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CEA Industries Inc. Reports Fourth Quarter and Full Year 2023 Results

CEA Industries Inc.
CEA Industries Inc.

Louisville, Colorado, March 28, 2024 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”), is reporting results for the three and twelve months ended December 31, 2023.

Fourth Quarter 2023 Financial Summary (in $ thousands, excl. margin items):

 

Q4 2023
(unaudited)

Q3 2023
(unaudited)

Q4 2022
(unaudited)

Revenue

$

251

 

$

914

 

$

1,461

 

Gross Profit

$

(286

)

$

(104

)

$

151

 

Gross Margin

 

(113.8

%)

 

(11.4

%)

 

10.3

%

Operating Expenses

$

709

 

$

703

 

$

1,433

 

Net Income/(Loss)

$

(988

)

$

(799

)

$

(1,272

)


Full Year 2023 Financial Summary (in $ thousands, excl. margin items):

 

FY 2023

FY 2022

Revenue

$

6,911

 

$

11,283

 

Gross Profit

$

542

 

$

1,145

 

Gross Margin

 

7.8

%

 

10.1

%

Operating Expenses

$

3,495

 

$

6,869

 

Net Income/(Loss)

$

(2,912

)

$

(5,497

)


“We continue to operate under the lean cost structure implemented during 2023, with a focus on expense reduction and capital preservation, as we manage through our remaining backlog,” said Tony McDonald, Chairman and CEO of CEA Industries. “Subsequent to year-end we enacted additional headcount reductions, which we anticipate will result in annualized cost savings of ~$230,000, in support of our ongoing efforts to optimize our operating expense profile.”

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Mr. McDonald continued: “As previously announced on August 14, 2023, the Board of Directors remains steadfast in their examination of strategic alternatives, including a sale, merger, or other potential strategic or financial transaction. We will provide updates on any material developments that result from this process.”

Fourth Quarter 2023 Financial Results

Revenue in the fourth quarter of 2023 was $0.3 million compared to $1.5 million for the same period in 2022. The decrease was primarily attributed to lower bookings over the last twelve months.

Net bookings in the fourth quarter of 2023 were $0.1 million compared to $0.2 million in the year-ago period. The Company’s quarter-end backlog was $0.4 million compared to $5.6 million for the same period in 2022. The decrease in the Company’s net bookings and backlog for the fourth quarter of 2023 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 fourth quarter of 2023 was $(0.3) million compared to $0.2 million for the same period in 2022. Gross margin was (113.8%) compared to 10.3% in the prior year period. The decrease in gross margin 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 fourth quarter of 2023 decreased 51% to $0.7 million compared to $1.4 million for the same period in 2022. The decrease was primarily driven by reduced personnel and marketing costs and lower product development expenses.

Net loss in the fourth quarter of 2023 improved to $1.0 million or $(0.12) per share, compared to a net loss of $1.3 million or $(0.18) per share for the same period in 2022.

Cash and cash equivalents were $12.5 million at December 31, 2023, compared to $18.6 million on December 31, 2022, while working capital decreased by $2.6 million during this period. At December 31, 2023, 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)

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,508,251

 

 

$

18,637,114

 

Accounts receivable, net

 

 

18,655

 

 

 

2,649

 

Contract assets, net

 

 

224,414

 

 

 

-

 

Inventory, net

 

 

296,404

 

 

 

348,411

 

Prepaid expenses and other

 

 

313,115

 

 

 

1,489,921

 

Total Current Assets

 

 

13,360,839

 

 

 

20,478,095

 

Noncurrent Assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

38,558

 

 

 

68,513

 

Intangible assets, net

 

 

1,830

 

 

 

1,830

 

Deposits

 

 

14,747

 

 

 

14,747

 

Operating lease right-of-use asset

 

 

356,109

 

 

 

462,874

 

Total Noncurrent Assets

 

 

411,244

 

 

 

547,964

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

13,772,083

 

 

$

21,026,059

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

624,724

 

 

$

1,207,258

 

Deferred revenue

 

 

499,800

 

 

 

4,338,570

 

Accrued equity compensation

 

 

-

 

 

 

89,970

 

Current portion of operating lease liability

 

 

126,724

 

 

 

118,235

 

Total Current Liabilities

 

 

1,251,248

 

 

 

5,754,033

 

 

 

 

 

 

 

 

 

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

Operating lease liability, net of current portion

 

 

259,627

 

 

 

376,851

 

Total Noncurrent Liabilities

 

 

259,627

 

 

 

376,851

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

1,510,875

 

 

 

6,130,884

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 10)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

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; 8,076,372 and 7,953,974 shares issued and outstanding, respectively

 

 

81

 

 

 

80

 

Additional paid in capital

 

 

49,451,419

 

 

 

49,173,836

 

Accumulated deficit

 

 

(37,190,292

)

 

 

(34,278,741

)

Total Shareholders’ Equity

 

 

12,261,208

 

 

 

