UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2016
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 000-33383
WIZARD WORLD, INC.
(Exact name of registrant as specified in its charter)
Delaware | 98-0357690 | |
(State or other jurisdiction of incorporation) |
(IRS Employer Identification No.) |
662 N. Sepulveda Blvd., Suite 300
Los Angeles, CA 90049
(Address of principal executive offices)
(310) 648-8410
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 18, 2016, there were 51,368,386 shares outstanding of the registrant’s common stock.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | |||
Item 1. | Financial Statements. | 4 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 19 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 27 | |
Item 4. | Controls and Procedures. | 28 | |
PART II – OTHER INFORMATION | |||
Item 1. | Legal Proceedings. | 29 | |
Item 1A. | Risk Factors. | 29 | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 29 | |
Item 3. | Defaults Upon Senior Securities. | 29 | |
Item 4. | Mine Safety Disclosures. | 29 | |
Item 5. | Other Information. | 29 | |
Item 6. | Exhibits. | 30 | |
Signatures | 31 |
2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Wizard World, Inc.
September 30, 2016 and 2015
Index to the Condensed Consolidated Financial Statements
3 |
PART I – FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets
September 30, 2016 | December 31, 2015 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 3,188,406 | $ | 4,723,699 | ||||
Accounts receivable, net | 266,020 | 407,142 | ||||||
Inventory | 171,591 | 39,552 | ||||||
Prepaid convention expenses | 513,055 | 1,035,265 | ||||||
Prepaid rent - related party | 191,120 | - | ||||||
Prepaid taxes | 293,984 | 293,984 | ||||||
Total Current Assets | 4,624,176 | 6,499,642 | ||||||
Property and equipment, net | 236,342 | 250,786 | ||||||
Security deposits | 31,378 | 21,066 | ||||||
Total Assets | $ | 4,891,896 | $ | 6,771,494 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 1,383,153 | $ | 1,577,439 | ||||
Unearned revenue | 510,360 | 3,731,498 | ||||||
Due to CONtv joint venture | 186,741 | 111,741 | ||||||
Total Current Liabilities | 2,080,254 | 5,420,678 | ||||||
Total Liabilities | 2,080,254 | 5,420,678 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ Equity | ||||||||
Preferred stock par value $0.0001: 20,000,000 shares authorized; 50,000 shares designated, respectively | - | - | ||||||
Series A convertible preferred stock par value $0.0001: 50,000 shares designated; 39,101 shares issued and converted, respectively | - | - | ||||||
Common stock par value $0.0001: 80,000,000 shares authorized; 51,368,386 shares issued and outstanding, respectively | 5,138 | 5,138 | ||||||
Additional paid-in capital | 18,080,757 | 17,341,268 | ||||||
Accumulated deficit | (15,263,411 | ) | (16,013,296 | ) | ||||
Non-controlling interest | (10,842 | ) | 17,706 | |||||
Total Stockholders’ Equity | 2,811,642 | 1,350,816 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 4,891,896 | $ | 6,771,494 |
See accompanying notes to the condensed consolidated financial statements
4 |
Condensed Consolidated Statements of Operations
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenue | ||||||||||||||||
Convention revenue | $ | 6,267,631 | $ | 6,805,316 | $ | 20,768,937 | $ | 20,350,830 | ||||||||
ConBox revenue | 137,020 | 496,694 | 608,025 | 629,003 | ||||||||||||
Total revenue | 6,404,651 | 7,302,010 | 21,376,962 | 20,979,833 | ||||||||||||
Cost of revenue | 3,964,711 | 4,431,199 | 14,323,415 | 15,852,075 | ||||||||||||
Gross margin | 2,439,940 | 2,870,811 | 7,053,547 | 5,127,758 | ||||||||||||
Operating expenses | ||||||||||||||||
Compensation | 1,203,820 | 1,344,616 | 3,632,232 | 4,120,281 | ||||||||||||
Consulting fees | 161,637 | 168,546 | 438,888 | 450,102 | ||||||||||||
General and administrative | 598,019 | 453,939 | 1,901,456 | 1,545,182 | ||||||||||||
Total operating expenses | 1,963,476 | 1,967,101 | 5,972,576 | 6,115,565 | ||||||||||||
Income (loss) from operations | 476,464 | 903,710 | 1,080,971 | (987,807 | ) | |||||||||||
Other expenses | ||||||||||||||||
Interest expense | (92 | ) | (804 | ) | (977 | ) | (1,461 | ) | ||||||||
Loss on disposal of equipment | (36,876 | ) | — | (36,876 | ) | — | ||||||||||
Loss on CONtv joint venture | (75,000 | ) | (148,089 | ) | (225,000 | ) | (1,046,525 | ) | ||||||||
Other expenses | (111,968 | ) | (148,893 | ) | (262,853 | ) | (1,047,986 | ) | ||||||||
Income (loss) before income tax provision | 364,496 | 754,817 | 818,118 | (2,035,793 | ) | |||||||||||
Income tax provision | — | — | — | — | ||||||||||||
Net income (loss) | 364,496 | 754,817 | 818,118 | (2,035,793 | ) | |||||||||||
Net income (loss) attributable to non-controlling interests | (720 | ) | 29,199 | 68,233 | 23,413 | |||||||||||
Net income (loss) attributable to common stockholders | $ | 365,216 | $ | 725,618 | $ | 749,885 | $ | (2,059,206 | ) | |||||||
Income (loss) per share | ||||||||||||||||
Basic | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | (0.04 | ) | |||||||
Diluted | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | (0.04 | ) | |||||||
Weighted average common shares outstanding - basic | 51,368,386 | 51,368,386 | 51,368,386 | 51,362,415 | ||||||||||||
Weighted average common shares outstanding - diluted | 51,368,386 | 53,505,019 | 51,368,386 | 51,362,415 |
See accompanying notes to the condensed consolidated financial statements
5 |
Condensed Consolidated Statement of Stockholders’ Equity
For the Nine Months Ended September 30, 2016
(Unaudited)
Preferred | Common | |||||||||||||||||||||||||||||||
Stock Par | Stock Par | Additional | Non- | Total | ||||||||||||||||||||||||||||
Value $0.0001 | Value $0.0001 | Paid-in | Accumulated | controlling | Stockholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Equity | |||||||||||||||||||||||||
Balance - December 31, 2015 | - | $ | - | 51,368,386 | $ | 5,138 | $ | 17,341,268 | $ | (16,013,296 | ) | $ | 17,706 | $ | 1,350,816 | |||||||||||||||||
Share-based compensation | - | - | - | - | 642,708 | - | - | 642,708 | ||||||||||||||||||||||||
Acquisition of controlling interest of ConBox | - | - | - | - | 96,781 | - | (96,781 | ) | - | |||||||||||||||||||||||
Net income | - | - | - | - | - | 749,885 | 68,233 | 818,118 | ||||||||||||||||||||||||
Balance - September 30, 2016 | - | $ | - | 51,368,386 | $ | 5,138 | $ | 18,080,757 | $ | (15,263,411 | ) | $ | (10,842 | ) | $ | 2,811,642 |
See accompanying notes to the condensed consolidated financial statements
6 |
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended | ||||||||
September 30, 2016 | September 30, 2015 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income (loss) | $ | 818,118 | $ | (2,035,793 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 117,589 | 85,448 | ||||||
Loss on disposal of equipment | 36,876 | - | ||||||
Loss on CONtv joint venture | 225,000 | 1,046,525 | ||||||
Share-based compensation | 642,708 | 999,278 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 141,122 | (221,652 | ) | |||||
Inventory | (132,039 | ) | (34,747 | ) | ||||
Prepaid convention expenses | 522,210 | (173,951 | ) | |||||
Prepaid rent | (191,120 | ) | - | |||||
Security deposits | (10,312 | ) | (1,000 | ) | ||||
Accounts payable and accrued liabilities | (194,286 | ) | 505,614 | |||||
Unearned revenue | (3,221,138 | ) | (652,246 | ) | ||||
Net Cash Used In Operating Activities | (1,245,272 | ) | (482,524 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Purchase of property and equipment | (144,871 | ) | (77,487 | ) | ||||
Proceeds received on disposal of equipment | 4,850 | - | ||||||
Investment | - | (3,319 | ) | |||||
Investment in CONtv joint venture - net | (150,000 | ) | (953,872 | ) | ||||
Net Cash Used In Investing Activities | (290,021 | ) | (1,034,678 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from the exercise of options | - | 4,000 | ||||||
Net Cash Provided By Financing Activities | - | 4,000 | ||||||
Net change in cash and cash equivalents | (1,535,293 | ) | (1,513,202 | ) | ||||
Cash and cash equivalents at beginning of year | 4,723,699 | 5,790,724 | ||||||
Cash and cash equivalents at end of reporting period | $ | 3,188,406 | $ | 4,277,522 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid | $ | 1,028 | $ | - | ||||
Income tax paid | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Acquisition of controlling interest of ConBox | $ | 96,781 | $ | - |
See accompanying notes to the condensed consolidated financial statements
7 |
September 30, 2016
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Organization and Operations
Wizard World, Inc.
Wizard World, Inc., formerly GoEnergy, Inc. (“Wizard World” or the “Company”) was incorporated on May 2, 2001, under the laws of the State of Delaware. We, through our operating subsidiary, are a producer of pop culture and live multimedia conventions across North America.
Kick the Can Corp.
Kick The Can Corp. was incorporated on September 20, 2010, under the laws of the State of Nevada.
Kicking the Can, L.L.C.
Kicking The Can, L.L.C. was formed on April 17, 2009, under the laws of the State of Delaware.
Acquisition of Kick the Can Corp. / Wizard Conventions, Inc. Recognized as a Reverse Acquisition
On December 7, 2010, the Company entered into and consummated a share exchange agreement (“Share Exchange Agreement”) with successor, Kick the Can Corp. (“KTC Corp.”) and its predecessors Wizard Conventions, Inc. and Kicking The Can, L.L.C. (collectively, “Conventions”). Pursuant to the Exchange Agreement, the Company issued 32,927,596 shares of its common stock to the KTC Corp. shareholders in exchange for 100% of the issued and outstanding shares of KTC Corp. The shares issued represented approximately 94.9% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement.
As a result of the controlling financial interest of the former stockholder of Conventions, for financial statement reporting purposes, the merger between the Company and Conventions has been treated as a reverse acquisition with KTC Corp. deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with section 805-10-55 of the Financial Accounting Standards Board (‘FASB”) Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of KTC Corp. (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of KTC Corp. which are recorded at historical cost. The equity of the Company is the historical equity of KTC Corp. retroactively restated to reflect the number of shares issued by the Company in the transaction. Because of the predecessor/successor relationship between the Company and KTC Corp., Conventions ultimately became the accounting acquirer.
Wizard World Digital, Inc.
On March 18, 2011, the Company formed a wholly owned subsidiary called Wizard World Digital, Inc., a Nevada corporation (“Digital”). Digital never commenced operations or has employees, and Digital is currently dormant, pending execution of a digital strategy.
