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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-Q
______________________________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2026
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 001-41266
______________________________________
CEA INDUSTRIES INC.
______________________________________
(Exact name of registrant as specified in its charter)
Nevada
27-3911608
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
385 South Pierce Avenue, Suite C, Louisville, Colorado
80027
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (303) 993-5271
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00001 par valueBNC
Nasdaq Capital Market
Warrants to purchase common stockBNCWW
Nasdaq Capital Market
Warrants to purchase common stockBNCWZ
Nasdaq Capital Market
Preferred Stock Purchase RightsN/A
Nasdaq Capital Market
Securities registered pursuant to section 12(g) of the Act:
None.
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days. Yes x No o
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). Yes x No o
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," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filer
Smaller reporting company
Emerging growth companyo
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
At September 4, 2026, the registrant had 41,173,850 shares of common stock, $0.00001 par value, outstanding.




TABLE OF CONTENTS
Page

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that constitute "forward-looking statements" within the meaning of the U.S. federal securities laws, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “should,” “seek,” “approximately,” “predict,” “intend,” “will,” “plan,” “project,” “target,” “estimate,” “anticipate,” “conviction,” the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. BNC’s expectations, beliefs and projections are expressed in good faith and BNC believes there is a reasonable basis for them. However, there can be no assurance that BNC’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.
The statements in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements which involve risks and uncertainties. Examples of forward-looking statements include, but are not limited to, statements regarding the Company’s execution of its BNB digital asset treasury strategy, driving operational and strategic execution and resolving the pending Asset Management Agreement litigation, the Company’s position as the world’s largest corporate BNB treasury, the Company’s BNB holdings, treasury management opportunities within the BNB ecosystem, the Company’s expectations with respect to shareholder advisory costs, the Company’s director search, the Company’s CEO search, the Company’s financial condition and liquidity outlook, the Company’s future financial results, share repurchases, strategy, plans, objectives, expectations (financial or otherwise) and growth potential, and the Company’s ability to create shareholder value and statements in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q. BNC wishes to caution readers that these forward-looking statements may be affected by the risks and uncertainties in BNC’s business, as well as other important factors that may have affected and could in the future affect BNC’s actual results and could cause BNC’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of BNC. In evaluating these forward-looking statements, readers should consider various risk factors, which include, but are not limited to: volatility in the market price of BNB and other digital assets; the concentration of BNC’s holdings in BNB and of its custody arrangements within the Binance ecosystem; collateral maintenance and repayment obligations under BNC’s master loan facility; the outcome of the AMA litigation, BNC’s non-payment of accrued management fees, and the enforceability of the AMA’s liquidated damages provision; BNC’s ability to appoint a permanent chief executive officer and an additional independent director within the deadlines under the Cooperation Agreement; the previously disclosed material weakness in BNC’s internal control over financial reporting; BNC’s continued compliance with Nasdaq listing requirements; BNC’s ability to finance its current business and proposed future business, including the ability to finance the continued acquisition of BNB; evolving laws, regulations and accounting guidance applicable to digital assets; the future value and adoption of BNB; the Company's expectations with respect to shareholder activism; outcome of the Company's director and CEO searches; and execution of the Company's BNB digital asset treasury strategy.
Forward-looking statements are subject to numerous conditions and risks, many of which are beyond BNC’s control. In addition, these forward-looking statements and the information in this Quarterly Report on Form 10-Q are qualified in their entirety by cautionary statements and risk factor disclosures contained in BNC’s filings with the SEC, including BNC’s most recent Annual Report on Form 10-K and this Quarterly Report on Form 10-Q and BNC’s subsequent filings with the SEC, as each may be amended or supplemented from time to time. Copies of BNC’s filings with the SEC are available on the SEC’s website at www.sec.gov. BNC undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this Quarterly Report on Form 10-Q, except as required by law.
Except where the context requires otherwise, the terms "Company," "we," "us," "our," and "BNC" refer to CEA Industries Inc., a Nevada corporation, and its subsidiaries.
    1         
Table of Contents
PART I
Financial Information
ITEM 1. FINANCIAL STATEMENTS
CEA Industries Inc.
Index to Unaudited Condensed Consolidated Financial Statements

Financial StatementsPage
Condensed Consolidated Balance Sheets
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity
Unaudited Condensed Consolidated Statements of Cash Flows
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 — Nature of Operations
Note 2 — Basis of Presentation and Significant Accounting Policies
Note 3 — Revenue
Note 4 — Digital Assets
Note 5 — Debt Obligations
Note 6 — Equity and Earnings Per Share
Note 7 — Variable Interest Entities
Note 8 — Fair Value Measurement
Note 9 — Taxes
Note 10 — Transactions with Affiliates and Affiliated Entities
Note 11 — Commitments and Contingencies
Note 12 — Subsequent Events
    2         
Table of Contents    CEA Industries Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
July 31, 2026April 30, 2026
(Unaudited)(Audited)
ASSETS
Current assets
Cash and cash equivalents
$7,084 $3,061 
Inventory, net
3,816 4,040 
Other current assets
3,931 3,127 
Total current assets
14,831 10,228 
Non-current assets
Digital assets, net of current portion
302,297 317,256 
Intangible assets, net
4,520 4,800 
Goodwill
3,427 3,538 
Other non-current assets
2,077 2,024 
Total non-current assets
312,321 327,618 
Total Assets
$327,152 $337,846 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Current liabilities
Accounts payable and accrued expenses
$4,437 $5,290 
Current portion of operating lease liability
621 670 
Debt
15,000 — 
Related party note payable
1,798 1,083 
Other current related party liabilities, at fair value
— 558 
Other current related party liabilities
1,468 365 
Other current liabilities
760 678 
Total current liabilities
24,084 8,644 
Non-current liabilities
Warrants
12,049 22,031 
Related party note payable
— 753 
Other non-current liabilities
1,590 1,642 
Total non-current liabilities
13,639 24,426 
Total liabilities
37,723 33,070 
Commitments and contingencies (Note 11)
SHAREHOLDERS’ EQUITY
Preferred stock $0.00001 par value; 25,000,000 authorized; none issued and outstanding
— — 
Common stock $0.00001 par value; 200,000,000 authorized; 41,173,850 and 42,607,962 issued and outstanding at July 31, 2026 and April 30, 2026, respectively
— — 
Additional paid-in capital
227,542 231,274 
Retained earnings
62,043 73,443 
Accumulated other comprehensive income (loss)
(156)59 
Total shareholders’ equity
289,429 304,776 
Total Liabilities and Shareholders' Equity
$327,152 $337,846 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
    3         
Table of Contents    CEA Industries Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(dollars in thousands, except per share amounts)
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Revenue
$
7,165 
$
4,580 
$
2,928 
Cost of revenue
5,201 
3,207 
2,002 
Gross profit
1,964 
1,373 
926 
Operating expenses
Management fees to affiliate
1,103 
— 
— 
Selling, general and administrative expenses
5,427 
1,630 
905 
Shareholder advisory expenses
1,391 
— 
— 
Unrealized loss on digital assets
15,294 
— 
— 
Other affiliate operating expenses
(20)
— 
— 
Total operating expenses
23,195 
1,630 
905 
Operating income (loss)
(21,231)
(257)
21 
Other income (loss), net
Airdrop income
284 
— 
— 
Gain on change in fair value of warrant liability
9,982 
— 
— 
Interest expense
(314)
(252)
— 
Interest expense to affiliate
(26)
(16)
— 
Business combination expenses
— 
(721)
— 
Total other income (loss), net
9,926 
(989)
— 
Income (loss) before income tax expense (benefit)
(11,305)
(1,246)
21 
Income tax expense (benefit)
95 
(60)
2 
Net income (loss)
(11,400)
(1,186)
19 
Other comprehensive income (loss)
Foreign currency translation adjustment
(215)
(47)
35 
Total comprehensive income (loss)
$
(11,615)
$
(1,233)
$
54 
Net income (loss) per share of common stock attributable to common shareholders
Basic
$
(0.22)
$
(1.41)
$
13.48 
Diluted
$
(0.22)
$
(1.41)
$
13.48 
Weighted average number of common shares outstanding
Basic
52,914,444 
842,852 
1,410 
Diluted
52,914,444 
842,852 
1,410 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents    CEA Industries Inc.
Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity
(dollars in thousands)
Successor
Common StockPreferred StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated Other
Comprehensive
 Income (Loss)		Total
SharesAmountSharesAmount
April 30, 2026
42,607,962 
$
— 
— 
$
— 
$
231,274 
$
73,443 
$
59 
$
304,776 
Repurchase of common stock, net
(1,434,112)
— 
— — 
(3,799)
— 
— 
(3,799)
Equity-based compensation
— 
— 
— — 
67 
— 
— 
67 
Foreign currency translation adjustment
— 
— 
— — 
— 
— 
(215)
(215)
Net loss
— 
— 
— — 
— 
(11,400)
— 
(11,400)
July 31, 2026
41,173,850 
$
— 
— 
$
— 
$
227,542 
$
62,043 
$
(156)
$
289,429 
Successor
Common StockPreferred StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated Other
Comprehensive
 Income (Loss)		Total
SharesAmountSharesAmount
June 7, 2025
802,346 
$
— 
— 
$
— 
$
49,613 
$
(41,802)
$
— 
$
7,811 
Issuance of common stock, net
Exercise of warrants
17,648 
— 
— 
— 
— 
— 
— 
— 
Fat Panda Acquisition
39,000 
— 
— 
— 
314 
— 
— 
314 
Equity-based compensation
1,529 
— 
— 
— 
7 
— 
— 
7 
Foreign currency translation adjustment
— 
— 
— 
— 
— 
— 
(47)
(47)
Net loss
— 
— 
— 
— 
— 
(1,186)
— 
(1,186)
July 31, 2025
860,523 
$
— 
— 
$
— 
$
49,934 
$
(42,988)
$
(47)
$
6,899 
Predecessor
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated Other
Comprehensive
 Income (Loss)		Total
SharesAmount
April 30, 2025
1,410 
$
— 
$
— 
$
4,838 
$
(77)
$
4,761 
Foreign currency translation adjustment
— 
— 
— 
— 
35 
35 
Net income
— 
— 
— 
19 
— 
19 
June 6, 2025
1,410 
$
— 
$
— 
$
4,857 
$
(42)
$
4,815 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
    5         
Table of Contents    CEA Industries Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Cash flows from operating activities
Net income (loss)
$
(11,400)
$
(1,186)
$
19 
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization
158 
124 
13 
Equity-based compensation
67 
7 
— 
Non-cash income from airdrops
(284)
— 
— 
Unrealized loss on digital assets
15,294 
— 
— 
Change in fair value of warrant liabilities
(9,982)
— 
— 
Other, net
240 
(74)
— 
Changes in operating assets and liabilities:
Accounts receivable
(96)
(8)
53 
Income taxes payable
153 
(60)
2 
Inventory
96 
286 
(363)
Prepaid expenses
(1,057)
1,118 
7 
Accounts payable and accrued liabilities
(275)
(1,972)
35 
Lease liabilities
(31)
— 
— 
Deferred revenue
76 
(33)
— 
Royalty
— 
— 
(5)
Related party liabilities
1,104 
— 
— 
Cash Incentive Award
(538)
— 
— 
Net cash used in operating activities
(6,475)
(1,798)
(239)
Cash flows from investing activities
Cash paid for acquisition of Fat Panda
— 
(10,571)
— 
Purchases of property and equipment
(123)
— 
— 
Net cash used in investing activities
(123)
(10,571)
— 
Cash flows from financing activities
Proceeds from notes payable
14,963 
3,910 
— 
Repurchase of shares
(4,279)
— 
— 
Net cash provided by financing activities
10,684 
3,910 
— 
Net increase (decrease) in cash and cash equivalents
4,086 
(8,459)
(239)
Effect of exchange rate changes on cash and cash equivalents
(63)
32 
14 
Cash and cash equivalents, beginning of period
3,061 
11,447 
2,149 
Cash and cash equivalents, end of period
$
7,084 
$
3,020 
$
1,924 
Supplemental cash flow information
Cash paid for interest
$
211 
$
— 
$
— 
Cash paid for income taxes
— 
— 
— 
Non-cash Investing and Financing Activities:
Issuance of common stock to acquire Fat Panda
$
— 
$
(314)
$
— 
CRA indemnity note
— 
365 
— 
Issuance of related party notes for Fat Panda acquisition
— 
1,394 
— 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)

Note 1 — Nature of Operations
Description of Business
CEA Industries Inc. ("CEAI," or, together with its subsidiaries, the "Company" or "BNC") is a digital asset treasury ("DAT") focused exclusively on BNB, the native token of the BNB blockchain network ("BNB Chain"). Its primary business is to build and manage the largest corporate treasury of BNB to provide institutional-grade exposure to blockchain infrastructure and decentralized finance ("DeFi") and to generate income, such as by receiving new tokens or coins distributed by a project to a wide range of individuals in the crypto community ("Airdrops"), including to BNC in connection with its eligible BNB holdings. The Company may also generate returns through additional digital asset-related activities, such as staking, validation services, lending, and other DeFi protocols in the future, though it has not staked any BNB through July 31, 2026. Additionally, as part of the Company's ongoing operations, it engages in core retail nicotine vape operations and sale of industrial climate control systems for controlled environment agriculture.
