Louisville, Colorado, Nov. 14, 2023 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) ("CEA Industries" or the "Company"), is reporting results for the three months ended September 30, 2023.
Third Quarter 2023 Financial Summary (in $ thousands, excl. margin items):
| Q3 2023 | Q2 2023 | Q3 2022 | |||||||
| Revenue | $ | 914 | $ | 1,064 | $ | 5,063 | |||
| Gross Profit (Loss) | $ | (104 | ) | $ | 79 | $ | 597 | ||
| Gross Margin | (11.4 | %) | 7.4 | % | 11.8 | % | |||
| Operating Expenses | $ | 703 | $ | 783 | $ | 1,656 | |||
| Net Income/(Loss) | $ | (799 | ) | $ | (694 | ) | $ | (1,042 | ) |
"Given the state of our operations, our current corporate assets, and our service position in the cannabis and controlled agricultural sectors, our focus is to work through our backlog and take action to mitigate operating expenses and preserve cash," said Tony McDonald, Chairman and CEO of CEA Industries.
"As previously announced on August 14, 2023, the Board of Directors continues to review strategic alternatives, including a sale, merger or other potential strategic or financial transaction. We will provide updates on any material developments that may result from this process.
Third Quarter 2023 Financial Results
Revenue in the third quarter of 2023 was $0.9 million compared to $5.1 million for the same period in 2022. The decrease was primarily attributed to lower bookings over the last twelve months.
Net bookings in the third quarter of 2023 were $0.4 million compared to $2.2 million in the year-ago period. The Company's quarter-end backlog was $0.5 million compared to $6.8 million for the same period in 2022. The decrease in the Company's net bookings and backlog for the third quarter of 2023 was primarily driven by fewer capital expenditures by cannabis operators in the markets we serve, in addition to a reduced sales effort.
Gross profit in the third quarter of 2023 was $(0.1) million compared to $0.6 million for the same period in 2022. Gross margin was (11.4%) compared to 11.8% 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 third quarter of 2023 decreased 58% to $0.7 million compared to $1.7 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 third quarter of 2023 improved to $0.8 million or $(0.10) per share, compared to a net loss of $1.0 million or $(0.13) per share for the same period in 2022.
Cash and cash equivalents were $13.3 million on September 30, 2023, compared to $18.6 million on December 31, 2022, while working capital decreased by $1.6 million during this period. At September 30, 2023, the Company remained debt free.
CEA Industries has decided not to host its regular quarterly conference call for this quarter.
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)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 13,342,805 | $ | 18,637,114 | ||||
| Accounts receivable, net | 272,547 | 2,649 | ||||||
| Inventory, net | 315,096 | 348,411 | ||||||
| Prepaid expenses and other | 323,751 | 1,489,921 | ||||||
| Total Current Assets | 14,254,199 | 20,478,095 | ||||||
| Noncurrent Assets | ||||||||
| Property and equipment, net | 45,737 | 68,513 | ||||||
| Intangible assets, net | 1,830 | 1,830 | ||||||
| Deposits | 14,747 | 14,747 | ||||||
| Operating lease right-of-use asset | 383,169 | 462,874 | ||||||
| Total Noncurrent Assets | 445,483 | 547,964 | ||||||
| TOTAL ASSETS | $ | 14,699,682 | $ | 21,026,059 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 571,885 | $ | 1,207,258 | ||||
| Deferred revenue | 474,888 | 4,338,570 | ||||||
| Accrued equity compensation | - | 89,970 | ||||||
| Current portion of operating lease liability | 124,319 | 118,235 | ||||||
| Total Current Liabilities | 1,171,092 | 5,754,033 | ||||||
| Noncurrent Liabilities | ||||||||
| Operating lease liability, net of current portion | 290,051 | 376,851 | ||||||
| Total Noncurrent Liabilities | 290,051 | 376,851 | ||||||
| TOTAL LIABILITIES | 1,461,143 | 6,130,884 | ||||||
| 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; 8,076,372 and 7,953,974 shares issued and outstanding, respectively | 81 | 80 | ||||||
| Additional paid in capital | 49,441,231 | 49,173,836 | ||||||
| Accumulated deficit | (36,202,773 | ) | (34,278,741 | ) | ||||
| Total Shareholders' Equity | 13,238,539 | 14,895,175 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 14,699,682 | $ | 21,026,059 | ||||
CEA Industries Inc.