8 |
Wiz Wizard, LLC
On December 29, 2014, the Company and a member of the Board of Directors (the “Board”) of the Company formed Wiz Wizard, LLC (“Wiz Wizard”) under the law of the State of Delaware. The Company and the member of the Board each owned 50% of the membership interest and agreed to allocate the profits and losses accordingly upon repayment of the initial capital contributions on a pro rata basis. The Company consolidates its 50% equity interest and reports the remaining 50% equity interest owned by a member of the Board as the non-controlling interest in Wiz Wizard as the management of the Company believes that the Company has the control of Wiz Wizard. In addition, the Company and Wiz Wizard, launched ComicConBox (“ConBox”) in April 2015. ConBox is a subscription-based premium monthly box service featuring collectibles, exclusives, toys, tech and gaming, licensed artwork, superior comics and apparel, Comic Convention tickets, special VIP discounts and more, which will be shipped on or around the end of every month. The Company plans to continue to partner with major Comic Convention related brands and celebrities to deliver a high quality and variation of products directly to the front doors of its subscribers. On February 4, 2016, the member of the Board assigned his fifty percent (50%) membership interest to the Company. Consequently, Wiz Wizard is a wholly-owned subsidiary of the Company.
ButtaFyngas LLC
On April 10, 2015, the Company and an unrelated third party formed ButtaFyngas, LLC (“ButtaFyngas”) under the law of the State of Delaware. The Company and the unrelated party each own 50% of the membership interest and shall allocate the profits and losses accordingly upon repayment of the initial capital contributions on a pro rata basis. The Company consolidates its 50% equity interest and reports the remaining 50% equity interest owned by the third party as the non-controlling interest in ButtaFyngas.
Note 2 - Liquidity and Management Plans
As reflected in the accompanying condensed consolidated financial statements, the Company incurred a net income and net cash used in operations of $749,885 and ($1,245,272), respectively, for the nine months ended September 30, 2016. As of September 30, 2016, the Company had a working capital of $2,543,922 and an accumulated deficit of $15,263,411. As of September 30, 2016, the Company had cash and cash equivalents of $3,188,406. The Company estimates the cash and cash equivalents currently on hand as of November 21, 2016 is insufficient to fund its operations on a long term basis past December 31, 2016. In order to fund operations past that date is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, or the significant reduction of operating expenses until such time that funds provided by operations are sufficient to fund working capital requirements. There is no assurance that the Company’s projections and estimates are accurate. The Company is actively managing and controlling the Company’s cash outflows to mitigate these risks.
Note 3 – Significant and Critical Accounting Policies and Practices
The management of the Company is responsible for the selection and use of appropriate accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on April 14, 2016.
9 |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Principles of Consolidation
The condensed consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
Name of consolidated subsidiary or entity | State or other jurisdiction of incorporation or organization | Date of incorporation or formation | Attributable interest | |||||
KTC Corp. | The State of Nevada, U.S.A. | September 20, 2010 | 100 | % | ||||
Kicking the Can L.L.C. | The State of Delaware, U.S.A. | April 17, 2009 | 100 | % | ||||
Wizard World Digital, Inc. | The State of Nevada, U.S.A. | March 18, 2011 | 100 | % | ||||
Wiz Wizard, LLC | The State of Delaware, U.S.A. | December 29, 2014 | 100 | % | ||||
ButtaFyngas, LLC | The State of Delaware, U.S.A. | April 10, 2015 | 50 | % |
All inter-company balances and transactions have been eliminated. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.
As of September 30, 2016, the aggregate non-controlling interest in ButtaFyngas was ($10,842). As of December 31, 2015, the aggregate non-controlling interest in Wiz Wizard and ButtaFyngas was $17,706. The non-controlling interest is separately disclosed on the Condensed Consolidated Balance Sheet.
Investments - Cost Method, Equity Method and Joint Venture
In accordance with sub-topic 323-10 of the FASB ASC (“Sub-topic 323-10”), the Company accounts for investments in common stock of an investee for which the Company has significant influence in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock.
Method of Accounting
Investments held in stock of entities other than subsidiaries, namely corporate joint ventures and other non-controlled entities usually are accounted for by one of three methods: (i) the fair value method (addressed in Topic 320), (ii) the equity method (addressed in Topic 323), or (iii) the cost method (addressed in Subtopic 325-20). Pursuant to Paragraph 323-10-05-5, the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee.
10 |
Investment in CONtv
On August 27, 2014, the Company entered into a joint venture and executed an Operating Agreement for CON TV LLC (“CONtv”) with Cinedigm Entertainment Corp. (“Cinedigm”), ROAR, LLC (a related party partially owned by a member of the Board) (“ROAR”) and Bristol Capital, LLC (a related party controlled by a member of the Board) (“Bristol Capital”). The Company owned a 47.50% interest in the newly formed entity, CONtv. The Company was accounting for the interest in the joint venture utilizing the equity method of accounting.
On November 16, 2015, pursuant to that certain Amended and Restated Operating Agreement for CONtv by and among the aforementioned parties (the “A&R Operating Agreement”), the Company’s ownership interest in CONtv was reduced to 10%. Pursuant to the A&R Operating Agreement, the Company is only obligated to fund on-going costs in the amount of $25,000 in cash on an on-going monthly basis for a period of 12 months following the effective date.
For the three months ended September 30, 2016 and 2015, the Company recognized $75,000 and $148,089 in losses from this venture, respectively. For the nine months ended September 30, 2016 and 2015, the Company recognized $225,000 and $1,046,525 in losses from this venture, respectively. As of September 30, 2016 and December 31, 2015, the investment in CONtv was $0.
Revenue Recognition and Cost of Revenues
The Company follows Paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Unearned convention revenue is deposits received for conventions that have not yet taken place, which are fully or partially refundable depending upon the terms and conditions of the agreements.
Unearned ConBox revenue is non-refundable up-front payments for products. These payments are initially deferred and subsequently recognized over the subscription period, typically three months, and upon shipment of the product.
The Company recognizes cost of revenues in the period in which the revenues was earned. In the event the Company incurs cost of revenues for conventions that are yet to occur, the Company records such amounts as prepaid expenses and such prepaid expenses are expensed during the period the convention takes place.
Earnings Per Share
Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
11 |
Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23, diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of Paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: (a.) exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued, (b.) the proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See Paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.), and (c.) the incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.
The following table shows the outstanding dilutive common shares excluded from the diluted net income (loss) per share calculation as they were anti-dilutive:
September 30, 2016 | September 30, 2015 | |||||||
Stock options | 4,419,000 | 7,580,000 | ||||||
Total | 4,419,000 | 7,580,000 |
The computations of basic and diluted net income attributable to common stockholders are as follows:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2016 | September 30, 2016 | |||||||||||||||
Income | Shares (a) | Income | Shares (a) | |||||||||||||
Net income attributable to common stockholders | $ | 365,216 | $ | 749,885 | ||||||||||||
Basic net income per common share | $ | 0.01 | 51,368,386 | $ | 0.01 | 51,368,386 | ||||||||||
Net income attributable to common stockholders | $ | 365,216 | 51,368,386 | $ | 749,885 | 51,368,386 | ||||||||||
Dilutive securities: | ||||||||||||||||
Options | - | - | - | - | ||||||||||||
Diluted net income | $ | 365,216 | 51,368,386 | $ | 749,885 | 51,368,386 | ||||||||||
Diluted net income per common share | $ | 0.01 | $ | 0.02 |
(a) - Weighted-average common shares outstanding.
The Company’s contingent share issuance arrangements, stock options and warrants are as follows:
Contingent share issuance arrangements, stock options and warrants | ||||||||
September 30, 2016 | September 30, 2015 | |||||||
Stock options | 4,419,000 | 7,580,000 | ||||||
Total contingent share issuance arrangements, stock options and warrants | 4,419,000 | 7,580,000 |
12 |
Income Taxes
In the ordinary course of business, there is inherent uncertainty in quantifying income tax positions. The Company assesses its income tax positions and records tax assets or liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense or benefit.
During the nine months ended September 30, 2016, the Company partially utilized NOL carry-forwards to offset taxable income.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to Accounting Standards Update (“ASU”) 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
In July 2015, the FASB issued the ASU No. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-11 on the condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its condensed consolidated financial statements and disclosures.
In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” (topic 606). In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net)” (topic 606). These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which we intend to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard.
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In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the impact of the new standard.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.
Note 4 – Property and Equipment
Property and equipment stated at cost, less accumulated depreciation, consisted of the following:
September 30, 2016 | December 31, 2015 | |||||||
Computer Equipment | $ | 31,887 | $ | 33,792 | ||||
Equipment | 382,728 | 343,359 | ||||||
Furniture and Fixtures | 42,609 | 48,950 | ||||||
Leasehold Improvements | 20,264 | - | ||||||
477,488 | 426,101 | |||||||
Less: Accumulated Depreciation | (241,146 | ) | (175,315 | ) | ||||
$ | 236,342 | $ | 250,786 |
Depreciation expense was $117,589 and $85,448 for the nine months ended September 30, 2016 and 2015, respectively.
During the nine months ended September 30, 2016, the Company disposed of property and equipment receiving proceeds of $4,850 and recorded a loss of $36,876.
Note 5 – Investment in CONtv Joint Venture
For the nine months ended September 30, 2016 and 2015, the Company recognized $225,000 and $1,046,525 in losses from this venture, respectively.
As of September 30, 2016 and December 31, 2015, the Company has a balance due to CONtv of $186,741 and $111,741, respectively.
Note 6 – Related Party Transactions
Wiz Wizard
On December 29, 2014, the Company and a member of the Board formed Wiz Wizard (d/b/a ConBox) in the State of Delaware. The Company and the member of the Board each owned 50% of the membership interest and agreed to allocate the profits and losses accordingly upon repayment of the initial capital contributions on a pro rata basis. On February 4, 2016, the member of the Board assigned his fifty percent (50%) membership interest to the Company.
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Operating Sublease
On June 16, 2016, the Company entered into a Standard Multi-Tenant Sublease (“Sublease”) with Bristol Capital Advisors, LLC (“Bristol Capital Advisors”), an entity controlled by the Company’s Chairman of the Board. The term of the Sublease is for 5 years and 3 months beginning on July 1, 2016 with monthly payments of $8,118. Upon execution of the Sublease, the Company paid a security deposit of $9,137 and $199,238 for prepaid rent. See Note 6 for future minimum rent payments due.
Outsourced Marketing
During the nine months ended September 30, 2016, the Company utilized outsourced marketing support from a company affiliated with ROAR, which is partially owned by a member of the Board. The Company had expenses of $36,809 during the nine months ended September 30, 2016 and had an outstanding payable of $13,703 as of September 30, 2016.
Note 7 – Commitments and Contingencies
Employment Agreements
Appointment of Executive Vice President and Chief Operating Officer
On November 8, 2016, the Company formally entered into an employment agreement (the “Malinoff Employment Agreement”) with Randall S. Malinoff in connection with his appointment as the Company’s Executive Vice President and Chief Operating Officer on July 14, 2016 (the “Effective Date”) to serve for a period of two years from the Effective Date. In connection with such appointment, Mr. Malinoff will receive an annual base salary of $225,000 and will be eligible for a performance-based bonus at the discretion of the Board. On November 8, 2016, pursuant to the terms of the Malinoff Employment Agreement, the Company granted 600,000 stock options to Mr. Malinoff.