As more fully described in "—Segment Reporting," the Company operates the following two business segments:
●BNB Treasury Management — Operations directly related to the Company's DAT strategy, including the acquisition, disposition, and management of the Company's BNB holdings or other digital assets such as via Airdrops.
●Retail and Industry — Fat Panda's retail and distribution operations along with revenue and operating costs related to designing, engineering, and selling industrial climate control systems for controlled environment agriculture.
Formation and Organization
CEAI was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered in Louisville, Colorado. Historically, CEAI operated a portfolio of consumer and industrial businesses, including industrial climate control systems for controlled environment agriculture.
On June 6, 2025 (the "Acquisition Date"), CEAI completed the acquisition of Fat Panda Ltd., a Canadian corporation, and its related entities ("Fat Panda") (the "Fat Panda Acquisition"), entering the Canadian retail nicotine vape industry. The Fat Panda Acquisition, completed before the Company commenced its DAT strategy, aligned with the Company's then-current strategy to focus on high-growth, regulated consumer markets and provide a vertically integrated infrastructure to support retail expansion and e-commerce capabilities. The Company changed its Nasdaq ticker symbol from "CEAD" to "VAPE" on June 13, 2025 in connection with its acquisition of Fat Panda.
In August 2025, the Company initiated a strategic transformation to adopt the current BNB-focused DAT strategy that commenced on August 5, 2025, following the closing of a private placement that raised $500.0 million (the "PIPE Transaction"), with up to $750.0 million additional proceeds available through warrant exercises (Note 6), and execution of an Asset Management Agreement ("AMA") to provide asset management and related services with respect to the Company's DAT strategy with 10X Capital Partners LLC ("Asset Manager") (Note 10). 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 reserve asset. The Company's treasury assets are held by BNC BNB Cayman, a Cayman Islands exempt company, indirectly owned through the Company's wholly owned subsidiary, CEA BRS LLC, a Delaware limited liability company and the sole stockholder of BNC BNB Cayman (Note 7).
Segment Reporting
During the second fiscal quarter of 2026, the Company introduced a new business line focused on the Company's DAT strategy, and appointed a new Chief Executive Officer, who served as the chief operating decision maker ("CODM") until July 2026, after which the Interim Principal Executive Officer and Chief Financial Officer served as the CODM. These changes triggered a reassessment of the Company's operating segments under the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") ASC 280, Segment Reporting. As a result of this reassessment, the Company determined that it operates two reportable segments: BNB Treasury Management and Retail and Industry (see "—Description of Business"). Comparative periods have been recast to reflect this change in segment composition. The CODM evaluates the financial performance of the business and makes resource allocation decisions based on these two distinct sources of business activity.
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 within the Company.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
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 taxes for each of the periods presented. Total segment assets provided to the CODM are also disclosed in the tables below for each period presented. Corporate activities are not considered an operating segment consisting primarily of corporate support functions that include capital and funding to support the business activities of the Company as well as costs and expenses not allocated to a line of business.
Successor
Three Months Ended July 31, 2026
Retail and IndustryBNB Treasury ManagementCorporateTotal
Total revenue, net
$
7,165 
$
— 
$
— 
$
7,165 
Cost of revenue
(5,201)
— 
— 
(5,201)
Unrealized gain (loss) on digital assets
— 
(15,294)
— 
(15,294)
Other income from Airdrops
— 
284 
— 
284 
Advertising and marketing expense
(43)
— 
(108)
(151)
Compensation expense
(1,206)
(44)
(726)
(1,976)
Management fees to affiliate
— 
(1,103)
— 
(1,103)
Professional and contractor fees
(84)
— 
(1,359)
(1,443)
Equity-based compensation
(1)
— 
(66)
(67)
Gain from change in fair value of warrant liabilities
— 
— 
9,982 
9,982 
Interest expense and other income, net
(26)
— 
(314)
(340)
Other segment expenses(A)
(1,063)
(82)
(2,016)
(3,161)
Income (loss) from operations before provision for income taxes
(459)
(16,239)
5,393 
(11,305)
Total Assets
16,611 
309,384 
1,157 
327,152 
Successor
Period from June 7, 2025 through July 31, 2025
Retail and IndustryBNB Treasury ManagementCorporateTotal
Total revenue, net
$
4,580 
$
— 
$
— 
$
4,580 
Cost of revenue
(3,207)
— 
— 
(3,207)
Advertising and marketing expense
(72)
— 
— 
(72)
Compensation expense
(518)
— 
— 
(518)
Professional and contractor fees
(549)
— 
— 
(549)
Equity-based compensation
(7)
— 
— 
(7)
Interest expense and other income, net
(268)
— 
— 
(268)
Other segment expenses(A)
(1,205)
— 
— 
(1,205)
Income (loss) from operations before provision for income taxes
(1,246)
— 
— 
(1,246)
Total Assets
19,128 
— 
— 
19,128 
    8         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Predecessor
Period from May 1, 2025 through June 6, 2025
Retail and IndustryBNB Treasury ManagementCorporateTotal
Total revenue, net
$
2,928 
$
— 
$
— 
$
2,928 
Cost of revenue
(2,002)
— 
— 
(2,002)
Advertising and marketing expense
(63)
— 
— 
(63)
Compensation expense
(431)
— 
— 
(431)
Professional and contractor fees
(135)
— 
— 
(135)
Other segment expenses(A)
(276)
— 
— 
(276)
Income (loss) from operations before provision for income taxes
21 
— 
— 
21 
Total Assets
9,191 
— 
— 
9,191 
A.Includes other selling, general, and administrative expenses such as occupancy expenses, maintenance expenses, utilities, depreciation and amortization expenses. Amounts also include business combination expenses during the period from June 7, 2025 through July 31, 2025 and shareholder advisory expenses during the three months ended July 31, 2026.
Note 2 — Basis of Presentation and Significant Accounting Policies
Basis of Presentation
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 34 retail locations and an 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 Company has been identified as the accounting acquirer ("Successor") in the Fat Panda Acquisition, and Fat Panda as the accounting predecessor ("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 because CEAI's operations prior to the acquisition were insignificant relative to those of Fat Panda. Financial information for periods beginning on and after the Acquisition Date reflects the operations of the combined entities under the control of the Company. The merger was accounted for as a business combination using the acquisition method of accounting. The Successor's 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 at the Acquisition Date, the accompanying unaudited 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's unaudited condensed consolidated financial statements.
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 ("U.S. 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 U.S. 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 three months ended July 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2027.
The balance sheet information at April 30, 2026 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended April 30, 2026.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Consolidation
The Company consolidates those entities over which it controls significant operating, financial, and investing decisions of the entity as well as those entities deemed to be variable interest entities ("VIEs") in which the Company is determined to be the primary beneficiary.
The analysis as to whether to consolidate an entity is subject to a significant amount of judgment. Some of the criteria considered are the determination as to the degree of control over an entity by its various equity holders, the design of the entity, how closely related the entity is to each of its equity holders, the relation of the equity holders to each other and a determination of the primary beneficiary in entities in which the Company has a variable interest. These analyses involve estimates, based on the assumptions of management, as well as judgments regarding significance and the design of entities.
VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
The Company monitors investments in VIEs and analyzes the potential need to consolidate the related entities pursuant to the VIE consolidation requirements. These analyses require considerable judgment in determining whether an entity is a VIE and determining the primary beneficiary of a VIE since they involve subjective determinations of significance with respect to both power and economics. The result could be the consolidation of an entity that otherwise would not have been consolidated or the deconsolidation of an entity that otherwise would have been consolidated. See Note 7 for more information regarding the VIEs in which the Company holds an interest.
Segments
The Company operates through two operating and reportable segments, which reflects how the CODM allocates resources and assesses performance. (Note 1)
Risks and Uncertainties
In the normal course of business, the Company is subject to risks and uncertainties common to companies in its industries, including, but not limited to, changes in general economic conditions, customer demand, supplier relationships, regulatory developments, competition, liquidity, and access to capital. The Company’s operating results and financial condition may also be affected by volatility in digital asset markets, including changes in the fair value and liquidity of its BNB holdings and other digital assets held by the Company, as well as evolving laws, regulations, custody practices, exchange practices, and accounting guidance applicable to digital assets. These factors could materially affect the Company’s future results of operations, cash flows, liquidity, and financial position.
Concentrations
BNB Holdings
The Company’s digital asset holdings are substantially concentrated in its BNB holdings, which is its primary treasury reserve asset. Since a significant portion of the Company’s assets consists of BNB, adverse changes in the market price, liquidity, custody environment, regulatory treatment, or broader adoption of BNB or the BNB ecosystem could have a material adverse effect on the Company’s financial condition, results of operations, cash flows, and liquidity.
