Caution Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations for the three months ended
March 31, 2022and 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" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 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 Delawareon 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 (known collectively as "legacy operations"). All legacy operations were discontinued during 2021. The Company operates an eCommerce site selling pop culture memorabilia and will evaluate whether to continue the eCommerce operations in 2022. On August 6, 2021, we entered into an Asset Purchase Agreement (the "Agreement") with Informa Pop Culture Events, Inc., a Delawarecorporation ("Informa"). Pursuant to the 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 $722,429and 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 $1,500,000and recognized a gain on the transaction of approximately $1,130,740. 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. We currently mine and hold Bitcoin exclusively. We plan to hold our mined Bitcoin in excess of our operating and capital expenditure needs until the next halving event (expected to occur around
March 2024), which we believe will lead to an increase in the market price of Bitcoin, other than for such sales of Bitcoin as determine to be necessary to fund operating or capital expenses, such as our purchase commitments for additional miners from Bitmain. While we do not have the intention of mining any other cryptocurrencies in the near future, we may expand our mining operations to include additional crypto assets if, after evaluation of the financial merits of such crypto assets based on a number of factors, including the anticipated profitability and price stability of such crypto assets and the ability and cost of our existing miners to mine for such digital assets, we determine that such additional crypto assets are reasonably likely to result in better margin than Bitcoin. 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 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. All of the miners we operate 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. In October 2021we put 156 Bitmain S19J Pro miners into production, and added another 84 into production in December 2021. In March 2022we received 270 Bitmain S19 miners but as of March 31, 2022they had yet to be placed into production. As of March 31, 2022, we had 240 Bitmain S19J Pro miners with 24 Ph/s of hashing capacity in production, we had received 270 Bitmain S19 miners with 24.3 Ph/s of hashing capacity not yet placed into production, and had deposits for an additional 870 miners with 111.1 Ph/s hashing capacity to be delivered in 2022 as follows:
? 270 Bitmain S19J Pro (100 Th/s per miner, 27 Ph/s total hash capacity)
delivered in April ? 600 Bitmain S19XP (140 Th/s per miner, total 84 Ph/s hashing capacity) delivery expected July through
After delivery of the above miners, we will have a total of 1,380 miners with 159.3 Ph/s of hash capacity.
The purchase commitment for undelivered miners as of
March 31, 2022totals $9,378,300, including $6,203,100paid as deposits as of the period ending March 31, 2022, and the remaining $3,175,200due to be paid monthly from the proceeds of the sale of earned Bitcoin during the year ending December 31, 2022or, if necessary or advisable, with earned Bitcoin to the extent that the vendor accepts Bitcoin as a form of payment or from additional capital raising, which may be debt or equity, or a combination thereof pursuant to a private or public offering, with the last payment scheduled to occur on November 10, 2022. Mobile Data Centers
We utilize mobile data centers to house our miners. Our mobile data centers are located close to natural gas wellheads. We use natural gas to power a mobile turbine that produces electricity that, in turn, is used to power our miners. The Company measures its operations by the number and
U.S.Dollar (US$) value of the cryptocurrency rewards it earns from its cryptocurrency mining activities. The following table presents additional information regarding our cryptocurrency mining operations: Quantity of Bitcoin US$ Amounts Balance September 30, 2021 - $ -
Revenue recognized from cryptocurrency mined 6.7
Mining pool operating fees (0.1 ) (7,398 ) Impairment of cryptocurrencies - (59,752 ) Balance December 31, 2021 6.6 $
Revenue recognized from cryptocurrency mined 8.3
Mining pool operating fees (0.2 ) (6,868 ) Impairment of cryptocurrencies -
(106,105 ) Balance March 31, 2022 14.7 $ 532,736
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, 2012at block 210,000; (2) on July 9, 2016at block 420,000; and (3) on May 11, 2020at 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 2024at 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.
