Filing summary
Entity and period: The supplied metadata identifies Prairie Operating Co., but the filing itself is Wizard Entertainment, Inc. (formerly Wizard World, Inc.), a Delaware company producing pop-culture conventions. This is an unaudited Form 10-Q for the quarter ended September 30, 2018, comparing results with 2017.
Financial performance
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $4.47 million | $5.23 million | $13.57 million | $13.70 million |
| Gross profit (margin) | $1.00 million (22.4%) | $(4,975) (-0.1%) | $2.73 million (20.1%) | $31,630 (0.2%) |
| Operating income (loss) | $(4,203) | $(1.28) million | $34,802 | $(4.45) million |
| Net loss | $(447,507) | $(1.39) million | $(838,396) | $(4.74) million |
| Operating cash flow | Not separately stated | Not separately stated | $(512,833) | $(3.13) million |
- Q3 convention revenue declined $764,507 year over year despite five events versus four; the company attributed lower average event revenue to two smaller-market shows.
- Nine-month revenue was nearly flat. Operating expenses fell 40% to $2.69 million, which management attributed to lower staffing, officer compensation, service fees, and production costs. The filing elsewhere describes operating-cost reduction as 38%.
- Interest expense was $443,304 in Q3 and $873,198 for the nine months, compared with $112,068 and $289,527, respectively, in 2017. The company attributed this primarily to its convertible note and debt-discount amortization.
Liquidity, debt, and balance sheet
- September 30 cash was $1.25 million, down from $1.77 million at year-end 2017. Cash declined $524,254 over the first nine months, including $512,833 of operating cash use and $11,421 of investing cash use.
- Working-capital deficit was $4.28 million, versus $3.54 million at December 31, 2017. Current assets were $2.35 million and current liabilities $6.62 million; stockholders’ deficit was $4.16 million.
- Current liabilities included $4.17 million in accounts payable and accrued expenses, $463,294 in unearned revenue, and a $1.77 million net related-party convertible note. The note had an initial $2.5 million principal, a 12% annual interest rate, and a December 30, 2018 maturity; it was convertible at an initial $0.15 per share, subject to adjustment.
- The company reported $224,241 due to the CONtv joint venture. No off-balance-sheet arrangements were reported.
Outlook, risks, and unusual items
- Management planned to produce 13 live events in 2018, subject to changes in locations and venues, and described plans to expand into media and digital activities. Announced initiatives included exploring projects with Sony Pictures Entertainment and programming two channels in China through CN Live, with Associated Television International supporting the planned network launch. The filing gives no quantified revenue guidance or assurance these initiatives will produce revenue.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing prior concerns extending through September 2019, low cash, and the working-capital deficit. It said cost savings, revenue growth, and possible related-party or external financing could help, but acknowledged there was no assurance of success.
- Disclosure controls and procedures were deemed ineffective. Management said it was reviewing reporting policies and working to improve controls; no material change in internal control over financial reporting during the quarter was reported.
- A former COO’s contract and disability-discrimination dispute was set for trial in 2019; the company intended to proceed and said it believed the claims lacked merit. The company also reported settlements of $45,000, $5,000, and $11,000 in other matters, and a pending vendor action.
- The 2017 comparative statements were restated after early adoption of ASU 2017-11; the revision removed previously reported derivative fair-value losses and reduced the reported comparative net loss. The filing also says the company changed its name to Wizard Entertainment effective October 5, 2018.
Investor facts to verify
- Confirm the intended issuer: the filing is for Wizard Entertainment, not Prairie Operating Co.
- Verify repayment, refinancing, or other resolution of the convertible note due December 30, 2018, and the extent of any additional financing available.
- Track cash use, the working-capital deficit, accrued payables, and whether the company can sustain convention operations.
- Assess whether the announced Sony and China channel initiatives progressed to operating agreements and generated material revenue.
- Review remediation of ineffective disclosure controls and developments in the former COO litigation.