Prairie Operating Co. (PROP) FY 2022 MD&A

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary
Notice Regarding Forward-Looking Statements

The
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.

We
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.

Company
Overview

Creek
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”).

On
August 6, 2021, we entered into the Informa Agreement with Informa. Pursuant to the Informa Agreement, Creek Road Miners Corp. (fka Kick
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.

On
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.

On
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.

Cryptocurrency
Mining

We
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.

Mining
Equipment

All
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
rewards. 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.

23

On
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
miner. 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
of miners. 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:

As
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.

Mining
Results

The
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:

24

Factors
Affecting Profitability

Our
business is heavily dependent on the market price of Bitcoin. The prices of cryptocurrencies, specifically Bitcoin, have experienced
substantial volatility. Further affecting the industry, and particularly for the Bitcoin blockchain, the cryptocurrency reward for solving
a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of
inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half,
hence the term “halving”. For Bitcoin the reward was initially set at 50 Bitcoin currency rewards per block. The Bitcoin
blockchain has undergone halving three times since its inception as follows: (1) on November 28, 2012 at block 210,000; (2) on July 9,
2016 at block 420,000; and (3) on May 11, 2020 at block 630,000, when the reward was reduced to its current level of 6.25 Bitcoin per
block. The next halving for the Bitcoin blockchain is anticipated to occur in March 2024 at block 840,000, when the reward will be reduced
to 3.125 Bitcoin per block. This process will reoccur until the total amount of Bitcoin currency rewards issued reaches 21 million and
the theoretical supply of new Bitcoin is exhausted. Many factors influence the price of Bitcoin, and potential increases or decreases
in prices in advance of, or following, a future halving is unknown.

Competition

Our
business environment is constantly evolving, and cryptocurrency miners can range from individuals to large-scale commercial mining operations.
We compete with other companies that focus all or a portion of their activities on mining activities at scale, including several public
and private companies. We face significant competition in every aspect of our business, including, but not limited to, the acquisition
of mining equipment, the ability to raise capital, and the ability to obtain the lowest cost energy to power our mining operations.

Government
Regulation

Cryptocurrency
is increasingly becoming subject to governmental regulation, both in the U.S. and internationally. State and local regulations also may
apply to our activities and other activities in which we may participate in the future. Numerous regulatory bodies have shown an interest
in regulating blockchain or cryptocurrency activities. For example, on March 9, 2022 President Biden signed an executive order on cryptocurrencies.
While the executive order does not mandate any specific regulations, it instructs various federal agencies to consider potential regulatory
measures, including the evaluation of the creation of a U.S. Central Bank digital currency. Future changes to existing regulations or
entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of
reliability. As the regulatory and legal environment evolves, we may become subject to new laws and regulation which may affect our mining
and other activities. For additional discussion regarding our belief about the potential risks existing and future regulation pose to
our business, see the Section entitled “Risk Factors” herein.

Critical
Accounting Policies and Estimates

The
preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States,
or U.S. GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses,
and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical
experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances.
Actual results may differ under different estimates and assumptions. The accounting estimates and assumptions discussed in this section
are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant
judgments and uncertainties.

Principles
of Consolidation

The
accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany
balances and transactions have been eliminated in consolidation.

Use
of Estimates

The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

Reclassification

Certain
prior period amounts have been reclassified to conform to current period presentation.

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Cash
and cash equivalents

For
purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with an
original maturity of three months or less. In all periods presented, cash equivalents consist primarily of money market funds.

Fair
value of financial instruments

Under
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value
Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged or a liability transferred
in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where
available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable
prices or parameters are not available, valuation models are applied. A fair value hierarchy prioritizes the inputs used in measuring
fair value into three broad levels as follows:

Level
1 – Quoted prices in active markets for identical assets or liabilities.

Level
2 – Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level
3 – Unobservable inputs based on the Company’s assumptions.

The
Company is required to use observable market data if such data is available without undue cost and effort. The Company has no fair value
items required to be disclosed as of December 31, 2022 or 2021 under these requirements. The carrying amounts of financial assets and
liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the
short maturity of these instruments.

Transactions
involving related parties typically cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions
of competitive, free market dealings may not exist. However, in the case of the secured convertible debentures due to related parties,
the Company obtained a fairness opinion from an independent third party which supports that the transaction was carried out at an arm’s
length basis.

