CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the
“Company”), is reporting results for the three and twelve months
ended December 31, 2022.
“The market environment for cannabis has
continued to face headwinds as operators contend with pricing
pressure and inflationary impacts on consumer wallets, ” said Tony
McDonald, Chairman and CEO of CEA Industries Inc. “As a result,
capital expenditures in the sector have slowed significantly,
leading to project and buildout delays which are negatively
impacting our business. In response to the challenged environment,
we have focused on diversifying our customer base beyond cannabis
and have proactively implemented a series of cost saving
initiatives to mitigate the pressures. Early signs have already
begun to show a positive trend, as reflected by our double-digit
sequential reduction in operating expenses in the fourth quarter of
2022.
“Although the economic environment has impacted
our business, we remain focused on providing the high-quality
products and services our customers expect. Looking ahead, we will
continue to evaluate our cost structure to maximize working capital
and overall liquidity. We believe our fortified balance sheet and
prudent cost management will enable us to withstand the challenged
environment and deliver shareholder value.”
Fourth Quarter
2022 Financial
Summary (in $ thousands, excl. margin items):
|
|
Q4 2022 |
|
|
Q3 2022 |
|
|
Q4 2021 |
|
|
% QoQ |
|
|
% YoY |
|
Revenue |
|
$ |
1,461 |
|
|
$ |
5,063 |
|
|
$ |
3,056 |
|
|
|
-71 |
% |
|
|
-52 |
% |
Gross Profit |
|
$ |
151 |
|
|
$ |
597 |
|
|
$ |
552 |
|
|
|
-75 |
% |
|
|
-73 |
% |
Gross Margin |
|
|
10.3 |
% |
|
|
11.8 |
% |
|
|
18.1 |
% |
|
|
-150 |
bps |
|
|
-780 |
bps |
Operating Expenses |
|
$ |
1,434 |
|
|
$ |
1,656 |
|
|
$ |
1,518 |
|
|
|
-13 |
% |
|
|
-6 |
% |
Net Income/(Loss) |
|
$ |
(1,272 |
) |
|
$ |
(1,042 |
) |
|
$ |
(402 |
) |
|
|
NA |
|
|
|
NA |
|
Full Year 2022 Financial
Summary (in $ thousands, excl. margin items):
|
|
FY 2022 |
|
|
FY 2021 |
|
|
% YoY |
|
Revenue |
|
$ |
11,283 |
|
|
$ |
13,639 |
|
|
|
-17 |
% |
Gross Profit |
|
$ |
1,145 |
|
|
$ |
2,926 |
|
|
|
-61 |
% |
Gross Margin |
|
|
10.1 |
% |
|
|
21.5 |
% |
|
|
-1,140 |
bps |
Operating Expenses |
|
$ |
6,869 |
|
|
$ |
4,905 |
|
|
|
40 |
% |
Net Income/(Loss) |
|
$ |
(5,497 |
) |
|
$ |
(1,338 |
) |
|
|
NA |
|
Fourth Quarter 2022
Financial Results
Revenue in the fourth quarter of 2022 was $1.5
million compared to $3.1 million for the same period in 2021. The
decrease was primarily attributed to supply chain and project
delays as well as a reduction in the size and number of signed
contracts during 2022.
Net bookings in the fourth quarter of 2022 were
$206,000 compared to $4.0 million in the year-ago period. The
Company’s quarter-end backlog was $5.6 million compared to $10.8
million for the same period in 2021. The decrease in the Company’s
net bookings and backlog for the fourth quarter of 2022 was
primarily driven by fewer capital projects and expenditures by
cannabis growers.
Gross profit in the fourth quarter of 2022 was
$0.2 million compared to $0.6 million for the same period in 2021.
Gross margin was 10.3% compared to 18.1% in the year ago period.
The decrease in gross margin was primarily driven by lower revenue
and an increase in variable costs, which include the cost of
equipment, external engineering costs, shipping and handling, and
travel and warranty costs.
