CEA Industries Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
BNC$4.87+6.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001493152-24-019229
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001493152-24-032140
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 75 previous paragraphs and 88 current paragraphs.
43 unchanged; 28 reworded; 12 added; 4 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Revenue for the three months ended June 30, 2024 was $1,761,000, compared to $1,064,000 for the three months ended June 30, 2023, representing an increase of $697,000, or 66%. The increase was primarily due to one contract for $1,200,000 that was booked and shipped (revenue recorded) in the second quarter of 2024, offset by overall fewer shipments as a result of lower bookings and backlog. In addition, we continue to satisfy our performance obligations on the prior backlog.
Current report
Cost of revenue increased by $596,000 or 61%, from $985,000 for the three months ended June 30, 2023 to $1,581,000 for the three months ended June 30, 2024. The increase was primarily due to an increase in revenue, along with a decrease in fixed and other variable costs, as discussed below.
Current report
Our variable costs (which include the cost of equipment, outside engineering costs, shipping and handling, travel and warranty costs) totaled $1,374,000, or 78% of total revenue, during the three months ended June 30, 2024, as compared to $665,000, or 63% of total revenue, in the three months ended June 30, 2023. The increase in variable costs was primarily due to: (i) an increase in equipment costs of $746,000 driven by higher revenue and lower equipment margins, and (ii) an increase of $30,000 for outside engineering services, partially offset by (iii) a decrease in excess and obsolete inventory expense of $28,000, (iv) a decrease in warranty expense of $18,000 due to a reduction in the warranty accrual as a result of lower revenue during the past 18 months, (v) a decrease in travel of $17,000, and (vi) a decrease of $4,000 for shipping and handling expense and other.
Current report
Our decrease in SG&A expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to: (i) a decrease of $137,000 in salaries and benefits (including stock-based compensation) and other employee related costs, (ii) a decrease in facility and office expense of $13,000, and (iii) a decrease of $13,000 for accounting and other professional fees, partially offset by (iv) an increase of $33,000 for business taxes and licenses, primarily due to an increase in real estate taxes, and (v) an increase in investor relations expense of $32,000.
Current report
Comparison of the Six Months Ended June 30, 2024 and June 30, 2023
Current report
Our gross profit for the six months ended June 30, 2024 was $25,000 compared to $932,000 for the six months ended June 30, 2023, a decrease of $907,000 or 97%. Our gross profit margin decreased by 15 percentage points from 16% for the six months ended June 30, 2023, to 1% for the six months ended June 30, 2024, primarily due to lower revenue and an increase in fixed costs as a percentage of revenue, as described below. Additionally, total revenue in the six months ended June 30, 2024 and June 30, 2023 included $44,000 and $205,000, respectively, from forfeited, non-refundable deposits from former customers on previously cancelled contracts.
Current report
Operating Expenses
Current report
Operating Loss
Current report
We recognized an operating loss of $1,401,000 for the six months ended June 30, 2024, as compared to an operating loss of $1,151,000 for the six months ended June 30, 2023, an increase of $250,000 or 22%. The operating loss for the six months ended June 30, 2024 included $69,000 of non-cash, stock-based compensation, and $10,000 of depreciation expense, compared to $162,000 of non-cash, stock-based compensation, and $13,000 of depreciation expense for the six months ended June 30, 2023. Excluding these non-cash items, our operating loss increased by $346,000. This increase in operating loss was primarily due to a significant decrease in revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. Of the additional revenue for the six-month period in 2023, 80% was recorded in the second quarter. Additionally, we had higher fixed and variable costs as a percentage of revenue in 2024.
Current report
Other Income (Expense)
Current report
Net Loss
Current report
Overall, we recognized a net loss of $1,387,000 for the six months ended June 30, 2024, as compared to a net loss of $1,125,000 for the six months ended June 30, 2023, an increase of $262,000 or 23%. The net loss for the six months ended June 30, 2024 included $69,000 of non-cash, stock-based compensation, and $10,000 of depreciation expense, compared to $162,000 of non-cash, stock-based compensation, $13,000 of depreciation expense for the six months ended June 30, 2023. Excluding these non-cash items, our net loss increased by $357,000. This increase in net loss was primarily due to a significant decrease in revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. Of the additional revenue for the six-month period in 2023, 80% was recorded in the second quarter. Additionally, we had higher fixed and variable costs as a percentage of revenue in 2024.
