Core Insights - CEA Industries is strategically evolving by acquiring Fat Panda, a leading retailer and manufacturer in the Canadian vape market, which is experiencing significant growth [2][5] - The acquisition is expected to close in the first half of 2025, subject to customary closing conditions [5][6] Company Overview - CEA Industries aims to enhance Fat Panda's vertically integrated operations through both organic and inorganic growth initiatives, optimizing its retail presence across 33 locations in Canada [3][5] - Fat Panda operates its own e-commerce platform and offers a diverse product lineup, including premium e-liquids and a portfolio of trademarks [3] Financial Performance - Fat Panda reported preliminary financial highlights for 2024, with revenue of CAD $38.5 million (USD $28.5 million), a 14% increase from CAD $33.8 million (USD $25.4 million) in fiscal 2023 [7] - Gross margins decreased to 39% in fiscal 2024 from 46% in fiscal 2023, while operating expenses improved by 11% to CAD $13.4 million (USD $9.9 million) [7] - Net income rose by 126% to CAD $1.2 million (USD $0.9 million) in fiscal 2024, and adjusted EBITDA increased by 16% to CAD $8.0 million (USD $5.9 million) [7]

Core Viewpoint - CEA Industries Inc. is progressing with the acquisition of Fat Panda Ltd., a leading retailer and manufacturer of nicotine vape products in central Canada, which is seen as a strategic move to enter the high-growth vape industry [1][3]. Company Overview - CEA Industries Inc. provides a suite of offerings to the controlled environment agriculture industry, supporting the development of the global ecosystem for indoor cultivation [5]. Acquisition Details - Fat Panda is the largest retailer and manufacturer of e-cigarettes and vape products in central Canada, operating 33 retail locations and an e-commerce platform [2]. - In fiscal 2024, Fat Panda generated CAD $38.5 million (USD $28.5 million) in revenue, with a gross margin of 39% and adjusted EBITDA of CAD $8.4 million (USD $6.2 million) [2]. - Both revenue and adjusted EBITDA grew over 10% from fiscal 2023, while gross margin declined by 15% [2]. - The acquisition is expected to be completed in the first half of 2025, subject to customary closing conditions [3]. Strategic Importance - The acquisition is viewed as pivotal for CEA Industries to leverage Fat Panda's market leadership, extensive retail network, and vertically integrated operations, aiming to accelerate expansion and create long-term value for shareholders [3].

Core Insights - CEA Industries Inc. reported a significant decline in revenue and increased net losses for both the fourth quarter and full year of 2024 compared to previous periods [1][3][9] Financial Performance - **Fourth Quarter 2024**: Revenue was $417,000, up from $391,000 in Q3 2024 and $251,000 in Q4 2023, indicating a year-over-year increase of approximately 66.2% [2][5] - **Gross Profit**: The gross loss for Q4 2024 was $175,000, an improvement from a gross loss of $286,000 in Q4 2023, reflecting a reduction in variable costs [2][7] - **Operating Expenses**: Operating expenses rose to $850,000 in Q4 2024 from $677,000 in Q3 2024, primarily due to acquisition-related expenses [2][8] - **Net Loss**: The net loss for Q4 2024 was $1,019,000, compared to a net loss of $988,000 in Q4 2023, with a loss per share of $(1.29) [2][9] - **Full Year 2024**: Total revenue for FY 2024 was $2,803,000, a significant decrease from $6,911,000 in FY 2023 [3][16] - **Gross Profit**: The full-year gross loss was $220,000, down from a gross profit of $542,000 in FY 2023 [3][16] - **Operating Expenses**: Operating expenses decreased to $2,952,000 in FY 2024 from $3,495,000 in FY 2023, reflecting a 16% reduction [3][16] - **Net Loss**: The net loss for FY 2024 was $3,146,000, compared to a net loss of $2,912,000 in FY 2023 [3][16] Strategic Developments - The company signed an agreement to acquire Fat Panda, a retailer and manufacturer of e-cigarettes and vape devices, which is expected to enhance operational efficiencies and long-term value creation [4] - The acquisition aligns with the company's strategic objectives and aims to leverage Fat Panda's market presence for expansion [4] Backlog and Bookings - **Net Bookings**: In Q4 2024, net bookings increased to $500,000 from $100,000 in the same period last year, attributed to a significant equipment order [6] - **Backlog**: The company's backlog at the end of Q4 2024 was $500,000, up from $400,000 in Q4 2023, indicating a positive trend in demand [6]

