CEA Industries Inc. Reports Fourth Quarter and Full Year 2022 Results

Louisville, Colorado, March 28, 2023 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ:CEAD, CEADW))) ("CEA Industries" or the "Company"), is reporting results for the three and twelve months ended December 31, 2022.

"The market environment for cannabis has continued to face headwinds as operators contend with pricing pressure and inflationary impacts on consumer wallets, " said Tony McDonald, Chairman and CEO of CEA Industries Inc. "As a result, capital expenditures in the sector have slowed significantly, leading to project and buildout delays which are negatively impacting our business. In response to the challenged environment, we have focused on diversifying our customer base beyond cannabis and have proactively implemented a series of cost saving initiatives to mitigate the pressures. Early signs have already begun to show a positive trend, as reflected by our double-digit sequential reduction in operating expenses in the fourth quarter of 2022.

"Although the economic environment has impacted our business, we remain focused on providing the high-quality products and services our customers expect. Looking ahead, we will continue to evaluate our cost structure to maximize working capital and overall liquidity. We believe our fortified balance sheet and prudent cost management will enable us to withstand the challenged environment and deliver shareholder value."

Fourth Quarter 2022 Financial Summary (in $ thousands, excl. margin items):

		Q4 2022				Q3 2022				Q4 2021				% QoQ				% YoY
Revenue		$	1,461			$	5,063			$	3,056				-71	%			-52	%
Gross Profit		$	151			$	597			$	552				-75	%			-73	%
Gross Margin			10.3	%			11.8	%			18.1	%			-150	bps			-780	bps
Operating Expenses		$	1,434			$	1,656			$	1,518				-13	%			-6	%
Net Income/(Loss)		$	(1,272	)		$	(1,042	)		$	(402	)			NA				NA

Full Year 2022 Financial Summary (in $ thousands, excl. margin items):

		FY 2022				FY 2021				% YoY
Revenue		$	11,283			$	13,639				-17	%
Gross Profit		$	1,145			$	2,926				-61	%
Gross Margin			10.1	%			21.5	%			-1,140	bps
Operating Expenses		$	6,869			$	4,905				40	%
Net Income/(Loss)		$	(5,497	)		$	(1,338	)			NA

Fourth Quarter 2022 Financial Results

Revenue in the fourth quarter of 2022 was $1.5 million compared to $3.1 million for the same period in 2021. The decrease was primarily attributed to supply chain and project delays as well as a reduction in the size and number of signed contracts during 2022.

Net bookings in the fourth quarter of 2022 were $206,000 compared to $4.0 million in the year-ago period. The Company's quarter-end backlog was $5.6 million compared to $10.8 million for the same period in 2021. The decrease in the Company's net bookings and backlog for the fourth quarter of 2022 was primarily driven by fewer capital projects and expenditures by cannabis growers.

Gross profit in the fourth quarter of 2022 was $0.2 million compared to $0.6 million for the same period in 2021. Gross margin was 10.3% compared to 18.1% in the year ago period. The decrease in gross margin was primarily driven by lower revenue and an increase in variable costs, which include the cost of equipment, external engineering costs, shipping and handling, and travel and warranty costs.

Operating expenses in the fourth quarter of 2022 decreased 6% to $1.4 million compared to $1.5 million for the same period in 2021. The decrease was primarily driven by lower product development expenses.

Net loss in the fourth quarter of 2022 was $1.3 million or $(0.18) per share, compared to a net loss of $0.4 million or $(0.25) per share for the same period in 2021. Net loss per share for the fourth quarter of 2022 was lower than the net loss per share in the year-ago quarter due to higher issued and outstanding shares as of the fourth quarter of 2022.

Cash and cash equivalents were $18.6 million on December 31, 2022, compared to $2.2 million on December 31, 2021, while working capital increased by $15.1 million during this period. The increase was primarily driven by net proceeds from the Company's sale of common stock and warrants of approximately $22 million in February 2022. At December 31, 2022, 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: Tuesday, March 28, 2023

Time: 4:30 p.m. ET

Dial: 1-973-528-0008

Access Code: 901537

Webcast URL: https://www.webcaster4.com/Webcast/Page/2893/47830

Interested parties may submit questions to the Company prior to the call by emailing [email protected]. 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 March 28, 2023 at 4:30 p.m. ET.

About CEA Industries Inc.

CEA Industries Inc. (www.ceaindustries.com), is home to industry leaders in supplying the controlled environment agriculture, with complementary and adjacent companies added to its portfolio when aligned with the company's product and sales initiatives. As the global environment for indoor cultivation continues to develop, CEA Industries was formed to embrace companies that support these ecosystems.

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.

Media Contact:        

Courtney Gwynn

Marketing Manager

[email protected]

(720) 531-0311

Investor Contact:

Sean Mansouri, CFA

Elevate IR

[email protected]

(720) 330-2829

CEA Industries Inc.

