CEA Industries Inc. Reports Second Quarter 2024 Results
August 14 2024 - 4:15PM
CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the
“Company”), is reporting results for the three months ended June
30, 2024.
Second Quarter 2024 Financial Summary (in $
thousands, excl. margin items):
|
|
Q2 2024(unaudited) |
|
|
Q1 2024(unaudited) |
|
|
Q2 2023(unaudited) |
|
Revenue |
|
$ |
1,761 |
|
|
$ |
235 |
|
|
$ |
1,064 |
|
Gross Profit |
|
$ |
180 |
|
|
$ |
(154 |
) |
|
$ |
79 |
|
Operating Expenses |
|
$ |
657 |
|
|
$ |
769 |
|
|
$ |
783 |
|
Net Income/(Loss) |
|
$ |
(470 |
) |
|
$ |
(917 |
) |
|
$ |
(694 |
) |
“We continue to operate under the lean cost
structure we implemented last year, with a focus on expense
reduction and capital preservation as we work through our remaining
backlog of projects,” said Tony McDonald, Chairman and CEO of CEA
Industries. “During the quarter, we booked and fulfilled a $1.2
million contract, which reduced our net loss for the second
quarter. To help preserve our balance sheet and minimize cash burn,
we further reduced headcount, eliminated product development costs,
and cut down business development expenses in support of our
ongoing strategic review process.”
Mr. McDonald continued: “As previously
announced, the Board of Directors continues their examination of
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.”
Second Quarter 2024 Financial Results
Revenue in the second quarter of 2024 increased
66% to $1.8 million compared to $1.1 million for the same period in
2023. The increase was primarily attributed to a $1.2 million
contract that was booked and fulfilled in the second quarter of
2024. Additionally, the Company continued to satisfy its
performance obligations on the prior backlog.
Net bookings in the second quarter of 2024
increased approximately 7x to $1.4 million compared to $0.2 million
in the year-ago period. The Company’s quarter-end backlog was $0.2
million compared to $1.1 million for the same period in 2023. The
increase in the Company’s net bookings for the second quarter of
2024 was primarily driven by the aforementioned $1.2 million
contract. The decrease in the CEA Industries’ backlog 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 second quarter of 2024
increased more than 2x to $180,000 compared to $79,000 for the same
period in 2023. Gross margin increased 280 basis points to 10.2%
compared to 7.4% in the year-ago period. The increase in gross
margin was primarily driven by higher revenue and fixed costs
becoming a smaller percentage of revenue. Fixed costs include the
cost of services, engineering, manufacturing, and project
management.
Operating expenses in the second quarter of 2024
decreased 16% to $0.7 million compared to $0.8 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 second quarter of 2024 decreased
to $0.5 million or $(0.66) per share, compared to a net loss of
$0.7 million or $(1.03) per share for the same period in 2023.
Cash and cash equivalents were $11.3 million at
June 30, 2024, compared to $12.5 million on December 31, 2023,
while working capital decreased by $1.3 million during this period.
At June 30, 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)
|
|
June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
11,325,387 |
|
|
$ |
12,508,251 |
|
Accounts receivable, net |
|
|
32,158 |
|
|
|
18,655 |
|
Contract assets, net |
|
|
224,414 |
|
|
|
224,414 |
|
Inventory, net |
|
|
23,670 |
|
|
|
296,404 |
|
Prepaid expenses and other |
|
|
614,724 |
|
|
|
313,115 |
|
Total Current Assets |
|
|
12,220,353 |
|
|
|
13,360,839 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
14,312 |
|
|
|
38,558 |
|
Intangible assets, net |
|
|
1,830 |
|
|
|
1,830 |
|
Deposits |
|
|
14,747 |
|
|
|
14,747 |
|
Operating lease right-of-use asset |
|
|
301,214 |
|
|
|
356,109 |
|
Total Noncurrent Assets |
|
|
332,103 |
|
|
|
411,244 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
12,552,456 |
|
|
$ |
13,772,083 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
886,395 |
|
|
$ |
624,724 |
|
Deferred revenue |
|
|
393,358 |
|
|
|
499,800 |
|
Current portion of operating lease liability |
|
|
130,973 |
|
|
|
126,724 |
|
Total Current Liabilities |
|
|
1,410,726 |
|
|
|
1,251,248 |
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
Operating lease liability, net of current portion |
|
|