Removed paragraphs (4)
Previous report
NASDAQ Continued Listing - Delisting Notice
Previous report
As stated in Note 12 (Subsequent Events) above, on April 10, 2023 the Company received notice from The Nasdaq Stock Market LLC (“Nasdaq”) that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business day period between February 24, 2023, through April 6, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The notice indicated that the Company may submit an update to its existing plan to regain compliance with the Listing Rule no later than October 9, 2023, and, following receipt of the update, Nasdaq would consider granting an extension of 180 calendar days to regain compliance. On October 11, 2023, Nasdaq formally determined to grant the Company a second 180-day compliance period, which allowed the Company until April 7, 2024, to satisfy the Listing Rule 5550(a)(2) deficiency. During that time, the Company was unable to satisfy the Listing Rule 5550(a)(2) deficiency.
Previous report
On April 9, 2024, the Company received a second notice from Nasdaq indicating that the Listings Qualifications Staff would be delisting the shares of common stock and common stock warrants from Nasdaq at the opening of business on April 18, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission, which would remove the Company’s securities from listing and registration on The Nasdaq Stock Market.
Previous report
On April 16, 2024, the Company filed an appeal with Nasdaq’s Listing Committee, which temporarily stays the delisting of the Company’s securities and the filing of the Form 25-NSE, pending the decision of the Nasdaq’s Listing Committee. As part of this process the Company will be provided a hearing, at which it will be asked to provide a plan to regain compliance and a commitment to effect a reverse stock split, if necessary.
Reworded paragraphs (28)
Previous wording
We believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial reporting. We believe the conflicts will have only a general impact on our operations in the same manner as it is having a general impact on all businesses that have their operations limited to North America resulting from international sanction and embargo regulations, possible shortages of goods and goods incorporating parts that may be supplied from countries involved in the conflicts, supply chain challenges, and the international and US domestic inflation resulting from the conflict and government spending in relation to the conflicts. As our operations are related only to the North American controlled agricultural industry, largely within the cannabis space, we do not believe we will be targeted for cyber-attacks related to the conflicts. We have no operations in the countries directly involved in the conflict or are specifically impacted by any of the sanctions and embargoes, as we principally operate in the United States and Canada. We do not believe that the conflicts will have any impact on our internal control over financial reporting. Other than general securities market trends, we do not have reason to believe that investors will evaluate the company as having special risks or exposures related to the conflicts.
Current wording
We believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial reporting. We believe the conflicts will have only a general impact on our operations in the same manner as it is having a general impact on all businesses that have their operations limited to North America resulting from international sanction and embargo regulations, possible shortages of goods and goods incorporating parts that may be supplied from countries involved in the conflicts, supply chain challenges, and the international and US domestic inflation resulting from the conflict and government spending in relation to the conflicts. As our operations are related only to the North American controlled agricultural industry, largely within the cannabis space, we do not believe we will be specifically targeted for cyber-attacks related to the conflicts. We have no operations in the countries directly involved in the conflict or are specifically impacted by any of the sanctions and embargoes specifically related to those conflicts, as we principally operate in the United States and Canada. We do not believe that the conflicts will have any impact on our internal control over financial reporting. Other than general securities market trends, we do not have reason to believe that investors will evaluate the company as having special risks or exposures related to the conflicts.
Previous wording
During the three months ended March 31, 2024, we executed new sales contracts with a total contract value of $223,000. During this same period, we had positive change orders of $80,000. Consequently, our net bookings in the three months ended March 31, 2024 were $303,000, representing an increase of $165,000 (or 119%) from net bookings of $138,000 in the fourth quarter of 2023.
Current wording
During the three months ended June 30, 2024, we executed new sales contracts with a total contract value of $1,625,000. During this same period, we had negative change orders of $172,000 and cancellations of $13,000. Consequently, our net bookings in the three months ended June 30, 2024 were $1,440,000, representing an increase of $1,137,000 (or 375%) from net bookings of $303,000 in the first quarter of 2024.
