Eva Live Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Eva Live operates digital advertising and media-monetization platforms, including the Eva Platform and Eva XML Platform. It reported as a smaller reporting company and emerging growth company.
Financial results and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1,699,173 | $209,990 | $3,124,652 | $1,049,135 |
| Operating income (loss) | $489,989 | ($299,488) | $862,401 | ($1,940,261) |
| Net income (loss) | $489,989 | ($299,488) | $862,401 | ($1,940,261) |
| Media traffic expense | $979,000 | $149,304 | $1,580,172 | $931,000 |
| General and administrative expense | $175,740 | $305,730 | $518,746 | $1,440,029 |
Revenue increased about 709% year over year in Q3 and about 198% for the nine-month period. The company attributed growth to a larger customer base and larger contracts. Operating margins were approximately 28.8% in Q3 and 27.6% for the nine months; no income tax provision was reported. Basic and diluted EPS were reported as $0.00 for Q3 and $0.01 for the nine months.
At September 30, cash was $555,303, versus $38,506 at December 31, 2022. Current assets were $1,490,222 and current liabilities $1,956,822, yielding a $466,600 working-capital deficit. Current liabilities included $1,832,194 of accounts payable and accrued liabilities and $124,628 owed to a related party. The balance sheet also reported a $40,832 PPP loan, unchanged from year-end 2022. Total assets were $3,530,992, including $2,010,606 of goodwill; stockholders’ equity was $1,533,338.
The cash-flow statement reports a $516,797 increase in cash for the nine months, with $516,797 shown for operating cash flow and no investing or financing cash flows. However, the operating cash-flow line is labeled “used,” its reconciliation begins with positive $862,401 as “net loss,” and management separately describes operating cash flows as negative. The filing therefore does not present a clear, internally consistent operating cash-flow characterization.
Changes, outlook, and risks
- The company moved from a loss to net income compared with the prior-year periods. G&A expense fell materially, while media traffic expense rose as revenue expanded.
- Management and the financial-statement notes state that substantial doubt exists about the company’s ability to continue as a going concern. The company says it needs additional capital for growth and operations, expects to seek equity or debt financing, and provides no assurance that financing will be available on acceptable terms.
- Management expects up to $250,000 in capital expenditures over the next 12 months. It also cites additional spending needs for sales and marketing and working capital, but the reported amounts are unclear: the text gives $250,000 and then lists $100,000 and “$1500,000.”
- Customer concentration is a significant risk: the filing says the top three customers accounted for over 92% of revenue in 2021 and 2022. Accounts receivable primarily relates to two customers; the balance was $933,514, net of a $183,744 allowance.
- The company recorded a $1.5 million impairment of AdFlare goodwill in 2022; $2,010,606 of goodwill from the earlier EvaMedia transaction remained on the September 2023 balance sheet. Capitalized website/software costs declined to $30,164 after amortization.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at quarter-end, citing inadequate segregation of duties and insufficient written accounting, IT, and reporting procedures. It described remediation plans, including additional review and possible staffing and professional support.
- The company reported no pending legal proceedings or off-balance-sheet arrangements. A subsequent event was the SEC’s November 11, 2023 notice that its Form S-1 registration statement was effective.
Important facts for investors to verify
- Reconcile the cash-flow statement’s “used” label and positive operating cash-flow amount with management’s statements that operating cash flows are negative.
- Clarify the working-capital and sales-and-marketing funding estimates, including the apparent “$1500,000” figure, and assess financing availability and runway.
- Review customer concentration, receivable collectability, and the allowance for doubtful accounts.
- Confirm the status, repayment or forgiveness terms of the $40,832 PPP loan and the timing of accrued and related-party liabilities.
- Monitor remediation of the disclosed control weaknesses and reassess goodwill carrying values and impairment assumptions.