convertible Debenture is convertible into shares of the Company’s common stock at any time at the option of the holder. The initial conversion price was $3.00 (as converted) per share, subject to adjustment. In the event of default occurs, the conversion price shall be the lesser of (i) the initial conversion price of $3.00 and (ii) 50% of the average of the three lowest trading prices during the 20 trading days immediately prior to the applicable conversion date.

The Bristol Convertible Debenture contains anti-dilution provisions where, if the Company, at any time while the Bristol Convertible Debenture is outstanding, sells or grants any option to purchase, right to reprice, or otherwise dispose of or issue any common stock or common stock equivalents, at an effective price per share less that is lower than the conversion price then in effect, the conversion price shall be reduced to the lower effective price per share.

On December 19, 2019, the maturity date of the Bristol Convertible Debenture was amended to December 30, 2021.

On May 1, 2020, the maturity date of the Bristol Convertible Debenture was amended to December 31, 2022.

On August 3, 2020, as a result of the anti-dilution provisions, the effect of repricing stock options held by directors and employees to $0.25 decreased the conversion price to $0.25. As of December 31, 2020, the Bristol Convertible Debenture held by Bristol Investment Fund was convertible into 10,000,000 shares of common stock.

On October 31, 2021, in consideration for the release of senior security interest in certain of the assets, properties, and rights of discontinued operations that were sold during the year, the Bristol Convertible Debenture was amended to reduce the conversion price to $0.175.

During March 31, 2022, the Bristol Convertible Debenture principal in the amount of $3,150 was converted into 18,000 shares of common stock using a conversion price of $0.175.

On December 31, 2022 the maturity date of the Bristol Convertible Debenture was amended to May 31, 2023.

As of March 31, 2023, the Bristol Convertible Debenture with a principal amount of $2,496,850 held by Bristol Investment Fund was convertible into 14,267,714 shares of common stock using a conversion price of $0.175.

As of March 31, 2023 and December 31, 2022, the amount of accrued interest payable to Bristol Investment Fund under the Bristol Convertible Debenture was $1,899,074, and $1,825,195, respectively.

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(ii) Series A Common Stock Purchase Warrants

On December 1, 2016, the Company issued series A common stock purchase warrants to acquire up to 833,333 shares of common stock at exercise price of $3.00, and expiring on December 1, 2021. The warrants contain anti-dilution provisions where, if the Company, at any time while the warrant is outstanding, sells or grants any option to purchase, right to reprice, or otherwise dispose of or issue any common stock or common stock equivalents, at an effective price per share less than the exercise price then in effect, the exercise price shall be reduced, and the number of warrant shares shall be increased such that the aggregate exercise price payable hereunder, shall be equal to the aggregate exercise price prior to such adjustment.

On December 19, 2019, as a result of the anti-dilution provisions, the issuance of the Barlock Convertible Debenture with a conversion price of $2.50 increased the number of shares of common stock issuable upon exercise of the series A common stock purchase warrants to 1,000,000, and decreased the exercise price to $2.50.

On December 19, 2019, Bristol Investment Fund assigned 300,000 series A common stock purchase warrants to Barlock Capital Management, LLC, and the expiration date of the warrants was extended to December 1, 2024. After the assignment, Bristol Investment Fund held series A common stock purchase warrants to acquire 700,000 shares of common stock at an exercise price to $2.50.

On August 3, 2020, as a result of the anti-dilution provisions, the effect of repricing stock options held by directors and employees to $0.25 increased the number of shares of common stock issuable upon exercise of the series A common stock purchase warrants to 7,000,000, and decreased the exercise price to $0.25. As of December 31, 2020, Bristol Investment Fund held series A common stock purchase warrants to acquire 7,000,000 shares of common stock at an exercise price to $0.25.

On October 31, 2021, as a result of the anti-dilution provisions, the effect of reducing the conversion price of the Convertible Debentures to $0.175 increased the common stock issuable upon the exercise of the series A common stock purchase warrants to 10,000,000, and decreased the exercise price to $0.175.

On September 9, 2022, Bristol Investment Fund assigned 20% of its series A common stock purchase warrants shares to Leviston Resources, LLC.

As of March 31, 2023, Bristol Investment Fund held series A common stock purchase warrants to acquire 10,000,000 shares of common stock at an exercise price of $0.175.

In addition, the warrants may be exercised, in whole or in part, at any time until they expire. If at any time after the 6-month anniversary of the closing date there is no effective registration statement, or no current prospectus available for the resale of the warrant shares, then the warrants may be exercised, in whole or in part, on a cashless basis at any time until they expire.

(iii) Series B Common Stock Purchase Warrants

On December 1, 2016, the Company issued series B common stock purchase warrants to acquire up to 833,333 shares of Common Stock at an initial exercise price of $0.002, and expiring on December 1, 2021. The series B common stock purchase warrants were exercised immediately on the issuance date, and the Company received gross proceeds of $1,667.

Upon issuance of the Bristol Convertible Debenture, the Company valued the warrants using the Black-Scholes Option Pricing model and accounted for it using the relative fair value of $1,448,293 as debt discount on the consolidated balance sheet. Debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the effective interest method which approximates the interest method. The amortization of debt discount is included as a component of interest expense in the condensed consolidated statement of operations. There was no unamortized debt discount as of March 31, 2023 and December 31, 2022.

Related Party: Barlock 2019 Fund, LP

Barlock is managed by Scott D. Kaufman, who served as Chief Executive Officer of the Company from November 24, 2020, through May 11, 2022, and as co-Chief Executive Officer from May 12, 2022 through August 8, 2022, and as a Director from November 4, 2019, through August 8, 2022, and as Chairman of the Board of Directors from November 24, 2020, through December 1, 2021.

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Securities Purchase Agreement – December 2019

On December 19, 2019, the Company entered into the purchase agreement with Barlock, pursuant to which the Company sold to Barlock, for a cash purchase price of $2,500,000, securities comprising of: (i) the Barlock Convertible Debenture, and (ii) Series A common stock purchase warrants assigned from Bristol Investment Fund. Pursuant to the purchase agreement, the Company paid $25,400 to Barlock for legal fees which was recorded as a debt discount.

(i) Secured Convertible Debenture

On December 19, 2019, the Company entered issued the Barlock Convertible Debenture with an initial principal balance of $2,500,000, and a maturity date of December 30, 2021. The Barlock Convertible Debenture accrues interest on the aggregate unconverted and then outstanding principal amount at the rate of 12% per annum. Interest is payable quarterly on (i) January 1, April 1, July 1 and October 1, beginning on January 1, 2020, (ii) on each date the purchaser converts, in whole or in part, the Barlock Convertible Debenture into common stock (as to that principal amount then being converted), and (iii) on the day that is 20 days following the Company’s notice to redeem some or all of the of the outstanding principal of the Barlock Convertible Debenture (only as to that principal amount then being redeemed) and on the maturity date. Interest may be paid in cash, common stock, or a combination thereof at the sole discretion of the Company.

The Barlock Convertible Debenture is convertible into shares of the Company’s common stock at any time at the option of the holder. The initial conversion price was $2.50 (as converted) per share, subject to adjustment. In the event default occurs, the conversion price shall be the lesser of (i) the initial conversion price of $2.50 and (ii) 50% of the average of the three lowest trading prices during the 20 trading days immediately prior to the applicable conversion date.

The Barlock Convertible Debenture contains anti-dilution provisions where, if the Company, at any time while the Barlock Convertible Debenture is outstanding, sells or grants any option to purchase, right to reprice, or otherwise dispose of or issue any common stock or common stock equivalents, at an effective price per share less that is lower than the conversion price then in effect, the conversion price shall be reduced to the lower effective price per share.

On August 3, 2020, as a result of the anti-dilution provisions, the effect of repricing stock options held by directors and employees to $0.25 decreased the conversion price to $0.25. As of December 31, 2020, the Barlock Convertible Debenture held by Barlock was convertible into 10,000,000 shares of common stock.

On October 31, 2021, in consideration for the release of senior security interest in certain of the assets, properties, and rights of discontinued operations that were sold during the year, the Barlock Convertible Debenture was amended to reduce the conversion price to $0.175, and the maturity date was amended to December 31, 2023.

In March 2022, the principal amount of $3,150 under the Barlock Convertible Debenture was converted into 18,000 shares of common stock at a conversion price of $0.175.

As of March 31, 2023, the Barlock Convertible Debenture with a principal amount of $2,496,850 held by Barlock was convertible into 14,267,714 shares of common stock at a conversion price of $0.175.

As of March 31, 2023 and December 31, 2022, the amount of accrued interest payable to Barlock under the Barlock Convertible Debenture was $985,923 and $912,044, respectively.

(ii) Series A Common Stock Purchase Warrants

On December 19, 2019, Bristol Investment Fund assigned to Barlock Capital Management, LLC series A common stock purchase warrants to acquire up to 300,000 shares of common stock at exercise price of $2.50, and expiring on December 1, 2024. The warrants contain anti-dilution provisions where, if the Company, at any time while the warrant is outstanding, sells or grants any option to purchase, right to reprice, or otherwise dispose of or issue any common stock or common stock equivalents, at an effective price per share less than the exercise price then in effect, the exercise price shall be reduced, and the number of warrant shares shall be increased such that the aggregate exercise price payable hereunder, shall be equal to the aggregate exercise price prior to such adjustment.

On August 3, 2020, as a result of the anti-dilution provisions, the effect of repricing stock options held by directors and employees to $0.25 increased the number of shares of common stock issuable upon exercise of the series A common stock purchase warrants to 3,000,000, and decreased the exercise price to $0.25. As of December 31, 2020, Barlock Capital Management, LLC held series A common stock purchase warrants to acquire 3,000,000 shares of common stock at an exercise price to $0.25.

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On October 31, 2021, as a result of the anti-dilution provisions, the effect of reducing the conversion price of the secured convertible debenture to $0.175 increased the number of shares of common stock issuable upon exercise of the series A common stock purchase warrants to 4,285,714, and decreased the exercise price to $0.175.