All of the Company's BNB holdings not pledged as collateral are held in custody through the Company’s sole custodian, Ceffu, a non-U.S. institutional digital asset custody platform operating within the Binance ecosystem. Ceffu uses a 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, the Company's 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 the Company's ability to access, transfer, or liquidate its BNB holdings.
    10         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Fat Panda Suppliers
Fat Panda sources inventory, including raw materials and finished goods, from multiple suppliers. However, two suppliers accounted for 41.0% and 34.0% for the three months ended July 31, 2026 and 42.0% and 37.0% for the period from May 1, 2025 through June 6, 2025, respectively, of inventory purchases. One of those two suppliers accounted for 81.0% of inventory purchases for the period from June 7, 2025 through July 31, 2025. Loss of one, or both, suppliers could have a material adverse effect on the Company’s financial condition, results of operations, cash flows, and liquidity.
Foreign Currency Translation
The Company's unaudited condensed consolidated financial statements are presented in U.S. dollars ("USD"). Financial statements of foreign subsidiaries are translated into USD 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 income (loss) within the unaudited condensed consolidated financial statements. The Company's functional currency is USD, except for Fat Panda that uses Canadian dollars ("CAD").
Use of Estimates and Assumptions
The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management makes subjective estimates of project installations, warranty claims, product returns, promotional programs, and other variable consideration that significantly impacts revenue; inventory obsolescence, cost allocation, and impairment that significantly impacts costs of revenue; determinations of fair value of digital assets, including the value of tokens received from Airdrops that impact realized and unrealized digital asset gains or losses; volatility of the Company's stock that significantly impacts the fair value of warrants accounted as liabilities as well as warrants and other forms of compensatory equity awards that impacts such compensation expense or changes in liability fair value; the fair value of acquired tangible and intangible assets and liabilities assumed that significantly impacts goodwill and amortization of definite-lived intangible assets; estimates regarding trade accounts receivable that impact impairment and allowances for related losses; the useful lives of tangible and intangible assets; estimates of future taxable income and deductibility of compensatory warrants that impact current and deferred tax assets and liabilities and related tax provisions; and the outcome of litigation that may impact losses, expenses, or other items, including transactions with the Company's Asset Manager. Actual results may ultimately differ materially from those estimates.
Accounting Changes
Accounting Changes and Error Corrections
As previously disclosed in the Company's quarterly financial statements filed on Form 10-Q on March 16, 2026, the Company erroneously recognized $4.6 million of compensation expense in July 2025 for equity-based awards granted under a proposed equity incentive plan (the "2025 Equity Incentive Plan") that had not been approved by shareholders of the Company, and has not been approved at July 31, 2026. In July 2026, the Company's shareholders voted against the 2025 Equity Incentive Plan, though the Company may be required to offer its shareholders the opportunity to vote upon the 2025 Equity Incentive Plan a second time.
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 unaudited condensed consolidated financial statements. Accordingly, an amendment to the previously issued financial statements was not required.
The accompanying comparative unaudited condensed consolidated financial statements for the period from June 7, 2025 through July 31, 2025 have been recast to correct the immaterial error.
Unaudited Condensed Consolidated Statement of Operations
Period from June 7 through July 31, 2025
As Reported(A)
AdjustmentRecast
Selling, general and administrative expenses
$
6,292 
$
(4,662)
$
1,630 
A.Includes $0.1 million of advertising and marketing expenses, but excludes $0.7 million of business combination expenses presented separately.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity
Period from June 7 through July 31, 2025
As ReportedAdjustmentRecast
Equity-based compensation
$
4,669 
$
(4,662)
$
7 
Net loss
(5,848)
4,662 
(1,186)
Unaudited Condensed Consolidated Statement of Cash Flows
Period from June 7 through July 31, 2025
As ReportedAdjustmentRecast
Net loss
$
(5,848)
$
4,662 
$
(1,186)
Equity-based compensation
4,669 
(4,662)
7 
Significant Accounting Policies
Fair Value Measurement
U.S. GAAP requires the categorization of the fair value of financial instruments into three broad levels that form a hierarchy, based on the transparency of inputs to the valuation to estimate 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.
LevelMeasurement
1
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
2
Inputs are other than quoted prices that are observable for the asset or liability as Level 1 inputs, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability.
3
Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
The Company follows this hierarchy for the fair value measurement of applicable assets and liabilities, with classifications based on the lowest level of input that is significant to the fair value measurement. The following summarizes the Company's asset and liability fair value hierarchy at July 31, 2026:
LevelAsset or LiabilityMeasurement
1
Cash and cash equivalents
Estimates of fair value are measured using observable, quoted market prices, or Level 1 inputs. The Company estimates the fair value of USD Coin ("USDC") at parity with USD.
Digital Assets
Estimates of fair value are measured using observable, quoted market prices on principal exchanges, or Level 1 inputs, on Binance exchange for BNB, Bitcoin ("BTC"), and Tether ("USDT").
3
Warrant Liabilities
Estimates of fair value are measured using observable, quoted market prices on Nasdaq Capital Markets traded under BNCWZ that started trading on April 15, 2026, but are not actively traded at July 31, 2026, as well as unobservable inputs, including adjusted historical volatility of shares of the Company's common stock.
Cash Incentive Award
Estimates of fair value are measured using observable, quoted market prices of shares of the Company's common stock as well as unobservable inputs, including adjusted historical volatility of shares of the Company's common stock.
Intangible Assets & Goodwill
Estimates of fair value of Fat Panda's trade name and goodwill recorded from the Fat Panda Acquisition are based upon discounted future cash flows of Fat Panda. Carrying value represents the lower of carrying value or impaired fair value if undiscounted cash flows are less than the carrying value at the date of the impairment assessment.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Valuation Process — On a quarterly basis, with assistance from an independent valuation firm, management estimates the fair value of the Company's Level 3 financial instruments. The Company's determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. When an independent valuation firm expresses an opinion on the fair value of assets or liabilities in the form of a range, management selects a value within the range provided by the independent valuation firm to assess the reasonableness of management’s estimated fair value for that asset or liability. At July 31, 2026, the Company's valuation process for Level 3 measurements, as described below, was conducted internally or by an independent valuation firm and reviewed by management.
Valuation of Digital Assets — The Company has designated the Binance exchange as its principal market for its digital assets as it is the market to which it has access that provides the greatest volume and level of orderly transactions for its respective digital assets. 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 Coordinated Universal Time ("UTC") on the reporting date to determine fair value. All of the Company's digital assets are held by BNC BNB Cayman, and the principal market for each asset is determined based on the markets accessible to this subsidiary.
Valuation of Warrant Liabilities — Management considers the Stapled Warrants (Note 6) issued together with shares in connection with the PIPE Transaction and redeemable for the Company's equity as Level 3 liabilities in the fair value hierarchy as liquid markets exist for such liabilities, but the instruments do not actively trade. On a quarterly basis, management engages an independent valuation firm to estimate the fair value of the Company's warrants, applying a Monte-Carlo model using estimates of volatility, contractual terms, discount rates, dividend rates, expiration dates, and risk-free rates. Management estimates fair value of warrants on an equal-weighted basis between the observed market trades and model outputs.
Valuation of Cash Incentive Award — Management considers the Cash Incentive Award issued under the Transition Agreement (Note 10) as Level 3 liability in the fair value hierarchy as no market exists for the agreement and management uses a model with unobservable inputs to estimate the award value. Management engaged an independent valuation firm to estimate the fair value of the Cash Incentive Award at April 30, 2026, applying a Monte-Carlo model using estimates of volatility, contractual terms, discount rates, dividend rates, expiration dates, and risk-free rates.
Valuation of Intangibles and Goodwill — The Company carries intangible assets, excluding applicable digital assets, and goodwill at the lower of their carrying value or fair value. Significant assumptions and estimates used in the valuation of intangible assets and goodwill include future expected cash flows, including projected revenues and expenses, and applicable discount rates. These assumptions and estimates are Level 3 inputs and based on assumptions that the Company believes to be reasonable.
Other Valuation Matters — For Level 3 assets acquired and liabilities assumed during the calendar month immediately preceding a quarter end that were conducted in an orderly transaction with an unrelated party, management generally believes that the transaction price provides the most observable indication of fair value given the illiquid nature of these financial instruments, unless management is aware of any circumstances that may cause a material change in the fair value through the remainder of the reporting period. For instance, significant changes in a counterparty’s intent or ability to make payments on a financial asset may cause material changes in the fair value of that financial asset.
The Company's financial assets and liabilities consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt. The carrying value of cash and cash equivalents; accounts receivable, net of allowances for doubtful accounts; accounts payable; accrued expenses; and current debt approximates fair value due to the short-term nature of those instruments.
See Note 8 for additional information regarding the valuation of the Company's assets and liabilities.
Leases
The Company recognizes right-of-use assets and lease liabilities at the commencement date of the lease based on the present value of remaining fixed and determinable lease payments over the lease term. The Company calculates the present value of future payments by using an estimated incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis and over a similar term, and recognizes lease expense for operating leases on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to control the use of an identified asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company uses the incremental borrowing rate on the commencement date in determining the present value of the lease payments. See Note 11 for additional information regarding the Company's leases.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Balance Sheet Measurement
Cash and Cash Equivalents
Cash and cash equivalents consist of bank checking accounts and USDC. The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Substantially all amounts on deposit with major financial institutions exceed insured limits. The Company reported cash and cash equivalents in the following line items of its Condensed Consolidated Balance Sheets, which totals the aggregate amount presented in the Company's Unaudited Condensed Consolidated Statements of Cash Flows:
July 31, 2026April 30, 2026
(Unaudited)(Audited)
Total cash and cash equivalents shown in the Consolidated Statements of Cash Flows
$7,084 
$3,061 
Digital Assets
The Company holds digital assets, primarily BNB, as part of its DAT strategy, including stablecoins, digital assets received from Airdrops, and other digital assets. Digital assets that meet the scope criteria in ASC 350-60, Intangibles—Goodwill and Other—Crypto Assets, are accounted for as crypto intangible assets. The Company initially recognizes these digital assets, whether restricted or not, at cost or at fair value when received in a non-cash transaction, and subsequently remeasures such digital assets at fair value at each reporting date, with changes in fair value recognized in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) within "Unrealized loss on digital assets." The Company classifies digital assets, or receivables thereon, that it does not expect to hold for more than twelve months as current assets. Generally, the Company expects to hold BNB holdings longer than twelve months and classifies such digital assets as non-current assets.
Digital Assets Held by Third Parties
The Company may deposit certain digital assets with certain third parties (e.g., exchanges or custodians) to facilitate digital asset treasury activities. Such third parties may not maintain these digital assets in segregated wallets under the Company's exclusive control and may pool the digital assets with assets of other customers. The Company evaluates such arrangements to determine whether it has ownership of, and control over, the underlying digital assets.