Appointment of President and Chief Executive Officer
On April 22, 2016, the Board approved the appointment of Mr. John D. Maatta as the Company’s President and Chief Executive Officer, effective as of May 3, 2016. Mr. Maatta will continue to serve as a member of the Board. In addition, the Board granted Mr. Maatta options to purchase up to an aggregate of 1,100,000 shares of the Company’s common stock, subject to the terms and conditions of the Third Amended and Restated 2011 Stock Incentive and Award Plan. Mr. Maatta formally entered into his Employment Agreement with the Company on July 17, 2016.
Mr. Maatta received the following, with effective dates as defined below:
1) | upon the effectiveness of the Maatta Appointment on May 3, 2016, three hundred thousand (300,000) options to purchase shares of the Company’s common stock at an exercise price of $0.50 per share, such options to vest only upon a Change in Control (as defined in Mr. Maatta’s Employment Agreement) during Mr. Maatta’s tenure as President and Chief Executive Officer; | |
2) | upon the effectiveness of the Maatta Appointment on May 3, 2016, eight hundred thousand (800,000) options to purchase shares of the Company’s common stock, such options to vest, at the applicable exercise price, as follows: |
a. | one hundred thousand (100,000) options shall be exercisable at a price of $0.50 per share and shall vest by June 30, 2016; | |
b. | one hundred thousand (100,000) options shall be exercisable at a price of $0.50 per share and shall vest by September 30, 2016; |
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c. | one hundred thousand (100,000) options shall be exercisable at a price of $0.50 per share and shall vest by December 31, 2016; | |
d. | one hundred thousand (100,000) options shall be exercisable at a price of $0.55 per share and shall vest by March 31, 2017; | |
e. | one hundred thousand (100,000) options shall be exercisable at a price of $0.55 per share and shall vest by June 30, 2017; | |
f. | one hundred thousand (100,000) options shall be exercisable at a price of $0.55 per share and shall vest by September 30, 2017; | |
g. | one hundred thousand (100,000) options shall be exercisable at a price of $0.60 per share and shall vest by December 31, 2017; and | |
h. | one hundred thousand (100,000) options shall be exercisable at a price of $0.60 per share and shall vest by June 30, 2018. |
Operating Lease
Effective July 17, 2014, the Company entered into a sublease, as lessee, with Ironclad Performance Wear Corporation, as lessor, for new space located in El Segundo, California (the “Ironclad Sublease”). The term of the Ironclad Sublease was for one year and ten (10) months commencing on September 1, 2014. Pursuant to the Ironclad Sublease, the Company paid base rent of $11,132 per month and an initial security deposit of $11,466 was required.
The lease matured during the three months ended March 31, 2016. The Company is awaiting the return of the security deposit from the lessor.
On June 16, 2016, the Company entered into a Standard Multi-Tenant Sublease (“Sublease”) with Bristol Capital Advisors, an entity controlled by the Company’s Chairman of the Board. The term of the Sublease is for 5 years and 3 months beginning on July 1, 2016 with monthly payments of $8,118. Upon execution of the Sublease, the Company paid a security deposit of $9,137 and $199,238 for prepaid rent. See below for future minimum rent payments due.
Future minimum lease payments inclusive of related tax required under the non-cancelable operating lease are as follows:
Fiscal year ending December 31: | ||||
2016 (remainder of year) | $ | 36,972 | ||
2017 | 145,800 | |||
2018 | 97,416 | |||
2019 | 97,416 | |||
2020 | 97,416 | |||
Thereafter | 73,062 | |||
$ | 548,082 |
Obligation to Fund CONtv
As discussed in Note 1, on November 16, 2015, pursuant to that certain A&R Operating Agreement for CONtv, the Company’s ownership interest in CONtv was reduced to 10%. In addition, the Company is only obligated to fund on-going costs in the amount of $25,000 in cash on an on-going monthly basis for a period of 12 months following the effective date.
Shamus Lawsuit
On October 28, 2016, the Company filed a Complaint (the “Complaint”) and commenced a lawsuit in the United States District Court, Southern District of New York, against Stephen Shamus, the former Chief Marketing Officer of the Company whose employment was terminated on October 27, 2016 (the “Shamus Lawsuit”). In the Shamus Lawsuit, the Company alleges, among other things, breach of fiduciary duty, misappropriation of corporation assets, breach of contract, and conversion, against Mr. Shamus relating to the Company’s assertion that he used his position with the Company to improperly obtain memorabilia at the Company’s comic conventions which he would then sell and retain the profits from for his own benefit. On November 16, 2016, Mr. Shamus filed an Answer to the Complaint with counterclaims to the Complaint (the “Counterclaim”). The Counterclaim alleges breach of contract and unjust enrichment against the Company and seeks compensatory damages in the form of cash.
The lawsuit is in an early stage and the Company intends to thoroughly pursue its claims and establish a rigorous defense against the Counterclaim. In the event we fail to defend against the Counterclaim, we may be subject to a judgment which could materially impact our financial condition.
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Note 8 – Stockholders’ Equity
The Company’s authorized capital stock consists of 100,000,000 shares, of which 80,000,000 are for shares of common stock, par value $0.0001 per share, and 20,000,000 are for shares of preferred stock, par value $0.0001 per share, of which 50,000 have been designated as Series A Cumulative Convertible Preferred Stock. As of September 30, 2016 and December 31, 2015, there were 51,368,386 shares of our common stock issued and outstanding. Each share of our common stock entitles its holder to one vote on each matter submitted to the shareholders.
Stock Options
The following is a summary of the Company’s option activity:
Options | Weighted Average Exercise Price | |||||||
Outstanding – December 31, 2015 | 9,933,500 | $ | 0.70 | |||||
Exercisable – December 31, 2015 | 4,332,500 | $ | 0.45 | |||||
Granted | 1,100,000 | $ | 0.53 | |||||
Exercised | - | $ | - | |||||
Forfeited/Cancelled | (6,614,500 | ) | $ | - | ||||
Outstanding – September 30, 2016 | 4,419,000 | $ | 0.57 | |||||
Exercisable – September 30, 2016 | 1,240,000 | $ | 0.46 |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
$0.40 - 0.94 | 4,419,000 | 3.11 years | $ | 0.57 | 1,240,500 | $ | 0.46 |
At September 30, 2016, the total intrinsic value of options outstanding and exercisable was $0 and $0, respectively.
The Company recognized an aggregate of $642,708 and $999,278 in compensation expense during the periods ended September 30, 2016 and 2015, respectively, related to option awards.
Note 9 – Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. As of September 30, 2016, substantially all of the Company’s cash and cash equivalents were held by major financial institutions and the balance in certain accounts exceeded the maximum amount insured by the Federal Deposits Insurance Corporation (“FDIC”). However, the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant risks on such accounts.
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Note 10 – Segment Information
The Company evaluates performance of its operating segments based on revenue and operating profit (loss). Segment information for the three and nine months ended September 30, 2016 and 2015 and as of September 30, 2016 and December 31, 2015, are as follows:
Conventions | ConBox | Total | ||||||||||
Three Months ended September 30, 2016 | ||||||||||||
Revenue | $ | 6,267,631 | 137,020 | 6,404,651 | ||||||||
Cost of revenue | (3,888,811 | ) | (75,900 | ) | (3,964,711 | ) | ||||||
Gross margin | 2,378,820 | 61,120 | 2,439,940 | |||||||||
Operating expenses | (1,964,872 | ) | (1,396 | ) | (1,963,476 | ) | ||||||
Operating profit (loss) | 413,948 | 62,516 | 476,464 | |||||||||
Three Months ended September 30, 2015 | ||||||||||||
Revenue | $ | 6,805,316 | 496,694 | 7,302,010 | ||||||||
Cost of revenue | (4,003,067 | ) | (428,132 | ) | (4,431,199 | ) | ||||||
Gross margin | 2,802,249 | 68,562 | 2,870,811 | |||||||||
Operating expenses | (1,947,994 | ) | (19,107 | ) | (1,967,101 | ) | ||||||
Operating loss | 854,255 | 49,455 | 903,710 | |||||||||
Nine Months ended September 30, 2016 | ||||||||||||
Revenue | $ | 20,768,937 | $ | 608,025 | $ | 21,376,962 | ||||||
Cost of revenue | (13,672,094 | ) | (651,321 | ) | (14,323,415 | ) | ||||||
Gross margin | 7,096,843 | (43,296 | ) | 7,053,547 | ||||||||
Operating expenses | (5,958,148 | ) | (14,428 | ) | (5,972,576 | ) | ||||||
Operating profit | 1,138,695 | (57,724 | ) | 1,080,971 | ||||||||
Nine Months ended September 30, 2015 | ||||||||||||
Revenue | $ | 20,350,830 | $ | 629,003 | $ | 20,979,833 | ||||||
Cost of revenue | (15,300,576 | ) | (551,499 | ) | (15,852,075 | ) | ||||||
Gross margin | 5,050,254 | 77,504 | 5,127,758 | |||||||||
Operating expenses | (6,084,882 | ) | (30,679 | ) | (6,115,565 | ) | ||||||
Operating loss | (1,034,628 | ) | 46,825 | (987,807 | ) | |||||||
September 30, 2016 | ||||||||||||
Accounts receivable, net | $ | 177,310 | $ | 88,710 | $ | 266,020 | ||||||
Unearned revenue | 414,814 | 95,546 | 510,360 | |||||||||
December 31, 2015 | ||||||||||||
Accounts receivable, net | $ | 108,795 | $ | 298,347 | $ | 407,142 | ||||||
Unearned revenue | 3,340,837 | 390,661 | 3,731,498 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This quarterly report on Form 10-Q and other reports filed by Wizard World, Inc. (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Overview
We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes for the three and nine months ended September 30, 2016 and 2015, included elsewhere in this report.
We are a producer of pop culture and multimedia conventions (“Comic Conventions”) across North America that market movies, TV shows, video games, technology, toys, social networking/gaming platforms, comic books and graphic novels. These Comic Conventions provide sales, marketing, promotions, public relations, advertising and sponsorship opportunities for entertainment companies, toy companies, gaming companies, publishing companies, marketers, corporate sponsors, and retailers.
Plan of Operation
Our Company has two lines of business: (i) live multimedia events, which involve admissions and exhibitor booth space, and (ii) ConBox. Our current focus is two-fold and includes both growing our existing Comic Conventions by obtaining new exhibitors and dealers and attracting more high profile celebrities and VIPs, and identifying new markets in which to produce additional Comic Conventions. We also plan to expose our database of fans and our target market of young adults and families to our content through digital media such as Facebook®, Twitter®, YouTube®, Flickr®, Instagram® and Snapchat, and draw higher traffic to our website www.wizardworld.com by creating content from our live multimedia events and promoting such events through emails and newsletters.
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We expect to produce 19 live events during the year ending December 31, 2016. Historically, we have operated profitable live events in Philadelphia, Chicago, New Orleans, Columbus, Portland, Nashville, Austin, Sacramento, Louisville, Minneapolis, San Antonio, Atlanta, Tulsa, Reno and St. Louis, 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 to drive admissions, 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.
The Company also plans to produce a live music concert series with well-known emerging and known artists at approximately seven (7) of its Comic Conventions during 2016. Admissions to the concerts will be sold separately from the admission to the Comic Convention.