As of March 31, 2023, Barlock Capital Management, LLC held series A common stock purchase warrants to acquire 4,285,714 shares of common stock at an exercise price to $0.175.

In addition, the warrants may be exercised, in whole or in part, at any time until they expire. If at any time after the six month anniversary of the closing date there is no effective registration statement, or no current prospectus available for the resale of the warrant shares, then the warrants may be exercised, in whole or in part, on a cashless basis at any time until they expire. Shares of common stock issuable upon exercise of warrants are subject to a 4.99% beneficial ownership limitation, which may increase to 9.99% upon notice to the Company.

Upon issuance of the secured convertible debenture, the Company valued the warrants using the Black-Scholes Option Pricing model and accounted for it using the relative fair value of $545,336 as debt discount on the consolidated balance sheet. Debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the effective interest method which approximates the interest method. The amortization of debt discount is included as a component of interest expense in the condensed consolidated statement of operations. There was no unamortized debt discount as of March 31, 2023 and December 31, 2022.

Related Party: Barlock Capital Management, LLC

Barlock Capital Management, LLC, is managed by Scott D. Kaufman, who served as Chief Executive Officer of the Company from November 24, 2020, through May 11, 2022, and as co-Chief Executive Officer from May 12, 2022 through August 8, 2022, and as a Director from November 4, 2019, through August 8, 2022, and as Chairman of the Board of Directors from November 24, 2020, through December 1, 2021. From September 2021 through December 2021, the Company rented executive office space located at 2700 Homestead Road, Park City, UT 84098, for approximately $3,000 per month from Barlock Capital Management, LLC.

Related Party: American Natural Energy Corporation

Scott D. Kaufman is a director and shareholder of American Natural Energy Corporation (“ANEC”). In addition, Richard G. Boyce is a former director of the Company who resigned from the Board on July 22, 2022, is also a director of ANEC. On October 22, 2021, the Company entered into an agreement with ANEC, where ANEC would: (i) allow the Company to moor a barge on the ANEC operations site with the Company’s mobile data center that houses cryptocurrency miners and a mobile turbine, and, (ii) supply natural gas to power a mobile turbine that produces electricity that, in turn, is used to power the miners. ANEC charged the Company for the amount of natural gas used based on the daily spot price of an unaffiliated third party, and a daily fee of $1,500 during the initial 90-day term, and $2,000 thereafter, for the use of their operations site to moor the barge. The agreement terminated on May 24, 2022. The total amount paid to ANEC under the agreement for the three months ended March 31, 2023 and March 31, 2022 was $0 and $230,000, respectively.

In addition, in January 2022, the Company began renting executive office space located at 2700 Homestead Road, Park City, UT 84098, for approximately $3,000 per month from ANEC. The amount of rent paid to ANEC for the three months ended March 31, 2023 and March 31, 2022 was $0 and $19,000, respectively.

Related Party: Scott D. Kaufman, Chief Executive Officer

On September 7, 2021, Scott D. Kaufman received a one-time non-accountable expense reimbursement of $200,000 in consideration for significant efforts and diligence in negotiating and structuring investment transactions.

Related Party: K2PC Consulting, LLC

K2PC Consulting, LLC is managed by the spouse of Scott D. Kaufman. The company paid marketing fees to K2PC Consulting, LLC in the amount of $0 and $7,850, for the three months ended March 31, 2023 and 2022, respectively.

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Related Party: John D. Maatta, Director

John D. Maatta is a current director, and served as Chief Executive Officer of the Company until November 24, 2020, as co-Chief Executive Officer from May 12, 2022 through July 8, 2022, and again as Chief Executive Officer beginning on July 9, 2022. On November 22, 2018, the Company agreed to issue 86,466 shares of preferred stock for settlement of the outstanding compensation due to Mr. Maatta of $212,707, for the period June 17, 2017 through November 15, 2018.

On August 3, 2020, the Company cancelled the 86,466 shares of preferred stock previously determined to be issued, and issued 21,271 shares of Series A preferred stock for the settlement of the previous outstanding amount due. In addition, on August 3, 2020, the Company issued 29,496 shares of Series A preferred stock for the settlement of $294,965 in additional outstanding compensation due to Mr. Maatta, and 35,100 shares of Series A preferred stock for the settlement of $351,000 in loans to the Company made by Mr. Matta. The non-interest-bearing loans were made as follows: during the year ended December 31, 2019, Mr. Maatta loaned $100,000 to the Company, during the year ended December 31, 2020, Mr. Matta loaned an additional $125,000 to the Company, and paid for other amounts on behalf of the Company amounting to $126,000. There were no outstanding balance of the loan payable to Mr. Maatta as of March 31, 2023 or December 31, 2022.

On March 1, 2021, 8,500 shares of Series A preferred stock were issued to Mr. Maatta in satisfaction of an aggregate of $85,546 due to Mr. Maatta under his separation agreement.

Related Party: CONtv

CONtv is a joint venture with third parties and Bristol Capital, LLC. The Company holds a limited and passive interest of 10% in CONtv. As of March 31, 2023 and December 31, 2022, the investment in CONtv and the amount due to CONtv was $0 for both periods.

Note 9. Convertible Notes Payable

Creecal Holdings LLC (Assigned from Leviston Resources LLC)

In connection with a loan in the principal amount of $500,000 received on May 18, 2022 pursuant to an oral agreement between the Company’s then-CEO and Leviston Resources LLC on September 9, 2022 the Company documented such loan with the issuance of a convertible note assigned to Creecal Holdings LLC, dated as of September 8, 2022 in the principal amount of $500,000 (the “Creecal Note”). On March 8, 2023 the then due date of the Creecal Note was amended to May 31, 2023.

The Creecal Note is convertible at the holder’s option at the conversion price of the Company’s Series C preferred stock then in effect (the “Creecal Note Conversion Price”), provided that so long as an event of default has not occurred under the Note and the Company’s Series B preferred stock remains outstanding, the Creecal Note Conversion Price shall not be lower than the conversion price of the Series B preferred stock. Unless the holder opts to convert the Creecal Note contemporaneously with the Merger, the Creecal Note will be immediately due and paid at the closing of the Merger. In the event the Merger is abandoned or cancelled the Creecal Note will be due 30 days after such event.

Alpha Capital Anstalt

On August 24, 2022, the Company entered into an Agreement (the “Settlement”) with Alpha Capital Anstalt (“Alpha”). The Settlement relates to a dispute with the Company’s then-CEO in connection with Alpha’s partial exercise on March 20, 2022 of warrants to purchase 600,000 shares of the Company’s common stock, par value $0.0001 (the “Warrant Shares”), at an aggregate conversion price of $900,000.

Pursuant to the Settlement, Alpha agreed to exchange the 600,000 Warrant Shares for a convertible promissory note in the principal amount of $900,000 due August 25, 2023 (the “Alpha Note”). Upon the occurrence and during the continuation of any event of default under the Alpha Note, interest shall accrue at a default interest rate of 22% per annum. As of December 31, 2022 Alpha had returned 600,000 shares of common stock in connection with the Settlement.

The Alpha Note is convertible at Alpha’s option at the conversion price of the Company’s Series C preferred stock then in effect (the “Alpha Note Conversion Price”). Upon notice that the Merger is imminent, Alpha will convert the Alpha Note at a 10% discount of the amounts owed thereunder into shares of common stock at the lower of: (i) the Alpha Note Conversion Price; or (ii) the lowest per share valuation attributed to the common stock in the Merger and any capital raise completed by the Company in connection with the Merger.

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Note 10. SBA/PPP Notes Payable

Small Business Administration Paycheck Protection Program Loans

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act was enacted and included a provision for the Small Business Administration (“SBA”) to implement its Paycheck Protection Program (“PPP”). The PPP provides small businesses with funds to pay payroll costs, including some benefits over a covered period of up to 24 weeks. Funds received under the PPP may also be used to pay interest on mortgages, rent, and utilities. Subject to certain criteria being met, all or a portion of the loan may be forgiven. The loans bear interest at an annual rate of one percent (1%), are due two (2) years from the date of issuance, and all payments are deferred for the first six (6) months of the loan. Any unforgiven balance of loan principal and accrued interest at the end of the six (6) month loan deferral period is amortized in equal monthly installments over the remaining 18-months of the loan term.

SBA Guaranteed PPP Loan

On April 30, 2020, the Company entered into an SBA guaranteed PPP loan. The Company received aggregate proceeds of $197,600 under the loan. The loan accrues interest at a rate of 1.00%. On December 11, 2021, the SBA forgave $183,567 of loan principal. As of March 31, 2023 and December 31, 2022, there was no outstanding balance under the loan.

SBA Loan

On May 31, 2020, the Company entered into a loan agreement with the SBA. The Company received aggregate proceeds of $149,900 under the loan. The loan accrues interest at a rate of 3.75%, and will mature in June 2050. As of March 31, 2023 and December 31, 2022, the outstanding balance under the loan was $149,900, for both periods.

Second Draw SBA Guaranteed PPP Loan

On February 24, 2021, the Company entered into a Second Draw SBA guaranteed PPP loan. The Company received aggregate proceeds of $197,662 under the loan. The loan accrues interest at a rate of 1.00%, and will mature in February 2026. On March 10, 2022, the SBA forgave $197,662 of loan principal. As of March 31, 2023 and 2022, there was no outstanding balance under the loan.

The following table summarizes PPP/SBA loans payable:

Schedule of Loans Payable

|  | March 31, 2023 |  |  | December 31, 2022 |
|  | As of |
|  | March 31, 2023 |  |  | December 31, 2022 |
SBA Guaranteed PPP Loan |  | $ | — |  |  | $ | — |
SBA Loan |  |  | 149,900 |  |  |  | 149,900 |
Second Draw SBA Guaranteed PPP Loan |  |  | — |  |  |  | — |
Total |  | $ | 149,900 |  |  | $ | 149,900 |

Note 11. Contingencies and Commitments

Russia – Ukraine Conflict

The Russia – Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. The Company does not receive goods or services sourced from those countries, does not anticipate any disruption in its supply chain and has no business relationships, connections to or assets in Russia, Belarus or Ukraine. No impairments to assets have been made due to the conflict. We are unable at this time to know the full ramifications of the Russia – Ukraine conflict and its effects on our business.

