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Item 7. Management’s Discussion and Analysis

2024-03-19 compared with 2023-03-31 · 459 added, 442 removed, 29 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Notice Regarding Forward-Looking Statements

following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and 2021

should be read in conjunction with our consolidated financial statements and related notes to those financial statements that are included

elsewhere in this report.

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”

and elsewhere in this report.

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.

Road Miners, Inc.

(formerly known as Wizard Brands, Inc., Wizard Entertainment, Inc., Wizard World, Inc., and GoEnergy, Inc.) 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 (collectively known as “legacy

operations”).

August 6, 2021, we entered into the Informa Agreement with Informa.

Pursuant to the Informa Agreement, Creek Road Miners Corp.

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.

September 15, 2021, we 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.

October 24, 2022, we entered into the Merger Agreement with Creek Road Merger Sub, LLC, a Delaware limited liability company and our

wholly-owned subsidiary (“Merger Sub”), and Prairie, pursuant to which Merger Sub will merge with and into Prairie, with

Prairie surviving and continuing to exist as a Delaware limited liability company and our wholly-owned subsidiary.

should read the following discussion and analysis of our financial condition and results of operations for the fiscal years ended December

31, 2023 and 2022 together with our consolidated financial statements and related notes and other financial information appearing in

this Annual Report.

The discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions

concerning events and financial trends that may affect our future operating results or financial position.

Actual results and the timing

of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those

described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing

elsewhere in the Annual Report.

We are an independent oil and

gas company focused on the acquisition and development of crude oil, natural gas and NGLs.

We currently hold attractive acreage in the

DJ Basin that our experienced management team intends to develop, deploying next-generation technology and techniques in an environmentally

efficient manner.

In addition to growing production through our drilling operations, we also seek to grow our business through accretive

acquisitions, focusing on assets with the following criteria:

(i) producing reserves, with opportunities to add accretive, undeveloped

bolt-on acreage;

(ii) ample, high rate-of-return inventory of drilling locations that can be developed with cash flow reinvestment;

strong well-level economics;

(iv) liquids-rich assets;

and (v) accretive valuation.

of December 31, 2023, all of the Company’s E&P assets were acquired in the Exok Transaction (as described herein) and Exok

Option Purchase (as defined herein) and consist of certain oil and gas leasehold interests with no existing oil and gas production or

In February 2024, we acquired the Genesis Bolt-on Assets offsetting our existing assets.

We refer to the assets acquired in

these transactions as our “Genesis Assets.” In all, the total Genesis Assets include 24,351 net mineral acres in, on and

under 37,985 gross acres.

In addition, in January 2024, we entered into a definitive agreement with NRO to acquire producing acreage

and PUDs that are complementary to our existing acreage, which we refer to as the “Central Weld Assets.” We have no current

drilling or completion operations.

As such, our current activities are focused on obtaining requisite permits to begin drilling wells

on our Genesis Assets, as well as funding and closing the NRO Acquisition, which we anticipate in the first half of 2024.

also engaged in cryptocurrency mining operations and these operations accounted for all of our revenues in 2023.

In January 2024, we

divested all of our cryptocurrency mining assets.

See “ Business—Recent Developments ” for more information regarding

the NRO and Genesis Bolt-On Assets acquisitions, as well as the sale of our Cryptocurrency mining operations.

Merger, Exok Transaction and Related Events

May 3, 2023, the Company completed the Merger, 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

Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie

Operating Co.” The Merger was accounted for as a reverse asset acquisition;

as a result, our cryptocurrency mining operations

are reported as commencing on May 3, 2023, concurrent with the Merger and prior revenues and expenses of Creek Road related to

cryptocurrency mining activities are not presented in this “ Management’s Discussion and Analysis of Financial

Condition and Results of Operations ” or the accompanying financial statements.

connection with the Merger, we acquired oil and gas leases covering approximately 3,158 net mineral acres in, on and under 4,494 gross

acres from Exok for $3.0 million.

To fund the Exok Transaction, the Company sold an aggregate of approximately $17.4 million of Series

D Preferred Stock with a stated value of $1,000 per share and convertible into shares of common stock at a price of $5.00 per share,

Series A warrants to purchase 3,475,250 shares of common stock at an exercise price of $6.00 per share (“Series D A Warrants”)

and Series B warrants to purchase 3,475,250 shares of common stock at an exercise price of $6.00 per share (“Series D B Warrants”)

in a private placement (the “Series D PIPE”) pursuant to securities purchase agreements, dated May 3, 2023, by and between

the Company and each of the investors thereto (the “Series D PIPE Investors”).

August 15, 2023, the Company exercised its option under the Exok Transaction to purchase approximately 20,328 net mineral acres in, on

and under approximately 32,695 additional gross acres from Exok (the “Exok Option Assets”).

The Company acquired this acreage

for $25.3 million consisting of (i) $18.0 million in cash (the “Cash Consideration”) to Exok, (ii) issuance of 670,499 shares

of the Company’s common stock and warrants to purchase 670,499 shares of common stock (“Exok Warrants”) to affiliates

of Exok, and (iii) direct transaction costs.

The Cash Consideration was funded from the Series E preferred issuance (see below).

Company received an aggregate of $20.0 million in proceeds from the Series E private placement (the “Series E PIPE”) in exchange

for 20,000 shares of Series E preferred stock, par value $0.01 per share (“Series E Preferred Stock”) along with 39,614 shares

of the Company’s common stock, and Series A warrants to purchase 4,000,000 shares of the Company’s common stock (the “Series

E A Warrants”) and Series B warrants to purchase 4,000,000 shares of common stock (the “Series E B Warrants” and together

with the Series E A Warrants, the “Series E PIPE Warrants”).

“ Business—Background ” for more information regarding the Merger, the Exok Transaction and related events in

October 16, 2023, the Company effected the Reverse Stock Split at an exchange ratio of 1:28.5714286.

Unless otherwise noted, all per

share and share amounts presented herein have been retroactively adjusted for the effect of the Reverse Stock Split.

Cryptocurrency

currently generate substantially all our revenue through cryptocurrency we earn through our mining activities, which we may strategically

hold or sell at beneficial prices and times.

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 (“mining pool(s)”) 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 is neither receiving meaningful cryptocurrency awards nor generating meaningful revenue from cryptocurrency mining.

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

As of December 31, 2022, 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, none of which were in service.

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

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

As of December 31, 2022, the Company has made payments of $3,969,000 (classified as deposits on mining equipment) to Bitmain

pursuant to the Bitmain Agreement, and the remaining amount due under the Bitmain Agreement is $47,600 and presented in the table below:

July 2022 batch (100 miners)

August 2022 batch (100 miners)

September 2022 batch (100 miners)

October 2022 batch (100 miners)

November 2022 batch (100 miners)

December 2022 batch (100 miners)

Estimated total amount due

Payments made

Remaining amount due

of December 31, 2022, all 600 miners purchased from Bitmain have not 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.

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

Balance September 30, 2021