CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the
“Company”), is reporting results for the three months ended March
31, 2023.
“Q1 results reflect the completion of some
previously delayed projects as well as the successful
implementation of our cost cutting initiatives,” said Tony
McDonald, Chairman and CEO of CEA Industries. “We experienced
double-digit growth in revenue and material operating expense
savings. Although these results are a step in the right direction,
we recognize the market continues to combat pricing and
inflationary pressures affecting both consumers and operators.
“Moving forward, our primary focus will remain
on running a lean operation while securing new contract wins both
within the cannabis and traditional agriculture verticals. Given
the challenged environment over the past year, our net bookings
have been limited in recent quarters, which will have an adverse
effect on future revenue. However, with our strong liquidity
position and prudent approach to capital allocation, we believe we
are well-equipped to navigate the current environment and deliver
value to both our customers and shareholders.”
First Quarter
2023 Financial
Summary (in $ thousands, excl. margin items):
|
Q1
2023 |
Q4
2022 |
Q1
2022 |
% QoQ |
% YoY |
Revenue |
$ |
4,683 |
|
$ |
1,461 |
|
$ |
1,744 |
|
221 |
% |
169 |
% |
Gross Profit |
$ |
853 |
|
$ |
151 |
|
$ |
91 |
|
465 |
% |
837 |
% |
Gross Margin |
|
18.2 |
% |
|
10.3 |
% |
|
5.2 |
% |
790bps |
1300bps |
Operating Expenses |
$ |
1,299 |
|
$ |
1,434 |
|
$ |
1,702 |
|
-9 |
% |
-24 |
% |
Net Income/(Loss) |
$ |
(431 |
) |
$ |
(1,272 |
) |
$ |
(1,423 |
) |
NA |
NA |
First Quarter
2023 Financial Results
Revenue in the first quarter of 2023 increased
more than 2x to $4.7 million compared to $1.7 million for the same
period in 2022. The increase was primarily attributed to
improvements in the Company’s supply chain and deployment of
project work as the Company worked through delayed projects from
prior periods.
Net bookings in the first quarter of 2023 were
$0.8 million compared to $2.1 million in the year-ago period. The
Company’s quarter-end backlog was $1.9 million compared to $11.2
million for the same period in 2022. The decrease in the Company’s
net bookings and backlog for the first quarter of 2023 was
primarily driven by fewer capital projects and expenditures by
cannabis operators.
Gross profit in the first quarter of 2023
increased to $0.9 million compared to $0.1 million for the same
period in 2022. Gross margin increased significantly to 18.2%
compared to 5.2% in the year-ago period. The increase in gross
margin was primarily driven by higher revenue and a decrease in
fixed costs as a percentage of revenue, which include the cost of
services, engineering, manufacturing and project management.
Operating expenses in the first quarter of 2023
decreased 24% to $1.3 million compared to $1.7 million for the same
period in 2022. The decrease was primarily driven by lower product
development expenses, as well as decreased personnel and marketing
costs.
Net loss in the first quarter of 2023 improved
to $0.4 million or $(0.05) per share, compared to a net loss of
$1.4 million or $(0.41) per share for the same period in 2022.
Cash and cash equivalents were $15.9 million on
March 31, 2023, compared to $18.6 million on December 31, 2022,
while working capital decreased by $0.2 million during this period.
At March 31, 2023, the Company remained debt free.
Conference Call
CEA management will host a conference call today
to discuss its financial and operating results, followed by a
question-and-answer session.
Date: Monday, May 15, 2023Time: 4:15 p.m. ETDial:
1-973-528-0008Access Code: 704185Webcast URL:
https://www.webcaster4.com/Webcast/Page/2893/48284
Interested parties may submit questions to the
Company prior to the call by emailing info@ceaindustries.com. For
those unable to participate in the conference call at that time, a
replay will be available for two weeks in the Investors section of
the Company’s website at www.ceaindustries.com beginning on May 15,
2023, at 5:15 p.m. ET.
About CEA Industries
Inc.
CEA Industries Inc. (www.ceaindustries.com) is
home to industry leaders that provide 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.
Headquartered in Louisville, Colorado, CEA
Industries knows that growth is a team sport. Through future
partnerships and mergers and acquisitions, both financial and
strategic, CEA Industries will continue its pursuit of companies
and products that bring accretive value to its customers.
