Prairie Operating Co
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
PROP$0.39-4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001493152-24-030880
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001493152-24-044178
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 57 previous paragraphs and 80 current paragraphs.
25 unchanged; 28 reworded; 27 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
On August 15, 2024, we and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which, total consideration of the NRO Acquisition was reduced to $84.5 million cash, subject to certain closing price adjustments and other customary closing conditions, and the parties agreed to remove the deferred cash payments. Additionally on August 15, 2024, $6.0 million of the Deposit was released to NRO and the remaining $3.0 million was returned to us.
Current report
On October 1, 2024, we closed the NRO Acquisition and paid $49.6 million to the sellers in cash, using cash on hand, the proceeds from the issuance of Common Stock, and a portion of the proceeds from the issuance of the Senior Convertible Note. Refer toNote 4 – Acquisitions and Mergersfor a further discussion of the NRO Acquisition,* Note 8 – Debt* for a discussion of the Senior Convertible Note, andNote 12 – Common Stock for further discussion of the issuance of Common Stock.
Current report
Consent and Agreement
Current report
On August 15, 2024, we entered into the Consent and Agreement with the O’Neill Trust, pursuant to which the O’Neill Trust (a) consented to, and waived any and all negative covenants with respect to, any and all transactions the we may consummate in connection with the funding of the NRO Acquisition and our ongoing operations; (b) released its mortgage on certain of our property, which was established in favor of the O’Neill Trust securing our obligations under the Series E Certificate; and (c) agreed to (i) amend Section 6(d) of the Series E Certificate to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 49.9%, (ii) increase the Beneficial Ownership Limitation from 9.99% to 49.9% and (iii) amend Section 2(e) of each of the O’Neill Trust’s Series D A Warrant and Series E A Warrant and Section 2(d) of the O’Neill Trust’s Series E B Warrant to increase the Beneficial Ownership Limitation Ceiling from 25% to 49.9%.
Current report
In connection with the increase to the Beneficial Ownership Limitation Ceiling, the O’Neill Trust agreed pursuant to the Consent and Agreement that (i) until its remaining Series D Preferred Stock, Series D PIPE Warrants, and Series E PIPE Warrants are exercised or converted, as applicable, it will not acquire any other shares of our Common Stock, and (ii) for a period of ten years following the date of the Consent and Agreement, it will not, directly or indirectly, acquire by means of public equity trading markets, any Common Stock or other securities with underlying Common Stock, to the extent the O’Neill Trust would beneficially own the voting, investment or economic control over 49.9% of our Common Stock.
Current report
The O’Neill Trust further agreed that if at any time it beneficially owns, or exercises control over, shares of Common Stock with voting rights that exceed the Voting Threshold, we shall exercise the voting rights with respect to such shares of Common Stock beneficially owned in excess of the Voting Threshold in the same proportion as the outstanding Common Stock (excluding Common Stock beneficially owned, directly or indirectly, by the O’Neill Trust or any Affiliate of the O’Neill Trust, but including any of our securities eligible to vote with the Common Stock on an as-converted basis) voted on all matters submitted to a vote of the holders of our Common Stock.
Current report
Standby Equity Purchase Agreement
Current report
On September 30, 2024, we entered into the SEPA with Yorkville, whereby, subject to certain conditions, we have the right, not the obligation, to sell to Yorkville up to $40.0 million shares of Common Stock, at any time and in the amount as set forth in the applicable Advance Notice, during the commitment period commencing on the SEPA Effective Date and terminating on September 30, 2026. Each Advance by us under the SEPA is subject to a maximum limit equal to 100% of the aggregate volume traded of our Common Stock on the Nasdaq Stock Market during the five trading days immediately prior to the date of the Advance Notice. The shares will be issued and sold to Yorkville at a per share price equal to 97% of the lowest daily volume weighted average price of Common Stock for three consecutive trading days commencing on the trading day immediately following the Yorkville’s receipt of an Advance Notice. On September 30, 2024, pursuant to the SEPA, we paid Yorkville a structuring fee of $25,000 and a Commitment Fee by issuing Yorkville 100,000 shares of Common Stock.
Current report
Any purchases under an Advance will be subject to certain limitations, including that Yorkville cannot acquire (i) any shares that would result in the Yorkville, including its affiliates, beneficially owning more than 4.99% of our outstanding Common Stock at the time of an Advance or (ii) more than the Exchange Cap, subject to limited exceptions.
Current report
We have determined that the SEPA represents a derivative instrument pursuant to ASC 815, which should be recorded at fair value at inception and remeasured at fair value each reporting period with changes in the fair value recognized in earnings. Additionally, the Commitment Fees and any issuance costs associated with the SEPA have been expensed to general and administrative expenses.
Current report
Our right to sell shares to Yorkville under the SEPA is contingent upon us having an effective registration statement, which had not been filed or deemed effective as of September 30, 2024. Therefore, we have concluded that the fair value of the SEPA is zero as of September 30, 2024, because Yorkville does not have the right to exercise its put option under the SEPA.
