# Prairie Operating Co.: Form 10-Q for the period ended Sep 30, 2021

- Company: [Prairie Operating Co.](/companies/prop.md) (CIK 1162896)
- Form: 10-Q
- Filed: 2021-11-15
- Accepted by EDGAR: Nov 12, 2021, 21:47 ET
- Period: 2021-09-30
- Accession: 0001493152-21-028266
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1162896/000149315221028266/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1162896/000149315221028266/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $148.4k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2021-01-01 to 2021-09-30 | $754.3k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $176.8k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2021-01-01 to 2021-09-30 | $640.1k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | −$28.4k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-01-01 to 2021-09-30 | $114.2k | us-gaap:GrossProfit |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | −$2.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-01-01 to 2021-09-30 | −$6.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2021-07-01 to 2021-09-30 | $294.5k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2021-01-01 to 2021-09-30 | $764.0k | us-gaap:InterestExpense |
| Diluted EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2021-01-01 to 2021-09-30 | −$1.21 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-01-01 to 2021-09-30 | −$1.21 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-07-01 to 2021-09-30 | 5,607,877 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2021-01-01 to 2021-09-30 | 3,865,416 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2021-01-01 to 2021-09-30 | −$4.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-01-01 to 2021-09-30 | $1.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2021-09-30 | $3.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $4.2m | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $5.5m | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $5.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-09-30 | $2.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2021-09-30 | −$3.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 45,495 characters.

THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.

We intend that this discussion will provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes for the quarters and nine-month periods ended September 30, 2021 and 2020, included elsewhere in this report.

Prior to the onset of COVID-19, we produced live pop culture conventions (“Comic Conventions”) across the United States. However, due to the ongoing COVID-19 pandemic, we have not produced an in-person live event since March 8, 2020 and we currently have no plans to continue producing in-person live events in the foreseeable future. Following our last live event, we transitioned nimbly to a virtual event Format that went from concept to execution in three weeks. To augment our move into digital programming, in the first quarter of 2020, we launched an e-commerce site, Wizard World Vault (the “Vault”), which features the best in pop culture memorabilia from the Wizard World Live and virtual events, along with items from the top artists and exhibitors in the memorabilia world.

There has recently been considerable interest in a consumer category of digital products known as NFTs (Non-Fungible Tokens). NFTs are collectibles where various objects (including pictures, music and video) are digitized. The digital version of the object is sold as a unique, blockchain-authenticated collectible. Although the NFT market is currently gaining considerable attention in the press and achieving traction with consumers, it is impossible to know the ultimate size and significance of the NFT marketplace. The fan base that comprises our largest constituency is already active in the digital space and the brand extension into digital collectibles is a natural progression into a new and vibrant marketplace. Possessing an extensive collection of celebrity collectables and our current market position in the pop-culture consumer products, we entered this sector in Q1 of 2021.

As part of a move to expand the current NFT minting activities into mining cryptocurrencies, we changed our name to Creek Road Miners, Inc. on July 9, 2021. As part of this transition, we sold the bulk of our live events business on August 6, 2021. On September 15, 2021, we sold our wholly owned subsidiary, Jevo Holdings, LLC, in a Membership Interest sale. With the disposition of our non-core assets, our objective shifted completely to building out a diversified cryptocurrency portfolio from the Company’s own mining operations. To achieve this objective, the Company has developed a unique five-cornerstone approach. The Five Cornerstones are:

1\. Vertical Integration: By implementing the purest and stringiest form of vertical integration, the Company will own its energy sources and use the energy directly at the source. The Company will benefit from increased profits by eliminating middlemen, reduced transportation costs, and ensuring continuity in energy supply.

2\. Energy Diversification: By diversifying its energy sources at each power generation facility, the Company will mitigate supply and interruption risks.

3\. Geographic Diversification: By geographically distributing its mining facilitates, the Company will further mitigate potential supply and interruption risks.

4\. Cryptocurrency Mining Diversification: The Company will build out and balance its portfolio by mining for different cryptocurrencies.

5\. Revenue Diversification: Having multiple non-correlated revenue streams across different commodities will diversify the Company’s revenue while providing a means for the Company to maintain treasury status of its mined cryptocurrency.