Cryptocurrency

Cryptocurrency
(Bitcoin) is included in current assets in the accompanying consolidated balance sheets. The classification of cryptocurrencies as a
current asset has been made after the Company’s consideration of the significant consistent daily trading volume on readily available
cryptocurrency exchanges and the absence of limitations or restrictions on Company’s ability to sell Bitcoin. Cryptocurrencies
awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy
disclosed below. Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with
an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances
occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount
exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured.
In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely
than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative
impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the
extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses
is not permitted. Cryptocurrencies awarded to the Company through its mining activities are included within operating activities on the
accompanying consolidated statements of cash flows.

Impairment
of Long-Lived Assets

Long-lived
assets are comprised of intangible assets and property and equipment. Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An estimate of undiscounted future cash
flows produced by the asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment
exists, pursuant to the provisions of FASB ASC 360-10 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of”. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets,
if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including
a discounted value of estimated future cash flows and fundamental analysis. The Company reports an asset to be disposed of at the lower
of its carrying value or its estimated net realizable value.

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Property
and equipment

Property
and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of 3 to 9 years.
Leasehold improvements are amortized over the shorter of the useful lives of the related assets, or the lease term. Expenditures for
maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals
are included in the consolidated statements of operations.

Management
assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from
the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment
loss is recognized to write down the asset to its estimated fair value.

Revenue
Recognition

We
account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying
principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.

Revenues
are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration
that we expect to receive in exchange for those goods or services. We apply the following five steps in order to determine the appropriate
amount of revenue to be recognized as we fulfill our obligations under each of our agreements:

The
Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power
to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation
only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company
is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction
fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain.
The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator
to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing
computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision
of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The
transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date
received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from
the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur,
the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm)
and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant
financing component in these transactions.

Fair
value of the cryptocurrency award received is determined using the market rate of the related cryptocurrency at the time of receipt.
There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies
recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment.
In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect
on the Company’s consolidated financial position and results from operations.

Cryptocurrency
Mining Costs

The
Company’s cryptocurrency mining costs consist primarily of direct costs of earning Bitcoin related to mining operations, including
mining pool fees, natural gas costs, turbine rental costs, and mobile data center rental costs, but exclude depreciation and amortization,
which are separately stated in the Company’s consolidated statements of operations.

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Reverse
Stock Split

We
implemented a 1-for-20 reverse stock split of our outstanding shares of common stock that was effective on January 23, 2020. Unless otherwise
noted, all share and related option, warrant, and convertible security information presented has been retroactively adjusted to reflect
the reduced number of shares, and the increase in the share price which resulted from this action.

Stock-Based
Compensation

We
periodically issue stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions,
and for financing costs. We account for share-based payments under the guidance as set forth in the Share-Based Payment Topic 718 of
the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based
payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values.
We estimate the fair value of stock option and warrant awards to employees and directors on the date of grant using an option-pricing
model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service
period in our Statements of Operations. We estimate the fair value of restricted stock awards to employees and directors using the market
price of our common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized
as expense over the required service period in our Statements of Operations.

Income
taxes

We
account for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Discontinued
Operations

On
August 6, 2021, we entered into the Informa Agreement with Informa. Pursuant to the Informa Agreement, Creek Road Miners Corp (fka Kick
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.

On
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.

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”).

The
related assets and liabilities associated with the discontinued operations in our consolidated balance sheets for the years ending December
31, 2022 and 2021, are classified as discontinued operations. Additionally, the financial results associated with discontinued operations
in our consolidated statement of operations for the years ending December 31, 2022 and 2021, are classified as discontinued operations.

28

Results
of Operations

Comparison
of the Years Ended December 31, 2022 and 2021

Revenue

Total
revenue increased $147,798, or 40%, for the year ended December 31, 2022 compared to the prior year, primarily because cryptocurrency
mining operations did not begin until October 2021.

Operating
Costs and Expenses

29

Our
operating costs and expenses decreased $10,455,832 or 56%, for the year ended December 31, 2022 compared to the prior year, due to the
following:

Net
Income (Loss)

Net
loss from continuing operations decreased $5,801,038 or 30%, for the year ended December 31, 2022 compared to the prior year, primarily
due to decreased stock based compensation and general and administrative expenses as described above, partially offset by an impairment
of fixed assets of approximated $5.2 million.