In addition, the Company through its subsidiary, Wiz Wizard, launched ConBox in April 2015. ConBox is a subscription-based premium monthly box service featuring collectibles, exclusives, toys, tech and gaming, licensed artwork, superior comics and apparel, Comic Convention admissions, special VIP discounts and more, which will be shipped on or around the end of every month. The Company plans to continue to partner with major Comic Convention related brands and celebrities to deliver a high quality and variation of products directly to the front doors of its subscribers.
We continue to develop the Wizard World digital strategy and grow our existing database through social media, on-site activation, and the Company’s digital presence on properties that include Facebook®, Twitter®, YouTube®, Flickr®, Instagram® and Snapchat. Also, as additional events are added, more people join the Wizard World universe and become loyal to the brand and its affiliated properties.
Wizardworlddigital.com continues to be the hub for all Comic Convention and related events news and content, and wizardworld.com continues to act as the e-commerce engine for all admissions, VIP experiences, one-of-a-kind packages, and more.
Results of Operations
Summary of Statements of Operations for the Three Months Ended September 30, 2016 and 2015:
Three Months Ended | ||||||||
September 30, 2016 | September 30, 2015 | |||||||
Convention revenue | $ | 6,267,631 | $ | 6,805,316 | ||||
ConBox revenue | $ | 137,020 | $ | 496,694 | ||||
Gross profit | $ | 2,439,640 | $ | 2,870,811 | ||||
Operating expenses | $ | (1,963,476 | ) | $ | (1,967,101 | ) | ||
Income (loss) from operations | $ | 476,464 | $ | 903,710 | ||||
Other expenses | $ | (111,968 | ) | $ | (148,893 | ) | ||
Net income attributable to common shareholder | $ | 365,216 | $ | 725,618 | ||||
Income per common share – basic and diluted | $ | 0.01 | $ | 0.01 |
Convention Revenue
Convention revenue was $6,267,631 for the three months ended September 30, 2016, as compared to $6,805,316 for the comparable period ended September 30, 2015, a decrease of $537,685. The decrease in convention revenue is primarily attributable to operating two less events during the three months ended September 30, 2016 for a total of four events, as compared to producing six events during the three months ended September 30, 2015. Average revenue generated per event held in the third quarter of 2016 was $1,566,908 as compared to $1,134,219 during 2015. The increase in average revenue per show was primarily attributable to producing well-attended events in more established markets during the three months ended September 30, 2016.
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ConBox Revenue
ConBox revenue was $137,020 for the three months ended September 30, 2016, as compared to $496,694 for the comparable period ended September 30, 2015, a decrease of $359,674. The decrease in ConBox revenue is attributable to the new management team primarily focused on driving the convention business forward.
Gross Profit
Gross profit percentage decreased from a gross profit of 39% during the three months ended September 30, 2015, to a gross profit of 38% during the three months ended September 30, 2016. The Company produced three events during the period ended September 30, 2016, as compared to six events during the comparable period ended September 30, 2015. The gross profit percentage decrease was attributable to increased investment in the programming including Wizard World gaming, resulting in an improved fan experience at the Company’s events.
Operating Expenses
Operating expenses for the three months ended September 30, 2016, was $1,963,476 as compared to $1,967,101 for the three months ended September 30, 2015. The change is attributable to a decrease in employee compensation offset by an increase in general and administrative expenses. The $140,796 decrease in compensation is primarily attributable to a decline in both headcount and officer compensation. General and administrative expenses increased by $144,347 since the prior year comparative period due to a rise in professional fees, depreciation expense and web development.
Income from Operations
Income from operations for the three months ended September 30, 2016, was $476,464 as compared to income of $903,710 for the three months ended September 30, 2015. The decrease is primarily attributable to, as noted above, revenue from ConBox decreased by $359,674 during the period compared to the prior periods. In addition, the Company is no longer exhausting resources into CONtv.
Other Expenses
Other expenses for the three months ended September 30, 2016, was $111,968, as compared to $148,893 for the three months ended September 30, 2015. The change is attributable to the Company’s $148,089 loss during the three months ended September 30, 2015 on the CONtv joint venture with Cinedigm compared to a loss of $75,000 for the three months ended September 30, 2016. The Company incurred these losses in connection with the launching of CONtv, which occurred during the nine months ended September 30, 2015. For the three months ended September 30, 2016, the Company recorded a loss of $36,876 upon the disposal of equipment.
Net Income Attributable to Common Stockholder
Net income attributable to common stockholder for three months ended September 30, 2016, was $365,216 or income per share of $0.01, as compared to $725,618 or income per share of $0.01, for the three months ended September 30, 2015. The per share amounts are calculated net of deemed dividends.
Summary of Statements of Operations for the Nine Months Ended September 30, 2016 and 2015:
Nine Months Ended | ||||||||
September 30, 2016 | September 30, 2015 | |||||||
Convention revenue | $ | 20,768,937 | $ | 20,350,830 | ||||
ConBox revenue | $ | 608,025 | 629,003 | |||||
Gross profit | $ | 7,053,547 | $ | 5,127,758 | ||||
Operating expenses | $ | (5,972,576 | ) | $ | (6,115,565 | ) | ||
Income (loss) from operations | $ | 1,080,971 | $ | (987,807 | ) | |||
Other income (expenses) | $ | (262,853 | ) | $ | (1,047,986 | ) | ||
Net income (loss) attributable to common shareholder | $ | 749,885 | $ | (2,059,206 | ) | |||
Income (loss) per common share – basic and diluted | $ | 0.01 | $ | (0.04 | ) |
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Convention Revenue
Convention revenue was $20,768,937 for the nine months ended September 30, 2016, as compared to $20,350,830 for the comparable period ended September 30, 2015, an increase of $418,107. The increase in convention revenue is primarily attributable to running better advertised and marketed events. In addition, the Company increased admission prices and the overall size and scope of each event. The Company ran fifteen events during the period ended September 30, 2016, as compared to twenty events during the comparable period ended September 30, 2015. Average revenue generated per event in 2016 was $1,384,596 as compared to $1,017,542 during 2015.
ConBox Revenue
ConBox revenue was $608,025 for the nine months ended September 30, 2016, as compared to $629,003 for the comparable period ended September 30, 2015, a decrease of $20,978. The decrease in ConBox revenue is attributable to the new management team primarily focused on driving the convention business forward.
Gross Profit
Gross profit percentage increased from a gross profit of 24% during the nine months ended September 30, 2015, to a gross profit of 33% during the nine months ended September 30, 2016. The Company produced fifteen events during the nine months ended September 30, 2016, as compared to twenty events during the comparable period ended September 30, 2015. The gross profit percentage increase was attributable to producing well-attended events in more established markets with increased investment in the programming and convention center build-out, resulting in an improved fan experience at the Company’s events.
Operating Expenses
Operating expenses for the nine months ended September 30, 2016, was $5,972,576, as compared to $6,115,565 for the nine months ended September 30, 2015. The change is attributable to a decrease in employee compensation offset by an increase in general and administrative expenses. The $488,049 decrease in compensation is primarily attributable to a decline in both headcount and officer compensation. General and administrative expenses increased by $356,274 since the prior year comparative period due to a rise in professional fees, depreciation expense and web development.
Income (Loss) from Operations
Income from operations for the nine months ended September 30, 2016, was $1,080,971 as compared to a loss of $(987,807) for the nine months ended September 30, 2015. The increase is primarily attributable to producing well-attended events with popular celebrity guests and programming, combined with increased cost containment in the area of event production. In addition, the Company is no longer exhausting resources into CONtv.
Other Expenses
Other expenses for the nine months ended September 30, 2016, was $262,853, as compared to $1,047,986 for the nine months ended September 30, 2015. The change is primarily attributable to the Company’s $1,046,525 loss during the nine months ended September 30, 2015 on the CONtv joint venture with Cinedigm compared to a loss of $225,000 during the nine months ended September 30, 2016. The Company incurred these losses in connection with the launching of CONtv, which occurred during the nine months ended September 30, 2015. For the nine months ended September 30, 2016, the Company recorded a loss of $36,876 upon the disposal of equipment.
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Net Income (Loss) Attributable to Common Stockholder
Net income (loss) attributable to common stockholder for the nine months ended September 30, 2016, was $749,885 or income per basic share of $0.01, compared to a net loss of $(2,059,206) or loss per basic share of $(0.04), for the nine months ended September 30, 2015. The per share amounts are calculated net of deemed dividends.
Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.
Liquidity and Capital Resources
The following table summarizes total current assets, liabilities and working capital at September 30, 2016 compared to December 31, 2015:
September 30, 2016 | December 31, 2015 | Increase/(Decrease) | ||||||||||
Current Assets | $ | 4,624,176 | $ | 6,499,642 | $ | (1,875,466 | ) | |||||
Current Liabilities | $ | 2,080,254 | $ | 5,420,678 | $ | (3,340,424 | ) | |||||
Working Capital (Deficit) | $ | 2,543,922 | $ | 1,078,964 | $ | 1,464,958 |
At September 30, 2016, we had a working capital of $2,543,922, as compared to working capital of $1,078,964, at December 31, 2015, an increase of $1,464,958. The increase is primarily attributable to the Company recognizing income from operations during the nine months ended September 30, 2016 coupled with the increase in cash balances, accounts payable and accrued expenses and the due to CONtv balance offset by decreases in unearned revenue and the due to CONtv balance.
Net Cash
Net used in operating activities for the nine months ended September 30, 2016 and 2015, was $1,245,272 and $482,524, respectively. The net income (loss) for the nine months ended September 30, 2016 and 2015, was $818,118 and $(2,035,793), respectively.
As reflected in the accompanying condensed consolidated financial statements, the Company incurred a net income and net cash used in operations of $749,885 and ($1,245,272), respectively, for the nine months ended September 30, 2016. As of September 30, 2016, the Company had a working capital of $2,543,922 and an accumulated deficit of $15,263,411. As of September 30, 2016, the Company had cash and cash equivalents of $3,188,406. The Company estimates the cash and cash equivalents currently on hand as of November 20, 2016 is insufficient to fund its operations on a long term basis past December 31, 2016. In order to fund operations past that date is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, or the significant reduction of operating expenses until such time that funds provided by operations are sufficient to fund working capital requirements. There is no assurance that the Company’s projections and estimates are accurate. The Company is actively managing and controlling the Company’s cash outflows to mitigate these risks.
Off-Balance Sheet Arrangements
As of September 30, 2016, the Company had no off-balance sheet arrangements.
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Critical Accounting Policies
We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). Actual results could differ from those estimates.
Property and Equipment
Property and equipment is stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the assets, varying from 3 to 5 years or, when applicable, the life of the lease, whichever is shorter.
Carrying Value, Recoverability and Impairment of long-lived assets
The Company has adopted paragraph 360-10-35-17 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for its long-lived assets. The Company’s long-lived assets, which include property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, are included in operating expenses in the accompanying statements of operations.
Income Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB ASC. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB ASC (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
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The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carryforwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Revenue Recognition
The Company follows Paragraph 605-10-S99-1 of the FASB ASC for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Unearned convention revenue is deposits received for conventions that have not yet taken place, which are fully or partially refundable depending upon the terms and conditions of the agreements.
Unearned ConBox revenue is non-refundable up-front payments for products. These payments are initially deferred and subsequently recognized over the subscription period, typically three months, and upon shipment of the product.
