BNB Standard Corp 10-Q for FY2026 Q3
BNB Standard Corp (BNC)
About this 10-Q
BNB Standard Corp filed this 10-Q on March 16, 2026, covering the quarter ended January 31, 2026 (FY2026 Q3).
Headline figures
Quarter ended January 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.33M
- Net loss
- $106.57M
- Diluted EPS
- -$2.00
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR
THE QUARTERLY PERIOD ENDED
OR
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Preferred stock purchase rights | Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
As of March 13, 2026, the number of outstanding shares of common stock of the registrant was .
CEA Industries Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended January 31, 2026
Table of Contents
| i |
In this Quarterly Report on Form 10-Q, unless otherwise indicated, the “Company”, “we”, “us” or “our” refer to CEA Industries Inc. and, where appropriate, its wholly owned subsidiaries.
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical fact but are based on current management expectations that involve substantial risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these terms or other similar words. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements including, but not limited to, any projections of revenue, gross profit, earnings or loss, tax provisions, cash flows or other financial items; any statements of the plans, strategies or objectives of management for future operations; any statements regarding current or future macroeconomic or industry-specific trends or events and the impact of those trends and events on us or our financial performance; any statements regarding pending investigations, legal claims or tax disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: about our digital asset treasury strategy, our expectations regarding the market price and adoption of BNB, the native utility token of the Binance ecosystem, a community-driven, decentralized blockchain network originally initiated by the Binance exchange, the regulatory environment applicable to digital assets, our ability to manage risks associated with holding digital assets, and statements about:
| ● | the Company’s digital asset treasury strategy, including expectations regarding the acquisition, holding, and potential disposition of BNB and other digital assets; | |
| ● | the long-term growth, adoption, and value of the Binance ecosystem and BNB tokens; | |
| ● | the Company’s ability to maintain or grow its position as a significant holder of BNB; | |
| ● | the volatility of digital asset prices, including BNB, and the impact of such volatility on the Company’s financial condition and results of operations; | |
| ● | the regulatory environment for digital assets, including potential classification of digital assets as securities and the impact of regulatory developments on the Company’s digital asset holdings and operations; | |
| ● | the liquidity of digital assets, including the Company’s ability to convert digital assets to fiat currency on acceptable terms; | |
| ● | the performance of the Company’s operating businesses, including the Fat Panda retail vaping operations and our climate control systems segment; | |
| ● | the Company’s ability to remediate material weaknesses in internal control over financial reporting. |
Forward-looking statements in this Quarterly Report also include statements regarding: the effects of the shareholder rights agreement on potential change of control transactions; the Company’s liquidity and capital resources; the Company’s ability to fund operations from its digital asset holdings; expectations regarding custodial and counterparty risks associated with third-party exchanges; the integration and performance of the Fat Panda acquisition; and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company.
These factors should not be construed as exhaustive and should be read with the other cautionary statements in this report.
Although we believe that we use reasonable assumptions for these forward-looking statements, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Item 1A – Risk Factors” in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025 and in Part II, Item 1A of this Quarterly Report on Form 10-Q, as updated from time to time in the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”). You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q. The forward-looking statements and projections contained in this Quarterly Report on Form 10-Q are intended to be within the meaning of “forward-looking statements” in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
| ii |
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CEA Industries Inc.
Condensed Consolidated Balance Sheets
| January 31, 2026 | April 30, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Related parties receivables, net | ||||||||
| Receivables, net | ||||||||
| Contract assets, net | ||||||||
| Digital assets, current | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other | ||||||||
| Income tax receivable | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Digital assets, net of current portion | ||||||||
| Goodwill | ||||||||
| Deposits | ||||||||
| Deferred tax assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Deferred revenue | ||||||||
| Related party note payable | ||||||||
| Income taxes payable | ||||||||
| Current portion of operating lease liability | ||||||||
Promissory note payable | ||||||||
| Royalty liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Deferred tax liabilities | ||||||||
| Convertible promissory note payable | ||||||||
| Warrant liabilities - stapled warrants | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Common stock $ par value; authorized; shares issued and outstanding | - | |||||||
| Common stock, authorized; shares issued and outstanding | - | |||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Total shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 2 |
CEA Industries Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
| Successor | Predecessor | Successor | Predecessor | |||||||||||||||||
Three Months Ended January 31, 2026 | Three Months Ended January 31, 2025 | Period from June 7, 2025 through January 31, 2026 | Period from May 1 through June 6, 2025 | Nine Months Ended January 31, 2025 | ||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of revenue | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Advertising and marketing expenses | ||||||||||||||||||||
| Unrealized loss on digital assets | ||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense), net | ||||||||||||||||||||
| Airdrop income | ||||||||||||||||||||
| Gain on change in fair value of warrant liability | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense), net | ( | ) | ||||||||||||||||||
| Total other income, net | ||||||||||||||||||||
| Income (loss) before income tax expense (benefit) | ( | ) | ||||||||||||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||
| Foreign currency translation adjustment | $ | ( | ) | ( | ) | |||||||||||||||
| Total comprehensive income (loss) | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Net income (loss) per share of common stock attributable to common stockholders | ||||||||||||||||||||
| Basic | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Diluted | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 3 |
CEA Industries Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
| Number of Shares | Amount | Paid in Capital | Retained Earnings | Comprehensive Income (Loss) | Total | |||||||||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulated Other
Comprehensive | |||||||||||||||||||||
| Number of Shares | Amount | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance, November 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Stock based compensation expense | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, January 31, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulated Other Comprehensive | |||||||||||||||||||||
| Number of Shares | Amount | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Successor | ||||||||||||||||||||||||
| Balance, June 7, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common shares issued to directors on settlement of restricted stock units | 4,189 | - | 49,379 | - | - | 49,379 | ||||||||||||||||||
| Stock based compensation expense | ||||||||||||||||||||||||
| Common shares issued on acquisition of Fat Panda | ||||||||||||||||||||||||
| Issuance of shares and warrants in private offering, net of issuance costs of $ | ||||||||||||||||||||||||
| Issuance of | ||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance, January 31, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance, May 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance, June 6, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulative Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income | Total | |||||||||||||||||||
| Balance, November 1, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance, January 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulative Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income | Total | |||||||||||||||||||
| Balance, May 1, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance, January 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 4 |
CEA Industries Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Successor | ||||||||||||
| Period from June 7 through January 31, 2026 | Period from May 1 through Jun 6, 2025 | Period from May 1 through January 31, 2025 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash used in operating activities | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Share-based compensation | ||||||||||||
| Amortization of debt discount | ||||||||||||
| Non-cash income from airdrops | ( | ) | ||||||||||
| Non-cash fees paid in digital assets | ||||||||||||
| Unrealized loss on digital assets | ||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||
| Loss on disposal of assets | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ||||||||||||
| Income taxes payable | ( | ) | ||||||||||
| Inventory | ( | ) | ( | ) | ||||||||
| Prepaid expenses | ( | ) | ||||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||||
| Lease liabilities | ||||||||||||
| Deferred revenue | ||||||||||||
| Royalty | ( | ) | ( | ) | ||||||||
| Related parties | ( | ) | ||||||||||
| Contract assets | ||||||||||||
| Deferred tax asset | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from investing activities | ||||||||||||
| Cash paid for acquisitions of Fat Panda | ( | ) | ||||||||||
| Purchase of digital assets | ( | ) | ||||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||||||
| Net cash used in investing activity | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities | ||||||||||||
| Proceeds from notes payable | ||||||||||||
| Proceeds from issuance of common stock and warrants in PIPE offering | ||||||||||||
| Issuance cost of common stock and warrants in PIPE offering | ( | ) | ||||||||||
| Proceeds from issuance of common stock | ||||||||||||
| Warrants exercised | ||||||||||||
| Repurchase of shares | ( | ) | ||||||||||
| Repayments from notes payable | ( | ) | ||||||||||
| Net cash provided by financing activity | ||||||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||
| Cash and cash equivalents, end of period | $ | $ | $ | |||||||||
| Non-cash Investing and Financing Activities: | ||||||||||||
| Proceeds from issuance of common stock for Fat Panda acquisition | $ | ( | ) | $ | $ | |||||||
| Accrued share repurchase liability | $ | ( | ) | $ | $ | |||||||
| CRA indemnity note | $ | $ | $ | |||||||||
| Issuance of related party notes for Fat Panda acquisition | $ | $ | $ | |||||||||
| In-kind digital assets contribution received against issuance of equity and warrants in PIPE offerings | $ | $ | $ | |||||||||
| In-kind digital assets acquired from PIPE offerings proceeds | $ | ( | ) | $ | $ | |||||||
| Supplemental cash flow information | ||||||||||||
| Cash paid for interest | $ | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
| 5 |
CEA Industries Inc.
Notes to Condensed Consolidated Statements Financial Statements
(Unaudited)
Note 1 – Nature of Operations
Description of Business
CEA Industries Inc. (the “Company”) was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered in Louisville, Colorado. Historically, the Company operated a portfolio of consumer and commercial businesses, including climate control systems for controlled environment agriculture and retail operations in the vaping industry.
In August 2025, the Company initiated a strategic transformation by adopting a digital asset treasury strategy focused exclusively on BNB, the native token of the BNB Chain. Through its wholly owned subsidiary, CEA BRS LLC, a Delaware limited liability company and the sole stockholder of BNC BNB Cayman, a Cayman Islands exempt company, the Company seeks to build and manage the largest corporate treasury of BNB, providing institutional-grade exposure to blockchain infrastructure and decentralized finance (DeFi).
The Company’s treasury
operations currently include acquiring and holding BNB and the Company may generate income from airdrops received in connection with its BNB holdings. The Company may in the future generate returns
through additional digital asset-related activities such as validation services, lending, and other decentralized finance protocols,
though no BNB is currently staked or pledged. The Company’s BNB-focused Digital Asset Treasury (“DAT”) strategy
was on August 5, 2025, following the closing of a private placement that raised approximately $
In connection with this strategic shift, the Company changed its Nasdaq ticker symbol from “VAPE” to “BNC” on August 6, 2025, reflecting the Company’s strategic focus on BNB as its primary treasury asset while continuing its core business operations. While the Company continues to operate its legacy business and beginning in the second fiscal quarter ended October 31, 2025, its financial results also reflect the implementation of its DAT.
Additionally, on June 6, 2025 (the “Acquisition Date”), the Company completed the acquisition of Fat Panda Ltd. and its related entities (“Fat Panda”) (the “Fat Panda Acquisition”), entering the Canadian nicotine vape industry. This acquisition aligned with the Company’s strategy at that time to focus on high-growth, regulated consumer markets and provide a vertically integrated infrastructure to support retail expansion and e-commerce capabilities.
Note 2 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the successor period from June 7, 2025 to January 31, 2026 and the predecessor period from May 1, 2025 to June 6, 2025, are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2026.
The balance sheet information as of April 30, 2025, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025.
On the Acquisition Date, the Company completed the Fat Panda Acquisition. As described in Note 4 – Business Combination, the Company has been identified as the accounting acquirer (the “Successor”) and Fat Panda as the accounting predecessor (the “Predecessor”) in accordance with the acquisition method of accounting under ASC 805, Business Combinations. As a result of this designation, the financial statements reflect a change in reporting entity. Financial information for periods prior to the Acquisition Date represents the historical operations of Fat Panda and is labelled as “Predecessor.” Financial information for periods beginning on and after the Acquisition Date reflects the operations of the combined entity under the control of the Company and is labelled as “Successor” since the company operations prior to the acquisition were insignificant relative to those of Fat Panda. The merger was accounted for as a business combination using the acquisition method of accounting. The Successor financial statements reflect a new basis of accounting based on the fair value of the identifiable net assets acquired. Determining the fair value of certain assets and liabilities assumed involves significant judgment and the use of estimates and assumptions. See Business Combinations below for additional information on the fair values of assets and liabilities recorded in connection with the Fat Panda Acquisition.
As a result of applying the acquisition method of accounting as of the Acquisition Date, the accompanying condensed consolidated financial statements include a black line division to distinguish between the Predecessor and Successor reporting entities. These entities are presented on different bases and are therefore not comparable. The lack of comparability is primarily due to the impacts of the Fat Panda Acquisition, including the remeasurement of acquired assets and assumed liabilities at fair value in the Successor condensed consolidated financial statements.
| 6 |
Use of Estimates and Assumptions
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements and the notes. Actual results may ultimately differ materially from those estimates.
Digital Assets
In December 2023, the FASB issued ASU 2023-08, Digital Assets, which provides guidance on the recognition, measurement, presentation, and disclosure of digital assets through the creation of ASC 350-60, Intangibles – Goodwill and Other – Crypto Assets (“ASC 350-60”). ASU 2023-08 became effective for all entities for fiscal years beginning after December 15, 2024. The standard became effective for the Company on May 1, 2025, and no cumulative-effect adjustment was required. The Company accounts for its digital assets, including BNB tokens, in accordance with ASC 350-60. The Company has determined its digital assets meet the scoping criteria of ASC 350-60, which requires eligible crypto assets to be measured at fair value, with changes in fair value recognized in net income. Fair value is determined in accordance with ASC 820, Fair Value Measurement, using quoted prices in active markets. The Company has designated the Binance exchange as its principal market as it is the market that the Company has access to and has the greatest volume and level of activity of BNB for determining the fair value of BNB tokens.
The Company may deposit certain digital assets with certain third-party exchanges to facilitate digital asset treasury activities. Assets that would be held on these exchanges may not be maintained in segregated wallets under the Company’s exclusive control and could be pooled with assets of other customers. Due to the lack of sufficient regulatory oversight and the Company’s inability to prevent such an exchange from using such assets for purposes other than those directed by the Company, the Company has concluded it would not have complete control over the deposited assets. Accordingly, such amounts would be recorded as receivables from the exchange within current assets, rather than as digital assets on the condensed consolidated balance sheet, as the Company does not expect that it would hold these receivables for more than 12 months.
The Company holds its BNB digital assets with a non-U.S. Binance-ecosystem custodial provider and periodically receives airdrops from blockchain projects within the Binance ecosystem. Airdrops are distributed randomly without consideration or contractual agreement; therefore, they do not meet the criteria for revenue recognition under ASC 606. The Company records the fair value of airdrops upon receipt and classifies the income as non-operating, presented within other income in the condensed consolidated statements of operations.
The activity from remeasurement of digital assets at fair value is reflected in the condensed consolidated statements of operations within unrealized gain/loss on digital assets. Realized gains and losses from the derecognition of digital assets would be included in the realized gain/loss on digital assets in the condensed consolidated statements of operations. During the period, the Company has converted digital assets (such as airdrops) into stablecoins and BNB as part of its regular operations. The Company has not disposed of digital assets for fiat currency during the reporting period, in the event there are disposals in the future, the Company will use the specific identification method to calculate the realized gains/losses on digital assets.
Sales and purchases of digital assets are reflected as cash flows from investing activities in the condensed consolidated statements of cash flows. Contributions of digital assets received as part of the consideration received in a private placement (referred to as PIPE Transaction as discussed in Note 13 – Shareholders’ Equity) are presented within supplemental information for non-cash investing and financing activities in the condensed consolidated statements of cash flows.
Cash and Cash Equivalents
All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents.
| 7 |
As
of January 31, 2026 (Successor), the Company had approximately $
The Company periodically monitors the financial condition of its financial institutions and considers strategies to mitigate credit risk exposure related to uninsured balances. The Company has not experienced any losses to date on depository accounts. The Company maintains its cash accounts with high credit quality financial institutions and therefore believes that its loss exposure is minimal.
Fair Value Measurement
The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company uses a three-level hierarchy to prioritize the inputs used in measuring fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other market-corroborated inputs.
Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
The Company has designated the Binance exchange as its principal market for its digital assets as it is the market to which its wholly owned subsidiary, BNC BNB Cayman, has access and that provides the greatest volume and level of orderly transactions. The Company reassesses its principal market when facts and circumstances change, including but not limited to when new markets become accessible, or the volume/activity in the current principal market declines. For digital assets that trade continuously across global markets, the Company applies a consistent valuation cut-off at midnight UTC on the reporting date to determine fair value. All digital assets are measured at fair value using quoted prices in their respective principal markets, which are classified as Level 1 inputs under ASC 820.
All of the Company’s digital assets, including BNB, BTC, USDT, and USDC, are held by BNC BNB Cayman, and the principal market for each asset is determined based on the market accessible to this subsidiary. The Company has elected the Fair Value Option for its USDC holdings to align with the treatment of its other digital assets. USDC is measured at fair value on a recurring basis using quoted prices in the Company’s principal market on the date of recognition.
The Company’s Stapled Warrants, issued in October 2025, are liability classified, and fair valued using a Monte-Carlo option model using Level 3 inputs. Information related to the Stapled Warrants is disclosed in Note 15 – Investor Warrants.
The Company’s financial assets and liabilities consist of cash, accounts receivable, accounts payable, accrued expenses and debt. The carrying value of cash, accounts receivable, accounts payable, and accrued expenses approximates fair value due to the short-term nature of those instruments. The carrying value of debt approximates fair value due to the variable rate nature of the debt.
The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, Earnings per Share (“ASC 260”). Basic EPS is computed by dividing undistributed earnings attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The diluted impact from potential common stock instruments is calculated using the treasury stock method, and if-converted method as applicable, unless the effect would be anti-dilutive.
Business Combinations
For acquisitions meeting the definition of a business combination, the acquisition method of accounting is used. The consideration transferred for the acquired business is allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets. Any excess of the amount paid over the estimated fair values of the identifiable net assets acquired is allocated to goodwill. Acquisition-related costs, such as professional fees, are excluded from the consideration transferred and are expensed as incurred. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially recorded in connection with a business combination as of the acquisition date.
| 8 |
Goodwill
Goodwill represents the excess of the purchase price for an acquisition over the fair value of the identifiable net assets acquired in a business combination. Goodwill recognized in connection with the acquisition is denominated in the functional currency of the acquired entity and was translated into U.S. dollars using the exchange rate as of the acquisition date. Goodwill is subsequently translated into U.S. dollars at each reporting date using the period-end exchange rate.
Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level, or more frequently if events or changes in circumstances indicate that the Company’s carrying amount may not be recovered. The Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of the relevant reporting unit is less than its carrying amount. If a quantitative assessment is required, the Company compares the estimated fair value of the reporting unit with its carrying value. If the carrying value exceeds the reporting unit’s fair value, the Company recognizes an impairment loss in an amount equal to that excess, limited to the carrying amount of goodwill.
During the quarter ended January 31, 2026, the Company evaluated events and circumstances in accordance with the qualitative assessment guidance in ASC 350-20 to determine whether it was more likely than not that the fair value of the Fat Panda reporting unit was less than its carrying amount. Based on this evaluation, management concluded that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.
Intangible Assets
The Company has recognized two intangible assets: one with an indefinite useful life and one with a finite useful life. The indefinite-lived intangible asset, a trade name, is not subject to amortization. Instead, it is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances suggest that the asset may be impaired. The impairment assessment involves estimating the fair value of the trade name using discounted future cash flows and comparing it to its carrying amount. If the carrying amount exceeds the estimated fair value, an impairment charge is recorded for the difference.
The
finite-lived intangible asset, also a trade name, is recorded at historical cost less accumulated amortization. Amortization is recognized
on a straight-line basis over the asset’s estimated useful life of
Based
on the carrying value of intangible assets at January 31, 2026, estimated amortization expense for the subsequent five years is as follows:
remaining one quarter of 2026—$
Revenue Recognition
The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires revenue to be recognized as control of promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled.