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, |
|
|
2023 |
|
|
|
2022 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current
Assets |
|
|
|
Cash and cash equivalents |
$ |
15,948,077 |
|
|
$ |
18,637,114 |
|
Accounts receivable, net |
|
61,774 |
|
|
|
2,649 |
|
Inventory, net |
|
441,133 |
|
|
|
348,411 |
|
Prepaid expenses and other |
|
471,137 |
|
|
|
1,489,921 |
|
Total Current Assets |
|
16,922,121 |
|
|
|
20,478,095 |
|
Noncurrent
Assets |
|
|
|
Property and equipment, net |
|
60,713 |
|
|
|
68,513 |
|
Intangible assets, net |
|
1,830 |
|
|
|
1,830 |
|
Deposits |
|
14,747 |
|
|
|
14,747 |
|
Operating lease right-of-use asset |
|
436,549 |
|
|
|
462,874 |
|
Total Noncurrent Assets |
|
513,839 |
|
|
|
547,964 |
|
|
|
|
|
TOTAL
ASSETS |
$ |
17,435,960 |
|
|
$ |
21,026,059 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
Current
Liabilities |
|
|
|
Accounts payable and accrued liabilities |
$ |
1,164,134 |
|
|
$ |
1,207,258 |
|
Deferred revenue |
|
1,102,601 |
|
|
|
4,338,570 |
|
Accrued equity compensation |
|
- |
|
|
|
89,970 |
|
Current portion of operating lease liability |
|
120,245 |
|
|
|
118,235 |
|
Total Current Liabilities |
|
2,386,980 |
|
|
|
5,754,033 |
|
|
|
|
|
Noncurrent
Liabilities |
|
|
|
Operating lease liability, net of current portion |
|
348,179 |
|
|
|
376,851 |
|
Total Noncurrent
Liabilities |
|
348,179 |
|
|
|
376,851 |
|
|
|
|
|
TOTAL
LIABILITIES |
|
2,735,159 |
|
|
|
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 |
|
49,410,899 |
|
|
|
49,173,836 |
|
Accumulated deficit |
|
(34,710,179 |
) |
|
|
(34,278,741 |
) |
Total Shareholders’
Equity |
|
14,700,801 |
|
|
|
14,895,175 |
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
17,435,960 |
|
|
$ |
21,026,059 |
|
CEA Industries
Inc.Condensed Consolidated Statements of
Operations(in US
Dollars except share
numbers)(Unaudited)
|
For the Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Revenue, net |
$ |
4,682,573 |
|
|
$ |
1,744,427 |
|
|
|
|
|
Cost of revenue |
|
3,829,297 |
|
|
|
1,653,919 |
|
|
|
|
|
Gross profit |
|
853,276 |
|
|
|
90,508 |
|
|
|
|
|
Operating expenses: |
|
|
|
Advertising and marketing expenses |
|
202,323 |
|
|
|
251,015 |
|
Product development costs |
|
76,413 |
|
|
|
138,918 |
|
Selling, general and administrative expenses |
|
1,020,702 |
|
|
|
1,311,777 |
|
Total operating expenses |
|
1,299,438 |
|
|
|
1,701,710 |
|
|
|
|
|
Operating loss |
|
(446,162 |
) |
|
|
(1,611,202 |
) |
|
|
|
|
Other income (expense): |
|
|
|
Other income (expense), net |
|
5,704 |
|
|
|
185,000 |
|
Interest income (expense), net |
|
9,020 |
|
|
|
3,260 |
|
Total other income
(expense) |
|
14,724 |
|
|
|
188,260 |
|
|
|
|
|
Loss before provision for
income taxes |
|
(431,438 |
) |
|
|
(1,422,942 |
) |
|
|
|
|
Income taxes |
|
- |
|
|
|
- |
|
|
|
|
|
Net loss |
$ |
(431,438 |
) |
|
$ |
(1,422,942 |
) |
|
|
|
|
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 |
$ |
(431,438 |
) |
|
$ |
(1,898,925 |
) |
|
|
|
|
Loss per common share – basic
and diluted |
$ |
(0.05 |
) |
|
$ |
(0.41 |
) |
|
|
|
|
Weighted average number of
common shares outstanding, basic and diluted |
|
8,071,731 |
|
|
|
4,622,427 |
|
CEA Industries
Inc.Condensed Consolidated Statements of Cash
Flows (in US
Dollars except share
numbers)(Unaudited)
|
For the Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Cash Flows From Operating
Activities: |
|
|
|
Net loss |
$ |
(431,438 |
) |
|
$ |
(1,422,942 |
) |
Adjustments to reconcile net
loss to net cash provided by (used in) operating activities: |
|
|
|
Depreciation and intangible asset amortization expense |
|
7,500 |
|
|
|
8,556 |
|
Share-based compensation |
|
147,094 |
|
|
|
92,517 |
|
Provision for doubtful accounts |
|
(1,705 |
) |
|
|
(22,168 |
) |
Provision for excess and obsolete inventory |
|
33,638 |
|
|
|
3,676 |
|
Loss on disposal of assets |
|
100 |
|
|
|
5,499 |
|
Amortization of operating lease ROU asset |
|
26,325 |
|
|
|
25,433 |
|
|
|
|
|
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable |
|
(57,420 |
) |
|
|
10,610 |
|
Inventory |
|
(126,360 |
) |
|
|
(631,269 |
) |
Prepaid expenses and other |
|
1,018,785 |
|
|
|
(551,261 |
) |
Accounts payable and accrued liabilities |
|
(43,124 |
) |
|
|
43,438 |
|
Deferred revenue |
|
(3,235,970 |
) |
|
|
2,645,579 |
|
Operating lease liability, net |
|
(26,662 |
) |
|
|
(14,811 |
) |
Net cash provided by (used in)
operating activities |
|
(2,689,237 |
) |
|
|
192,857 |
|
|
|
|
|
Cash Flows From Investing
Activities |
|
|
|
Purchases of property and equipment |
|
- |
|
|
|
(13,948 |
) |
Proceeds from the sale of property and equipment |
|
200 |
|
|
|
- |
|
Net cash provided by (used in)
investing activities |
|
200 |
|
|
|
(13,948 |
) |
|
|
|
|
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 |
|
(2,689,037 |
) |
|
|
19,874,056 |
|
Cash and cash equivalents,
beginning of period |
|
18,637,114 |
|
|
|
2,159,608 |
|
Cash and cash equivalents, end
of period |
$ |
15,948,077 |
|
|
$ |
22,033,664 |
|
|
|
|
|
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 |
|
Options issued for accrued equity compensation liability |
$ |
89,970 |
|
|
$ |
- |
|
|
|
|
|
CEA Industries (NASDAQ:CEADW)
Historical Stock Chart
From Jul 2024 to Aug 2024
CEA Industries (NASDAQ:CEADW)
Historical Stock Chart
From Aug 2023 to Aug 2024