The Company recognizes cost of revenues in the period in which the revenues was earned. In the event the Company incurs cost of revenues for conventions that are yet to occur, the Company records such amounts as prepaid expenses and such prepaid expenses are expensed during the period the convention takes place.
Equity–based compensation
The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.
Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a four year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.
The fair value of option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are input into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s Common stock over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on our Common stock and does not intend to pay dividends on our Common stock in the foreseeable future. The expected forfeiture rate is estimated based on historical experience.
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Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.
The Company accounts for share–based payments granted to non–employees in accordance with ASC 505-40, “Equity Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete. The fair value of the equity instruments is re-measured each reporting period over the requisite service period.
Fair Value of Financial Instruments
We follow Paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of our financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of our financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
● | Level 1 – Quoted market prices available in active markets for identical assets or liabilities as of the reporting date; | |
● | Level 2 – Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date; and | |
● | Level 3 – Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses, accounts payable and accrued liabilities, and unearned revenue approximate their fair value because of the short maturity of those instruments.
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Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its condensed consolidated financial statements and disclosures.
In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” (topic 606). In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net)” (topic 606). These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which we intend to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard.
In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the impact of the new standard.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We do not hold any derivative instruments and do not engage in any hedging activities.
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Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
Pursuant to Rule 13a- 15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Company continues to be committed to improving financial organization. As part of this commitment, management and the Board are performing an extensive review of the Company’s past and current policies and procedures as it relates to financial reporting in an effort to mitigate future risks of potential misstatements. The former Chairman of the Board, Chief Executive Officer and Chief Accounting Officer has declined to participate in such review procedures. The Company will focus on continuing to develop and documenting internal controls and procedures surrounding the financial reporting process, primarily through the use of account reconciliations, and supervision.
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On October 28, 2016, the Company filed a Complaint (the “Complaint”) and commenced a lawsuit in the United States District Court, Southern District of New York, against Stephen Shamus, the former Chief Marketing Officer of the Company whose employment was terminated on October 27, 2016 (the “Shamus Lawsuit”). In the Shamus Lawsuit, the Company alleges, among other things, breach of fiduciary duty, misappropriation of corporation assets, breach of contract, and conversion, against Mr. Shamus relating to the Company’s assertion that he used his position with the Company to improperly obtain memorabilia at the Company’s comic conventions which he would then sell and retain the profits from for his own benefit. On November 16, 2016, Mr. Shamus filed an Answer to the Complaint with counterclaims to the Complaint (the “Counterclaim”). The Counterclaim alleges breach of contract and unjust enrichment against the Company and seeks compensatory damages in the form of cash.
The lawsuit is in an early stage and the Company intends to thoroughly pursue its claims and establish a rigorous defense against the Counterclaim. In the event we fail to defend against the Counterclaim, we may be subject to a judgment which could materially impact our financial condition.
Other than the matter described above, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on April 14, 2016.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of the Company’s equity securities during the quarter ended September 30, 2016, that were not otherwise disclosed in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.
Item 4. Mine Safety Disclosures.
Not applicable.
On November 21, 2016, the Board of Directors (the “Board”) of the Company adopted the First Amendment to the Bylaws of the Company (the “Amendment”), effective immediately. The Amendment requires that only business properly brought before an annual meeting of the shareholders may be conducted at such meeting and sets forth the procedures to properly bring business before such meeting. To be properly brought before an annual meeting of the shareholders, business must be (i) specified in the notice given by the Board, (ii) otherwise properly brought before the meeting by the Board, or (c) otherwise properly brought by a shareholder of record of the Company.
For business to be properly brought by a shareholder, a shareholder must provide notice to the Secretary of the Company by no later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the anniversary of the of the preceding year’s annual meeting. The notice must set forth the following for each matter the shareholder proposes to bring before the annual meeting: (i) a brief description of the business and the reasons for conducting such business, (ii) the name and address of the shareholder, (iii) the class and number of shares beneficially owned by the shareholder, (iv) any material interest of the shareholder in such business, and (v) any other information that is required to be disclosed in a proxy statement.
In addition, pursuant to the Amendment, only persons nominated for election to the Board at an annual meeting of the shareholders may be made by the Board or by any shareholder of record entitled to vote at such meeting who complies with the notice provisions set forth in the Amendment. A shareholder must provide timely notice to the Secretary as described above and shall set forth as to each person proposed for nomination by the shareholder (i) the name, age, business address and residence address of such person, (ii) the principal occupation of such person, (iii) the class and number of shares beneficially owned by such person, (iv) description of all arrangements between the shareholder and each nominee, and (v) any other information relating to such persona that must be disclosed in a proxy statement.
The description of the Amendment set forth herein does not purport to be complete and is qualified in its entirety by reference to the full text filed as Exhibit 3.1 to this Report, and is incorporated herein by reference.
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Exhibit No. | Description | |
3.1 | First Amendment to the Bylaws of Wizard World, Inc.* | |
10.1 | 2016 Incentive Stock and Award Plan (as filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2016). | |
10.2 | Employment Agreement, dated July 15, 2016, by and between Wizard World, Inc. and John D. Maatta (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 20, 2016). | |
10.3 | Non-Compete, Non-Solicitation and Non-Disclosure Agreement, dated July 15, 2016, by and between Wizard World, Inc. and John D. Maatta (as filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 20, 2016). | |
10.4 | Indemnification Agreement, dated July 15, 2016, by and between Wizard World, Inc. and John D. Maatta (as filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on July 20, 2016). | |
10.5 | Option Agreement, dated July 15, 2016, by and between Wizard World, Inc. and John D. Maatta (as filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on July 20, 2016). | |
31.1 | Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). * | |
31.2 | Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). * | |
32.1 | Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * | |
32.2 | Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * | |
101.INS | XBRL Instance Document * | |
101.SCH | XBRL Taxonomy Extension Schema * | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase * | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase * | |
101.LAB | XBRL Taxonomy Extension Label Linkbase * | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase * |
* Filed herewith.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WIZARD WORLD, INC. | ||
Date: November 21, 2016 | By: | /s/ John D. Maatta |
Name: | John D. Maatta | |
Title: | Chief
Executive Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) |
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FIRST AMENDMENT TO THE
BY-LAWS
OF
WIZARD WORLD, INC.
The By-Laws (the “By-Laws”) of Wizard World, Inc., a Delaware corporation, formerly known as “GoEnergy Inc.” are hereby amended as follows:
1. The following provision shall be inserted as Section 8 of Article I of the By-Laws and each subsequent provision contained in Article I shall be renumbered accordingly:
“8. NOTICE TO CONDUCT BUSINESS.
(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (C) otherwise properly brought before the meeting by a stockholder of record of the corporation. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date of the previous year’s annual meeting, notice by the stockholder to be timely must be so received not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or, in the event public announcement of the date of such annual meeting is first made by the corporation fewer than seventy (70) days prior to the date of such annual meeting, the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation, and with respect to any annual meeting publicly announced by the corporation within sixty (60) days after adoption of the amendment to this Section 8 of Article I of the By-Laws on November 21, 2016, the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the postponement of a meeting as to which the notice of meeting has been sent to stockholders commence a new time period (or extend any time period) for giving of a stockholder’s notice as described above. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be disclosed in a proxy statement by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), in his capacity as a proponent to a stockholder proposal. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (a) of Section 8 (other than matters properly brought under Rule 14a-8 under the 1934 Act). The chair of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (a) of Section 8, and if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.
(b) Only persons who are nominated in accordance with the procedures set forth in this paragraph (b) of Section 8 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at an annual meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of record of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (b) of Section 8. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation in accordance with the provisions of paragraph (a) of this Section 8. Such stockholder’s notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the corporation that are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in a proxy statement in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (a) of this Section 8. At the request of the Board of Directors, any person nominated by a stockholder for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (b) of Section 8. The chair of the annual meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded.
(c) For purposes of this Section 8, “public announcement” or “publicly announced” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act and the rules and regulations promulgated thereunder.
2. Except as set forth above, the remaining provisions of the By-Laws shall not be amended hereby and shall remain in full force and effect in accordance with their respective terms.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John D. Maatta, certify that:
1. | I have reviewed this Form 10-Q of Wizard World, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 21, 2016 | By: | /s/ John D. Maatta |
John D. Maatta | ||
Principal Executive Officer | ||
Wizard World, Inc. |
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John D. Maatta, certify that:
1. | I have reviewed this Form 10-Q of Wizard World, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 21, 2016 | By: | /s/ John D. Maatta |
John D. Maatta | ||
Principal Financial Officer Wizard World, Inc. |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Wizard World, Inc. (the “Company”), on Form 10-Q for the period ended September 30, 2016, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, John D. Maatta, Principal Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | Such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 21, 2016 | By: | /s/ John D. Maatta |
John D. Maatta | ||
Principal Executive Officer | ||
Wizard World, Inc. |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Wizard World, Inc. (the “Company”), on Form 10-Q for the period ended September 30, 2016, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, John D. Maatta, Principal Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | Such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 21, 2016 | By: | /s/ John D. Maatta |
John D. Maatta | ||
Principal Financial Officer | ||
Wizard World, Inc. |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 18, 2016 |
|
Document And Entity Information | ||
Entity Registrant Name | Wizard World, Inc. | |
Entity Central Index Key | 0001162896 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 51,368,386 | |
Trading Symbol | WIZD | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2016 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares converted | ||
Preferred stock, shares designated | 50,000 | 50,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 80,000,000 | 80,000,000 |
Common stock, shares issued | 51,368,386 | 51,368,386 |
Common stock, shares outstanding | 51,368,386 | 51,368,386 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 39,101 | 39,101 |
Preferred stock, shares converted | 39,101 | 39,101 |
Preferred stock, shares designated | 50,000 | 50,000 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenue | ||||
Convention revenue | $ 6,267,631 | $ 6,805,316 | $ 20,768,937 | $ 20,350,830 |
ConBox revenue | 137,020 | 496,694 | 608,025 | 629,003 |
Total revenue | 6,404,651 | 7,302,010 | 21,376,962 | 20,979,833 |
Cost of revenue | 3,964,711 | 4,431,199 | 14,323,415 | 15,852,075 |
Gross margin | 2,439,940 | 2,870,811 | 7,053,547 | 5,127,758 |
Operating expenses | ||||
Compensation | 1,203,820 | 1,344,616 | 3,632,232 | 4,120,281 |
Consulting fees | 161,637 | 168,546 | 438,888 | 450,102 |
General and administrative | 598,019 | 453,939 | 1,901,456 | 1,545,182 |
Total operating expenses | 1,963,476 | 1,967,101 | 5,972,576 | 6,115,565 |
Income (loss) from operations | 476,464 | 903,710 | 1,080,971 | (987,807) |
Other expenses | ||||
Interest expense | (92) | (804) | (977) | (1,461) |
Loss on dispossal of equipment | (36,876) | (36,876) | ||
Loss on CONtv joint venture | (75,000) | (148,089) | (225,000) | (1,046,525) |
Other expenses | (111,968) | (148,893) | (262,853) | (1,047,986) |
Income (loss) before income tax provision | 364,496 | 754,817 | 818,118 | (2,035,793) |
Income tax provision | ||||
Net income (loss) | 364,496 | 754,817 | 818,118 | (2,035,793) |
Net income (loss) attributable to non-controlling interests | (720) | 29,199 | 68,233 | 23,413 |
Net income (loss) attributable to common stockholders | $ 365,216 | $ 725,618 | $ 749,885 | $ (2,059,206) |
Income (loss) per share | ||||
Basic | $ 0.01 | $ 0.01 | $ 0.01 | $ (0.04) |
Diluted | $ 0.01 | $ 0.01 | $ 0.01 | $ (0.04) |
Weighted average common shares outstanding - basic | 51,368,386 | 51,368,386 | 51,368,386 | 51,362,415 |
Weighted average common shares outstanding - diluted | 51,368,386 | 53,505,019 | 51,368,386 | 51,362,415 |
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) |
Preferred Stock Par Value $0.0001 [Member] |
Common Stock Par Value $0.0001 [Member] |
Additional Paid-In Capital [Member] |
Accumulated Deficit [Member] |
Non-controlling Interest [Member] |
Total |
---|---|---|---|---|---|---|
Balance at Dec. 31, 2015 | $ 5,138 | $ 17,341,268 | $ (16,013,296) | $ 17,706 | $ 1,350,816 | |
Balance, shares at Dec. 31, 2015 | 51,368,386 | |||||
Share-based compensation | 642,708 | 642,708 | ||||
Acquisition of controlling interest of ConBox | 96,781 | (96,781) | ||||
Net income | 749,885 | 68,233 | 818,118 | |||
Balance at Sep. 30, 2016 | $ 5,138 | $ 18,080,757 | $ (15,263,411) | $ (10,842) | $ 2,811,642 | |
Balance, shares at Sep. 30, 2016 | 51,368,386 |
Organization and Operations |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Operations |
Note 1 Organization and Operations
Wizard World, Inc.