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Note 12. Common Stock Options

On May 9, 2011, the Company adopted the 2016 Incentive Stock Award Plan (the “2011 Plan”), on August 12, 2016, the Company adopted the 2016 Incentive Stock Award Plan (the “2016 Plan”), on August 3, 2020, the Company adopted the 2020 Stock Plan (the “2020 Plan”), and on December 1, 2021, the Company adopted the 2021 Incentive Stock Award Plan (the “2021 Plan”), collectively (the “Plans”). The purpose of the Plans is to grant options to purchase our common stock, and other incentive awards, to our employees, directors and key consultants.

The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2020 Plan was 500,000. On December 1, 2021, all prior stock award plans were retired, and the 2021 Plan was adopted. The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2021 Plan is 10,000,000. The shares of our common stock underlying cancelled and forfeited awards issued under the 2021 Plan may again become available for grant under the 2021 Plan. As of March 31, 2022, there were 3,000,000 shares available for grant under the 2021 Plan, and no shares were available for grant under the 2020 Plan, 2016 Plan, or 2011 Plan.

On August 21, 2020 the Board approved the repricing of the exercise price of outstanding stock options that had been issued to directors and employees to $0.25 per share.

Stock-based compensation cost is measured at the grant date, based on the fair value of the awards that are ultimately expected to vest, and recognized on a straight-line basis over the requisite service period, which is generally the vesting period.

The following table summarizes stock option activity during the three months ended March 31, 2023:

Schedule of Stock Option Activity

|  |  |  |  | Weighted Average |
|  | Options |  |  | Exercise Price |
Outstanding at December 31, 2022 |  |  | 259,250 |  |  | $ | 0.25 |
Granted |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |
Forfeited/Cancelled |  |  | — |  |  |  | — |
Outstanding at March 31, 2023 |  |  | 259,250 |  |  | $ | 0.25 |
Exercisable at December 31, 2022 |  |  | 259,250 |  |  |  | 0.25 |
Exercisable at March 31, 2023 |  |  | 259,250 |  |  |  | 0.25 |

The weighted average remaining contractual life of all options outstanding, vested and exercisable as of March 31, 2023 was 1.8 years. The aggregate intrinsic value of options outstanding as of March 31, 2023 was zero, based on the fair value of the Company’s common stock on March 31, 2023.

Additional information regarding stock options outstanding and exercisable as of March 31, 2023 is as follows:

Schedule of Stock Option Outstanding and Exercisable

Option |  |  |  |  |  | Remaining |  |  |  |
Exercise |  |  | Options |  |  | Contractual |  |  | Options |
Price |  |  | Outstanding |  |  | Life (in years) |  |  | Exercisable |
$ | 0.25 |  |  |  | 259,250 |  |  |  | 1.8 |  |  |  | 259,250 |

Note 13. Common Stock Warrants

On January 1, 2022, the Company granted warrants to purchase shares of the Company’s common stock to a consultant in connection with the issuance of Series C preferred stock as follows: a warrant to purchase 400,000 shares with an exercise price of $1.50 per share, and a term of 5 years; a warrant to purchase 250,000 shares with an exercise price of $2.50 per share, and term of 5 years; and a warrant to purchase 250,000 shares with an exercise price of $2.75 per share, and term of 5 years.

On March 29, 2022, the Company offered 16 warrant holders replacement warrants with an exercise price of $1.50 per common share, in exchange for any warrants exercised at this time at the exercise price of $1.50 per common share. The issuance of replacement warrants has the effect of resetting the conversion price of all outstanding shares of Series C preferred stock to $1.50 per common share and resetting the exercise price of all outstanding warrants to $1.50 per common share in instances where those conversion and exercise prices are above $1.50.

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On March 30, 2022, warrants to purchase 600,000 shares of the Company’s common stock were exercised by one warrant holder resulting in $900,000 in cash proceeds being received by the Company. The Company issued replacement warrants to purchase 600,000 shares of the Company’s common stock to such warrant holder.

The following table summarizes common stock warrant activity during the three months ended March 31, 2023:

Schedule of Stock Warrants Activity

|  | Common Stock Warrants |  |  | Weighted Average Exercise Price |
Outstanding at December 31, 2022 |  |  | 21,984,266 |  |  | $ | 0.37 |
Granted |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |
Forfeited/Cancelled |  |  | — |  |  |  | — |
Outstanding at March 31, 2023 |  |  | 21,984,266 |  |  | $ | 0.37 | (1)
Exercisable at December 31, 2022 |  |  | 21,984,266 |  |  | $ | 0.37 |
Exercisable at March 31, 2023 |  |  | 21,984,266 |  |  | $ | 0.37 |

(1) |  | On March 29, 2022, the Company offered 16 warrant holders replacement warrants with an exercise price of $1.50 per common share, in exchange for any warrants exercised at this time at the exercise price of $1.50 per common share. The issuance of replacement warrants has the effect of resetting the conversion price of all outstanding shares of Series C preferred stock to $1.50 per common share and resetting the exercise price of all outstanding warrants to $1.50 per common share in instances where those conversion and exercise prices are above $1.50.

The weighted average remaining contractual life of all common stock warrants outstanding as of March 31, 2023 was 2.3 years. The aggregate intrinsic value of common stock warrants outstanding as of March 31, 2023 was $0, based on the fair value of the Company’s common stock on March 31, 2023.

Additional information regarding common stock warrants outstanding and exercisable as of March 31, 2023 is as follows:

Schedule of Stock Warrants Outstanding and Exercisable

Warrant |  |  |  |  |  | Remaining |  |  |  |
Exercise |  |  | Warrants |  |  | Contractual |  |  | Warrants |
Price |  |  | Outstanding |  |  | Life (in years) |  |  | Exercisable |
$ | 0.175 |  |  |  | 14,285,714 |  |  |  | 1.7 |  |  |  | 14,285,714 |
| 0.50 |  |  |  | 6,318,552 |  |  |  | 3.7 |  |  |  | 6,318,552 |
| 1.00 |  |  |  | 300,000 |  |  |  | 1.0 |  |  |  | 300,000 |
| 1.50 |  |  |  | 400,000 |  |  |  | 3.8 |  |  |  | 400,000 |
| 1.53 |  |  |  | 180,000 |  |  |  | 1.4 |  |  |  | 180,000 |
| 2.50 |  |  |  | 250,000 |  |  |  | 3.8 |  |  |  | 250,000 |
| 2.75 |  |  |  | 250,000 |  |  |  | 3.8 |  |  |  | 250,000 |
| Total |  |  |  | 21,948,266 |  |  |  |  |  |  |  | 21,948,266 |

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Note 14. Series B Preferred Stock Warrants

From March 2021 through December 2021, in connection with the issuance of Series B preferred stock, the Company issued (i) a warrant to acquire 5,000 shares of the Series B preferred stock at an exercise price of $1,000 per share of Series B preferred stock, which became exercisable immediately upon issuance and which expired on March 26, 2023; and (ii) a warrant to acquire 5,000 shares of the Series B preferred stock at an exercise price of $1,000 per share of Series B preferred stock, which became exercisable immediately upon issuance and which expires on March 26, 2024. If at any time after the 60-day anniversary of the closing date there is no effective registration statement, or no current prospectus available for the resale of the warrant shares, then the warrants may be exercised, in whole or in part, on a cashless basis at any time until they expire. The Company can force the exercise of the warrants if the VWAP exceeds $3.75 per share per share for 20 consecutive trading days and the daily average trading volume of the Common Stock exceeds $100,000 in aggregate value for such period. The warrant holder may not be forced to exercise the warrant if such exercise would cause the holder’s beneficial ownership to exceed 4.9%.

The Series B preferred stock issuable upon exercise of the Series B preferred stock warrants are automatically convertible into shares of common stock at the Series B conversion price. Each share of our Series B preferred stock is convertible into a number of shares of our common stock determined by dividing the aggregate stated value for the Series B preferred stock being converted ($1,080 per share, as amended, subject to adjustment as set forth in the currently effective Series B Certificate of Designation) by the then-applicable conversion price (initially $1.50 per share), subject to adjustment as set forth in the currently effective Series B Certificate of Designation. As of March 31, 2021, in connection with the issuance of Series B preferred stock, there were outstanding warrants to acquire 10,000 shares of Series B preferred stock at an exercise price of $1,000, resulting in Series B preferred stock with a stated value of $10,800,000, and convertible into 7,200,000 shares of common stock, using a conversion price of $1.50.

The following table summarizes Series B preferred stock warrant activity during the three months ended March 31, 2023:

Schedule of Stock Warrants Activity

|  | Series B Preferred Stock Warrants |  |  | Weighted Average Exercise Price |
Outstanding at December 31, 2022 |  |  | 10,000 |  |  | $ | 1,000 |
Granted |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |
Forfeited/Cancelled |  |  | (5,000 | ) |  |  | 1,000 |
Outstanding at March 31, 2023 |  |  | 5,000 |  |  | $ | 1,000 |
Exercisable at March 31, 2023 |  |  | 5,000 |  |  |  | 1,000 |

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The weighted average remaining contractual life of all Series B preferred stock warrants outstanding as of March 31, 2023 was 1.0 year.

Note 15. Common Stock

Holders of our Common Stock are entitled to one vote per share. Our Certificate of Incorporation does not provide for cumulative voting. Holders of our Common Stock are entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally available funds. However, the current policy of our Board is to retain earnings, if any, for our operations and expansion. Upon liquidation, dissolution or winding-up, the holders of our Common Stock are entitled to share ratably in all of our assets which are legally available for distribution, after payment of or provision for all liabilities. The holders of our Common Stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our Common Stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue.