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) CEA Industries offers CEA tech for cannabis, diversifying into e-cigarettes, facing industry challenges and regulatory risks - CEA Industries focuses on environmental control and technology solutions for the Controlled Environment Agriculture (CEA) industry, primarily serving cannabis cultivators[26](index=26&type=chunk)[27](index=27&type=chunk)[162](index=162&type=chunk) - The company is acquiring Fat Panda Ltd., a Canadian e-cigarette, vape device, and e-liquid manufacturer and retailer, for **CAD$18,000,000** (approximately **US$12,600,000**), diversifying its business outside the CEA industry[29](index=29&type=chunk)[32](index=32&type=chunk)[540](index=540&type=chunk) - The CEA industry faces challenges including high energy costs, evolving waste regulations, inflationary pressures, labor shortages, and declining cannabis prices, leading to a decline in company activity and sales in 2024[28](index=28&type=chunk)[42](index=42&type=chunk)[169](index=169&type=chunk) [Overview](index=5&type=section&id=Overview) Surna Cultivation Technologies provides environmental control and tech solutions for the CEA industry, primarily serving cannabis cultivators - CEA Industries, through Surna Cultivation Technologies LLC, provides environmental control and other technologies and services to the Controlled Environment Agriculture (CEA) industry, aiming to optimize horticultural resources[26](index=26&type=chunk) - The company offers air handling equipment, air sanitation products, LED lighting, and benching/racking solutions, primarily to customers cultivating marijuana[162](index=162&type=chunk)[163](index=163&type=chunk)[16](index=16&type=chunk) [Recent Developments – Acquisition of Fat Panda](index=6&type=section&id=Recent%20Developments%20%E2%80%93%20Acquisition%20of%20Fat%20Panda) CEA Industries plans to acquire Fat Panda Ltd., a Canadian e-cigarette and vape product manufacturer and retailer, for CAD$18 million - CEA Industries has an agreement to acquire Fat Panda Ltd., a leading e-cigarette, vape device, and e-liquid manufacturer and retailer in central Canada, with 33 retail locations and an online platform[29](index=29&type=chunk)[30](index=30&type=chunk)[540](index=540&type=chunk) - The purchase price is **CAD$18,000,000** (approximately **US$12,600,000**), payable in cash, securities (**39,000 shares** of common stock valued at **CAD$700,000**), and seller loans (**CAD$2,060,000** in notes)[32](index=32&type=chunk)[542](index=542&type=chunk) - The acquisition is subject to conditions including audited financial statements, due diligence, government approvals, lease continuation, and securing financing for a portion of the cash purchase price, with completion anticipated in the first half of fiscal year 2025[33](index=33&type=chunk)[34](index=34&type=chunk)[543](index=543&type=chunk)[544](index=544&type=chunk) [Our Current CEA Services and Equipment Solutions](index=7&type=section&id=Our%20Current%20CEA%20Services%20and%20Equipment%20Solutions) The company provides comprehensive services and equipment for the entire lifecycle of indoor agriculture facilities - The company aims to provide comprehensive services and equipment for the complete lifecycle of indoor agriculture facilities, including design, engineering, infrastructure technologies, installation advisory, training, and ongoing maintenance[35](index=35&type=chunk)[36](index=36&type=chunk) [Our CEA Customers and Prospects](index=7&type=section&id=Our%20CEA%20Customers%20and%20Prospects) Customers are primarily new entrants to the CEA industry, including multi-facility operators, but not the largest publicly traded MSOs - Customers are primarily new entrants to the CEA industry, including multi-facility operators (MFOs), but the company currently does not have projects with the largest publicly traded Multi-State Operators (MSOs)[38](index=38&type=chunk) [Competition in the CEA Market](index=7&type=section&id=Competition%20in%20the%20CEA%20Market) The company competes with various engineering and HVACD firms, differentiating with crop-specific climate control systems, facing increasing market competition - The company competes with national and local MEP engineering firms, HVACD contractors, and traditional HVACD equipment suppliers, differentiating itself with crop-specific climate control systems and engineering services for CEA facilities[39](index=39&type=chunk) - Increased competition is observed as more competitors enter the CEA market, potentially impacting the company's ability to secure new projects and requiring acceptance of lower gross margins[39](index=39&type=chunk) [Intellectual Property](index=7&type=section&id=Intellectual%20Property) The company protects its intellectual property through patents, trademarks, licenses, trade secrets, and contractual restrictions - The company relies on a combination of patent and trademark rights, licenses, trade secrets, and contractual restrictions to protect its intellectual property, including registered trademarks for its Surna brand and SentryIQ platform[40](index=40&type=chunk) [Employees](index=8&type=section&id=Employees) The company currently has 6 full-time employees and utilizes consultants, with future hiring dependent on business growth - The company currently has **6 active full-time employees** and may utilize consultants and independent contractors, with future hiring dependent on business needs and growth[41](index=41&type=chunk) [US Government Regulation in Relation to Cannabis](index=8&type=section&id=US%20Government%20Regulation%20in%20Relation%20to%20Cannabis) The company operates in the federally