Filing summary
Entity mismatch: The supplied filing is Wizard World, Inc.’s Form 10-Q, not a filing for Prairie Operating Co. This summary covers Wizard World’s quarter ended March 31, 2013.
Business context and reporting period
Wizard World produces pop-culture and multimedia conventions, with revenue from live events and sponsorships and advertising. It also operates a developing digital media business. The unaudited results compare the three months ended March 31, 2013, with the same period in 2012.
Financial results and liquidity
- Revenue: $1.793 million, up $1.273 million (about 245%) from $520,155. The company held two events versus one; it attributed growth to marketing, higher ticket prices, and larger events.
- Gross profit and margin: $816,599 and 46%, compared with $153,395 and 29%.
- Operating results: Operating expenses rose to $690,507 from $508,419. Operating income was $126,092, versus an operating loss of $355,024.
- Net results: Net income was $1.175 million; income attributable to common stockholders after a $70,681 deemed preferred-stock dividend was $1.104 million, or $0.03 basic and $0.02 diluted per share. The comparable common-stockholder loss was $357,774, or $0.01 per share.
- Non-operating item: A $1.050 million gain from the fair-value decrease in derivative liabilities substantially contributed to reported net income. The gain was noncash.
- Cash flow: Operating cash flow was $191,861, versus cash used of $221,606. Investing used $29,298; financing provided no cash. Cash increased $162,563 to $2.120 million.
- Liquidity: Working capital was $1.132 million, up from $1.012 million at December 31, 2012. Current assets were $2.744 million and current liabilities $1.613 million.
- Balance sheet and obligations: Total liabilities were $5.347 million, including a $3.734 million non-current derivative liability and $1.613 million of current liabilities. Stockholders’ deficit was $2.555 million. The filing reports no debt default.
- Potential dilution: Weighted-average diluted shares were 57.2 million versus 35.8 million basic shares; 21.4 million potentially dilutive shares were excluded as anti-dilutive. The company also reported 7.987 million warrants outstanding.
Changes, outlook, and risks
- Management expected to produce eight live events in 2013. It said some events had been profitable and others operated at a deficit; event performance depends on attendance, exhibitor and booth sales, sponsorships, and advertising.
- The digital platform was generating some revenue but not enough to cover operating costs. Management expected to rely on outside investment and live-event cash flow until digital operations could support themselves.
- Management estimated next-12-month working-capital needs of $2.3 million and a monthly burn rate of $190,000, while stating available cash and operating cash flow should fund requirements for at least 12 months. These estimates merit comparison with the $2.120 million quarter-end cash balance.
- The company entered into a seven-year office lease effective April 22, 2013, with entities controlled by a director and the CEO/significant stockholder. Base rent is $6,900 per month; disclosed future minimum payments total $579,600.
- Management reported no material litigation and no material change to previously disclosed risk factors. It also stated disclosure controls and procedures were not effective; no material change in internal control over financial reporting occurred during the quarter.
Important facts to verify
- Confirm the correct issuer: the provided metadata says Prairie Operating Co., but the filing identifies Wizard World, Inc.
- Assess how much of the quarter’s reported earnings depends on the noncash derivative-liability gain and review the Level 3 valuation assumptions.
- Reconcile management’s 12-month liquidity statement and $2.3 million working-capital estimate with cash, forecast event receipts, and the stated $190,000 monthly burn rate.
- Review the potential dilution from preferred stock, warrants, and options, and the obligations under the related-party lease.
- Investigate the disclosed ineffective controls and apparent filing inconsistencies: the market-risk section says the company holds no derivatives despite the reported derivative liability, and the subsequent-events note says none were reportable despite disclosing the April 22 lease.