CEA Industries Reports Second Quarter 2022 Results
Louisville, Colorado, Aug. 11, 2022 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”) a leader in controlled environment agriculture (CEA) systems engineering and technologies, is reporting results for the three months ended June 30, 2022.
Second Quarter 2022 Financial Highlights (in $ thousands, excl. margin items):
| Q2 2022 | Q1 2022 | Q2 2021 | % QoQ | % YoY | ||||||||
Revenue | $ | 3,015 |
| $ | 1,744 |
| $ | 4,510 |
| 73% | -33% | ||
Gross Profit | $ | 306 |
| $ | 91 |
| $ | 1,282 |
| 238% | -76% | ||
Gross Margin |
| 10.2 | % |
| 5.2 | % |
| 28.4 | % | 500 bps | -1,820 bps | ||
Operating Expenses | $ | 2,077 |
| $ | 1,702 |
| $ | 1,166 |
| 22% | 78% | ||
Net Income (Loss) | $ | (1,761 | ) | $ | (1,423 | ) | $ | 265 |
| NA | NA | ||
Management Commentary
“We experienced a recovery in revenue during the quarter as sales were up more than 70% compared to Q1 2022, however compared to the prior year, the market environment remains challenged, as we continue to work through the effects of inflation and lingering supply chain challenges,” said Tony McDonald, Chairman and CEO of CEA Industries Inc. “That said, we have begun to see the benefit of our sales, marketing, and product development initiatives, as reflected by a quarter-over-quarter increase in new bookings. In Q2, we both expanded current contracts and signed multiple new customers, including a new contract with Greene Brothers Farm that has the potential to represent a multi-year engagement. We still have work to do to execute on our organic growth initiatives, however, the early results from our sales and marketing investments are encouraging.
“Looking ahead, we plan to execute on both organic and inorganic growth initiatives. Our strong balance sheet enables us to be patient and selective in our pursuit of M&A targets. Although the macro environment presents its share of challenges, it also presents a unique opportunity to acquire accretive businesses at attractive multiples that can accelerate our growth and profitability.”
Second Quarter 2022 Financial Results
Revenue in the second quarter of 2022 was $3.0 million compared to $4.5 million for the same period in 2021. The decrease was attributed to supply chain and project delays. The Company continues to expect recognizing delayed revenue in the second half of the year and currently has approximately $10 million of backlog which is expected to be recognized over the next 18 months.
Net bookings in the second quarter of 2022 grew 67% to $1.5 million compared to $0.9 million in the year-ago period. The Company’s quarter-end backlog increased 21% to $9.7 million compared to $8.0 million for the same period in 2021. The increase in the Company’s new bookings and backlog for the second quarter of 2022 was partially offset by a $2.3 million contract cancellation that resulted from the customer’s loss of funding.
Gross profit in the second quarter of 2022 was $0.3 million compared to $1.3 million for the same period in 2021. Gross margin was 10.2% compared to 28.4% in the year ago period. The decrease in gross margin was primarily driven by lower revenue and higher fixed costs.
Operating expenses in the second quarter of 2022 were $2.1 million compared to $1.2 million for the same period in 2021. The increase was primarily driven by a non-cash goodwill impairment charge related to the decline in the Company’s stock price.
Net loss in the second quarter of 2022 was $1.8 million or $(0.23) per share, compared to net income of $0.3 million or $0.17 per share for the same period in 2021.
Cash and cash equivalents increased to $20.6 million on June 30, 2022, compared to $2.2 million on December 31, 2021, while working capital increased by $17.4 million during this period. The increase was primarily driven by net proceeds from the Company’s sale of common stock and warrants of approximately $21.7 million in February 2022. At June 30, 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: Thursday, August 11, 2022
Time: 4:15 p.m. ET
Dial: 1-973-528-0008
Access Code: 195138
Webcast URL: https://www.webcaster4.com/Webcast/Page/2893/46175
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 August 12, 2022, at 4:00 p.m. ET.
