CEADW CEA Industries Inc

CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”), is reporting results for the three months ended March 31, 2024.

First Quarter 2024 Financial Summary (in $ thousands, excl. margin items):

		Q1 2024(unaudited)				Q4 2023(unaudited)				Q1 2023(unaudited)
Revenue		$	235			$	251			$	4,683
Gross Profit		$	(154	)		$	(286	)		$	853
Operating Expenses		$	769			$	709			$	1,299
Net Income/(Loss)		$	(917	)		$	(988	)		$	(431	)

“We continue to address the level of our expenses in support of our ongoing strategic review process,” said Tony McDonald, Chairman and CEO of CEA Industries. “To demonstrate our commitment to our shareholders and prospects, we further reduced headcount, eliminated product development costs, and brought down business development expenses to help preserve our balance sheet. We will continue to prudently manage our capital as we work through our remaining backlog of projects.”

Mr. McDonald continued: “As previously announced on August 14, 2023, the Board of Directors is actively evaluating multiple 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.”

Update on Review of Strategic Alternatives

The Company’s strategic review remains underway. The Company is no longer exclusively partnered with Roth Capital Advisors (“Roth”). CEA Industries is in active discussions with certain prospects, but will continue to evaluate strategic opportunities, including a sale, merger or other potential strategic or financial transaction brought forward by Roth as well as other parties. There can be no assurance regarding the result or outcome of this review.

First Quarter 2024 Financial Results

Revenue in the first quarter of 2024 was $0.2 million compared to $4.7 million for the same period in 2023. The decrease was primarily attributed to lower bookings over the last twelve months.

Net bookings in the first quarter of 2024 were $0.3 million compared to $0.8 million in the year-ago period. The Company’s quarter-end backlog was $0.5 million compared to $1.9 million for the same period in 2023. The decrease in the Company’s net bookings and backlog for the first quarter of 2024 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 first quarter of 2024 was $(0.2) million compared to $0.9 million for the same period in 2023. The decrease in gross profit 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 first quarter of 2024 decreased 41% to $0.8 million compared to $1.3 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 first quarter of 2024 was $0.9 million or $(0.11) per share, compared to a net loss of $0.4 million or $(0.05) per share for the same period in 2023.

Cash and cash equivalents were $11.6 million at March 31, 2024, compared to $12.5 million on December 31, 2023, while working capital decreased by $0.8 million during this period. At March 31, 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, CFAElevate IRinfo@ceaindustries.com(720) 330-2829

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

		March 31,				December 31,
		2024				2023
			(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	11,598,836			$	12,508,251
Accounts receivable, net			20,126				18,655
Contract assets, net			224,414				224,414
Inventory, net			245,894				296,404
Prepaid expenses and other			227,514				313,115
Total Current Assets			12,316,784				13,360,839
Noncurrent Assets
Property and equipment, net			19,019				38,558
Intangible assets, net			1,830				1,830
Deposits			14,747				14,747
Operating lease right-of-use asset			328,792				356,109
Total Noncurrent Assets			364,388				411,244
TOTAL ASSETS		$	12,681,172			$	13,772,083
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities		$	361,876			$	624,724
Deferred revenue			539,956				499,800
Current portion of operating lease liability			128,839				126,724
Total Current Liabilities			1,030,671				1,251,248
Noncurrent Liabilities
Operating lease liability, net of current portion			228,927				259,627
Total Noncurrent Liabilities			228,927				259,627
TOTAL LIABILITIES			1,259,598				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; 8,212,737 and 8,076,372 shares issued and outstanding, respectively			82				81
Additional paid in capital			49,528,387				49,451,419
Accumulated deficit			(38,106,895	)			(37,190,292	)
Total Shareholders’ Equity			11,421,574				12,261,208
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	12,681,172			$	13,772,083

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

		For the Three Months Ended March 31,
		2024				2023
Revenue		$	234,506			$	4,682,573
Cost of revenue			388,881				3,829,297
Gross (loss) profit			(154,375	)			853,276
Operating expenses:
Advertising and marketing expenses			9,324				202,323
Product development costs			-				76,413
Selling, general and administrative expenses			760,110				1,020,702
Total operating expenses			769,434				1,299,438
Operating loss			(923,809	)			(446,162	)
Other income (expense):
Other income (expense), net			-				5,704
Interest income (expense), net			7,206				9,020
Total other income (expense)			7,206				14,724
Loss before provision for income taxes			(916,603	)			(431,438	)
Income taxes			-				-
Net loss			(916,603	)			(431,438	)
Loss per common share – basic and diluted		$	(0.11	)		$	(0.05	)
Weighted average number of common shares outstanding, basic and diluted			8,209,730				8,071,731

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

		For the Three Months Ended         March 31,
		2024				2023
Cash Flows From Operating Activities:
Net loss		$	(916,603	)		$	(431,438	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and intangible asset amortization expense			6,914				7,500
Share-based compensation			76,969				147,094
Provision for doubtful accounts			(34,566	)			(1,705	)
Provision for excess and obsolete inventory			38,360				33,638
Loss on disposal of assets			12,625				100
Operating lease expense			27,317				26,325
Changes in operating assets and liabilities:
Accounts receivable			33,096				(57,420	)
Inventory			12,151				(126,360	)
Prepaid expenses and other			85,600				1,018,785
Accounts payable and accrued liabilities			(262,849	)			(43,124	)
Deferred revenue			40,156				(3,235,970	)
Operating lease liability, net			(28,585	)			(26,662	)
Net cash used in operating activities			(909,415	)			(2,689,237	)
Cash Flows From Investing Activities
Proceeds from the sale of property and equipment			-				200
Net cash provided by investing activities			-				200
Net change in cash and cash equivalents			(909,415	)			(2,689,037	)
Cash and cash equivalents, beginning of period			12,508,251				18,637,114
Cash and cash equivalents, end of period		$	11,598,836			$	15,948,077
Supplemental cash flow information:
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-
Non-cash investing and financing activities:
Options issued for accrued equity compensation liability		$	-			$	89,970