PROP

Business Context and Reporting Period

Company: Wizard World, Inc. (Note: Metadata referenced "Prairie Operating Co.", but the filing text identifies the registrant as Wizard World, Inc., formerly Goenergy, Inc.)
Reporting Period: Quarterly period ended September 30, 2011 (Form 10-Q).
Business Overview: The Company produces pop culture and live multimedia conventions ("Comic Cons") across North America. It operates two primary lines of business: live multimedia events (ticket sales and exhibitor booths) and sponsorships/advertising. The Company also maintains a digital media platform funded by outside investors.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Convention revenue increased by 30% ($330,756) for the three months ended Sept 30, 2011, compared to the prior year, driven by a larger event in Chicago. For the nine months, revenue increased by 39% ($860,878) due to producing seven events in 2011 versus four in 2010.
• Profitability Decline: Despite revenue growth, the Company shifted from profitability to significant losses. Operating expenses surged 324% for the three months and 465% for the nine months compared to the prior year. This was driven by increased compensation, professional fees, web development costs, and non-cash stock-based compensation.
• Derivative Volatility: The Company recorded a loss of $1,143,968 on the fair value of derivative liabilities for the three months ended Sept 30, 2011. Conversely, the nine-month period showed a gain of $345,425 on derivatives, partially offset by a $199,019 bad debt recovery.
• Liquidity Deterioration: Cash decreased from $542,564 at year-end 2010 to $198,698 at Sept 30, 2011. The working capital deficit widened by $1.47 million to $(3.74) million.

Guidance, Outlook, Risks, and Unusual Items

• Going Concern: The filing explicitly states that the Company's accumulated deficit, net losses, and negative cash flows raise substantial doubt about its ability to continue as a going concern. Continued operations depend on raising additional capital through debt or equity markets.
• Management Commentary: Management plans to fund the digital media business through outside investors and cash flow from live events until the platform becomes self-sustaining. They expect to produce seven live events in 2012.
• Unusual Items:
  • Derivative Liability: A significant portion of liabilities ($2.67M) relates to derivative conversion features and warrants, which are marked-to-market and cause volatility in net income.
  • Stock-Based Compensation: Significant non-cash expenses were recorded for consulting fees and director agreements paid in stock or warrants.
  • Debt Default: Convertible promissory notes issued in August 2011 are currently in default. Senior Convertible Debentures issued in December 2011 (subsequent event) are also in default.
• Risks: The Company faces risks related to the profitability of live events, the ability to attract unique users to its digital platform, and the availability of financing. Disclosure controls and procedures were deemed ineffective.

Investor Verification Checklist

• Cash Runway: Verify if the $198,698 cash balance is sufficient to cover immediate operating expenses given the $1.2M cash burn from operations in the first nine months.
• Debt Status: Confirm the status of the convertible promissory notes and senior debentures currently in default and any potential acceleration of repayment.
• Derivative Liability: Assess the impact of the $2.67M derivative liability on future earnings and the likelihood of conversion to equity versus cash settlement.
• Capital Raises: Review subsequent events for the success of the December 2011 stock subscription ($250k) and debenture issuance ($325k) and whether further financing has been secured.
• Stock Issuance: Verify the issuance of accrued shares to consultants and directors (e.g., Brio Financial, Lucosky Brookman, Michael Mathews) which are recorded as liabilities but not yet issued.