About CEA Industries Inc.
CEA Industries Inc. (www.ceaindustries.com), is home to industry leaders in controlled environment agriculture, with complementary and adjacent companies added to its portfolio when aligned with the company’s growth initiatives. As the global environment for indoor cultivation continues to grow, 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 that bring accretive value to its customers and investors.
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:
Jamie English
Vice President, Marketing Communications
Jamie.english@surna.com
303.993.5271
Investor Contact:
Sean Mansouri, CFA
Elevate IR
info@ceaindustries.com
CEA Industries Inc.
Consolidated Balance Sheets
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
| (Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 20,611,388 |
|
| $ | 2,159,608 |
|
Accounts receivable (net of allowance for doubtful accounts of $172,760 and $181,942, respectively) |
|
| 140,473 |
|
|
| 179,444 |
|
Other receivables |
|
| 78,943 |
|
|
| - |
|
Inventory, net |
|
| 401,757 |
|
|
| 378,326 |
|
Prepaid expenses and other |
|
| 2,887,593 |
|
|
| 1,273,720 |
|
Total Current Assets |
|
| 24,120,154 |
|
|
| 3,991,098 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 84,687 |
|
|
| 77,346 |
|
Goodwill |
|
| - |
|
|
| 631,064 |
|
Intangible assets, net |
|
| 1,830 |
|
|
| 1,830 |
|
Deposits |
|
| 14,747 |
|
|
| 14,747 |
|
Operating lease right-of-use asset |
|
| 514,816 |
|
|
| 565,877 |
|
Total Noncurrent Assets |
|
| 616,080 |
|
|
| 1,290,864 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 24,736,234 |
|
| $ | 5,281,962 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 1,044,536 |
|
| $ | 1,345,589 |
|
Deferred revenue |
|
| 5,935,270 |
|
|
| 2,839,838 |
|
Accrued equity compensation |
|
| 46,373 |
|
|
| 83,625 |
|
Other liabilities |
|
| 37,078 |
|
|
| 37,078 |
|
Current portion of operating lease liability |
|
| 113,999 |
|
|
| 100,139 |
|
Total Current Liabilities |
|
| 7,177,256 |
|
|
| 4,406,269 |
|
|
|
|
|
|
|
|
|
|
NONCURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Operating lease liability, net of current portion |
|
| 432,496 |
|
|
| 486,226 |
|
Total Noncurrent Liabilities |
|
| 432,496 |
|
|
| 486,226 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 7,609,752 |
|
|
| 4,892,495 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 7) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
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 |
|
| 49,091,496 |
|
|
| 25,211,017 |
|
Accumulated deficit |
|
| (31,965,094 | ) |
|
| (28,781,566 | ) |
Total Shareholders’ Equity (Deficit) |
|
| 17,126,482 |
|
|
| (3,570,533 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
| $ | 24,736,234 |
|
| $ | 5,281,962 |
|
CEA Industries Inc.