●Digital assets held under arrangements for which the Company retains ownership and unrestricted control are presented as digital assets in the Condensed Consolidated Balance Sheets.
●If the Company retains ownership of digital assets held under such arrangements, but the Company may not freely control those assets, the Company reports restricted digital assets (Note 4). See Note 5 for more information regarding the Company's pledge of BNB under its debt facility.
●If, due to the lack of sufficient regulatory oversight or the Company's inability to prevent a third party from using digital assets for purposes other than those directed by the Company, the Company concludes that it would not retain sufficient control over the deposited assets, the Company derecognizes the digital assets and records a receivable from the third party in the Condensed Consolidated Balance Sheets. The Company did not record any digital asset receivables at July 31, 2026.
Digital Asset Purchases and Sales
The Company recognizes any realized gains and losses from the sale, exchange, conversion, or other derecognition of digital assets in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) within "Realized loss on digital assets." The Company uses the specific identification method to calculate the realized gains and losses on digital assets.
Sales and purchases of digital assets are reflected as cash flows from investing activities in the Unaudited Condensed Consolidated Statements of Cash Flows whereas contributions of digital assets received as part of the consideration received from the Company's issuance of its common stock (Note 6) are presented within supplemental information for non-cash investing and financing activities.
See Note 4 for additional information regarding the Company's digital assets.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Inventory
The Company accounts for inventory at the lower of cost or net realizable value on a first-in, first-out basis, and the Company evaluates lower of cost or net realizable value by considering obsolescence, excessive levels of inventory, deterioration, and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for the estimated excess, obsolescence, or impaired inventory and presented in "Cost of revenue" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Inventory consisted of the following:
July 31,
2026		April 30,
2026
(Unaudited) (Audited)
Finished goods
$
3,848 
$
4,070 
Raw materials
368 
379 
Allowance for excess and obsolete inventory
(400)
(409)
Inventory, net(A)
$
3,816 
$
4,040 
A.Includes labor and overhead expenses of $0.8 million and $0.4 million at July 31, 2026 and April 30, 2026, respectively. The Predecessor measured inventory on a standard cost basis until acquired by the Company.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair values of the net tangible and intangible assets of entities acquired in a business combination. The Company does not amortize goodwill, but it tests goodwill for impairment at the reporting unit level during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that impairment may have occurred. Triggering events that may indicate a potential impairment include, but are not limited to, significant adverse changes in customer demand or business climate and related competitive considerations. 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, based on this assessment, the Company concludes that it is more likely than not that the fair value is less than the carrying amount, a quantitative goodwill impairment test is performed. Under a quantitative test, the Company compares the estimated fair value of the reporting unit to its carrying amount, and recognizes an impairment loss for any excess of carrying value over fair value, limited to the carrying amount of goodwill. If the estimated fair value exceeds the carrying amount, the Company does not recognize any impairment.
The Company recorded goodwill in connection with the Fat Panda Acquisition. Goodwill recognized in connection with the acquisition is denominated in the functional currency of the acquired entity, Fat Panda, and translated into USD using the exchange rate at the acquisition date as well as at each reporting date using the period-end exchange rate, with changes recognized in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) within "Foreign currency translation adjustment."
During the quarter ended July 31, 2026, the Company qualitatively evaluated events and circumstances relevant to the Fat Panda reporting unit to determine whether it was more likely than not that the reporting unit's fair value 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.
The carrying value of the Company's goodwill changed by the following amounts:
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025
Beginning Carrying Value
Goodwill
$
3,538 
$
— 
Accumulated impairment losses
— 
— 
3,538 
— 
Changes in Goodwill
Fat Panda Acquisition
— 
4,218 
Foreign currency translation adjustment
(111)
— 
Ending Carrying Value
Goodwill
3,427 
4,218 
Accumulated impairment losses
— 
— 
$
3,427 
$
4,218 
Intangible Assets
The Company amortizes intangible assets on a straight-line basis over the assets' estimated useful life, based on the expected economic benefit and use of the asset, and evaluates intangible assets for impairment on a quarterly basis, or more frequently if events or changes in circumstances suggest that the asset may be impaired. The evaluation compares the carrying value to the estimated future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds those cash flows, the asset is considered impaired, and the impairment loss is measured as the excess of the carrying amount over its fair value. The Company's identified intangible assets include:
Estimated Useful Life (Years)Carrying Amount
AssetJuly 31, 2026April 30, 2026
(Unaudited)(Audited)
Trade names(A)
10.0
$
5,229 
$
5,229 
Accumulated amortization(B)(C)
(588)
(474)
Foreign currency translation adjustment
(121)
45 
$
4,520 
$
4,800 
A.Trade names acquired as part of the Fat Panda Acquisition ("—Business Combinations—Fat Panda Acquisition"), and valued using a relief-from-royalty method.
B.Includes amortization expense of $0.1 million and $0.1 million for the three months ended July 31, 2026 and the period from June 7, 2025 through July 31, 2025, respectively.
C.At July 31, 2026, the approximate aggregate annual amortization expense for definite-lived intangible assets is as follows:
Remaining nine months during fiscal year 2027
$
382 
2028
512 
2029
511 
2030
511 
2031
511 
Thereafter
2,093 
$
4,520 
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Debt Obligations
The Company's debt obligations consist of short-term notes payable to the selling shareholders of Fat Panda ("Selling Fat Panda Shareholders"), including related parties, and a short-term convertible note payable to a related party, each of which is denominated in CAD as well as borrowings collateralized by BNB. The Company initially recognizes debt obligations at the fair value of consideration received, net of debt-issuance costs and any original issue discount, and subsequently measures such obligations at amortized cost using the effective-interest method, unless the Company has elected the fair value option and carries the debt obligation at its estimated fair value, with changes in fair value recorded in its Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). At July 31, 2026, the Company has not elected the fair value option for any of its outstanding debt instruments.
Current debt obligations represent borrowings with contractual maturities of twelve months or less from the balance sheet date or when the Company does not have the unconditional right to defer settlement for at least twelve months. Debt obligations under which an uncured or unwaived default existed at the balance sheet date that would permit the lender to demand repayment within twelve months are also classified as current. All other debt obligations are classified as non-current liabilities.
The Company pledges BNB as collateral under secured financing agreements with a financial institution, the terms and conditions of which are governed by each respective financing agreement. Such collateralized financing arrangements do not provide the counterparty the right to rehypothecate the underlying collateral, and the Company discloses in the notes to the financial statements the extent to which such collateral has been pledged. The related collateral and corresponding liabilities are presented on a gross basis in the financial statements and any associated interest expense is recognized on a basis consistent with the Company's other financing arrangements. The amounts available to be borrowed under financing agreements are dependent upon the fair value of the collateral, which can be volatile and fluctuate with changes in BNB supply, ecosystem growth rate, sentiment, and other factors. The Company manages credit, market, and liquidity risks related to these agreements by holding additional collateral available to pledge and actively monitoring and maintaining margin requirements.
The Company capitalizes and amortizes deferred debt facility costs incurred when entering into financing agreements on a straight-line basis over the expected term of term facilities or weighted-average life of the expected principal repayments for open loans, when such recognition does not materially differ from the effective interest method, with amortization of deferred debt issuance costs, write-offs of unamortized deferred costs upon early extinguishment, contractual interest and fees, and foreign exchange remeasurement gains and losses on debt denominated in currency other than USD included within "Interest expense", or "Interest expense to affiliate" for debt obligations to related parties, in its Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
Interest payable on debt of $0.2 million and $— million at July 31, 2026 and April 30, 2026, respectively, is recorded as a component of "Other current liabilities" in the Condensed Consolidated Balance Sheets.
See Note 5 for additional information regarding the Company's debt obligations.
Warrants
The Company accounts for its warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability, and whether the warrants meet all of the requirements for equity classification, including whether the warrants are indexed to the Company's shares of common stock, among other conditions for equity classification. This assessment, which requires significant judgment, is conducted at the time of warrant issuance and at each quarterly reporting date thereafter while the warrants are outstanding. For warrants classified as equity, the Company records an increase to additional paid-in capital at the time of issuance based on the warrant's fair value. 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 at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss within "Gain on change in fair value of warrant liability" in the Company's Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Upon exercise of warrants classified as liabilities, the Company reclassifies the fair value of the warrant immediately prior to exercise as additional paid-in capital, together with any cash exercise price received, while the Company recognizes a gain upon expiry of warrants classified as liabilities that expire unexercised.
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
The Company issued the Pre-funded Warrants, Stapled Warrants, Strategic Advisor Warrants, and Asset Manager Warrants together with shares of its common stock in the PIPE Transaction (Note 6). Therefore, the Company allocated the $500.0 million gross proceeds from the PIPE Transaction to each component of the transaction, including the aforementioned warrants. First, the Company allocated $305.0 million to the Stapled Warrants, classified as liabilities as the Company does not control certain warrant settlement conditions, at their issuance-date fair value. The Company then allocated remaining proceeds to the other instruments issued in the transaction, including the Pre-funded Warrants, classified as equity, based on the relative fair value of all equity-classified instruments issued in the PIPE Transaction, including shares of the Company's common stock issued but excluding Strategic Advisor Warrants and Asset Manager Warrants treated as equity-based compensation that were expensed at their respective grant-date fair values. Direct and incremental transaction costs are allocated between instruments classified as liabilities and equity on the same proportionate basis as the gross proceeds. The Company expensed issuance costs allocated to Stapled Warrants within "PIPE Transaction costs" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) upon issuance while the Company reduced additional paid-in capital for transaction costs allocated to instruments classified as equity; such issuance costs include the grant-date fair value of both the Strategic Advisor Warrants and Asset Manager Warrants accounted for as equity-based compensation awards that were fully vested upon issuance as there were no service conditions.
See Note 6 for additional information regarding warrants issued by the Company.
Other Assets and Liabilities
At July 31, 2026 and April 30, 2026, accounts payable and accrued expenses, other assets, and other liabilities included:
July 31,
2026		April 30,
2026
(Unaudited)(Audited)
Other current and non-current assets(A)
$2.2 million of non-BNB digital assets, $1.7 million of right-of-use assets, $1.4 million of prepaid expenses; remaining balance is composed of receivables, property and equipment, and contract assets.
$2.4 million of non-BNB digital assets as well as right-of-use lease assets, prepaid expenses, accounts receivable, deposits, contract assets, and property and equipment.
Accounts payable and accrued expenses
$1.7 million of accrued professional fee expenses and $1.5 million of accounts payable; remaining balance is composed of accrued compensation and other expenses.
$5.3 million of accounts payable as well as accrued compensation, sales taxes payable, and other expenses.
Other current related party liabilities
Accrued fees under the AMA.
Accrued fees under the AMA.
Other current related party liabilities, at fair value
n.a.
