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]
CEA Industries(CEAD) - 2024 Q3 - Quarterly Report