Wizard World, Inc., formerly GoEnergy, Inc. (Wizard World or the Company) was incorporated on May 2, 2001, under the laws of the State of Delaware. We, through our operating subsidiary, are a producer of pop culture and live multimedia conventions across North America.
Kick the Can Corp.
Kick The Can Corp. was incorporated on September 20, 2010, under the laws of the State of Nevada.
Kicking the Can, L.L.C.
Kicking The Can, L.L.C. was formed on April 17, 2009, under the laws of the State of Delaware.
Acquisition of Kick the Can Corp. / Wizard Conventions, Inc. Recognized as a Reverse Acquisition
On December 7, 2010, the Company entered into and consummated a share exchange agreement (Share Exchange Agreement) with successor, Kick the Can Corp. (KTC Corp.) and its predecessors Wizard Conventions, Inc. and Kicking The Can, L.L.C. (collectively, Conventions). Pursuant to the Exchange Agreement, the Company issued 32,927,596 shares of its common stock to the KTC Corp. shareholders in exchange for 100% of the issued and outstanding shares of KTC Corp. The shares issued represented approximately 94.9% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement.
As a result of the controlling financial interest of the former stockholder of Conventions, for financial statement reporting purposes, the merger between the Company and Conventions has been treated as a reverse acquisition with KTC Corp. deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with section 805-10-55 of the Financial Accounting Standards Board (FASB) Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of KTC Corp. (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of KTC Corp. which are recorded at historical cost. The equity of the Company is the historical equity of KTC Corp. retroactively restated to reflect the number of shares issued by the Company in the transaction. Because of the predecessor/successor relationship between the Company and KTC Corp., Conventions ultimately became the accounting acquirer.
Wizard World Digital, Inc.
On March 18, 2011, the Company formed a wholly owned subsidiary called Wizard World Digital, Inc., a Nevada corporation (Digital). Digital never commenced operations or has employees, and Digital is currently dormant, pending execution of a digital strategy.
Wiz Wizard, LLC
On December 29, 2014, the Company and a member of the Board of Directors (the Board) of the Company formed Wiz Wizard, LLC (Wiz Wizard) under the law of the State of Delaware. The Company and the member of the Board each owned 50% of the membership interest and agreed to allocate the profits and losses accordingly upon repayment of the initial capital contributions on a pro rata basis. The Company consolidates its 50% equity interest and reports the remaining 50% equity interest owned by a member of the Board as the non-controlling interest in Wiz Wizard as the management of the Company believes that the Company has the control of Wiz Wizard. In addition, the Company and Wiz Wizard, launched ComicConBox (ConBox) in April 2015. ConBox is a subscription-based premium monthly box service featuring collectibles, exclusives, toys, tech and gaming, licensed artwork, superior comics and apparel, Comic Convention tickets, special VIP discounts and more, which will be shipped on or around the end of every month. The Company plans to continue to partner with major Comic Convention related brands and celebrities to deliver a high quality and variation of products directly to the front doors of its subscribers. On February 4, 2016, the member of the Board assigned his fifty percent (50%) membership interest to the Company. Consequently, Wiz Wizard is a wholly-owned subsidiary of the Company.
ButtaFyngas LLC
On April 10, 2015, the Company and an unrelated third party formed ButtaFyngas, LLC (ButtaFyngas) under the law of the State of Delaware. The Company and the unrelated party each own 50% of the membership interest and shall allocate the profits and losses accordingly upon repayment of the initial capital contributions on a pro rata basis. The Company consolidates its 50% equity interest and reports the remaining 50% equity interest owned by the third party as the non-controlling interest in ButtaFyngas. |
Liquidity and Management Plans |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity and Management Plans |
Note 2 - Liquidity and Management Plans
As reflected in the accompanying condensed consolidated financial statements, the Company incurred a net income and net cash used in operations of $749,885 and ($1,245,272), respectively, for the nine months ended September 30, 2016. As of September 30, 2016, the Company had a working capital of $2,543,922 and an accumulated deficit of $15,263,411. As of September 30, 2016, the Company had cash and cash equivalents of $3,188,406. The Company estimates the cash and cash equivalents currently on hand as of November 21, 2016 is insufficient to fund its operations on a long term basis past December 31, 2016. In order to fund operations past that date is dependent on managements plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, or the significant reduction of operating expenses until such time that funds provided by operations are sufficient to fund working capital requirements. There is no assurance that the Companys projections and estimates are accurate. The Company is actively managing and controlling the Companys cash outflows to mitigate these risks. |
Significant and Critical Accounting Policies and Practices |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant and Critical Accounting Policies and Practices |
Note 3 Significant and Critical Accounting Policies and Practices
The management of the Company is responsible for the selection and use of appropriate accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Companys financial condition and results and require managements most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Companys significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on April 14, 2016.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Principles of Consolidation
The condensed consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
All inter-company balances and transactions have been eliminated. Noncontrolling interest represents the minority equity investment in the Companys subsidiaries, plus the minority investors share of the net operating results and other components of equity relating to the noncontrolling interest.
As of September 30, 2016, the aggregate non-controlling interest in ButtaFyngas was ($10,842). As of December 31, 2015, the aggregate non-controlling interest in Wiz Wizard and ButtaFyngas was $17,706. The non-controlling interest is separately disclosed on the Condensed Consolidated Balance Sheet.
Investments - Cost Method, Equity Method and Joint Venture
In accordance with sub-topic 323-10 of the FASB ASC (Sub-topic 323-10), the Company accounts for investments in common stock of an investee for which the Company has significant influence in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock.
Method of Accounting
Investments held in stock of entities other than subsidiaries, namely corporate joint ventures and other non-controlled entities usually are accounted for by one of three methods: (i) the fair value method (addressed in Topic 320), (ii) the equity method (addressed in Topic 323), or (iii) the cost method (addressed in Subtopic 325-20). Pursuant to Paragraph 323-10-05-5, the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee.
Investment in CONtv
On August 27, 2014, the Company entered into a joint venture and executed an Operating Agreement for CON TV LLC (CONtv) with Cinedigm Entertainment Corp. (Cinedigm), ROAR, LLC (a related party partially owned by a member of the Board) (ROAR) and Bristol Capital, LLC (a related party controlled by a member of the Board) (Bristol Capital). The Company owned a 47.50% interest in the newly formed entity, CONtv. The Company was accounting for the interest in the joint venture utilizing the equity method of accounting.
On November 16, 2015, pursuant to that certain Amended and Restated Operating Agreement for CONtv by and among the aforementioned parties (the A&R Operating Agreement), the Companys ownership interest in CONtv was reduced to 10%. Pursuant to the A&R Operating Agreement, the Company is only obligated to fund on-going costs in the amount of $25,000 in cash on an on-going monthly basis for a period of 12 months following the effective date.
For the three months ended September 30, 2016 and 2015, the Company recognized $75,000 and $148,089 in losses from this venture, respectively. For the nine months ended September 30, 2016 and 2015, the Company recognized $225,000 and $1,046,525 in losses from this venture, respectively. As of September 30, 2016 and December 31, 2015, the investment in CONtv was $0.
Revenue Recognition and Cost of Revenues
The Company follows Paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Unearned convention revenue is deposits received for conventions that have not yet taken place, which are fully or partially refundable depending upon the terms and conditions of the agreements.
Unearned ConBox revenue is non-refundable up-front payments for products. These payments are initially deferred and subsequently recognized over the subscription period, typically three months, and upon shipment of the product.
The Company recognizes cost of revenues in the period in which the revenues was earned. In the event the Company incurs cost of revenues for conventions that are yet to occur, the Company records such amounts as prepaid expenses and such prepaid expenses are expensed during the period the convention takes place.
Earnings Per Share
Earnings per share (EPS) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23, diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of Paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260105523). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: (a.) exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued, (b.) the proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See Paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.), and (c.) the incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.
The following table shows the outstanding dilutive common shares excluded from the diluted net income (loss) per share calculation as they were anti-dilutive:
The computations of basic and diluted net income attributable to common stockholders are as follows:
(a) - Weighted-average common shares outstanding.
The Companys contingent share issuance arrangements, stock options and warrants are as follows:
Income Taxes
In the ordinary course of business, there is inherent uncertainty in quantifying income tax positions. The Company assesses its income tax positions and records tax assets or liabilities for all years subject to examination based upon managements evaluation of the facts and circumstances and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense or benefit.
During the nine months ended September 30, 2016, the Company partially utilized NOL carry-forwards to offset taxable income.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to Accounting Standards Update (ASU) 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
In July 2015, the FASB issued the ASU No. 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-11 on the condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entitys leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its condensed consolidated financial statements and disclosures.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (topic 606). In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (topic 606). These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, Revenue from Contracts with Customers. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entitys promise to grant a license provides a customer with either a right to use an entitys intellectual property or a right to access an entitys intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entitys adoption of ASU 2014-09, which we intend to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard.
In April 2016, the FASB issued ASU No. 2016-09, Compensation Stock Compensation (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the impact of the new standard.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements. |
Property and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment |
Note 4 Property and Equipment
Property and equipment stated at cost, less accumulated depreciation, consisted of the following:
Depreciation expense was $117,589 and $85,448 for the nine months ended September 30, 2016 and 2015, respectively.
During the nine months ended September 30, 2016, the Company disposed of property and equipment receiving proceeds of $4,850 and recorded a loss of $36,876. |
Investment in CONtv Joint Venture |
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Investment In Contv Joint Venture | |
Investment in CONtv Joint Venture |
Note 5 Investment in CONtv Joint Venture
For the nine months ended September 30, 2016 and 2015, the Company recognized $225,000 and $1,046,525 in losses from this venture, respectively.