14,895,175

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

13,772,083

 

 

$

21,026,059

 


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

 

 

For the Three Months Ended
December 31,

 

 

For the Years Ended
December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

Revenue

 

$

251,093

 

 

$

1,460,798

 

 

$

6,910,951

 

 

$

11,283,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

536,919

 

 

 

1,309,796

 

 

 

6,368,872

 

 

 

10,138,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

(285,826

)

 

 

151,002

 

 

 

542,079

 

 

 

1,144,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising and marketing expenses

 

 

16,445

 

 

 

292,566

 

 

 

273,409

 

 

 

1,157,871

 

Product development costs

 

 

-

 

 

 

65,514

 

 

 

76,487

 

 

 

319,987

 

Selling, general and administrative expenses

 

 

693,023

 

 

 

1,075,248

 

 

 

3,145,328

 

 

 

4,759,865

 

Goodwill impairment charges

 

 

-

 

 

 

-

 

 

 

-

 

 

 

631,064

 

Total operating expenses

 

 

709,467

 

 

 

1,433,328

 

 

 

3,495,224

 

 

 

6,868,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(995,293

)

 

 

(1,282,326

)

 

 

(2,953,145

)

 

 

(5,723,847

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

-

 

 

 

-

 

 

 

7,778

 

 

 

191,358

 

Interest income (expense), net

 

 

7,774

 

 

 

10,729

 

 

 

33,816

 

 

 

35,314

 

Total other income (expense)

 

 

7,774

 

 

 

10,729

 

 

 

41,594

 

 

 

226,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(987,519

)

 

 

(1,271,597

)

 

 

(2,911,551

)

 

 

(5,497,175

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(987,519

)

 

$

(1,271,597

)

 

$

(2,911,551

)

 

$

(5,497,175

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible preferred series B stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(35,984

)

Deemed dividend on convertible preferred series B stock on down round

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(439,999

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss available to common shareholders

 

$

(987,519

)

 

$

(1,271,597

)

 

$

(2,911,551

)

 

$

(5,973,158

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share – basic and diluted

 

$

(0.12

)

 

$

(0.18

)

 

$

(0.36

)

 

$

(0.84

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic and diluted

 

 

8,076,372

 

 

 

7,094,410

 

 

 

8,075,228

 

 

 

7,094,410

 


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

 

 

For the Years Ended December 31,

 

 

 

2023

 

 

2022

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(2,911,551

)

 

$

(5,497,175

)

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

 

 

 

 

 

 

 

 

Depreciation and intangible asset amortization expense

 

 

29,655

 

 

 

32,442

 

Share-based compensation

 

 

187,615

 

 

 

307,736

 

Provision for doubtful accounts

 

 

(2,056

)

 

 

(54,708

)

Provision for excess and obsolete inventory

 

 

121,791

 

 

 

(20,472

)

Loss on disposal of assets

 

 

100

 

 

 

4,489

 

Operating lease expense

 

 

106,765

 

 

 

103,003

 

Goodwill impairment charges

 

 

-

 

 

 

631,064

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(13,950

)

 

 

231,504

 

Contract assets

 

 

(224,414

)

 

 

-

 

Inventory

 

 

(69,784

)

 

 

50,387

 

Prepaid expenses and other

 

 

1,176,806

 

 

 

(216,202

)

Accounts payable and accrued liabilities

 

 

(582,534

)

 

 

(175,409

)

Deferred revenue

 

 

(3,838,771

)

 

 

1,498,732

 

Operating lease liability, net

 

 

(108,735

)

 

 

(91,279

)

Accrued equity compensation

 

 

-

 

 

 

6,345

 

Net cash used in operating activities

 

 

(6,129,063

)

 

 

(3,189,543

)

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

-

 

 

 

(30,348

)

Proceeds from the sale of property and equipment

 

 

200

 

 

 

2,250

 

Net cash provided by (used in) investing activities

 

 

200

 

 

 

(28,098

)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Payment of dividends on series B preferred stock

 

 

-

 

 

 

(35,984

)

Redemption of series B preferred stock

 

 

-

 

 

 

(1,980,000

)

Net cash proceeds on sale of common stock and warrants, net of expenses

 

 

-

 

 

 

21,711,131

 

Net cash provided by financing activities

 

 

-

 

 

 

19,695,147

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(6,128,863

)

 

 

16,477,506

 

Cash and cash equivalents, beginning of period

 

 

18,637,114

 

 

 

2,159,608

 

Cash and cash equivalents, end of period

 

$

12,508,251

 

 

$

18,637,114

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

-

 

 

$

-

 

Income taxes paid

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of series B preferred stock

 

 

-

 

 

$

1,980,000

 

Deemed dividend on series B preferred stock arising on down round

 

 

-

 

 

$

439,999

 

Cashless exercise of prefunded warrants

 

 

 

 

 

$

2

 

Options issued for accrued equity compensation liability

 

$

89,970

 

 

$

-