CEA Industries Inc. Reports First Quarter 2024 Results and Provides Update on Strategic Review Process
May 14 2024 - 4:50PM
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, CFAElevate IRinfo@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 |
|
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