Business context and reporting period
This filing is Creek Road Miners, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The request identifies Prairie Operating Co., but the supplied filing is for Creek Road Miners, Inc. (formerly Wizard Brands, Inc.).
The company was exiting live pop-culture events and Jevo, and shifting toward NFTs and cryptocurrency mining. It sold most live-event assets in August 2021 and Jevo in September 2021. A subsequent event states that its first cryptocurrency-mining facility began operations and generated its first Bitcoin revenue on October 25, 2021.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $148,397 | $601,042 | $754,297 | $4,019,838 in statements; $4,019,877 elsewhere |
| Gross profit (loss) | $(28,418) | $326,524 | $114,205 | $1,240,039 |
| Gross margin | (19)% | 54% | 15% | 31% |
| Operating expenses | $2,164,358 | $926,055 | $6,994,690 | $2,111,087 |
| Net loss | $(602,077) | $(743,826) | $(4,924,157) | $(1,317,883) |
| Loss attributable to common stockholders | $(392,881) | $(710,652) | $(4,658,063) | $(1,284,709) |
- Quarterly loss per share is reported as $(0.07) in the financial statements; MD&A gives the 2020 comparison as $(0.21), while the statements show $(0.20). Nine-month loss per share was $(1.21), versus $(0.37).
- At September 30, cash was $3.87 million; current assets were $4.20 million and current liabilities $5.62 million, implying a $1.42 million working-capital deficit. The company reported total assets of $5.50 million and stockholders’ deficit of $3.02 million.
- Nine-month operating cash use was $4.89 million; investing cash use was $1.13 million; financing cash provided was $7.99 million. Cash increased by $1.97 million from year-end 2020.
- Debt-related balance-sheet amounts include a $2.50 million related-party convertible promissory note, $2.25 million net convertible debenture, and $545,162 net notes payable. The statements list $197,600 and $197,662 of PPP loans and a $149,900 SBA loan; PPP forgiveness applications were pending.
- The balance-sheet presentation appears internally inconsistent: reported current liabilities of $5.62 million plus listed noncurrent liabilities exceed the stated total liabilities of $2.91 million. The filing text does not provide a clear reconciled total.
Material changes versus prior comparable periods
- Nine-month revenue fell about 81% year over year, primarily because no live events were held in 2021 and virtual-event revenue declined. In 2020, three live events contributed $2.61 million; 2021 revenue included $229,170 from virtual events, $362,303 from e-commerce and $162,824 from Jevo.
- Nine-month operating expenses rose to $6.99 million from $2.11 million, including higher consulting fees, staffing and marketing, and share-based compensation. Operating loss widened to $6.88 million from $871,048.
- Net loss includes substantial unusual other income: the filing reports a $1.13 million gain on the Jevo sale and other income associated with event-asset dispositions and a CONtv payable write-off. These items partially offset operating losses.
- Cash increased despite operating cash burn, supported by common-stock and Series B preferred-stock offerings and $1.5 million of proceeds from the Jevo sale. Common shares outstanding were 6,494,792 at November 12, 2021, up from 3,506,752 at year-end 2020.
Outlook, risks and other notable items
- Management planned to develop and operate Bitcoin-mining facilities, initially expecting the first facility to be operational by the end of 2021. The October 25, 2021 subsequent event reports that it had begun operating and earned initial Bitcoin revenue. No quantified revenue or earnings guidance is provided.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing losses and working-capital deficits. It relied on implementing its new business plan, controlling costs, generating revenue and obtaining further financing; management cautioned that future financing was not assured.
- The company disclosed raising $4.4 million through common-stock private placements from August 27 through October 4, 2021, partly after quarter-end. Leviston Series B preferred stock has variable conversion terms and cumulative dividends; substantial dilution is a risk. The filing also reports 11 million warrants outstanding and 12.38 million potential shares excluded from diluted EPS as anti-dilutive.
- Two legacy convertible debentures bear 12% interest and include conversion-price ratchets; holders had agreed to defer required payment until December 31, 2022. One related-party note and certain debt are secured by company assets, as described in the filing.
- COVID-19 disrupted live events, which the company had indefinitely postponed. Cryptocurrency-mining execution, access to capital, market volatility and uncertain demand for NFTs and mined assets are key risks. No material litigation was reported.
- Management concluded disclosure controls and procedures were not effective. It said there were no material changes to internal control over financial reporting during the quarter and described plans to improve financial reporting controls.
Most important facts for investors to verify
- Confirm the issuer: this is Creek Road Miners, Inc., not Prairie Operating Co.
- Reconcile the inconsistent total-liabilities presentation and revenue and quarterly loss-per-share figures across the filing.
- Review post-quarter financing terms, proceeds actually received, share issuance, and potential dilution from convertible preferred stock, notes, options and warrants.
- Assess the mining facility’s operating capacity, costs, funding needs and sustained Bitcoin revenue after the reported initial production.
- Evaluate going-concern risk, debt maturity and forbearance terms, and the effectiveness of management’s stated control-improvement efforts.