Fat Panda revenues consist primarily of retail sales, e-commerce and phone orders, factory-direct wholesale sales, and franchise arrangements. Retail sales represent a single performance obligation satisfied at the point of sale. Revenue is recognized upon payment and delivery, net of sales taxes. Based on historical data, no material liability for returns was recorded for the periods presented.
Revenue from e-commerce, phone orders, and factory-direct wholesale is recognized upon shipment (FOB shipping point). Shipping and handling are considered fulfilment costs. Historical return rates are minimal; no allowance for returns has been recorded.
Gift card sales are recorded as a liability at issuance and recognized upon redemption or when breakage becomes probable. Loyalty programs, such as “buy 10, get 1 free” punch cards, represent separate performance obligations; related liabilities were immaterial for all periods presented.
| 9 |
Franchise royalty fees are variable consideration based on a percentage of franchisee sales and are recognized in the period sales occur. Initial franchise fees are recognized upon opening of the new franchise location.
Climate control revenues are derived from contracts that may include engineering and technical services and the sale of climate control system equipment and components. These contracts may span multiple phases, from facility design to equipment delivery and start-up. The Company does not provide construction or installation services. A performance obligation is a promise in a contract to transfer a distinct good or service. Most client control contracts include multiple performance obligations, while certain contracts consist of a single performance obligation, typically engineering-only services.
The transaction price is allocated to each performance obligation based on its standalone selling price. For engineering services, standalone selling price is estimated using project characteristics such as facility size and system complexity. For equipment sales, standalone selling price is determined by expected costs plus an appropriate margin. When prices are highly variable, the Company uses a combination of methods and observable inputs. Revenue is recognized when control transfers - generally upon shipment for goods and over time for engineering services based on percentage completion toward milestones.
The Company excludes taxes assessed by governmental authorities from transaction prices and recognizes revenue net of sales taxes. Freight revenue and related costs are recorded when control of goods passes to the customer. The Company offers assurance-type warranties only and maintains a warranty reserve based on historical costs.
Concentrations
One
customer accounted for
Foreign Currency Translation
The Company’s condensed consolidated financial statements are presented in U.S. dollar (“USD”). Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within condensed consolidated statements of common shareholders’ equity as currency translation adjustment. Monetary assets and liabilities that are denominated in foreign currencies are translated at the rate prevailing at each reporting date. The U.S. dollar effects that arise from translating the net assets of these companies are recorded in other comprehensive income.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements from equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgement, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the condensed consolidated statements of operations.
Correction of Error – RSU Compensation
In July 2025, prior to the closing of the PIPE Transaction, the Company erroneously recognized $ million of compensation expense prematurely. Accordingly, the Company reversed the previously recognized $ million of compensation expense in the current period. The Company evaluated the impact in accordance with SEC Staff Accounting Bulletins (“SAB”) 99 Topic 1.M, Materiality, and SAB 108 Topic 1.N, Accounting Changes and Error Corrections and concluded that the error and subsequent correction were not material to prior or current interim condensed consolidated financial statements.
| 10 |
Recently Issued Accounting Pronouncements
In July 2025, the FASB issued Accounting Standards Update No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which introduces a practical expedient (for all entities) and an accounting policy election for non-public entities when estimating expected credit losses for current receivables and contract assets under ASC 606. The standard is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years, and early adoption is permitted. The amendments are applied prospectively, and eligible entities can choose to apply the practical expedient and accounting policy election, with required disclosures. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements and disclosures.
In January 2025, the FASB issued Accounting Standards Update No. 2025-01 to clarify the effective date of ASU 2024-03 (disaggregation of income statement expenses) for non-calendar year-end entities. The clarification ensures that initial adoption is required in an annual reporting period (rather than unintentionally in an interim period) for entities with non-calendar year ends. The amendments align with the effective dates stated in ASU 2024-03 (annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027) and early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its unaudited consolidated financial statements and related disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances transparency by requiring additional disaggregation in the rate reconciliation and expanded disclosures of income taxes paid by jurisdiction. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, for public business entities. As the Company’s fiscal year ending April 30, 2026 begins after that date, the Company will adopt this standard in its annual Form 10-K for the fiscal year ending April 30, 2026. The Company does not expect ASU 2023-09 to affect its interim disclosures for the current fiscal year.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosure.
Note 3 - Digital Assets
The following table sets forth the units held, cost basis, and fair value of digital assets held, as shown on the condensed consolidated balance sheet as of January 31, 2026:
Schedule of Units Held Cost Basis And Fair Value of Digital Assets Held
| Crypto Assets held: | Number of Tokens | Cost | Fair Value | |||||||||
| BNB | $ | $ | ||||||||||
| BTC | ||||||||||||
| USDC | ||||||||||||
| USDT | ||||||||||||
| Total | $ | $ | ||||||||||
BTC, USDC, and USDT are classified within current digital assets, as they are held primarily for operating liquidity and are expected to be available for use within the next twelve months. As of January 31, 2026, the Company has no digital assets held with third party exchanges, accordingly, has no digital assets receivable.
Cost basis is equal to the cost of the digital asset, net of any transaction fees, if any, at the time of purchase or upon receipt.
| 11 |
The following table summarizes the Company’s digital asset holdings, as of:
Schedule of Digital Asset Holdings
| Balance | ||||
| Balance as of June 7, 2025 | $ | |||
| Fair value of digital assets held, beginning | $ | |||
| Purchases | ||||
| Airdrop income | ||||
| Commission expense | ( | ) | ||
| Unrealized loss on BNB | ( | ) | ||
| Unrealized loss on BTC | ( | ) | ||
| Balance as of January 31, 2026 | $ | |||
| Fair value of digital assets held, ending | $ | |||
Note 4 - Business Combinations
On the Acquisition Date, the Company acquired Fat Panda, Central Canada’s leading retailer and manufacturer of vaping products, holding a significant market share across Manitoba, Ontario, and Saskatchewan. With 33 retail locations and a thriving e-commerce platform, Fat Panda offers a wide range of high-quality vape devices and e- liquids, including its own premium in-house line.
The
purchase price was $
The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their preliminary estimated fair values as of the Acquisition Date. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The goodwill is primarily attributable to the assembled workforce, synergies expected from combining operations, and future growth opportunities.
The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date and is based on the best estimate of management, which is subject to change within the measurement period.
Schedule of the Preliminary Fair Value of Assets Acquired and Liabilities Assumed
| As Initially Reported | Adjustment Increase (Decrease) | Revised Amount | ||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Accounts receivable | ( | ) | ||||||||||
| Related party receivables | ||||||||||||
| Inventory | ( | ) | ||||||||||
| Prepaid expenses | ( | ) | ||||||||||
| Fixed assets | ||||||||||||
| Right-of-use asset | ( | ) | ||||||||||
| Deposits | ||||||||||||
| Intangibles – trade name | ||||||||||||
| Goodwill | ( | ) | ||||||||||
| Accounts payable and accrued liability | ( | ) | ( | ) | ||||||||
| Income taxes payable | ( | ) | ( | ) | ||||||||
| Deferred tax liability | ( | ) | ( | ) | ||||||||
| Lease liabilities - short-term | ( | ) | ( | ) | ||||||||
| Current portion of royalty liabilities | ( | ) | ||||||||||
| Lease liabilities - long-term | ( | ) | ( | ) | ||||||||
| Total net assets acquired | $ | $ | ( | ) | $ | |||||||
During the period from June 7, 2025 to January 31, 2026, the Company recorded measurement period adjustments resulting from new information about facts and circumstances that existed as of the Acquisition Date. These adjustments primarily related to updated valuations of working capital accounts, including accounts receivable. inventory, prepaid expenses, right-of-use asset, and accrued liabilities, as well as the fair value of the notes issued to the seller as part of the purchase consideration. In accordance with ASC 805, the Company retrospectively adjusted the provisional amounts recognized at the Acquisition Date to reflect these new measurements. The adjustments resulted in changes to certain current assets and liabilities and the fair value of notes issued as consideration. The cumulative impact of these adjustments was recorded as a decrease to goodwill, and prior-period comparative information has been revised as if the adjustments had been recognized at the Acquisition Date.
| 12 |
As part of the purchase price allocation, the Company determined the identifiable intangible assets were a trade name. The fair value of the intangible assets was estimated using variations of the income approach. Specifically, the relief from royalty method was utilized to estimate the fair value of the trade name. The valuation of intangible assets incorporates significant unobservable inputs (Level 3 inputs) and requires significant judgment and estimates, including the amount and timing of future cash flows and discount rates. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.
Due to the timing of the completion of the acquisition, the purchase price and related allocations are preliminary and could be revised as a result of adjustments made to the purchase price and additional information obtained regarding assets acquired and liabilities assumed. Such adjustments may include, but are not limited to, changes in the estimated fair values of identifiable intangible assets, assumed liabilities, and deferred taxes. The purchase price allocation will be finalized during the measurement period, which may extend up to one year from the acquisition date.
The
Company’s buyer transaction costs to acquire Fat Panda totaled approximately $
The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the nine months ended January 31, 2026, and 2025, as if the Fat Panda Acquisition and related financing had occurred on May 1, 2024.
This information gives effect to certain purchase accounting and financing adjustments and is based on the historical financial statements of the Company. It is presented for illustrative purposes only and is not necessarily indicative of the Company’s actual operating results had the Fat Panda Acquisition and related financing occurred on May 1, 2024, nor is it indicative of future results.
Schedule of Certain Purchase Accounting and Financing Adjustments
| Proforma | Proforma | |||||||
For the nine months ended January 31, 2026 | For the nine months ended January 31, 2025 | |||||||
| Revenue | $ | $ | ||||||
| Net income/(loss) | $ | $ | ( | ) | ||||
| Proforma | Proforma | |||||||
For the three months ended January 31, 2026 | For the three months ended January 31, 2025 | |||||||
| Revenue | $ | $ | ||||||
| Net income/(loss) | $ | ( | ) | $ | ( | ) | ||
Pro
forma financial information is presented as if the operations of Fat Panda had been included in the consolidated results of the Company
since May 1, 2024, and reflects transactions that are directly attributable to the Fat Panda Acquisition and related financing. Pro forma
adjustments to the nine months ended January 31, 2026 and 2025 include adjustments for amortization of preliminary marketing-related
intangible assets, elimination of non-recurring transaction costs incurred related to the acquisition, debt discount amortization and
interest expense on the $
Note 5 – Leases
The
Company recorded operating lease costs for the period from June 7, 2025, through January 31, 2026 (Successor) of $
| 13 |
The Company’s operating and finance right-of-use assets and lease liabilities are as follows:
Schedule of Lease Cost
| Successor | ||||||||
| January 31, | April 30, | |||||||
| 2026 | 2025 | |||||||
| Operating lease right-of-use asset | $ | $ | ||||||
| Operating lease liability, current | $ | $ | ||||||
| Operating lease liability, long-term | $ | $ | ||||||
| Successor | ||||||||||||
| Period from June 7 through January 31, 2026 | Period from May 1 through June 6, 2025 | Nine Months Ended January 31,2025 | ||||||||||
| Cash paid for operating lease | $ | $ | $ | |||||||||
Future annual minimum lease payments under non-cancellable operating leases as of January 31, 2026, were as follows:
Schedule of Future Annual Minimum Lease Payments
| Successor | ||||
| January 31, | ||||
| Years ending April 30, | 2026 | |||
| 2026 (excluding the nine months ended January 31, 2026) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less imputed interest | ( | ) | ||
| Present value of minimum lease payments | $ | |||
Other information related to leases were as follows:
Schedule of Other Information Related to Leases
| Successor | ||||||||
| January 31, | April 30, | |||||||
| 2026 | 2025 | |||||||
| Weighted-average remaining lease term (in years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
Note 6 – Inventory
Inventory consisted of the following:
Schedule of Inventory
| Successor | ||||||||
| January 31, | April 30, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Finished goods | $ | $ | ||||||
| Raw materials | ||||||||
| Allowance for excess & obsolete inventory | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
Labor
and overhead expenses of $
Advance
payments on inventory purchases are recorded in prepaid expenses until title for such inventory passes to the Company. Prepaid expenses
included $
| 14 |
Note 7 – Property and Equipment
Property and Equipment consisted of the following:
Schedule of Property and Equipment
| Successor | ||||||||
| January 31, | April 30, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Vehicles | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Computer equipment | ||||||||
| Machinery and equipment | ||||||||
| Furniture and fixtures | ||||||||
| Signs | ||||||||
| Computer software | ||||||||
| Property and equipment at cost | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense for the period from June 7, 2025, through January 31, 2026 (Successor) was $
Note 8 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
Schedule of Accounts Payable and Accrued Liabilities
| January 31, | April 30, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll liabilities | ||||||||
| Sales tax payable | ||||||||
| Other accrued expenses | ||||||||
| Total | $ | $ | ||||||
| 15 |
Note 9- Revenue
The following table sets forth the Company’s revenue by source:
Schedule of Revenue by Source
| Successor | Successor | |||||||||||||||||||
| Three Months Ended January 31, 2026 | Three Months Ended January 31, 2025 | Period from June 7, 2025 through January 31, 2026 | Period from May 1 through June 6, 2025 | Nine Months Ended January 31, 2025 | ||||||||||||||||
| CEA equipment and systems sales | $ | $ | $ | $ | $ | |||||||||||||||
| CEA engineering and other services | ||||||||||||||||||||
| CEA other sales | ||||||||||||||||||||
| Retail Vape sales | ||||||||||||||||||||
| E-commerce Vape sales | ||||||||||||||||||||
| Factory direct wholesale Vape sales | ||||||||||||||||||||
| Franchise fee Vape sales | ||||||||||||||||||||
| Other Vape sales | ||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | |||||||||||||||
As
of January 31, 2026 (Successor), the Company’s remaining performance obligations, or backlog, was approximately $
Geographic Information
The Company classifies sales by customers’ locations in two geographic regions: the United States and Canada.
Schedule of Sales by Customers Locations in Geographic Regions
| Successor | Predecessor | Successor | Predecessor | Predecessor | ||||||||||||||||
| Three Months Ended January 31,2026 | Three Months Ended January 31, 2025 | Period from June 7 through January 31, 2026 | Period from May 1 through June 6,2025 | Nine Months Ended January 31,2025 | ||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||
| Canada | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
Note 10 – Note Payable
In
connection with the Company’s acquisition of Fat Panda, the Company entered into an interim loan facility with CEAD Panda Lender
LLC, under which it borrowed $
The
loan facility included customary borrower representations and warranties, event of default, and various covenants, including requirements
to maintain at least $
Note 11 – Related Party Note Payable and Related Party Convertible Note Payable
In connection with the Fat Panda Acquisition on the Acquisition Date, the Company issued three notes payable to selling shareholders, one of whom is the President of Fat Panda, a current employee of the Company.
The
first note payable was issued in the principal amount of $
| 16 |
The
second note payable was issued as a promissory note in the principal amount of $
The
third note payable, also issued to the President of Fat Panda, is a convertible promissory note with a principal amount of $
The table below represents the outstanding amount of promissory note and convertible promissory note as of January 31, 2026:
Schedule of Promissory Note and Convertible Promissory Note
| Related Party Note | Related Party Promissory Note | Related Party Convertible Promissory Note | ||||||||||
| Principal | $ | $ | $ | |||||||||
| Less: discount | ( | ) | ( | ) | ||||||||
| Carrying value | $ | $ | $ | |||||||||
Note 12 – Commitments and Contingencies
Litigation
From time to time, in the normal course of business, the Company is subject to claims and legal proceedings. Ligation is inherently unpredictable, and the Company’s assessments may change as matters progress. The Company expenses legal fees as incurred and records a liability for contingent losses when it is both probable that a loss has been incurred and the amount can be reasonable estimated. An unfavorable outcome to any matter, if material, could adversely affect the Company’s financial condition, liquidity or results of operations.
Abraham Gomez Matter
On
February 24, 2026, Abraham Gomez, an individual, filed a civil complaint in the Superior Court of the State of California, County of
Tulare, captioned Abraham Gomez v. CEA Industries, Inc., et al., (Case No. VCU331863), against the Company and Hans Thomas, a director
of the Company. The complaint asserts various claims against the defendants, including claims for fraud, promissory estoppel, quantum
meruit and unjust enrichment, arising from alleged investment-related discussions and alleged services purportedly performed for the
benefit of the Company. The plaintiff seeks damages, including compensatory damages according to proof (which the complaint alleges exceed
approximately $
Optima Consulting Services, LLC Matter
On
or about April 17, 2024, Optima Consulting Services, LLC (the “Claimant”), a client of the Company under an equipment and
engineering contract, notified the Company of a potential claim and demanded mediation. On or about October 28, 2024, Claimant asserted
claims for negligent/defective design and breach of warranty, alleging damages exceeding $
Sweet Cut Grow, LLC and Green Ice, LLC Matter
On
October 20, 2023, Sweet Cut Grow, LLC and Green Ice, LLC (collectively, “Claimant”), clients of the Company under an equipment
contract and engineering contract, filed a demand for arbitration asserting claims for breach of contract, breach of warranty, and unjust
enrichment, and seeking $
The
parties are required to arbitrate under the rules of the American Arbitration Association (“AAA”). The arbitration is expected
to be heard in Denver, Colorado, in 2026 unless resolved earlier. The matter is currently in the discovery phase, and the parties are
engaged in active settlement discussions. Legal fees will be borne by each party. In light of ongoing negotiations and the likelihood
of settlement, the Company has accrued an estimate of $
| 17 |
Canadian Payroll Taxes
We
have estimated approximately $
As discussed in Note 11 – Related Party Notes Payable and Related Party Convertible Note Payable above, any tax liability assessed in connection with this matter will reduce the repayment amount of the related vendor note to the former owners of Fat Panda on a dollar for dollar basis.
Leases
The
Company has 36 agreements to lease retail space, office and manufacturing space in Manitoba, Saskatchewan, and Ontario, Canada. The total
square footage of these facilities is approximately
The
Company also has a lease agreement for its manufacturing and office space in Louisville, CO. The total square footage of the facility
is
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.
Note 13 – Shareholders’ Equity
Stockholder Rights Agreement
On December 26, 2025, the Board of Directors (the “Board”) of the Company adopted a limited duration shareholder rights agreement (the “Rights Agreement”). This agreement is designed to reduce the probability that any person, entity, or group can gain control of the Company through open-market accumulation without providing all shareholders with an appropriate control premium or affording the Board sufficient time to make well-informed decisions in the best interests of all shareholders. In accordance with the Rights Agreement, the Company issued, as a dividend, one right (a “Right”) for each share of the Company’s common stock held as of January 8, 2026, and for each share of certain outstanding common stock warrants. Each Right allows its holder to purchase 1/1000th of a share of Series C Junior Participating Preferred Stock at an exercise price of $ per Right. Each share of Series C Junior Participating Preferred Stock is equivalent to shares of the Company’s common stock. The Rights have a limited term and will expire on December 26, 2026, or earlier, as specified in the Rights Agreement.