### Results of Operations

### Summary of Statements of Operations for the Three Months Ended September 30, 2021 and 2020:

|  | Three Months Ended September 30, 2021 | September 30, 2020 |
| --- | ---: | ---: |
| Revenues | $148,397 | $601,042 |
| Cost of revenues | $176,815 | $274,518 |
| Gross margin | $(28,418) | $326,524 |
| Operating expenses | $2,164,358 | $926,055 |
| Loss from operations | $(2,192,776) | $(599,531) |
| Other income (expenses) | $1,590,699 | $(144,295) |
| Net loss attributable to common shareholder | $(392,881) | $(710,652) |
| Loss per common share – basic | $(0.07) | $(0.21) |
| Loss per common share – diluted | $(0.07) | $(0.21) |

### Revenue

Revenue was $148,397 for the three months ended September 30, 2021, as compared to $601,042 for the comparable period ended September 30, 2020, a decrease of $452,645. The decrease in revenue was a result of the ongoing impact of Covid-19, the inability of the Company to produce live events and a decrease in demand for virtual events.

Because of the uncertainties surrounding the Covid-19 pandemic the Company produced no live events during the quarter ended September 30, 2021. Rather, the Company focused on the production of virtual events and growing its store front awareness. During the quarter ended September 30, 2021, the Company produced $117,438 of e-commerce through the Wizard World Vault and the eBay Platform. During the quarter ended September 30, 2020, the Company generated $459,428 of revenue from virtual events and an additional $78,323 of e-commerce through the Wizard World Vault and the eBay Platform.

Revenue was $65,098, during the three months ended September 30, 2021 as compared to $2,607 for the comparable period ended September 30, 2020 for Jevo. As some Covid-19 restrictions began to lift, sales of Jevo products increased.

As mentioned earlier, the Company has now divested itself of most if not all of its live event assets and all of its Jevo assets and operations. Accordingly, moving forward, the Company is now focused on producing and selling NFT’s and the mining of cryptocurrencies.

### Gross Profit

Gross profit percentage, after considering cost of revenues, was (19)% for the three months ended September 30, 2021 and 54% for the three months ended September 30, 2020.

### Operating Expenses

Operating expenses for the three months ended September 30, 2021, were $2,164,358, as compared to $926,055 for the three months ended September 30, 2020. The increase is primarily attributable to the integration of the Jevo operations which increased the consulting fees and general and administrative expenses in addition to an increase of stock-based compensation.

### Loss from Operations

Loss from operations for the three months ended September 30, 2021, was $2,192,776 as compared to a loss from operations of $599,531 for the three months ended September 30, 2020. The variance was primarily attributable to a significant decrease in revenue as well as the integration of the Jevo operations and an increase in consulting fees recorded as stock-based compensation.

### Other Income (Expenses)

Other income (expenses) for the three months ended September 30, 2021 was $1,590,699, as compared to $(144,295) for the three months ended September 30, 2020. During the three months ended September 30, 2021, the Company sold its interests in Jevo thereby creating a gain on sale of $1,130,740. In addition, with the sale of the bulk of the live events and the write-off of ConTv payables, the Company incurred other income of $1,589,597. In each case, the expense was interest expense related to convertible notes and corresponding debt discount.

### Net Loss Attributable to Common Stockholder

Net loss attributable to common stockholders for the three months ended September 30, 2021, was $392,881 or loss per basic share of $0.07, compared to a net loss of $710,652 or loss per basic share of $0.20 for the three months ended September 30, 2020.

Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.

### Summary of Statements of Operations for the Nine Months Ended September 30, 2021 and 2020:

|  | Nine Months Ended September 30, 2021 | September 30, 2020 |
| --- | ---: | ---: |
| Revenues | $754,297 | $4,019,877 |
| Cost of revenues | $640,092 | $2,779,838 |
| Gross margin | $114,205 | $1,240,039 |
| Operating expenses | $6,994,690 | $2,111,087 |
| Loss from operations | $(6,880,485) | $(871,048) |
| Other income (expenses) | $1,956,328 | $(446,835) |
| Net loss attributable to common shareholder | $(4,658,063) | $(1,284,709) |
| Loss per common share – basic | $(1.21) | $(0.37) |
| Loss per common share – diluted | $(1.21) | $(0.37) |

### Revenue

Revenue was $754,297 for the nine months ended September 30, 2021, as compared to $4,019,877 for the comparable period ended September 30, 2020, a decrease of $3,265,580. The decrease in revenue was a result of the ongoing impact of Covid-19, the inability of the Company to produce live events and a decrease in demand for virtual events.

