CEA Industries Inc. Reports Third Quarter 2023 Results
CEA Industries Inc. (NASDAQ: CEAD, CEADW) Reports Q3 2023 Financial Results, Including $0.9M Revenue, a Decrease from $5.1M in Q3 2022. The Company's Net Loss Improved to $0.8M, with Reduced Operating Expenses and Cash and Cash Equivalents of $13.3M as of September 30, 2023.
Positive
Reduced operating expenses by 58% in Q3 2023 compared to the same period in 2022.
Net loss improved to $0.8 million in Q3 2023 compared to $1.0 million in Q3 2022.
Cash and cash equivalents were $13.3 million on September 30, 2023, compared to $18.6 million on December 31, 2022.
11/14/2023 - 04:15 PM
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, CFAinfo@ceaindustries.com
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, $0.00 001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding - - Common stock, $0.00 001 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
What were CEA Industries Inc.'s Q3 2023 revenues?
CEA Industries Inc. reported $0.9 million in revenue for Q3 2023, a decrease from $5.1 million in Q3 2022.
What was CEA Industries Inc.'s net loss in Q3 2023?
CEA Industries Inc. reported a net loss of $0.8 million in Q3 2023, an improvement from $1.0 million in Q3 2022.
How much were CEA Industries Inc.'s cash and cash equivalents as of September 30, 2023?
CEA Industries Inc. had $13.3 million in cash and cash equivalents as of September 30, 2023, compared to $18.6 million on December 31, 2022.