We implemented a 1-for-20 reverse stock split of our outstanding shares of common stock that was effective on January 23, 2020. Unless otherwise noted, all share and related option, warrant, and convertible security information presented has been retroactively adjusted to reflect the reduced number of shares, and the increase in the share price which resulted from this action.

From August 2021 through October 2021, we consummated the transactions contemplated by the securities purchase agreement with the investors party thereto, pursuant to which, we generated net cash proceeds of $3,925,050, and issued in a private placement: (i) 2,933,340 shares of common stock for $1.50 per share and (ii) warrants to acquire 2,933,340 shares of common stock at an exercise price of $1.50 per share, which became exercisable immediately upon issuance and with a term of 5 years. The issuance generated net cash proceeds of approximately $3.9 million.

On January 25, 2022, the Company granted an officer 30,000 shares of common stock as compensation under his employment agreement for services provided through December 31, 2021.

Note 16. Preferred Stock

Under the terms of the Certificate of Incorporation, our Board is expressly granted authority to authorize the issuance from time to time of shares of preferred stock in one or more series, for such consideration and for such corporate purposes as our Board may from time to time determines, and by filing a certificate pursuant to applicable law of the State of Delaware to establish from time to time for each such series the number of shares to be included in each such series and to fix the designations, powers, rights and preferences of the shares of each such series, and the qualifications, limitations and restrictions thereof to the fullest extent permitted by the Certificate of Incorporation and the laws of the State of Delaware, including, without limitation, voting rights (if any), dividend rights, dissolution rights, conversion rights, exchange rights and redemption rights thereof.

Series A Preferred Stock

Holders of our Series A Preferred Stock are entitled to the number of votes per share equal to 2,000 shares of Common Stock. Holders of our Series A Preferred Stock are entitled to receive a cumulative dividend on each share of Series A Preferred Stock issued and outstanding at the rate of twelve percent (12%) per annum on the Aggregate Stated Value (as defined in the Certificate of Designation and Restatement of Rights, Preferences and restrictions of Series A Preferred Stock, the “Series A Certificate of Designation”) then in effect, payable quarterly on January 1, April 1, July 1 and October 1. Such dividend is payable in cash but may be paid in shares of Common Stock in our sole discretion if the shares of Common Stock are listed on a national securities exchange. In the event of any liquidation, dissolution or winding up of our company, whether voluntary or involuntary, holders of our Series A Preferred Stock are entitled to receive, prior and in preference to any distribution of any of our assets to the holders of Common Stock by reason of their ownership thereof, for each share held, an amount equal to the Stated Value (as defined in the Series A Certificate of Designation), plus unpaid dividends, if any. The Series A Preferred Stock is convertible, at the option of the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Aggregate Stated Value (initially $10.00 per share, subject to adjustment as set forth in the currently effective Series A Certificate of Designation) by the Conversion Price (as defined in the Series A Certificate of Designation), in effect on the date the certificate is surrendered for conversion, initially set at $0.25. Each share of Series A Preferred Stock is redeemable at the option of the holder for the payment of cash by us to the holder equal to the Aggregate Stated Value of the shares that the holder elects to redeem. The Series A Preferred Stock is entitled to certain protective provisions and we may not take certain actions without the written consent of at least a majority of the Series A Preferred Stock, including, without limitation, amend, alter or repeal any provision of the Series A Certificate of Designation to change the rights of the Series A Preferred Stock, create or authorize additional class or series of stock senior to the Series A Preferred Stock or create, authorize the creation of, issue or authorize the issuance of, any debt security which is convertible into or exchangeable for any equity security, if such equity security ranks senior to the Series A Preferred Stock as to dividends or liquidation rights.

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On January 1, 2022, the Company granted an officer 7,722 shares Series A preferred stock for settlement of $77,216 in compensation under his employment agreement for services provided through March 31, 2022.

On March 31, 2022, we issued 3,409 shares of our Series A preferred stock to Scott D. Kaufman, our Chief Executive Officer, for settlement of $34,090 of compensation payable to Mr. Kaufman under his employment agreement from January 1, 2022 through March 31, 2022. In addition, on March 31, 2022 we issued 4,941 shares of our Series A preferred stock to Paul L. Kessler, our Executive Chairman, for settlement of $49,410 of compensation payable to Mr. Kessler under his employment agreement from January 1, 2022 through March 31, 2022.

On June 30, 2022, we issued 5,361 shares of our Series A preferred stock to Scott D. Kaufman, our former co-Chief Executive Officer, for settlement of $53,610 of compensation payable to Mr. Kaufman under his employment agreement from April 1, 2022 through June 30, 2022. In addition, on June 30, 2022 we issued 4,941 shares of our Series A preferred stock to Paul L. Kessler, our Executive Chairman, for settlement of $49,410 of compensation payable to Mr. Kessler under his employment agreement from April 1, 2022 through June 30, 2022.

On September 30, 2022, we issued: 902 shares of our Series A preferred stock to Scott D. Kaufman, our former co-Chief Executive Officer, for settlement of $9,020 of compensation payable to Mr. Kaufman under his employment agreement from July 1, 2022 through July 8, 2022; 2,958 shares of our Series A preferred stock to Paul L. Kessler, our Executive Chairman, for settlement of $29,580 of compensation payable to Mr. Kessler under his employment agreement from July 1, 2022 through September 30, 2022; 8,333 shares of our Series A preferred stock to John D. Maatta, our Chief Executive Officer, for settlement of $83,333 of compensation payable to Mr. Maatta under his employment agreement from May 1, 2022 through September 30, 2022; and 3,426 shares of our Series A preferred stock to Scott Sheikh, our Chief Operating Officer and General Counsel, for settlement of $34,260 of compensation payable to Mr. Sheikh under his employment agreement from July 16, 2022 through September 30, 2022.

On December 31, 2022, we issued: 3,792 shares of our Series A preferred stock to Paul L. Kessler, our Executive Chairman, for settlement of $37,920 of compensation payable to Mr. Kessler under his employment agreement from October 1, 2022 through December 31, 2022; 5,000 shares of our Series A preferred stock to John D. Maatta, our Chief Executive Officer, for settlement of $50,000 of compensation payable to Mr. Maatta under his employment agreement from October 1, 2022 through December 31, 2022; 4,110 shares of our Series A preferred stock to Scott Sheikh, our Chief Operating Officer and General Counsel, for settlement of $41,100 of compensation payable to Mr. Sheikh under his employment agreement from October 1, 2022 through December 31, 2022, and 685 shares of our Series A preferred stock to Alan Urban, our former Chief Financial Officer, for settlement of $6,850 of compensation payable to Mr. Urban under his employment agreement from October 1, 2022 through December 31, 2022.

On March 31, 2023, we issued: 3,792 shares of our Series A preferred stock to Paul L. Kessler, our Executive Chairman, for settlement of $37,920 of compensation payable to Mr. Kessler under his employment agreement from January 1, 2023 through March 31, 2023; 5,000 shares of our Series A preferred stock to John D. Maatta, our Chief Executive Officer, for settlement of $50,000 of compensation payable to Mr. Maatta under his employment agreement from January 1, 2023 through March 31, 2023; 4,110 shares of our Series A preferred stock to Scott Sheikh, our Chief Operating Officer and General Counsel, for settlement of $41,100 of compensation payable to Mr. Sheikh under his employment agreement from January 1, 2023 through March 31, 2023, and 4,110 shares of our Series A preferred stock to Alan Urban, our former Chief Financial Officer, for settlement of $41,100 of compensation payable to Mr. Urban under his employment agreement from January 1, 2023 through March 31, 2023.

During the three months ended March 31, 2023, no shares Series A preferred stock were converted into common stock.

As of March 31, 2023, there were 273,129 shares of Series A preferred stock outstanding resulting in Series A preferred stock with a stated value of $2,731,290 and convertible into 15,607,371 shares of common stock, using a conversion price of $0.175.

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Series B Preferred Stock

Holders of our Series B Preferred Stock have no voting rights. Holders of our Series B Preferred Stock are entitled to receive a cumulative dividend on each share of Series B Preferred Stock issued and outstanding at the rate of five percent (5%) per annum, in cash or at the holder’s option, in fully paid and non-assessable shares of Series B Preferred Stock, at the Dividend Conversion Rate (as defined in the Series B Certificate of Designation). Such dividends are payable quarterly on January 1, April 1, July 1 and October 1. In the event of any liquidation, dissolution or winding up of our company, whether voluntary or involuntary, holders of our Series B Preferred Stock are entitled to receive, prior and in preference to any distribution of any of our assets to the holders of Common Stock and Common Stock Equivalents (as defined in the Series B Certificate of Designation, and which includes the Series A Preferred Stock and the Series C Preferred Stock) by reason of their ownership thereof, for each share held an amount equal to the Stated Value (as defined in the Series B Certificate of Designation), plus unpaid dividends or liquidated damages, if any. The Series B Preferred Stock is convertible, at the option of the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value, currently $1,080 as amended, by the Series B Conversion Price, subject to a minimum of $1.00, but not to exceed $1.50, subject to further adjustment in the event that the Company, subject to certain exemptions, disposes of or issues any Common Stock or securities convertible into, exercisable, or exchangeable for Common Stock for no consideration or for consideration less than the applicable Series B Conversion Price in effect immediately prior to such issuance. We are entitled to redeem some or all of the outstanding shares of Series B Preferred Stock for cash in an amount equal to the Optional Redemption Amount (as defined in the Series B Certificate of Designation). The Series B Preferred Stock is entitled to certain protective provisions and we may not take certain actions without the written consent of at least fifty one percent (51%) in Stated Value of the outstanding shares of the Series B Preferred Stock, including, without limitation, amend, alter or repeal any provision of the Series B Certificate of Incorporation or the Bylaws that materially and adversely affects the rights of the Series B Preferred Stock, pay cash dividends or distributions on Junior Securities (as defined in the Series B Certificate of Designation), or repay, repurchase or offer to repay, or otherwise acquire more than a de minimis number of shares of Common Stock, Common Stock Equivalents (as defined in the Series B Certificate of Designation) or Junior Securities. Shares of common stock issuable upon the conversion of Series B Preferred Stock are subject to a 9.99% beneficial ownership limitation.