Current report
Senior Convertible Note
Current report
On September 30, 2024, Yorkville advanced the Pre-Paid Advance of $15.0 million to us and we issued the Senior Convertible Note, with an interest rate of 8.00% and a maturity date of September 30, 2025. Our obligations with respect to the Pre-Paid Advance and under the Senior Convertible Note are guaranteed by Prairie LLC, a subsidiary of the Company, and Prairie Holdco, a subsidiary of the Company, pursuant to a global guaranty agreement entered into by Prairie LLC and Prairie Holdco in favor of Yorkville on September 30, 2024. Yorkville may convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price. We may, at any time, redeem all or a portion or the amounts outstanding under the Senior Convertible Note at 105% of the principal amount thereof, plus accrued and unpaid interest.
Current report
We did not receive the proceeds from the Senior Convertible Note until October 1, 2024; therefore, we have recorded a $14.3 million short-term financing receivable related to the Senior Convertible Note as of September 30, 2024.
Current report
We have determined that certain features of the Senior Convertible Note require bifurcation and separate accounting as embedded derivatives. As such, we have elected the fair value option to account for the Senior Convertible Note; therefore, in accordance with ASC 815, we have recorded the Senior Convertible Note at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings. Due to the short-term nature of the Senior Convertible Note, we have determined that its fair value as of September 30, 2024 is $14.3 million, which is equal to the face value of $15.0 million less the 5% original issuance discount.
Current report
In connection with the SEPA, we entered into the SEPA Registration Rights Agreement with Yorkville pursuant to which we agreed to file a registration statement registering the resale of the Common Stock underlying the SEPA, the Pre-Paid Advance, and the Commitment Fee.
Current report
Subordinated Promissory Note and Subordinated Note Warrants
Current report
On September 30, 2024, we entered into the Subordinated Note with the Noteholders, First Idea Ventures LLC and The Hideaway Entertainment LLC, in a principal amount of $5.0 million, with a maturity of September 30, 2025. The Subordinated Note has an interest rate of 10.00% and the Noteholders are entitled to a minimum return on capital of up to 2.0x upon the repayment, prepayment or acceleration of the obligations, or the occurrence of certain other triggering events under the Subordinated Note. Pursuant to the terms of the Subordinated Note, we issued the Subordinated Note Warrants to purchase up to 1,141,552 shares of Common Stock to the Noteholders, vesting in tranches based on the date of repayment of the Subordinated Note.
Current report
We did not receive a portion of the proceeds from the Subordinated Note until October 1, 2024; therefore, we have recorded a $2.0 million short-term financing receivable related to the Subordinated Note as of September 30, 2024.
Current report
We have determined that certain features of the Subordinated Note require bifurcation and separate accounting as embedded derivatives. As such, we have elected the fair value option to account for the Subordinated Note; therefore, in accordance with ASC 815, we have recorded the Subordinated Note at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings. As of September 30, 2024, the fair value of the Subordinated Note is $5.3 million. Additionally, we have determined that the Subordinated Note Warrants should be accounted for as a liability pursuant to ASC 480. In accordance with ASC 815, we have recorded the Subordinated Note Warrants at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings. As of September 30, 2024, the fair value of the Subordinated Note Warrants is $2.8 million and was determined using a Monte Carlo simulation model. The total fair value of the Subordinated Note and the Subordinated Note Warrants exceeded the proceeds of $5.0 million, as a result, we have recognized a loss on debt issuance of $3.0 million on our condensed consolidated statements of operations for the three and nine months ended September 30, 2024.
Current report
Pursuant to the Subordinated Note, we entered into the SPA Registration Rights Agreement with the Noteholders pursuant to which we have agreed to file a registration statement registering the resale of the Common Stock underlying the Subordinated Note Warrants.
Current report
Depreciation, depletion, and amortization. For the three and nine months ended September 30, 2024, DD&A increased $711 compared to the three and nine months ended September 30, 2023. This increase was driven by depreciation recognized for office furniture purchased in the third quarter of 2024, which was not recognized during the same periods of 2023.
Current report
Loss on debt issuance.For the three and nine months ended September 30, 2024, the loss on debt issuance of $3.0 million reflects the loss recognized for the issuance of the Subordinated Note and the Subordinated Note Warrants. As discussed above, we have elected the fair value option to account for both the Subordinated Note and the Subordinated Note Warrants and engaged a third-party to determine the fair value of both instruments at issuance. As of September 30, 2024, the total fair value of the Subordinated Note and the Subordinated Note Warrants exceeded the proceeds of $5.0 million, as a result, we have recognized a loss on debt issuance of $3.0 million on our condensed consolidated statements of operations for the three and nine months ended September 30, 2024. Refer toNote 5 – Fair Value Measurements,Note 8 – Debt,andNote 13 – Common Stock Options and Warrantsfor a further discussion of the Subordinated Note and the Subordinated Note Warrants.
