Filing summary
Entity discrepancy: The request identifies Prairie Operating Co., but the supplied filing is Wizard World, Inc.’s Form 10-K. The summary below reflects the filing text provided, not Prairie Operating Co.
Business context and reporting period
Wizard World produces pop-culture conventions across North America, earning revenue principally from admissions, exhibitor booths, sponsorships and advertising. Its fiscal year ended December 31, 2013; this is an annual filing, and it does not provide a separate fourth-quarter financial summary. The company held eight events in 2013, compared with seven in 2012, and planned 16 events for 2014. Its digital-media platform had not yet generated a profit.
Financial results and liquidity
| Metric | 2013 | 2012 |
|---|---|---|
| Convention revenue | $11.19 million | $6.74 million |
| Gross profit; gross margin | $4.27 million; 38% | $2.42 million; 36% |
| Operating expenses | $3.92 million | $2.22 million |
| Operating income | $343,506 | $197,809 |
| Net loss | $3.64 million | $1.02 million |
| Net loss attributable to common stockholders | $3.88 million | $3.14 million |
| Basic and diluted loss per share | $0.09 | $0.09 |
| Cash from operating activities | $1.73 million | $243,161 |
Revenue increased about 66%, which management attributed to improved event marketing, higher admission prices, larger events and one additional event. Average revenue per event rose to approximately $1.40 million from $963,357. Operating expenses rose about $1.70 million, including higher compensation and share-based payments.
Net loss was driven largely by a $3.97 million noncash expense from changes in the fair value of derivative liabilities. The 2012 comparison included a $1.01 million derivative expense. The derivative liability was eliminated in connection with 2013 equity conversions; the company reported no derivative liability at year-end.
At December 31, 2013, cash was $3.63 million, current assets were $4.30 million, current liabilities were $2.09 million, and working capital was $2.21 million. Total liabilities were $2.09 million, with no non-current liabilities reported. Cash increased from $1.96 million in 2012. Investing activities used $54,919; financing activities provided no cash in 2013. The company reported no off-balance-sheet arrangements.
Material changes versus 2012
- Revenue, gross profit and operating income increased, while the net loss widened substantially because of derivative fair-value expense.
- Operating cash flow improved to $1.73 million from $243,161, despite the larger reported net loss.
- In August 2013, all outstanding Series A preferred stock was converted into common stock; related warrant exchanges and accrued-dividend shares also increased common shares. The filing reports no warrants outstanding at year-end.
- Year-end stockholders’ equity turned positive at $2.29 million, compared with a $3.75 million deficit in 2012.
Outlook, commentary, risks and unusual items
Management planned 16 live events in 2014 and intended to expand existing shows, add markets, and grow sponsorship and digital-media revenue. No quantified financial guidance was provided. Management said some events had been profitable while others operated at a deficit; it also said the digital platform had yet to earn a profit.
- Key risks include the need for adequate cash and possible additional capital, event-level losses, competition, changing consumer tastes, advertising-market weakness, and dependence on key personnel, particularly the CEO.
- The stock trades on OTC quotation systems and is described as thinly traded, volatile and subject to penny-stock rules. Future equity financing could dilute shareholders.
- Insiders and other major holders beneficially owned approximately 60.28% of common stock as of February 28, 2014. The company did not expect to pay dividends in the foreseeable future.
- The filing reports no material pending litigation. It discloses related-party arrangements, including a seven-year office lease at $6,900 per month involving entities managed by the CEO and a director.
- The audit opinion was unqualified. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Confirm the filing issuer: the supplied document is Wizard World, Inc., not Prairie Operating Co.
- Reconcile the reported $3.97 million derivative fair-value expense and the liability’s elimination through conversions; these materially affect reported earnings and equity comparisons.
- Verify the quality and sustainability of operating cash flow, including the impact of unearned convention revenue and accrued liabilities.
- Assess whether planned 2014 events and digital initiatives could generate consistent profits and whether additional financing would be required.
- Check the filing’s working-capital narrative: one passage states “$22,206,367,” but the balance-sheet table supports $2,206,367. The filing also gives operating cash flow as $1,731,704 in MD&A and $1,731,705 in the cash-flow statement.