Previous wording
Our backlog at March 31, 2024 was $535,000, an increase of $100,000, or 23%, from our backlog of $435,000 at December 31, 2023. The increase in backlog is the result of higher bookings and slightly lower revenue in the first quarter of 2024. Subsequent to March 31, 2024, a portion of one contract was cancelled. The amount cancelled was $170,000. While we expect to recognize all revenue from the remaining backlog in 2024, there is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. Therefore, investors should not view backlog as earned revenue.
Current wording
Our backlog at June 30, 2024 was $227,000, a decrease of $308,000, or 58%, from our backlog of $535,000 at March 31, 2024. The decrease in backlog is the result of fulfilling contract obligations and recording revenue against our prior backlog. While we expect to recognize all revenue from the remaining backlog in 2024, there is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. Therefore, investors should not view backlog as earned revenue.
Previous wording
Our backlog has significantly declined since the beginning of 2023. The primary reason for the decline has been fewer new order bookings and contract cancellations.
Current wording
Our backlog has significantly declined since the January 1, 2023 backlog of $5,578,000. The primary reason for the decline has been fewer new order bookings and contract cancellations.
Previous wording
Our recognized revenue for the quarters ended March 31, 2023, June 30, 2023, September 30, 2023, December 31, 2023, and March 31, 2024, in the table below, excludes $149,000, $56,000, $29,000, $0, and $31,000, respectively, in revenue arising from the forfeiture of non-refundable deposits from former customers on previously cancelled contracts. The contracts were removed from the backlog at the time of cancellation. Subsequent to March 31, 2024, a portion of one contract was cancelled. The amount cancelled was $170,000.
Current wording
Our recognized revenue for the quarters ended June 30, 2023, September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024, in the table below, excludes $56,000, $29,000, $0, $31,000, and $12,000, respectively, in revenue arising from the forfeiture of non-refundable deposits from former customers on previously cancelled contracts. The contracts were removed from the backlog at the time of cancellation.
Previous wording
During the three months ended March 31, 2024 we recognized a gross loss of $154,000 compared to a gross profit of $853,000 for the three months ended March 31, 2023, a loss increase of 118%. Our gross profit margin decreased by 84 percentage points from a gross profit margin of 18% for the three months ended March 31, 2023 to a gross loss margin of 66% for the three months ended March 31, 2024 primarily due to lower revenue and an increase in fixed costs as a percentage of revenue, as described below. Additionally, total revenue in the three months ended March 31, 2024 and March 31, 2023 included $31,000 and $149,000, respectively, from forfeited, non-refundable deposits from former customers on previously cancelled contracts.
Current wording
During the three months ended June 30, 2024, we recognized a gross profit of $180,000 compared to a gross profit of $79,000 for the three months ended June 30, 2023, an increase of $101,000 or 128%. Our gross profit margin increased by 3 percentage points from 7% for the three months ended June 30, 2023 to 10% for the three months ended June 30, 2024 primarily due to higher revenue and a decrease in fixed costs as a percentage of revenue, as described below. Additionally, total revenue in the three months ended June 30, 2024 and June 30, 2023 included $12,000 and $56,000, respectively, from forfeited, non-refundable deposits from former customers on previously cancelled contracts.
Previous wording
Our fixed costs (which include engineering, service, manufacturing and project management salaries and benefits and manufacturing overhead) totaled $254,000, or 108% of total revenue, for the three months ended March 31, 2024 as compared to $391,000, or 8% of total revenue, for the three months ended March 31, 2023. The decrease of $137,000 was primarily due to a decrease in salaries and benefits (including stock-based compensation) of $123,000 and a decrease in fixed overhead of $14,000.
Current wording
Our fixed costs (which include engineering, service, manufacturing and project management salaries and benefits and manufacturing overhead) totaled $207,000, or 12% of total revenue, for the three months ended June 30, 2024, as compared to $320,000, or 30% of total revenue, for the three months ended June 30, 2023. The decrease of $113,000 was due to a decrease in salaries and benefits (including stock-based compensation) of $96,000 and a decrease in fixed overhead of $17,000.
Previous wording
We recognized an operating loss of $924,000 for the three months ended March 31, 2024, as compared to an operating loss of $446,000 for the three months ended March 31, 2023, an increase of $478,000 or 107%. The operating loss for the three months ended March 31, 2024 included $77,000 of non-cash, stock-based compensation, and $6,000 of depreciation expense, compared to $147,000 of non-cash, stock-based compensation, and $6,000 of depreciation expense for the three months ended March 31, 2023. Excluding these non-cash items, our operating loss increased by $548,000.