The adoption of the Rights Agreement had no effect on the Company’s condensed consolidated financial statements, including basic and diluted earnings per share.
| 18 |
PIPE Financing
In August 2025, the Company entered into securities purchase agreements with a group of institutional and accredited investors pursuant to which it issued and sold shares of common stock and various classes of warrants (the “PIPE Warrants”) in a private placement (the “PIPE Transaction”):
| ● | shares of common stock at a purchase price of $ per share; | |
| ● | pre-funded warrants, each exercisable for one share
of common stock at an exercise price of $ | |
| ● | stapled warrants (warrants issued together with
shares), each exercisable at $ |
On
August 5, 2025, the Company closed the PIPE Transaction, which was settled through a combination of cash and digital assets. The
Company received aggregate proceeds of $
At-The-Market Offering
On
August 25, 2025, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement “or “ATM Program”)
with Cantor Fitzgerald & Co. (the “Agent”), pursuant to which the Company may offer and sell shares of its common stock
having an aggregate offering price of up to $
During
the period ended January 31, 2026, the Company sold shares under the ATM Program for net proceeds of $
Share Repurchase Program
On
September 22, 2025, the Company entered into a Stock Repurchase Agreement with Cantor Fitzgerald & Co. pursuant to which the Company
agreed to repurchase shares of its common stock. Under the terms of the agreement, the Company repurchased an aggregate of
and shares of its common stock during the quarter ended January 31, 2026 and the period from June 7, 2025 through January 31, 2026, for aggregate
purchase prices of $
The repurchases were funded through available cash on hand. The transaction was accounted for as a reduction of stockholders’ equity.
Successor
2017 Equity Incentive Plan
Under the Company’s 2017 Equity Incentive Plan, as may be modified and amended by the Company from time to time (the “2017 Equity Plan”), the Board of Directors (the “Board”) (or the compensation committee of the Board, if one is established) may grant equity-based awards, including stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017 Equity Plan authorized shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the 2017 Equity Plan. Any shares subject to an award that are forfeited, expire, or otherwise terminate without issuance are again available for grant under the 2017 Equity Plan.
As of January 31, 2026, of the shares authorized under the 2017 Plan for equity awards, shares have been issued, awards relating to options remain outstanding, and shares remain available for future equity awards.
| 19 |
2021 Equity Incentive Plan
The 2021 Equity Incentive Plan (the “2021 Equity Plan”) was approved by the Board on March 22, 2021 and by the Company’s stockholders on July 22, 2021. The 2021 Equity Plan authorizes the Board to grant awards of up to shares of common stock. The 2021 Equity Plan provides for the grant of incentive stock options intended to qualify under Section 422 Code, non-qualified stock options, SARs, RSAs, RSUs and other equity linked awards to our employees, consultants, and directors. If an equity award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the award receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that may be issued pursuant to this Plan.
As of January 31, 2026, of the shares authorized under the 2021 Equity Plan, shares have been issued in settlement of restricted stock units, awards relating to non-qualified stock options, incentive stock options and restricted stock units remain outstanding. shares remain available for future equity awards.
2025 Equity Incentive Plan
The Company adopted the 2025 Equity Incentive Plan (the “2025 Equity Plan”) on July 25, 2025. The 2025 Equity Plan authorizes the Board to grant awards of up to shares of common stock. The 2025 Equity Plan provides for the grant of incentive stock options intended to qualify under Section 422 Code, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock awards and restricted stock unit awards and other equity linked awards to our employees, consultants, and directors. If an equity award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the award receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that may be issued pursuant to this Plan.
As of January 31, 2026, of the shares authorized under the 2025 Equity Plan, restricted stock units remain outstanding and one share remains available for future equity awards.
Non-Qualified and Incentive Stock Options granted to employees and consultants
Schedule of Stock Option Activity
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term ( in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of June 7, 2025 | $ | $ | ||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Outstanding as of January 31, 2026 | $ | $ | ||||||||||||||
| Exercisable as of January 31, 2026 | $ | $ | ||||||||||||||
The aggregate intrinsic value for the stock options outstanding and exercisable as of January 31, 2026, was zero because these options were out of money on January 31, 2026.
The Company has issued options with a -year contractual term and a vesting period ranging from one month to thirty-two months.
For the period from June 7, 2025 through January 31, 2026, the Company recorded $ thousand as compensation expense related to stock options issued to employees and consultants. As of January 31, 2026, total unrecognized compensation expense for the non-qualified options issued to employees and consultants is $ thousand which will be recognized over a weighted average period of years.
| 20 |
Non-Qualified Stock Options granted to directors
Schedule of Non Qualified Stock Option
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding, June 7, 2025 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | - | - | ||||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Outstanding, January 31, 2026 | $ | $ | ||||||||||||||
| Exercisable, January 31, 2026 | $ | $ | ||||||||||||||
The aggregate intrinsic value for the stock options outstanding and exercisable as of January 31, 2026 was zero because these options were out of money on January 31, 2026.
During the period from June 7, 2025 through January 31, 2026, the Company did not incur any compensation expense related to options issued to directors.
Restricted Stock Units granted to employees and directors
Effective July 27, 2025, the Company accelerated the vesting of restricted stock units issued to a director and settled these units by the issuance of shares of common stock.
During the period June 7, 2025 through January 31, 2026, the Company recorded $ thousand as compensation expense related to RSUs issued to directors and employees. Aggregate fair value of restricted stock units vested during the period June 7, 2025, to January 31, 2026 is $ thousand.
Number of Units | Weighted Average Grant-Date Fair Value | |||||||
| Unvested, June 7, 2025 | $ | |||||||
| Granted | ||||||||
| Vested and settled with share issuance | ( | ) | ||||||
| Forfeited/cancelled | ( | ) | ||||||
| Unvested, January 31, 2026 | $ | |||||||
Stock-based compensation warrants
On
August 5, 2025, the Company entered into a Strategic Advisor Agreements with 10X BNB Cayman Sponsor and YZi Labs Management Ltd
(the “Strategic Advisors”) pursuant to which the Company engaged the Strategic Advisors to provide strategic advice and
guidance relating to the Company’s business, operations, growth initiatives and industry trends in the digital asset
technology sector. As compensation for services rendered by the Strategic Advisor under the Strategic Advisor Agreement, the Company
issued to the Strategic Advisor warrants to purchase
shares of the Company’s Common Stock (the “Strategic Advisor Warrants”) at an exercise price of $
| 21 |
On
August 5, 2025, the Company also entered into an asset management agreement (the “Asset Management Agreement”) with 10X Capital
Partners LLC (the “Asset Manager”). Under the Asset Management Agreement, the Company issued warrants to purchase
shares of the Company’s Common Stock (“Asset Manager
Warrants”) at an exercise price of $
Strategic Advisor warrants and Asset Manager warrants are accounted for as equity classified share-based compensation award in accordance with ASC 718. Following is a summary of the activities of warrants for the period ended January 31, 2026:
Schedule of Warrant Activity
Number of Warrants | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding as of June 7, 2025 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | - | |||||||||||
| Expired | - | |||||||||||
| Outstanding as of January 31, 2026 | $ | $ | ||||||||||
| Exercisable as of January 31, 2026 | $ | $ | ||||||||||
The measurement of fair value of the Strategic Advisor Warrants was determined based on the fair value of the underlying Common Stock on the issuance date given the nominal exercise price.
The Company estimated the fair value of Asset Manager warrants using the Black-Scholes option-pricing model, which requires assumptions, including volatility, the expected term of the warrants, the risk-free interest rate for a period that approximates the expected term of the warrants, and expected dividend yield. Volatility is estimated based on the historical volatility of the guideline public companies over a period approximately equal to the expected term. The contractual term of the warrants is used as the expected term since the warrant holders are nonemployees and expected to hold the warrants to expiration to maximize the value of the warrants.
Schedule of Key Assumption Inputs
Asset Manager Warrants | ||||
| Stock price | $ | |||
| Exercise price | $ | |||
| Expected term (in years) | ||||
| Risk-free interest rate | % | |||
| Expected volatility | % | |||
| Expected dividend yield | % | |||
Note 15 - Investor Warrants
Pre-Funded Warrants
On
August 5, 2025, the Company issued Pre-Funded Warrants exercisable for shares of Common Stock in conjunction with the PIPE
Transaction. The Pre-Funded Warrants are exercisable for a nominal consideration of $
| 22 |
Stapled Warrants
On
August 5, 2025, the Company issued Stapled Warrants exercisable for shares of Common Stock in conjunction with the PIPE Transaction.
The Stapled Warrants are exercisable immediately and may be exercised at any time until three years from issuance for an exercise price
of $
Schedule of Warrant Liability
| Amount | ||||
| Fair value at issuance | $ | |||
| Change in fair value during the period | ( | ) | ||
| Fair value as of January 31, 2026 | $ | |||
Schedule of Inputs Used in Valuation Warrants
August 5, 2025 | January 31, 2026 | |||||||
| Stock price | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Simulated trading days | ||||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Holding period (years) | ||||||||
During the period from June 7, 2025, to January 31, 2026, a total of warrants were exercised on a cashless basis resulting in the issuance of shares of common stock.
The following table summarizes information about warrants outstanding as of January 31, 2026:
Schedule of Warrant Outstanding
| Grant date | Warrants outstanding | Exercise price | ||||||||
| Stapled warrants | $ | |||||||||
| Pre-funded warrants | $ | |||||||||
| Investor warrants | $ | |||||||||
| 2022 Underwriter warrants | $ | |||||||||
| 23 |
Schedule of Computation of Basic and Diluted Earnings Per Share
| 2026 | 2025 | 2026 | 2025 | 2025 | ||||||||||||||||
| Successor | Predecessor | Successor | Predecessor | |||||||||||||||||
| Three months ended January 31, | Three months ended January 31, | Period from June 7 through January 31, | Period from May 1 through June 6, | Nine months ended January 31, | ||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2025 | ||||||||||||||||
| Basic earnings per share: | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Net income/(loss) available to common shareholders - basic | $ | ( | ) | $ | $ | |||||||||||||||
| Denominator: | ||||||||||||||||||||
| Weighted-average number of common shares outstanding – basic | ||||||||||||||||||||
| Basic earnings per common share | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Diluted earnings per share: | - | - | ||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Net income/(loss) available to common shareholders - basic | $ | ( | ) | $ | $ | $ | ||||||||||||||
| Add: Interest and discount amortization on convertible notes | ||||||||||||||||||||
| Net income available to common shareholders - dilutive | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Denominator: | ||||||||||||||||||||
| Weighted-average number of common shares outstanding – basic | ||||||||||||||||||||
| Add: dilutive securities | ||||||||||||||||||||
| Warrants | ||||||||||||||||||||
| Stock options | ||||||||||||||||||||
| RSUs | ||||||||||||||||||||
| Convertible note | ||||||||||||||||||||
| Weighted-average number of common shares outstanding - diluted | ||||||||||||||||||||
| Diluted earnings per common share | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
Schedule of Computation Diluted Income Per Common Share
Period from November 1, 2025 through January 31, 2026 | Period from June 7 through January 31, 2026 | |||||||
| Successor | ||||||||
Period from November 1, 2025 through January 31, 2026 | Period from June 7 through January 31, 2026 | |||||||
| Unvested RSUs | ||||||||
Note 17 – Income Taxes
For the period from June 7, 2025 to January 31, 2026 (Successor), the period from May 1, 2025 to June 6, 2025 (Predecessor) and the nine months ended January 31, 2025 (Predecessor), the Company’s earnings before income taxes, income tax expense and effective income tax rate were as follows:
Schedule of Earnings Before Income Taxes, Income Tax Expense and Effective Income Tax Rate
| Successor | Successor | |||||||||||||||||||
| Period from June 7 through January 31, | Period from May 1 through June 6, | Nine months ended January 31, | Three months ended January 31, | Three months ended January 31, | ||||||||||||||||
| 2026 | 2025 | 2025 | 2026 | 2025 | ||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Income tax expense (benefits) | ( | ) | ( | ) | ||||||||||||||||
| Effective income tax rate | - | % | % | % | % | % | ||||||||||||||
The change in the effective tax rate for the period June 7, 2025 to January, 31, 2026 (Successor), compared to the predecessor period for May 1, 2025 to June 6, 2025 (Predecessor), and the three months ended January 31, 2026 (Successor) compared to January 31, 2025 (Predecessor), was primarily due to the impact of foreign statutory rates that are lower than the U.S. statutory tax rate, non-deductible transaction costs, U.S. inclusions on foreign income, and changes to valuation allowances on the legacy business of CEA Industries Inc.’s United States operations.
During
the first quarter, the Company completed the acquisition of Fat Panda, which is taxed as a Canadian corporation. For Canadian
federal income tax purposes, the transaction was treated as a stock acquisition with no step-up basis in tax. As a result, the
goodwill and intangible assets recorded for financial reporting purposes are not deductible for tax purposes, giving rise to $
| 24 |
As
of January 31, 2026, the Company had $
Pursuant
to Section 382 of the Internal Revenue Code of 1986, as amended, and applicable state law, the Company’s ability to utilize its
NOL carry forwards may be limited if the Company experiences an “ownership change”, generally defined as a greater than
The Company must assess the likelihood that its net deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management’s judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets.
As of January 31, 2026, the Company recorded a full valuation allowance against the deferred tax assets related to its U.S operations. Based on the available evidence, the Company believes it is more likely than not that these deferred tax assets will be realized in the foreseeable future. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal. Estimates of future taxable income are based on assumptions consistent with the Company’s operating plans. However, if actual results differ from these estimates, the carrying value of deferred tax assets could be materially impacted.
The
Company also regularly evaluates the adequacy of its provisions for income tax contingencies in accordance with the applicable authoritative
guidance. Uncertain tax positions are recorded using a two-step process; (i) the determining whether a tax position is more likely than
not to be sustained on the basis of the technical merits, and (ii) measuring the amount of benefit to recognize as the largest amount
that is more likely than not to be realized upon ultimate settlement. The Company currently has recorded a $
On
July 4, 2025, the President signed H.R. 1, the One Big Beautiful Bill Act (the “Act”) into law. The Act includes several
changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including
the restoration of immediate expense of domestic R&D expenditures, reinstatement of
The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, GILTI, FDII, and BEAT, amongst other changes. These changes are generally effective for tax years beginning after Dec. 31, 2025.
The Company is currently assessing the impact of the Act but does not expect have a material impact on the tax provision.
Note 18 – Related Party Transactions
Agreements and Transaction with a Company Director
Mr. Nicholas J. Etten, a member of the Company’s Board of Directors, was previously party to two consulting agreements, one dated July 28, 2025 (the “2025 Agreement”) and a prior agreement dated June 19, 2024 which was replaced by the 2025 Agreement. These agreements contemplated that Mr. Etten would provide advisory services related to acquisition sourcing, strategic consulting, and investor coordination, and would be compensated at a rate of $ thousand per week, subject to downward adjustment based on hours worked.
The Company paid Mr. Etten $
Mr. Etten terminated the 2025 Agreement on February 2, 2026 with effect from January 1, 2026. As of January 31, 2026, there were no amounts payable to Mr. Etten under the 2025 Agreement.
| 25 |
Promissory notes to former owner/current employee
In connection with the Company’s acquisition of Fat Panda Ltd. on June 6, 2025, the Company issued the following promissory notes to related parties:
| ● | A
promissory note with a principal amount of $ |
| ● | A
convertible promissory note with a principal amount of $ |
| ● | A
promissory note with a principal amount of $ |
See Note 11, Related Party Note Payable and Related Party Convertible Note Payable, for additional details.
Asset Management Agreement & Accrued Fee with a Company Director
The
Asset Manager is an entity that is majority-owned and controlled by Hans Thomas, a current member of the Company’s Board of Directors.
In connection with the PIPE Transaction, the Company entered into the Asset Management Agreement with the Asset Manager, pursuant to
which the Company engaged the Asset Manager to provide asset management and related services with respect to the Company’s digital
assets strategy in exchange for the applicable management fees. The Company recorded management fees of $
Note 19 – Segment Reporting
During
the second quarter of 2026, the Company introduced a new business line focused on BNB Treasury Management and appointed a new Chief Executive
Officer, who serves as the Chief Operating Decision Maker (“CODM”). These changes triggered a reassessment of the Company’s
operating segments under ASC 280, Segment Reporting. As a result of this reassessment, the Company determined that it now operates
The CODM evaluates the financial performance of the business and makes resource allocation decisions based on these two distinct sources of business activity:
| ● | BNB Treasury Management – This segment includes income from digital asset activities, costs and expenses related to building and executing the Company’s digital asset strategy, and fair value changes (unrealized gains or losses) on digital assets associated with the Company’s BNB holdings. |
| ● | Retail and Industry Segment – This segment includes Fat Panda’s retail and distribution operations along with revenue and operating costs related to designing, engineering, and selling environmental control and other technologies for the Controlled Environment Agriculture industry. |
The “Corporate” category presented in the following table is not considered an operating segment. It consists primarily of corporate support functions including capital and funding to support the business activities of the company and includes costs and expenses not allocated to a line of business.
The CODM uses income (loss) from operations before provision for income taxes as the primary measure to assess segment performance. This measure is reviewed regularly by examining period-over-period trends, benchmarking against competitors, and monitoring budget versus actual results. The CODM also considers this metric when evaluating income generated from segment assets to determine whether to reinvest profits within the segment or allocate resources elsewhere in the entity.
The following tables present (for each segment and consolidated total) the Company’s revenues and significant expenses regularly provided to the CODM, reconciled to income (loss) from operations before provision for income tax for each of the periods presented. Total segment assets provided to the CODM are also disclosed in the tables below for each period presented.
Schedule of Segment Reporting Information
| CEA Industry Segment (Successor) | BNB Treasury Management Segment | Corporate | Total Consolidated | |||||||||||||
| Three Months Ended January 31, 2026 | ||||||||||||||||
| Retail and Industry Segment (Successor) | BNB Treasury Management Segment | Corporate | Total Consolidated | |||||||||||||
| Total revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||||||
| Unrealized loss on digital asset | ( | ) | ( | ) | ||||||||||||
| Other income from airdrop | ||||||||||||||||
| Advertising and marketing expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| Compensation expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Asset management fees | ( | ) | ( | ) | ||||||||||||
| Professional and contractor fees | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock-based compensation | ||||||||||||||||
| Other segment expenses (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain from change in fair value of warrant liabilities | ||||||||||||||||
| Interest expense and other income, net | ||||||||||||||||
| Income (loss) from operations before provision for income tax | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Total Assets | ||||||||||||||||
| 26 |
| CEA Industry Segment ( | BNB Treasury Management Segment | Corporate | Total Consolidated | |||||||||||||
| Three Months Ended January 31, 2025 | ||||||||||||||||
| Retail and Industry Segment (Predecessor) | BNB Treasury Management Segment | Corporate | Total Consolidated | |||||||||||||
| Total revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||||||
| Advertising and marketing expenses | ( | ) | ( | ) | ||||||||||||
| Compensation expenses | ||||||||||||||||
| Professional and contractor fees | ( | ) | ( | ) | ||||||||||||
| Other segment expenses (1) | (566,949 | ) | - | - | (566,949 | ) | ||||||||||
| Income (loss) from operations before provision for income tax | $ | $ | $ | $ | ||||||||||||
| Total Assets | ||||||||||||||||
| CEA Industry Segment (Successor) | BNB Treasury Management Segment | Corporate | Total Consolidated | CEA Industry Segment | ||||||||||||||||
| Period from June 7, 2025 to January 31, 2026 | Period from May 1, 2025 to June 6, 2025 | |||||||||||||||||||
| Retail and Industry Segment (Successor) | BNB Treasury Management Segment | Corporate | Total Consolidated | CEA Industry Segment(Predecessor) | ||||||||||||||||
| Total revenue, net | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Unrealized loss on digital asset | ( | ) | ( | ) | ||||||||||||||||
| Other income from airdrop | ||||||||||||||||||||
| Advertising and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Compensation expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Asset management fees | ( | ) | ( | ) | ||||||||||||||||
| Professional and contractor fees | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other segment expenses (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain from change in fair value of warrant liabilities | ||||||||||||||||||||
| Interest expense and other income, net | ( | ) | ( | ) | ||||||||||||||||
| Income (loss) from operations before provision for income tax | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||
| CEA
Industry Segment ( | BNB Treasury Management Segment | Corporate | Total Consolidated | |||||||||||||
| Nine Months Ended January 31, 2025 | ||||||||||||||||
| Retail and Industry Segment (Predecessor) | BNB Treasury Management Segment | Corporate | Total Consolidated | |||||||||||||
| Total revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||||||
| Advertising and marketing expenses | ( | ) | ( | ) | ||||||||||||
| Compensation expenses | ( | ) | ( | ) | ||||||||||||
| Professional and contractor fees | ( | ) | ( | ) | ||||||||||||
| Other segment expenses (1) | ( | ) | ( | ) | ||||||||||||
| Income (loss) from operations before provision for income tax | $ | $ | $ | $ | ||||||||||||
| (1) |
Note 20 – Subsequent Events
In accordance with ASC 855, Subsequent Events, the Company has evaluated all subsequent events through the date of issuance of these financial statements issued. No material subsequent events occurred after January 31, 2026.
| 27 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, which include additional information about our accounting policies, practices, and the transactions underlying our financial results, as well as with our audited consolidated financial statements included in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, as filed with the SEC. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Cautionary Statements” appearing elsewhere herein and the risks and uncertainties described or identified in “Item 1A – Risk Factors” in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, as updated from time to time in the Company’s filings with the SEC, and Part II, Item 1A of this Quarterly Report entitled “Risk Factors.”