Current report
Loss on adjustment to fair value – Warrant Liabilities.For the three and nine months ended September 30, 2023, the loss on the adjustment to fair value – Warrant Liabilities of $24.9 million reflected the change in fair value of the portion of the Series D A Warrants, all of the Series E A Warrants, and all of the Exok Warrants which were classified as liabilities as of September 30, 2023. The warrant liabilities were reclassified to equity in October 2023; therefore, we did not record a loss on the adjustment to fair value for the warrant liabilities during the three and nine months ended September 30, 2024. Refer toNote 5 – Fair Value MeasurementsandNote 13 – Common Stock Options and Warrantsfor a further discussion of the Series D A Warrants, the Series E A Warrants, and the Exok Warrants.
Current report
Liquidated damages. For the three and nine months ended September 30, 2023, we recognized liquidated damages expense of $0.2 million due to the registration statement registering the resale of certain shares of our Common Stock and the shares of Common Stock underlying the Series D Preferred Stock and Series D PIPE Warrants not being declared effective within the timeframe required under the related registration rights agreement. We did not recognize any liquidated damage expense during the three and nine months ended September 30, 2024. Refer toNote 15 – Related Party Transactionsfor a further discussion.
Current report
Additionally, during the third quarter of 2024, we raised approximately $35.0 million in cash by issuing Common Stock, the Senior Convertible Note, and the Subordinated Note. On October 1, 2024, we used cash on hand, the proceeds from the issuance of Common Stock, and a portion of the proceeds from the issuance of the Senior Convertible Note to fund the closing of the NRO Acquisition. We expect to use the remainder of the Senior Convertible Note proceeds and the Subordinated Note proceeds to fund our drilling program and other working capital requirements. We expect the producing assets acquired from NRO to provide cash flow going forward, however, we expect that our cash balance and expected revenues from our existing producing wells will not be sufficient to fund our development program and operations. We plan to obtain additional financing through public or private capital markets, including potentially through reserve-based lending arrangements and/or issuing additional Common Stock in public or private transactions, to supplement proceeds resulting from the exercise of our outstanding Common Stock warrants and issuances of Common Stock in connection with the SEPA.
Current report
Our cash balance as of September 30, 2024 has decreased, as we paid $49.6 million to close the NRO Acquisition on October 1, 2024. Refer toNote 4 – Acquisitions and Mergers for further discussion of the NRO Acquisition. Even though we will begin to recognize revenues from the producing wells acquired in the NRO Acquisition, we expect our cash balance and working capital will decrease in the future as we continue to incur expenses in connection with our business unless we are able to obtain additional financing through public or private capital markets.
Removed paragraphs (4)
Previous report
The outside date for the closing of the NRO Acquisition is August 15, 2024, with an economic effective date of February 1, 2024. We expect to fund the transaction through a combination of public or private issuance of equity, cash on hand, proceeds from existing warrant exercises, or short-term debt. We expect to close the NRO Acquisition in August 2024. However, there can be no assurances that the funding required to close can be attained on or before August 15, 2024 or that we will be able to close the NRO Acquisition on or before August 15, 2024, or at all. If we are unable to close the NRO Acquisition by August 15, 2024, or to extend the outside date, NRO could terminate the Agreement
Previous report
In addition, in order to close the NRO Acquisition, we will need to raise approximately $74.0 million in cash, subject to customary purchase price adjustments. We do not currently have sufficient cash or committed capital to close the NRO Acquisition. While we are seeking to raise the necessary capital through an equity offering, there is no assurance that we will be successful in raising sufficient funds from the proposed offering or through other sources. If we are unable to raise sufficient funds to close the NRO Acquisition, or if we are unable to close the acquisition for other reasons, we will need to seek other sources of capital to fund our development activity and operations until our other E&P assets are generating revenues. Under certain circumstances, if we are unable to close the NRO Acquisition, we would lose the Deposit. If we are unable to close the NRO Acquisition by August 15, 2024, or to extend the outside date, NRO could terminate the NRO Agreement.
Previous report
We expect to continue funding our business and strategic plans with cash on hand and proceeds from exercises of warrants, if any. Currently, we have no debt outstanding. However, we expect to enter into a revolving credit facility, primarily to support our future hedging program, but we may also utilize it from time to time to fund short–term working capital fluctuations and other needs. We may also issue debt securities or enter into short-term debt facilities from time to time to fund our operations or to fund acquisitions, including the NRO Acquisition.
Previous report
We expect that our cash balance will decline until we are able to obtain financing through public or private capital markets and/or upon the exercise of common stock warrants. As of June 30, 2024, we have common stock warrants with exercise prices of $6.00 per share of common stock which expire in August 2024 (refer toNote 13 – Common Stock Options and Warrants). Based on recent and current prices of our common stock, we expect these warrants to be exercised, which would represent cash proceeds of $24.0 million. However, there is no assurance that such common stock warrants will be exercised. During the six months ended June 30, 2024, we received $9.5 million of cash proceeds from warrant exercises.
