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CEA Industries Inc. Reports First Quarter 2024 Results and Provides Update on Strategic Review Process

CEA Industries Inc.
CEA Industries Inc.

Louisville, Colorado, May 14, 2024 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”), is reporting results for the three months ended March 31, 2024.

First Quarter 2024 Financial Summary (in $ thousands, excl. margin items):

 

 

Q1 2024

(unaudited)

 

 

Q4 2023

(unaudited)

 

 

Q1 2023

(unaudited)

 

Revenue

 

$

235

 

 

$

251

 

 

$

4,683

 

Gross Profit

 

$

(154

)

 

$

(286

)

 

$

853

 

Operating Expenses

 

$

769

 

 

$

709

 

 

$

1,299

 

Net Income/(Loss)

 

$

(917

)

 

$

(988

)

 

$

(431

)


“We continue to address the level of our expenses in support of our ongoing strategic review process,” said Tony McDonald, Chairman and CEO of CEA Industries. “To demonstrate our commitment to our shareholders and prospects, we further reduced headcount, eliminated product development costs, and brought down business development expenses to help preserve our balance sheet. We will continue to prudently manage our capital as we work through our remaining backlog of projects.”

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Mr. McDonald continued: “As previously announced on August 14, 2023, the Board of Directors is actively evaluating multiple strategic alternatives, including a sale, merger, special dividend, or other potential strategic or financial transaction, including a dissolution of the company whereby cash on the balance sheet would be returned to shareholders after adequate provision for outstanding corporate obligations. We will provide updates on material developments that result from this process.”

Update on Review of Strategic Alternatives

The Company’s strategic review remains underway. The Company is no longer exclusively partnered with Roth Capital Advisors (“Roth”). CEA Industries is in active discussions with certain prospects, but will continue to evaluate strategic opportunities, including a sale, merger or other potential strategic or financial transaction brought forward by Roth as well as other parties. There can be no assurance regarding the result or outcome of this review.

First Quarter 2024 Financial Results

Revenue in the first quarter of 2024 was $0.2 million compared to $4.7 million for the same period in 2023. The decrease was primarily attributed to lower bookings over the last twelve months.

Net bookings in the first quarter of 2024 were $0.3 million compared to $0.8 million in the year-ago period. The Company’s quarter-end backlog was $0.5 million compared to $1.9 million for the same period in 2023. The decrease in the Company’s net bookings and backlog for the first quarter of 2024 was primarily driven by fewer capital expenditures by cannabis operators in the markets served by the Company, in addition to a reduced sales effort.

Gross profit in the first quarter of 2024 was $(0.2) million compared to $0.9 million for the same period in 2023. The decrease in gross profit was primarily driven by lower revenue and fixed costs becoming a larger percentage of revenue. Fixed costs include the cost of services, engineering, manufacturing, and project management.

Operating expenses in the first quarter of 2024 decreased 41% to $0.8 million compared to $1.3 million for the same period in 2023. The decrease was primarily driven by reduced personnel and marketing costs and lower product development expenses.

Net loss in the first quarter of 2024 was $0.9 million or $(0.11) per share, compared to a net loss of $0.4 million or $(0.05) per share for the same period in 2023.

Cash and cash equivalents were $11.6 million at March 31, 2024, compared to $12.5 million on December 31, 2023, while working capital decreased by $0.8 million during this period. At March 31, 2024, the Company remained debt free.

About CEA Industries Inc.

CEA Industries Inc. (www.ceaindustries.com) provides a suite of complementary and adjacent offerings to the controlled environment agriculture industry. The Company’s comprehensive solutions, when aligned with industry operators’ product and sales initiatives, support the development of the global ecosystem for indoor cultivation.

Forward Looking Statements

This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect our current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release, including the factors set forth in “Risk Factors” set forth in our annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”), and subsequent filings with the SEC. Please refer to our SEC filings for a more detailed discussion of the risks and uncertainties associated with our business, including but not limited to the risks and uncertainties associated with our business prospects and the prospects of our existing and prospective customers; the inherent uncertainty of product development; regulatory, legislative and judicial developments, especially those related to changes in, and the enforcement of, cannabis laws; increasing competitive pressures in our industry; and relationships with our customers and suppliers. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. The reference to CEA’s website has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release.