Non-GAAP Financial Measures
To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings, backlog, as well as adjusted net income (loss) which reflects adjustments for certain non-cash expenses such as stock-based compensation, unrealized loss on digital assets, gain on change in fair value of warrant liability, airdrop income, certain debt-related items and depreciation and amortization expense. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. For purposes of this Quarterly Report, (i) “adjusted net income (loss)” and “adjusted operating income (loss)” mean GAAP net income (loss) and operating income (loss), respectively, after adjustment for non-cash equity compensation expense, unrealized loss on digital assets, airdrop income, certain debt-related items and depreciation & amortization expense, and (ii) “net bookings” means new sales contracts executed during the quarter for which we received an initial deposit, net of any adjustments including cancellations and change orders during the quarter.
Our backlog or remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog or remaining performance obligations will actually generate revenues or when the actual revenues will be generated.
Overview
CEA Industries Inc. (the “Company”) was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered in Louisville, Colorado. Historically, the Company operated a portfolio of consumer and commercial businesses, including climate control systems for controlled environment agriculture and retail operations in the vaping industry.
In August 2025, the Company initiated a strategic transformation by adopting a digital asset treasury strategy focused on BNB, the native token of the Binance blockchain. Through its wholly owned subsidiary, CEA BRS LLC, a Delaware limited liability company and the sole stockholder of BNC BNB Cayman, a Cayman Islands exempt company, the Company seeks to build and manage a substantial corporate treasury of BNB, providing institutional-grade exposure to blockchain infrastructure.
Overview of Digital Asset Treasury Strategy
The Company has recently implemented a treasury strategy focused on acquiring and holding digital assets, primarily BNB. As of January 31, 2026, the Company held 515,544 BNB tokens with an aggregate fair value of $402.8 million. These digital asset holdings represent the substantial majority of the Company’s total assets. Management views BNB as a strategic treasury asset and intends to continue evaluating opportunities to acquire additional digital assets as part of its capital allocation strategy.
The Company’s strategy represents a significant departure from traditional corporate treasury strategies, which typically involve holding cash, cash equivalents, and short-term investments. Instead, the Company’s financial condition and results of operations are now significantly influenced by changes in the market price of BNB. Digital asset markets have historically exhibited significant volatility and are subject to evolving regulatory frameworks and technological risks. As a result, fluctuations in the market price of BNB will have a material impact on the Company’s financial condition, results of operations, and the market price of its common stock. Investors should carefully consider the risks associated with the Company’s digital asset holdings and treasury strategy described under “Part II, Item 1A – Risk Factors” in this Quarterly Report on Form 10-Q.
The Company may in the future generate returns through additional digital asset-related activities such as validation services, lending, and other decentralized finance protocols, though no BNB is currently staked or pledged. The Company’s BNB-focused DAT strategy was launched on August 5, 2025, following the closing of the PIPE Transaction that raised approximately $500 million in cash and digital assets, with up to $750 million in additional proceeds available through warrant exercises. Under the DAT strategy, BNB is the primary treasury reserve asset.
To support this strategy, the Company established CEA BRS LLC, a Delaware limited liability company, as a special purpose entity to hold and manage certain cryptocurrency assets in accordance with the DAT strategy. Additionally, the Company formed BNC BNB Cayman, an exempted company organized under the laws of the Cayman Islands, to facilitate international operations and treasury management. These entities are wholly owned subsidiaries of the Company.
The Company’s BNB holdings are held in custody through Ceffu, an institutional digital asset custody platform operating within the Binance ecosystem. Ceffu utilizes multi-party computation wallet infrastructure and maintains segregated account structures designed for institutional holders. While Ceffu operates as a separate entity from the Binance exchange, our custody arrangement creates concentration exposure to the broader Binance ecosystem. Disruptions to Ceffu’s operations, changes in its regulatory status, or adverse developments affecting the Binance ecosystem could materially impact our ability to access, transfer, or liquidate our BNB holdings.
As a result of the implementation of our BNB focused DAT strategy, digital assets, primarily BNB, now represent 93.7% of our total assets, while our Retail and Industry segment operating businesses represent a significantly smaller portion of our overall asset base on economic exposure.
Key Drivers of Results of Operations
The Company’s results of operations are influenced by several key factors, including: changes in the market price of BNB and other ancillary digital assets held by the Company; fair value adjustments recognized under applicable accounting standards for digital assets; the generation of airdrop income; operating expenses associated with maintaining the Company’s public company infrastructure; and strategic decisions regarding the acquisition, holding, or disposition of digital assets. Because the Company holds a substantial quantity of digital assets, particularly BNB, changes in the market price of BNB may significantly affect the Company’s reported earnings. These fluctuations may not reflect changes in the Company’s operating performance but instead reflect market-driven changes in the value of its digital asset holdings.
| 28 |
During the period from October 31, 2025 to January 31, 2026, the Company’s BNB token holdings increased modestly by 0.7%, from 511,932 tokens to 515,544 tokens, reflecting incremental change of 3,612 tokens in holdings during the period. During this same period, the market price of BNB declined significantly by 28.3%, from $1,089 per token, to $781 per token. As a result, the aggregate fair value of the Company’s BNB holdings decreased from $557.4 million to $402.8 million, driven by market price volatility rather than changes in the token quantity. The decline in BNB market prices had a materially greater impact on the carrying value of digital assets than the operating results of the Company’s retail and industry business during the same period.
In addition to changes in token prices during this period, the Company recognized a substantial decrease in airdrop-related income associated with its digital asset holdings. The Company holds the majority of its BNB assets in Ceffu, an institutional custodian operating within the Binance ecosystem, which enables the Company to maintain eligibility to receive airdrops distributed within the Binance ecosystem. During the three months ended January 31, 2026, airdrop income totaled $1.3 million, representing a decrease of 77.6% compared to $5.8 million recognized during the three months ended October 31, 2025. This substantial decline in airdrop-related income reflects reduced airdrop activity within the Binance ecosystem during the current period. While airdrop income contributed positively to results, it did not offset the impact of the decline in BNB market prices during the quarter.
In addition to airdrops, a portion of our BNB treasury yield has historically been generated through participation in Binance Launchpool and HODLer Airdrops – platform programs through BNB holders receive newly issued tokens by locking or holding BNB. During the quarter ended January 31, 2026, the frequency and scale of these programs declined materially compared to prior periods, contributing to a reduction in platform-delivered yield. Taken together with the decline in airdrop activity described above, these trends reflect a broader moderation in yield generation during the period. The Company cannot predict the timing, frequency, or magnitude of future Launchpool or HODLer Airdrop allocations, and continued reduction in these programs may adversely affect our treasury yield and results of operations.
Digital Asset Market Conditions
Our treasury strategy is designed to accumulate and compound BNB over time, with a focus on growing value of our digital asset holdings on a per-share basis as a key long-term measure of shareholder value creation. Digital asset markets are inherently cyclical, and short-term price fluctuations — while material to our GAAP-reported results in any given quarter — do not alter our management’s conviction in the long-term trajectory of BNB and the broader Binance ecosystem. We believe our disciplined approach to treasury management positions the Company to benefit from market recoveries while managing risk through custody, yield optimization, and strategic capital allocation.
During the three months ended January 31, 2026, digital asset markets experienced periods of significant price volatility. The market price of BNB fluctuated in response to a variety of factors, including macroeconomic conditions, investor sentiment toward digital assets, developments affecting cryptocurrency exchanges and blockchain networks, and regulatory developments in the United States and other jurisdictions. Because the Company holds a significant quantity of BNB, changes in the market price of BNB had and will continue to have a substantial impact on the Company’s balance sheet and results of operations. Investors should consider that fluctuations in the Company’s financial results during the period were driven primarily to changes in digital asset market prices and airdrop yield rather than changes in the Company’s operating activities.
Our Retail & Industry Business
The Company operates its controlled environment agriculture (“CEA”) business within the Retail and Industry segment, which includes the provision of climate control systems for CEA industry. In June 2025, the Company acquired Fat Panda which also operates within this segment. As of January 31, 2026, Fat Panda operates 34 retail locations, including 30 Fat Panda branded stores and 4 Electric Fog branded outlets, along with an e-commerce platform. Fat Panda also manufactures a proprietary line of premium e-liquids in-house and maintains a portfolio of trademarks and related intellectual property. Revenue from CEA equipment and systems represents a relatively small portion of consolidated revenue, totaling $1.1 million for the nine months ended January 31, 2026 and $0.7 million for the three months ended January 31, 2026.
Recent Developments
Subsequent to the quarter end, the Board of Directors has taken steps to reconstitute all four of its standing committees – the Audit, Compensation, Nominating and Governance, and Strategic Committees - with three fully independent directors. The Board believes this action reinforces its commitment to strong corporate governance and shareholder accountability and reflects the Board’s ongoing focus on aligning its structure with best practices for public companies.
As a result of these governance enhancements and with the termination of an agreement between 10X Capital Partners LLC (“10X Capital Partners”) and YZi Labs Management Ltd. (“YZi Labs”), the Company, through the Strategic Committee, is currently engaged in the process of renegotiating the terms of the Company’s Asset Management Agreement with 10X Capital Partners (the “AMA”) with the goal of achieving market standard arms-length terms, including reduced management fees, for the benefit of all shareholders. The Company believes that amending the AMA to better align its terms with the Company’s current scale and asset profile is in the best interest of shareholders, and is committed to completing this process in an expeditious manner. There can be no assurance, however, that the renegotiation will be completed on terms acceptable to the Company.
On March 13, 2026, the Company received a letter from YZi Labs Management Ltd. (“YZi Labs”) that requested that the Company fix a record date for determining the stockholders entitled to consent to (1) repeal any provision of the Company’s Amended and Restated Bylaws (the “Bylaws”), in effect at the time such proposal becomes effective, including any amendments thereto, which were not included in the Bylaws that were in effect and were filed with the SEC on July 25, 2025, (2) increase the size of the Board by seven (7) directors to thirteen (13) directors in total pursuant to Article II, Section .02 of the Bylaws, (3) amend Article II, Section .04 of the Bylaws to clarify and affirm stockholders’ ability to fill vacancies on the Board, including those resulting from an increase in the size of the Board by the vote or written consent of the Company’s stockholders or by court order, and (4) elect YZi Labs’ seven (7) nominees: Max S. Baucus, David J. Chapman, Teresa Marie Goody Guillén, Jiajin “Jane” He, Alex Odagiu, Matthew Roszak and Ling “Ella” Zhang, to serve as directors of the Company. The Board will review YZi Labs’ letter to evaluate its validity under the Bylaws, and if such letter is valid the Company will disclose the record date for determining the stockholders entitled to consent to YZi Labs’ proposals.
| 29 |
Results of Operations
Because fair value changes in digital assets are recorded through our consolidated statements of operations, our BNB Treasury Management segment results—and consequently our consolidated net income—will be subject to significant volatility based on fluctuations in the market price of BNB. Investors should expect material period-to-period variations in our reported net income that may bear no relationship to the operating performance of our Retail and Industry segment.
Comparison of the Three Months Ended January 31, 2026, and January 31, 2025
| Successor | Predecessor | |||||||||||||||
Three months ended January 31, | Three months ended January 31, | Increase (Decrease) ($) | Percentage Change | |||||||||||||
| 2026 | 2025 | |||||||||||||||
| Revenue | $ | 7,334,626 | $ | 6,908,817 | $ | 425,809 | 6 | % | ||||||||
| Cost of revenue | 5,571,329 | 5,146,901 | (424,428 | ) | -8 | % | ||||||||||
| Gross profit | 1,763,297 | 1,761,916 | 1,381 | 0 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Advertising and marketing expenses | 284,366 | 191,531 | (92,835 | ) | -48 | % | ||||||||||
| Unrealized loss on digital assets | 159,791,308 | - | (159,791,308 | ) | 100 | % | ||||||||||
| Selling, general and administrative expenses | 5,997,657 | 612,731 | (5,384,926 | ) | -879 | % | ||||||||||
| Total operating expenses | 166,073,331 | 804,262 | (165,269,069 | ) | -20549 | % | ||||||||||
| Operating income (loss) | (164,310,034 | ) | 957,654 | (165,267,688 | ) | -17258 | % | |||||||||
| Other income (expense), net | ||||||||||||||||
| Airdrop income | 1,265,452 | - | 1,265,452 | 100 | % | |||||||||||
| Gain on change in fair value of warrant liability | 38,061,767 | - | 38,061,767 | 100 | % | |||||||||||
| Interest expense | (158,330 | ) | - | (158,330 | ) | 100 | % | |||||||||
| Other income (expense), net | 176,792 | - | 176,792 | 100 | % | |||||||||||
| Total other income | 39,345,681 | - | 39,345,681 | 100 | % | |||||||||||
| Income/ (loss) before income tax expense (benefit) | (124,964,353 | ) | 957,654 | (125,922,007 | ) | -13149 | % | |||||||||
| Income tax expense (benefit) | (18,392,213 | ) | 184,337 | (18,576,550 | ) | 0 | % | |||||||||
| Net Income (Loss) | $ | (106,572,140 | ) | $ | 773,317 | $ | (107,345,457 | ) | -13881 | % | ||||||
Revenues and Cost of revenue
Revenue for the three months ended January 31, 2026 was $7.3 million, compared to $6.9 million for the three months ended January 31, 2025, representing an increase of $0.4 million, or 6%. The increase in revenue was primarily driven by the CEA equipment and system sales, which contributed $0.6 million during the quarter. This increase was partially offset by $0.2 million reduction in sales from the discontinuation of one product as well as pricing adjustments implemented to recover Canadian excise tax.
Cost of revenue increased by $0.5 million or 8%, from $5.1 million for the three months ended January 31,2025 to $5.6 million for the three months ended January 31, 2026. The increase was primarily driven by $1.0 million of costs associated with CEA equipment and system revenues, including $0.4 million increase in warranty costs. This increase was partially offset $0.5 million or 5% improvement in margin, resulting from the discontinuation of one lower margin product.
Total operating expenses
Total operating expense was $166.1 million for the three months ended January 31, 2026, compared $0.8 million for the three months ended January 31, 2025, representing an increase of $165.3 million, or 20549%. The increase was primarily driven by an unrealized loss of $159.8 million on the remeasurement of digital assets during the current quarter, and higher selling, general and administrative expenses (“SG&A”).
During the period from October 31, 2025 to January 31, 2026, the Company’s BNB holdings increased modestly by 0.7%, while the market price of BNB declined by 28.3%, from $1,089 per token to $781 per token, resulting in an unrealized loss of $159.8 million. As a result, the unrealized loss recognized during the quarter was driven primarily by market price volatility, rather than changes in the quantity of digital assets held. Management believes this performance reflects broader digital asset market conditions rather than any deterioration in BNC’s underlying business or strategy.
| 30 |
SG&A expenses increased primarily due to $2.0 million of asset management fees and a $4.7 million increase in professional and advisory fees, which was offset by $2.7 million net decrease in compensation expense. The increase in professional and advisory fees included $1.6 million related to outsourced accounting integration support and other legal fees incurred in connection with ongoing legal matters. The increases were partially offset by a net decrease of $2.7 million in compensation expense, which reflected $1.6 million increase in compensation costs, offset by $4.6 million reversal of stock-based compensation expenses as described in Note 2 – Correction of Error – RUS Compensation.
In addition, the Company incurred significant costs as a direct result of the shareholder activism campaign initiated by YZi Labs during the quarter ended January 31, 2026. In connection with YZi Labs’ filing of preliminary consent solicitation materials seeking to expand the size of the Board of Directors and elect its own slate of director candidates, and its stated intent to nominate candidates at the Company’s next annual meeting of stockholders, the Company engaged legal, strategic, and communications advisors across multiple disciplines, resulting in $3.1 million in incremental professional and advisory fees during the period. These matters have required significant time and resources from the Board and management and are expected to continue to do so, which could adversely affect the Company’s results of operations. The Company expects these activism-related costs to remain elevated in the near term in connection with these matters. For a more detailed discussion of the risks associated with YZi Labs’ activist campaign, including the potential impact on the Company’s business, operations, and stock price, see Part II, Item 1A, “Risk Factors — Shareholder activism has caused and will continue to cause us to incur substantial costs and divert management’s attention and resources and could disrupt our operations and the trading price of our common stock”.
Other income (expense), net
The Company recognized other income of $39.3 million for the three months ended January 31, 2026, compared to $0 for the three months ended January 31, 2025. Other Income for the current period consisted of gain on change in fair value of warrant liability of $38.1 million, currency translation and interest expense on promissory notes related to the Acquisition and airdrop income.
The Company holds the majority of its BNB tokens with Ceffu, an institutional custodian operating within the Binance ecosystem, which enables the Company to maintain eligibility for airdrops distributed within Binance ecosystem. During the three months ended January 31, 2026, the Company recognized $1.3 million of airdrop income, compared to $5.8 million recognized during the three months ended October 31, 2025. This decline reflects reduced airdrop activity within the Binance ecosystem during the current period, which contributed to lower non-operating income. The Company cannot predict the timing or magnitude of future airdrops, and continued reduction in airdrop frequency or size could have an adverse effect on our results of operations.