Current wording
We recognized an operating loss of $477,000 for the three months ended June 30, 2024, as compared to an operating loss of $705,000 for the three months ended June 30, 2023, a decrease of $228,000 or 32%. The operating loss for the three months ended June 30, 2024 included a credit of $7,000 for non-cash, stock-based compensation related to forfeiture of unvested stock options, and $4,000 of depreciation expense, compared to $15,000 of non-cash, stock-based compensation, and $7,000 of depreciation expense for the three months ended June 30, 2023. Excluding these non-cash items, our operating loss decreased by $202,000.
Previous wording
We recognized other income (net) of $7,000 for the three months ended March 31, 2024, compared to other income (net) of $15,000 for the three months ended March 31, 2023. Other income for the three months ended March 31, 2024 consisted of interest income on our money market account. Other income for three months ended March 31, 2023 primarily consisted of interest income on a money market account of $10,000 and an adjustment to our ERC credit of $5,000.
Current wording
We recognized other income (net) of $7,000 for the three months ended June 30, 2024, compared to other income (net) of $11,000 for the three months ended June 30, 2023. Other income for the three months ended June 30, 2024 consisted of interest income on our money market account. Other income for three months ended June 30, 2023 primarily consisted of interest income on a money market account of $9,000 and an adjustment for unclaimed property of $2,000.
Previous wording
Overall, we recognized a net loss of $917,000 for the three months ended March 31, 2024, as compared to a net loss of $431,000 for the three months ended March 31, 2023, an increase of $485,000 or 113%. The net loss for the three months ended March 31, 2024 included $77,000 of non-cash, stock-based compensation, and $6,000 of depreciation expense, compared to $147,000 of non-cash, stock-based compensation, $6,000 of depreciation expense for the three months ended March 31, 2023. Excluding these non-cash items, our net loss increased by $555,000.
Current wording
Overall, we recognized a net loss of $470,000 for the three months ended June 30, 2024, as compared to a net loss of $694,000 for the three months ended June 30, 2023, a decrease of $224,000 or 32%. The net loss for the three months ended June 30, 2024 included a credit of $7,000 for non-cash, stock-based compensation related to forfeiture of unvested stock options, and $4,000 of depreciation expense, compared to $15,000 of non-cash, stock-based compensation, $7,000 of depreciation expense for the three months ended June 30, 2023. Excluding these non-cash items, our net loss decreased by $198,000.
Previous wording
Revenue for the three months ended March 31, 2024 was $235,000, compared to $4,683,000 for the three months ended March 31, 2023, representing a decrease of $4,448,000, or 95%. The decrease was primarily due to a decrease in bookings in the last 18 months. We believe the lower bookings are due to the suppression of capital expenditures in the cannabis market environment as a result of the prolonged effects of pricing and inflationary pressure, in addition to a reduced sales effort by the Company.
Current wording
Revenue for the six months ended June 30, 2024 was $1,995,000, compared to $5,746,000 for the six months ended June 30, 2023, representing a decrease of $3,751,000, or 65%. The decrease was primarily due to a decrease in bookings in the last 18 months. We believe the lower bookings are due to the delay of capital expenditures in the cannabis market environment as a result of the prolonged effects of pricing and inflationary pressure, in addition to a reduced sales effort by the Company.
Previous wording
Cost of revenue decreased by $3,440,000 or 90%, from $3,829,000 for the three months ended March 31, 2023 to $389,000 for the three months ended March 31, 2024. The decrease was primarily due to a decrease in revenue, along with a decrease in fixed and variable costs, as discussed below.
Current wording
Cost of revenue decreased by $2,844,000 or 59%, from $4,814,000 for the six months ended June 30, 2023, to $1,970,000 for the six months ended June 30, 2024. The decrease was primarily due to a decrease in revenue, along with a decrease in fixed and variable costs, as discussed below.