Reworded paragraphs (28)
Previous wording
The following discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2024 and 2023 should be read in conjunction with our consolidated financial statements and related notes to those financial statements that are included elsewhere in this report, as well as our audited consolidated financial statements and related notes and the related “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in our most recent Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023. Except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,” “our” or similar terms refer to Prairie Operating Co.
Current wording
The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with our consolidated financial statements and related notes to those financial statements that are included elsewhere in this report, as well as our audited consolidated financial statements and related notes and the related “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in our most recent Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023. Except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,” “our” or similar terms refer to Prairie Operating Co.
Previous wording
We are an independent oil and gas company focused on the acquisition and development of crude oil, natural gas and natural gas liquids (“NGLs”). We currently hold attractive acreage in the Denver–Julesburg Basin in Colorado (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; (iii) strong well–level economics; (iv) liquids–rich assets; and (v) accretive valuation.
Current wording
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 of Colorado 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; (iii) strong well–level economics; (iv) liquids–rich assets; and (v) accretive valuation.
Previous wording
As of June 30, 2024, all of our E&P assets, which we refer to as the “Genesis Assets,” were acquired in the Exok Transaction, the Exok Option Purchase, and the acquisition of the Genesis Bolt–on Assets. The Genesis Assets consist of certain oil and gas leasehold interests with no existing oil and gas production or revenue. In all, the total Genesis Assets include 24,351 net mineral acres in, on and under 37,985 gross acres. To date, we have not had any drilling or completion operations and have been focused on obtaining requisite permits to begin drilling wells on our Genesis Assets, as well as funding and closing the NRO Acquisition, described further below. Additionally, in January 2024, we divested all of our cryptocurrency mining assets.
Current wording
As of September 30, 2024, all of our E&P assets, which we refer to as the “Genesis Assets,” were acquired in the Exok Transaction, the Exok Option Purchase, and the acquisition of the Genesis Bolt–on Assets. The Genesis Assets consist of certain oil and gas leasehold interests with no existing oil and gas production or revenue. In all, the total Genesis Assets include 24,351 net mineral acres in, on and under 37,985 gross acres. We commenced drilling wells on our Genesis Assets in the third quarter of 2024.
Previous wording
On July 9, 2024, we announced plans to commence our initial drilling program in August 2024, starting with an 8-well pad on Shelduck South, part of the Genesis Bolt–on Assets acquired in February 2024. The Shelduck South development will consist of eight two-mile lateral wells across 1,280 mineral acres, targeting the Niobrara B and C formations. We have contracted a drilling rig and secured various oil field service providers to perform all drilling and completion operations. We anticipate the wells will be drilled, completed, and turned to production in the fourth quarter of 2024, subject to raising sufficient financing.
Current wording
During the third quarter of 2024, we commenced our initial drilling program, starting with an 8-well pad on Shelduck South, part of the Genesis Bolt–on Assets acquired in February 2024. The Shelduck South development consists of eight two-mile lateral wells across 1,280 mineral acres, targeting the Niobrara B and C formations. We spud our first well on September 5, 2024 and completed the drilling of all 8 wells in October.
Previous wording
On January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in Weld County, Colorado. for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. The Purchase Price consists of $83.0 million in cash and $11.5 million in deferred cash payments. Pursuant to the NRO Agreement, we deposited $9.0 million of the Purchase Price into an escrow account on January 11, 2024, which will be released to NRO upon the earlier of the closing date and August 15, 2024. Portions of the Deposit are subject to earlier release under certain circumstances.
Current wording
On January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in Weld County, Colorado. for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. The Purchase Price consisted of $83.0 million in cash and $11.5 million in deferred cash payments. Pursuant to the NRO Agreement, we deposited $9.0 million of the Purchase Price into an escrow account on January 11, 2024.
Previous wording
As discussed inNote 4 – Acquisitions and Merger, we acquired our cryptocurrency mining operations in May 2023, concurrent with the Merger. On January 23, 2024, we sold all of our Mining Equipment for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million in deferred cash payments, to be paid out of (i) 20% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals $250,000 and (ii) thereafter, 50% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals the Deferred Purchase Price, plus accrued interest. As of June 30, 2024, we have received $0.2 million of the Deferred Purchase Price.
Current wording
As discussed inNote 4 – Acquisitions and Merger, we acquired our cryptocurrency mining operations in May 2023, concurrent with the Merger. On January 23, 2024, we sold all of our Mining Equipment for consideration consisting of (i) $1.0 million in cash and (ii) $1.0 million in deferred cash payments, to be paid out of (a) 20% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals $250,000 and (b) thereafter, 50% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals the Deferred Purchase Price, plus accrued interest. As of September 30, 2024, we have received $0.2 million of the Deferred Purchase Price.