$0.6 million Cash Incentive Award(B)
Other current and non-current liabilities
$1.1 million of non-current lease liabilities; remaining balance is composed of current and deferred tax liabilities and deferred revenue.
Current and deferred tax liabilities, lease liabilities, and deferred revenue.
A.Net of accumulated depreciation and amortization of $0.6 million and $0.6 million at July 31, 2026 and April 30, 2026, respectively. Includes $0.1 million, $0.1 million, and $— million depreciation and amortization for the three months ended July 31, 2026, the period from June 7, 2025 through July 31, 2025, and the period from May 1, 2025 through June 6, 2025, respectively.
B.The Company estimates the fair value of this variable consideration cash award based on the trading price of shares of its common stock on a quarterly basis, with changes in fair value presented within "Other affiliate operating expenses" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 8 and Note 10 for more information regarding the Cash Incentive Award.
Income Statement Measurement
Revenue Recognition
The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires the Company to recognize revenue as control of promised goods or services is transferred to customers in an amount that reflects the expected consideration that the Company earns in satisfaction of its performance obligations.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Fat Panda
Revenue from Fat Panda consists primarily of retail and e-commerce vape sales, with other revenues earned from factory-direct wholesale vape sales and franchise arrangements. Control generally transfers to customers upon shipment under FOB shipping terms or at point of sale for retail sales, except franchise royalty fees that represent variable consideration based on a percentage of franchisee sales and are recognized over the period in which sales occur. Initial franchise fees are recognized upon opening of the new franchise location, though the Company does not have any franchisees at July 31, 2026.
Generally, the Company's delivery of vape products at time of control transfer represents its single performance obligation aside from separate performance obligations for product return guarantees and loyalty programs, including Fat Panda's "Buy 10, Get 1 Free" program; however, the Company has not recorded liabilities for such returns and loyalty program redemptions as they have not been material. The Company records revenue at the sales price, gross of transaction processing costs such as credit card fees, if any, and net of any discounts and sales taxes. The Company considers shipping and handling costs as fulfillment costs, and expenses such amounts as cost of revenue.
Fat Panda also sells gift cards, for which the Company records a liability at time of sale and recognizes revenues upon redemption or when the Company determines redemption is remote.
Other Industry Activities
Revenue from the sale of climate control systems are derived from contracts that may include engineering and technical services as well as the sale of industrial 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 climate 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.
Airdrops
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 as non-operating income, presented within "Airdrop income" in its Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
See Note 3 and Note 4 for additional information regarding the Company's revenues and Airdrops, respectively.
Cost of Revenue
Cost of revenue consists of all costs incurred to acquire, manufacture, transport, and deliver the products sold in the operations of the Company's Retail and Industry segment, comprising Fat Panda vape sales and industrial climate control systems. The Company recognizes cost of revenue concurrently with the recognition of the related revenue. Costs incurred prior to the recognition of the related revenue are deferred in inventory or in prepaid expenses, as applicable, and recognized in cost of revenue when the related revenue is recognized. The principal components of cost of revenue include:
Inventory cost — The cost of inventory sold during the period, including the purchase price of finished goods and raw materials, allowances for excess or obsolete inventory, and other costs incurred such as capitalized direct labor and manufacturing overhead applicable to the Company's in-house production of vape products and industrial climate control systems.
Shipping and handling costs — Shipping and handling costs incurred to deliver goods to customers that represent activities to fulfill sales orders.
Excise taxes — Products sold by Fat Panda are subject to federal and provincial excise taxes included as direct costs of revenue.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Compensation and Benefits
The Company expenses salaries, benefits, and equity-based compensation as services are provided, which it presents within "Selling, general and administrative expenses" in its Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) when not otherwise included in the Company's cost of revenues.
Equity-Based Compensation
The Company grants equity-based awards to employees and members of the Company's Board of Directors ("Board") under its equity plans, which entitle the holder to receive shares of the Company's common stock on various future dates if the recipient meets applicable service conditions, if any. The Company expenses the grant-date fair value of awards on a straight-line basis over the requisite service period, and records actual forfeitures as they occur since the Company does not estimate forfeitures. In addition, the Company issued compensatory warrants to its Strategic Advisors that did not contain any service conditions and the Company expensed the grant-date fair value upon issuance.
See Note 6 for information regarding the Company's equity-based compensation awards.
Other Operating Expenses
Selling, general, and administrative expenses and other operating expenses include professional accounting, consulting, audit, and legal fees, excluding such costs unrelated to the Company's recurring operations and presented separately in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss); compensation, including equity-based compensation, and benefits paid or accrued to employees, consultants, officers, and members of the Board; advertising and marketing expenses; lease, utilities, and other facility costs; insurance premiums; depreciation and amortization; and other general and administrative costs.
See Note 10 for information regarding management fees paid to the Asset Manager and Note 4 for realized and unrealized gains (losses) on digital assets, respectively.
Income Taxes
The Company computes current income tax expense or benefit as the estimated tax payable to, or refundable from, federal, state, foreign, and other taxing authorities in respect of taxable income or loss for the year, determined based on the enacted tax laws of each taxing jurisdiction. The Company classifies all deferred tax assets and liabilities as non-current, and accounts for those income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities and operating loss and tax credit carryforwards and are measured using the enacted tax rates that are expected to be in effect when the differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) in the period that includes the enactment date. Valuation allowances are established considering all available positive and negative evidence, including the existence and reversal pattern of taxable temporary differences, the Company's history of taxable income and losses, projections of future taxable income exclusive of reversing temporary differences, the carryforward periods, and limitations applicable to net operating losses and tax credits. A valuation allowance is recorded against deferred tax assets when, based on the weight of all such evidence, the Company concludes that it is more likely than not that all or a portion of those deferred tax assets will not be realized.
The Company accounts for uncertain tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return, and recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company regularly evaluates the adequacy of its provisions for income tax contingencies in accordance with the applicable authoritative guidance.
The Company applies a two-step process to the recognition and measurement of uncertain tax positions: (i) determining whether a tax position is more likely than not to be sustained on the basis of the technical merits of the position and (ii) measuring the amount of benefit to recognize, if any, as the largest amount that is more likely than not to be realized upon ultimate settlement with the relevant taxing authority.
See Note 9 for additional information regarding the Company's income taxes.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Business Combinations
The Company evaluates its acquisition of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the test is met, the transaction is accounted for as an asset acquisition. If the test is not met, further determination is required as to whether or not the Company acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the test to determine whether an acquisition is a business combination or an acquisition of assets.
For acquisitions meeting the definition of a business combination, the Company uses the acquisition method of accounting. Under the acquisition method, the Company's financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired, including identifiable intangible assets, and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the consideration transferred for the acquired business, or purchase price, 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.
Determining estimated fair value requires a significant amount of judgment and estimates. 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, the Company initially records any uncertain tax positions, tax-related valuation allowances, and pre-acquisition contingencies in connection with a business combination on the acquisition date. The Company recognizes measurement-period adjustments in the reporting period in which the adjustment amounts are determined. Income statement effects of these adjustments are calculated as if the accounting had been completed at the acquisition date.
Fat Panda Acquisition
The Company accounted for the Fat Panda Acquisition as a business combination under ASC 805. The acquisition of Fat Panda constitutes the acquisition of a business for purposes of ASC 805, and has been accounted for using the acquisition method resulting from a change of control with CEAI as the legal and accounting acquirer and Fat Panda as the accounting acquiree based on evaluation of the following primary factors:
●CEAI acquired 100% of the voting interests in Fat Panda having full and complete authority over all the affairs of Fat Panda and
●The Selling Fat Panda Shareholders do not have a controlling interest in CEAI after the Fat Panda Acquisition.
The $12.7 million purchase price paid by CEAI to the Selling Fat Panda Shareholders in the Fat Panda Acquisition consisted of: (a) $10.6 million cash, of which $4.0 million consisted of proceeds from the Fat Panda Bridge Loan, net of a $0.1 million original issue discount, and $1.9 million was placed in escrow to support post-closing adjustments, indemnity obligations, and employee-related matters ("Escrow Deposit"); (b) 39,000 shares of the Company's common stock with an agreed-upon value of $0.3 million; (c) a $0.4 million note payable upon resolution of uncertain tax obligations in connection with the Fat Panda Acquisition ("Tax Indemnification Note"); and (d) two promissory notes payable to the President of Fat Panda, one of the Selling Fat Panda Shareholders and a current employee of the Company, totaling $1.4 million ("Fat Panda Promissory Notes"). At the Acquisition Date, the Fat Panda Promissory Notes were composed of a $0.7 million promissory note payable in cash ("Promissory Note") and a $0.7 million promissory note payable in cash or convertible into the Company's common stock ("Convertible Promissory Note"). Each of the Tax Indemnification Note and Fat Panda Promissory Notes is payable in CAD and reported in USD.
The Company incurred $0.7 million of expenses directly related to the Fat Panda Acquisition during the period from June 7, 2025 through July 31, 2025 and included in "Business combination expenses" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
See Note 5 and Note 10 for additional information regarding the Fat Panda Bridge Loan, Tax Indemnification Note, and Fat Panda Promissory Notes.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Purchase Price Allocation
The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values at the Acquisition Date. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill, primarily attributable to the assembled workforce, synergies expected from combining operations, and future growth opportunities.
The following table summarizes the fair value of assets acquired and liabilities assumed at the Acquisition Date and is based on the best estimates of management, which were subject to change within the measurement period.
As Initially Reported
Adjustments(A)
Revised Amount
Cash and cash equivalents
$
1,922 
$
— 
$
1,922 
Accounts receivable
177 
88 
265 
Related party receivables
673 
— 
673 
Inventory
3,685 
(20)
3,665 
Prepaid expenses
113 
(33)
80 
Fixed assets
314 
— 
314 
Right-of-use asset
1,851 
(19)
1,832 
Deposits
219 
— 
219 
Intangibles(B)
5,229 
— 
5,229 
Goodwill
4,218 
(782)
3,436 
Accounts payable and accrued liabilities
(2,308)
46 
(2,262)
Income taxes payable
(108)
670 
562 
Deferred tax liability
(1,256)
(33)
(1,289)
Lease liabilities, current
(533)
— 
(533)
Current portion of royalty liabilities
(13)
13 
— 
Lease liabilities, non-current
(1,332)
— 
(1,332)
Total net assets acquired
$
12,851 
$
(70)
$
12,781 
A.During the period from June 7, 2025 to June 6, 2026, the Company recorded measurement period adjustments resulting from new information about facts and circumstances that existed at 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 Fat Panda Promissory Notes as part of the purchase 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. At July 31, 2026, the release of amounts within the $1.9 million Escrow Deposit remains uncertain, and the Company expects to record further adjustments, if any, within the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as the measurement period ended in June 2026.
B.Represents the estimated fair value of Fat Panda's trade names, valued using a relief-from-royalty method, with an estimated useful life of 10 years.