Previous wording
Our variable costs (which include the cost of equipment, outside engineering costs, shipping and handling, travel and warranty costs) totaled $135,000, or 58% of total revenue, during the three months ended March 31, 2024, as compared to $3,439,000, or 73% of total revenue, in the three months ended March 31, 2023. The decrease in variable costs was primarily due to: (i) a decrease in equipment costs of $3,170,000 driven by lower revenue, partially offset by lower equipment margins, (ii) a decrease in warranty of $119,000 due to a reduction in the warranty accrual as a result of lower revenue during the past 18 months, (iii) a decrease in travel of $6,000, (iv) a decrease in shipping and handling expense of $5,000, and (v) a reduction in other expenses of $4,000.
Current wording
Our variable costs (which include the cost of equipment, outside engineering costs, shipping and handling, travel and warranty costs) totaled $1,509,000, or 76% of total revenue, during the six months ended June 30, 2024, as compared to $4,104,000, or 71% of total revenue, in the six months ended June 30, 2023. The decrease in variable costs was primarily due to: (i) a decrease in equipment costs of $2,424,000 driven by lower revenue and lower equipment margins, (ii) a decrease in warranty expense of $137,000 due to a reduction in the warranty accrual as a result of lower revenue during the past 18 months, (iii) a decrease in travel of $23,000, (iv) a decrease of $23,000 in excess and obsolete inventory expense, and (v) reduced shipping and handling and other expense of $14,000, partially offset by (vi) an increase of $26,000 for outside engineering services.
Previous wording
Operating expenses decreased to $769,000 for the three months ended March 31, 2024, from $1,299,000 for the three months ended March 31, 2023, a decrease of $530,000, or 41%. The operating expense decrease consisted of: (i) a decrease in selling, general and administrative expenses (“SG&A expenses”) of $261,000, (ii) a decrease in advertising and marketing expenses of $193,000, and (iii) a decrease in product development of $76,000. These decreases are the result of our cost-cutting measures.
Current wording
Operating expenses decreased to $1,426,000 for the six months ended June 30, 2024, from $2,083,000 for the six months ended June 30, 2023, a decrease of $657,000, or 32%. The operating expense decrease consisted of: (i) a decrease in selling, general and administrative expenses (“SG&A expenses”) of $358,000, (ii) a decrease in advertising and marketing expenses of $222,000, and (iii) a decrease in product development of $76,000. These decreases are the result of our cost-cutting measures.
Previous wording
Our decrease in SG&A expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, was primarily due to: (i) a decrease of $195,000 in salaries and benefits (including stock-based compensation) and other employee related costs, (ii) a decrease in bad debt expense of $33,000, (iii) a decrease in commissions of $30,000, (iv) a decrease of $20,000 for facilities expenses and office supplies, (v) a decrease in travel of $10,000, (vi) a decrease in insurance of $6,000, (vii) a decrease of $5,000 for business taxes and licenses, (viii) a reduction in investor relations expense of $4,000, offset by, (ix) an increase in accounting and other professional fees of $30,000, and (x) an increase of $12,000 for loss on asset disposals.
Current wording
Our decrease in SG&A expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to: (i) a decrease of $332,000 in salaries and benefits (including stock-based compensation) and other employee related costs, (ii) a decrease in bad debt expense of $39,000, (iii) a decrease in facilities and offices expenses of $33,000, (iv) a reduction in commissions of $21,000, (v) a decrease of $10,000 for travel, and (vi) a decrease in insurance and other expenses of $9,000. These decreases were offset by (i) an increase of $28,000 for investor relations expenses, (ii) an increase of $28,000 in business taxes and licenses primarily due to an increase for real estate taxes, (iii) an increase of $17,000 for accounting and other professional fees, and (iv) an increase for loss on the disposal of fixed assets of $13,000.
Previous wording
The decrease in advertising and marketing expenses was primarily due to (i) a decrease in salaries and benefits (including stock compensation of $130,000), (ii) a decrease in advertising and promotion of $48,000, (iii) a decrease in outside services and other marketing expenses of $10,000, and (iv) a reduction in trade show related costs of $5,000.
Current wording
The decrease in advertising and marketing expenses was primarily due to (i) a decrease in salaries and benefits (including stock compensation) of $133,000, (ii) a decrease in advertising and promotion of $74,000, (iii) a decrease in outside services and other marketing expenses of $13,000, and (iv) a reduction in trade show related costs of $2,000.