Previous wording
For the three and six months ended June 30, 2024, loss from operations increased $5.7 million and $13.7 million, respectively, compared to the three and six months ended June 30, 2023. These increases were entirely related to incremental operating costs and expenses recognized during the current periods.
Current wording
For the three and nine months ended September 30, 2024, loss from operations increased $2.5 million and $16.2 million, respectively, compared to the three and nine months ended September 30, 2023. These increases were entirely related to incremental operating costs and expenses recognized during the current periods, as discussed below.
Previous wording
The cryptocurrency mining revenue earned and cryptocurrency mining operating costs and expenses incurred during the six months ended June 30, 2024 and prior to the Crypto Sale have been classified as discontinued operations.
Current wording
The cryptocurrency mining revenue earned and cryptocurrency mining operating costs and expenses incurred during the nine months ended September 30, 2024 and prior to the Crypto Sale have been classified as discontinued operations.
Previous wording
For the three and six months ended June 30, 2024, operating costs and expenses increased $5.7 million and $13.7 million, respectively, compared to the three and six months ended June 30, 2023.
Current wording
For the three and nine months ended September 30, 2024, operating costs and expenses increased $2.5 million and $16.2 million, respectively, compared to the three and nine months ended September 30, 2023.
Previous wording
The operating costs and expenses incurred and related to the cryptocurrency mining assets during the six months ended June 30, 2024 and prior to the Crypto Sale have been classified as discontinued operations.
Current wording
The operating costs and expenses incurred and related to the cryptocurrency mining assets during the nine months ended September 30, 2024 and prior to the Crypto Sale have been classified as discontinued operations.
Previous wording
*General and administrative expenses.*For the three months ended June 30, 2024, general and administrative expenses increased $5.7 million compared to the three months ended June 30, 2023. The increase was primarily driven by incremental employee and benefit expenses of $2.6 million, stock–based compensation of $1.5 million, investor relations costs of $1.2 million, legal and accounting costs of $0.3 million, and other professional services of $0.1 million.
Current wording
*General and administrative expenses.*For the three months ended September 30, 2024, general and administrative expenses increased $2.5 million compared to the three months ended September 30, 2023. The increase was primarily driven by incremental stock–based compensation of $1.5 million, legal and accounting costs of $1.6 million, and financing commitment fees of $0.6 million, partially offset by a decrease in investor relations costs of $1.6 million.
Previous wording
For the six months ended June 30, 2024, general and administrative expenses increased $13.2 million compared to the six months ended June 30, 2023. This increase was driven by incremental employee and benefit expenses of $4.9 million, stock–based compensation of $3.6 million, investor relations costs of $2.9 million, legal and accounting costs of $0.8 million, and other professional services of $0.5 million.
Current wording
For the nine months ended September 30, 2024, general and administrative expenses increased $15.7 million compared to the nine months ended September 30, 2023. This increase was driven by incremental stock–based compensation of $5.1 million, employee and benefit expenses of $4.9 million, legal and accounting costs of $2.4 million, investor relations costs of $1.3 million, financing commitment fees of $0.6 million, and other professional services of $0.5 million.
Previous wording
Exploration expenses. For the three and six months ended June 30, 2024, exploration expense increased $0.1 million and $0.5 million, respectively, compared to the three and six months ended June 30, 2023. These increases were driven by delay rental costs incurred on oil and gas leases during the three and six months ended June 30, 2024, which were not incurred during the same periods of 2023.
Current wording
Exploration expenses. For the three and nine months ended September 30, 2024, exploration expenses increased less than $0.1 million and $0.5 million, respectively, compared to the three and nine months ended September 30, 2023. These increases were driven by delay rental costs incurred on oil and gas leases during the three and nine months ended September 30, 2024, which were not incurred during the same periods of 2023.
Previous wording
Interest income. For the three and six months ended June 30, 2024, interest income increased $12,102 and $64,203, respectively, compared to the three and six months ended June 30, 2023. These increases were largely due to higher average cash balances in the current periods.
Current wording
Interest income. For the three and nine months ended September 30, 2024, interest income increased $0.3 million and $0.4 million, respectively, compared to the three and nine months ended September 30, 2023. These increases were largely due to higher average cash balances in the current periods.
Previous wording
*Interest expense.*For the three and six months ended June 30, 2023, interest expense reflected our accrued interest on the AR Debentures and SBA Loan, both connected with the Merger, and certain financing costs incurred in the periods. We did not have any debt outstanding during the three and six months ended June 30, 2024 and therefore did not incur any interest expense during the current periods.
Current wording
Interest expense.For the three and nine months ended September 30, 2023, interest expense reflected our accrued interest on the AR Debentures and SBA Loan, both connected with the Merger, and certain financing costs incurred in the periods. We did not have any debt outstanding during the three and nine months ended September 30, 2024 and therefore did not incur any interest expense during the current periods. Refer toNote 8 – Debt for a discussion of the AR Debentures and SBA Loan.