Unaudited Pro Forma Operating Results
The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three months ended July 31, 2026, and 2025, as if the Fat Panda Acquisition transactions, including related financing, on June 6, 2025 had occurred on May 1, 2024. The unaudited pro forma results give effect to certain purchase accounting and financing adjustments based on the historical financial statements of the Company, but neither necessarily reflect actual results of operations that would have been achieved nor are they necessarily indicative of future results of operations.
Three Months Ended July 31,
20262025
Revenue
$7,165 $10,133 
Net loss
(11,400)(616)
Pro forma adjustments include adjustments for amortization of intangible assets, elimination of non-recurring transaction costs incurred related to the acquisition, debt discount amortization and interest expense on the Fat Panda Bridge Loan and Fat Panda Promissory Notes.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Recently Issued Accounting Pronouncements
The FASB has issued the following Accounting Standards Updates ("ASUs") that may materially impact the Company's financial position and results of operations, or may impact the preparation of, but not materially affect, the Company's consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregated disclosure of income statement expenses for public entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the effect this guidance will have on its disclosures.
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.
Accounting Pronouncements Recently Adopted
In July 2025, the FASB issued ASU 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 adopted ASU 2025-05, which did not materially impact the Company's consolidated financial statements and disclosures.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 3 — Revenue
U.S. GAAP does not recognize the income that the Company generates from its digital assets (Note 4), which comprise approximately 93.1% and 94.6% of its total assets at July 31, 2026 and April 30, 2026, respectively, as revenue. However, the Company recognizes revenue from (a) Canadian retail vape sales from its Fat Panda operations at time of sale and (b) industrial climate control system sales in the United States over a period of time between system delivery and completion of its performance obligations, if any, in connection with the installation of delivered systems. The Company's contracts include the following groups of similar services that do not include any significant financing components:
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Fat Panda
Retail
$
6,784 
$
4,192 
$
2,761 
E-commerce
316 
223 
166 
Other
— 
7 
1 
Total Fat Panda
7,100 
4,422 
2,928 
Industrial Climate Control Systems(A)
Equipment and systems sales(B)
65 
108 
— 
Other
— 
50 
— 
Total industrial climate control systems
65 
158 
— 
Total revenue, net(C)
$
7,165 
$
4,580 
$
2,928 
A.Since Fat Panda is the accounting predecessor, the Company omits its revenues earned prior to the Acquisition Date.
B.At July 31, 2026, the Company had yet to deliver, or provide installation services for, equipment totaling $0.2 million, which represents its remaining performance obligations under such contracts, and for which the Company has not recognized revenue; the timing and realized amount of such potential revenue is uncertain and depends, in part, on the performance of third parties.
C.The Company presents revenues net of variable consideration, including sales taxes, commissions, and promotional discounts.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 4 — Digital Assets
The Company holds its unrestricted BNB with Ceffu and periodically receives Airdrops from blockchain projects within the Binance ecosystem whereas restricted BNB held by a lender as collateral (Note 5) is not eligible to receive Airdrops. The Company may hold other digital assets at Ceffu and Circle Internet Group, a blockchain-based treasury and payments financial technology provider ("Circle"). Digital assets to which the Company is entitled, but does not control, are presented as receivables in the Condensed Consolidated Balance Sheets; however, the Company did not have any digital asset receivables at July 31, 2026 or April 30, 2026.
The following table sets forth the units held, cost basis, and fair value of digital assets held as shown in the Condensed Consolidated Balance Sheets:
July 31, 2026April 30, 2026
(Unaudited)(Audited)
Crypto Asset(A)
Number of Tokens(B)
Cost(C)
Fair Value
Number of Tokens(B)
Cost(C)
Fair Value
Current Digital Assets(D)
BTC
27 
$
3,173 
$
1,691 
27 
$
3,173 
$
2,056 
USDT
519,520 
520 
519 
310,383 
310 
310 
Total current Digital Assets
519,547 
3,693 
2,210 
310,410 
3,483 
2,366 
Non-Current Digital Assets
Unrestricted
BNB
471,346 
411,745 
276,381 
487,956 
424,942 
300,279 
Total unrestricted, non-current Digital Assets
471,346 
411,745 
276,381 
487,956 
424,942 
300,279 
Restricted
BNB
44,198 
34,709 
25,916 
27,588 
21,512 
16,977 
Total restricted, non-current Digital Assets
44,198 
34,709 
25,916 
27,588 
21,512 
16,977 
Total non-current Digital Assets
515,544 
446,454 
302,297 
515,544 
446,454 
317,256 
Total
1,035,091 
$
450,147 
$
304,507 
825,954 
$
449,937 
$
319,622 
A.Gains and losses presented within "Unrealized loss on digital assets" of the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Excludes USDC presented as "Cash and cash equivalents" in the Condensed Consolidated Balance Sheets.
B.Rounded to the nearest whole token.
C.Cost basis is equal to the cost of the digital asset, net of transaction fees, if any, at the time of purchase or upon receipt. The Company specifically identifies tokens to determine its cost basis for computing gains and losses.
D.Current digital assets are held primarily for operating liquidity, expected to be available for use within the next twelve months, and presented within "Other current assets" in the Condensed Consolidated Balance Sheets.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 5 — Debt Obligations
The Company's debt obligations consisted of the following:
July 31, 2026April 30, 2026
Weighted AverageCollateral
Carrying ValueOutstanding Face AmountMonth IssuedFinal Stated MaturityFunding CostLife (Years)Carrying ValueCarrying Value
Debt
BitGo Facility(A)
$
15,000 
$
15,000 
Apr-2026
Jan-2027
9.8 
%
0.3
$
25,916 
$
— 
Total debt
15,000 
15,000 
9.8 
%
0.3
25,916 
— 
Related Party Notes Payable
Tax Indemnification Note(B)
357 
357 
Jun-2025
n.a.
— 
n.a.
— 
368 
Promissory Note(C)
734 
734 
Jun-2025
Nov-2026
7.0 
0.3
n.a.
759 
Convertible Promissory Note(D)
734 
734 
Jun-2025
Jun-2027
7.0 
0.8
n.a.
758 
Total related party notes payable, gross
1,825 
1,825 
5.6 
0.6
— 
1,885 
Unamortized deferred financing costs(E)
(27)
— 
(49)
Total related party notes payable
1,798 
1,825 
— 
1,836 
Total, net
$
16,798 
$
16,825 
$
25,916 
$
1,836 
A.On April 30, 2026, the Company and BitGo Prime, LLC ("BitGo") entered into an uncommitted master loan facility ("BitGo Facility"), pursuant to which the Company may borrow digital assets or cash from BitGo from time to time. BitGo is not obligated to make any loan, and we have no committed borrowing capacity. Each loan is documented in a separate loan agreement by the parties setting forth the specific terms, including principal amount, fees, collateral requirements, and the date on which the loan is to commence and mature. Each loan may have a fixed term, or may include a call option held by BitGo or prepayment option held by the Company, as specified in each loan agreement. Borrowings under the master loan agreement are secured by collateral in favor of BitGo. Collateral may include BNB, cash, or other forms agreed upon by the parties. The collateral’s required value is typically higher than the borrowed amount, subject to margin calls as set forth in the master loan agreement. If the value of posted collateral falls below the margin call threshold, the Company must promptly post additional collateral. Failure to maintain sufficient collateral can result in an event of default and remedies available to BitGo, including the right to liquidate pledged collateral. BitGo holds BNB collateral owned by the Company in a segregated custody account in the Company's name, and BitGo is not permitted to use such BNB to secure any other loan or account. The final stated maturity of the facility represents the greater of the maturity of the master loan agreement or the maturity of any fixed term loan agreement thereunder. At July 31, 2026 and April 30, 2026, the Company accrued $0.1 million and $— million of unpaid interest, respectively, in "Other current liabilities" in the Condensed Consolidated Balance Sheets.
B.The $0.4 million note with the Selling Fat Panda Shareholders does not bear interest and does not have a fixed maturity date. The Company must repay the note in full within 15 days following the date that Canada Revenue Agency issues a letter confirming a certain tax liability does not exist in connection with the Fat Panda Acquisition. Conversely, the note payable is reduced in the amount of any tax liability assessed.
C.The $0.7 million interest-only note with the President of Fat Panda bears interest at 7.0% per annum, payable monthly.
D.The $0.7 million convertible note with the President of Fat Panda bears interest at 7.0% per annum. The President of Fat Panda may elect to convert the note into shares of the Company's common stock at a conversion price of $19.00 per share until June 1, 2027. If no election occurs by that date, the Company must pay the entire principal plus interest in cash. At July 31, 2026 and April 30, 2026, the Company accrued $0.1 million and $— million of unpaid interest, respectively, in "Other current liabilities" in the Condensed Consolidated Balance Sheets.
E.The Company amortized a total of $— million, $0.1 million, and $— million of deferred financing costs during the three months ended July 31, 2026, the period from June 7, 2025 through July 31, 2025, and the period from May 1, 2025 through June 6, 2025, respectively.
Maturities
All of the Company's debt obligations are recourse to the Company and mature within its current fiscal year, except the Tax Indemnification Note that is recourse to the Company, presented as a current obligation as the Tax Indemnification Note does not have a stated maturity.
Covenants
The Company's debt obligations contain customary representations and warranties, financial and non-financial covenants, event of default provisions, including cross-default provisions, and financial reporting requirements. Financial covenants include requirements that the Company maintain (a) a minimum net equity of $25.0 million, and (b) a maximum ratio of total assets-to-net equity of 2:1, in each case excluding the impact of warrants treated as liabilities under U.S. GAAP. The Company was in compliance with all of its debt covenants at July 31, 2026.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Debt Activities
BitGo Facility
On April 30, 2026, the Company and BitGo entered into a loan agreement with a six-month rolling term to borrow USDC 10.0 million collateralized with BNB (Note 4) for which the Company received proceeds on May 1, 2026. Borrowed amounts bear interest at 9.5% per annum and the Company paid a 0.3% onboarding fee on borrowed amounts. During the three months ended July 31, 2026, the Company borrowed a total of USDC 15.0 million, inclusive of amounts received on May 1, 2026, collateralized with BNB valued at $25.5 million at the time of each borrowing, on the aforementioned terms.
