Prairie Operating(PROP) - 2022 Q2 - Quarterly Report

Financial Performance - As of June 30, 2022, the company had mined a total of 14.7 Bitcoin valued at $532,736, with a revenue of $166,592 recognized from cryptocurrency mined during the quarter [202]. - Cryptocurrency mining revenue for the three months ended June 30, 2022, was $165,592, compared to $0 in the same period in 2021, representing a significant increase [235]. - Revenue from cryptocurrency mining for the three months ended June 30, 2022, was $165,592, and for the six months ended June 30, 2022, it was $509,647, with no revenue from the prior year periods [237]. - The net loss from continuing operations for the three months ended June 30, 2022, was $2,003,127, a 26% increase from the loss of $1,586,118 in 2021 [235]. - The net loss for the six months ended June 30, 2022, was $5,141,139, compared to a loss of $4,322,080 in 2021, reflecting a 19% increase [236]. - Stock-based compensation for the three months ended June 30, 2022, was $466,136, a 145% increase from $189,919 in 2021 [235]. - Depreciation and amortization for the three months ended June 30, 2022, was $164,520, a significant increase of 2,125% from $7,394 in 2021 [235]. - The impairment of mined cryptocurrency for the three months ended June 30, 2022, was $34, with no prior impairment recorded in 2021 [235]. - The company recognized a realized loss on the sale of cryptocurrency amounting to $131,075 for both the three and six months ended June 30, 2022 [236]. Market Conditions - The market price of Bitcoin has dropped approximately 60% since the beginning of 2022 and 70% from its all-time high, significantly impacting the company's revenue [205]. - The cost of natural gas used to power mining operations has increased by approximately 235% since the beginning of 2022, further affecting profitability [205]. - The next Bitcoin halving is anticipated to occur in March 2024, reducing the mining reward from 6.25 Bitcoin to 3.125 Bitcoin per block [203]. - The company faces significant competition in acquiring mining equipment and securing low-cost energy for operations, impacting its market position [206]. Equipment and Operations - The company has 270 Bitmain S19J Pro miners with a total hashing capacity of 27.0 Ph/s and an additional 270 Bitmain S19 miners with 24.3 Ph/s that have yet to be placed into service [197]. - The company entered into a purchase agreement for 600 Bitmain S19XP miners at a reference price of approximately $11,250 per miner, totaling an initial commitment of $6,762,000 [198]. - As of June 30, 2022, the company has made payments of $3,969,000 for the Bitmain miners, with negotiations ongoing to adjust the remaining payment based on current market prices [199]. - The company relocated 240 Bitmain S19J Pro miners with 24 Ph/s of hashing capacity to a facility in Colorado, but as of June 30, 2022, the facility was unable to supply sufficient natural gas for operations [238]. - The company entered into a Non-Fixed Price Sales and Purchase agreement for 600 Bitmain S19XP miners with a total reference price of approximately $6,762,000, but is negotiating to adjust the payment terms [252][253]. Cash Flow and Working Capital - As of June 30, 2022, the company had cash and cash equivalents of $816,146, a decrease of $1,969,042 from $2,785,188 as of December 31, 2021 [248]. - The working capital deficit as of June 30, 2022, was $2,462,912, a decrease of $7,251,574 from a working capital of $4,788,662 as of December 31, 2021 [256]. - Net cash used in operating activities for the six months ended June 30, 2022, was $1,438,286, resulting primarily from a net loss of $5,141,139 [249]. - Net cash used in investing activities for the six months ended June 30, 2022, was $1,916,723, primarily due to an increase in property and equipment, specifically mining equipment [250]. - Net cash provided by financing activities for the six months ended June 30, 2022, was $1,385,967, primarily from proceeds from the exercise of warrants and a note payable [255]. Operating Expenses - Total operating expenses for the three months ended June 30, 2022, were $1,796,014, an increase of 34% from $1,340,699 in 2021 [235]. - Cryptocurrency mining costs for the six months ended June 30, 2022, were $786,758, with total operating expenses reaching $5,308,947, a 25% increase from $4,261,101 in 2021 [236]. - Total operating expenses for the three months ended June 30, 2022, increased by $455,315 or 34% to $1,796,014, primarily due to cryptocurrency mining costs of $400,416 and stock-based compensation of $466,136 [239]. Asset Sales - The company reported a gain of approximately $1,130,740 from the sale of its wholly owned subsidiary containing Jevo assets for $1,500,000 [233].