As of September 30, 2016 and December 31, 2015, the Company has a balance due to CONtv of $186,741 and $111,741, respectively. |
Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions |
Note 6 Related Party Transactions
Wiz Wizard
On December 29, 2014, the Company and a member of the Board formed Wiz Wizard (d/b/a ConBox) in the State of Delaware. The Company and the member of the Board each owned 50% of the membership interest and agreed to allocate the profits and losses accordingly upon repayment of the initial capital contributions on a pro rata basis. On February 4, 2016, the member of the Board assigned his fifty percent (50%) membership interest to the Company. Operating Sublease
On June 16, 2016, the Company entered into a Standard Multi-Tenant Sublease (Sublease) with Bristol Capital Advisors, LLC (Bristol Capital Advisors), an entity controlled by the Companys Chairman of the Board. The term of the Sublease is for 5 years and 3 months beginning on July 1, 2016 with monthly payments of $8,118. Upon execution of the Sublease, the Company paid a security deposit of $9,137 and $199,238 for prepaid rent. See Note 6 for future minimum rent payments due.
Outsourced Marketing
During the nine months ended September 30, 2016, the Company utilized outsourced marketing support from a company affiliated with ROAR, which is partially owned by a member of the Board. The Company had expenses of $36,809 during the nine months ended September 30, 2016 and had an outstanding payable of $13,703 as of September 30, 2016. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Note 7 Commitments and Contingencies
Employment Agreements
Appointment of Executive Vice President and Chief Operating Officer
On November 8, 2016, the Company formally entered into an employment agreement (the Malinoff Employment Agreement) with Randall S. Malinoff in connection with his appointment as the Companys Executive Vice President and Chief Operating Officer on July 14, 2016 (the Effective Date) to serve for a period of two years from the Effective Date. In connection with such appointment, Mr. Malinoff will receive an annual base salary of $225,000 and will be eligible for a performance-based bonus at the discretion of the Board. On November 8, 2016, pursuant to the terms of the Malinoff Employment Agreement, the Company granted 600,000 stock options to Mr. Malinoff.
Appointment of President and Chief Executive Officer
On April 22, 2016, the Board approved the appointment of Mr. John D. Maatta as the Companys President and Chief Executive Officer, effective as of May 3, 2016. Mr. Maatta will continue to serve as a member of the Board. In addition, the Board granted Mr. Maatta options to purchase up to an aggregate of 1,100,000 shares of the Companys common stock, subject to the terms and conditions of the Third Amended and Restated 2011 Stock Incentive and Award Plan. Mr. Maatta formally entered into his Employment Agreement with the Company on July 17, 2016.
Mr. Maatta received the following, with effective dates as defined below:
Operating Lease
Effective July 17, 2014, the Company entered into a sublease, as lessee, with Ironclad Performance Wear Corporation, as lessor, for new space located in El Segundo, California (the Ironclad Sublease). The term of the Ironclad Sublease was for one year and ten (10) months commencing on September 1, 2014. Pursuant to the Ironclad Sublease, the Company paid base rent of $11,132 per month and an initial security deposit of $11,466 was required.
The lease matured during the three months ended March 31, 2016. The Company is awaiting the return of the security deposit from the lessor.
On June 16, 2016, the Company entered into a Standard Multi-Tenant Sublease (Sublease) with Bristol Capital Advisors, an entity controlled by the Companys Chairman of the Board. The term of the Sublease is for 5 years and 3 months beginning on July 1, 2016 with monthly payments of $8,118. Upon execution of the Sublease, the Company paid a security deposit of $9,137 and $199,238 for prepaid rent. See below for future minimum rent payments due.
Future minimum lease payments inclusive of related tax required under the non-cancelable operating lease are as follows:
Obligation to Fund CONtv
As discussed in Note 1, on November 16, 2015, pursuant to that certain A&R Operating Agreement for CONtv, the Companys ownership interest in CONtv was reduced to 10%. In addition, the Company is only obligated to fund on-going costs in the amount of $25,000 in cash on an on-going monthly basis for a period of 12 months following the effective date.
Shamus Lawsuit
On October 28, 2016, the Company filed a Complaint (the Complaint) and commenced a lawsuit in the United States District Court, Southern District of New York, against Stephen Shamus, the former Chief Marketing Officer of the Company whose employment was terminated on October 27, 2016 (the Shamus Lawsuit). In the Shamus Lawsuit, the Company alleges, among other things, breach of fiduciary duty, misappropriation of corporation assets, breach of contract, and conversion, against Mr. Shamus relating to the Companys assertion that he used his position with the Company to improperly obtain memorabilia at the Companys comic conventions which he would then sell and retain the profits from for his own benefit. On November 16, 2016, Mr. Shamus filed an Answer to the Complaint with counterclaims to the Complaint (the Counterclaim). The Counterclaim alleges breach of contract and unjust enrichment against the Company and seeks compensatory damages in the form of cash.
The lawsuit is in an early stage and the Company intends to thoroughly pursue its claims and establish a rigorous defense against the Counterclaim. In the event we fail to defend against the Counterclaim, we may be subject to a judgment which could materially impact our financial condition. |
Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity |
Note 8 Stockholders Equity
The Companys authorized capital stock consists of 100,000,000 shares, of which 80,000,000 are for shares of common stock, par value $0.0001 per share, and 20,000,000 are for shares of preferred stock, par value $0.0001 per share, of which 50,000 have been designated as Series A Cumulative Convertible Preferred Stock. As of September 30, 2016 and December 31, 2015, there were 51,368,386 shares of our common stock issued and outstanding. Each share of our common stock entitles its holder to one vote on each matter submitted to the shareholders.
Stock Options
The following is a summary of the Companys option activity:
At September 30, 2016, the total intrinsic value of options outstanding and exercisable was $0 and $0, respectively.
The Company recognized an aggregate of $642,708 and $999,278 in compensation expense during the periods ended September 30, 2016 and 2015, respectively, related to option awards. |
Credit Risk |
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Risks and Uncertainties [Abstract] | |
Credit Risk |
Note 9 Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. As of September 30, 2016, substantially all of the Companys cash and cash equivalents were held by major financial institutions and the balance in certain accounts exceeded the maximum amount insured by the Federal Deposits Insurance Corporation (FDIC). However, the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant risks on such accounts. |
Segment Information |
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Segment Information |
Note 10 Segment Information
The Company evaluates performance of its operating segments based on revenue and operating profit (loss). Segment information for the three and nine months ended September 30, 2016 and 2015 and as of September 30, 2016 and December 31, 2015, are as follows:
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Significant and Critical Accounting Policies and Practices (Policies) |
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Basis of Presentation - Unaudited Interim Financial Information |
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on April 14, 2016. |
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Use of Estimates |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
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Principles of Consolidation |
Principles of Consolidation
The condensed consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
All inter-company balances and transactions have been eliminated. Noncontrolling interest represents the minority equity investment in the Companys subsidiaries, plus the minority investors share of the net operating results and other components of equity relating to the noncontrolling interest.
As of September 30, 2016, the aggregate non-controlling interest in ButtaFyngas was ($10,842). As of December 31, 2015, the aggregate non-controlling interest in Wiz Wizard and ButtaFyngas was $17,706. The non-controlling interest is separately disclosed on the Condensed Consolidated Balance Sheet. |
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Investments - Cost Method, Equity Method and Joint Venture |
Investments - Cost Method, Equity Method and Joint Venture
In accordance with sub-topic 323-10 of the FASB ASC (Sub-topic 323-10), the Company accounts for investments in common stock of an investee for which the Company has significant influence in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock. |
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Method of Accounting |
Method of Accounting
Investments held in stock of entities other than subsidiaries, namely corporate joint ventures and other non-controlled entities usually are accounted for by one of three methods: (i) the fair value method (addressed in Topic 320), (ii) the equity method (addressed in Topic 323), or (iii) the cost method (addressed in Subtopic 325-20). Pursuant to Paragraph 323-10-05-5, the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee. |
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Investment in CONTV |
Investment in CONtv
On August 27, 2014, the Company entered into a joint venture and executed an Operating Agreement for CON TV LLC (CONtv) with Cinedigm Entertainment Corp. (Cinedigm), ROAR, LLC (a related party partially owned by a member of the Board) (ROAR) and Bristol Capital, LLC (a related party controlled by a member of the Board) (Bristol Capital). The Company owned a 47.50% interest in the newly formed entity, CONtv. The Company was accounting for the interest in the joint venture utilizing the equity method of accounting.
On November 16, 2015, pursuant to that certain Amended and Restated Operating Agreement for CONtv by and among the aforementioned parties (the A&R Operating Agreement), the Companys ownership interest in CONtv was reduced to 10%. Pursuant to the A&R Operating Agreement, the Company is only obligated to fund on-going costs in the amount of $25,000 in cash on an on-going monthly basis for a period of 12 months following the effective date.
For the three months ended September 30, 2016 and 2015, the Company recognized $75,000 and $148,089 in losses from this venture, respectively. For the nine months ended September 30, 2016 and 2015, the Company recognized $225,000 and $1,046,525 in losses from this venture, respectively. As of September 30, 2016 and December 31, 2015, the investment in CONtv was $0. |
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Revenue Recognition and Cost Revenues |
Revenue Recognition and Cost of Revenues
The Company follows Paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Unearned convention revenue is deposits received for conventions that have not yet taken place, which are fully or partially refundable depending upon the terms and conditions of the agreements.
Unearned ConBox revenue is non-refundable up-front payments for products. These payments are initially deferred and subsequently recognized over the subscription period, typically three months, and upon shipment of the product.
The Company recognizes cost of revenues in the period in which the revenues was earned. In the event the Company incurs cost of revenues for conventions that are yet to occur, the Company records such amounts as prepaid expenses and such prepaid expenses are expensed during the period the convention takes place. |
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Earnings per Share |
Earnings Per Share
Earnings per share (EPS) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23, diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of Paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260105523). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: (a.) exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued, (b.) the proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See Paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.), and (c.) the incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.
The following table shows the outstanding dilutive common shares excluded from the diluted net income (loss) per share calculation as they were anti-dilutive:
The computations of basic and diluted net income attributable to common stockholders are as follows:
(a) - Weighted-average common shares outstanding.
The Companys contingent share issuance arrangements, stock options and warrants are as follows:
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Income Taxes |
Income Taxes
In the ordinary course of business, there is inherent uncertainty in quantifying income tax positions. The Company assesses its income tax positions and records tax assets or liabilities for all years subject to examination based upon managements evaluation of the facts and circumstances and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense or benefit.
During the nine months ended September 30, 2016, the Company partially utilized NOL carry-forwards to offset taxable income. |
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Subsequent Events |
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to Accounting Standards Update (ASU) 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. |
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Recently Issued Accounting Pronouncements |
Recently Issued Accounting Pronouncements
In July 2015, the FASB issued the ASU No. 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-11 on the condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entitys leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its condensed consolidated financial statements and disclosures.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (topic 606). In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (topic 606). These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, Revenue from Contracts with Customers. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entitys promise to grant a license provides a customer with either a right to use an entitys intellectual property or a right to access an entitys intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entitys adoption of ASU 2014-09, which we intend to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard.
