Filing identity and period
Important identity discrepancy: The request identifies Prairie Operating Co., but the supplied Form 10-Q is for Wizard World, Inc. This summary reflects the filing text provided. It covers the quarter and nine months ended September 30, 2016; financial statements are unaudited.
Business context and financial performance
Wizard World produces pop-culture conventions across North America and operates ConBox, a subscription box business. For the nine months ended September 30, 2016, revenue was $21.38 million: $20.77 million from conventions and $608,025 from ConBox.
- Third quarter: Revenue was $6.40 million, down 12.3% from $7.30 million a year earlier. Gross profit was $2.44 million (38.1% margin), versus $2.87 million (39.3%). Operating income was $476,464, compared with $903,710; net income attributable to common stockholders was $365,216, or $0.01 per share, versus $725,618, also $0.01 per share.
- Nine months: Revenue was $21.38 million, up 1.9% from $20.98 million. Gross profit was $7.05 million (33.0% margin), versus $5.13 million (24.4%). Operating income was $1.08 million, compared with an operating loss of $987,807. Net income attributable to common stockholders was $749,885, or $0.01 per share, versus a net loss of $2.06 million, or $0.04 per share.
- Cash flow: Operating activities used $1.25 million in the first nine months, versus $483,000 used in 2015. Investing activities used $290,021, including $150,000 net investment in CONtv. Cash declined $1.54 million to $3.19 million.
- Liquidity and balance sheet: Working capital was $2.54 million, up from $1.08 million at December 31, 2015; current assets were $4.62 million and current liabilities $2.08 million. Total liabilities were $2.08 million, consisting of current liabilities; the filing reports no interest-bearing debt balance. Accumulated deficit was $15.26 million.
Material changes versus prior comparable periods
- Nine-month convention revenue rose $418,107 despite producing 15 events versus 20 in 2015; management attributed the increase to better-marketed events, higher admission prices, and larger events. Average revenue per event increased to approximately $1.38 million from $1.02 million.
- Third-quarter convention revenue fell $537,685, with four events reported in the related discussion versus six in the prior-year quarter. ConBox revenue fell $359,674 in the quarter to $137,020; nine-month ConBox revenue was down $20,978.
- Nine-month cost of revenue fell to $14.32 million from $15.85 million, supporting the higher gross margin. Operating expenses declined $142,989, as lower compensation offset higher general and administrative expense.
- CONtv losses declined to $225,000 for the nine months from $1.05 million in 2015. The company’s CONtv ownership was reduced to 10%; its investment balance was zero at September 30, 2016.
- Unearned revenue fell to $510,360 from $3.73 million at year-end, a significant working-capital movement. The company acquired the remaining 50% interest in Wiz Wizard, the ConBox entity, in February 2016.
Outlook, risks, contingencies, and unusual items
- Funding risk: Management said cash on hand as of November 2016 was not sufficient to fund operations on a long-term basis past December 31, 2016. Plans include raising debt or equity, other financing, or significantly reducing operating expenses; there is no assurance financing or projections will be achieved.
- Operating plans: The company expected to produce 19 live events in 2016. It also described plans to grow existing conventions, enter new markets, and develop its digital audience; it reported that the digital platform had not yet earned a profit.
- Legal contingency: The company sued former Chief Marketing Officer Stephen Shamus in October 2016, alleging fiduciary-duty and other claims. Shamus filed counterclaims seeking cash damages. The case was at an early stage; the company warned an adverse judgment could materially affect its financial condition.
- Related-party commitments: A five-year, three-month office sublease beginning July 2016 is with an entity controlled by the Chairman; stated future minimum payments total $548,082. The filing also reports outsourced marketing expenses paid to a company affiliated with a CONtv-related party.
- Controls: Management concluded disclosure controls and procedures were not effective at period-end. It reported no material changes in internal control during the quarter and said it was reviewing and improving financial-reporting procedures.
- Unusual items and equity: The company recorded a $36,876 loss on equipment disposal in 2016. It had 51,368,386 common shares outstanding at September 30 and November 18, 2016; 4,419,000 options were outstanding at September 30.
Most important facts for investors to verify
- Confirm the issuer: the supplied filing is Wizard World, Inc., not Prairie Operating Co.
- Assess whether the company obtained financing or reduced costs sufficiently to fund operations beyond December 31, 2016, given negative operating cash flow despite reported net income.
- Review the Shamus litigation and potential counterclaim exposure as the case develops.
- Reconcile internal-control weaknesses and management’s remediation progress.
- Check apparent filing inconsistencies: the third-quarter event count is described as both four and three; third-quarter gross profit is shown as $2,439,940 in the statements but $2,439,640 in MD&A; and the EPS note gives nine-month diluted EPS of $0.02 while the statements report $0.01.