Previous wording
Loss on adjustment to fair value – AR Debentures. For the three and six months ended June 30, 2023, the loss on the adjustment to fair value – AR Debentures of $741,000 reflected the change in fair value of the AR Debentures since the Merger until June 30, 2023. The AR Debentures were converted into common stock in October 2023; therefore, we did not record a loss on the adjustment to fair value for the AR Debentures during the three and six months ended June 30, 2024.
Current wording
Loss on adjustment to fair value – AR Debentures. For the three and nine months ended September 30, 2023, the loss on the adjustment to fair value – AR Debentures of $2.1 million and $2.9 million, respectively, reflected the change in fair value of the AR Debentures since the Merger until September 30, 2023. The AR Debentures were converted into Common Stock in October 2023; therefore, we did not record a loss on the adjustment to fair value for the AR Debentures during the three and nine months ended September 30, 2024. Refer toNote 5 – Fair Value MeasurementsandNote 8 – Debtfor a further discussion of the AR Debentures.
Previous wording
Loss on adjustment to fair value – Obligation Shares. For the three and six months ended June 30, 2023, the loss on the adjustment to fair value for the obligation shares of $706,185 reflected the change in fair value of the Obligation Shares liability since the Merger until June 30, 2023. The underlying shares were fully issued on September 7, 2023; therefore, we did not record a loss on the adjustment to fair value for the obligation during the three and six months ended June 30, 2024.
Current wording
Loss on adjustment to fair value – Obligation Shares. For the three and nine months ended September 30, 2023, the loss on the adjustment to fair value for the obligation shares of $0.8 million and $1.5 million respectively, reflected the change in fair value of the Obligation Shares liability since the Merger until September 7, 2023. The underlying shares were fully issued on September 7, 2023; therefore, we did not record a loss on the adjustment to fair value for the obligation during the three and nine months ended September 30, 2024. Refer toNote 5 – Fair Value MeasurementsandNote 12 – Common Stockfor a further discussion of the Obligation Shares.
Previous wording
During the three months ended June 30, 2024, we did not have any cryptocurrency mining revenue or related expenses, as a result of the Crypto Sale completed in January 2024, and therefore we did not have a net loss from discontinued operations. For the three months ended June 30, 2023, the net loss from discontinued operations reflects the cryptocurrency mining revenue and related expenses for the period as well as $16.8 million of impairment of cryptocurrency mining equipment, recorded to write off the excess of the allocated purchase price to the cryptocurrency assets which were over the fair value of the acquired net assets and to subsequently write off shipping and customs fees incurred on miners after the Merger.
Current wording
During the three months ended September 30, 2024, we did not have any cryptocurrency mining revenue or related expenses, as a result of the Crypto Sale completed in January 2024, and therefore we did not have a net loss from discontinued operations. For the three months ended September 30, 2023, the net loss from discontinued operations reflects the cryptocurrency mining revenue and related expenses for the period.
Previous wording
For the six months ended June 30, 2024, the net loss from discontinued operations decreased $15.8 million compared to the six months ended June 30, 2023. As discussed above, we completed the Crypto Sale in January 2024, therefore, we did not have any cryptocurrency mining revenue or related expenses during the majority of the six months ended June 30, 2024. However, we did recognize a $1.0 million loss on the sale of cryptocurrency mining equipment. Additionally, during the six months ended June 30, 2023, we recognized $16.8 million of impairment of cryptocurrency mining equipment to write off the excess of the allocated purchase price to the cryptocurrency assets which were over the fair value of the acquired net assets and to subsequently write off shipping and customs fees incurred on miners after the Merger.
Current wording
For the nine months ended September 30, 2024, the net loss from discontinued operations decreased $16.0 million compared to the nine months ended September 30, 2023. As discussed above, we completed the Crypto Sale in January 2024; therefore, we did not have any cryptocurrency mining revenue or related expenses during the majority of the nine months ended September 30, 2024. However, we did recognize a $1.1 million loss on the sale of cryptocurrency mining equipment. Additionally, during the nine months ended September 30, 2023, we recognized $16.8 million of impairment of cryptocurrency mining equipment to write off the excess of the allocated purchase price to the cryptocurrency assets which were over the fair value of the acquired net assets and to subsequently write off shipping and customs fees incurred on miners after the Merger.
Previous wording
Our E&P activities will require us to make significant operating and capital expenditures. In 2023, our primary sources of liquidity were the Series D PIPE and the Series E PIPE, which funded the purchase of the Initial Genesis Assets and working capital, as well as proceeds from the exercise of warrants, which funded, among other things, working capital and the deposit for the NRO Acquisition in 2024. Since we sold our only revenue–generating assets in January 2024 and do not yet have any operating E&P assets, we will require additional capital to fund our development program and operations. Our primary uses of cash have been for the acquisition and development of oil and natural gas properties and payments of general, administrative and operating costs.