From March 2021 through December 2021, we consummated the transactions contemplated by the securities purchase agreement with Leviston Resources LLC, pursuant to which, we generated net cash proceeds of $4,378,995, and issued in a private placement: (i) 5,000 shares of Series B preferred stock, convertible by dividing the stated value, currently $1,080, as amended, by the Series B conversion price; and (ii) a warrant to acquire 5,000 shares of the Series B preferred stock at an exercise price of $1,000 per share of Series B preferred stock, which became exercisable immediately upon issuance and which expires on March 26, 2023; and (iii) a warrant to acquire 5,000 shares of the Series B preferred stock at an exercise price of $1,000 per share of Series B preferred stock, which became exercisable immediately upon issuance and which expires on March 26, 2024. The Series B preferred stock issuable upon exercise of the Series B preferred stock warrants are automatically convertible into shares of common stock at the Series B conversion price.

In late-August and early-September 2022, the Company and holders of Series B and Series C preferred stock entered into Support Agreements. Pursuant to the Support Agreements, the holders of Series B and Series C preferred stock agreed to use their reasonable best efforts to cooperate with the Company in connection with the Merger. The Support Agreements amend the conversion price of the Series B and Series C preferred stock to $0.50, amends the exercise price of all outstanding warrants held by Series B and Series C Preferred Stockholders to $0.50 per common share, and provides for the conversion of the Series B and Series C preferred stock into shares of the Company’s common stock immediately prior to the closing of the Merger.

During the three months ended March 31, 2023, no shares of Series B preferred stock were converted into common stock.

As of March 31, 2023, there were 1,458 shares of Series B preferred stock outstanding resulting in Series B preferred stock with a stated value of $1,574,640, and convertible into 3,149,280 shares of common stock, using a conversion price of $0.50.

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Series C Preferred Stock

Holders of our Series C Preferred Stock have no voting rights. Holders of our Series C Preferred Stock are entitled to receive dividends on Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to any dividends paid on Common Stock. In the event of any liquidation, dissolution or winding up of our company, whether voluntary or involuntary, holders of our Series C Preferred Stock are entitled to receive, prior and in preference to any distribution of any of our assets to the holders of Common Stock and Common Stock Equivalents (as defined in the Certificate of Designation) by reason of their ownership thereof, for each share held an amount equal to the Stated Value (as defined in the Certificate of Designation), plus fees, if any. The Series C Preferred Stock ranks junior to the Series B Preferred Stock as to rights upon a liquidation, dissolution or winding up of the Company. The Series C Preferred Stock is convertible, at the option of the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value, currently $1,111, by the Series C Conversion Price, subject to further adjustment in the event that the Company, subject to certain exemptions, disposes of or issues any Common Stock or securities convertible into, exercisable, or exchangeable for Common Stock for no consideration or for consideration less than the applicable Series C Conversion Price in effect immediately prior to such issuance. We are entitled to redeem some or all of the outstanding shares of Series C Preferred Stock for cash in an amount equal to the Optional Redemption Amount (as defined in the Certificate of Designation). The Series C Preferred Stock is entitled to certain protective provisions and, without the written consent of at least 50.1% in Stated Value of the outstanding shares of the Series C Preferred Stock, we may not (or permit any of our subsidiaries to) enter into, create, incur, assume, guarantee or suffer to exist any indebtedness, other than Permitted Indebtedness (as defined in the Certificate of Designation). Shares of common stock issuable upon the conversion of Series C Preferred Stock are subject to a 4.99% beneficial ownership limitation, which may increase to 9.99% upon notice to the Company.

On March 29, 2022, the Company offered 16 warrant holders replacement warrants with an exercise price of $1.50 per common share, in exchange for any warrants exercised at this time at the exercise price of $1.50 per common share. The issuance of replacement warrants has the effect of resetting the conversion price of all outstanding shares of Series C preferred stock to $1.50 per common share and resetting the exercise price of all outstanding warrants to $1.50 per common share in instances where those conversion and exercise prices are above $1.50.

On July 7, 2022, 250 shares of Series C preferred stock were converted into 185,167 shares of common stock.

In late-August and early-September 2022, the Company and holders of Series B and Series C preferred stock entered into Support Agreements. Pursuant to the Support Agreements, the holders of Series B and Series C preferred stock agreed to use its reasonable best efforts to cooperate with the Company in connection with the Merger. The Support Agreements amend the conversion price of the Series B and Series C preferred stock to $0.50, amends the exercise price of all outstanding warrants held by Series B and Series C Preferred Stockholders to $0.50 per common share, and provides for the conversion of the Series B and Series C preferred stock into shares of the Company’s common stock immediately prior to the closing of the Merger.

As of March 31, 2023, there were 7,630 shares of Series C preferred stock outstanding resulting in Series C preferred stock with a stated value of $8,476,930, and convertible into 16,953,860 shares of common stock, using a conversion price of $0.50.

Note 17. Discontinued Operations

On August 6, 2021, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Informa. Pursuant to the Agreement, Creek Road Miners Corp. (formerly known as Kick the Can Corp.) sold, transferred, and assigned certain assets, properties, and rights to Informa related to the business of operating and producing live pop culture events. The Company released deferred revenue and other liabilities totaling $722,429 and recorded a gain from sale of discontinued operations of this amount.

On September 15, 2021, the Company sold our wholly owned subsidiary which contained our Jevo assets and all rights to our Jevo operations for $1,500,000 and recognized a gain from sale of discontinued operations on the transaction of approximately $1,130,740. The gain from sale of discontinued operations consists of the following:

Schedule of Gain from Sale of Discontinue Operation

Description |  | Amount |
Net cash paid on the closing date |  | $ | 1,500,000 |
Less: |  |  |  |
Current assets |  |  | 36,060 |
Inventory |  |  | 193,300 |
Fixed assets, net |  |  | 16,700 |
Intangible assets, net |  |  | 123,200 |
Total |  |  | 369,260 |
Gain from sale |  | $ | 1,130,740 |

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CONtv is a joint venture with third parties and Bristol Capital, LLC. The Company holds a limited and passive interest of 10% in CONtv. As of March 31, 2023 and December 31, 2022, the investment in CONtv was $0. As of March 31, 2023 and December 31, 2022, the amount due to CONtv was $0.

Prior to cryptocurrency mining operations that began in October 2021, the Company produced live and virtual pop culture conventions and events, and sold a gelatin machine and related consumables that were discontinued in 2021. In addition, the Company operated an eCommerce site selling pop culture memorabilia that was discontinued on June 30, 2022 (collectively known as “legacy operations”).

The related assets and liabilities associated with the discontinued operations in our condensed consolidated balance sheets for the three months ended March 31, 2023 and year ended December 31, 2022, are classified as discontinued operations. Additionally, the financial results associated with discontinued operations in our condensed consolidated statement of operations for the three months ended March 31, 2023 and 2022, are classified as discontinued operations.

The assets and liabilities related to discontinued operations consists of the following:

Schedule of Discontinued Operation of Balance Sheet and Operation Statement

|  | March 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Assets |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Prepaid expenses |  | $ | — |  |  | $ | — |
Inventory |  |  | — |  |  |  | — |
Total current assets |  |  | — |  |  |  | — |
Other assets: |  |  |  |  |  |  |  |
Property and equipment, net |  |  | — |  |  |  | — |
Intangible assets, net |  |  | — |  |  |  | — |
Total assets |  | $ | — |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 485,712 |  |  | $ | 485,712 |
Deferred revenue |  |  | — |  |  |  | — |
Due to CONtv |  |  | — |  |  |  | — |
Total liabilities |  | $ | 485,712 |  |  | $ | 485,712 |

In addition, revenue and expenses from discontinued operations were as follows:

|  | 2023 |  |  | 2022 |
|  | Three Months Ended |
|  | March 31, |
|  | 2023 |  |  | 2022 |
Revenue |  | $ | — |  |  | $ | — |
Operating costs and expenses: |  |  |  |  |  |  |  |
Cost of revenue |  |  | — |  |  |  | — |
General and administrative |  |  | — |  |  |  | — |
Total operating expenses |  |  | — |  |  |  | — |
Loss from operations |  |  | — |  |  |  | — |
Other income (expense): |  |  |  |  |  |  |  |
Other income |  |  | — |  |  |  | 6,004 |
Interest income |  |  | — |  |  |  | — |
Loss on disposal of fixed assets |  |  | — |  |  |  | — |
Total other income (expense) |  |  | — |  |  |  | 6,004 |
Income (loss) from discontinued operations |  | $ | — |  |  | $ | 6,004 |

Note 18. Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, other than as described below, the Company did not identify any other subsequent events that would have required adjustments in these condensed consolidated financial statements.

As described in Note 1, on May 3, 2023, the Company consummated the Merger.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Notice Regarding Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2023 and 2022 should be read in conjunction with our consolidated financial statements and related notes to those financial statements that are included elsewhere in this report. Except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,” “our” or similar terms refer to Prairie Operating Co.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements.

Company Overview

On May 3, 2023, we changed our name from Creek Road Miners, Inc. to Prairie Operating Co. (the “Company,” “we,” “us” or “our”) in connection with the Merger (as defined below). The Company was incorporated in Delaware on May 2, 2001. Prior to cryptocurrency mining operations that began in October 2021, the Company produced live and virtual pop culture conventions and events and sold a gelatin machine and related consumables that were discontinued in 2021. In addition, the Company operated an eCommerce site selling pop culture memorabilia that was discontinued on June 30, 2022 (known collectively as “legacy operations”).