illegal cannabis industry, facing evolving regulations and financial challenges due to federal prohibitions - The company provides services to the cannabis industry, which is federally illegal as a Schedule I controlled substance, despite state-level legalization for medical or recreational use[43](index=43&type=chunk)[44](index=44&type=chunk) - Evolving federal enforcement policies and ongoing legislative considerations (e.g., MORE Act, States Reform Act, SAFER Banking Act) could significantly impact the cannabis industry and, consequently, the company's business[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - Federal laws prohibit most federally chartered banks from accepting funds from marijuana businesses, leading to reliance on state-chartered banks and credit unions, and creating financial challenges for the industry[49](index=49&type=chunk)[118](index=118&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) Investing in CEA Industries' securities involves significant risks, including limited revenues, working capital deficits, fluctuating operating results, supply chain disruptions, intense competition, and regulatory challenges in the cannabis industry - The company has historically had limited revenues, operated with a working capital deficit, and experienced fluctuating operating results, requiring external financing for growth and continued operations[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) - Significant risks include the inability to convert contract backlog into revenue due to customer financing, permitting, and construction delays, as well as supply chain disruptions and inflationary pressures affecting costs and margins[56](index=56&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - The company's reliance on the cannabis industry exposes it to federal illegality, anti-money laundering laws, civil asset forfeiture, and difficulties for customers in accessing banking services and deducting business expenses under Section 280E of the Code[56](index=56&type=chunk)[97](index=97&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk)[118](index=118&type=chunk)[122](index=122&type=chunk) [Summary Of Risk Factors Relating to our Current CEA Operations](index=10&type=section&id=Summary%20Of%20Risk%20Factors%20Relating%20to%20our%20Current%20CEA%20Operations) Key risks for CEA operations include limited revenues, working capital deficits, fluctuating results, backlog conversion challenges, cannabis regulatory exposure, and internal control weaknesses - Key risks for CEA operations include limited revenues, working capital deficit, fluctuating operating results, challenges in converting contract backlog to revenue, exposure to the cannabis industry's regulatory environment, and material weaknesses in financial reporting controls[56](index=56&type=chunk) [Risks Relating to Our Current CEA Business](index=11&type=section&id=Risks%20Relating%20to%20Our%20Current%20CEA%20Business) The company's limited revenues necessitate additional financing, and inconsistent backlog conversion, along with internal control weaknesses, pose significant business risks - The company's limited revenues necessitate additional financing for growth and operations, which may not always be available, potentially leading to shareholder dilution or increased debt vulnerability[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Conversion of backlog into revenue is inconsistent and dependent on customer factors like funding, permits, and facility construction, with no guarantee of profitability even with increased customer base or project size[62](index=62&type=chunk) - Material weaknesses in internal controls over financial reporting, including insufficient accounting expertise, inadequate segregation of duties, and reliance on unverified spreadsheets, could adversely impact financial reporting accuracy and investor confidence[64](index=64&type=chunk)[65](index=65&type=chunk) [Risks Related to the Cannabis Industry](index=18&type=section&id=Risks%20Related%20to%20the%20Cannabis%20Industry) The cannabis industry's federal illegality in the U.S. poses significant risks, including enforcement actions, financial service access difficulties, and regulatory uncertainties - Cannabis remains illegal under U.S. federal law, posing a risk that strict enforcement could prevent the company from executing its business plan and lead to significant losses from its cannabis industry clients[97](index=97&type=chunk)[99](index=99&type=chunk)[103](index=103&type=chunk) - The company is subject to anti-money laundering laws and civil asset forfeiture risks, and its

Louisville, Colorado, Feb. 12, 2025 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”), today announced that it has signed an agreement to acquire Fat Panda Ltd. (“Fat Panda”), a leading Canadian retailer and manufacturer of nicotine vape products, for an aggregate purchase price of CAD $18 million (USD $12.6 million) payable at closing. The Company will pay the purchase price with a combination of cash, CEA Industries common shares, and seller and bank debt. T ...

