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CEA Industries Inc. Reports First Quarter 2024 Results and Provides Update on Strategic Review Process
[May 14, 2024]

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


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.”

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
[email protected]
(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 


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