On May 3, 2023, Prairie Operating Co., a Delaware corporation formerly named Creek Road Miners, Inc. (the “Company”), completed its previously announced merger with Prairie Operating Co., LLC, a Delaware limited liability company (“Prairie LLC”), pursuant to the terms of the Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023 (the “Merger Agreement,” and the closing thereunder, the “Closing”), by and among the Company, Creek Road Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”), and Prairie LLC, pursuant to which, among other things, Merger Sub merged with and into Prairie LLC, with Prairie LLC surviving and continuing to exist as a Delaware limited liability company and a wholly-owned subsidiary of the Company (the “Merger”). Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.” The Company continues to trade under the current ticker symbol “CRKR” and expects to commence trading on the OTCQB under the new name and ticker symbol “PROP” once FINRA processes the Company’s pending Rule 10b-17 action request pursuant to FINRA Rule 6490.

Prior to the consummation of the Merger, the Company effectuated a series of restructuring transactions in the following order: (i) the Company’s Series A preferred stock, par value $0.0001 per share (“Series A Preferred Stock”), Series B preferred stock, par value $0.0001 per share (“Series B Preferred Stock”), and Series C preferred stock, par value $0.0001 per share (“Series C Preferred Stock”), plus accrued dividends, were converted, in the aggregate, into 76,251,018 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”); (ii) the Company’s 12% senior secured convertible debentures (the “Original Debentures”), plus accrued but unpaid interest and a 30% premium, were exchanged, in the aggregate, for (a) 12% amended and restated senior secured convertible debentures in the principal amount of $1,000,000 in substantially the same form as their respective Original Debentures, (b) shares of Common Stock and (c) shares of Series D Preferred Stock, and such Series D Preferred Stock shall automatically convert into shares of Common Stock at a price of $0.175 per share immediately after the shares of Common Stock is listed or quoted for trading on the NYSE American securities exchange (or any successor thereto) or any other national securities exchange; (iii) accrued fees payable to the Company’s board of directors (the “Board”) in the amount of $110,250 were converted into 630,000 shares of Common Stock; (iv) accrued consulting fees of the Company in the amount of $318,750 payable to Bristol Capital Advisors, LLC (“Bristol Capital”) were converted into 1,821,429 shares of Common Stock; and (v) all amounts payable pursuant to certain convertible promissory notes were converted into an aggregate of 6,608,220 shares of Common Stock.

Prior to the Closing, all of the Company’s then existing warrants to purchase shares of Common Stock and Series B Preferred Stock and options to purchase shares of Common Stock were cancelled and retired and ceased to exist without the payment of any consideration to the holders thereof.

At the effective time of the Merger, membership interests in Prairie LLC were converted into the right to receive each member’s pro rata share of 65,647,676 shares of Common Stock (the “Merger Consideration”).

In addition, the Company consummated the previously announced purchase of oil and gas leases, including all of Exok, Inc.’s, an Oklahoma corporation (“Exok”), right, title and interest in, to and under certain undeveloped oil and gas leases located in Weld County, Colorado, together with certain other associated assets, data and records, consisting of approximately 3,157 net mineral acres in, on and under approximately 4,494 gross acres from Exok for $3,000,000 pursuant to the Amended and Restated Purchase and Sale Agreement, dated as of May 3, 2023, by and among the Company, Prairie LLC and Exok (the “Exok Transaction”).

To fund the Exok Transaction, the Company received an aggregate of $17.3 million in proceeds from a number of investors (the “PIPE Investors”), and the PIPE Investors were issued Series D preferred stock, par value $0.0001 per share (“Series D Preferred Stock”), with a stated value of $1,000 per share and convertible into shares of Common Stock at a price of $0.175 per share, and 100% warrant coverage for each of Series A warrants to purchase shares of Common Stock (the “Series A Warrants”) and Series B warrants to purchase shares of Common Stock (the “Series B Warrants” and together with the Series A Warrants, the “PIPE Warrants”), in a private placement pursuant to securities purchase agreements entered into with each PIPE Investor (collectively, the “Securities Purchase Agreements”).

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Cryptocurrency Mining

We generate substantially all our revenue through cryptocurrency we earn through our mining activities. We have historically mined and held Bitcoin exclusively, which we may sell to fund our operating and capital expenditures. Our mining operations commenced on October 24, 2021. We use special cryptocurrency mining computers (known as “miners”) to solve complex cryptographic algorithms to support the Bitcoin blockchain and, in return, receive Bitcoin as our reward. Miners measure their processing power, which is known as “hashing” power, in terms of the number of hashing algorithms solved (or “hashes”) per second, which is the miner’s “hash rate.” We participate in mining pools that pool the resources of groups of miners and split cryptocurrency rewards earned according to the “hashing” capacity each miner contributes to the mining pool. Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

Mining Equipment

All of our miners were manufactured by Bitmain, and incorporate application-specific integrated circuit (ASIC) chips specialized to solve blocks on the Bitcoin blockchains using the 256-bit secure hashing algorithm (SHA-256) in return for Bitcoin cryptocurrency rewards. As of March 31, 2023, we had 510 Bitmain S19J Pro miners with 51.0 Ph/s of hashing capacity and 270 Bitmain S19 miners with 24.3 Ph/s of hashing capacity.

On December 17, 2021 the Company entered into a Non-Fixed Price Sales and Purchase Agreement (the “Bitmain Agreement”) with Bitmain Technologies Limited (“Bitmain”) for 600 Bitmain S19XP miners with a reference price of approximately $11,250 per miner. The miners have a total of 84 Ph/s of hashing capacity and an initial estimated purchase commitment of $6,762,000 (the “total reference price”), subject to price adjustments and related offsets, including potential adjustments related to the market price of miners. The final adjusted price under the contract was $4,016,600 as of March 31, 2023, and the Company has made payments of $4,016,600 (classified as deposits on mining equipment) to Bitmain pursuant to the Bitmain Agreement as of such date.

As of March 31, 2023, none of the 600 miners purchased from Bitmain have been delivered to the Company, and will remain undelivered until all fees are paid to ship the miners from the Bitmain facility to the Company.

Mining Results

The Company measures its operations by the number and U.S. Dollar (US$) value of the cryptocurrency rewards it earns from its cryptocurrency mining activities. The following table presents additional information regarding our cryptocurrency mining operations:

|  | Quantity of Bitcoin |  |  | US$ Amounts |
Balance September 30, 2021 |  |  | — |  |  | $ | — |
Revenue recognized from cryptocurrency mined |  |  | 6.7 |  |  |  | 369,804 |
Mining pool operating fees |  |  | (0.1 | ) |  |  | (7,398 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (59,752 | )
Balance December 31, 2021 |  |  | 6.6 |  |  | $ | 302,654 |
Revenue recognized from cryptocurrency mined |  |  | 8.3 |  |  |  | 343,055 |
Mining pool operating fees |  |  | (0.2 | ) |  |  | (6,868 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (106,105 | )
Balance March 31, 2022 |  |  | 14.7 |  |  | $ | 532,736 |
Revenue recognized from cryptocurrency mined |  |  | 4.6 |  |  |  | 166,592 |
Mining pool operating fees |  |  | (0.1 | ) |  |  | (3,428 | )
Proceeds from the sale of cryptocurrency |  |  | (18.9 | ) |  |  | (564,205 | )
Realized loss on the sale of cryptocurrency |  |  | — |  |  |  | (131,075 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (34 | )
Balance June 30, 2022 (1) |  |  | 0.3 |  |  | $ | 586 |
Revenue recognized from cryptocurrency mined |  |  | 0.3 |  |  |  | 7,955 |
Mining pool operating fees |  |  | — |  |  |  | (156 | )
Impairment of cryptocurrencies |  |  | — |  |  |  | (1,035 | )
Balance September 30, 2022 (1) |  |  | 0.6 |  |  | $ | 7,350 |
Revenue recognized from cryptocurrency mined |  |  | — |  |  |  | — |
Mining pool operating fees |  |  | — |  |  |  | — |
Proceeds from the sale of cryptocurrency |  |  | (0.6 | ) |  |  | (11,203 | )
Realized gain on the sale of cryptocurrency |  |  | — |  |  |  | 3,853 |
Balance December 31, 2022 |  |  | — |  |  | $ | — |
Revenue recognized from cryptocurrency mined |  |  | — |  |  |  | — |
Mining pool operating fees |  |  | — |  |  |  | — |
Proceeds from the sale of cryptocurrency |  |  | — |  |  |  | — |
Realized gain on the sale of cryptocurrency |  |  | — |  |  |  | — |
Balance March 31, 2023 (1) |  |  | — |  |  | $ | — |

(1) | Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

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Factors Affecting Profitability

Our business is heavily dependent on the market price of Bitcoin. The prices of cryptocurrencies, specifically Bitcoin, have experienced substantial volatility. Further affecting the industry, and particularly for the Bitcoin blockchain, the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For Bitcoin the reward was initially set at 50 Bitcoin currency rewards per block. The Bitcoin blockchain has undergone halving three times since its inception as follows: (1) on November 28, 2012 at block 210,000; (2) on July 9, 2016 at block 420,000; and (3) on May 11, 2020 at block 630,000, when the reward was reduced to its current level of 6.25 Bitcoin per block. The next halving for the Bitcoin blockchain is anticipated to occur in March 2024 at block 840,000, when the reward will be reduced to 3.125 Bitcoin per block. This process will reoccur until the total amount of Bitcoin currency rewards issued reaches 21 million and the theoretical supply of new Bitcoin is exhausted. Many factors influence the price of Bitcoin, and potential increases or decreases in prices in advance of, or following, a future halving is unknown.

We have historically mined and held Bitcoin exclusively, which we may sell to fund our operating and capital expenditures. Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

Our business is heavily dependent on the market price of Bitcoin, which has experienced substantial volatility and has recently dropped to its lowest price since December 2020. As of March 31, 2023 the market price of Bitcoin was $28,478, which reflects a decrease of approximately 31% since the beginning of 2022, and a decrease of approximately 58% from its all-time high of approximately $67,000. The price movements result in decreased cryptocurrency mining revenue which has had a material adverse effect on our business and financial results.

