Filing summary
Registrant and period: The supplied filing is Wizard Brands, Inc.’s Form 10-K for the fiscal year ended December 31, 2020—not a filing for Prairie Operating Co. or a standalone 2020 fourth quarter. The financial statements are audited and presented in U.S. dollars.
Business context and financial performance
Wizard Brands operated live pop-culture conventions, virtual events and memorabilia e-commerce, and acquired Jevo assets in April 2020. COVID-19 halted live events after March 8, 2020; the company shifted toward online programming and sales.
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $4.52 million | $10.58 million |
| Gross profit | $1.51 million | $0.90 million |
| Gross margin | 33.5% | 8.6% |
| Operating expenses | $2.83 million | $2.76 million |
| Operating loss | $1.32 million | $1.86 million |
| Net loss | $1.94 million | $2.16 million |
| Net loss attributable to common stockholders | $1.85 million | $2.16 million |
| Operating cash flow | $(1.07) million | $(0.71) million |
Revenue fell 57% year over year, principally because the company held only three live shows in 2020 versus 14 in 2019. The higher gross margin reflected lower costs for virtual events and e-commerce relative to live conventions. Operating expenses edged up, including higher consulting, general and administrative, and stock-based compensation costs; interest expense also increased.
Liquidity, debt and capital structure
At year-end, cash was $1.90 million, current assets $2.22 million, current liabilities $7.07 million, and working-capital deficit $4.85 million. Total liabilities were $9.52 million, against total assets of $2.67 million; stockholders’ deficit was $6.84 million. Cash declined from $2.78 million at year-end 2019. The filing reports no off-balance-sheet arrangements.
Debt includes a $2.5 million related-party convertible note, a $1.96 million net convertible debenture, and $347,500 of SBA loans reported net of discount. The PPP loan was $197,600 and the company expected to seek full forgiveness; forgiveness is not established in the supplied text. A separate $149,900 SBA loan bears 3.75% interest and matures in 2050. Convertible debt carries 12% stated interest; the holders agreed to forbear collection until December 31, 2022. Conversion and warrant exercise prices were reset to $0.25 under ratchet provisions, creating substantial potential dilution. The debt is secured by substantially all company assets under the described security agreement.
Management identifies substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, the working-capital deficit, and uncertainty over live events and financing. It believes cost controls, virtual activities, e-commerce, and potential financing may help, but gives no assurance of sufficient revenue or capital.
Outlook, risks and unusual items
- COVID-19 and live events: Resumption depends on pandemic conditions and government restrictions; the filing says the number of 2021 live events is uncertain.
- Growth plans: Management describes expanding virtual subscription programming and international audiences, relaunching Jevo manufacturing (targeting Q2 2021), entering new Jevo markets, and exploring NFTs. These are plans and market opportunities, not reported results or quantified guidance.
- Jevo: The company acquired assets and recorded $132,000 of intellectual property, but the final purchase-price allocation had not been completed. Manufacturing and sales execution, including hospitality-sector demand and supply readiness, remain risks.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective. Material weaknesses cited include limited segregation of duties and incomplete control documentation. The auditor expressed no opinion on control effectiveness.
- Ownership and trading: The common stock is thinly traded on OTC markets. Insider influence, potential dilution, penny-stock rules, and low liquidity are disclosed risks.
- Related parties: The filing describes significant related-party financing, consulting fees, preferred-stock settlements, and a lease arrangement. No material litigation was reported as pending.
Most important facts to verify
- Confirm the filing’s registrant: the supplied document is for Wizard Brands, Inc., inconsistent with the request metadata naming Prairie Operating Co.
- Reconcile revenue by channel: the MD&A narrative assigns $1.47 million to virtual events and $412,325 to e-commerce, while the financial-statement note labels $412,325 “Virtual” and $1.47 million “Vault.” The channel classification is unclear from the filing text.
- Review the going-concern assessment, cash runway, maturity/forbearance terms, collateral, and availability of additional financing.
- Validate convertible-note balances, interest accruals, the $0.25 conversion-price ratchets, warrant terms, and resulting dilution against the debt agreements and current capitalization table.
- Check the final Jevo purchase-price allocation, inventory valuation, manufacturing restart, and actual post-year-end performance; also confirm PPP forgiveness status.
- Investigate internal-control remediation and reconcile the reported common-share count and derivative-inclusive beneficial-ownership percentages.