In April 2016, the FASB issued ASU No. 2016-09, Compensation Stock Compensation (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the impact of the new standard.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements. |
Significant and Critical Accounting Policies and Practices (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Consolidated Interest in Controlling Entities |
The condensed consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows:
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Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share |
The following table shows the outstanding dilutive common shares excluded from the diluted net income (loss) per share calculation as they were anti-dilutive:
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Summary of Computation of Loss per Share |
The computations of basic and diluted net income attributable to common stockholders are as follows:
(a) - Weighted-average common shares outstanding. |
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Schedule of Contingent Share Issuance Arrangements, Stock Options and Warrants |
The Companys contingent share issuance arrangements, stock options and warrants are as follows:
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Property and Equipment (Tables) |
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Schedule of Property and Equipment |
Property and equipment stated at cost, less accumulated depreciation, consisted of the following:
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Commitments and Contingencies (Tables) |
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Schedule of Future Minimum Rental Payments for Non-Cancelable Operating Lease |
Future minimum lease payments inclusive of related tax required under the non-cancelable operating lease are as follows:
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Stockholders' Equity (Tables) |
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Summary of Stock Option Activity |
The following is a summary of the Companys option activity:
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Schedule of Information Regarding Stock Options Outstanding |
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue from Segment Information |
The Company evaluates performance of its operating segments based on revenue and operating profit (loss). Segment information for the three and nine months ended September 30, 2016 and 2015 and as of September 30, 2016 and December 31, 2015, are as follows:
|
Organization and Operations (Details Narrative) - shares |
Dec. 07, 2010 |
Sep. 30, 2016 |
Feb. 04, 2016 |
Apr. 10, 2015 |
Dec. 29, 2014 |
---|---|---|---|---|---|
Equity method investment ownership percentage | 50.00% | 50.00% | 50.00% | ||
Percentage of equity interest owned by member of board as non-controlling interest | 50.00% | 50.00% | |||
Percentage of equity interest and reports remaining | 50.00% | 50.00% | |||
Wiz Wizard, LLC [Member] | |||||
Percentage of membership interest | 50.00% | ||||
Share Exchange Agreement [Member] | KTC Corp [Member] | |||||
Stock issued during period shares for acquisitions | 32,927,596 | ||||
Exchange percentage of issued and outstanding shares of KTC Corp | 100.00% | ||||
Percentage of represented shares after consummation of share exchange agreement | 94.90% |
Liquidity and Management Plans (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Net income | $ 365,216 | $ 725,618 | $ 749,885 | $ (2,059,206) | ||
Net cash used in operations | (1,245,272) | (482,524) | ||||
Working capital | 2,543,922 | 2,543,922 | ||||
Accumulated deficit | 15,263,411 | 15,263,411 | $ 16,013,296 | |||
Cash and cash equivalents | $ 3,188,406 | $ 4,277,522 | $ 3,188,406 | $ 4,277,522 | $ 4,723,699 | $ 5,790,724 |
Significant and Critical Accounting Policies and Practices (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Nov. 16, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
Apr. 10, 2015 |
Dec. 29, 2014 |
Aug. 27, 2014 |
|
Non-controlling interest | $ (10,842) | $ (10,842) | $ 17,706 | ||||||
Percentage of shares in another entity | 50.00% | 50.00% | 50.00% | 50.00% | |||||
Ownership interest in CONtv | 50.00% | 50.00% | |||||||
Recognized losses from the venture | $ 75,000 | $ 148,089 | $ 225,000 | $ 1,046,525 | |||||
Investment in CONtv | $ 0 | $ 0 | $ 0 | ||||||
Largest amount of tax benefit with greater than liklihood | 50% | ||||||||
A&R [Member} | |||||||||
Ownership interest in CONtv | 10.00% | ||||||||
Fund on-going costs | $ 25,000 | ||||||||
Con Tv LLC [Member] | |||||||||
Percentage of shares in another entity | 47.50% |
Significant and Critical Accounting Policies and Practices - Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Total antidilutive securities | 4,419,000 | 7,580,000 |
Stock Options [Member] | ||
Total antidilutive securities | 4,419,000 | 7,580,000 |
Significant and Critical Accounting Policies and Practices - Summary of Computation of Loss per Share (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Accounting Policies [Abstract] | ||||
Net income attributable to common stockholders | $ 365,216 | $ 725,618 | $ 749,885 | $ (2,059,206) |
Basic net income per common share | $ 0.01 | $ 0.01 | $ 0.01 | $ (0.04) |
Net income attributable to common stockholders, shares | 51,368,386 | 51,368,386 | 51,368,386 | 51,362,415 |
Dilutive securities: Options | ||||
Diluted net income | $ 365,216 | $ 749,885 | ||
Diluted net income, shares | 51,368,386 | 53,505,019 | 51,368,386 | 51,362,415 |
Diluted net income per common share | $ 0.01 | $ 0.01 | $ 0.01 | $ (0.04) |
Significant and Critical Accounting Policies and Practices - Schedule of Contingent Share Issuance Arrangements, Stock Options and Warrants (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Total contingent share issuance arrangements, stock options and warrants | 4,419,000 | 7,580,000 |
Stock Options [Member] | ||
Total contingent share issuance arrangements, stock options and warrants | 4,419,000 | 7,580,000 |
Property and Equipment (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 117,589 | $ 85,448 | ||
Proceeds from disposal of property and equipment | 4,850 | |||
Loss on disposal of equipment | $ 36,876 | $ 36,876 |
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Computer Equipment | $ 31,887 | $ 33,792 |
Equipment | 382,728 | 343,359 |
Furniture and Fixtures | 42,609 | 48,950 |
Construction in Progress | 20,264 | |
Total | 477,488 | 426,101 |
Less: Accumulated Depreciation | (241,146) | (175,315) |
Property and equipment, net | $ 236,342 | $ 250,786 |
Investment in CONtv Joint Venture (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Investment In Contv Joint Venture Details Narrative | |||||
Loss from venture | $ 75,000 | $ 148,089 | $ 225,000 | $ 1,046,525 | |
Due to CONtv | $ 186,741 | $ 186,741 | $ 111,741 |
Related Party Transactions (Details Narrative) - USD ($) |
9 Months Ended | |||||
---|---|---|---|---|---|---|
Jun. 16, 2016 |
Sep. 30, 2016 |
Feb. 04, 2016 |
Dec. 31, 2015 |
Apr. 10, 2015 |
Dec. 29, 2014 |
|
Equity method investment ownership percentage | 50.00% | 50.00% | 50.00% | |||
Security deposit | $ 31,378 | $ 21,066 | ||||
Prepaid rent | 191,120 | |||||
Wiz Wizard, LLC [Member] | ||||||
Equity method investment ownership percentage | 50.00% | |||||
Wiz Wizard, LLC [Member] | ||||||
Percentage of membership interest | 50.00% | |||||
Bristol Capital Advisors, LLC [Member] | ||||||
Lease term | 5 years 3 months | |||||
Monthly lease payment | $ 8,118 | |||||
Security deposit | 9,137 | |||||
Prepaid rent | $ 199,238 | |||||
ROAR, LLC [Member] | ||||||
Outsourced marketing expenses | 36,809 | |||||
Outstanding payable | $ 13,703 |
Commitments and Contingencies - Schedule of Future Minimum Rental Payments for Non-Cancelable Operating Lease (Details) |
Sep. 30, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2016 (remainder of year) | $ 36,972 |
2017 | 145,800 |
2018 | 97,416 |
2019 | 97,416 |
2020 | 97,416 |
Thereafter | 73,062 |
Future minimum lease payments | $ 548,082 |
Stockholders' Equity (Details Narrative) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Authorized capital stock | 100,000,000 | ||
Number of common stock authorized | 80,000,000 | 80,000,000 | |
Common stock par value | $ 0.0001 | $ 0.0001 | |
Number of preferred stock authorized | 20,000,000 | 20,000,000 | |
Preferred stock par value | $ 0.0001 | $ 0.0001 | |
Preferred stock, shares designated | 50,000 | 50,000 | |
Common stock issued | 51,368,386 | 51,368,386 | |
Common stock outstanding | 51,368,386 | 51,368,386 | |
Common stock voting rights | Each share of our common stock entitles its holder to one vote on each matter submitted to the shareholders. | ||
Intrinsic value of options outstanding | $ 0 | ||
Intrinsic value of options exercisable | 0 | ||
Shares compensation expense | $ 642,708 | $ 999,278 | |
Series A Convertible Preferred Stock [Member] | |||
Preferred stock par value | $ 0.0001 | $ 0.0001 | |
Preferred stock, shares designated | 50,000 | 50,000 |
Stockholders' Equity - Schedule of Information Regarding Stock Options Outstanding (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Equity [Abstract] | |
Range of Exercise Price Lower Limit | $ 0.40 |
Range of Exercise Price Upper limit | $ 0.94 |
Number of Shares Outstanding | shares | 4,419,000 |
Weighted Average Remaining Contractual Life (years) | 3 years 1 month 10 days |
Weighted Average Exercise Price | $ 0.57 |
Number of Shares Exercisable | shares | 1,240,500 |
Weighted Average Exercise Price | $ 0.46 |
Segment Information - Schedule of Revenue from Segment Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
Dec. 30, 2015 |
|
Revenue | $ 6,404,651 | $ 7,302,010 | $ 21,376,962 | $ 20,979,833 | ||
Cost of revenue | (3,964,711) | (4,431,199) | (14,323,415) | (15,852,075) | ||
Gross margin | 2,439,940 | 2,870,811 | 7,053,547 | 5,127,758 | ||
Operating expenses | (1,963,476) | (1,967,101) | (5,972,576) | (6,115,565) | ||
Operating profit (loss) | 476,464 | 903,710 | 1,080,971 | (987,807) | ||
Accounts receivable, net | 266,020 | 266,020 | $ 407,142 | |||
Unearned revenue | 510,360 | 510,360 | 3,731,498 | |||
Conventions [Member] | ||||||
Revenue | 6,267,631 | 6,805,316 | 20,768,937 | 20,350,830 | ||
Cost of revenue | (3,888,811) | (4,003,067) | (13,672,094) | (15,300,576) | ||
Gross margin | 2,378,820 | 2,802,249 | 7,096,843 | 5,050,254 | ||
Operating expenses | (1,964,872) | (1,947,994) | (5,958,148) | (6,084,882) | ||
Operating profit (loss) | 413,948 | 854,255 | 1,138,695 | (1,034,628) | ||
Accounts receivable, net | 177,310 | 177,310 | 108,795 | |||
Unearned revenue | 414,814 | 414,814 | $ 3,340,837 | |||
ConBox [Member] | ||||||
Revenue | 137,020 | 496,694 | 608,025 | 629,003 | ||
Cost of revenue | (75,900) | (428,132) | (651,321) | (551,499) | ||
Gross margin | 61,120 | 68,562 | (43,296) | 77,504 | ||
Operating expenses | (1,396) | (19,107) | (14,428) | (30,679) | ||
Operating profit (loss) | 62,516 | $ 49,455 | (57,724) | $ 46,825 | ||
Accounts receivable, net | 88,710 | 88,710 | $ 298,347 | |||
Unearned revenue | $ 95,546 | $ 95,546 | $ 390,661 |
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