Operating expenses in the fourth quarter of 2022
decreased 6% to $1.4 million compared to $1.5 million for the same
period in 2021. The decrease was primarily driven by lower product
development expenses.
Net loss in the fourth quarter of 2022 was $1.3
million or $(0.18) per share, compared to a net loss of $0.4
million or $(0.25) per share for the same period in 2021. Net loss
per share for the fourth quarter of 2022 was lower than the net
loss per share in the year-ago quarter due to higher issued and
outstanding shares as of the fourth quarter of 2022.
Cash and cash equivalents were $18.6 million on
December 31, 2022, compared to $2.2 million on December 31, 2021,
while working capital increased by $15.1 million during this
period. The increase was primarily driven by net proceeds from the
Company’s sale of common stock and warrants of approximately $22
million in February 2022. At December 31, 2022, the company
remained debt free.
Conference Call
CEA management will host a conference call today
to discuss its financial and operating results, followed by a
question-and-answer session.
Date: Tuesday, March 28, 2023Time: 4:30 p.m. ETDial:
1-973-528-0008Access Code: 901537Webcast URL:
https://www.webcaster4.com/Webcast/Page/2893/47830
Interested parties may submit questions to the
Company prior to the call by emailing info@ceaindustries.com. For
those unable to participate in the conference call at that time, a
replay will be available for two weeks in the Investors section of
the Company’s website at www.ceaindustries.com beginning on March
28, 2023 at 4:30 p.m. ET.
About CEA Industries
Inc.
CEA Industries Inc. (www.ceaindustries.com), is
home to industry leaders in supplying the controlled environment
agriculture, with complementary and adjacent companies added to its
portfolio when aligned with the company’s product and sales
initiatives. As the global environment for indoor cultivation
continues to develop, CEA Industries was formed to embrace
companies that support these ecosystems.
Headquartered in Louisville, Colorado, CEA
Industries knows that growth is a team sport. Through future
partnerships and mergers and acquisitions, both financial and
strategic, CEA Industries will continue its pursuit of companies
and products that bring accretive value to its customers.
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.
Media
Contact:
Courtney GwynnMarketing Manager courtney.gwynn@surna.com(720)
531-0311
Investor Contact:
Sean Mansouri, CFAElevate IRinfo@ceaindustries.com(720)
330-2829
CEA Industries
Inc.Consolidated Balance Sheets
|
|
December 31, |
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
18,637,114 |
|
|
$ |
2,159,608 |
|
Accounts receivable, net |
|
|
2,649 |
|
|
|
179,444 |
|
Inventory, net |
|
|
348,411 |
|
|
|
378,326 |
|
Prepaid expenses and other |
|
|
1,489,921 |
|
|
|
1,273,720 |
|
Total Current Assets |
|
|
20,478,095 |
|
|
|
3,991,098 |
|
Noncurrent
Assets |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
68,513 |
|
|
|
77,346 |
|
Goodwill |
|
|
- |
|
|
|
631,064 |
|
Intangible assets, net |
|
|
1,830 |
|
|
|
1,830 |
|
Deposits |
|
|
14,747 |
|
|
|
14,747 |
|
Operating lease right-of-use asset |
|
|
462,874 |
|
|
|
565,877 |
|
Total Noncurrent Assets |
|
|
547,964 |
|
|
|
1,290,864 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
21,026,059 |
|
|
$ |
5,281,962 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
1,207,258 |
|
|
$ |
1,345,589 |
|
Deferred revenue |
|
|
4,338,570 |
|
|
|
2,839,838 |
|
Accrued equity compensation |
|
|
89,970 |
|
|
|
83,625 |
|
Other liabilities |