Competition

Our business environment is constantly evolving, and cryptocurrency miners can range from individuals to large-scale commercial mining operations. We compete with other companies that focus all or a portion of their activities on mining activities at scale, including several public and private companies. We face significant competition in every aspect of our business, including, but not limited to, the acquisition of mining equipment, the ability to raise capital, and the ability to obtain the lowest cost energy to power our mining operations.

Government Regulation

Cryptocurrency is increasingly becoming subject to governmental regulation, both in the U.S. and internationally. State and local regulations also may apply to our activities and other activities in which we may participate in the future. Numerous regulatory bodies have shown an interest in regulating blockchain or cryptocurrency activities. For example, on March 9, 2022 President Biden signed an executive order on cryptocurrencies. While the executive order does not mandate any specific regulations, it instructs various federal agencies to consider potential regulatory measures, including the evaluation of the creation of a U.S. Central Bank digital currency. Future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability. As the regulatory and legal environment evolves, we may become subject to new laws and regulation which may affect our mining and other activities. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Russia – Ukraine Conflict

The Russia – Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. The Company does not receive goods or services sourced from those countries, does not anticipate any disruption in its supply chain and has no business relationships, connections to or assets in Russia, Belarus or Ukraine. No impairments to assets have been made due to the conflict. We are unable at this time to know the full ramifications of the Russia – Ukraine conflict and its effects on our business.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or U.S. GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions. The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.

Principles of Consolidation

The accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

Reclassification

Certain prior period amounts have been reclassified to conform to current period presentation.

Cash and cash equivalents

For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with an original maturity of three months or less. In all periods presented, cash equivalents consist primarily of money market funds.

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Fair value of financial instruments

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. A fair value hierarchy prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level 3 – Unobservable inputs based on the Company’s assumptions.

The Company is required to use observable market data if such data is available without undue cost and effort. The Company has no fair value items required to be disclosed as of December 31, 2022 or 2021 under these requirements. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments.

Transactions involving related parties typically cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. However, in the case of the secured convertible debentures due to related parties, the Company obtained a fairness opinion from an independent third party which supports that the transaction was carried out at an arm’s length basis.

Cryptocurrency

Cryptocurrency (Bitcoin) is included in current assets in the accompanying consolidated balance sheets. The classification of cryptocurrencies as a current asset has been made after the Company’s consideration of the significant consistent daily trading volume on readily available cryptocurrency exchanges and the absence of limitations or restrictions on Company’s ability to sell Bitcoin. Cryptocurrencies awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy disclosed below. Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Cryptocurrencies awarded to the Company through its mining activities are included within operating activities on the accompanying consolidated statements of cash flows.

Impairment of Long-Lived Assets

Long-lived assets are comprised of intangible assets and property and equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An estimate of undiscounted future cash flows produced by the asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists, pursuant to the provisions of FASB ASC 360-10 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows and fundamental analysis. The Company reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.

Property and equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of 3 to 9 years. Leasehold improvements are amortized over the shorter of the useful lives of the related assets, or the lease term. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals are included in the consolidated statements of operations.

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Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Revenue Recognition

We account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:

| ● | identify the contract with a customer;
| ● | identify the performance obligations in the contract;
| ● | determine the transaction price;
| ● | allocate the transaction price to performance obligations in the contract; and
| ● | recognize revenue as the performance obligation is satisfied.

The Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the market rate of the related cryptocurrency at the time of receipt. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

Cryptocurrency Mining Costs

The Company’s cryptocurrency mining costs consist primarily of direct costs of earning Bitcoin related to mining operations, including mining pool fees, natural gas costs, turbine rental costs, and mobile data center rental costs, but exclude depreciation and amortization, which are separately stated in the Company’s consolidated statements of operations.

Reverse Stock Split

We implemented a 1-for-20 reverse stock split of our outstanding shares of common stock that was effective on January 23, 2020. Unless otherwise noted, all share and related option, warrant, and convertible security information presented has been retroactively adjusted to reflect the reduced number of shares, and the increase in the share price which resulted from this action.

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Stock-Based Compensation

We periodically issue stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. We account for share-based payments under the guidance as set forth in the Share-Based Payment Topic 718 of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. We estimate the fair value of stock option and warrant awards to employees and directors on the date of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations. We estimate the fair value of restricted stock awards to employees and directors using the market price of our common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations.

Income taxes

We account for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Discontinued Operations

Prior to cryptocurrency mining operations that began in October 2021, the Company produced live and virtual pop culture conventions and events, and sold a gelatin machine and related consumables that were discontinued in 2021 In addition, the Company operated an eCommerce site selling pop culture memorabilia that was discontinued on June 30, 2022 (collectively known as “legacy operations”).

The related assets and liabilities associated with the discontinued operations in our consolidated balance sheets for the three months ended March 31, 2023, and year ended December 31, 2022, are classified as discontinued operations. Additionally, the financial results associated with discontinued operations in our consolidated statement of operations for the three months ended March 31, 2023 and 2022, are classified as discontinued operations.

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Results of Operations

Comparison of the Three Months Ended March 31, 2023 and 2022

|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |  |  | $ Change |  |  | % Change |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cryptocurrency mining |  | $ | — |  |  | $ | 343,055 |  |  | $ | (343,055 | ) |  |  | (100 | )%
eCommerce |  |  | — |  |  |  | 42,059 |  |  |  | (42,059 | ) |  |  | (100 | )%
Total revenue |  |  | — |  |  |  | 385,114 |  |  |  | (385,114 | ) |  |  | (100 | )%
Operating costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cryptocurrency mining costs (exclusive of depreciation and amortization shown below) |  |  | 6,305 |  |  |  | 386,342 |  |  |  | (380,037 | ) |  |  | (98 | )%
eCommerce costs |  |  | — |  |  |  | 17,478 |  |  |  | (17,478 | ) |  |  | (100 | )%
Depreciation and amortization |  |  | 64,576 |  |  |  | 164,520 |  |  |  | (99,944 | ) |  |  | (61 | )%
Stock based compensation |  |  | 170,120 |  |  |  | 1,923,105 |  |  |  | (1,752,985 | ) |  |  | (91 | )%
General and administrative |  |  | 576,289 |  |  |  | 932,861 |  |  |  | (356,572 | ) |  |  | (38 | )%
Impairment of mined cryptocurrency |  |  | — |  |  |  | 106,105 |  |  |  | (106,105 | ) |  |  | (100 | )%
Total operating expenses |  |  | 817,290 |  |  |  | 3,530,411 |  |  |  | (2,713,121 | ) |  |  | (77 | )%
Loss from operations |  |  | (817,290 | ) |  |  | (3,145,297 | ) |  |  | 2,328,007 |  |  |  | 74 | %
Other income (expense): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
PPP loan forgiveness |  |  | — |  |  |  | 197,662 |  |  |  | (197,662 | ) |  |  | (100 | )%
Interest expense |  |  | (154,076 | ) |  |  | (148,064 | ) |  |  | (6,012 | ) |  |  | (4 | )%
Other income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — | %
Total other income (expense) |  |  | (154,076 | ) |  |  | 49,598 |  |  |  | (203,674 | ) |  |  | (411 | )%
Net loss from continuing operations |  |  | (971,366 | ) |  |  | (3,095,699 | ) |  |  | 2,124,333 |  |  |  | 69 | %
Discontinued operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) from discontinued operations |  |  | — |  |  |  | 6,604 |  |  |  | (6,604 | ) |  |  | (100 | )%
Gain from sale of discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — | %
Net income from discontinued operations |  |  | — |  |  |  | 6,604 |  |  |  | (6,604 | ) |  |  | (100 | )%
Net loss |  | $ | (971,366 | ) |  | $ | (3,089,095 | ) |  | $ | 2,117,729 |  |  |  | 69 | %

Revenue

|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |  |  | $ Change |  |  | % Change |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cryptocurrency mining |  | $ | — |  |  | $ | 343,055 |  |  | $ | (343,055 | ) |  |  | (100 | )%
eCommerce |  |  | — |  |  |  | 42,059 |  |  |  | (42,059 | ) |  |  | (100 | )%
Total revenue |  | $ | — |  |  | $ | 385,114 |  |  | $ | (385,114 | ) |  |  | (100 | )%

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Total revenue decreased $385,114, or 100%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Since June 30, 2022 the Company has neither received meaningful cryptocurrency awards nor generated meaningful revenue from cryptocurrency mining.

Operating Costs and Expenses

|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |  |  | $ Change |  |  | % Change |
Operating Costs and Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cryptocurrency mining costs (exclusive of depreciation and amortization shown below) |  | $ | 6,305 |  |  | $ | 386,342 |  |  | $ | (380,037 | ) |  |  | (98 | )%
eCommerce costs |  |  | — |  |  |  | 17,478 |  |  |  | (17,478 | ) |  |  | (100 | )%
Depreciation and amortization |  |  | 64,576 |  |  |  | 164,520 |  |  |  | (99,944 | ) |  |  | (61 | )%
Stock based compensation |  |  | 170,120 |  |  |  | 1,923,105 |  |  |  | (1,752,985 | ) |  |  | (91 | )%
General and administrative |  |  | 576,289 |  |  |  | 932,861 |  |  |  | (356,572 | ) |  |  | (38 | )%
Impairment of mined cryptocurrency |  |  | — |  |  |  | 106,105 |  |  |  | (106,105 | ) |  |  | (100 | )%
Total operating expenses |  | $ | 817,290 |  |  | $ | 3,530,411 |  |  | $ | (2,713,121 | ) |  |  | (77 | )%

Our operating costs and expenses decreased $2,713,121, or 77%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to lower stock based compensation of $1,752,985, lower cryptocurrency mining costs of $380,037, and lower general and administrative costs of $356,572

Net Income (Loss)

|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |  |  | $ Change |  |  | % Change |
Net Income (Loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss from continuing operations |  | $ | (971,366 | ) |  | $ | (3,095,699 | ) |  | $ | 2,124,333 |  |  |  | 69 | %
Net income from discontinued operations |  |  | — |  |  |  | 6,604 |  |  |  | (6,604 | ) |  |  | (100 | )%
Total net loss |  | $ | (971,366 | ) |  | $ | (3,089,095 | ) |  | $ | 2,117,729 |  |  |  | 69 | %

Net loss from continuing operations decreased $2,124,333 or 69%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to increased operating costs and expenses as described above.