Going
Concern Analysis

Historically,
we have relied upon cash from financing activities to fund substantially all of the cash requirements of our activities and have incurred
significant losses and experienced negative cash flow. The Company had net losses from continuing operations of $13,401,076, and $19,202,114,
for the years ended December 2022 and 2021, respectively. We cannot predict if we will be profitable. We may continue to incur losses
for an indeterminate period of time and may be unable to achieve profitability. An extended period of losses and negative cash flow may
prevent us from successfully operating and expanding our business. We may be unable to achieve or sustain profitability on a quarterly
or annual basis. On December 31, 2022, we had cash and cash equivalents of $246,358, a working capital deficit of approximately $8.1
million, and an accumulated deficit of approximately $61 million.

We
have evaluated the significance of the uncertainty regarding the Company’s financial condition in relation to our ability to meet
our obligations, which has raised substantial doubts about the Company’s ability to continue as a going concern. While it is very
difficult to estimate our future liquidity requirements the Company believes that if it is unable close the Merger, or obtain debt and/or
equity financing, existing cash resources will be depleted in early 2023. The Company may be able to generate cash through the sale of
fixed assets, specifically cryptocurrency miners. However, the total cash generated would be significantly less that the total of the
Company’s liabilities. There are no assurances that the Merger will close, that debt and/or equity financing can be obtained, or
that the sale of fixed assets, specifically cryptocurrency miners can be achieved.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets, or the amounts and classification of liabilities that may result from the matters discussed herein.

The
Company’s ability to continue as a going concern is dependent upon the Company’s ability to close the merger with Prairie,
or obtain debt and/or equity financing, and there are no assurances that either can occur.

Liquidity
and Capital Resources

30

Liquidity

As
of December 31, 2022, we had cash and cash equivalents of $246,358, compared to $2,785,187 as of December 31, 2021, a decrease of $2,538,830.
This decrease was primarily due to cash used in operating and investing activities, partially offset by cash generated by financing activities.

Operating
Activities

Net
cash used in operating activities was $2,192,607 for the year ended December 31, 2022 and resulted primarily from a net loss of $13,418,814,
partially offset by the impairment of fixed assets of $5,231,752, an increase in accounts payable and accrued expenses of $3,371,432,
and stock based compensation of $2,870,665.

Net
cash used in operating activities was $6,969,723 for the year ended December 31, 2021 and resulted primarily from a net loss of $17,270,703,
an adjustment for the gain on sale of discontinued operations of $1,853,169, a decrease in liabilities associated with discontinued operations
of $1,228,911, and partially offset by stock based compensation of $12,585,009.

Investing
Activities

Net
cash used in investing activities was $1,815,520 for the year ended December 31, 2022 and resulted primarily the purchase of property
and equipment of $5,295,478, partially offset by deposits on mining equipment, net of $2,939,550.

Net
cash used in investing activities was $9,928,726 for the year ended December 31, 2021 and resulted primarily from deposits on mining
equipment of $7,613,230, and the purchase of property and equipment, specifically mining equipment, of $2,315,496.

Financing
Activities

Net
cash provided by financing activities was $1,469,297 for the year ended December 31, 2022 and resulted primarily from proceeds from the
exercise of warrants of $983,330 and the issuance of a note payable for $500,000.

Net
cash provided by financing activities was $17,785,933 for the year ended December 31, 2021 and resulted primarily from proceeds from
the issuance of common and preferred stock and warrants, net of approximately $16 million, and from proceeds from of the sale of discontinued
operations of $1.5 million.

Working
Capital (Deficit)

The
following table summarizes total current assets, liabilities, and working capital for the years ended December 31, 2022 and 2021:

As
of December 31, 2022, we had a working capital deficit of $8,117,516, compared to a working capital of $4,788,662 as of December 31,
2021, a decrease of 12,906,178. The decrease was primarily due to decreases in cash and deposits on mining equipment, and increases in
accounts payable and accrued expenses, accrued interest, convertible notes payable, and secured convertible debenture – related
party moving from a non-current to a current liability.

Off-Balance
Sheet Arrangements

We
do not have any off-balance sheet arrangements.

Recently
Issued Accounting Pronouncements

For
information about recently issued accounting standards, refer to Note 3 to our Consolidated Financial Statements appearing elsewhere
in this report.