Consolidated Statements of Operations
(Unaudited)
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue, net |
| $ | 3,014,885 |
|
| $ | 4,509,505 |
|
| $ | 4,759,312 |
|
| $ | 6,876,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 2,708,646 |
|
|
| 3,227,181 |
|
|
| 4,362,565 |
|
|
| 5,249,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
| 306,239 |
|
|
| 1,282,324 |
|
|
| 396,747 |
|
|
| 1,626,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing expenses |
|
| 309,690 |
|
|
| 168,042 |
|
|
| 560,705 |
|
|
| 345,187 |
|
Product development costs |
|
| 56,577 |
|
|
| 111,546 |
|
|
| 195,495 |
|
|
| 224,184 |
|
Selling, general and administrative expenses |
|
| 1,080,094 |
|
|
| 886,758 |
|
|
| 2,391,871 |
|
|
| 1,627,231 |
|
Goodwill impairment charges |
|
| 631,064 |
|
|
| - |
|
|
| 631,064 |
|
|
| - |
|
Total operating expenses |
|
| 2,077,425 |
|
|
| 1,166,346 |
|
|
| 3,779,135 |
|
|
| 2,196,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| (1,771,186 | ) |
|
| 115,978 |
|
|
| (3,382,388 | ) |
|
| (569,672 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
| - |
|
|
| 150,518 |
|
|
| 185,000 |
|
| $ | 43,518 |
|
Interest income (expense),net |
|
| 10,600 |
|
|
| (1,254 | ) |
|
| 13,860 |
|
| $ | (1,972 | ) |
Total other income (expense) |
|
| 10,600 |
|
|
| 149,264 |
|
|
| 198,860 |
|
|
| 41,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before provision for income taxes |
|
| (1,760,586 | ) |
|
| 265,242 |
|
|
| (3,183,528 | ) |
|
| (528,126 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (1,760,586 | ) |
| $ | 265,242 |
|
| $ | (3,183,528 | ) |
| $ | (528,126 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred series B stock dividends |
|
| - |
|
|
| - |
|
|
| (35,984 | ) |
|
| - |
|
Deemed dividend on convertible preferred series B stock on down round |
|
| - |
|
|
| - |
|
|
| (439,999 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
| $ | (1,760,586 | ) |
| $ | 265,242 |
|
| $ | (3,659,511 | ) |
| $ | (528,126 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share – basic |
| $ | (0.23 | ) |
| $ | 0.17 |
|
| $ | (0.59 | ) |
| $ | (0.33 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per common share – diluted |
| $ | (0.23 | ) |
| $ | 0.17 |
|
| $ | (0.59 | ) |
| $ | (0.33 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic |
|
| 7,801,211 |
|
|
| 1,582,998 |
|
|
| 6,220,600 |
|
|
| 1,579,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, diluted |
|
| 7,801,211 |
|
|
| 1,605,526 |
|
|
| 6,220,600 |
|
|
| 1,579,938 |
|
CEA Industries Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (3,183,528 | ) |
| $ | (528,126 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and intangible asset amortization expense |
|
| 16,697 |
|
|
| 37,180 |
|
Share-based compensation |
|
| 225,396 |
|
|
| 21,748 |
|
Common stock issued for other expense |
|
| - |
|
|
| 67,000 |
|
Provision for doubtful accounts |
|
| (9,182 | ) |
|
| 23,213 |
|
Provision for excess and obsolete inventory |
|
| (34,417 | ) |
|
| (10,945 | ) |
Loss on disposal of assets |
|
| 4,060 |
|
|
| 8,042 |
|
Amortization of ROU asset |
|
| 51,061 |
|
|
| 98,913 |
|
Goodwill impairment charges |
|
| 631,064 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 48,153 |
|
|
| (224,183 | ) |
Inventory |