Financial Performance - Total revenue for Q3 2024 was $390,817, a decrease of 57.3% compared to $913,571 in Q3 2023[16] - Cost of revenue for Q3 2024 was $460,970, down 54.7% from $1,017,634 in Q3 2023[16] - Gross loss for Q3 2024 was $(70,153), compared to a gross loss of $(104,063) in Q3 2023[16] - Total operating expenses for Q3 2024 were $676,519, a slight decrease of 3.4% from $702,999 in Q3 2023[16] - Operating loss for Q3 2024 was $(746,672), compared to $(807,062) in Q3 2023, reflecting an improvement of 7.5%[16] - Net loss for Q3 2024 was $(740,403), a decrease from $(799,019) in Q3 2023, indicating a 7.3% improvement[16] - For the nine months ended September 30, 2024, total revenue was $2,386,023, a decrease of 64.1% compared to $6,659,858 for the same period in 2023[48] - Revenue for the three months ended September 30, 2024, was $391,000, a decrease of $523,000, or 57%, compared to $914,000 for the same period in 2023[149] - Revenue for the nine months ended September 30, 2024, was $2,386,000, a decrease of $4,274,000 or 64% compared to $6,660,000 for the same period in 2023[159] Cash and Assets - Cash and cash equivalents as of September 30, 2024, were $10,295,159, down from $12,508,251 as of December 31, 2023[15] - Total assets decreased to $11,336,310 as of September 30, 2024, from $13,772,083 as of December 31, 2023[15] - Total liabilities decreased to $1,132,929 as of September 30, 2024, from $1,510,875 as of December 31, 2023[15] - Shareholders' equity decreased to $10,203,381 as of September 30, 2024, from $12,261,208 as of December 31, 2023[15] - Cash and cash equivalents at the end of the period were $10,295,159, down from $13,342,805 at the end of September 2023[21] - Working capital as of September 30, 2024, was $10,071,000, down from $12,110,000 as of December 31, 2023[175] - Total accounts receivable as of September 30, 2024, was $71,000, with contract assets of $224,000 and inventory of $25,000[174] Operating Activities - The company experienced a net cash used in operating activities of $2,213,092 for the nine months ended September 30, 2024, a significant improvement from $5,294,509 in the prior year[21] - Cash used in operations for the nine months ended September 30, 2024, was $2,213,000, a decrease of $3,081,000 compared to $5,294,000 for the same period in 2023[178] - The company continues to monitor economic factors that could impact its financial position and results of operations, including inflation and market risks[201] Legal and Regulatory Matters - CEA Industries Inc. is evaluating merger and acquisition opportunities and considering a potential plan for dissolution, which would require shareholder approval[23][32] - On October 20, 2023, a client filed a demand for arbitration against the company, claiming $1,049,280 in damages for breach of contract and warranty[86] - Another client, on October 28, 2024, asserted claims exceeding $2,000,000 for negligent/defective design and breach of warranty[87] - The company has not recorded an accrual for any potential loss related to the ongoing claims due to uncertainty around estimability and success[88] - The company is currently involved in a potential claim exceeding $2,000,000 related to an equipment contract, which it intends to vigorously defend[125] - The company does not expect ongoing legal proceedings