Non-GAAP Combined Nine Months Ended January 31, 2026
Our financial results for the periods from May 1, 2025 through June 6, 2025, and the nine months ended January 31, 2025 are referred to as those of the “Predecessor” period. Our financial results for the period from June 7, 2025, through January 31, 2026 are referred to as those of the “Successor” period. Our results of operations as reported in our Condensed Consolidated Financial Statements and Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for these periods are prepared in accordance with U.S. GAAP. Although U.S. GAAP requires that we report our results for the period from May 1, 2025 through June 6, 2025 and the period from June 7, 2025 through January 31, 2026 separately, management views our operating results for the nine months ended January 31, 2026 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods. We believe we cannot adequately benchmark the operating results of the period from June 7, 2025 through January 31, 2026 against any of the previous periods reported in our Condensed Consolidated Financial Statements and Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) without combining it with the period from May 1, 2025 through June 6, 2025, and do not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding our overall operating performance. Management believes that the key performance metrics for the Successor period when combined with the Predecessor period provide more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our Condensed Consolidated Financial Statements in accordance with U.S. GAAP, the tables and discussion below also present the combined results for the nine months ended January 31, 2026. The combined results for the nine months ended January 31, 2026, represent the sum of the reported amounts for the Predecessor period from May 1, 2025 through June 6, 2025 and the Successor period from June 7, 2025 through January 31, 2026. These combined results are not considered to be prepared in accordance with U.S. GAAP and have not been prepared as pro forma results per applicable regulations. The combined operating results do not reflect the actual results we would have achieved absent our acquisition of Fat Panda and are not necessarily indicative of future results. Accordingly, the results for the combined nine months ended January 31, 2026 (prepared on a non-GAAP basis) and nine months ended January 31, 2025 (prepared on a GAAP basis) may not be comparable.
| 31 |
Comparison of the Nine Months Ended January 31, 2026, and January 31, 2025
| Successor | Predecessor | Non-GAAP Combined | Predecessor | |||||||||||||||||||||
Period
from through January 31, | Period
from through June 6, | Nine months ended January 31, | Nine months ended January 31, | Increase (Decrease) | Percentage Change | |||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||
| Revenue | $ | 19,055,752 | $ | 2,927,689 | $ | 21,983,441 | $ | 21,313,671 | $ | 669,770 | 3 | % | ||||||||||||
| Cost of revenue | 13,827,593 | 2,001,537 | 15,829,130 | 13,824,712 | (2,004,418 | ) | -14 | % | ||||||||||||||||
| Gross profit | 5,228,159 | 926,152 | 6,154,311 | 7,488,959 | (1,334,648 | ) | -18 | % | ||||||||||||||||
| - | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Advertising and marketing expenses | 5,010,953 | 63,202 | 5,074,155 | 490,008 | (4,584,147 | ) | -936 | % | ||||||||||||||||
| Unrealized loss on digital assets | 45,757,590 | - | 45,757,590 | - | (45,757,590 | ) | 100 | % | ||||||||||||||||
| Selling, general and administrative expenses | 34,599,188 | 842,348 | 35,441,536 | 4,798,756 | (30,642,780 | ) | -639 | % | ||||||||||||||||
| Total operating expenses | 85,367,731 | 905,550 | 86,273,281 | 5,288,764 | (80,984,517 | ) | -1531 | % | ||||||||||||||||
| Operating income (loss) | (80,139,572 | ) | 20,602 | (80,118,970 | ) | 2,200,195 | (82,319,165 | ) | -3741 | % | ||||||||||||||
| - | ||||||||||||||||||||||||
| Other income (expense), net | ||||||||||||||||||||||||
| Airdrop income | 7,093,030 | - | 7,093,030 | - | 7,093,030 | 100 | % | |||||||||||||||||
| Gain on change in fair value of warrant liability | 244,879,854 | - | 244,879,854 | - | 244,879,854 | 100 | % | |||||||||||||||||
| Interest expense | (822,607 | ) | - | (822,607 | ) | - | (822,607 | ) | 100 | % | ||||||||||||||
| Other income (expense), net | (80,223 | ) | - | (80,223 | ) | - | (80,223 | ) | 100 | % | ||||||||||||||
| Total other income | 251,070,054 | - | 251,070,054 | - | 251,070,054 | 100 | % | |||||||||||||||||
| - | ||||||||||||||||||||||||
| Income/ (loss) before income tax expense (benefit) | 170,930,482 | 20,602 | 170,951,084 | 2,200,195 | 168,750,889 | 7670 | % | |||||||||||||||||
| - | ||||||||||||||||||||||||
| Income tax expense (benefit) | (291,754 | ) | 1,589 | (290,165 | ) | 426,838 | (717,003 | ) | -168 | % | ||||||||||||||
| - | ||||||||||||||||||||||||
| Net Income (Loss) | $ | 171,222,236 | $ | 19,013 | $ | 171,241,249 | $ | 1,773,357 | $ | 169,467,892 | 9556 | % | ||||||||||||
Revenues and Cost of revenue
Revenue for the nine months ended January 31, 2026, was $22.0 million, compared to $21.3 million for the nine months ended January 31, 2025, representing an increase of $0.7 million, or 3%. The increase was primarily driven by $1.1 million of revenue from CEA equipment and systems. This increase was partially offset by $0.4 million decrease in revenue resulting from the discontinuation of one product as well as pricing adjustments implemented to recover Canadian excise tax.
Cost of revenue increased by $2.0 million or 14%, from $13.8 million for the nine months ended January 31, 2025 to $15.8 million for the nine months ended January 31, 2026. The increase was primarily driven by $1.4 million of costs associated with CEA equipment and systems revenue, which included an additional $0.4 million in warranty costs and a net $0.6 million increase reflecting higher material costs resulting from increased cost per unit following the enactment of new Canadian federal and provincial excise taxes, partially offset by a modest improvement in margins from the discontinuation of one lower margin product.
Total operating expenses
Total operating expenses was $86.3 million for the nine months ended January 31, 2026, compared to operating expenses of $5.3 million for the nine months ended January 31, 2025, an increase of $81.0 million, or 1531%. The increase was primarily driven by an unrealized loss of $45.8 million on the remeasurement of digital assets during the nine months ended January 31, 2026, by higher selling, general and administrative expenses, which increased by $30.6 million to $35.4 million.
As of January 31, 2026, the Company held 515,544 BNB tokens. During the period, the market price of BNB experienced significant volatility, increasing by 32% from $825 per token in August 2025 to $1,089 per token as of October 31, 2025, before declining by 28.3% to $781 per token as of January 31, 2026. As a result, the unrealized loss recognized during the period was driven primarily by fluctuations in market price, rather than changes in the quantity of digital assets held.
| 32 |
The increase in SG&A was mainly attributable to a one-time warrant issuance cost of $14.6 million, asset management fees of $3.8 million, an increase of $7.5 million in professional and contractor fees, and $0.5 million in additional insurance costs associated with BNB treasury operations. Of the increase in professional and advisory fees, $3.1 million is associated with our ongoing response to an activist shareholder campaign while $4.4 million is associated with accounting and other legal fees incurred in connection with the Fat Panda Acquisition and PIPE Transaction. Advertising and marketing expenses also increased by $4.6 million from $0.5 million during the nine months ended January 31, 2025 to $5.1 million during the nine months ended January 31, 2026 as the Company incurred additional marketing costs in connection with PIPE Transaction and ATM sales during the current quarter.
Other income (expense), net
We recognized other income of $251.1 million for the nine months ended January 31, 2026, compared to $0 for the nine months ended January 31, 2025. Other Income for the current period consisted of airdrop income, gain on change in fair value of warrant liability, and interest and debt discount amortization on notes related to the Acquisition.
Financial Condition, Liquidity and Capital Resources
Our primary sources of liquidity include cash and cash equivalents, and, beginning in August 2025, digital assets held in our treasury. As of January 31, 2026, we had cash and cash equivalents of $11.3 million and digital assets measured at fair value of $409.2 million, as presented in our condensed consolidated unaudited balance sheets. We did not have any borrowings outstanding under a credit facility as of January 31, 2026.
We hold a significant portion of our liquid assets in digital assets, which are measured at fair value with changes recognized in earnings. As further described in Note 3 – Digital Assets to our condensed consolidated financial statements, our digital assets consist primarily of BNB.
Our liquidity and capital resources are subject to volatility in the market price of BNB and other digital assets. A decline in the market price of BNB or other digital assets would reduce the fair value of our digital assets and could adversely affect our ability to fund operations, invest in growth, or meet obligations as they come due. We manage this risk by maintaining fiat liquidity; however, these measures may not fully mitigate market, custodial or regulatory risks. A 10% decline in the price of BNB as of January 31, 2026, holding all other factors constant, would have resulted in an additional unrealized loss of approximately $40.3 million. Conversely, a 10% increase would have resulted in an additional unrealized gain of approximately $40.3 million. These potential fluctuations significantly exceed the operating income or loss expected from our Retail and Industry segment.
A substantial portion of the Company’s assets consists of digital assets, primarily BNB. Although digital assets may be traded on various cryptocurrency exchanges, the liquidity of these assets may vary depending on market conditions. Periods of significant volatility or market stress may reduce liquidity, widen bid-ask spreads, and limit the Company’s ability to sell digital assets at favorable prices.
The Company’s ability to generate liquidity may depend in part on its ability to sell digital assets in the market. If the Company were required to liquidate a significant portion of its BNB holdings to meet liquidity needs, such sales could adversely affect the market price of BNB and reduce the value of the Company’s remaining holdings. Management evaluates the Company’s liquidity requirements on an ongoing basis and may determine to sell or otherwise utilize portions of its digital asset holdings to fund operations, pursue strategic opportunities, or satisfy other capital requirements.
Digital Asset Treasury Risk Management
The Company has implemented policies and procedures designed to manage risks associated with holding digital assets. These measures include the use of institutional custodial platforms, internal controls governing the authorization and execution of digital asset transactions, and monitoring of market conditions affecting the Company’s digital asset holdings. Despite these measures, digital assets are subject to risks that differ from traditional financial assets, including cybersecurity risks, technological risks associated with blockchain networks, and the potential for rapid changes in market conditions. The Company continuously evaluates and updates its risk management practices as its digital asset treasury strategy evolves.
| 33 |
Summary of Cash Flows
The following summarizes our approximate cash flows for the period from June 7, 2025 through January 31, 2026 (Successor), for the period May 1, 2025 through June 6, 2025 (Predecessor) and for the nine months ended January 31, 2025 (Predecessor):
| Successor | Predecessor | |||||||||||
Period from June 7 through January 31, | Period from May 1 through June 6, | For nine Months Ended January 31, | ||||||||||
| 2026 | 2025 | 2025 | ||||||||||
| Net cash used in operating activities | $ | (32,107,342 | ) | $ | (238,442 | ) | $ | (306,009 | ) | |||
| Net cash used in investing activities | (185,657,820 | ) | - | (56,153 | ) | |||||||
| Net cash provided by financing activities | 217,621,064 | - | - | |||||||||
| Net decrease in Cash and Cash Equivalents | $ | (144,098 | ) | $ | (238,442 | ) | $ | (362,162 | ) | |||
Operating Activities
Cash used in operating activities for the period from June 7, 2025 through January 31, 2026 (Successor) was $32.1 million, compared to $0.2 million used during the period from May 1, 2025 through June 6, 2025 (Predecessor) and $0.3 million used for the nine months ended January 31, 2025 (Predecessor). Operating cash flows for the Successor period were significantly affected by several non-cash items, including an unrealized loss on digital assets of $45.8 million, a $244.9 million gain from changes in the fair value of warrant liabilities, and $7.1 million of non-cash income from airdrops. Depreciation and amortization expense and non-cash fees paid in digital assets also impacted cash used in operations.
Working-capital movements of $0.5 million further contributed to the overall cash outflow. A $1.2 million utilization in prepaid expenses represented the source of cash. Additional changes in accounts receivable, taxes payable inventory, and accounts payable and accrued liabilities also affected cash used in operations.
Investing Activities
Cash used in investing activities for the period from June 7, 2025 through January 31, 2026 (Successor) was $185.7 million, compared with no cash used during the period from May 1, 2025 through June 6, 2025 (Predecessor) and $56 thousand used during the nine months ended January 31, 2025 (Predecessor).This outflow was primarily driven by $10.4 million of cash consideration paid in connection with the Fat Panda Acquisition and the $175.3 million used to purchase digital assets.
Financing Activities
Cash provided by financing activities for the period from June 7, 2025 through January 31, 2026 (Successor) totaled $217.6 million, compared to no financing cash flows during the periods from May 1, 2025 through June 6, 2025 (Predecessor) or the nine months ended January 31, 2025 (Predecessor). The primary source of cash was $217.5 million of net proceeds from the issuance of common stock and warrants in the PIPE offering, which included $9.3 million of issuance costs related to common stock and warrants in the PIPE offering. In addition, the Company generated $12.9 million of proceeds from sales under the ATM program. These inflows were partially offset by $12.7 million in cash used for share repurchases during the period.
Contractual Payment Obligations
As of January 31, 2026, our contractual payment obligations consisted of a building lease. Refer to Note 5 – Leases of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of our building lease.
Commitments and Contingencies
Refer to Note 12 – Commitments and Contingencies of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of commitments and contingencies.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our liquidity or capital resources. As of January 31, 2026, we had no off-balance sheet arrangements. During the quarter ended January 31, 2026, we did not engage in any off-balance sheet financing activities other than those included in the discussed above and those reflected in Note 12 – Commitments and Contingencies of our condensed consolidated financial statements.
| 34 |
Known Trends and Uncertainties Affecting Our Business
Management is aware of several trends and uncertainties that may affect the Company’s financial condition and results of operations, including: continued volatility in digital asset markets; evolving regulatory frameworks governing digital assets and cryptocurrency exchanges; technological developments affecting blockchain networks and decentralized applications; and macroeconomic conditions affecting investor demand for digital assets. These trends may influence the market value and liquidity of BNB and other digital assets and may therefore materially affect the Company’s financial condition and results of operations.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers, and information available from other outside sources, as appropriate. Actual results could materially differ from those estimates. Key estimates include allocation of transaction prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on remaining performance obligations under contracts with customers, valuation of intangible assets, valuation of equity- based compensation, valuation of deferred tax assets and liabilities, warranty accruals, accounts receivable and inventory allowances, and legal contingencies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, therefore are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Principal Financial and Accounting Officer, both of which positions have previously been held by the same person, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that as a result of material weaknesses in our internal control over financial reporting as described in Item 9A of our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, our disclosure controls and procedures were not effective as of January 31, 2026. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure.
We did not maintain effective controls over certain aspects of the financial reporting process because: (i) we lack a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements, (ii) there is inadequate segregation of duties due to our limited number of accounting personnel, and (iii) we have insufficient controls and processes in place to adequately verify the accuracy and completeness of spreadsheets that we use for a variety of purposes including revenue, taxes, stock-based compensation and other areas, and place significant reliance on, for our financial reporting.
We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies in the future when our financial assets and our operations would support the requirements of additional personnel. We are committed to continuing to improve our financial organization, when we are able, including, without limitation, expanding our accounting staff and improving our systems and controls to reduce our reliance on the manual nature of our existing systems. However, due to our size and our financial resources, remediating the several identified weaknesses has not been possible and may not be economically feasible now or in the future.
As a significant step in the remediation of these deficiencies, effective March 9, 2026, the Company appointed Brent Miller as Chief Financial Officer. Mr. Miller’s appointment separates the principal financial and accounting officer function from the Chief Executive Officer role for future periods and is expected to strengthen the Company’s financial reporting capabilities, supervisory review structure, and segregation of duties.
Changes in Internal Control over Financial Reporting
There were changes in our internal control over financial reporting during the quarter ended January 31, 2026 related to integration of new digital asset treasury processes and valuation controls for warrant liabilities. These changes were part of our remediation plan and did not materially affect, and are not reasonably likely to materially affect, our internal control over financial reporting, except as noted above with respect to the identified material weakness.
Management has implemented procedures designed to provide reasonable assurance regarding the safeguarding of the Company’s digital assets, including controls governing access to private keys, authorization requirements for digital asset transfers, and oversight of custodial arrangements with third-party service providers.
| 35 |
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, in the normal course of business, the Company is subject to claims and legal proceedings. Litigation is inherently unpredictable, and the Company’s assessments may change as matters progress. The Company expenses legal fees as incurred and records a liability for contingent losses when it is both probable that a loss has been incurred and the amount can be reasonable estimated. An unfavorable outcome to any matter, if material, could adversely affect the Company’s financial condition, liquidity or results of operations.
On February 24, 2026, Abraham Gomez, an individual, filed a civil complaint in the Superior Court of the State of California, County of Tulare, captioned Abraham Gomez v. CEA Industries, Inc., et al., (Case No. VCU331863), against the Company and Hans Thomas, a director of the Company. The complaint asserts various claims against the defendants, including claims for fraud, promissory estoppel, quantum meruit and unjust enrichment, arising from alleged investment-related discussions and alleged services purportedly performed for the benefit of the Company. The plaintiff seeks damages, including compensatory damages according to proof (which the complaint alleges exceed approximately $2.75 million), together with interest, attorneys’ fees, costs and other relief. As of March 13, 2026, the Company has not yet filed its response to the complaint but intends to defend the action vigorously. At this preliminary stage of the matter, the Company cannot reasonably estimate the possible loss or range of loss, if any, that may result from the proceeding.
On or about April 17, 2024, Optima Consulting Services, LLC (the “Claimant”), a client of the Company under an equipment and engineering contract, notified the Company of a potential claim and demanded mediation. On or about October 28, 2024, Claimant asserted claims for negligent/defective design and breach of warranty, alleging damages exceeding $2.0 million. The Company denied the claims, believing it satisfied all contractual obligations and that any issues were attributable to Claimant and/or third parties. The matter was mediated under the AAA process. Effective May 9, 2025, the parties entered into a settlement agreement under which all claims were resolved for a payment of $0.3 million by the Company. This settlement payment was funded by the Company’s insurance coverage, except for $35 thousand representing the deductibles, which was paid by the Company.
On October 20, 2023, Sweet Cut Grow, LLC and Green Ice, LLC (collectively, “Claimant”), clients of the Company under an equipment contract and engineering contract, filed a demand for arbitration asserting claims for breach of contract, breach of warranty, and unjust enrichment, and seeking $1.0 million in damages, plus interest. The Company denies the claims and has asserted a counterclaim. The Company believes it fulfilled all its contractual obligations and that any alleged issues related to the negligence of a third-party supplier.
The parties are required to arbitrate under the rules of the American Arbitration Association (“AAA”). The arbitration is expected to be heard in Denver, Colorado, in 2026 unless resolved earlier. The matter is currently in the discovery phase, and the parties are engaged in active settlement discussions. Legal fees will be borne by each party. In light of ongoing negotiations and the likelihood of settlement, the Company has accrued an estimate of $0.4 million to warranty expense.
Canadian Payroll Taxes
We have estimated approximately $0.2 million of potential liability related to Canadian payroll tax matters for the period 2020-2025. Other than this matter, no additional losses or provisions for loss contingency have been recorded to date. As discussed in Note 11 Related Party Note Payable and Related Party Convertible Note Payable above, any tax liability assessed in connection with this matter will reduce, on a dollar for dollar basis, the repayment amount of the related vendor note issued to the former owners of Fat Panda.
| 36 |
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025. Those risk factors, together with the risk factors set forth below, could materially affect our business, financial condition, operating results, or prospects. The risks described in our Form 10-KT and below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, operating results, or prospects.
Risks Related to Our Digital Asset Treasury Strategy
Our financial condition is highly dependent on the market price of BNB, which has historically been subject to significant volatility.
Our financial condition is highly dependent on the market price of BNB, which has historically been subject to significant volatility. As of January 31, 2026, we held 515,544 BNB tokens with a fair value of $402.8 million, representing the substantial majority of our total assets. As a result, our financial condition, results of operations, and the market price of our common stock may be materially affected by fluctuations in the market price of BNB. The price of BNB has historically experienced significant volatility and may continue to fluctuate substantially in response to numerous factors, many of which are beyond our control. These factors include, among others: overall cryptocurrency market conditions and investor sentiment; technological developments affecting blockchain networks; regulatory developments in the United States or other jurisdictions; changes in trading volumes or liquidity in markets for BNB; macroeconomic factors, including inflation, interest rates and financial market conditions; trading activity by large holders of BNB or other digital assets; and market speculation, media coverage, or social media commentary relating to digital assets. Digital asset markets may be more volatile and less regulated than traditional financial markets, and prices may fluctuate significantly over short periods of time. Because BNB represents a substantial portion of our assets, even modest declines in the market price of BNB could materially reduce the value of our assets and stockholders’ equity and may negatively affect our reported financial results. In addition, because changes in the fair value of our digital assets are reflected in our statements of operations, fluctuations in the market price of BNB may cause significant volatility in our reported earnings.