|
|
- |
|
|
|
37,078 |
|
Current portion of operating lease liability |
|
|
118,235 |
|
|
|
100,139 |
|
Total Current Liabilities |
|
|
5,754,033 |
|
|
|
4,406,269 |
|
|
|
|
|
|
|
|
|
|
Noncurrent
Liabilities |
|
|
|
|
|
|
|
|
Operating lease liability, net of current portion |
|
|
376,851 |
|
|
|
486,226 |
|
Total Noncurrent
Liabilities |
|
|
376,851 |
|
|
|
486,226 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
6,130,884 |
|
|
|
4,892,495 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
(Note 11) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
TEMPORARY
EQUITY |
|
|
|
|
|
|
|
|
Series B Redeemable Convertible Preferred Stock, $0.00001 par
value; 0 and 3,300 issued and outstanding, respectively |
|
|
- |
|
|
|
3,960,000 |
|
Total Temporary Equity |
|
|
- |
|
|
|
3,960,000 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY
(DEFICIT) |
|
|
|
|
|
|
|
|
Preferred stock, $.00001 par value; 25,000,000 and 150,000,000
shares authorized, respectively; 0 shares issued and
outstanding |
|
|
- |
|
|
|
- |
|
Common stock, $0.00001 par value; 200,000,000 and 850,000,000
shares authorized, respectively; 7,953,974 and 1,600,835 shares
issued and outstanding, respectively |
|
|
80 |
|
|
|
16 |
|
Additional paid in capital |
|
|
49,173,836 |
|
|
|
25,211,017 |
|
Accumulated deficit |
|
|
(34,278,741 |
) |
|
|
(28,781,566 |
) |
Total Shareholders’ Equity
(Deficit) |
|
|
14,895,175 |
|
|
|
(3,570,533 |
) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY (DEFICIT) |
|
$ |
21,026,059 |
|
|
$ |
5,281,962 |
|
CEA Industries
Inc.Consolidated Statements of
Operations(in US Dollars except share
numbers)
|
|
For the Twelve Months Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
Revenue, net |
|
$ |
11,283,189 |
|
|
$ |
13,638,558 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
10,138,249 |
|
|
|
10,712,563 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,144,940 |
|
|
|
2,925,995 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Advertising and marketing expenses |
|
|
1,157,871 |
|
|
|
772,139 |
|
Product development costs |
|
|
319,987 |
|
|
|
469,703 |
|
Selling, general and administrative expenses |
|
|
4,759,865 |
|
|
|
3,662,668 |
|
Goodwill impairment charges |
|
|
631,064 |
|
|
|
- |
|
Total operating expenses |
|
|
6,868,787 |
|
|
|
4,904,510 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(5,723,847 |
) |
|
|
(1,978,515 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Other income (expense), net |
|
|
191,358 |
|
|
|
627,592 |
|
Interest income (expense), net |
|
|
35,314 |
|
|
|
(2,832 |
) |
Gain on lease termination |
|
|
- |
|
|
|
15,832 |
|
Total other income
(expense) |
|
|
226,672 |
|
|
|
640,592 |
|
|
|
|
|
|
|
|
|
|
Loss before provision for
income taxes |
|
|
(5,497,175 |
) |
|
|
(1,337,923 |
) |
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,497,175 |
) |
|
$ |
(1,337,923 |
) |
|
|
|
|
|
|
|
|
|
Convertible preferred series B stock redemption value
adjustment |
|
$ |
- |
|
|
$ |
(2,262,847 |
) |
Convertible preferred series B stock dividends |
|
|
(35,984 |
) |
|
|
(67,447 |
) |
Dividend on redemption of series A preferred stock |
|
|
- |
|
|
|
(20,595 |
) |
Deemed dividend on convertible preferred series B stock on down
round |
|
|
(439,999 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net loss available to common
shareholders |
|
$ |
(5,973,158 |
) |
|
$ |
(3,688,812 |
) |
|
|
|
|
|
|
|
|
|
Loss per common share – basic
and diluted |
|
$ |
(0.84 |
) |
|
$ |
(2.33 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding, basic and diluted |
|
|
