Business context and reporting period
The supplied filing is Wizard World, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2013—not a filing identified as Prairie Operating Co. The company produces pop-culture and multimedia conventions across North America, with revenue from events and sponsorships/advertising.
Financial performance and position
- Third quarter: Convention revenue was $4.11 million, up 47% year over year. Gross profit was $2.03 million (about 49% of revenue), and operating income was $1.10 million. A $2.23 million derivative fair-value loss contributed to a $1.13 million net loss and a $1.22 million loss attributable to common stockholders ($0.03 per share). In Q3 2012, common-stockholder income was $1.23 million ($0.04 per share), including a derivative fair-value gain.
- Nine months: Revenue was $8.81 million, up 70%; gross profit was $3.41 million (about 39% of revenue versus 38%); and operating income was $929,250 versus $52,054. Net loss was $3.05 million, while loss attributable to common stockholders was $3.29 million ($0.09 per share), compared with $2.76 million ($0.08 per share) in 2012. The $3.97 million derivative fair-value expense was the principal reported non-operating burden.
- Cash flow and liquidity: Nine-month operating cash flow was $1.31 million, versus $310,949 in 2012; investing cash outflow was $40,276, and financing cash flow was zero. Cash rose to $3.22 million from $1.96 million at year-end 2012. Working capital was $2.44 million. Current liabilities were $1.23 million; no derivative liability remained at quarter-end, and the balance sheet reported no non-current liabilities.
- Debt and equity: The filing reports no default on indebtedness and no derivative liability at September 30. During August, preferred stock was converted into common shares, warrants were exchanged for common shares, and shares were issued for accrued dividends. Common shares outstanding were 50.87 million at September 30 and November 7.
Changes, outlook, and risks
- Revenue growth reflected better advertising and marketing, higher ticket prices, larger events, and six events in the first nine months versus five in 2012. Q3 had two events in both years; average revenue per event increased to about $2.06 million from $1.40 million.
- Operating expenses increased to $2.48 million for nine months, primarily from higher salaries, headcount, and share-based compensation. Management said some events were profitable and others operated at a deficit; the digital platform had not yet earned a profit.
- Management expected eight events in 2013 and estimated the next 12 months’ working-capital requirement at $2.52 million, with an estimated burn rate of $210,000 per month. It believed cash and operating cash flows would cover requirements for at least 12 months. It also described exploring expansion opportunities and cost efficiencies; no specific financial targets were given.
- Unusual items include the derivative fair-value expense and the August equity restructuring, which removed the derivative liability but involved substantial share issuance. Management used Level 3 valuation inputs for derivatives. The company also entered a seven-year office lease with entities related to directors/management, with total disclosed minimum payments of $538,200.
- Disclosure controls and procedures were concluded to be ineffective. Management reported no material change in internal control over financial reporting during the quarter. The company reported no litigation believed likely to have a material adverse effect and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the issuer: the supplied document names Wizard World, Inc., although the request metadata names Prairie Operating Co.
- Assess event-level profitability, attendance, and revenue concentration; the filing gives limited event-specific detail and acknowledges loss-making events.
- Evaluate whether the stated cash runway and $210,000 monthly burn estimate are consistent with actual operating cash flows and upcoming event costs.
- Review the effects of the preferred-stock and warrant conversions on dilution, and the valuation assumptions behind the large derivative fair-value charge.
- Understand the causes and remediation plans for ineffective disclosure controls, and review the terms and governance of the related-party lease.