During the three months ended January 31, 2026, we recognized an unrealized loss of $159.8 million on digital assets as a result of declines in the price of BNB. Under our accounting policies, unrealized gains and losses from changes in the fair value of our digital asset holdings are recorded in our consolidated statements of operations. Accordingly, our reported net income or loss will be significantly affected by fluctuations in the market price of BNB, and these fluctuations could cause our financial results to vary substantially from period to period, independent of the performance of our operating businesses. A significant decline in the market price of BNB could adversely affect our ability to fund our operations, pursue strategic initiatives, pay dividends, service any indebtedness, or otherwise execute our business strategy. In addition, our stock price may be correlated with the price of BNB and other digital assets, and declines in the price of BNB could adversely affect the trading price of our common stock.
Our digital asset treasury strategy is concentrated in a single asset, which subjects us to risks specific to the Binance ecosystem.
Our digital asset treasury strategy currently focuses primarily on acquiring and holding BNB. As a result, our digital asset holdings are concentrated in a single digital asset rather than diversified across multiple assets or asset classes. This concentration increases our exposure to risks specific to BNB and the broader Binance ecosystem. The value and functionality of BNB are closely tied to the continued development, operation and adoption of the BNB Chain blockchain and the broader Binance ecosystem. Negative developments affecting BNB Chain, the Binance ecosystem, or entities associated with the development or promotion of BNB could adversely affect the value, liquidity, or market perception of BNB. These developments could include technological failures, security vulnerabilities, regulatory actions, reputational harm, or reduced developer or user adoption of BNB Chain. In addition, changes to the economic design, governance structure, or technical features of BNB or the BNB Chain network, including changes to token supply mechanisms, validator governance, or transaction fee structures, could negatively affect the value of BNB. Because we do not currently intend to diversify our digital asset holdings, any adverse developments affecting BNB or the Binance ecosystem could have a disproportionately negative impact on our financial condition and results of operations. Notwithstanding the foregoing, we may in the future diversify our digital asset holdings and reserve all rights to do so at the direction of the Board of Directors. Any digital assets into which we diversify may expose the Company to risks similar to those described above, as well as additional risks that may be specific to the particular digital asset or blockchain technology ecosystem in which such asset operates.
| 37 |
Failures, vulnerabilities, or disruptions in the BNB Chain network could adversely affect the value of BNB and our digital asset holdings.
BNB operates on the BNB Chain blockchain network, which relies on complex software, cryptographic protocols, and a distributed network of validators to process transactions and maintain the integrity of the blockchain. The BNB Chain network may be subject to technical failures, software bugs, consensus failures, or other vulnerabilities that could compromise the network’s security or functionality. In addition, blockchain networks have historically been targets of cyberattacks, including attempts to exploit vulnerabilities in network software or associated applications. Any successful attack or exploit affecting the BNB Chain network could disrupt network operations, reduce confidence in the network, or adversely affect the market price of BNB. Any such developments could materially and adversely affect the value of our digital asset holdings.
The validator structure of the BNB Chain network may expose it to governance or operational risks.
The BNB Chain network relies on a limited number of validators to confirm transactions and maintain the network. Compared to some other blockchain networks, the validator structure of BNB Chain may involve a relatively concentrated group of participants. Concentration among validators could increase the risk of coordinated actions, governance disputes, or operational disruptions affecting the network. If validators were to act in a manner that adversely affects the operation or perceived integrity of the network, confidence in the Binance ecosystem could decline. Any such decline in confidence could negatively affect the market price of BNB and the value of our digital asset holdings.
Certain of our digital assets are held at third-party exchanges and are subject to custodial and counterparty risks.
Certain of our digital assets are held at third-party exchanges or custodial platforms. These assets may be recorded as receivables rather than digital assets on our condensed consolidated balance sheet when they are held on such platforms. Digital asset exchanges and custodians have historically been subject to cyberattacks, fraud, insolvency, operational failures, and regulatory enforcement actions.
Ownership and control of digital assets are generally determined by possession of cryptographic private keys or other access credentials. We rely on third-party custodians to safeguard control of our digital assets, including the management of private keys. If the private keys or access credentials associated with our digital assets that are held by those third-party custodians were lost, destroyed, compromised, misused, or otherwise became inaccessible, we could lose access to our digital assets permanently. Unlike traditional financial accounts, digital asset transactions are generally irreversible, and there may be no central authority capable of restoring access to lost assets. Any loss or theft of our digital assets, including as a result of the foregoing, could materially and adversely affect our financial condition.
If any exchange or custodial platform that holds our digital assets were to become insolvent, experience a security breach, suspend withdrawals, or otherwise fail to safeguard our assets, we could experience delays in accessing our digital assets or suffer a partial or total loss of those assets. In the event of an insolvency of a custodial platform, we may be treated as an unsecured creditor and may not recover the full value of our assets. In addition, exchanges and custodial platforms may impose withdrawal limits, suspend trading, or otherwise restrict transfers of digital assets during periods of market volatility or regulatory uncertainty. Such restrictions could limit our ability to access or liquidate our digital assets in a timely manner. These assets are not maintained in segregated wallets under our exclusive control and may be pooled with assets of other customers of such exchanges. Unlike bank deposits, digital assets held at exchanges are generally not insured by the Federal Deposit Insurance Corporation or any other governmental agency. We are exposed to counterparty risk if these exchanges experience financial difficulty, security breaches, cyberattacks, operational failures, regulatory enforcement actions, or become insolvent. The digital asset industry has experienced significant exchange failures and insolvencies, including the collapse of FTX Trading Ltd. in November 2022, which resulted in substantial losses for customers and creditors. If an exchange at which we hold digital assets were to fail, enter bankruptcy, or become subject to regulatory seizure, we may be unable to recover some or all of our digital assets, and any recovery could be subject to significant delays and uncertainty. The loss of digital assets held at such exchanges could materially and adversely affect our financial condition, results of operations, and the trading price of our common stock.
Digital assets, including BNB, are subject to an evolving and uncertain regulatory landscape.
Digital assets, including BNB, are subject to evolving and uncertain regulatory frameworks in the United States and internationally. The regulatory status of digital assets and related activities is subject to significant uncertainty, and regulations may vary significantly among jurisdictions. Changes in laws, regulations, or enforcement priorities by U.S. or foreign regulators, including the SEC, CFTC, FinCEN, state regulators, or international bodies, could adversely affect our ability to acquire, hold, transact in, or derive value from our digital asset holdings. In particular, if BNB or other digital assets we hold were to be classified as securities under U.S. federal or state laws, we could become subject to registration requirements under the Securities Act of 1933 or the Investment Company Act of 1940, which could impose significant compliance costs, restrict our ability to transact in such assets, or require us to dispose of our holdings. Anti-money laundering and know-your-customer regulations applicable to digital assets may become more stringent and could increase our compliance costs or limit our ability to transact in digital assets. Tax treatment of digital asset transactions is also subject to uncertainty and may change in ways that adversely affect our financial results. Any regulatory developments that restrict or prohibit our digital asset activities could have a material adverse effect on our business, financial condition, and results of operations.
| 38 |
BNB could be determined to be a security under U.S. federal securities laws, which could materially affect the value and tradability of our digital assets.
The regulatory status of many digital assets, including BNB, remains uncertain. Regulatory authorities in the United States and other jurisdictions have taken the position that certain digital assets may constitute securities under applicable law. If BNB were determined to be a security under U.S. federal securities laws, trading platforms that currently list BNB may be required to register as securities exchanges, broker-dealers or alternative trading systems, or they may cease offering trading in BNB. Any determination that BNB constitutes a security, or any enforcement action by regulatory authorities relating to BNB or trading platforms that support BNB trading, could significantly reduce the liquidity and market value of BNB. Such developments could make it more difficult for us to buy or sell or value BNB, could result in delistings of BNB from trading platforms, and could materially and adversely affect the value of our digital asset holdings and our financial condition.
Adverse publicity or developments involving the Binance ecosystem could negatively affect the value of BNB.
The market value of BNB may be influenced by the reputation and perceived stability of the broader Binance ecosystem, including entities associated with the development, promotion, or operation of platforms that support BNB or the BNB Chain network. Negative media coverage, regulatory actions, litigation, or other adverse developments involving such entities could negatively affect market sentiment toward BNB. Any loss of confidence in the Binance ecosystem could reduce demand for BNB, impair liquidity in markets for BNB, and negatively affect the value of our digital asset holdings.
While we report substantial digital asset holdings, the liquidity of these assets may be limited by market conditions.
As of January 31, 2026, we held digital assets with a fair value of $409.2 million. Although digital asset markets operate continuously, the liquidity of BNB and other digital assets may be limited during periods of market stress or volatility. Order book depth in digital asset markets may be insufficient to support large transactions without materially affecting market prices. Because we hold a substantial quantity of BNB, any attempt by us to sell a significant portion of our holdings could exert downward pressure on the market price of BNB. In addition, a significant portion of the outstanding supply of BNB may be held by a relatively small number of market participants, and sales by large holders could also adversely affect market prices. If market liquidity were to decline, we may be unable to liquidate our digital asset holdings at favorable prices or within desired timeframes. Large sales of BNB by us or other significant holders could adversely affect the market price of BNB, and we may not be able to liquidate our holdings without significant losses. We maintain fiat cash reserves of $11.3 million to support day-to-day operations, but these reserves represent a small fraction of our total assets and may be insufficient to fund our operations, capital expenditures, or other obligations if we are unable to liquidate our digital assets on acceptable terms. Any inability to convert our digital assets to fiat currency when needed could have a material adverse effect on our liquidity, financial condition, and ability to continue as a going concern.
Fair value accounting for digital assets may cause significant volatility in our financial statements.
Under applicable accounting standards, including ASC 350-60, digital assets such as BNB are measured at fair value, with changes in fair value recognized in earnings during each reporting period. As a result, fluctuations in the market price of BNB may result in significant unrealized gains or losses in our financial statements. These fair value adjustments may cause substantial volatility in our reported earnings and may not reflect the underlying performance of our operations. Investors may find it difficult to evaluate our financial performance because our results may be significantly affected by changes in the market price of BNB that are unrelated to our operating activities.
| 39 |
Risks Related to Shareholder Rights Plan and Activist Investors
Shareholder activism has caused and will continue to cause us to incur substantial costs and divert management’s attention and resources and could disrupt our operations and the trading price of our common stock.
A stockholder of the Company, YZi Labs has launched a shareholder activism campaign against the Company . Among other public actions, YZi has filed preliminary consent materials indicating its intent to solicit consents of our stockholders to expand the size of our Board of Directors (the “Board”) and elect seven candidates identified by YZi Labs to fill the vacancies (the “Consent Solicitation”). In addition, YZi Labs has indicated its intent to nominate candidates at the Company’s next annual meeting of stockholders.
On March 13, 2026, the Company received a letter from YZi Labs Management Ltd. (“YZi Labs”) that requested that the Company fix a record date for determining the stockholders entitled to consent to (1) repeal any provision of the Company’s Amended and Restated Bylaws (the “Bylaws”), in effect at the time such proposal becomes effective, including any amendments thereto, which were not included in the Bylaws that were in effect and were filed with the SEC on July 25, 2025, (2) increase the size of the Board by seven (7) directors to thirteen (13) directors in total pursuant to Article II, Section .02 of the Bylaws, (3) amend Article II, Section .04 of the Bylaws to clarify and affirm stockholders’ ability to fill vacancies on the Board, including those resulting from an increase in the size of the Board by the vote or written consent of the Company’s stockholders or by court order, and (4) elect YZi Labs’ seven (7) nominees: Max S. Baucus, David J. Chapman, Teresa Marie Goody Guillén, Jiajin “Jane” He, Alex Odagiu, Matthew Roszak and Ling “Ella” Zhang, to serve as directors of the Company. The Board will review YZi Labs’ letter to evaluate its validity under the Bylaws, and if such letter is valid the Company will disclose the record date for determining the stockholders entitled to consent to YZi Labs’ proposals.
While we welcome input from all our stockholders, including YZi Labs, and desire to have a constructive relationship with them as our largest stockholder and a key business partner, YZi Labs’ campaign has adversely affected and may continue to adversely affect our business.
Our business has been negatively affected and the trading price of our common stock could be negatively affected by YZi Labs’ campaign because, among other things:
| ● | responding to YZi Labs’ campaign has required and may continue to require substantial attention from our Board and management team that has distracted and may continue to distract their attention from our operations and strategic plans, which has disrupted and may continue to disrupt our operations; | |
| ● | responding to YZi Labs’ campaign and managing the resulting impact on the Company has required us to engage legal, strategic and communications advisors, the costs of which have been and may continue to be significant and could negatively impact our financial results; | |
| ● | YZi Labs’ campaign has created and may continue to create perceived uncertainties as to our future direction, strategy or leadership and may result in the loss of potential business opportunities, make it more difficult to attract and retain qualified directors, executives, other employees, investors and commercial and financial providers, and cause our stock price to experience periods of volatility or stagnation; | |
| ● | claims made by YZi Labs have and may continue to harm our reputation, damage our relations with employees, investors and commercial and financial providers, or otherwise impair our business; and | |
| ● | a deterioration in our relationship with YZi Labs, whose affiliates were involved in the creation of BNB and the BNB Chain, and who we believe continues to hold substantial amounts of BNB, could negatively impact our digital asset treasury strategy or damage our reputation and be an impediment to potential relationships or opportunities involving BNB. |
In addition, if YZi Labs is successful in expanding the size of the Board and electing YZi Labs’ nominees to a majority of the Board seats, it may impact our business strategy and operations, and may result in a default, acceleration or result in other consequences under certain of our debt instruments, equity plans, employment agreements, and other agreements, which could negatively affect our business and the trading price of our common stock.
We cannot assure you as to the outcome or timing of any matters relating to actions by YZi Labs and our responses thereto or the ultimate impact on our business, results of operations or financial condition.
Our Stockholder Rights Plan could delay or prevent a change of control, which could limit the market price of our common stock.
On December 26, 2025, the Board of Directors adopted a stockholder rights plan (the “Rights Plan”), which is currently scheduled to expire on December 26, 2026. While in force or if otherwise extended, the Rights Plan may have certain anti-takeover effects. Specifically, the rights issued pursuant to the Rights Plan will cause substantial dilution to a person or group that acquires beneficial ownership of more than a specified percentage of our outstanding common stock without the prior approval of our Board of Directors. The Rights Plan is not intended to interfere with any merger or other business combination approved by the Board, but the Rights Plan may deter certain parties from pursuing strategic transactions involving us, including potential acquisitions.
| 40 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table presents information related to our repurchases of common stock during the three months ended January 31, 2026:
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| 11/1/2025 - 11/30/2025 | 1,278,064 | $ | 5.38 | 1,278,064 | $ | 238,741,797 | ||||||||||
| 12/1/2025 - 12/31/2025 | - | $ | - | - | $ | 238,741,797 | ||||||||||
| 1/1/2026 - 1/31/2026 | 368,983 | $ | 5.45 | 368,983 | $ | 236,730,476 | ||||||||||
| Total | 1,647,047 | $ | 5.39 | 1,647,047 | $ | 236,730,476 | ||||||||||
| (1) | On September 22, 2025, our Board of Directors authorized a stock repurchase plan authorizing us to repurchase, from time to time, up to $250 million of our outstanding common stock (the “Repurchase Plan”). As of the date of this filing, we had $236.7 million of authorization remaining under the Repurchase Plan. The Repurchase Plan has no expiration and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. |
Item 5. Other Information
Annual Meeting of Stockholders
The Company’s Board of Directors has not yet determined the date, time or location of the Company’s 2026 Annual Meeting of Stockholders (the “2026 Annual Meeting”). The Company intends to announce the date, time and location of the 2026 Annual Meeting through a press release and the filing of proxy materials with the SEC once such information has been determined.
Because the date of the 2026 Annual Meeting has not yet been established, the deadlines for stockholder proposals or director nominations pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 and the Company’s bylaws have not yet been determined. Once the Company announces the date of the 2026 Annual Meeting, stockholders will be notified of the applicable deadlines for submission of stockholder proposals and director nominations in accordance with applicable SEC rules and the Company’s governing documents.
Transition Agreement
On March 16, 2026, the Board approved a Transition Agreement (as defined below) with David Namdar, the Company’s current Chief Executive Officer, and his affiliate, and determined that, in accordance with the Transition Agreement, Mr. Namdar’s service in such role will conclude upon the earlier of (a) the Company’s next annual meeting of stockholders, (b) the appointment by the Board of a new or interim chief executive officer of the Company, or (c) August 31, 2026 (the “Separation Date”). In connection with Mr. Namdar’s transition out of his role as Chief Executive Officer, on March 16, 2026, the Company entered into a Transition Agreement (the “Transition Agreement”) with Mr. Namdar and Abound LLC, a Puerto Rico limited liability company pursuant to which Mr. Namdar performs services for the Company, which (i) acknowledges and provides for compensation with respect to the work performed by Mr. Namdar for the Company since his appointment as Chief Executive Officer on August 5, 2025 (for which he has received no cash or equity compensation to date), and (ii) provides for the provision of transitional services by Mr. Namdar until the Separation Date.
As compensation for the work performed by Mr. Namdar from August 5, 2025 (the “Appointment Date”) to the date of the Transition Agreement, Mr. Namdar will receive a make-up consulting fee of $375,000. As compensation for the work to be performed by Mr. Namdar commencing on March 16, 2026 and through the Separation Date, Mr. Namdar will receive a base consulting fee of $50,000 per month. In addition, in lieu of an equity incentive award for his service from the Appointment Date, and in exchange for execution and non-revocation of a release of claims in favor of the Company, Mr. Namdar will receive a lump sum cash payment equal in amount to the product of 132,000 shares multiplied by the greater of the 30-trading day average stock price of the Company’s common stock on (x) March 16, 2026 or (y) the Separation Date. Under the Transition Agreement, in exchange for a release of claims and Mr. Namdar’s agreement to certain restrictive covenants, including confidentiality, non-compete, non-solicitation, non-disparagement and non-assistance to litigants restrictions, Mr. Namdar will receive a lump sum cash payment equal to eighteen months of the base consulting fee ($900,000), payable following the Separation Date.
The foregoing description of the Transition Agreement is not complete and is qualified in its entirety by reference to the full text of the Transition Agreement, a copy of which is attached hereto as Exhibit 10.7 and incorporated herein by reference.
Item 6. Exhibits
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
| 41 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CEA INDUSTRIES INC. | ||
| (the “Registrant”) | ||
| Dated: March 16, 2026 | By: | /s/ David Namdar |
| David Namdar | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| 42 |
Exhibit 10.7
TRANSITION AGREEMENT
This Transition Agreement (the “Agreement”) is effective as of March 16, 2026 (the “Effective Date”) and is entered into by and between CEA Industries, Inc., a Nevada corporation (the “Company”); Abound LLC, a Puerto Rico limited liability company (“Consultant”); and David Namdar, individually (the “Designated Individual”). The Company, Consultant, and the Designated Individual are collectively referred to herein as the “Parties.” The Parties acknowledge that Consultant provided certain consulting services to the Company, through the Designated Individual, commencing on August 5, 2025 (the “Commencement Date”), and that the engagement of Consultant and its representative, the Designated Individual, is hereby terminated as set forth herein.