Because of the uncertainties surrounding the Covid-19 pandemic the Company produced no live events during the nine months ended September 30, 2021. Rather, the Company focused on the production of virtual events and growing its store front awareness. During the nine months ended September 30, 2020, the Company was able to produce 3 live events which generated revenue of $2,608,678. During the nine-month period ended September 30, 2021, the Company produced approximately 450 virtual events which generated $229,170 of revenue and an additional $362,303 through its e-commerce website Wizard World Vault and the eBay platform. During the nine months ended September 30, 2020, the Company generated $1,216,686 of revenue from virtual events and an additional $191,906 of e-commerce through the Wizard World Vault and the eBay Platform.

During the nine-month period ended September 30, 2021, the revenue contributed by Jevo was $162,824. As Covid-19 restrictions began to lift, sales of Jevo products increased.

As mentioned earlier, the Company has now divested itself of most if not all of its live event assets and all of its Jevo assets and operations. Accordingly, moving forward, the Company is now focused on producing and selling NFT’s and the mining of cryptocurrencies.

### Gross Profit

Gross profit percentage, after considering cost of revenues, was 15% for the nine months ended September 30, 2021 and 31% for the nine months ended September 30, 2020.

### Operating Expenses

Operating expenses for the nine months ended September 30, 2021, were $6,994,690, as compared to $2,111,087 for the nine months ended September 30, 2020. The increase is primarily attributable to the integration of the Jevo operations which increased the consulting fees and general and administrative expenses in addition to an increase of stock-based compensation. General and administrative expenses increased by $683,667 from the comparative period of the prior year due to increased staffing and marketing for Wizard World virtual events and Jevo activities.

### Loss from Operations

Loss from operations for the nine months ended September 30, 2021, was $6,880,485 as compared to a loss from operations of $871,048 for the nine months ended September 30, 2020. The variance was primarily attributable to primarily attributable to a significant decrease in revenue as well as the integration of the Jevo operations and an increase in consulting fees recorded as stock-based compensation.

### Other Income (Expenses)

Other income (expenses) for the nine months ended September 30, 2021 was $1,956,328, as compared to $(446,835) for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, the Company sold its interests in Jevo thereby creating a gain on sale of $1,130,740. In addition, with the sale of the bulk of the live events and the write-off of ConTv payables, the Company incurred other income of $1,589,597. In each case, the expense was interest expense related to convertible notes and corresponding debt discount.

### Net Loss Attributable to Common Stockholder

Net loss attributable to common stockholders for the nine months ended September 30, 2021, was $4,658,063 or loss per basic share of $1.21, compared to a net loss of $1,317,883 or loss per basic share of $0.37 for the nine months ended September 30, 2020.

### Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at September 30, 2021 compared to December 31, 2020:

|  | September 30, 2021 | December 31, 2020 | Increase/(Decrease) |
| --- | ---: | ---: | ---: |
| Current Assets | $4,201,896 | $2,217,487 | $1,984,409 |
| Current Liabilities | $5,617,598 | $7,065,862 | $(1,448,264) |
| Working Capital (Deficit) | $(1,415,702) | $(4,848,375) | $3,432,673 |

At September 30, 2021, we had a working capital deficit of $1,415,702 as compared to working capital deficit of $4,307,242 at September 30, 2020, a change of $3,432,673. The change in working capital is primarily attributable to increases in cash and prepaid expenses and decreases in accounts payable and accrued expenses, operating lease liability, unearned revenue and due to CONtv joint venture offset primarily by decreases in accounts receivable and inventory.

