Eva Live Inc. — Q1 2024 Form 10-Q
Period: Three months ended March 31, 2024; filed May 17, 2024. Eva Live operates digital advertising and media-monetization platforms, including AI-based campaign management and its Eva XML traffic-buying platform. The company says it earns revenue under a principal-based model.
Financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $2,236,950 | $345,813 |
| Operating expenses | $2,046,809 | $453,927 |
| Operating and net income (loss) | $190,141 | ($108,114) |
| Operating / net margin | 8.5% | (31.3%) |
| Cash flow from operations, as presented | $1,031,856 provided | $12,364 used |
Revenue rose approximately 547% year over year. Management attributes the increase to customer growth from seven to nine and larger contracts. Media traffic purchases, made exclusively through related party Hottest Media LLC, were $1,661,968 (74.3% of revenue), versus $198,172 (57.3%) a year earlier. General and administrative expense was $384,841 (17.2% of revenue), versus $201,311 (58.2%). No amortization or depreciation was recorded in Q1 2024, compared with $54,444 in Q1 2023. Reported basic and diluted earnings per share rounded to $0.00.
Balance sheet and liquidity
- Cash was $1,504,365 at March 31, up from $472,509 at December 31, 2023.
- Current assets were $2,158,128 and current liabilities $2,029,128, resulting in working capital of $129,000, compared with a $61,141 deficit at year-end.
- Total liabilities were $2,029,128, principally $1,898,628 of accrued payroll liabilities owed to related parties. The filing reports no borrowings on the quarter-end balance sheet.
- Net accounts receivable was $653,494, after a $624,898 allowance; receivables primarily relate to two customers.
- Accumulated deficit was $23,985,950. Goodwill was $2,010,606; capitalized software had no unamortized balance.
The cash-flow statement reports positive operating cash flow of $1,031,856, primarily reflecting a $941,424 reduction in accounts receivable. This conflicts with management’s narrative that the company continues to experience negative operating cash flows. The filing provides no clear reconciliation of that discrepancy.
Outlook, risks, and other material matters
- Management and the financial-statement note disclose substantial doubt about the company’s ability to continue as a going concern. The company expects to seek additional private or public-market financing; availability and terms are uncertain.
- Management expects to invest in sales, marketing, product support, and technology, and estimates capital expenditures of up to $250,000 over the next 12 months. The additional spending estimate and its allocation are unclear in the filing: it states $250,000 of additional expenditure but lists $100,000 for sales and marketing and “$1500,000” for working capital.
- In April 2024, after quarter-end, the company secured a six-month convertible note with $200,000 face value, purchased for $170,000, bearing 12.5% interest; the filing says the $170,000 purchase price had been received.
- The top three customers accounted for over 83% of Q1 2024 revenue, compared with 70% in Q1 2023. Management warns that reduced spending or loss of major customers could materially affect results.
- Hottest Media LLC was the sole media buyer in both periods and is a related party, creating related-party transaction and dependency risk. The CEO’s annual salary is $360,000; related-party payroll liabilities increased to $1,898,628.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at March 31, citing inadequate segregation of duties and insufficient written accounting, IT, and reporting procedures. Remediation plans include additional review, staffing, and outside professional support.
- The company reports no pending litigation and no off-balance-sheet arrangements. It says it has no operating exposure to the Russia–Ukraine conflict.
Important facts for investors to verify
- Reconcile the reported positive operating cash flow with management’s statements about negative operating cash flows and funding needs.
- Assess the collectability and concentration of receivables, including the allowance and exposure to two customers.
- Review customer and related-party concentration, including Hottest Media’s role and the substantial accrued related-party payroll.
- Confirm the convertible note’s conversion terms and repayment obligations; those terms are not clearly provided in the supplied filing text.
- Clarify the company’s stated working-capital spending estimate, which appears inconsistent or malformed, and its financing plans given the going-concern warning.
- Consider the disclosed ineffective controls and whether management’s remediation plans are implemented and effective.