Current wording
Our E&P activities will require us to make significant operating and capital expenditures. In 2023, our primary sources of liquidity were the proceeds from the Series D PIPE and the Series E PIPE, which funded the purchase of the initial Genesis Assets and working capital, as well as proceeds from the exercise of warrants, which funded, among other things, working capital and the deposit for the NRO Acquisition in 2024. We commenced drilling wells on our Genesis Assets in the third quarter of 2024 and expect those wells to start producing by the end of the year.
Previous wording
Our 2024 development program is dependent upon the closing of the NRO Acquisition and the related financing. If we are able to close the NRO Acquisition, we anticipate funding these capital costs through the remaining net proceeds from an equity offering after funding the NRO Acquisition and revenues from the operating wells acquired in the NRO Acquisition. As a supplement to these sources of capital, we expect to receive additional proceeds from warrant exercises, and anticipate that we may access public and private equity markets to accelerate drilling activities, fund development program changes, or other changes to our forecast and capital needs. The availability of such additional capital is subject to numerous factors outside of our control including prices of oil and natural gas and the overall health of the U.S. and global economic environments. There can be no assurance that we will be able to obtain such additional capital. The amount and allocation of future capital expenditures will depend upon a number of factors, including the amount and timing of cash flows from operations, investing and financing activities, and the timing and cost of additional capital sources.
Current wording
Our development program is dependent upon our ability to obtain additional financial through public and private capital markets. The availability of such additional capital is subject to numerous factors outside of our control including prices of oil and natural gas and the overall health of the U.S. and global economic environments. There can be no assurance that we will be able to obtain such additional capital. The amount and allocation of future capital expenditures will depend upon a number of factors, including the amount and timing of cash flows from operations, investing and financing activities, and the timing and cost of additional capital sources.
Previous wording
We define working capital as current assets less current liabilities. As of June 30, 2024, we had a working capital deficit of $7.9 million and as of December 31, 2023, we had working capital of $8.1 million. Our current working capital deficit is expected to increase in the future as we continue to incur expenses in connection with our business until we recognize revenue from our E&P business and/or we raise additional capital through the exercise of existing warrants or through public and/or private markets. As of June 30, 2024 and December 31, 2023, cash and cash equivalents totaled $2.2 million and $13.0 million, respectively.
Current wording
We define working capital as current assets less current liabilities. As of September 30, 2024 and December 31, 2023, we had working capital of $12.1 million and $8.1 million, respectively, and cash and cash equivalents of $40.1 million and $13.0 million, respectively. Our cash and cash equivalents, and corresponding working capital, as of September 30, 2024, will decrease, as we paid $49.6 million to close the NRO Acquisition on October 1, 2024. Refer toNote 4 – Acquisitions and Mergers for further discussion of the NRO Acquisition. Even though we will begin to recognize revenues from the producing wells acquired in the NRO Acquisition, we expect our cash balance and working capital will decrease in the future as we continue to incur expenses in connection with our business unless we are able to obtain additional financing through public or private capital markets.
Previous wording
*Operating activities.*Net cash used in operating activities totaled $8.4 million and $5.1 million during the six months ended June 30, 2024 and 2023, respectively. The $3.4 million change in our net cash used in operating activities is largely due to increased operating costs during the current period, including $9.7 million of incremental general and administrative expenses and a $0.5 million increase in exploration expenses, partially offset by a $6.4 million decrease in working capital.
Current wording
*Operating activities.*Net cash used in operating activities totaled $5.7 million and $7.9 million during the nine months ended September 30, 2024 and 2023, respectively. The $2.3 million change in our net cash used in operating activities is largely due to an increase in operating costs during the current period.
Previous wording
*Investing activities.*Net cash used in investing activities totaled $11.8 million and $3.3 million during the six months ended June 30, 2024 and 2023, respectively. The $8.2 million increase in our net cash used in investing activities was largely driven by the $9.0 million deposit made in connection with the NRO Acquisition and $3.5 million increase in capital investments in oil and natural gas properties during the six months ended June 30, 2024. These increases were partially offset with $1.0 million cash proceeds and $0.2 million note receivable from the Crypto Sale in January 2024, which is reflected as discontinued operations, and $3.0 million spent on the acquisition of unproved oil and natural gas properties from Exok during the six months ended June 30, 2023.
Current wording
*Investing activities.*Net cash used in investing activities totaled $13.9 million and $21.6 million during the nine months ended September 30, 2024 and 2023, respectively. The $7.7 million decrease in our net cash used in investing activities was largely driven by the $21.1 million spent in connection with the Exok Option Purchase during the nine months ended September 30, 2023 and the $1.0 million cash proceeds and $0.2 million note receivable from the Crypto Sale in January 2024, which is reflected as discontinued operations. These decreases were partially offset by the $9.0 million deposit made in connection with the NRO Acquisition, $3.0 million of which was returned to us during the three months ended September 30, 2024, and an $8.6 million increase in capital investments in oil and natural gas properties during the nine months ended September 30, 2024.