Other Debt Activities
In connection with the Fat Panda Acquisition, the Company entered into a nine-month loan facility on June 4, 2025 with CEAD Panda Lender LLC, a United States-based lender, under which it borrowed $4.0 million ("Fat Panda Bridge Loan"). The Company fully repaid borrowings on December 4, 2025 and incurred total interest expense of $0.7 million in connection with the facility.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 6 — Equity and Earnings Per Share
The Company's articles of incorporation (as amended) authorize the issuance of 200,000,000 shares of common stock, par value $0.00001 per share, and 25,000,000 shares of preferred stock, par value $0.00001 per share. The Company listed its common stock on The Nasdaq Stock Market LLC ("Nasdaq") using the ticker symbol "CEAD" in February 2022 in connection with its initial public offering (subsequently changed to "BNC" (Note 1)), as well as public warrants ("Public Warrants") using ticker symbol "CEADW" (subsequently changed to "BNCWW"). The Company also issued warrants in connection with the PIPE Transaction ("PIPE Warrants"), including certain warrants ("Stapled Warrants") which were listed on Nasdaq using the ticker symbol "BNCWZ" beginning April 15, 2026. No shares of preferred stock were issued or outstanding at July 31, 2026 or April 30, 2026. In December 2025, the Board designated 200,000 shares of preferred stock as Series C Junior Participating Preferred Stock in connection with the Stockholder Rights Agreement described below; no shares of that series have been issued. The Company's equity at July 31, 2026 included:
Successor
Shares
Potential Shares(A)
AuthorizedIssued and Outstanding
Warrants(B)
Stock Rights(C)
RSUs(D)
Options(E)
Total
Common stock(F)
200,000,000 
41,173,850 
62,305,007 
— 
364,966 
16,265 
103,860,088 
Preferred stock(G)(H)
25,000,000 
— 
— 
200,000 
— 
— 
200,000 
Total
225,000,000 
41,173,850 
62,305,007 
200,000 
364,966 
16,265 
104,060,088 
A.Excludes shares issuable upon conversion of the Convertible Promissory Note (Note 5), which is convertible only at the holder's election on or before June 1, 2027. The share count varies with the CAD/USD exchange rate.
B.Includes unexercised Public Warrants and PIPE Warrants.
C.Represents the 200,000 shares of Series C Junior Participating Preferred Stock reserved for issuance upon exercise of the Series C Junior Participating Preferred Stock Rights, subject to the terms of the Stockholder Rights Agreement described below. The Series C Junior Participating Preferred Stock Rights were not exercisable at July 31, 2026, and no shares of Series C Junior Participating Preferred Stock have been issued.
D.Restricted stock units ("RSUs") represent the right to receive, upon vesting and lapse of restrictions, one share of the Company's common stock for each unit granted.
E.Stock options provide optionholders the opportunity to purchase shares of the Company's common stock in the future at the exercise price of the option.
F.Par value of $0.00001 per share. Each shareholder of common stock is entitled to one vote per share, ratable dividends, when and as declared by the Board, and liquidation preferences subordinate to preferred stock.
G.Represents up to 200,000 shares of Series C Junior Participating Preferred Stock with a par value of $0.00001 per share, reserved for issuance upon exercise of the associated preferred stock purchase rights. Each Series C Junior Participating Preferred Stock Rights entitles the holder to purchase 1/1000th of a share of Series C Junior Participating Preferred Stock, and each share of Series C Junior Participating Preferred Stock is designed to be economically equivalent to 1,000 shares of common stock. After the first issuance of a share, or fraction of a share, of Series C Junior Participating Preferred Stock, shareholders of Series C Junior Participating Preferred Stock are entitled to quarterly dividends in an amount per share equal to the greater of (i) $1,000 and (ii) 1,000 times the aggregate per share amount of all cash dividends, plus 1,000 times the aggregate per share amount of all non-cash dividends or other distributions other than a dividend payable in shares of common stock, paid in-kind, subject to adjustment for stock splits, stock dividends, and combinations. Holders are similarly entitled to preferential amounts on liquidation and to equivalent consideration in a merger or consolidation At July 31, 2026, no Series C Junior Participating Preferred Stock Rights were exercised and the Company had not issued any shares of Series C Junior Participating Preferred Stock.
H.The Board is authorized, subject to the laws of the state of Nevada or other applicable law and without further stockholder action, to designate one or more series of preferred stock and to fix the number of shares, designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock, including, but not limited to, dividend, conversion, and voting rights as well as redemption terms and liquidation preferences. In the event of the Company's liquidation, holders of preferred stock are entitled to a distribution per share in the amount of the liquidation preference, if any, fixed or determined in accordance with the terms of such preferred stock plus, if applicable, an amount per share equal to accumulated and unpaid dividends in respect of such preferred stock, whether or not earned or declared, to the date of such distribution before any payment or distribution on the common stock or any other class of stock junior to the preferred stock upon liquidation. Neither the sale, lease, or exchange of all or substantially all of the property and assets of the Company, nor any consolidation or merger of the Company, is deemed to be a liquidation for the purposes of preferred stock liquidation preferences.
Predecessor Equity
For periods prior to the Acquisition Date, the Company presents the equity of Fat Panda as the accounting predecessor, which consisted of 1,410 shares of unlimited authorized common stock with no par value, which are different than the Company's equity and therefore not comparable. While the Company eliminates the equity it holds in Fat Panda as a wholly-owned subsidiary, the Company issued 39,000 shares of its common stock to the Selling Fat Panda Shareholders as part of the consideration paid in the Fat Panda Acquisition (Note 2).
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Stockholder Rights Agreement
On December 26, 2025, the Board adopted a limited duration shareholder rights agreement ("Stockholder 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 Stockholder Rights Agreement, the Company issued, as a dividend, one right ("Series C Junior Participating Preferred Stock Right") for each share of the Company's common stock held at January 8, 2026, and for each share of certain outstanding common stock warrants. Each Series C Junior Participating Preferred Stock Right allows its holder to purchase 1/1000th of a share of Series C Junior Participating Preferred Stock at an exercise price of $33.50 per Series C Junior Participating Preferred Stock Right. Each share of Series C Junior Participating Preferred Stock is equivalent to 1,000 shares of the Company's common stock. The Series C Junior Participating Preferred Stock Rights have a limited term and will expire on December 26, 2026, or earlier, as specified in the Stockholder Rights Agreement.
Under the terms of the Stockholder Rights Agreement, if any person or group obtains beneficial ownership of 15.0% or more of the Company's outstanding common stock ("Acquiring Party"), subject to certain exceptions, including an exception for current holders exceeding this percentage who do not acquire additional shares, the Series C Junior Participating Preferred Stock Rights become exercisable. All holders of Series C Junior Participating Preferred Stock Rights, excluding those held by the Acquiring Party that will become void and non-exercisable, are entitled to purchase shares of the Company's common stock at a 50.0% discount to the prevailing market price, at an exchange ratio of one share of common stock, or one one-thousandth of a share of Series C Junior Participating Preferred Stock (or of another class or series of preferred stock with equivalent rights, preferences, and privileges), per outstanding Series C Junior Participating Preferred Stock Right, subject to adjustment.
Equity Activities
Share Repurchase Program
In September 2025, the Board approved a share repurchase program to repurchase up to $250.0 million total dollar value in outstanding shares of the Company's common stock through open market purchases, privately-negotiated transactions, accelerated share repurchases, or otherwise, in accordance with applicable federal securities laws, based on available capital resources and other financial and operational performance metrics, market conditions, securities law limitations, and other factors. There is no minimum number of shares required to be repurchased under the share repurchase program, and the share repurchase program may be suspended or discontinued at any time. The Company repurchased and retired 1,434,112 shares, at a weighted-average price of $2.63, for a total of $3.8 million, excluding $— million transaction costs, during the three months ended July 31, 2026, presented as a reduction of stockholders' equity. At July 31, 2026, the Company had repurchased and retired a total of 4,676,322 shares equaling a total dollar value of $21.1 million, excluding transaction costs, under the program.
ATM Program
In August 2025, the Company entered into an at-the-market offering agreement ("ATM Program") with Cantor Fitzgerald & Co. ("ATM Agent"), pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $50.0 million from time to time through the ATM Agent, acting as the Company's sales agent or principal. Sales under the ATM Program, if any, will be made by means of ordinary brokers' transactions on Nasdaq or otherwise at market prices prevailing at the time of sale, or at prices related to prevailing market prices. Under the ATM Program, the Company has provided the ATM Agent with customary indemnification rights, and the ATM Agent will be entitled to a commission of up to 3.0% of the gross proceeds from each sale of shares made through, or to, the ATM Agent. Since the inception of the ATM Program through July 31, 2026, the Company has sold and issued 856,275 shares at a total dollar value of $13.1 million, gross of $0.2 million transaction costs, under the ATM Program. The Company did not sell any shares under the ATM Program during the three months ended July 31, 2026.
PIPE Transaction
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 its common stock and the PIPE Warrants in a private placement:
●41,754,478 shares of common stock at a purchase price of $10.10 per share;
●7,750,510 pre-funded warrants, each immediately exercisable at an exercise price of $0.00001 per share ("Pre-funded Warrants"); and
●49,504,988 Stapled Warrants, each exercisable at $15.15 per share.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Additionally, the Company issued the following fully-vested compensatory warrants to 10X BNB Cayman Sponsor, an affiliate of the Asset Manager, and YZi Labs Management Ltd. (together, the "Strategic Advisors"):
●5,940,598 warrants issued to the Strategic Advisors, valued at $105.6 million, to provide strategic advice and guidance relating to the Company's business, operations, growth initiatives and industry trends in the digital asset technology sector ("Strategic Advisor Warrants"); and
●990,099 warrants issued to the Asset Manager, valued at $15.0 million, under the AMA ("Asset Manager Warrants").
On August 5, 2025, the Company closed the PIPE Transaction, which was settled through a combination of cash, cash equivalents, and digital assets. The Company received $409.9 million in cash and cash equivalent proceeds, net of $23.9 million of issuance costs, and $66.3 million in digital assets, consisting of USDT and BTC. The Company allocated $305.0 million in proceeds to warrant liabilities based on the fair value of the Stapled Warrants with the remaining gross proceeds of $195.1 million recorded in additional paid-in capital, net of $9.3 million allocated issuance costs. To allocate total issuance costs of $23.9 million, the Company valued Pre-funded Warrants and Strategic Advisor Warrants at the fair value of its common stock given the nominal exercise price. Issuance costs of $14.6 million were allocated to the Stapled Warrants and expensed in August 2025.
Warrants
The Company has issued the following outstanding warrants at July 31, 2026:
Nasdaq SymbolIssue DateExpiry Date
Warrants Outstanding(A)
Exercise Price
Stapled Warrants(B)
BNCWZ
August 2025
August 2028
49,504,988 
$
15.15 
Pre-funded Warrants(C)
n.a.
August 2025
n.a.
7,750,510 
— 
Strategic Advisor Warrants(D)
n.a.
August 2025
August 2030
3,564,362 
— 
Asset Manager Warrants
n.a.
August 2025
August 2030
990,099 
10.23 
Public Warrants
BNCWW
February 2022
February 2027
4,909,408 
60.00 
2022 Underwriter Warrants(E)
n.a.
February 2022
February 2027
1,031,162 
60.51 
A.Each warrantholder may exercise their warrant for one share of the Company's common stock, except for the Public Warrants and 2022 Underwriter Warrants that are exercisable for 1/12th and 1/12th of a common share per warrant, respectively.
B.The Company holds a mandatory exercise right to force exercise of the Stapled Warrants if the volume-weighted average price of its common stock exceeds $20.20 for 20 out of 30 consecutive trading days.
C.Pre-funded Warrants have an exercise price of $0.00001 per share and do not have an expiration date.