Going Concern Analysis

Historically, we have relied upon cash from financing activities to fund substantially all of the cash requirements of our activities and have incurred significant losses and experienced negative cash flow. The Company had net losses from continuing operations of $971,366, and $3,095,699, for the three months ended March 31, 2023 and 2022, respectively. We cannot predict if we will be profitable. We may continue to incur losses for an indeterminate period of time and may be unable to achieve profitability. An extended period of losses and negative cash flow may prevent us from successfully operating and expanding our business. We may be unable to achieve or sustain profitability on a quarterly or annual basis. On March 31, 2023, we had cash and cash equivalents of $27,020, a working capital deficit of approximately $ 9 million, and an accumulated deficit of approximately $ 62 million. Upon closing of the Merger and related transactions on May 3, 2023, we received proceeds from the issuance of preferred stock of $17.3 million. A majority of these proceeds remain within the Company after the Merger and related transactions for use in our business.

The assessment of the liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company can meet its obligations and has adequate liquidity to operate. Significant assumptions used in the Company’s forecasted model of liquidity in the next 12 months include its current cash position, inclusive of the impacts from the Merger and related transactions, and its ability to manage spending. Based on an assessment of these factors, management believes that the Company will have adequate liquidity for its operations for at least the next 12 months. Therefore, management’s conclusion is that substantial doubt is not raised as to the Company’s ability to continue as a going concern.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the matters discussed herein.

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Liquidity and Capital Resources

|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |
Consolidated Statements of Cash Flow Data: |  |  |  |  |  |  |  |
Net cash used in operating activities |  | $ | (171,738 | ) |  | $ | (1,145,134 | )
Net cash used in investing activities |  |  | (47,600 | ) |  |  | (1,404,122 | )
Net cash provided by financing activities |  |  | — |  |  |  | 885,967 |
Net decrease in cash and cash equivalents |  |  | (219,338 | ) |  |  | (1,663,289 | )
Cash and cash equivalents, beginning of period |  |  | 246,358 |  |  |  | 2,785,188 |
Cash and cash equivalents, end of period |  | $ | 27,020 |  |  | $ | 1,121,899 |

Liquidity

As of March 31, 2023, we had cash and cash equivalents of $27,030, compared to $246,358 as of December 31, 2022, a decrease of $219,338. This decrease was primarily due to cash of $171,738 used in operating activities and cash of $47,600 used in investing activities.

Operating Activities

Net cash used in operating activities was $171,738 for the three months ended March 31, 2023 and resulted primarily from a net loss of $971,366, partially offset by an increase in accounts payable and accrued expenses of $556,501 and stock based compensation of $170,120.

Net cash used in operating activities was $1,145,134 for the three months ended March 31, 2022 and resulted primarily from a net loss of $3,089,095, partially offset by stock based compensation of $1,923,105.

Investing Activities

Net cash used in investing activities was $47,600 for the three months ended March 31, 2023 and resulted from deposits made on mining equipment.

Net cash used in investing activities was $1,404,122 for the three months ended March 31, 2022 and resulted primarily from an increase in property and equipment, specifically mining equipment, of $2,111,932, partially offset by a decrease in net deposits of mining equipment of $707,810.

Financing Activities

Net cash provided by financing activities was zero for the three months ended March 31, 2023.

Net cash provided by financing activities was $885,967 for the three months ended March 31, 2022 and resulted primarily from proceeds from the exercise of warrants for $900,000.

Working Capital Deficit

The following table summarizes total current assets, liabilities, and working capital for the periods ended March 31, 2023 and December 31, 2022:

|  | As of |  |  |  |
|  | March 31, 2023 |  |  | December 31, 2022 |  |  | Increase/(Decrease) |
Current assets |  | $ | 4,775,099 |  |  | $ | 5,050,740 |  |  | $ | (275,641 | )
Current liabilities |  | $ | 13,705,333 |  |  | $ | 13,168,256 |  |  | $ | 537,077 |
Working capital deficit |  | $ | (8,930,234 | ) |  | $ | (8,117,516 | ) |  | $ | (812,718 | )

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As of March 31, 2023, we had a working capital deficit of $8,930,234, compared to a working capital deficit of $8,117,516 as of December 31, 2022, a decrease of $812,718. The decrease was primarily due to a decrease in cash and an increase in accounts payable and accrued expenses.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. For purposes of this section, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2023, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting

In addition, our management with the participation of our principal executive officer and principal financial officer have determined that no change in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) occurred during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any disputes and does not have any litigation matters pending which the Company believes could have a materially adverse effect on the Company’s financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors

As of the date of this Quarterly Report on Form 10-Q, we believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on March 31, 2023 and in our Information Statement on Schedule 14C, filed with the SEC on November 7, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of the Company’s equity securities during the quarter ended March 31, 2023, that were not otherwise disclosed in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit No. |  | Description
2.1† |  | Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023, by and among Creek Road Miners, Inc., Creek Road Merger Sub, LLC and Prairie Operating Co., LLC (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
3.1† |  | Bylaws (as filed as Exhibit 2.1 to the Company’s Registration Statement on Form SB-2, filed with the SEC on March 25, 2003). Certificate of Incorporation of GoEnergy, Inc. (as filed as Exhibit 1.1 to the Company’s Registration Statement on Form SB-2, filed with the SEC on March 25, 2003).
3.2† |  | Certificate of Amendment to the Certificate of Incorporation of GoEnergy, Inc., dated December 6, 2010 (as filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed with the SEC on December 13, 2010).
3.3† |  | Certificate of Correction, dated December 8, 2010 (as filed as Exhibit 3.4 to the Company’s Current Report on Form 8-K, filed with the SEC on December 13, 2010).
3.4† |  | Second Certificate of Correction filed January 20, 2011 (as filed as Exhibit 3.5 to the Company’s Current Report on Form 8-K, filed with the SEC on January 25, 2011).
3.5† |  | Certificate of Amendment of Certificate of Incorporation (as filed as Exhibit 3.11 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2020).
3.6† |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Creek Road Miners, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
3.7† |  | Amended and Restated Bylaws of Prairie Operating Co. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
3.8† |  | Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock. (incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
4.1† |  | Form of Warrant (incorporated by reference to Exhibit C of Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.1† |  | Master Services Agreement and Order Form by and between Atlas Power Hosting, LLC and Creek Road Miners, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on March 6, 2023).
10.2† |  | Amended and Restated Purchase and Sale Agreement, dated as of May 3, 2023, by and among Prairie Operating Co., LLC, Exok, Inc. and Creek Road Miners, Inc (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.3† |  | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.4† |  | Support Agreement (Series B Preferred Stock), dated as of May 3, 2023, by and between Creek Road Miners, Inc. and Bristol Investment Fund, Ltd. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.5† |  | Form of Support Agreement (Series C Preferred Stock) (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.6† |  | Support Agreement (Senior Secured Convertible Debenture), dated as of May 3, 2023, by and between Creek Road Miners, Inc. and Bristol Investment Fund, Ltd. (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.7† |  | Support Agreement (Senior Secured Convertible Debenture and Series A Preferred Stock), dated as of May 3, 2023, by and among Creek Road Miners, Inc., Barlock 2019 Fund, LP, Scott D. Kaufman and American Natural Energy Corporation (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.8† |  | Support Agreement (Convertible Promissory Note), dated as of May 3, 2023, by and between Creek Road Miners, Inc. and Creecal Holdings, LLC (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.9† |  | Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.10† |  | Stockholders Agreement, dated as of May 3, 2023, by and among Creek Road Miners, Inc., Bristol Capital Advisors, LLC, Paul Kessler, Edward Kovalik and Gary C. Hanna (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.11† |  | Form of Lock-up Agreement (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.12† |  | Form of Lock-up Agreement (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.13† |  | Form of Lock-up Agreement (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K, filed with the SEC on May 4, 2023).
10.14† |  | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.15† |  | Form of 12% Amended and Restated Senior Secured Convertible Debenture Due December 31, 2023 (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.16† |  | Amended and Restated Security Agreement, dated as of May 3, 2023, by and among Prairie Operating Co. and its subsidiaries, Barlock 2019 Fund, LP, Bristol Investment Fund, Ltd. and Gary Henrie, as collateral agent (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.17† |  | Form of Amended and Restated Non-Compensatory Option Agreement (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.18† |  | Form of Employment Agreement (President and CEO) (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.19† |  | Form of Employment Agreement (Other Executive Officers) (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
10.20† |  | Amended and Restated Prairie Operating Co. Long Term Incentive Plan (incorporated by reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2023).
31.1* |  | Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2* |  | Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1* |  | Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* |  | Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* |  | Inline XBRL Instance Document
101.SCH*† |  | Inline XBRL Taxonomy Extension Schema
101.CAL*† |  | Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*† |  | Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*† |  | Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*† |  | Inline XBRL Taxonomy Extension Presentation Linkbase
104.0 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

† Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement for purposes of Section 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these section.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| PRAIRIE OPERATING CO.
| By: | /s/ Edward Kovalik
|  | Edward Kovalik
Date: June 1, 2023 |  | Chief Executive Officer (Principal Executive Officer)
| By: | /s/ Craig Owen
|  | Craig Owen
Date: June 1, 2023 |  | Chief Financial Officer
|  | (Principal Financial and Accounting Officer)

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