197,946 |
|
|
|
259,627 |
|
Total Noncurrent Liabilities |
|
|
197,946 |
|
|
|
259,627 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
1,608,672 |
|
|
|
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; 791,580
and 673,090 shares issued and outstanding, respectively |
|
|
8 |
|
|
|
7 |
|
Additional paid in capital |
|
|
49,520,970 |
|
|
|
49,451,493 |
|
Accumulated deficit |
|
|
(38,577,194 |
) |
|
|
(37,190,292 |
) |
Total Shareholders’ Equity |
|
|
10,943,784 |
|
|
|
12,261,208 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$ |
12,552,456 |
|
|
$ |
13,772,083 |
|
CEA Industries
Inc.Condensed Consolidated Statements of
Operations(in US Dollars except share
numbers)(Unaudited)
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Revenue |
|
$ |
1,760,700 |
|
|
$ |
1,063,714 |
|
|
$ |
1,995,206 |
|
|
$ |
5,746,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
1,580,900 |
|
|
|
985,021 |
|
|
|
1,969,781 |
|
|
|
4,814,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
179,800 |
|
|
|
78,693 |
|
|
|
25,425 |
|
|
|
931,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing expenses |
|
|
3,855 |
|
|
|
33,091 |
|
|
|
13,179 |
|
|
|
235,414 |
|
Product development costs |
|
|
- |
|
|
|
74 |
|
|
|
- |
|
|
|
76,487 |
|
Selling, general and administrative expenses |
|
|
653,150 |
|
|
|
750,156 |
|
|
|
1,413,260 |
|
|
|
1,770,858 |
|
Total operating expenses |
|
|
657,005 |
|
|
|
783,321 |
|
|
|
1,426,439 |
|
|
|
2,082,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(477,205 |
) |
|
|
(704,628 |
) |
|
|
(1,401,014 |
) |
|
|
(1,150,790 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
|
- |
|
|
|
2,074 |
|
|
|
- |
|
|
|
7,778 |
|
Interest income (expense), net |
|
|
6,906 |
|
|
|
8,979 |
|
|
|
14,112 |
|
|
|
17,999 |
|
Total other income
(expense) |
|
|
6,906 |
|
|
|
11,053 |
|
|
|
14,112 |
|
|
|
25,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for
income taxes |
|
|
(470,299 |
) |
|
|
(693,575 |
) |
|
|
(1,386,902 |
) |
|
|
(1,125,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(470,299 |
) |
|
$ |
(693,575 |
) |
|
$ |
(1,386,902 |
) |
|
$ |
(1,125,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share – basic
and diluted |
|
$ |
(0.66 |
) |
|
$ |
(1.03 |
) |
|
$ |
(1.99 |
) |
|
$ |
(1.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding, basic and diluted |
|
|
711,530 |
|
|
|
673,031 |
|
|
|
697,867 |
|
|
|
672,839 |
|
CEA Industries
Inc.Condensed Consolidated Statements of Cash
Flows (in US Dollars except share
numbers)(Unaudited)
|
|
For the Six Months EndedJune
30, |
|
|
|
2024 |
|
|
2023 |
|
Cash Flows From Operating
Activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,386,902 |
) |
|
$ |
(1,125,013 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and intangible asset amortization expense |
|
|
11,621 |
|
|
|
14,988 |
|
Share-based compensation |
|
|
69,478 |
|
|
|
162,260 |
|
Provision for doubtful accounts (bad debt recovery) |
|
|
(36,489 |
) |
|
|
2,096 |
|
Provision for excess and obsolete inventory |
|
|
37,781 |
|
|
|
60,574 |
|
Loss on disposal of assets |
|
|
12,625 |
|
|
|
100 |
|
Operating lease expense |
|
|
54,895 |
|
|
|
52,893 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
22,986 |
|
|
|
(293,214 |
) |
Inventory |
|
|
234,953 |
|
|
|
(109,318 |
) |
Prepaid expenses and other |
|
|
(301,609 |
) |
|
|
969,665 |
|
Accounts payable and accrued liabilities |
|
|
261,671 |
|
|
|
(408,634 |
) |
Deferred revenue |
|
|
(106,442 |
) |
|
|
(3,712,659 |
) |
Operating lease liability, net |
|
|
(57,432 |
) |
|
|
(53,567 |
) |
Net cash used in operating
activities |
|
|
(1,182,864 |
) |
|
|
(4,439,829 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities |
|
|
|
|
|
|
|
|
Proceeds from the sale of property and equipment |
|
|
- |
|
|
|
200 |
|
Net cash provided by investing
activities |
|
|
- |
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities |
|
|
- |
|
|
|
- |
|
Net cash provided by financing
activities |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
(1,182,864 |
) |
|
|
(4,439,629 |
) |
Cash and cash equivalents,
beginning of period |
|
|
12,508,251 |
|
|
|
18,637,114 |
|
Cash and cash equivalents, end
of period |
|
$ |
11,325,387 |
|
|
$ |
14,197,485 |
|
|
|
|
|
|
|
|
|
|
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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