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, CFAElevate IRinfo@ceaindustries.com(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 EndedSeptember 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  
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