CEA Industries Inc. Reports Second Quarter 2024 Results

Louisville, Colorado, Aug. 14, 2024 (GLOBE NEWSWIRE) -- 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, CFA

Elevate IR

[email protected]

(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 Ended June 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