### Net Cash

Net cash used in operating activities for the nine months ended September 30, 2021 and 2020 was $4,890,776 and $870,687, respectively. The net loss for the nine-month period ended September 30, 2021 and 2020, was $4,924,157 and $1,317,883, respectively.

#### Going Concern Analysis

The Company had a loss from operations of $6,880,485 and $871,048 for the nine months ended September 30, 2021 and 2020, respectively. On September 30, 2021, we had cash and cash equivalents of approximately $3.9 million and a working capital deficit of approximately $1.4 million. We have evaluated the significance of these conditions in relation to our ability to meet our obligations, which had previously raised doubts about the Company’s ability to continue as a going concern through November 2022. However, the Company believes that the effects of its cost savings efforts with regard to corporate overhead together with the initiation of virtual activities, e-commerce, and move to expand the current NFT minting activities into mining cryptocurrencies will guide the Company in a positive direction as we continue to strive to attain profitability.

However, because of the current situation with the Covid-19 virus, the Company was unable to produce any live events after the First Quarter of 2020. At present it is unclear how many live events will actually be produced by the Company in 2021. It is presently unknowable how long the current situation with Covid-19 will continue and what impact the Covid-19 situation will ultimately have upon the Company in 2021. At this point, the Company has postponed all of the live shows that it has scheduled for 2021. In the face of the impact of Covid-19 on live events generally, the Company has focused on producing virtual events. The first such virtual event was an interactive fan experience which took place on March 31, 2020 and since that time the Company has produced approximately \_\_\_\_ virtual events. In addition, the Company has moved into e-commerce with online sales of collectables and the creation of the “Wizard World Vault” as a site for consumers to purchase pop-culture memorabilia and collectables and is now moving to expand the current NFT minting activities into mining cryptocurrencies.

On December 19, 2019, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Barlock 2019 Fund, LP (the “Purchaser”), for the sale of the Company’s securities, comprised of (I) a $2,500,000 convertible debenture, convertible at a price of $2.50 per share, and (ii) warrants to acquire 300,000 shares of the Company’s common stock at an exercise price of $2.50 per share. The warrants are now exercisable at $0.25 per share due to anti-dilution protections contained in the securities. As a condition to Purchaser entering into the Purchase Agreement, the Company entered into a security agreement in favor of the Purchaser, granting a security interest in substantially all of the property of the Company, whether presently owned or existing or hereafter acquired or coming into existence, including but not limited to, its ownership interests in its subsidiaries, to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the debenture. The security interest is on equal footing with certain other creditors of the Company. The Company received $2,500,000 in cash from the offering of the securities but was required to pay out of the closing proceeds Purchaser’s attorney’s fees in the amount of $25,000. The Company has agreed with the Purchaser that the funds received will be restricted and utilized only for M&A opportunities, new business ventures, brand extensions and the creation of new vertical opportunities by the Company. The subject debenture contains a “ratchet” provision that adjusts the conversion rates of the notes to the lowest rate the Company has agreed to issue stock. The effect of repricing board and employee options to $0.25 reset the conversion rates the note to $0.25. In light of the financial stress Covid-19 has placed on the Company the holder of the note has agreed to not require payment due under the outstanding notes until December 31, 2022. The debenture contains a “ratchet” provision that adjusts the conversion rate of the debenture to the lowest rate the Company has agreed to issue stock. The effect of repricing board and employee options to $0.25 reset the conversion rates of the debenture to $0.25. In light of the financial stress Covid-19 has placed on the Company the holder of the debenture has agreed to not require payment due under each of the outstanding debenture until December 31, 2022.

