Prairie Operating Co. annual report, FY2021

Prairie Operating Co. — Filing Summary

Entity and period: The supplied filing is Creek Road Miners, Inc.’s Form 10-K for the fiscal year ended December 31, 2021, not a filing identified as Prairie Operating Co. It reports full-year results, not standalone fourth-quarter results. The audited statements received an unqualified opinion; the auditor did not audit or opine on internal control effectiveness.

Business context

Creek Road discontinued its legacy live-events and Jevo operations during 2021 and began Bitcoin mining on October 24, 2021. It also continued a pop-culture memorabilia eCommerce business, whose future it said it would evaluate in 2022. Mining uses Bitmain equipment in mobile data centers powered by natural gas near wellheads. At year-end, 240 miners with 24 Ph/s of capacity were operating; the company had ordered 1,140 more miners for expected 2022 delivery.

Financial performance and position

Metric20212020
Revenue$807,577$412,325
Operating loss$18,087,077$2,274,697
Net loss$17,270,703$1,940,401
Adjusted EBITDA (non-GAAP)$(5,636,141)$(1,842,021)
Cash and cash equivalents at year-end$2,785,187$1,897,703
Working capital$4,788,662$(4,848,585)
Total assets$13,199,869$2,670,363
Total liabilities$9,002,022$9,515,272
  • Revenue rose 96%, reflecting $369,804 of mining revenue—mining began late in the year—and a 6% increase in eCommerce revenue to $437,773. Mining costs were $281,790, before separately reported depreciation and cryptocurrency impairment.
  • Operating expenses increased to $18.9 million from $2.7 million. Stock-based compensation was $12.34 million, up from $408,000; general and administrative expense was $5.78 million, up from $2.05 million.
  • Cash used in operating activities was $6.97 million; cash used in investing was $9.93 million, primarily equipment deposits ($7.61 million) and mining equipment purchases ($2.32 million). Financing provided $17.79 million, chiefly from securities issuances and the sale of discontinued operations.
  • Year-end Bitcoin holdings were 6.6 BTC, carried at approximately $302,655 after a $59,752 impairment. The filing states that impairment losses are not reversed if Bitcoin prices later rise.
  • Debt and related-party obligations included $5.0 million principal of secured convertible debentures, plus $2.23 million of accrued related-party interest and expenses. The debentures bear 12% interest and were convertible at $0.175 per share at year-end. SBA/PPP loans payable totaled $361,595; the company reported that a $197,662 PPP loan was forgiven in March 2022.
  • Preferred-stock dividends were $372,325. The company reported no income tax provision and a full valuation allowance against deferred tax assets.

Material changes, outlook, and risks

  • The company sold Jevo operations for $1.5 million, recognizing a gain of approximately $1.13 million, and transferred certain live-event assets to Informa, recognizing $722,429 of other income from released liabilities. Total gain on sale of discontinued operations reported in the statements was $1.85 million. Discontinued operations generated $1.81 million of net income in 2021, partly offsetting the continuing-operations loss.
  • Mining-equipment commitments totaled approximately $11.5 million, including $7.089 million paid in deposits. About $4.4 million remained due through November 2022; management expected to fund it with Bitcoin-sale proceeds, Bitcoin accepted by the vendor, or additional debt or equity financing.
  • Management planned to hold mined Bitcoin until the expected March 2024 halving, but said it could sell Bitcoin to fund operations or in response to market conditions. It described a longer-term strategy involving energy-source and geographic diversification and potential ownership of oil and gas assets; these are plans, not reported achievements.
  • The filing says prior losses and negative cash flow had raised substantial doubt about the company’s ability to continue as a going concern. Management cited year-end cash and working capital, the transition to mining, cost control, and possible financing as mitigating factors, but acknowledged financing and revenue were not assured.
  • Principal risks include Bitcoin-price volatility and halving, mining difficulty and competition, regulatory changes, energy and internet interruptions, reliance on Bitmain and mining-pool providers, supplier prepayments, equipment insurance, and custody or cybersecurity loss of Bitcoin. The company also disclosed significant related-party arrangements, including its natural-gas/site agreement with ANEC.
  • After year-end, the company offered warrant holders replacement warrants at a $1.50 exercise price. By March 30, 2022, 600,000 warrants had been exercised, producing $900,000; the filing said the associated repricing would have dilution equivalent to 2,334,581 common shares. The offer could raise approximately $4.4 million if fully exercised.
  • Management reported effective disclosure controls and internal control over financial reporting as of year-end. The auditor’s report expressly did not provide an opinion on internal controls.

Most important facts for investors to verify

  • Confirm the intended issuer: the supplied filing identifies Creek Road Miners, Inc., not Prairie Operating Co.
  • Check whether the 2022 miner deliveries occurred, whether the remaining purchase commitments were funded, and whether projected hashing capacity and operating economics were achieved.
  • Assess liquidity and going-concern progress against operating cash burn, debt service, related-party balances, and the need for additional capital.
  • Review the full conversion, dividend, redemption, warrant, and anti-dilution terms of preferred stock and related-party debentures; these create substantial potential dilution and control concentration.
  • Verify subsequent warrant exercises and repricing effects, including proceeds received and resulting share dilution.
  • Evaluate Bitcoin valuation and custody disclosures, the related-party energy arrangement, and whether mining revenue can cover operating costs as Bitcoin prices and network conditions change.