Previous wording
As of March 31, 2024, we had cash and cash equivalents of $11,599,000, compared to cash and cash equivalents of $12,508,000 as of December 31, 2023. The $909,000 decrease in cash and cash equivalents during the three months ended March 31, 2024, was the result of cash used in operations. Our cash is held in bank depository accounts in a financial institution. During the three months ended March 31, 2024, we held deposits in this financial institution that exceeded the federally insured amount.
Current wording
As of June 30, 2024, we had cash and cash equivalents of $11,325,000, compared to cash and cash equivalents of $12,508,000 as of December 31, 2023. The $1,183,000 decrease in cash and cash equivalents during the six months ended June 30, 2024, was the result of cash used in operations. Our cash is held in bank depository accounts in a financial institution. During the six months ended June 30, 2024, we held deposits in this financial institution that exceeded the federally insured amount.
Previous wording
As of March 31, 2024, we had accounts receivable (net of allowance for doubtful accounts) of $20,000, contract assets (net of allowance for doubtful accounts) of $224,000, inventory (net of excess and obsolete allowance) of $246,000, and prepaid expenses and other assets of $228,000 (including $13,000 in advance payments on inventory purchases). While we typically require advance payment before we commence engineering services or ship equipment to our customers, we have made exceptions requiring us to record accounts receivable, which carry a risk of non-collectability especially since most of our customers are funded on an as-needed basis to complete facility construction.
Current wording
As of June 30, 2024, we had accounts receivable (net of allowance for doubtful accounts) of $32,000, contract assets (net of allowance for doubtful accounts) of $224,000, inventory (net of excess and obsolete allowance) of $24,000, and prepaid expenses and other assets of $615,000 (including $62,000 in advance payments on inventory purchases and a vendor credit for inventory returns of $144,000). While we typically require advance payment before we commence engineering services or ship equipment to our customers, we have made exceptions requiring us to record accounts receivable, which carry a risk of non-collectability especially since most of our customers are funded on an as-needed basis to complete facility construction.
Previous wording
As of March 31, 2024, we had total accounts payable and accrued expenses of $362,000, deferred revenue of $540,000, and the current portion of operating lease liability of $129,000. As of March 31, 2024, we had working capital of $11,286,000, compared to working capital of $12,110,000 as of December 31, 2023. The decrease in our working capital was primarily related to (i) a decrease in cash of $909,000, (ii) a decrease in prepaid and other expenses of $86,000, (iii) a decrease in inventory (net) of $51,000, (iv) a decrease in accounts payable and accrued liabilities of $263,000, offset by, (v) an increase in deferred revenue of $40,000.
Current wording
As of June 30, 2024, we had total accounts payable and accrued expenses of $886,000, deferred revenue of $393,000, and the current portion of operating lease liability of $131,000. As of June 30, 2024, we had working capital of $10,810,000, compared to working capital of $12,110,000 as of December 31, 2023. The decrease in our working capital was primarily related to (i) a decrease in cash of $1,183,000, (ii) a decrease in inventory (net) of $273,000, (iii) an increase in accounts payable and accrued liabilities of $262,000, partially offset by (iv) an increase in prepaid expenses and other assets of $302,000, and (v) a decrease in deferred revenue of $106,000.
Previous wording
The following summarizes our approximate cash flows for the three months ended March 31, 2024 and March 31, 2023:
Current wording
The following summarizes our approximate cash flows for the six months ended June 30, 2024 and June 30, 2023:
Previous wording
We incurred a net loss for the three months ended March 31, 2024 of $917,000 and have an accumulated deficit of $38,107,000 as of March 31, 2024.
Current wording
We incurred a net loss for the six months ended June 30, 2024 of $1,387,000 and have an accumulated deficit of $38,577,000 as of June 30, 2024.
Previous wording
Cash used in operations for the three months ended March 31, 2024 was $909,000 compared to cash used in operating activities of $2,689,000 for the three months ended March 31, 2023, a decrease of $1,780,000.
Current wording
Cash used in operations for the six months ended June 30, 2024 was $1,183,000 compared to cash used in operating activities of $4,440,000 for the six months ended June 30, 2023, a decrease of $3,257,000.