On March 29, 2021, the Company entered into a Securities Purchase Agreement (the “Leviston Purchase Agreement”) with Leviston Resources LLC (“Leviston”) dated March 26, 2021, pursuant to which the Company sold to Leviston, and the Leviston purchased from the Company, 5,000 shares of the Company’s Series B Preferred Stock, par value $0.0001 per share Series B Preferred Stock with an aggregate stated value of $5,400,000, a Series B Preferred Stock Purchase Warrant to purchase 5,000 shares of Series B Preferred Stock, having a term expiring on March 26, 2023 and a per share exercise price (subject to adjustment for stock splits, reverse stock splits, mergers or reorganizations, and similar changes affecting shares of the Company’s common stock, par value $0.0001 per share and/or securities entitling the holder thereof to acquire shares of Common Stock, as applicable) of $1,000 (the “Series 1 Warrant”), and a Series B Preferred Stock Purchase Warrant to purchase 5,000 shares of Series B Preferred Stock, having a term expiring on March 26, 2024 and a per share exercise price (subject to adjustment for stock splits, reverse stock splits, mergers or reorganizations, and similar changes affecting shares of Common Stock and/or securities entitling the holder thereof to acquire shares of Common Stock, as applicable) of $1,000 (the “Series 2 Warrant” and together with the Series 1 Warrant, the “Warrants,” and together with the Closing Shares, the “Securities”). The aggregate purchase price for the Securities is $5,000,000, which Leviston will pay as follows: $2,000,000 on the Closing Date; $500,000 on or before the date that is three business days from the date that the Company files a registration statement relating to the shares of Common Stock issuable upon conversion of the Closing Shares and the shares of Series B Preferred Stock issuable upon exercise of the Warrants; and $2,500,000 on or before the date that is three business days from the date that such registration statement is declared effective in accordance with the terms and provisions of the Registration Rights Agreement.

On July 16, 2021, the parties to the Leviston Purchase Agreement amended the agreements as necessary to achieve the following results: The Series B Preferred Stock is now convertible at a price (as adjusted, “Series B Conversion Price”) equal to the lesser of (x) $4.52 and (y) 85% of the lowest variable weighted average price (“VWAP”) of the Common Stock on a trading day during the 10 trading days prior to and ending on, and including, the date of conversion, subject to a conversion price floor of $1.00, but not to exceed $1.50, subject to further adjustment in the event that the Company, subject to certain exemptions, disposes of or issues any common stock or securities convertible into, exercisable, or exchangeable for common stock for no consideration or for consideration less than the applicable Series B Conversion Price in effect immediately prior to such issuance.

On March 24, 2021 the Company entered into an agreement with Kingswood Capital Markets (“Kingswood”), a division of Benchmark Investments, Inc. in connection with providing general financial advisory to the Company. The Company issued 300,000 warrants to Kingswood exercisable at $1.00 for a period of three years. The fair value so the warrants issued was determined by using the Black-Scholes-Merton method of valuation and resulted in the Company recording $1,592,517 of expense on its books.

On March 29, 2021 the Company filed a Form D – Notice of Exempt Offerings of Securities with the Securities and Exchange Commission. The total offering amount was $5,000,000. The Company received proceeds of approximately $1,700,000 and paid a commission to Kingswood of $170,000.

Between August 27, 2021, and October 4, 2021, the Company raised $4,400,000 for working capital purposes through the sale of its common stock in private placements.

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 coupled with current favorable market conditions, It is understood however, that although there is a recent history of related-parties providing a source of financing, there is no absolute certainty that any such related-party financing can be obtained on a going-forward basis. Therefore, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

The condensed 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 generate sufficient revenue, control costs and the ability to raise additional funds, if necessary, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses.

### Off-Balance Sheet Arrangements

As of September 30, 2021, the Company had no off-balance sheet arrangements.

### Critical Accounting Policies

*We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.*

#### Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

#### Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

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 disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

#### Principles of Consolidation

The consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting period(s).

#### Property and Equipment

Property and equipment is stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the assets, varying from 2 to 7 years or, when applicable, the life of the lease, whichever is shorter.

The impairment charges, if any, are included in operating expenses in the accompanying statements of operations.

#### Intangible assets

Intangible assets represent intangible assets acquired in connection with the Company’s purchase of Jevo patents and technology. The transaction was not a business combination or acquisition of a business.

The intangible assets are expected to be amortized using a straight-line method consistent with the expected future cash flows related to the intangible asset. Amortized intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable. When indicators of impairment exist, an estimate of undiscounted net cash flows is used in measuring whether the carrying amount of the asset or related asset group is recoverable.

Measurement of the amount of impairment, if any, is based upon the difference between the asset or asset group’s carrying value and fair value. Fair value is determined through various valuation techniques, including market and income approaches as considered necessary.

