Posted in: Comics | Tagged: 2011, Comics, John Macaluso, wizard world

Where's The Money At With Wizard World?

Wizard World has entered its latest SEC Filings for 2011, as they are obliged to do as a publically owned company, and there is some interesting reading. The thing about these filings is that they have to be brutally honest and direct, covering worst case scenarios for potential investors. They are intended to be read by a legal eye, and to cover their ass over every trouble that may befall them.

I can't pretend to fully understand all of it, but there are some key points that stick out. Specifically that Wizard World Philadephia and Chicago make money but the other shows… don't. And the website, is nowhere near close.

We expect to produce seven (7) live events during the year ended December 31, 2012. We run the risk that we will not be profitable in the live event business. To date, we have operated profitable live events in both the Philadelphia and Chicago markets, but we have operated at a deficit in other events. In order for us to operate a successful event, we must produce an event that is relevant to the public in order drive ticket sales, booth sales, sponsorship and advertising. In order for the Company to grow the digital business, we must attract unique users and drive traffic to our online site. To date, we have exhausted considerable resources developing our media platform, but we have yet to earn a profit from the platform.

So where is the money coming from?

Currently, our digital media business has been funded on capital raised from outside investors. We are currently earning revenue from the site and from the newly launched digital entertainment ad network, but not enough to maintain the costs to operate. We must continue to fund the digital media business from outside investors and from cash flow from the live event business until the media platform generates enough revenue to support its own operation.

I asked an actual analysts for some thought. Trey Luby, an accountant from Los Angeles told me;

Overall, it looks like things have taken a turn for the worse.  They have burned through a lot of cash in the first 9 months of 2011 and their accounts receivable, or people who owe them money, has more than doubled in the first 9 months of 2011.  On the other side, the Accounts Payable, or people they owe money to, has almost doubled as well so they are being squeezed at both ends.  They have a new promissory note of $262k in place of an old one for only $75k, so they have a net increase of about $200k in promissory notes, which is just a kind of debt they owe to someone else.  The equity section of the Balance sheet shows, among other things, an increase in additional paid in capital of almost $1.2m so this just really means someone put an additional 1.2m of money into the company to keep it going.

From looking at the income statements and comparing to last year, the revenues year-to-date for 9/30/11 are pretty flat compared to last year meaning they are roughly the same.  The biggest difference is in the expenses that have skyrocketed.  They have consulting fees of $1.2m in 2011 and I don't see what they are for exactly or if this will be a recurring expense.  Overall, the net income for the company for Jan thru Sept 2011 is a negative $2.1m and since last year for the same time period was a positive $291k, that a swing in the wrong direction of $2.3m.

The item that stands out from the cash flow statement is the negative derivative income of $345k, which looks like they had some risky investments they lost money on.

A major issue I noticed was Note 3 on page F-11 regarding a going concern.  It is indicated they are concerned for the company's ability to continue to operate on a daily basis based in part due to its cash position.  My experience is that it is significant to make such a statement in a public filing such as this.  The feeling is echoed in managements discussion and analysis at the end where they also indicate the company may not be able to survive.

Fellow accountant Jim Dougan also noted;

I'd need more time to say more, but the fact that the shareholder's equity is HUGELY negative (liabilities are greater than assets) jumps out. There's a BIG increase in 'consulting fees' in most recent nine months, a depletion of cash balance, issuance of convertible shares as comp. That last one is not unusual, but anyone taking it would have to assume they'd be worth something in future. It's a little strange that Wizard is issuing shares to a trust for the Exec Chairman's children. How strange? Dunno.

Talking to the new Wizard World President and CEO John Macaluso on the phone yesterday, and raising issues such as the declaration that only two of the conventions were making money, he assured me that this was no longer the case, that all the conventions were now making money and Wizard will not run a loss making convention again.

We may have to wait till next year's filings to see how right he was…

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