to materially affect its financial condition or results of operations[200] Internal Controls and Governance - The company has identified material weaknesses in its internal control over financial reporting, which were not effective as of September 30, 2024[192] - The company plans to improve its financial organization and internal controls when resources allow, but current financial constraints limit immediate remediation efforts[194] Market and Economic Conditions - The company continues to face challenges due to the COVID-19 pandemic, affecting sales, project implementation, and supply chain[24][25] - Inflation is impacting the company's operations, leading to increased costs in products and services, which may adversely affect margins[28] - The company is facing inflationary pressures that are impacting product costs, operational expenses, and margins, which may lead to adjustments in contract pricing[185] Shareholder and Equity Matters - A reverse stock split at a ratio of one-for-twelve was approved and became effective on June 7, 2024[35] - As of September 30, 2024, the company had 200,000,000 shares of common stock authorized, with 791,580 shares issued and outstanding[91] - A reverse stock split at a ratio of one-for-twelve was effective on June 7, 2024, reducing the number of shares from 8,076,372 to 673,090[92][93] - During the nine months ended September 30, 2024, the company issued 11,364 shares in settlement of restricted stock units under the 2021 Equity Incentive Plan[103] - As of September 30, 2024, 22,411 shares have been issued under the 2021 Equity Plan, with 18,639 shares remaining available for future equity awards[105] Cost Management - The company is actively monitoring costs and taking actions to mitigate the long-term impacts of the COVID-19 pandemic[25] - Total operating expenses decreased to $2,103,000 for the nine months ended September 30, 2024, from $2,786,000 for the same period in 2023, a decrease of $683,000 or 25%[165] - Operating expenses decreased to $677,000 for the three months ended September 30, 2024, from $703,000 for the same period in 2023, a decrease of $26,000, or 4%[154] Inventory and Backlog - The company's remaining performance obligations, or backlog, was approximately $352,000 as of September 30, 2024, a decrease of $196,000 from $548,000 in September 2023[56] - Finished goods inventory was valued at $141,393 as of September 30, 2024, down from $366,844 as of December 31, 2023[79] - Inventory net value decreased to $24,680 as of September 30, 2024, from $296,404 as of December 31, 2023[79] - Backlog at September 30, 2024, was $352,000, an increase of $125,000, or 55%, from $227,000 at June 30, 2024[139] - The backlog has significantly declined from $5,578,000 on January 1, 2023, primarily due to fewer new order bookings and contract cancellations[140]

Louisville, Colorado, Aug. 14, 2024 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) ("CEA Industries" or the "Company"), is reporting results for the three months ended June 30, 2024. Second Quarter 2024 Financial Summary (in $ thousands, excl. margin items): | --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------------|---------------------|-------|-------|-------|---------------------|-------|---------------------|-------| | | | | | | | | | | | | Q2 2024 (unaudited) | | | | Q ...