#### 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. The Company did not record any impairment for the quarters ended September 30, 2021 and 2020, as there were no triggering events or changes in circumstances that indicate that the carrying amount of an asset may not be recoverable.

#### Leases

On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach and recognized a right of use (“ROU”) asset and liability in the condensed consolidated balance sheet in the amount of $252,980 related to the operating lease for office space. Results for the nine months ended September 30, 2021 and 2020 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the legacy accounting guidance under ASC Topic 840, *Leases.*

As part of the adoption, we elected the practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to:

1\. Continue applying our current policy for accounting for land easements that existed as of, or expired before, January 1, 2019.

2\. Not separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component.

3\. Not to apply the recognition requirements in ASC 842 to short-term leases.

4\. Not record a right of use asset or right of use liability for leases with an asset or liability balance that would be considered immaterial.

#### Revenue Recognition

The Company follows the FASB Accounting Standards Codification ASC 606 for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

1\) *Identify the contract with a customer*

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

2\) *Identify the performance obligations in the contract*

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

3\) *Determine the transaction price*

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts as of September 30, 2021 contained a significant financing component.

4\) *Allocate the transaction price to performance obligations in the contract*

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

5\) *Recognize revenue when or as the Company satisfies a performance obligation*

The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

Convention revenue is generally earned upon completion of the convention. Unearned convention revenue is deposits received for conventions that have not yet taken place, which are fully or partially refundable depending upon the terms and conditions of the agreements.

The Company recognizes cost of revenues in the period in which the revenues was earned. In the event the Company incurs cost of revenues for conventions that are yet to occur, the Company records such amounts as prepaid expenses and such prepaid expenses are expensed during the period the convention takes place.

#### Equity–based compensation

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “*Compensation – Stock Compensation”*. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a four-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.

The fair value of option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are input into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s Common stock over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on our Common stock and does not intend to pay dividends on our Common stock in the foreseeable future. The expected forfeiture rate is estimated based on historical experience.

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.

#### Fair Value Measurements

The Company follows ASC 820-10 of the FASB Accounting Standards Codification to measure the fair value of its financial instruments and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by ASC 820-10 are described below:

|  |  |
| --- | --- |
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3 | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses 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 convertible promissory note discussed in Note 5, 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.

#### Income Taxes

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “*Income Taxes.”* Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2021 and December 31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

The Company is no longer subject to tax examinations by tax authorities for years prior to 2018.

#### Recently Adopted Accounting Guidance

In December 2019, the FASB issued ASU 2019-12, *Income Taxes(Topic 740): “Simplifying the Accounting for Income Taxes”*, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. Certain amendments within this ASU are required to be applied on a retrospective basis, certain other amendments are required to be applied on a modified retrospective basis and all other amendments on a prospective basis. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial statement presentation or disclosures.

#### Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, “*Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”* ASU 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. The amendments of ASU No. 2020-04 are effective immediately, as of March 12, 2020, and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company is evaluating the impact that the amendments of this standard would have on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—”*Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”*. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the financial statements of the Company.

## Market risk

As filed, 182 characters.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

## Controls and procedures

As filed, 1,937 characters.

### (a) Evaluation of Disclosure Controls and Procedures.

Pursuant to Rule 13a- 15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.

### (b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company is committed to improving financial organization. As part of this commitment, management and the Board perform reviews of the Company’s policies and procedures as they relate to financial reporting in an effort to mitigate future risks of potential misstatements. The Company will continue to focus on developing and documenting internal controls and procedures surrounding the financial reporting process, primarily through the use of account reconciliations, and supervision.

## Risk factors

As filed, 591 characters.

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on March 29, 2021. However, at present, because of the substantial uncertainties concerning the course and scope of the current situation with the Covid-19 virus, it is currently unclear how many live events will actually be produced by the Company in 2021. It is presently unknowable how long the current situation with Covid-19 will continue and what impact the Covid-19 situation will ultimately have upon the Company in 2021.

Filed Nov 15, 2021.
Source: SEC EDGAR, the filing index for accession 0001493152-21-028266. Last ingested by Listed: Nov 6, 2026, 19:07 ET. No prices; not investment advice.