Previous wording
*Financing activities.*Net cash provided by financing activities totaled $9.5 million for the six months ended June 30, 2024, fully driven by proceeds from the exercise of Series D B warrants, compared to $17.0 million of net cash provided by financing activities for the six months ended June 30, 2023, which was comprised of proceeds from the issuance of the Series D PIPE of $17.4 million, partially offset by the related financing costs of $0.4 million.
Current wording
*Financing activities.*Net cash provided by financing activities totaled $46.7 million for the nine months ended September 30, 2024, driven by proceeds of $33.5 million from the exercise of Series D B and Series E B warrants, $15.0 million of proceeds from the issuance of Common Stock, partially offset by the related issuance costs of $4.9 million, and $3.0 million of proceeds from the issuance of the Subordinated Note. Net cash provided by financing activities totaled $36.7 million for the nine months ended September 30, 2023, which was comprised of proceeds from the issuance of the Series D PIPE of $17.4 million, partially offset by the related financing costs of $0.4 million, and the issuance of the Series E PIPE of $20.0 million, partially offset by the related financing costs of $0.2 million.
Previous wording
For the six months ended June 30, 2024, we had a net loss of $17.6 million. We cannot predict if or when we will be profitable, and we may continue to incur losses for an indeterminate period of time. Additionally, we may be unable to achieve or sustain profitability on a quarterly or annual basis and extended periods of losses and negative cash flow may prevent us from successfully operating and expanding our business. As of June 30, 2024, we had cash and cash equivalents of $2.2 million, a working capital deficit of $7.9 million, and an accumulated deficit of $96.4 million.
Current wording
For the nine months ended September 30, 2024, we had a net loss of $29.0 million. We cannot predict if or when we will be profitable, and we may continue to incur losses for an indeterminate period of time. Additionally, we may be unable to achieve or sustain profitability on a quarterly or annual basis and extended periods of losses and negative cash flow may prevent us from successfully operating and expanding our business. As of September 30, 2024, we had cash and cash equivalents of $40.1 million, working capital of $12.1 million, and an accumulated deficit of $107.8 million.
Previous wording
The assessment of liquidity requires management to make estimates of future activity and judgments about whether we can meet our obligations and have adequate liquidity to operate. Significant assumptions used in our forecasted model of liquidity in the next 12 months include our current cash position and our ability to manage spending. Based on an assessment of these factors, management believes that we will have adequate liquidity for our operations for at least the next 12 months.
Current wording
The assessment of liquidity requires management to make estimates of future activity and judgments about whether we can meet our obligations and have adequate liquidity to operate. Significant assumptions used in our forecasted model of liquidity in the next 12 months include our current cash position and our ability to manage spending. Based on an assessment of these factors, management expects that our cash balance and expected revenues from our existing producing wells will not be sufficient to meet our obligations over the next twelve months. We plan to obtain additional financing through public or private capital markets, including potentially through reserve-based lending arrangements, and view our plans as probable of being successfully implemented based on the value of our proved developed reserves acquired in the NRO Acquisition, the value of our outstanding Common Stock warrants, and our ability to issue additional Common Stock in public or private transactions, including the SEPA, as discussed above. Based on these plans, substantial doubt about our ability to continue as a going concern does not exist.
Previous wording
The discussion and analysis of our financial condition and results of operations is based upon the accompanying condensed consolidated financial statements. These financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reports for assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Management believes its estimates and assumptions to be reasonable under these circumstances. Certain estimates and assumptions are inherently unpredictable and actual results could differ from those estimates. We have provided a full discussion of our significant accounting policies, estimates, and judgments in Note 2 – Summary of Significant Accounting Policies in our 2023 Annual Report on Form 10–K/A for the fiscal year ended December 31, 2023. We have not changed any of our significant accounting policies, estimates, or judgements during the six months ended June 30, 2024, however, we did apply the discontinued operations guidance to account for the Crypto Sale in January 2024. Refer toNote 3 – Discontinued Operations for a full discussion of the discontinued operations and the subsequent accounting.
Current wording
The discussion and analysis of our financial condition and results of operations is based upon the accompanying condensed consolidated financial statements. These financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reports for assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Management believes its estimates and assumptions to be reasonable under these circumstances. Certain estimates and assumptions are inherently unpredictable and actual results could differ from those estimates. We have provided a full discussion of our significant accounting policies, estimates, and judgments in Note 2 – Summary of Significant Accounting Policies in our 2023 Annual Report on Form 10–K/A for the fiscal year ended December 31, 2023. We have not changed any of our significant accounting policies, estimates, or judgements during the nine months ended September 30, 2024, however, we did apply the discontinued operations guidance to account for the Crypto Sale in January 2024. Refer toNote 3 – Discontinued Operations for a full discussion of the discontinued operations and the subsequent accounting.