7,094,410 |
|
|
|
1,582,869 |
|
CEA Industries
Inc.Consolidated Statements of Cash
Flows
|
|
For the Twelve Months
Ended December
31, |
|
|
|
2022 |
|
|
2021 |
|
Cash Flows From Operating
Activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,497,175 |
) |
|
$ |
(1,337,923 |
) |
Adjustments to reconcile net
loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and intangible asset amortization expense |
|
|
32,442 |
|
|
|
65,372 |
|
Gain on forgiveness of note payable |
|
|
- |
|
|
|
(517,032 |
) |
Share-based compensation |
|
|
307,736 |
|
|
|
369,214 |
|
Common stock issued for other expense |
|
|
- |
|
|
|
67,000 |
|
Provision for doubtful accounts |
|
|
(54,708 |
) |
|
|
16,844 |
|
Provision for excess and obsolete inventory |
|
|
(20,472 |
) |
|
|
(1,666 |
) |
Gain on lease termination |
|
|
- |
|
|
|
(15,832 |
) |
Loss on disposal of assets |
|
|
4,489 |
|
|
|
67,567 |
|
Amortization of operating lease ROU asset |
|
|
103,003 |
|
|
|
204,521 |
|
Goodwill impairment charges |
|
|
631,064 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
231,504 |
|
|
|
(162,808 |
) |
Inventory |
|
|
50,387 |
|
|
|
(49,551 |
) |
Prepaid expenses and other |
|
|
(216,202 |
) |
|
|
(235,897 |
) |
Accounts payable and accrued liabilities |
|
|
(175,409 |
) |
|
|
(476,450 |
) |
Deferred revenue |
|
|
1,498,732 |
|
|
|
(884,350 |
) |
Accrued interest |
|
|
- |
|
|
|
2,832 |
|
Deposits |
|
|
- |
|
|
|
(14,747 |
) |
Operating lease liability, net |
|
|
(91,279 |
) |
|
|
(259,475 |
) |
Accrued equity compensation |
|
|
6,345 |
|
|
|
(44,809 |
) |
Net cash used in operating
activities |
|
|
(3,189,543 |
) |
|
|
(3,207,190 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(30,348 |
) |
|
|
(68,657 |
) |
Proceeds from the sale of property and equipment |
|
|
2,250 |
|
|
|
11,500 |
|
Net cash used in investing
activities |
|
|
(28,098 |
) |
|
|
(57,157 |
) |
|
|
|
|
|
|
|
|
|
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 |
|
|
|
- |
|
Cash proceeds from sale of preferred stock and warrants, net of
issuance costs |
|
|
- |
|
|
|
2,624,874 |
|
Proceeds from issuance of note payable |
|
|
- |
|
|
|
514,200 |
|
Net cash provided by financing
activities |
|
|
19,695,147 |
|
|
|
3,139,074 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
16,477,506 |
|
|
|
(125,273 |
) |
Cash and cash equivalents,
beginning of period |
|
|
2,159,608 |
|
|
|
2,284,881 |
|
Cash and cash
equivalents, end of period |
|
$ |
18,637,114 |
|
|
$ |
2,159,608 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
- |
|
|
$ |
- |
|
Income taxes paid |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and
financing activities: |
|
|
|
|
|
|
|
|
Adjustment of carrying value of series B preferred
stock to redemption value |
|
$ |
- |
|
|
$ |
2,262,847 |
|
Conversion of series B preferred stock |
|
$ |
1,980,000 |
|
|
$ |
- |
|
Accrued series B interest payable settled in shares of common
stock |
|
$ |
- |
|
|
$ |
67,447 |
|
Series A preferred stock converted into shares of common stock |
|
$ |
- |
|
|
$ |
420 |
|
Deemed dividend on series B preferred stock arising on down
round |
|
$ |
439,999 |
|
|
$ |
- |
|
Dividend on redemption of series A preferred stock settled in
shares of common stock |
|
$ |
- |
|
|
$ |
20,595 |
|
Right of Use asset arising on new office lease |
|
$ |
- |
|
|
$ |
582,838 |
|
Cashless exercise of prefunded warrants |
|
$ |
2 |
|
|
$ |
- |
|
CEA Industries (NASDAQ:CEAD)
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CEA Industries (NASDAQ:CEAD)
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From Nov 2023 to Nov 2024