We plan to hold our mined Bitcoin until the next halving event (expected around
Our business is heavily dependent on the market price of Bitcoin, which has experienced substantial volatility and has recently dropped to its lowest price since
December 2020. The market price of Bitcoin has dropped approximately 35% since the beginning of 2022. In addition, the cost of natural gas that we use to produce electricity to power our miners has increased substantially. The cost of natural gas has increased approximately 120% since the beginning of 2022.These price movements result in decreased cryptocurrency mining revenue and increased cryptocurrency mining costs, both of which have a material adverse effect on our business and financial results. 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. 30 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, 2022President 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 Bankdigital 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" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Strategic Initiatives Our objective is to mine and hold select cryptocurrencies. We seek to own multiple oil and natural gas producing assets and utilize the natural gas to power environmentally friendly, state-of-the-art cryptocurrency mining facilities. To achieve this aim, we are targeting between $10 millionand $15 millionof acquisitions of oil and natural gas producing assets in 2022. As of the date of this report, no discussions with natural gas producers have led to definitive agreements. We anticipate that we will fund any such acquisitions through the proceeds of the sale of earned Bitcoin, vendor financing, a private placement of the Company's securities or a combination thereof. By directing income from oil and excess natural gas sales to cover operating expenses we will have the opportunity to retain our mined cryptocurrencies as assets. We are also seeking to scale our existing operations through the purchase of additional miners. As of March 31, 2022, we had 240 Bitmain S19J Pro miners with 24 Ph/s of hashing capacity in production, we had received 270 Bitmain S19 miners with 24.3 Ph/s of hashing capacity not yet placed into production, and had deposits for an additional 870 miners with 111.1 Ph/s hashing capacity that we expect to be delivered in 2022. We anticipate paying the remaining commitments monthly from the proceeds of the sale of earned Bitcoin during the year ending December 31, 2022or, if necessary or advisable, with earned Bitcoin to the extent that the vendor accepts Bitcoin as a form of payment or from additional capital raising, which may be debt or equity, or a combination thereof pursuant to a private or public offering. If received in the second half of the year, the Bitmain S19XP miners will allow us to mine more efficiently by operating at a higher hash rate while using the same amount of energy as our current miners.
We aim to achieve geographic diversity by installing up to six data centers in locations designed to mitigate concentration risk.
COVID-19 We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain. The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statements, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.
Russia- Ukraineconflict is a global concern. The Company does not have any direct exposure to Russiaor Ukrainethrough its operations, employee base, investments or sanctions. The Company does not receive goods or services sourced from those countries, does not anticipate any disruption in its supply chain and has no business relationships, connections to or assets in Russia, Belarusor Ukraine. No impairments to assets have been made due to the conflict. We are unable at this time to know the full ramifications of the Russia- Ukraineconflict and its effects on our business. 31
Significant 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 on 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 the current period’s presentation.
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
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
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs, other than quoted prices in active markets, are directly or indirectly observable.
Level 3 – Unobservable inputs based on Company 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, 2021or 2020 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. 32 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. 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:
? identify the contract with a customer;
? identify performance obligations in the contract;
? determine the price of the transaction;
? allocate the transaction price to the performance obligations of the contract; and
? recognize revenue as the performance obligation is satisfied.
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. 33 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. Reverse Stock Split
We implemented a 1 for 20 equity consolidation of our outstanding common shares which became effective on
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 an Asset Purchase Agreement (the "Agreement") with Informa. Pursuant to the 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 $722,429and 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 $1,500,000and recognized a gain on the transaction of approximately $1,130,740. The related assets and liabilities associated with the discontinued operations in our consolidated balance sheets for the periods ending March 31, 2022, and December 31, 2021, are classified as discontinued operations. Additionally, the financial results associated with discontinued operations in our consolidated statement of operations for the periods ending March 31, 2022and 2021, are classified as discontinued operations. Results of Operations
