Replies to post #10148 on CEA Industries Inc. (CEAD)

[tcfib]

I’m curious to know if they plan on a reverse split, as acquisition through shares would cause massive dilution at this price.

[iamga]

I always skip press releases and just read the reports, but I didn't see anything about intending to uplist. That sounds good, but it also makes me question whether they have any idea what they're doing or have even a basic handle on reality. Under what standard do they have even a hope of meeting NASDAQ's standards? The only way would be to get acquired or acquire someone much bigger than they are, which I don't think their capital structure currently supports--and making it support such a deal would not likely be awesome for shareholders--but I suppose it's possible--especially if you think a nickel is an accurate reflection of a share's value... (to Avinco's point in the last message*).

From Investopedia (and these strike me as wrong, so maybe I am pulling wrong info or maybe it's changed but):

Standard No. 1: Earnings
The company must have aggregate pre-tax earnings in the prior three years of at least $11 million, in the previous two years at least $2.2 million, and no single year in the prior three years can have a net loss.

Yeah. Right. Best case scenario, we're three years away, and that's not going to happen.

Standard No. 2: Capitalization with Cash Flow
The company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years, with no negative cash flow in any of those three years. Also, its average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be $110 million, minimum.

Do I even need to consider this one?

Standard No. 3: Capitalization with Revenue
Companies can be removed from the cash flow requirement of the second standard if its average market capitalization over the past 12 months is at least $850 million and revenues over the prior fiscal year are at least $90 million.

Current market cap is something like $10M. Honestly, as I'm looking at this, I'm wondering if they're at risk of getting sent to the pinks--but I'm not going to go look at the QB's standards right now. Someone else can.

Standard No. 4: Assets with Equity
Companies can eliminate the cash flow and revenue requirements, and decrease its marketing capitalization requirements to $160 million if their total assets total at least $80 million and their stockholders' equity is at least $55 million.

So... the idea of them uplisting any time soon under the current business is laughable. That said, I agree that enthusiasm is as good a sign as any (though I'm not sure it's sufficient to make the pr "very positive"), and it could be that they have some deal in the works that would enable them to uplist under a different ticker post-acquisition or something. *Re: dilution--even if they reverse-split in connection with an acquisition, it's going to be incredibly dilutive at a nickel/share, but I agree that they should try to manage dilution by reverse-split if they do find someone willing to get bought.