Financial Performance - Revenue for Q2 2024 was $1,760,700, a 65.7% increase from $1,063,714 in Q2 2023[13] - Gross profit for Q2 2024 was $179,800, compared to $78,693 in Q2 2023, reflecting a significant improvement[13] - Operating loss for Q2 2024 was $(477,205), reduced from $(704,628) in Q2 2023, indicating better cost management[13] - Net loss for the six months ended June 30, 2024, was $(1,386,902), compared to $(1,125,013) for the same period in 2023[13] - Loss per common share for Q2 2024 was $(0.66), an improvement from $(1.03) in Q2 2023[13] - Total operating expenses for Q2 2024 were $657,005, down from $783,321 in Q2 2023, showing a reduction in costs[13] Cash Flow and Liquidity - The company's cash and cash equivalents decreased to $11,325,387 as of June 30, 2024, down from $14,197,485 at the end of June 2023, reflecting a decline of about 20.5%[16] - Net cash used in operating activities for the six months ended June 30, 2024, was $1,182,864, a significant improvement compared to $4,439,829 for the same period in 2023, representing a reduction of approximately 73%[16] - Cash and cash equivalents as of June 30, 2024, were $11,325,000, down from $12,508,000 as of December 31, 2023, a decrease of $1,183,000[142] - Cash used in operations for the six months ended June 30, 2024, was $1,183,000, a decrease of $3,257,000 compared to $4,440,000 for the same period in 2023[146] Inventory and Accounts Payable - CEA Industries Inc. experienced a provision for excess and obsolete inventory of $37,781 in 2024, compared to $60,574 in 2023, showing a decrease of about 37.7%[16] - Inventory as of June 30, 2024, totaled $23,670, a significant decrease from $296,404 as of December 31, 2023, primarily due to an allowance for excess and obsolete inventory of $(230,478)[68] - Accounts payable increased to $598,745 as of June 30, 2024, compared to $183,359 as of December 31, 2023, indicating a rise in short-term liabilities[71] Revenue Recognition and Backlog - The company reported a backlog that may impact future revenue generation, with ongoing efforts to convert backlog into revenue[6] - Remaining performance obligations, or backlog, decreased to approximately $227,000 as of June 30, 2024, down from $1,066,000 a year earlier[48] - The company faces significant uncertainty regarding the timing of revenue recognition on remaining performance obligations due to various external factors[47] Challenges and Market Conditions - The company is facing challenges from increased competitive pressures in the Controlled Environment Agriculture (CEA) industry[6] - Future revenue projections remain uncertain due to various macroeconomic factors and potential disruptions in the CEA industry[6] - CEA Industries Inc. continues to face challenges due to inflation, which is impacting the cost of products and operational expenses, potentially affecting margins and financial results[22] - The company continues to face challenges in the CEA industry, including high energy costs, labor shortages, and evolving regulatory standards[107] Corporate Actions and Future Plans - The company is actively evaluating merger and acquisition opportunities and considering a potential plan for dissolution, which would involve distributing cash assets after settling corporate obligations[18] - A reverse stock split at a ratio of one-for-twelve was approved on May 7, 2024, reducing the number of shares outstanding from 8,076,372 to 673,090[28] - The Company has been experiencing recurring losses since its inception, necessitating reliance on additional financing sources for growth[25] Shareholder and Stock Information - As of June 30, 2024, the Company had 791,580 shares of common stock issued and outstanding following a reverse stock split at a ratio of one-for-twelve[82] - The Company issued 11,364 shares of common stock in settlement of restricted stock units to independent directors under the 2021 Equity Incentive Plan[87] - As of June 30, 2024, 22,411 shares have been issued under the 2021 Equity Plan, with 18,639 shares remaining available for future equity awards[87] Accounting and Estimates - Key accounting estimates include revenue recognition, valuation of intangible assets, and warranty accruals, which are subject to significant judgment and uncertainty[156] - The Company has established a full valuation allowance against its net deferred tax assets as of June 30, 2024, indicating it is unlikely to utilize these assets in the foreseeable future[98]

Core Points - CEA Industries Inc. announced a 1-for-12 reverse stock split of its outstanding shares of common stock [1][2] - The reverse stock split will convert every twelve shares into one share, with the adjusted purchase price for warrants set at $60.00 per share [2][4] - The company aims to maintain its listing on the Nasdaq Capital Market through this action [4] Company Information - CEA Industries Inc. provides solutions for the controlled environment agriculture industry, supporting the development of the global ecosystem for indoor cultivation [7] - The common stock will begin trading on a split-adjusted basis starting June 7, 2024, and a new CUSIP number has been assigned for the common stock [5][6]

Louisville, Colorado, June 04, 2024 (GLOBE NEWSWIRE) -- CEA Industries Inc. (the "Company") (NASDAQ: CEAD) announced that it approved a 1-for-12 reverse stock split of the outstanding shares of common stock and corresponding adjustment to the publicly traded common stock purchase warrants. Pursuant to the reverse stock split, each twelve (12) shares of the Company's outstanding common stock, $0.00001 par value per share, will be automatically combined and converted into one (1) outstanding share of common s ...