Comparison of the three months ended
Three Months Ended March 31, 2022 2021 $ Change % Change Revenue: Cryptocurrency mining
$ 343,055$ - $ 343,055- % eCommerce 42,059 172,698 (130,639 ) (76 )% Total revenue 385,114 172,698 212,416 123 % Operating costs and expenses: Cryptocurrency mining costs (exclusive of depreciation and amortization shown below) 386,342 - 386,342 - % eCommerce costs 17,478 75,199 (57,721 ) (77 )% Depreciation and amortization 164,520 4,955
159,565 3,220 % Stock based compensation 1,923,105 1,847,556 75,549 4 % General and administrative 932,861 1,067,891 (135,030 ) (13 )%
Impairment of mined cryptocurrency 106,105 -
106,105 - % Total operating expenses 3,530,411 2,995,601 534,810 18 % Loss from operations (3,145,297 ) (2,822,903 ) (322,394 ) (11 )% Other income (expense): PPP loan forgiveness 197,662 - 197,662 - % Interest expense (148,064 ) (224,092 ) 76,028 34 % Other income - - - - % Total other income (expense) 49,598 (224,092 ) 273,690 122 %
Net loss from continuing operations (3,095,699 ) (3,046,995 ) (48,704 )
(2 )% Discontinued operations: Income (loss) from discontinued operations 6,604 578,120 (571,516 ) (99 )% Gain from sale of discontinued operations - - - - % Net income from discontinued operations 6,604 578,120 (571,516 ) (99 )% Net loss
$ (3,089,095 ) $ (2,468,875 ) $ (620,220 )(25 )% Revenue Three Months Ended March 31, 2022 2021 $ Change % Change Revenue: Cryptocurrency mining $ 343,055$ - $ 343,055- % eCommerce 42,059 172,698 (130,639 ) (76 )% Total revenue $ 385,114 $ 172,698 $ 212,416123 % 34 Total revenue increased $212,416, or 123%, for the three months ended March 31, 2022compared to the three months ended March 31, 2021, due to the following: Category Change Key Drivers Cryptocurrency mining Cryptocurrency mining operations did not ? $ 343,055begin until October 2021 eCommerce ? $ (130,639 )Lower order volume
Operating costs and expenses
Three Months Ended March 31, 2022 2021 $ Change % Change Operating Costs and Expenses: Cryptocurrency mining costs (exclusive of depreciation and amortization shown below)
$ 386,342$ - $ 386,342- % eCommerce costs 17,478 75,199 (57,721 ) (77 )% Depreciation and amortization 164,520 4,955 159,565 3,220 % Stock based compensation 1,923,105 1,847,556 75,549 4 % General and administrative 932,861 1,067,891 (135,030 ) (13 )% Impairment of mined cryptocurrency 106,105 - 106,105 - % Total operating expenses $ 3,530,411 $ 2,995,601 $ 534,81018 % Our operating costs and expenses increased $534,810, or 18%, for the three months ended March 31, 2022compared to the three months ended March 31, 2021, due to the following: Category Change Key Drivers Cryptocurrency mining ? $ 386,342Cryptocurrency mining operations costs (1) did not begin until October 2021 eCommerce costs ? $ (57,721 )Lower order volume Depreciation and Addition of cryptocurrency mining amortization ? $ 159,565equipment Increased issuances of stock Stock based compensation ? $ 75,549warrants General and administrative ? $ (135,030 )Primarily lower marketing expenses Impairment of ? $ 106,105Cryptocurrency mining operations cryptocurrency did not begin until October 2021
(1) excluding depreciation and amortization presented below
Net Income (Loss) Three Months Ended March 31, 2022 2021 $ Change % Change Net Income (Loss): Net loss from continuing operations
$ (3,095,699 ) $ (3,046,995 ) $ (48,704 )(2 )% Net income from discontinued operations 6,604 578,120 (571,516 ) (99 )% Total net loss $ (3,089,095 ) $ (2,468,875 ) $ (620,220 )(25 )% Net loss from continuing operations increased $620,220or 25%, for the three months ended March 31, 2022compared to the three months ended March 31, 2021, primarily due to increased operating costs and expenses as described above.
35 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
$3,095,699, and $3,046,995, for the three months ended March 31, 2022and 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 March 31, 2022, we had cash and cash equivalents of approximately $1.1 millionand working capital of approximately $2.4 million. We have evaluated the significance of these conditions 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. However, the Company believes that the effects of the sale of its legacy operations during 2021, and the entrance into cryptocurrency mining operations that began in October 2021, will guide the Company in a positive direction as we continue to strive to attain profitability, but there is no absolute certainty that profitability can be achieved. Additionally, if necessary, management believes that both related parties (management and members of the Board of Directors of the Company) and potential external sources of debt and/or equity financing may be obtained based on management's history of being able to raise capital from both internal and external sources. However, although there have been recent external source financings, there is no absolute certainty that any such external source or related-party financing can be obtained in the future. Therefore, 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. While the Company believes in the viability of management's strategy to obtain debt and/or equity financing, generate sufficient revenue, and control costs, there can be no assurances to that effect. The Company's ability to continue as a going concern is dependent upon the ability to obtain debt and/or equity financing, generate sufficient revenues, and to control operating expenses.
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