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue, net | $ | 913,571 | $ | 5,063,079 | $ | 6,659,858 | $ | 9,822,391 | ||||||||
| Cost of revenue | 1,017,634 | 4,465,888 | 5,831,953 | 8,828,453 | ||||||||||||
| Gross profit (loss) | (104,063 | ) | 597,191 | 827,905 | 993,938 | |||||||||||
| Operating expenses: | ||||||||||||||||
| Advertising and marketing expenses | 21,551 | 304,600 | 256,965 | 865,305 | ||||||||||||
| Product development costs | - | 58,978 | 76,487 | 254,473 | ||||||||||||
| Selling, general and administrative expenses | 681,448 | 1,292,746 | 2,452,305 | 3,684,617 | ||||||||||||
| Goodwill impairment charges | - | - | - | 631,064 | ||||||||||||
| Total operating expenses | 702,999 | 1,656,324 | 2,785,757 | 5,435,459 | ||||||||||||
| Operating loss | (807,062 | ) | (1,059,133 | ) | (1,957,852 | ) | (4,441,521 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income (expense), net | - | 6,358 | 7,778 | 191,358 | ||||||||||||
| Interest income (expense), net | 8,043 | 10,725 | 26,042 | 24,585 | ||||||||||||
| Total other income (expense) | 8,043 | 17,083 | 33,820 | 215,943 | ||||||||||||
| Loss before provision for income taxes | (799,019 | ) | (1,042,050 | ) | (1,924,032 | ) | (4,225,578 | ) | ||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Net loss | $ | (799,019 | ) | $ | (1,042,050 | ) | $ | (1,924,032 | ) | $ | (4,225,578 | ) | ||||
| 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 | $ | (799,019 | ) | $ | (1,042,050 | ) | $ | (1,924,032 | ) | $ | (4,701,561 | ) | ||||
| Loss per common share - basic and diluted | $ | (0.10 | ) | $ | (0.13 | ) | $ | (0.24 | ) | $ | (0.69 | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | 8,076,372 | 7,953,974 | 8,074,842 | 6,804,741 | ||||||||||||
CEA Industries Inc.
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | (1,924,032 | ) | $ | (4,225,578 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and intangible asset amortization expense | 22,476 | 24,731 | ||||||
| Share-based compensation | 177,427 | 280,739 | ||||||
| Provision for doubtful accounts | (2,056 | ) | 93,500 | |||||
| Provision for excess and obsolete inventory | 111,123 | (5,332 | ) | |||||
| Loss on disposal of assets | 100 | 4,489 | ||||||
| Amortization of operating lease ROU asset | 79,705 | 76,917 | ||||||
| Goodwill impairment charges | - | 631,064 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (267,842 | ) | 8,801 | |||||
| Inventory | (77,808 | ) | (230,966 | ) | ||||
| Prepaid expenses and other | 1,166,170 | 171,582 | ||||||
| Accounts payable and accrued liabilities | (635,373 | ) | 910,523 | |||||
| Deferred revenue | (3,863,683 | ) | 1,595,644 | |||||
| Operating lease liability, net | (80,716 | ) | (65,157 | ) | ||||
| Accrued equity compensation | - | (14,065 | ) | |||||
| Net cash provided by (used in) operating activities | (5,294,509 | ) | (743,108 | ) | ||||
| 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 | (5,294,309 | ) | 18,923,941 | |||||
| Cash and cash equivalents, beginning of period | 18,637,114 | 2,159,608 | ||||||
| Cash and cash equivalents, end of period | $ | 13,342,805 | $ | 21,083,549 | ||||
| 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 | $ | 78,938 | ||||