Previous wording
The decrease in cash used in operating activities during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, was primarily attributable to: (i) a decrease in cash used to fund working capital of $2,350,000, (ii) an increase in net loss of $485,000, and (iii) a decrease in non-cash operating charges of $85,000.
Current wording
The decrease in cash used in operating activities during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to: (i) a decrease in cash used to fund working capital of $3,662,000, (ii) an increase in net loss of $262,000, and (iii) a decrease in non-cash operating charges of $143,000.
Previous wording
The decrease in our working capital was primarily related to (i) a decrease in cash of $909,000, (ii) a decrease in prepaid and other expenses of $86,000, (iii) a decrease in inventory (net) of $51,000, (iv) a decrease in accounts payable and accrued liabilities of $263,000, offset by, (v) an increase in deferred revenue of $40,000.
Current wording
The decrease in our working capital was primarily related to (i) a decrease in cash of $1,183,000, (ii) a decrease in inventory (net) of $273,000, (iii) an increase in accounts payable and accrued liabilities of $262,000, partially offset by (iv) an increase in prepaid expenses and other assets of $302,000, and (v) a decrease in deferred revenue of $106,000.
Previous wording
The decrease in non-cash operating charges was primarily due to (i) a decrease of $70,000 for share-based compensation, (ii) a decrease in the provision for doubtful accounts of $33,000, and (iii) an increase in loss on asset disposal of $12,000.
Current wording
The decrease in non-cash operating charges was primarily due to (i) a decrease of $93,000 for share-based compensation, (ii) a decrease in the provision for doubtful accounts of $39,000, and (iii) a decrease in the change to the provision for excess and obsolete inventory of $23,000.
Previous wording
There were no cash flows from investing activities during the three months ended March 31, 2024. Cash provided by investing activities during the three months ended March 31, 2023 was less than $1,000.
Current wording
There were no cash flows from investing activities during the six months ended June 30, 2024. Cash provided by investing activities during the six months ended June 30, 2023 was less than $1,000.
Previous wording
There were no cash flows from financing activities during the three months ended March 31, 2024 and March 31, 2023.
Current wording
There were no cash flows from financing activities during the six months ended June 30, 2024 and June 30, 2023.
Previous wording
We are required to disclose any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. As of March 31, 2024, we had no off-balance sheet arrangements. During the three months ended March 31, 2024, we did not engage in any off-balance sheet financing activities other than those included in the “Contractual Payment Obligations” discussed above and those reflected inNote 6 of our condensed consolidated financial statements.
Current wording
We are required to disclose any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. As of June 30, 2024, we had no off-balance sheet arrangements. During the six months ended June 30, 2024, we did not engage in any off-balance sheet financing activities other than those included in the “Contractual Payment Obligations” discussed above and those reflected inNote 6 of our condensed consolidated financial statements.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Operating expenses decreased to $657,000 for the three months ended June 30, 2024, from $783,000 for the three months ended June 30, 2023, a decrease of $126,000, or 16%. The operating expense decrease consisted of: (i) a decrease in selling, general and administrative expenses (“SG&A expenses”) of $97,000, and (ii) a decrease in advertising and marketing expenses of $29,000. These decreases are the result of our cost-cutting measures.
Current report — wording carried from elsewhere
The decrease in advertising and marketing expenses was primarily due to (i) a decrease in advertising and promotion of $26,000, and (ii) a decrease in salaries and benefits of $3,000.
Current report — wording carried from elsewhere
Revenues and Cost of Goods Sold
Current report — wording carried from elsewhere
Our fixed costs (which include engineering, service, manufacturing and project management salaries and benefits and manufacturing overhead) totaled $460,000, or 23% of total revenue, for the six months ended June 30, 2024, as compared to $710,000, or 12% of total revenue, for the six months ended June 30, 2023. The decrease of $250,000 was due to a decrease in salaries and benefits (including stock-based compensation) of $219,000 and a decrease in fixed overhead of $31,000.
Current report — wording carried from elsewhere
We recognized other income (net) of $14,000 for the six months ended June 30, 2024, compared to other income (net) of $26,000 for the six months ended June 30, 2023. Other income for the six months ended June 30, 2024 consisted of interest income on our money market account. Other income for six months ended June 30, 2023 primarily consisted of interest income on a money market account of $18,000 and an adjustment to our ERC credit and unclaimed property of $8,000.