Prairie Operating Co. quarterly report, Q3 FY2015

Business context and reporting period

The supplied filing is Wizard World, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2015—not a filing for Prairie Operating Co. Wizard World produces pop-culture conventions and operates the subscription-based ConBox service. It also holds an equity-method interest in the CONtv joint venture.

Financial results and liquidity

For the nine months, operating cash flow was $(0.48) million, investing cash flow was $(1.03) million, and financing cash flow was $0.004 million. Cash declined to $4.28 million from $5.79 million at year-end 2014. At September 30, current assets were $6.69 million, current liabilities $3.81 million, and working capital $2.87 million. The balance sheet reports no debt; total liabilities consist of current liabilities.

Material changes versus comparable periods

• Third-quarter convention revenue fell $58,000 year over year even though Wizard World held six events versus five; average revenue per event declined to about $1.13 million from $1.37 million.
• For the first nine months, convention revenue rose $1.20 million, but events increased to 20 from 13 and average revenue per event fell to about $1.02 million from $1.47 million.
• Nine-month gross margin fell to 24% from 37%, which management attributed to more marketing, programming and venue build-out spending and ten new shows. Operating expenses rose to $6.12 million from $4.94 million, including higher compensation and share-based payments.
• Nine-month results swung from $1.99 million of net income to a $2.06 million loss attributable to common stockholders. The $1.05 million CONtv equity-method loss was a major factor.
• Cash from operations changed from $2.69 million provided in the prior-year period to $0.48 million used; working capital declined by $0.96 million from December 31, 2014.

Outlook, commentary, risks and unusual items

Management expected to produce 26 live events in 2015; 20 had been held through September. It described growth plans focused on expanding existing events, entering new markets, and building digital reach and ConBox partnerships. Management also said the digital platform had yet to earn a profit. No earnings or revenue guidance was provided.

On November 16, 2015, after quarter-end, Wizard World’s CONtv interest was reduced from 47.5% to a non-dilutable 10%. The company agreed to fund ongoing costs of $25,000 monthly for 12 months. The filing says Cinedigm agreed that Wizard World would recognize only 10% of CONtv losses for July–September, while the quarter’s statements report a $148,089 CONtv loss; the accounting and timing should be verified.

The company disclosed no material off-balance-sheet arrangements, no litigation it believed would materially adversely affect it, and no material changes to previously disclosed risk factors. Management said disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.

Important facts for investors to verify

• Confirm the issuer: the provided filing identifies Wizard World, Inc., not Prairie Operating Co.
• Reconcile the ConBox third-quarter revenue discrepancy: the financial statements report $496,694, while MD&A states $494,694 in one passage.
• Clarify the CONtv loss recognized for the third quarter in light of the November 16 agreement, the 10% loss allocation, and the new monthly funding obligation.
• Assess event-level economics: event count grew, but average revenue per event and nine-month gross margin declined.
• Monitor cash generation, working capital, and the company’s ability to fund operations and planned events.

*The financial statements report $496,694; MD&A elsewhere reports $494,694.