CEA Industries Inc. Reports Fourth Quarter and Full Year 2023 Results

Louisville, Colorado, March 28, 2024 (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, 2023.

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

 Q4 2023
Q3 2023
Q4 2022
Revenue$251 $914 $1,461 
Gross Profit$(286)$(104)$151 
Gross Margin (113.8%) (11.4%) 10.3%
Operating Expenses$709 $703 $1,433 
Net Income/(Loss)$(988)$(799)$(1,272)

Full Year 2023 Financial Summary (in $ thousands, excl. margin items):

 FY 2023FY 2022
Revenue$6,911 $11,283 
Gross Profit$542 $1,145 
Gross Margin 7.8% 10.1%
Operating Expenses$3,495 $6,869 
Net Income/(Loss)$(2,912)$(5,497)

“We continue to operate under the lean cost structure implemented during 2023, with a focus on expense reduction and capital preservation, as we manage through our remaining backlog,” said Tony McDonald, Chairman and CEO of CEA Industries. “Subsequent to year-end we enacted additional headcount reductions, which we anticipate will result in annualized cost savings of ~$230,000, in support of our ongoing efforts to optimize our operating expense profile.”

Mr. McDonald continued: “As previously announced on August 14, 2023, the Board of Directors remains steadfast in their examination of strategic alternatives, including a sale, merger, or other potential strategic or financial transaction. We will provide updates on any material developments that result from this process.”

Fourth Quarter 2023 Financial Results

Revenue in the fourth quarter of 2023 was $0.3 million compared to $1.5 million for the same period in 2022. The decrease was primarily attributed to lower bookings over the last twelve months.

Net bookings in the fourth quarter of 2023 were $0.1 million compared to $0.2 million in the year-ago period. The Company’s quarter-end backlog was $0.4 million compared to $5.6 million for the same period in 2022. The decrease in the Company’s net bookings and backlog for the fourth quarter of 2023 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 fourth quarter of 2023 was $(0.3) million compared to $0.2 million for the same period in 2022. Gross margin was (113.8%) compared to 10.3% 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 fourth quarter of 2023 decreased 51% to $0.7 million compared to $1.4 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 fourth quarter of 2023 improved to $1.0 million or $(0.12) per share, compared to a net loss of $1.3 million or $(0.18) per share for the same period in 2022.

Cash and cash equivalents were $12.5 million at December 31, 2023, compared to $18.6 million on December 31, 2022, while working capital decreased by $2.6 million during this period. At December 31, 2023, 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
(720) 330-2829

CEA Industries Inc.
Condensed Consolidated Balance Sheets
(in US Dollars except share numbers)

  December 31,  December 31, 
  2023  2022 
Current Assets        
Cash and cash equivalents $12,508,251  $18,637,114 
Accounts receivable, net  18,655   2,649 
Contract assets, net  224,414   - 
Inventory, net  296,404   348,411 
Prepaid expenses and other  313,115   1,489,921 
Total Current Assets  13,360,839   20,478,095 
Noncurrent Assets        
Property and equipment, net  38,558   68,513 
Intangible assets, net  1,830   1,830 
Deposits  14,747   14,747 
Operating lease right-of-use asset  356,109   462,874 
Total Noncurrent Assets  411,244   547,964 
TOTAL ASSETS $13,772,083  $21,026,059 
Current Liabilities        
Accounts payable and accrued liabilities $624,724  $1,207,258 
Deferred revenue  499,800   4,338,570 
Accrued equity compensation  -   89,970 
Current portion of operating lease liability  126,724   118,235 
Total Current Liabilities  1,251,248   5,754,033 
Noncurrent Liabilities        
Operating lease liability, net of current portion  259,627   376,851 
Total Noncurrent Liabilities  259,627   376,851 
TOTAL LIABILITIES  1,510,875   6,130,884 
Commitments and Contingencies (Note 10)  -   - 
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  49,451,419   49,173,836 
Accumulated deficit  (37,190,292)  (34,278,741)
Total Shareholders’ Equity  12,261,208   14,895,175 

CEA Industries Inc.
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2023  2022  2023  2022 
  (Unaudited)  (Unaudited)       
Revenue $251,093  $1,460,798  $6,910,951  $11,283,189 
Cost of revenue  536,919   1,309,796   6,368,872   10,138,249 
Gross profit  (285,826)  151,002   542,079   1,144,940 
Operating expenses:                
Advertising and marketing expenses  16,445   292,566   273,409   1,157,871 
Product development costs  -   65,514   76,487   319,987 
Selling, general and administrative expenses  693,023   1,075,248   3,145,328   4,759,865 
Goodwill impairment charges  -   -   -   631,064 
Total operating expenses  709,467   1,433,328   3,495,224   6,868,787 
Operating loss  (995,293)  (1,282,326)  (2,953,145)  (5,723,847)
Other income (expense):                
Other income (expense), net  -   -   7,778   191,358 
Interest income (expense), net  7,774   10,729   33,816   35,314 
Total other income (expense)  7,774   10,729   41,594   226,672 
Loss before provision for income taxes  (987,519)  (1,271,597)  (2,911,551)  (5,497,175)
Income taxes  -   -   -   - 
Net loss $(987,519) $(1,271,597) $(2,911,551) $(5,497,175)
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 $(987,519) $(1,271,597) $(2,911,551) $(5,973,158)
Loss per common share – basic and diluted $(0.12) $(0.18) $(0.36) $(0.84)
Weighted average number of common shares outstanding, basic and diluted  8,076,372   7,094,410   8,075,228   7,094,410 

CEA Industries Inc.
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)

  For the Years Ended December 31, 
  2023  2022 
Cash Flows From Operating Activities:        
Net loss $(2,911,551) $(5,497,175)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and intangible asset amortization expense  29,655   32,442 
Share-based compensation  187,615   307,736 
Provision for doubtful accounts  (2,056)  (54,708)
Provision for excess and obsolete inventory  121,791   (20,472)
Loss on disposal of assets  100   4,489 
Operating lease expense  106,765   103,003 
Goodwill impairment charges  -   631,064 
Changes in operating assets and liabilities:        
Accounts receivable  (13,950)  231,504 
Contract assets  (224,414)  - 
Inventory  (69,784)  50,387 
Prepaid expenses and other  1,176,806   (216,202)
Accounts payable and accrued liabilities  (582,534)  (175,409)
Deferred revenue  (3,838,771)  1,498,732 
Operating lease liability, net  (108,735)  (91,279)
Accrued equity compensation  -   6,345 
Net cash used in operating activities  (6,129,063)  (3,189,543)
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  (6,128,863)  16,477,506 
Cash and cash equivalents, beginning of period  18,637,114   2,159,608 
Cash and cash equivalents, end of period $12,508,251  $18,637,114 
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  $-