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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Note 6 – Commitments and Contingencies Litigation On October 20, 2023, Green Ice, LLC and Sweet Cut Grow, LLC (“Claimants”) filed an Arbitration Petition in Denver, Colorado against the Company. The Claimants allege a breach by the Company of two contracts – an Engineering Agreement with Green Ice, dated January 14, 2021 (“Engineering Agreement”), and an Equipment Agreement with Sweet Cut Grow, dated March 29, 2021 (“Equipment Agreement”). The Arbitration Petition alleges causes of action for breach of the Engineering Agreement, Breach of the Equipment Agreement, Breach of the Warranties under the Equipment Agreement, and Unjust Enrichment in the amount of moneys paid by Claimant to CEA to date under the contracts, of $1,049,280. Given the Arbitration Petition’s current uncertainty around estimability and success of claims, we have not recorded an accrual for any potential loss related to this matter. Regardless, we intend to generally defend the claims on the basis that we promptly addressed all problems, and that any issues with defective HVAC equipment are the responsibility of our third-party equipment manufacturer. From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount of the loss is known. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations. Leases The Company has a lease agreement for its manufacturing and office space. Refer to Note 2 Leases above. CEA Industries Inc. Notes to Condensed Consolidated Financial Statements September 30, 2023 (in US Dollars except share numbers) (Unaudited) Other Commitments In the ordinary course of business, the Company enters into commitments to purchase inventory and may also provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors, and employees of acquired companies, in certain circumstances.

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