TERMS AND CONDITIONS
1. Conclusion of Engagement. The engagement of Consultant and the Designated Individual by the Company is hereby concluded, effective as of the earlier of (i) the Company’s next Annual Meeting of Stockholders (the “Annual Meeting”), (ii) the appointment by the Company’s Board of a new or interim chief executive officer, or (iii) August 31, 2026 (the “Separation Date”), and shall be treated as a conclusion by the Company without cause for all purposes hereunder.
2. Services. During the time between the Effective Date and the Separation Date (the “Transition Period”), Consultant agrees, and shall use its best efforts, to provide the services set forth in Exhibit A hereto, as may be requested, required, or amended, from time to time, by the Company (the “Services”). Consultant hereby agrees to devote its reasonable time, abilities, skills, and energy to the performance of the Services. For purposes herein, Consultant shall retain David Namdar to perform the Services and shall not substitute him without the prior written consent of the Company. The Designated Individual agrees (i) to perform the Services and otherwise be subject to the terms and conditions set forth in this Agreement, (ii) be personally bound by the provisions herein, and (iii) to not assign his obligations and duties under this Agreement; and the Consultant agrees (a) that the Designated Individual, for purposes of all securities law and any disclosure obligations relating to the Company, shall be named or identified in filings with the U.S. Securities and Exchange Commission or other regulatory authorities in connection with the Services, and (b) the Consultant shall not be permitted to substitute anyone else for the Designated Individual.
3. Compensation, Expenses, and Taxes. Subject to Consultant’s and the Designated Individual’s execution and non-revocation of this Agreement, including the General Release set forth below, Company shall pay Consultant:
(a) Makeup Consulting Fee. In consideration for the performance of the Services by Consultant from the Commencement Date through March 15, 2026, Company agrees to pay Consultant a flat sum amount of $375,000 (the “Makeup Consulting Fee”), payable on the Company’s next regular payment date for payroll following the Effective Date.
(b) Base Consulting Fee. In consideration for the performance of services by Consultant commencing on March 16, 2026 and through the Separation Date, Company agrees to pay Consultant, on a monthly basis a fee equal to $50,000 (the “Consulting Fee”), prorated as applicable from the Effective Date of this Agreement, no later than the fifth (5th) business day following receipt of Consultant’s Consulting Fee invoice (see below) each month, in accordance with the Company’s standard consultant payment practices and procedures, as in effect from time to time.
For the Makeup Consulting Fee and each subsequent monthly Consulting Fee, Consultant will deliver to the Company a written Consulting Fee invoice not more than once each month by the first (1st) business day of each month. Such invoice will be prepared in a form and supported by documentation as the Company may reasonably require. At a minimum, the invoices shall be separately numbered and include the Company as the addressee; the Consultant’s name and contact information; a description of the Services; and a certification that the amounts invoiced are accurate and in compliance with the terms and conditions of this Agreement.
(c) Payment in Lieu of Equity Incentive Award. In consideration of the fact that the Company’s amended and restated 2021 Equity Incentive Plan or any successor plan has not been approved by shareholders since August 2025 and that no initial equity awards were granted to the Designated Individual as a result, and in exchange for the Consultant’s and the Designated Individual’s execution and non-revocation of the General Release herein, Company agrees to pay Consultant a lump sum cash payment equal in amount to the product of 132,000 shares multiplied by the greater of the 30-trading day average stock price of a Share on (A) the Effective Date or (B) the Separation Date, payable on the Company’s next regular payment date for payroll following the Separation Date. For the avoidance of doubt, this payment constitutes compensation for services rendered by Consultant and reflects the Company’s inability to deliver equity awards due to the failure to obtain shareholder approval of the equity incentive plan.
(d) Separation. Subject to the effectiveness of the General Release herein, the Company shall pay Consultant a lump-sum cash payment equal to eighteen (18) months of the Consulting Fee ($900,000), payable in a lump sum on the Company’s next regular payment date for payroll following the Separation Date.
(e) Expenses. Consultant shall be entitled to reimbursement for all reasonable business expenses incurred through the Separation Date that were preapproved in writing by the Company, in accordance with the Company’s expense reimbursement policy. Upon presentment by Consultant of appropriate and sufficient documentation, the Company shall reimburse Consultant for all such expenses within thirty (30) days following the later of (i) the Separation Date or (ii) timely submission of proper documentation in accordance with Company policy (but in no event later than the last day of the calendar year following the calendar year in which Consultant incurred the reimbursable expense). The right to any reimbursement pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.
(f) Form W-9. Consultant shall provide the Company with a signed and completed IRS Form W-9 or any other applicable withholding form per Consultant’s tax classification election or absence thereof upon execution of this Agreement. Payment by the Company will be made to the entity named on the IRS Form W-9 or any other applicable withholding form. Consultant hereby agrees to notify the Company immediately upon any change of taxpayer information set forth on the IRS Form W-9 or any other applicable withholding form.
(g) Taxes. The Company shall not withhold any taxes from any payment it makes to Consultant under this Agreement, nor make any contributions to any federal, state, or local agency with respect to such payments on behalf of Consultant, but shall report the payments made to Consultant hereunder on an IRS Form 1099. Consultant and the Company acknowledge that the Company intends to deduct the fees it pays to Consultant for the Services as an ordinary and necessary business expense for income tax purposes. Consultant agrees and represents that, except as otherwise required in writing by the Internal Revenue Service: (i) Consultant will report and pay taxes on such fees in accordance with all applicable tax laws and regulations; (ii) Consultant shall be responsible for paying, when due, all taxes (including estimated taxes), Social Security contributions or payments, disability insurance, unemployment taxes, and other payroll type taxes applicable to, incurred, imposed, or assessed as a result of Consultant’s receipt of such fees from the Company (“Consultant’s Taxes”); and (iii) if Consultant fails to report or pay taxes on such fees in accordance with applicable tax laws and regulations, or fails to pay Consultant’s Taxes or any such taxes applicable to its employment of the Designated Individual, Consultant and/or the Designated Individual will indemnify and hold harmless the Company from any and all taxes, penalties, interest, costs, and expenses actually incurred, including reasonable attorneys’ fees and accounting fees, or assessed against the Company as a result thereof.
(h) Principal Place of Engagement. Consultant’s principal place of engagement shall be Puerto Rico, although substantial time may be spent, as part of performing the Services, in such other domestic and/or international locations, as may be reasonably necessary from time to time, for which Consultant may be required to travel. Consultant shall be solely responsible for: (i) accurately tracking and substantiating the location and number of days the Services are performed in each jurisdiction; (ii) providing such information to Company within five (5) working days from the date of the request; and (iii) complying with all applicable tax reporting and tax payment obligations arising from the income earned, including any filing or payment obligations in Puerto Rico, the United States, or any other applicable jurisdiction.
| 2 |
4. General Release of Claims.
(a) Release by Consultant and the Designated Individual. In consideration of the payments and benefits provided under this Agreement, the sufficiency of which Consultant and the Designated Individual expressly acknowledge, each of (i) Abound LLC, a Puerto Rico limited liability company, on behalf of itself and its members, managers, officers, employees, agents, attorneys, insurers, predecessors, successors, and assigns, and (ii) David Namdar, individually, on behalf of himself and his heirs, executors, administrators, trustees, legal representatives, successors, and assigns (all of the foregoing collectively, the “Releasing Parties”), hereby fully, finally, irrevocably, and unconditionally releases, acquits, and forever discharges the Company, its parents, subsidiaries, affiliates, predecessors, successors, and assigns, and each of their respective current and former directors, officers, shareholders, members, managers, employees, agents, attorneys, insurers, and representatives, in their individual and official capacities (collectively, the “Company Released Parties”), from any and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, matured or unmatured, contingent or fixed, at law or in equity, which any Releasing Party ever had, now has, or hereafter can, shall, or may have against any Company Released Party, arising out of or relating to the engagement of Consultant and the Designated Individual by the Company, from the beginning of time through the date of execution of this Agreement, including without limitation:
(i) any and all claims arising out of or relating to the engagement of Consultant, or the Designated Individual by the Company, or the termination thereof;
(ii) any and all claims for unpaid or additional compensation, consulting fees, bonuses, incentive compensation, equity, commissions, severance, benefits, expense reimbursements, or remuneration of any kind whatsoever;
(iii) any and all claims arising under any federal, state, local, or Puerto Rico law, statute, regulation, or ordinance, including but not limited to any claims under the Fair Labor Standards Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, the Sarbanes-Oxley Act, or any equivalent Puerto Rico or other applicable statute;
(iv) any and all claims arising under common law, including without limitation claims for breach of contract (express or implied), breach of the implied covenant of good faith and fair dealing, promissory estoppel, unjust enrichment, quantum meruit, wrongful termination, retaliation, defamation, fraud, misrepresentation, negligence, intentional or negligent infliction of emotional distress, invasion of privacy, or any other tort or quasi-tort claim;
(v) any and all claims for injunctive relief, declaratory relief, or other equitable relief of any kind; and
(vi) any and all claims for damages of any kind, including compensatory, consequential, punitive, or exemplary damages, attorneys’ fees, costs, or disbursements.
| 3 |
Notwithstanding the foregoing, this Release shall not apply to: (A) any rights or obligations arising under this Agreement, including the Company’s payment obligations hereunder; (B) any rights of the Designated Individual in his capacity as a stockholder of the Company; (C) any indemnification rights under this Agreement or the Company’s officer and director indemnification agreement; or (D) any claims arising from events occurring after the date of execution of this Agreement.
Consultant and the Designated Individual represent and warrant that they have not assigned, transferred, or purported to assign or transfer to any person or entity any claim or portion thereof released herein, and that no other person or entity has any interest in any such claims. Consultant and the Designated Individual further represent and warrant that they are not aware of any claims against any Company Released Party other than those fully and finally released herein. The release set forth in this Section is intended to be as broad as the law permits, and Consultant and the Designated Individual expressly waive any right to assert, and covenant not to sue upon, any claim released herein. Any breach of this covenant not to sue shall entitle the Company to recover from the breaching Party all costs and expenses, including reasonable attorneys’ fees, incurred in defending against such claim.
(b) Release by Company. The Company, on behalf of itself and its subsidiaries and affiliates, hereby releases and discharges Consultant and the Designated Individual from any and all claims, demands, actions, and causes of action, known or unknown, arising out of or relating to this Agreement or the engagement thereunder, through the date of the Company’s execution of this Agreement; provided, however, that this release shall not apply to: (i) any obligations of Consultant or the Designated Individual expressly set forth in this Agreement; (ii) any claims arising from fraud; embezzlement; gross misappropriation of Company property or assets; gross willful misconduct; violation of securities laws or regulations (including, without limitation, insider trading and market manipulation); breach of fiduciary duty owed to the Company, its affiliates, or any third-parties; unlawful harassment, discrimination, or retaliation against any employee, contractor, or other individual; gross negligence; or criminal conduct by Consultant or the Designated Individual; or (iii) any claims for breach of the surviving obligations set forth in this Agreement. The Company represents and warrants to the Consultant and Designated Individual that no member of its Board of Directors has any knowledge as of the date hereof of any actual or potential claims, demands, actions, and causes of action against the Consultant or Designated Individual that are subject to the foregoing clauses (i) through (iii).
(c) Exclusions. Notwithstanding the foregoing, nothing in this Section shall release any Party from obligations expressly set forth in this Agreement, or release any claims that cannot be waived as a matter of applicable law, including the right to file a charge with a government agency (though each Party waives the right to any monetary recovery in connection therewith to the fullest extent permitted by law).
5. Proprietary Information. “Proprietary Information” shall mean all information and materials that relate to the business and affairs of Company, its parents, subsidiaries, affiliates, and/or any of their current or former Related Parties (as defined below), donors, users, viewers, licensors, licensees and distributors, in any form and whether or not labeled or identified as confidential or proprietary, including but not limited to, (a) information about actual or potential investees or grantees; (b) financial and other information about costs, revenue, profits or forecasts; (c) information regarding business strategy, marketing or methods of operation; (d) personnel files and information about compensation and benefits; (e) third-party information or materials that Company or its parents, subsidiaries or affiliates agree to hold in confidence; (f) technologies, concepts, methods, sources, methods of doing business, patterns, processes, compounds, formulae, programs, devices, tools, compilations of information, development, manufacturing, purchasing, engineering, computer programs (whether in source code or object code), theories, techniques, procedures, strategies, systems, written works, and designs; (g) information and items relating to or concerning officers, members, employees, managers or investors of the Company, their family and associates, and their businesses (collectively, “Related Parties”); (h) private and confidential matters concerning Company or any Related Parties; (i) financial, business, medical, legal, personal and contractual matters of, or pertaining to, Company or any Related Parties; and (j) any communication, correspondence, photographs, film or other documents or writings pertaining in any way to Company or any Related Parties. Proprietary Information shall not include: (i) information or materials that are or become generally known to the public through lawful means not in violation of this Agreement; or (ii) information or materials known to Consultant without confidentiality restrictions prior to the initial disclosure by or on behalf of the Company or its Related Parties.
| 4 |
6. Confidentiality. Because any unauthorized disclosure of the Company’s Proprietary Information would harm its competitive position and strategic initiatives, at all times, both during the Term and thereafter in perpetuity, Consultant and the Designated Individual, shall keep and hold all Proprietary Information and IP (as defined herein) in strict confidence and trust, and will not disclose any such Proprietary Information to any party whatsoever (including but not limited to newspapers, periodicals, magazines, publications, television stations, radio stations, publishers, and any other enterprise involved in the print or electronic media, including individuals working directly or indirectly for, or on behalf of, any of said entities) without the prior written consent of Company, except to Consultant’s legal counsel or if required by court order from a court of competent jurisdiction, provided that Consultant shall first notify Company such that Company has an opportunity to object to such court order. Consultant and the Designated Individual, will not use any such Proprietary Information and IP except as may be necessary in order to perform the Services under this Agreement. Consultant agrees to notify Company of any unauthorized release or use of Proprietary Information and IP.
Notwithstanding the foregoing, Consultant and, for the avoidance of doubt, the Designated Individual, shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, in the event that Consultant and the Designated Individual, files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Consultant and the Designated Individual, may disclose the trade secret to his attorney and use the trade secret information in the court proceeding, if Consultant: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
7. Privacy. Consultant acknowledges that, in the course of the Services hereunder, Consultant may come across personally identifiable information protected by state, federal and/or local privacy laws and/or Company policies and Consultant shall take care that such information is not exposed or at risk of being exposed to any third-party.
| 5 |
8. Ownership; Assignment. All inventions, improvements, designs, works of authorship, formulas, processes, methods, software, databases, trade secrets, videos and photographs, know-how and ideas, and any other results or proceeds of Consultant’s and, for the avoidance of doubt, the Designated Individual’s services (including prior services) for Company made, conceived, developed, created or incorporated by Consultant and the Designated Individual, either alone or jointly with others, in connection with the Services provided under this Agreement or otherwise related to the Proprietary Information whether or not patentable, copyrightable or protectable as trade secrets, and all patents, copyright rights, trade secret rights and other intellectual property rights related thereto (“IP”) shall be and remain the sole property of Company and its assigns in perpetuity. Consultant and the Designated Individual further acknowledge and agree that such IP and other works of authorship are “works made for hire” as defined in the U.S. Copyright Law, 17 U.S.C. § 101 et seq. (as amended), for purposes of the Company’s rights under copyright laws. To the extent that title to any IP or any materials comprising or including any IP, does not, by operation of law, vest in the Company, or is not considered “works made for hire,” Consultant and the Designated Individual hereby assign all right, title and interest in and to such IP to Company and its assigns. Consultant and the Designated Individual irrevocably assign to the Company, in each case without additional consideration, all right, title, and interest throughout the world in and to these materials, including all intellectual property rights and unrestricted copyright. Consultant and the Designated Individual agree to waive and not to assert any and all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like to all IP. Consultant and the Designated Individual agree to assist Company in every proper way to obtain for Company and enforce any rights in or to the IP, including without limitation, execution of any documents that Company may reasonably request for use in obtaining or enforcing such rights. Should Company be unable to secure Consultant’s or the Designated Individual’s signature on any such document, due to their incapacity or any other cause, they hereby irrevocably designate and appoint Company and each of its duly authorized officers and agents as Consultant’s and the Designated Individual’s agent and attorney-in-fact for the sole limited purpose of doing all lawfully permitted acts to further the prosecution, issuance, and enforcement of any rights in or to the IP with the same force and effect as if executed and delivered by them.
9. Representations, Warranties and Covenants.
(a) Consultant represents and warrants Consultant has the full power and authority to enter into this Agreement and to perform its obligations hereunder, without the need for any third-party consents or approvals, and that Consultant is not and shall not become during the term hereof subject to any conflicting agreement, arrangement, commitment or obligation that would or might interfere with Consultant’s ability to perform hereunder.
(b) Consultant represents, warrants and covenants that Consultant has the qualifications and ability to perform, and shall perform, the Services provided under this Agreement in a professional and timely manner, with the degree of skill and judgment normally exercised by recognized professionals performing the same or substantially similar services (or better), without the control or supervision of Company. In the event of any breach of the foregoing warranty and in addition to any other remedies Company may have at law or in equity, Consultant shall re-perform the non-conforming services to conform to this standard.
(c) Consultant represents, warrants and covenants that Consultant shall not violate, infringe or misappropriate any third-party intellectual property, publicity or privacy rights in connection with the performance of the Services, and any information or materials provided to Company shall not violate, infringe or misappropriate any third-party intellectual property, publicity or privacy rights.
| 6 |
(d) Consultant represents, warrants, and covenants that the Designated Individual does not have, and will not obtain, any direct or indirect economic interests in 10X Capital Asset Management LLC or YZILabs Asset Management LLC or any of their respective affiliates (other than the Company), in each case except for such interests that are disclosed in writing, in advance, to the Board of Directors of the Company prior to the Termination Date or prior to obtaining such interests.
10. Compliance with Laws. Consultant agrees to comply with all applicable laws and regulations, including any applicable internal rules and policies of the Company applicable to Consultant, during the term of this Agreement.
11. Indemnification.
(a) Subject to the Company’s Articles of Incorporation, as amended, bylaws, as amended and applicable law, in the event that Consultant and/or its principals are made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by Consultant or the Company related to any contest or dispute between the Consultant and the Company with respect to this Agreement, by reason of the fact that Consultant is or was engaged by the Company, or any affiliate of the Company, or is or was serving at the request of the Company or any affiliate of the Company, Consultant shall be indemnified and held harmless by the Company from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees). Costs and expenses incurred by Consultant in defense of such Proceeding (including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of: (i) a written request for payment and (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought. During the Term and for a period of six (6) years thereafter, the Company or any successor to the Company shall purchase and maintain, at its own expense, liability insurance providing coverage to Consultant on terms that are the same as the coverage provided to other directors and executives of the Company or any successor. For the avoidance of doubt, the indemnification and advancement rights provided under this Agreement are in addition to, and not in lieu of, any other indemnification, advancement, contribution, or insurance rights available to the Designated Individual.
