Business Context and Reporting Period
This Form 8-K is filed by Wizard Brands, Inc. (not Prairie Operating Co.) on March 1, 2021. The filing reports material definitive agreements regarding executive compensation, officer appointments, and unregistered sales of equity securities. The company is incorporated in Delaware and maintains executive offices in Park City, Utah.
Key Financial Metrics and Compensation
The filing does not provide consolidated revenue, profit, cash flow, or debt metrics. However, it discloses specific compensation obligations and equity issuances:
- CEO Compensation: Scott D. Kaufman appointed as CEO with a $250,000 annual base salary. Payment may be made in Series A Preferred Stock until the company achieves six months of positive net income.
- CFO Compensation: Heidi C. Bowman appointed as CFO with a $120,000 annual base salary. Payment may be made in Series A Preferred Stock until the company achieves six months of positive net income.
- Separation Costs: John D. Maatta received $21,634.20 in accrued vacation and Series A Preferred Stock valued at $63,913.04 for unpaid salary.
- Consulting Fees: A six-month consulting agreement with Mr. Maatta at $10,000 per month was ratified.
Material Changes and Equity Issuances
On March 1, 2021, the Board approved the issuance of unregistered securities to satisfy compensation and consulting obligations:
- Series A Preferred Stock Issuances:
- 8,500 shares to John D. Maatta (value: $84,947.55).
- 22,500 shares to Bristol Capital, LLC (value: $225,000).
- 8,300 shares to Scott D. Kaufman (value: $83,333).
- 4,000 shares to Heidi C. Bowman (value: $40,000).
- Warrant Issuances:
- Two warrants for 100,000 shares each at an exercise price of $0.50.
- Two warrants for 100,000 shares each at an exercise price of $1.00.
- All warrants vest 50% annually over two years and have a five-year term.
- Conversion Terms: Series A Preferred Stock converts to Common Stock at an initial ratio of 40:1 ($10.00 stated value / $0.25 conversion price).
Outlook, Risks, and Management Commentary
Management Commentary: The company is currently not generating positive net income, as evidenced by the provision to pay executive salaries in stock until six months of profitability are achieved. The Board has taken steps to appoint the new CEO to the Board of Directors.
Risks and Contingencies:
- Liquidity Risk: The reliance on stock issuance for salary payments indicates potential cash flow constraints.
- Dilution Risk: Significant issuance of convertible preferred stock and warrants may dilute existing common shareholders.
- Legal Indemnification: The company has entered into indemnification agreements with new officers covering claims arising from their service for at least three years post-employment.
Investor Verification Checklist
- Verify the current cash position and ability to fund operations without further equity dilution.
- Confirm the total outstanding shares of Series A Preferred Stock and the potential dilution upon conversion to Common Stock.
- Review the "Certificate of Designation" for Series A Preferred Stock to understand anti-dilution adjustments and liquidation preferences.
- Assess the financial impact of the $10,000/month consulting fee to the former officer.
- Check for any subsequent filings regarding the company's progress toward the six-month positive net income threshold required for cash salary payments.