CEA Industries Inc. Reports Fourth Quarter and Full Year 2023 Results
March 28 2024 - 4:10PM
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.”
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, CFAElevate IRinfo@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 EndedDecember
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 |
|
|
$ |
- |
|
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