CEA Industries Inc. Reports Third Quarter 2023 Results

Louisville, Colorado, Nov. 14, 2023 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ:CEAD, CEADW))) ("CEA Industries" or the "Company"), is reporting results for the three months ended September 30, 2023.

Third Quarter 2023 Financial Summary (in $ thousands, excl. margin items):

	Q3 2023			Q2 2023			Q3 2022
Revenue	$	914		$	1,064		$	5,063
Gross Profit (Loss)	$	(104	)	$	79		$	597
Gross Margin		(11.4	%)		7.4	%		11.8	%
Operating Expenses	$	703		$	783		$	1,656
Net Income/(Loss)	$	(799	)	$	(694	)	$	(1,042	)

"Given the state of our operations, our current corporate assets, and our service position in the cannabis and controlled agricultural sectors, our focus is to work through our backlog and take action to mitigate operating expenses and preserve cash," said Tony McDonald, Chairman and CEO of CEA Industries.

"As previously announced on August 14, 2023, the Board of Directors continues to review strategic alternatives, including a sale, merger or other potential strategic or financial transaction. We will provide updates on any material developments that may result from this process.

Third Quarter 2023 Financial Results

Revenue in the third quarter of 2023 was $0.9 million compared to $5.1 million for the same period in 2022. The decrease was primarily attributed to lower bookings over the last twelve months.

Net bookings in the third quarter of 2023 were $0.4 million compared to $2.2 million in the year-ago period. The Company's quarter-end backlog was $0.5 million compared to $6.8 million for the same period in 2022. The decrease in the Company's net bookings and backlog for the third quarter of 2023 was primarily driven by fewer capital expenditures by cannabis operators in the markets we serve, in addition to a reduced sales effort.

Gross profit in the third quarter of 2023 was $(0.1) million compared to $0.6 million for the same period in 2022. Gross margin was (11.4%) compared to 11.8% in the prior year period. The decrease in gross margin 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 third quarter of 2023 decreased 58% to $0.7 million compared to $1.7 million for the same period in 2022. The decrease was primarily driven by reduced personnel and marketing costs and lower product development expenses.

Net loss in the third quarter of 2023 improved to $0.8 million or $(0.10) per share, compared to a net loss of $1.0 million or $(0.13) per share for the same period in 2022.

Cash and cash equivalents were $13.3 million on September 30, 2023, compared to $18.6 million on December 31, 2022, while working capital decreased by $1.6 million during this period. At September 30, 2023, the Company remained debt free.

CEA Industries has decided not to host its regular quarterly conference call for this quarter.

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)

		September 30,				December 31,
		2023				2022
			(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	13,342,805			$	18,637,114
Accounts receivable, net			272,547				2,649
Inventory, net			315,096				348,411
Prepaid expenses and other			323,751				1,489,921
Total Current Assets			14,254,199				20,478,095
Noncurrent Assets
Property and equipment, net			45,737				68,513
Intangible assets, net			1,830				1,830
Deposits			14,747				14,747
Operating lease right-of-use asset			383,169				462,874
Total Noncurrent Assets			445,483				547,964
TOTAL ASSETS		$	14,699,682			$	21,026,059
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities		$	571,885			$	1,207,258
Deferred revenue			474,888				4,338,570
Accrued equity compensation			-				89,970
Current portion of operating lease liability			124,319				118,235
Total Current Liabilities			1,171,092				5,754,033
Noncurrent Liabilities
Operating lease liability, net of current portion			290,051				376,851
Total Noncurrent Liabilities			290,051				376,851
TOTAL LIABILITIES			1,461,143				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			49,441,231				49,173,836
Accumulated deficit			(36,202,773	)			(34,278,741	)
Total Shareholders' Equity			13,238,539				14,895,175
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	14,699,682			$	21,026,059

CEA Industries Inc.

Condensed Consolidated Statements of Operations

(in US Dollars except share numbers)

(Unaudited)

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2023				2022				2023				2022
Revenue, net		$	913,571			$	5,063,079			$	6,659,858			$	9,822,391
Cost of revenue			1,017,634				4,465,888				5,831,953				8,828,453
Gross profit (loss)			(104,063	)			597,191				827,905				993,938
Operating expenses:
Advertising and marketing expenses			21,551				304,600				256,965				865,305
Product development costs			-				58,978				76,487				254,473
Selling, general and administrative expenses			681,448				1,292,746				2,452,305				3,684,617
Goodwill impairment charges			-				-				-				631,064
Total operating expenses			702,999				1,656,324				2,785,757				5,435,459
Operating loss			(807,062	)			(1,059,133	)			(1,957,852	)			(4,441,521	)
Other income (expense):
Other income (expense), net			-				6,358				7,778				191,358
Interest income (expense), net			8,043				10,725				26,042				24,585
Total other income (expense)			8,043				17,083				33,820				215,943
Loss before provision for income taxes			(799,019	)			(1,042,050	)			(1,924,032	)			(4,225,578	)
Income taxes			-				-				-				-
Net loss		$	(799,019	)		$	(1,042,050	)		$	(1,924,032	)		$	(4,225,578	)
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		$	(799,019	)		$	(1,042,050	)		$	(1,924,032	)		$	(4,701,561	)
Loss per common share – basic and diluted		$	(0.10	)		$	(0.13	)		$	(0.24	)		$	(0.69	)
Weighted average number of common shares outstanding, basic and diluted			8,076,372				7,953,974				8,074,842				6,804,741

CEA Industries Inc.

Condensed Consolidated Statements of Cash Flows

(in US Dollars except share numbers)

(Unaudited)

		For the Nine Months Ended September 30,
		2023				2022
Cash Flows From Operating Activities:
Net loss		$	(1,924,032	)		$	(4,225,578	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and intangible asset amortization expense			22,476				24,731
Share-based compensation			177,427				280,739
Provision for doubtful accounts			(2,056	)			93,500
Provision for excess and obsolete inventory			111,123				(5,332	)
Loss on disposal of assets			100				4,489
Amortization of operating lease ROU asset			79,705				76,917
Goodwill impairment charges			-				631,064
Changes in operating assets and liabilities:
Accounts receivable			(267,842	)			8,801
Inventory			(77,808	)			(230,966	)
Prepaid expenses and other			1,166,170				171,582
Accounts payable and accrued liabilities			(635,373	)			910,523
Deferred revenue			(3,863,683	)			1,595,644
Operating lease liability, net			(80,716	)			(65,157	)
Accrued equity compensation			-				(14,065	)
Net cash provided by (used in) operating activities			(5,294,509	)			(743,108	)
Cash Flows From Investing Activities
Purchases of property and equipment			-				(30,348	)
Proceeds from the sale of property and equipment			200				2,250
Net cash provided by (used in) investing activities			200				(28,098	)
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			(5,294,309	)			18,923,941
Cash and cash equivalents, beginning of period			18,637,114				2,159,608
Cash and cash equivalents, end of period		$	13,342,805			$	21,083,549
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
Cashless exercise of prefunded warrants						$	2
Options issued for accrued equity compensation liability		$	89,970			$	78,938