ENTREPRENEUR UNIVERSE BRIGHT GROUP SEC 10-Q Report

Entrepreneur Universe Bright Group (EUBG), a company primarily engaged in consultancy services and sourcing and marketing services, has released its Form 10-Q report for the third quarter of 2024. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

For the three months ended September 30, 2024, EUBG reported:

• Revenue: $1.67 million, a decrease of 2.6% compared to the same period in the prior year, primarily due to a drop in consultation services for a client engaged in live streaming business.
• Gross Profit: $1.49 million, a decrease of 4.1% compared to the same period in the prior year, attributed to additional consultancy and labor costs.
• Operating Income: $1.07 million, a decrease of 12.0% compared to the same period in the prior year.
• Net Income: $703,615, a decrease of 5.1% compared to the same period in the prior year.
• Net Income Per Share: $0.00, consistent with the same period in the prior year.

For the nine months ended September 30, 2024, the company reported:

• Revenue: $4.19 million, a decrease of 8.8% compared to the same period in the prior year, mainly due to a drop in consultation services for a client engaged in live streaming business.
• Gross Profit: $3.68 million, a decrease of 13.5% compared to the same period in the prior year, due to additional consultancy and labor costs.
• Operating Income: $2.38 million, a decrease of 21.9% compared to the same period in the prior year.
• Net Income: $1.43 million, a decrease of 23.5% compared to the same period in the prior year.
• Net Income Per Share: $0.00, consistent with the same period in the prior year.

Business Highlights

EUBG's business performance for the period included the following key highlights:

• Revenue Segments: The company primarily generates revenue from consultancy services and sourcing and marketing services, with consultancy services accounting for the majority of the revenue. Significant contributions came from clients engaged in live streaming and other consultation services.
• Geographical Performance: EUBG operates mainly in China, including Hong Kong. The performance in these regions is critical to the company's overall operations, with the majority of revenue being generated through services provided in these areas.
• Future Outlook: The company believes that its ability to generate cash from operations is adequate to fund working capital, capital spending, and other cash needs for at least the next 12 months. However, changes in operating plans, lower than anticipated sales, increased expenses, interest rate increases, acquisitions, or other events may cause the company to seek additional debt or equity financing in future periods.

Strategic Initiatives

EUBG has undertaken several strategic initiatives to enhance its long-term growth and financial stability:

• Cost Management: The company has focused on maintaining lower selling expenses and managing general and administrative expenses, which include audit fees, professional fees, payroll expenses, and consultancy fees. Additionally, the company has introduced a new service provider to manage costs and improve service delivery.
• Capital Management: EUBG declared a special one-time cash dividend of $0.0013 per share, totaling approximately $2.2 million, paid on or about September 12, 2024. The company also distributed dividends of RMB20,000,000 (equivalent to $2,782,570) to its Hong Kong subsidiary. Cash used in financing activities for the nine months ended September 30, 2024, was primarily due to dividends paid to shareholders. The company has no off-balance sheet arrangements and has not engaged in any equity repurchases or stock splits during the reporting period.
• Future Outlook: The company acknowledges the potential impact of changes in the PRC regulatory environment and plans to continue tightly controlling expenses while exploring opportunities for sustainable growth. The company may seek additional debt or equity financing in future periods if necessary, although there is no assurance that such financing will be available on acceptable terms.

Challenges and Risks

EUBG faces several challenges and risks that could impact its operations and financial performance:

• Regulatory Risks: Operating primarily in China, EUBG faces significant risks due to its operations and major shareholders being located in China. The Chinese government may exert supervision over the operations of companies with any level of operations in China, which could impact the company's ability to offer securities, list on foreign exchanges, conduct business, or accept foreign investment. Such government actions could materially change the company's operations, devalue its common stock, or hinder its ability to offer securities, potentially making them worthless.
• Operational Risks: For the three months ended September 30, 2024, the company experienced a decrease in revenue by 2.6% compared to the same period in the prior year, primarily due to a drop in consultation services for a client engaged in live streaming. This was partly offset by an increase in other consultation services. The cost of revenue increased by 57.3% due to the introduction of a new service provider, leading to a lower profit margin. General and administrative expenses increased by 11.9%, mainly due to higher audit fees, professional fees, payroll expenses, and consultancy fees. Net income decreased by 5.1% compared to the same period in the prior year.
• Liquidity and Capital Resources: The company’s cash and cash equivalents decreased from $9,324,115 as of December 31, 2023, to $8,275,329 as of September 30, 2024. Net cash generated from operating activities decreased by 40.5% compared to the same period in the prior year. The decrease in operating cash flows was mainly due to a decrease in net income and changes in trade receivables, other receivables, prepayments, and tax payables. The company paid dividends of $2,211,536 to shareholders during the nine months ended September 30, 2024.
• Future Capital Requirements: The company believes it can generate adequate cash from operations to fund its needs for at least the next 12 months. However, this depends on successfully implementing business strategies, controlling expenses, and managing changes in the PRC regulatory environment. There is no assurance that financing will be available on acceptable terms if needed. Additional equity financing could dilute common stockholders, and debt financing could impose additional cash payment obligations and covenants.

SEC Filing: ENTREPRENEUR UNIVERSE BRIGHT GROUP [ EUBG ] - 10-Q - Nov. 13, 2024