|
| 10,986 |
|
|
| (106,299 | ) |
Prepaid expenses and other |
|
| (1,692,816 | ) |
|
| (949,152 | ) |
Accounts payable and accrued liabilities |
|
| (317,453 | ) |
|
| 124,583 |
|
Deferred revenue |
|
| 3,095,431 |
|
|
| 331,585 |
|
Accrued interest |
|
| - |
|
|
| 1,972 |
|
Deposits |
|
| - |
|
|
| (16,122 | ) |
Operating lease liability, net |
|
| (39,870 | ) |
|
| (130,156 | ) |
Accrued equity compensation |
|
| (37,251 | ) |
|
| 108,945 |
|
Net cash used in operating activities |
|
| (1,231,669 | ) |
|
| (1,141,802 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (13,948 | ) |
|
| (15,316 | ) |
Proceeds from the sale of property and equipment |
|
| 2,250 |
|
|
| 1,500 |
|
Net cash used in investing activities |
|
| (11,698 | ) |
|
| (13,816 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
Payment of dividends on series B preferred stock |
|
| (35,984 | ) |
|
| - |
|
Redemption of series B preferred stock |
|
| (1,980,000 | ) |
|
| - |
|
Cash proceeds on sale of common stock and warrants, net of expenses |
|
| 21,711,131 |
|
|
| - |
|
Proceeds from issuance of note payable |
|
| - |
|
|
| 514,200 |
|
Net cash provided by financing activities |
|
| 19,695,147 |
|
|
| 514,200 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 18,451,780 |
|
|
| (641,418 | ) |
Cash and cash equivalents, beginning of period |
|
| 2,159,608 |
|
|
| 2,284,881 |
|
Cash and cash equivalents, end of period |
| $ | 20,611,388 |
|
| $ | 1,643,463 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ | - |
|
| $ | - |
|
Income taxes paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Unpaid purchases of equipment and other assets |
| $ | 16,400 |
|
| $ | - |
|
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 |
|
| $ | - |
|
|
| Q2 2022 |
|
| Q1 2022 |
|
| Q2 2021 |
|
| % QoQ |
|
| % YoY |
| |||||
Revenue |
| $ | 3,015 |
|
| $ | 1,744 |
|
| $ | 4,510 |
|
|
| 73 | % |
|
| -33 | % |
Gross Profit |
| $ | 306 |
|
| $ | 91 |
|
| $ | 1,282 |
|
|
| 238 | % |
|
| -76 | % |
Gross Margin |
|
| 10.2 | % |
|
| 5.2 | % |
|
| 28.4 | % |
|
| 500 bps |
|
|
| -1,820 bps |
|
Operating Expenses |
| $ | 2,077 |
|
| $ | 1,702 |
|
| $ | 1,166 |
|
|
| 22 | % |
|
| 78 | % |
Net Income (Loss) |
| $ | (1,761 | ) |
| $ | (1,423 | ) |
| $ | 265 |
|
|
| NA |
|
|
| NA |
|
|
| Q2 2022 |
|
| Q1 2022 |
|
| Q2 2021 |
|
| % QoQ |
|
| % YoY |
| |||||
Revenue |
| $ | 3,015 |
|
| $ | 1,744 |
|
| $ | 4,510 |
|
|
| 73 | % |
|
| -33 | % |
Gross Profit |
| $ | 306 |
|
| $ | 91 |
|
| $ | 1,282 |
|
|
| 238 | % |
|
| -76 | % |
Gross Margin |
|
| 10.2 | % |
|
| 5.2 | % |
|
| 28.4 | % |
|
| 500 bps |
|
|
| -1,820 bps |
|
Operating Expenses |
| $ | 2,077 |
|
| $ | 1,702 |
|
| $ | 1,166 |
|
|
| 22 | % |
|
| 78 | % |
Net Income (Loss) |
| $ | (1,761 | ) |
| $ | (1,423 | ) |
| $ | 265 |
|
|
| NA |
|
|
| NA |
|
|
| Q2 2022 |
|
| Q1 2022 |
|
| Q2 2021 |
|
| % QoQ |
| % YoY | |||
Revenue |
| $ | 3,015 |
|
| $ | 1,744 |
|
| $ | 4,510 |
|
| 73% |
| -33% |
Gross Profit |
| $ | 306 |
|
| $ | 91 |
|
| $ | 1,282 |
|
| 238% |
| -76% |
Gross Margin |
|
| 10.2 | % |
|
| 5.2 | % |
|
| 28.4 | % |
| 500 bps |
| -1,820 bps |
Operating Expenses |
| $ | 2,077 |
|
| $ | 1,702 |
|
| $ | 1,166 |
|
| 22% |
| 78% |
Net Income (Loss) |
| $ | (1,761 | ) |
| $ | (1,423 | ) |
| $ | 265 |
|
| NA |
| NA |
