Business context and reporting period
Entity mismatch: The supplied filing is Wizard World, Inc.’s Form 10-Q, not a filing identified as Prairie Operating Co. It covers the three months ended March 31, 2016; the interim financial statements are unaudited. Wizard World produces pop-culture conventions and operates a subscription-box business (ConBox).
Financial performance and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Total revenue | $5.34 million | $6.10 million; down 12% |
| Gross profit / margin | $2.21 million / 41% | $1.52 million / 25% |
| Operating income (loss) | $129,088 | $(550,465) |
| Net income (loss) | $53,282 | $(981,941) |
| Net loss attributable to common stockholders | $(16,080); reported loss per share rounded to $(0.00) | $(981,941); $(0.02) per share |
| Operating cash flow | $1.41 million | $(104,001) |
| Cash and cash equivalents | $6.09 million at March 31 | $4.72 million at December 31, 2015 |
| Working capital | $1.46 million | $1.08 million at December 31, 2015 |
Convention revenue was $4.99 million, down $1.11 million, while ConBox contributed $348,182 versus none in the prior-year quarter. The company held four conventions, compared with seven; average revenue per event rose to $1.25 million from $872,000. Management attributed the improved gross margin and operating result to stronger attendance in established markets and cost containment in event production.
Total liabilities were $7.33 million, all classified as current; the largest component was $5.99 million of unearned revenue. The balance sheet reports no borrowings, although interest expense was $806. Cash flow from operations benefited substantially from a $2.26 million increase in unearned revenue, primarily deposits for conventions scheduled in Q2. Investing cash outflow was $43,078, and cash increased $1.37 million during the quarter.
Material changes, outlook and risks
- Management expected to produce 19 live events in 2016 and planned a concert series at approximately seven conventions. These are plans, not earnings guidance.
- The company said it had operated profitable events in some markets but had run other events at a deficit. Its digital media platform had consumed considerable resources but had not generated a profit.
- CONtv ownership had been reduced to 10% in November 2015; the company recorded a $75,000 Q1 2016 loss on the venture, versus $431,476 in Q1 2015. It remained obligated to fund $25,000 monthly for 12 months from the amended agreement’s effective date. The investment balance was zero at quarter-end.
- On February 4, 2016, a director transferred his 50% interest in Wiz Wizard, which operates ConBox, to the company, making it wholly owned. The filing reports $348,182 in ConBox revenue for the quarter.
- CEO and President John Macaluso resigned effective April 19, 2016; the filing says the resignation did not result from a disagreement. John D. Maatta was appointed CEO and President effective May 3, and Paul L. Kessler became board chair. The filing describes up to 1.1 million options for Maatta, including change-in-control vesting for 300,000 options.
- Management concluded disclosure controls and procedures were not effective at March 31 and said it planned to review and improve financial-reporting controls. The company reported no material litigation and no off-balance-sheet arrangements. Cash at certain banks exceeded FDIC insurance limits, though management said it believed related risk was not significant.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Wizard World, Inc., not Prairie Operating Co.
- Track convention attendance, event-level profitability, and delivery of the planned 19 events; revenue declined despite higher revenue per event.
- Assess the timing, refundability, and fulfillment obligations associated with $5.99 million of unearned revenue and related prepaid convention costs.
- Monitor cash generation apart from customer deposits, CONtv funding obligations, and the company’s limited reported debt.
- Review remediation of ineffective disclosure controls and the financial and governance effects of the executive transition and option awards.