Consolidated Balance Sheets

		December 31,				December 31,
		2022				2021
ASSETS
Current Assets
Cash and cash equivalents		$	18,637,114			$	2,159,608
Accounts receivable, net			2,649				179,444
Inventory, net			348,411				378,326
Prepaid expenses and other			1,489,921				1,273,720
Total Current Assets			20,478,095				3,991,098
Noncurrent Assets
Property and equipment, net			68,513				77,346
Goodwill			-				631,064
Intangible assets, net			1,830				1,830
Deposits			14,747				14,747
Operating lease right-of-use asset			462,874				565,877
Total Noncurrent Assets			547,964				1,290,864
TOTAL ASSETS		$	21,026,059			$	5,281,962
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities		$	1,207,258			$	1,345,589
Deferred revenue			4,338,570				2,839,838
Accrued equity compensation			89,970				83,625
Other liabilities			-				37,078
Current portion of operating lease liability			118,235				100,139
Total Current Liabilities			5,754,033				4,406,269
Noncurrent Liabilities
Operating lease liability, net of current portion			376,851				486,226
Total Noncurrent Liabilities			376,851				486,226
TOTAL LIABILITIES			6,130,884				4,892,495
Commitments and Contingencies (Note 11)			-				-
TEMPORARY EQUITY
Series B Redeemable Convertible Preferred Stock, $0.00001 par value; 0 and 3,300 issued and outstanding, respectively			-				3,960,000
Total Temporary Equity			-				3,960,000
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.00001 par value; 25,000,000 and 150,000,000 shares authorized, respectively; 0 shares issued and outstanding			-				-
Common stock, $0.00001 par value; 200,000,000 and 850,000,000 shares authorized, respectively; 7,953,974 and 1,600,835 shares issued and outstanding, respectively			80				16
Additional paid in capital			49,173,836				25,211,017
Accumulated deficit			(34,278,741	)			(28,781,566	)
Total Shareholders' Equity (Deficit)			14,895,175				(3,570,533	)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)		$	21,026,059			$	5,281,962

CEA Industries Inc.

Consolidated Statements of Operations

(in US Dollars except share numbers)

		For the Twelve Months Ended December 31,
		2022				2021
Revenue, net		$	11,283,189			$	13,638,558
Cost of revenue			10,138,249				10,712,563
Gross profit			1,144,940				2,925,995
Operating expenses:
Advertising and marketing expenses			1,157,871				772,139
Product development costs			319,987				469,703
Selling, general and administrative expenses			4,759,865				3,662,668
Goodwill impairment charges			631,064				-
Total operating expenses			6,868,787				4,904,510
Operating loss			(5,723,847	)			(1,978,515	)
Other income (expense):
Other income (expense), net			191,358				627,592
Interest income (expense), net			35,314				(2,832	)
Gain on lease termination			-				15,832
Total other income (expense)			226,672				640,592
Loss before provision for income taxes			(5,497,175	)			(1,337,923	)
Income taxes			-				-
Net loss		$	(5,497,175	)		$	(1,337,923	)
Convertible preferred series B stock redemption value adjustment		$	-			$	(2,262,847	)
Convertible preferred series B stock dividends			(35,984	)			(67,447	)
Dividend on redemption of series A preferred stock			-				(20,595	)
Deemed dividend on convertible preferred series B stock on down round			(439,999	)			-
Net loss available to common shareholders		$	(5,973,158	)		$	(3,688,812	)
Loss per common share – basic and diluted		$	(0.84	)		$	(2.33	)
Weighted average number of common shares outstanding, basic and diluted			7,094,410				1,582,869

CEA Industries Inc.

Consolidated Statements of Cash Flows

		For the Twelve Months Ended         December 31,
		2022				2021
Cash Flows From Operating Activities:
Net loss		$	(5,497,175	)		$	(1,337,923	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and intangible asset amortization expense			32,442				65,372
Gain on forgiveness of note payable			-				(517,032	)
Share-based compensation			307,736				369,214
Common stock issued for other expense			-				67,000
Provision for doubtful accounts			(54,708	)			16,844
Provision for excess and obsolete inventory			(20,472	)			(1,666	)
Gain on lease termination			-				(15,832	)
Loss on disposal of assets			4,489				67,567
Amortization of operating lease ROU asset			103,003				204,521
Goodwill impairment charges			631,064				-
Changes in operating assets and liabilities:
Accounts receivable			231,504				(162,808	)
Inventory			50,387				(49,551	)
Prepaid expenses and other			(216,202	)			(235,897	)
Accounts payable and accrued liabilities			(175,409	)			(476,450	)
Deferred revenue			1,498,732				(884,350	)
Accrued interest			-				2,832
Deposits			-				(14,747	)
Operating lease liability, net			(91,279	)			(259,475	)
Accrued equity compensation			6,345				(44,809	)
Net cash used in operating activities			(3,189,543	)			(3,207,190	)
Cash Flows From Investing Activities
Purchases of property and equipment			(30,348	)			(68,657	)
Proceeds from the sale of property and equipment			2,250				11,500
Net cash used in investing activities			(28,098	)			(57,157	)
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				-
Cash proceeds from sale of preferred stock and warrants, net of issuance costs			-				2,624,874
Proceeds from issuance of note payable			-				514,200
Net cash provided by financing activities			19,695,147				3,139,074
Net change in cash and cash equivalents			16,477,506				(125,273	)
Cash and cash equivalents, beginning of period			2,159,608				2,284,881
Cash and  cash equivalents, end of period		$	18,637,114			$	2,159,608
Supplemental cash flow information:
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-
Non-cash investing and financing activities:
Adjustment of carrying value of series B preferred stock  to redemption value		$	-			$	2,262,847
Conversion of series B preferred stock		$	1,980,000			$	-
Accrued series B interest payable settled in shares of common stock		$	-			$	67,447
Series A preferred stock converted into shares of common stock		$	-			$	420
Deemed dividend on series B preferred stock arising on down round		$	439,999			$	-
Dividend on redemption of series A preferred stock settled in shares of common stock		$	-			$	20,595
Right of Use asset arising on new office lease		$	-			$	582,838
Cashless exercise of prefunded warrants		$	2			$	-