Non-GAAP Financial Measures

To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings and backlog, as well as other significant non-cash expenses such as stock-based compensation and depreciation expenses. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

Investor Contact:

Sean Mansouri, CFA
Elevate IR
info@ceaindustries.com
(720) 330-2829

CEA Industries Inc.
Condensed Consolidated Balance Sheets
(in US Dollars except share numbers)

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,598,836

 

 

$

12,508,251

 

Accounts receivable, net

 

 

20,126

 

 

 

18,655

 

Contract assets, net

 

 

224,414

 

 

 

224,414

 

Inventory, net

 

 

245,894

 

 

 

296,404

 

Prepaid expenses and other

 

 

227,514

 

 

 

313,115

 

Total Current Assets

 

 

12,316,784

 

 

 

13,360,839

 

Noncurrent Assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

19,019

 

 

 

38,558

 

Intangible assets, net

 

 

1,830

 

 

 

1,830

 

Deposits

 

 

14,747

 

 

 

14,747

 

Operating lease right-of-use asset

 

 

328,792

 

 

 

356,109

 

Total Noncurrent Assets

 

 

364,388

 

 

 

411,244

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

12,681,172

 

 

$

13,772,083

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

361,876

 

 

$

624,724

 

Deferred revenue

 

 

539,956

 

 

 

499,800

 

Current portion of operating lease liability

 

 

128,839

 

 

 

126,724

 

Total Current Liabilities

 

 

1,030,671

 

 

 

1,251,248

 

 

 

 

 

 

 

 

 

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

Operating lease liability, net of current portion

 

 

228,927

 

 

 

259,627

 

Total Noncurrent Liabilities

 

 

228,927

 

 

 

259,627

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

1,259,598

 

 

 

1,510,875

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 6)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $0.00001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding

 

 

-

 

 

 

-

 

Common stock, $0.00001 par value; 200,000,000 authorized; 8,212,737 and 8,076,372 shares issued and outstanding, respectively

 

 

82

 

 

 

81

 

Additional paid in capital

 

 

49,528,387

 

 

 

49,451,419

 

Accumulated deficit

 

 

(38,106,895

)

 

 

(37,190,292

)

Total Shareholders’ Equity

 

 

11,421,574

 

 

 

12,261,208

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

12,681,172

 

 

$

13,772,083

 

CEA Industries Inc.
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)
(Unaudited)

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenue

 

$

234,506

 

 

$

4,682,573

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

388,881

 

 

 

3,829,297

 

 

 

 

 

 

 

 

 

 

Gross (loss) profit

 

 

(154,375

)

 

 

853,276

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Advertising and marketing expenses

 

 

9,324

 

 

 

202,323

 

Product development costs

 

 

-

 

 

 

76,413

 

Selling, general and administrative expenses

 

 

760,110

 

 

 

1,020,702

 

Total operating expenses

 

 

769,434

 

 

 

1,299,438

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(923,809

)

 

 

(446,162

)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

-

 

 

 

5,704

 

Interest income (expense), net

 

 

7,206

 

 

 

9,020

 

Total other income (expense)

 

 

7,206

 

 

 

14,724

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(916,603

)

 

 

(431,438

)

 

 

 

 

 

 

 

 

 

Income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(916,603

)

 

 

(431,438

)

 

 

 

 

 

 

 

 

 

Loss per common share – basic and diluted

 

$

(0.11

)

 

$

(0.05

)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic and diluted

 

 

8,209,730

 

 

 

8,071,731

 

CEA Industries Inc.
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)
(Unaudited)

 

 

For the Three Months Ended         March 31,

 

 

 

2024

 

 

2023

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(916,603

)

 

$

(431,438

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and intangible asset amortization expense

 

 

6,914

 

 

 

7,500

 

Share-based compensation

 

 

76,969

 

 

 

147,094

 

Provision for doubtful accounts

 

 

(34,566

)

 

 

(1,705

)

Provision for excess and obsolete inventory

 

 

38,360

 

 

 

33,638

 

Loss on disposal of assets

 

 

12,625

 

 

 

100

 

Operating lease expense

 

 

27,317

 

 

 

26,325

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

33,096

 

 

 

(57,420

)

Inventory

 

 

12,151

 

 

 

(126,360

)

Prepaid expenses and other

 

 

85,600

 

 

 

1,018,785

 

Accounts payable and accrued liabilities

 

 

(262,849

)

 

 

(43,124

)

Deferred revenue

 

 

40,156

 

 

 

(3,235,970

)

Operating lease liability, net

 

 

(28,585

)

 

 

(26,662

)

Net cash used in operating activities

 

 

(909,415

)

 

 

(2,689,237

)

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Proceeds from the sale of property and equipment

 

 

-

 

 

 

200

 

Net cash provided by investing activities

 

 

-

 

 

 

200

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(909,415

)

 

 

(2,689,037

)

Cash and cash equivalents, beginning of period

 

 

12,508,251

 

 

 

18,637,114

 

Cash and cash equivalents, end of period

 

$

11,598,836

 

 

$

15,948,077

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

-

 

 

$

-

 

Income taxes paid

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Options issued for accrued equity compensation liability

 

$

-

 

 

$

89,970