(b) Consultant and the Designated Individual shall indemnify, defend, and hold harmless the Company, its affiliates, and their respective directors, officers, employees, and agents from and against any and all third-party claims, demands, causes of action, losses, liabilities, damages, fines, penalties, judgments, costs, and expenses (including reasonable attorneys’ fees) arising out of or relating to: (i) Consultant’s material breach of this Agreement; (ii) Consultant’s gross negligence, willful misconduct, or fraud; (iii) Consultant’s violation of applicable law; or (iv) any act or omission by Consultant outside the scope of the authority granted under this Agreement. This indemnification obligation shall not apply to the extent the claim arises from the Company’s own gross negligence or willful misconduct. Consultant and the Designated Individual shall be jointly and severally liable for the indemnification obligations herein.
| 7 |
12. Finality; Waiver of Revocation. Consultant and the Designated Individual acknowledge that they have been given a reasonable and sufficient period of time to consider this Agreement before signing, that they have been advised to consult with an attorney of their choice prior to executing this Agreement and have done so to the extent they deemed appropriate, and that they enter into this Agreement knowingly, voluntarily, and of their own free will. This Agreement is final and binding upon execution by all Parties and is immediately effective upon such execution. Each of Consultant and the Designated Individual hereby knowingly and voluntarily waives any right to revoke or rescind this Agreement or the General Release contained herein, whether such right arises under the Older Workers Benefit Protection Act, any other applicable statute, or otherwise. No Party may unilaterally revoke this Agreement following execution. Any modification, rescission, or revocation of this Agreement shall require the mutual written consent of all Parties.
13. Non-Competition and Non-Solicitation. During the Term and for a period of twelve (12) months following the Separation Date, each of Consultant and the Designated Individual shall not, directly or indirectly:
(a) Engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or in other capacity or role similar to services hereunder, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the business of the Company or any of its subsidiaries in the same line of business to which Consultant and the Designated Individual have provided consulting services, it being understood that this restriction shall only apply specifically to YZILabs Asset Management LLC and any corporation, limited liability company, or partnership that Consultant or the Designated Individual knows or reasonably should know is an affiliate of YZILabs Asset Management LLC and has a principal business in acquiring, holding or trading BNB tokens or BNB derivatives, in light of the global scope of competition in the Company’s industry;
(b) Either alone or in association with others, solicit, divert or take away, or attempt to divert or take away, the business or patronage of any vendors, service providers or business partners, or the investment of any investors, of the Company who were engaged with or known to be invested with the Company during the Term who were personally served by or had contact with Consultant or the Designated Individual within a period of five (5) years prior to the Separation Date and continued in a relationship with the Company anytime during the twelve (12) months prior to the Separation Date; or
(c) Either alone or in association with others (i) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or other engagement with the Company, or (ii) hire, or recruit or attempt to hire, or engage or attempt to engage as an independent contractor or employee, any person who was employed or otherwise engaged by the Company at any time during the Term.
| 8 |
(d) The Parties expressly acknowledge and agree that the Company operates a specialized and highly competitive, cryptocurrency business centered on acquiring, holding, managing, and trading BNB tokens and BNB derivatives, which relies on proprietary digital assets, treasury strategies, timing and execution decisions, risk allocation frameworks, commercial and trading relationships, platform selection, and non-public analyses of market conditions and regulatory exposure. The Parties also recognize the fast-evolving nature of the Company’s global digital reach and the broad asset market served where its competitive advantage depends on the protection and confidentiality of its Proprietary Information, goodwill, and strategic placement. By virtue of Consultant and the Designated Individual’s services, they have had and will continue to have access to the Proprietary Information and the Company’s strategic initiatives in development and confidential plans which are central to the Company’s ongoing operations and its ability to compete effectively in the digital-asset market. The Parties further agree that the disclosure or use of such information by or for the benefit of a competing enterprise would foreseeably and materially harm the Company’s business interests, and that such harm would not be reasonably and readily compensable by monetary damages alone. Thus, this non-competition and non-solicitation obligation is reasonable and is intended to solely protect the Company’s legitimate business interests and not to restrain Consultant or the Designated Individual from lawful employment or economic activity beyond what is necessary to safeguard the Company’s operation in its line of business.
(e) Consultant and the Designated Individual acknowledge that, prior to commencing services, the Company advised that this engagement would be subject to restrictive covenants, including non-competition and non-solicitation obligations, and that he voluntarily began providing services in anticipation of executing this Agreement. The Parties agree that the consulting fees payable under this Agreement --- including amounts payable retroactively to the date services commenced --- together with any incentive compensation, special emoluments, continued engagement, and access to the Company’s confidential and Proprietary Information, constitute valid, independent, and sufficient consideration for the restrictive covenants herein, and that such compensation and benefits were specifically negotiated in exchange for, and in reliance upon, Consultant’s and the Designated Individual’s agreement to be bound by these obligations, to which they were not otherwise legally entitled absent this Agreement.
14. Mutual Non-Disparagement. Subject to the exceptions set forth below, each of the Company, the Consultant and the Designated Individual agrees that it shall not make any statement to any third-party that is intended to or is reasonably likely to disparage, slander or otherwise damage the business reputation of the other Party, and if as to the Company, any of its affiliates and any of the Company’s or its affiliates, current or former directors, officers, employees, service providers, advisors, agents or other representatives (collectively, “Company Representatives”).
| 9 |
15. Exceptions. Notwithstanding anything in this Agreement that could be construed to the contrary, nothing in this Agreement shall limit the ability of the Company, any Company Representative, Consultant or the Designated Individual (or their respective attorneys) to initiate communications directly with, respond to any inquiry from, volunteer information to, or provide testimony before the Securities and Exchange Commission, the Department of Justice, any regulatory or self-regulatory organization, or any other governmental, law enforcement, or regulatory authority, regarding this Agreement and its underlying facts and circumstances, or any reporting of, investigation into, or proceeding regarding suspected violations of law, and that, in each case, no such person is required to advise or seek permission from the Company before or after engaging in any such activity. Each of the Parties further acknowledges that, in connection with any such activity described above, the Company, any Company Representative, Consultant and the Designated Individual must inform such authority of the confidential nature of any confidential information that it provides, and it is not permitted to disclose any information that is protected by the attorney-client privilege or any other privilege belonging to the Company, as the Company does not waive and intends to preserve such privileges. Each Party is hereby notified that, pursuant to federal law (the Defend Trade Secrets Act), an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is (i) made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; or (ii) made in a complaint or other document filed in a lawsuit or other proceeding if such filing is made under seal. Further, nothing in this Agreement prohibits the Company, any Company Representative, Consultant or the Designated Individual from testifying truthfully in an administrative, legislative or judicial proceeding when compelled by law or from providing documents pursuant to a court order, subpoena, or other compulsory legal process, provided that the Company, any Company Representative, the Consultant or the Designated Individual (unless prohibited by law) first provides the Company or the Consultant, as applicable, with prior notice of such legal compulsion to afford such person an opportunity to seek a protective order preventing or limiting such disclosure. In addition, nothing in this Agreement prevents the Company, any Company Representative, Consultant or the Designated Individual from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that he has reason to believe is unlawful, and each of Consultant and the Designated Individual represents and warrants that it is not aware of any such harassment or discrimination involving the Company. Further, the Company and the Company Representatives shall not be restricted from making truthful statements with respect to the Consultant or the Designated Individual when required by law, including, without limitation, the Company’s obligations with respect to filings with the Securities and Exchange Commission or other applicable authorities.
16. Cooperation. Each of Consultant and the Designated Individual agrees to make itself reasonably available to, and fully cooperate with the Company in, any internal investigation or administrative, regulatory, or judicial inquiry, investigation, proceeding or arbitration, and the Company shall make reasonable efforts to schedule such cooperation in a manner that minimizes any interference with Consultant’s or the Designated Individual’s professional and personal commitments. Notwithstanding the foregoing, neither Consultant nor the Designated Individual shall be required to devote more than twenty (20) hours in any calendar year to such cooperation without receiving reasonable compensation from the Company for additional time spent, at a reasonable hourly rate mutually agreed upon by the Parties (which rate shall take into account Consultant’s and the Designated Individual’s then-current professional and personal commitments). Each of Consultant and the Designated Individual understands and agrees that its cooperation includes, but is not limited to, making itself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over all relevant documents which are or may come into its possession. The term “cooperation” does not mean that Consultant and the Designated Individual must provide information that is favorable to the Company; it means only that Consultant and the Designated Individual will provide truthful information within its knowledge and possession upon request of the Company. Each of Consultant and the Designated Individual understands that, if the Company asks for its cooperation in accordance with this Section, or it is required to participate in an administrative or legal proceeding or arbitration related to matters within the scope of their service at the Company, the Company will reimburse it for reasonable travel and similar expenses provided that it submits to the Company appropriate documentation of such expenses within thirty (30) calendar days after such expenses are incurred (provided that such proceeding was not initiated by Consultant or the Designated Individual and does not otherwise concern any claims by Consultant or the Designated Individual against the Company).
| 10 |
17. Non-Assistance to Litigants. Each of Consultant and the Designated Individual agrees that they will not aid, advise or otherwise assist any competitor or potential competitor of the Company, current or prospective stockholder or other investor in the Company, litigant or potential litigant against the Company (each, a “Potential Adverse Party” and, for the avoidance of doubt, this defined term excludes any governmental or regulatory authority) in asserting, prosecuting, or defending any claim, or making any other demands, against the Company, or in taking any actions to influence the management or directors of the Company, and, further, Consultant and the Designated Individual shall promptly notify the Company if, at any time within the twelve (12)-month period following the Separation Date, either of them is approached by any Potential Adverse Party to provide assistance concerning any such matters; provided, however, that the preceding language shall not limit Consultant’s or the Designated Individual’s ability to (i) make truthful statements or disclosures that are required by applicable law, regulation or legal process; (ii) request or receive confidential legal advice; (iii) cooperate, participate, or file charges with any federal, state or local government agency; (iv) report suspected violations of law; or (v) enforce this Agreement or any other agreement between Consultant and the Company or the Designated Individual and the Company.
18. Publicity. Consultant and the Designated Individual shall not make any public statement or announcement, or release or post any photo or video or other media, including on Consultant’s or the Designated Individual’s website or social media, about this Agreement without Company’s prior written approval in each instance.
19. Relationship of the Parties. Neither Party shall have any right or authority, express or implied, to assume or create any obligation of any kind, or to make any representation or warranty, on behalf of the other Party or to bind the other Party in any respect whatsoever.
20. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada (without reference to the conflicts of laws provisions thereof). The Parties agree that the Eighth Judicial District Court of Clark County of the State of Nevada (or, if the Eighth Judicial District Court does not have jurisdiction, another state district court located within the State of Nevada or, if no state district court located within the State of Nevada has jurisdiction, the federal district court for the District of Nevada) shall have exclusive jurisdiction for purposes of any action, suit or proceeding arising hereunder, and the Parties hereby consent to such venue and submit to such exclusive jurisdiction. Each Party agrees that it will not bring any action, suit or proceeding relating to this Agreement in any court other than the Eighth Judicial District Court of Clark County of the State of Nevada (or, if the Eighth Judicial District Court does not have jurisdiction, another state district court located within the State of Nevada or, if no state district court located within the State of Nevada has jurisdiction, the federal district court for the District of Nevada). Each of the Parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each of the Company, Consultant and the Designated Individual hereby irrevocably waives any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.
| 11 |
21. Notice. Any notice or other communication required or permitted to be given hereunder shall be deemed to have been duly given when personally delivered or when sent by registered mail, return receipt requested, postage prepaid, as follows:
If to the Company, at:
CEA Industries Inc.
385 South Pierce Avenue, Suite C
Louisville, Colorado 80027
Attn: Board of Directors
If to Consultant or the Designated Individual, at:
Consultant’s registered agent address, or
the Designated Individual’s home address or email address on file with the Company
Either Party hereto may change its address for the purpose of this paragraph by written notice similarly given.
22. Waiver. The waiver by either Party of a breach of or a default under any provision of this Agreement shall not be effective unless in writing and shall not be construed as a waiver of any past, subsequent or contemporaneous breach of or default under the same or any other provision of this Agreement, nor shall any delay or omission on the part of either Party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any right or remedy. A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.
23. Severability. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, such provision shall be enforced to the maximum extent lawfully possible so as to affect the intent of the Parties, and the remainder of this Agreement shall remain in full force and effect.
24. Assignment; No Third-party Beneficiaries. Consultant shall not, and shall not have the right to assign, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, by operation of law or otherwise, this Agreement or any of its rights or obligations under this Agreement without the prior written consent of Company. Any purported assignment, sale, transfer, delegation or other disposition by Consultant, except as permitted herein, shall be null and void. Company may assign, transfer, delegate or otherwise dispose of this Agreement and any of its rights or obligations of this Agreement without the prior written consent of Consultant. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer, nor shall anything herein confer on, any person other than the Parties and the respective successors or permitted assigns of the Parties, any rights, remedies, obligations or liabilities.
25. Remedies; Injunctive Relief. Any specific right or remedy provided in this Agreement shall not be exclusive but shall be in addition to all other rights and remedies set forth in this Agreement and permitted under applicable law; provided that both Consultant and the Designated Individual shall not seek to interfere with any IP rights granted to Company hereunder, and Consultant hereby waives any right of Consultant to seek injunctive or other specific or equitable relief, except that Consultant shall retain the right to seek injunctive or equitable relief solely with respect to (i) the Company’s failure to make any payment required under this Agreement and (ii) any breach by the Company of the non-disparagement obligations set forth herein; Consultant’s remedies under this Agreement, if any, shall be limited to the right to seek monetary damages in an action at law, except as set forth above. Consultant acknowledges and agrees that there can be no adequate remedy at law for any breach by Consultant of Sections 4-7, or 12, 13, 15 or 16 of this Agreement, that any such breach would result in irreparable harm to Company for which monetary damages would be inadequate to compensate Company, and that Company shall have the right, in addition to any other rights available under applicable law, to obtain from any court of competent jurisdiction injunctive relief to restrain any breach or threatened breach of, or otherwise to specifically enforce, such covenants or obligations of Consultant under this Agreement, without the necessity of posting any bond or security.
| 12 |
26. Captions; Interpretation. All captions and headings in this Agreement are for the purposes of reference and convenience only, and shall not limit or expand the provisions of this Agreement. This Agreement shall be deemed to have been drafted by all Parties and, in the event of a dispute, no Party hereto shall be entitled to claim that any provision should be construed against any other Party by reason of the fact that it was drafted by one particular Party. If any restriction set forth in this Agreement is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted, when permitted by law, to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
27. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed original, and together which shall constitute one in the same instrument. Electronically transmitted counterparts shall be deemed originals for all purposes.
28. Modifications and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Parties. No waiver by either of the Parties of any breach by the other Party hereto of any condition or provision of this Agreement to be performed by the other Party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the Parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
29. Entire Agreement; Conflicts; Consent. This Agreement (including any and all exhibits and other attachments hereto, as well as any award agreements) constitutes the entire agreement with respect to the subject matter hereof, and shall supersede any prior or contemporaneous oral or written agreements, understandings or communications or past courses of dealing between Company, Consultant and the Designated Individual with respect to the subject matter hereof. In the event of a conflict between the body of this Agreement and between the terms of any exhibits, attachments hereto, or any award agreements, the terms of this Agreement shall control. Consultant and the Designated Individual expressly acknowledge that they have had a full opportunity to review, revise and negotiate this Agreement, consult with independent legal counsel of their choice, and enter into this Agreement voluntarily and knowingly. Notwithstanding the foregoing, this Agreement does not supersede, amend, replace, or limit that certain Indemnification Agreement between the Designated Individual and the Company, which shall remain in full force and effect in accordance with its terms.
30. Individual Acknowledgment and Assumption. The Designated Individual hereby acknowledges and agrees that, notwithstanding that he performs services through Consultant, he is personally bound by and shall assume the obligations herein in his personal capacity and shall comply with the provisions of this Agreement including without limitation: Taxes (Sections 3(f), (g), (h)); Proprietary Information (Section 5); Confidentiality (Section 6); Privacy (Section 7); Ownership, Assignment (Section 8); Non-Competition, Non-Solicitation (Section 13); Non-Disparagement (Section 14); Cooperation (Section 16); Non-Assistance to Litigants (Section 17); Publicity (Section 18). He further agrees that his execution of this Agreement in an individual capacity creates direct contractual obligations enforceable by the Company and that such obligations are not contingent upon, nor limited by, the separate legal personality of Consultant.
SIGNATURES ON FOLLOWING PAGE
| 13 |
IN WITNESS WHEREOF, the Parties or authorized representatives thereof have duly executed this Agreement as of the Effective Date.
| COMPANY: | ||
| By: | /s/ Tony McDonald | |
| Tony McDonald | ||
| President | ||
CONSULTANT: |
||
| ABOUND LLC | ||
| By: | /s/ David Namdar | |
| David Namdar | ||
| As the Designated Individual | ||
DESIGNATED INDIVIDUAL: |
|
| /s/ David Namdar | |
| David Namdar | |
| Individually |
| 14 |
Exhibit
A
Description of the Services
EXHIBIT A
Description of the Services
During the Transition Period, Consultant shall provide the following transitional services to support an orderly transition of leadership and operations to the Company’s successor CEO and/or such other persons as the Board may designate
(“Successor Leadership”):
Financial & Operational Oversight
| ● | Support continuity of day-to-day operations during the Transition Period to minimize disruption | |
| ● | Ensure company achieves financial targets and maintains fiscal responsibility | |
| ● | Oversee capital allocation decisions including BNB acquisition strategy | |
| ● | Ensure orderly transition of all digital asset treasury wallet, custody account or other email, 2FA or other access points | |
| ● | Ensure ordering transition of any bank account authorizations | |
| ● | Monitor key performance indicators and drive operational excellence | |
| ● | Ensure regulatory compliance and appropriate risk management frameworks |
Board & Stakeholder Management
| ● | Continue to report to and work closely with the Board of Directors on governance matters through the Separation Date | |
| ● | Support transparent communication with shareholders and the investment community during the Transition Period, as directed by the Board | |
| ● | Assist in the preparation of any public disclosures or communications relating to the leadership transition |
Organizational & Operational Continuity
| ● | Assist Successor Leadership in understanding and assuming oversight of the executive team and senior leadership | |
| ● | Provide guidance on talent, succession, and organizational matters as reasonably requested by the Board |
Transition & Successor Support
| ● | Provide comprehensive transition briefings to Successor Leadership covering all material operational, strategic, financial, and regulatory matters | |
| ● | Prepare and deliver detailed handoff documentation, including status reports, pending matters, key contacts, and ongoing initiatives | |
| ● | Facilitate introductions and relationship transfers with key investors, partners, clients, vendors, and other stakeholders | |
| ● | Assist with the transfer of oversight responsibilities for any material ongoing business development, partnership, and market expansion initiatives | |
| ● | Remain available to Successor Leadership and the Board for consultation on matters arising from prior decisions or initiatives undertaken during the engagement |
Other Matters
Any other transition matters as reasonably requested
| 15 |
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, David Namdar, the Chief Executive Officer of CEA Industries Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of CEA Industries Inc. for the quarterly period ended January 31, 2026;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: March 16, 2026.
| By: | /s/ David Namdar | |
| David Namdar | ||
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, David Namdar, the acting Principal Financial Officer of CEA Industries Inc. certify that:
1. I have reviewed this quarterly report on Form 10-Q of CEA Industries Inc. for the quarterly period ended January 31, 2026;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: March 16, 2026.
| By: | /s/ David Namdar | |
| David Namdar | ||
| Acting Principal Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended January 31, 2026 (the “Report”), of CEA Industries Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, David Namdar, the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
| /s/ David Namdar | ||
| Name: | David Namdar | |
| Chief Executive Officer | ||
| Date: | March 16, 2026 |
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended January 31, 2026 (the “Report”), of CEA Industries Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, David Namdar, the acting Principal Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
| /s/ David Namdar | ||
| Name: | David Namdar | |
| Acting Principal Financial Officer | ||
| Date: | March 16, 2026 |
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.