D.The Strategic Advisor Warrants have an exercise price of $0.00001 per share.
E.Includes 761,670 and 269,492 warrants with exercise prices of $60.00 and $61.95 held by underwriters and their employees, respectively.
During the period from June 7, 2025 through July 31, 2025, 1,434,418 and 21,065 Public Warrants and 2022 Underwriter Warrants were exercised for 17,582 and 66 of the Company's common shares, representing $42.5 million and $0.6 million fair value at date of grant, respectively.
At July 31, 2026, outstanding and exercisable warrants had the following characteristics:
Intrinsic value
$
30,097 
Weighted-average exercise period (in years)
2.2
    30         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Equity-Based Compensation
The Compensation Committee of the Board, which must approve all grants and is composed entirely of independent members of the Board, has granted stock options and RSUs to its employees, consultants, officers, and members of the Company's Board under the following equity incentive plans at July 31, 2026:
Common Shares EquivalentsOutstanding
Plan(A)
AuthorizedIssuedRemaining AvailableRSUs
Options(B)
Total
2026 Inducement Plan(C)
1,000,000 
363,636 
636,364 
363,636 
— 
363,636 
2021 Equity Incentive Plan(D)
55,556 
35,927 
7,130 
1,330 
11,169 
12,499 
2017 Equity Incentive Plan(E)
27,778 
13,641 
9,041 
— 
5,096 
5,096 
Total
1,083,334 
413,204 
652,535 
364,966 
16,265 
381,231 
A.The Predecessor did not adopt any equity incentive plans or otherwise issue equity-based compensation.
B.The Company issued options with a 10-year contractual term and a vesting period ranging from one month to thirty-two months. Options outstanding include:
NQSOISOTotal
2021 Equity Incentive Plan
7,768 
3,401 
11,169 
2017 Equity Incentive Plan
5,096 
— 
5,096 
Total
12,864 
3,401 
16,265 
C.In April 2026, the Board approved the 2026 Inducement Plan, which permits the Compensation Committee to grant equity-based awards, including stock options, stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), and RSUs.
D.The 2021 Equity Incentive Plan permits the Board to grant incentive stock options ("ISOs"), non-qualified stock options ("NQSOs"), SARs, RSAs, RSUs, and other equity linked awards. If an equity award expires, or otherwise terminates without having been exercised in full, or settled in cash instead of the issuance of shares, then shares subject to such awards are again available for grant under the 2021 Equity Incentive Plan.
E.The Company may modify or amend the 2017 Equity Incentive Plan without shareholder approval, which permits the Compensation Committee to grant equity-based awards, including stock options, SARs, RSAs, RSUs, shares granted as a bonus or in lieu of another award, and other stock-based performance awards. Any shares subject to forfeited, expired, or otherwise terminated awards without issuance are again available for grant under the 2017 Equity Incentive Plan.
Activities
The Company presents equity-based compensation within the following line items in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):
Successor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025
Selling, general and administrative expenses
$
67 
$
7 
The following table summarizes the change in equity-based compensation awards to employees and members of the Company's Board.
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Employees
RSUsOptions
Grant Date Fair Value Per UnitWeighted Average Per Share
UnitsUnderlying SharesExercise PriceRemaining Contractual Term (Years)Aggregate Intrinsic Value
Outstanding at June 7, 2025
— 
$
— 
18,296 
$
83.19 
Granted
— 
— 
2,700 
7.74 
Forfeited and cancelled
— 
— 
(600)
8.05 
Outstanding at July 31, 2025
— 
— 
20,396 
74.68 
5.6
$
— 
Outstanding at April 30, 2026
363,636 
2.75 
18,460 
79.45 
Forfeited and cancelled
— 
— 
(146)
7.74 
Expired
— 
— 
(2,374)
126.54 
Outstanding at July 31, 2026
363,636 
2.75 
15,940 
73.16 
2.5
$
— 
Exercisable at July 31, 2026
15,940 
73.16 
2.5
$
— 
Board Members
RSUsOptions
Grant Date Fair Value Per UnitWeighted Average Per Share
UnitsUnderlying SharesExercise PriceRemaining Contractual Term (Years)Aggregate Intrinsic Value
Outstanding at June 7, 2025
1,529 
$
8.18 
4,760 
$
113.34 
Vested(A)
(1,529)
8.18 
— 
— 
Expired
— 
— 
(1,111)
52.20 
Outstanding at July 31, 2025
— 
— 
3,649 
131.95 
4.4
$
— 
Outstanding at April 30, 2026
1,330 
9.40 
3,649 
131.95 
Forfeited and cancelled
— 
— 
(3,324)
138.08 
Outstanding at July 31, 2026
1,330 
9.40 
325 
69.48 
4.0
$
— 
Exercisable at July 31, 2026
325 
69.48 
4.0
$
— 
A.Includes accelerated vesting of 1,529 RSUs in July 2025.
Unrecognized Compensation Expense
At July 31, 2026, the Company has not yet recognized compensation expense for the following awards:
Vesting ConditionWeighted-Average Recognition Period (Years)SharesUnrecognized Compensation Expense
Time-based
1.9
364,966 
$
923 
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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Basic and Diluted Earnings (Loss) per Share
The Company computes earnings per share ("EPS") in accordance with ASC 260, Earnings per Share. 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.
The following table sets forth the computation of basic and diluted earnings per share:
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Net income (loss) available to common shareholders
Net income (loss)
$
(11,400)
$
(1,186)
$
19 
Net income (loss) available to common shareholders, basic
(11,400)
(1,186)
19 
Net income (loss) available to common shareholders, basic and diluted
$
(11,400)
$
(1,186)
$
19 
Weighted average shares outstanding
Common shares outstanding
41,599,572 
842,852 
1,410 
Common share equivalents(A)
11,314,872 
— 
— 
Weighted average shares outstanding, basic and diluted
52,914,444 
842,852 
1,410 
Earnings (loss) per share
Basic
$
(0.22)
$
(1.41)
$
13.48 
Diluted
$
(0.22)
$
(1.41)
$
13.48 
A.Includes fully-vested, Pre-funded Warrants issued for nominal exercise prices and Strategic Advisor Warrants.

The following table summarizes the outstanding securities that were not included in the computation of diluted income (loss) per common share as they were anti-dilutive:
Successor
Predecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Warrants
Stapled Warrants
49,504,988 
— 
— 
Asset Manager Warrants
990,099 
— 
— 
Public Warrants
409,117 
519,959 
— 
2022 Underwriter Warrants
85,931 
87,558 
— 
Unvested RSUs(A)
13,212 
1,175 
— 
Stock Options
16,574 
22,109 
— 
Convertible Promissory Note(B)
42,426 
39,850 
— 
Total
51,062,347 
670,651 
— 
A.Incremental shares computed using the treasury stock method.
B.Denominator adjustment computed using the if-converted method.

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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
The following table summarizes the Company's weighted-average shares of all the potential equity (both dilutive and antidilutive) on a fully diluted basis:
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Common shares
41,599,572 
842,852 
1,410 
Common share equivalents
Pre-funded Warrants
7,750,510 
— 
— 
Strategic Advisor Warrants
3,564,362 
— 
— 
52,914,444 
842,852 
1,410 
Dilutive Shares
Warrants(A)
Stapled Warrants
49,504,988 
— 
— 
Asset Manager Warrants
990,099 
— 
— 
Public Warrants
409,117 
519,959 
— 
2022 Underwriter Warrants
85,931 
87,558 
— 
Total warrants
50,990,135 
607,517 
— 
Unvested RSUs
364,966 
1,175 
— 
Stock Options
16,574 
22,109 
— 
Convertible Promissory Note(B)
42,426 
39,850 
— 
Total dilutive shares
51,414,101 
670,651 
— 
Total
104,328,545 
1,513,503 
1,410 
A.Includes warrants that are out-of-the-money. Amounts shown represent common stock equivalents assuming warrant exercise on a cash basis.
B.Assumes note conversion at the weighted average foreign exchange rate for each period.

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Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
The following table summarizes the Company's common shares outstanding as well as potential shares at each period-end:
July 31, 2026April 30, 2026
(Unaudited)(Audited)
Common shares
41,173,850 
42,607,962 
Common share equivalents
Pre-funded Warrants
7,750,510 
7,750,510 
Strategic Advisor Warrants
3,564,362 
3,564,362 
52,488,722 
53,922,834 
Dilutive Shares
Warrants(A)
Stapled Warrants
49,504,988 
49,504,988 
Asset Manager Warrants
990,099 
990,099 
Public Warrants
409,117 
409,117 
2022 Underwriter Warrants
85,931 
85,931 
Total warrants
50,990,135 
50,990,135 
Unvested RSUs
364,966 
364,966 
Stock Options
16,265 
22,109 
Convertible Promissory Note(B)
41,771 
38,500 
Total dilutive shares
51,413,137 
51,415,710 
Total
103,901,859 
105,338,544 
A.Includes warrants that are out-of-the-money. Amounts shown represent common stock equivalents assuming warrant exercise on a cash basis.
B.Assumes note conversion based upon foreign exchange in effect at July 31, 2026.
    35         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 7 — Variable Interest Entities
Consolidated VIEs
The Company consolidates VIEs in which the Company is deemed to have both the power to direct the most significant activities of the entities and the right to receive benefits, or the obligation to absorb losses, that could potentially be significant to the entities. The Company did not identify any VIEs that it does not consolidate.
The table below presents the carrying value and classification of the assets and liabilities of VIEs consolidated within the Condensed Consolidated Balance Sheets, after elimination of intercompany balances:
July 31, 2026April 30, 2026
(Unaudited)(Audited)
Total AssetsTotal LiabilitiesTotal AssetsTotal Liabilities
BNC BNB Cayman
$
304,507 
$
— 
$
319,622 
$
26 
CEA BRS LLC
4,877 
— 
975 
— 
Total
$
309,384 
$
— 
$
320,597 
$
26 
CEA BRS LLC and BNC BNB Cayman
CEA BRS LLC, a wholly-owned subsidiary of CEA Industries Inc., and its subsidiary, BNC BNB Cayman, hold the Company's unrestricted digital assets (Note 4), but do not otherwise conduct activities sufficient to finance their activities without additional subordinated financial support. Therefore, the Company considers each entity as a VIE. CEA Industries Inc. consolidates both entities as it has the power to direct the activities that most significantly impact each entity's economic performance, which, subject to the terms of the AMA, include the management of the digital assets held by each entity.
    36         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 8 — Fair Value Measurement
The carrying values and fair values of the Company's assets or liabilities recorded at fair value on a recurring or non-recurring basis, as well as other financial instruments for which fair value is disclosed, at July 31, 2026 and April 30, 2026 were as follows:
Fair Value
Carrying ValueLevel 1Level 2Level 3Total
July 31, 2026 (Unaudited)
Assets:
Cash and cash equivalents
$
7,084 
$
7,084 
$
— 
$
— 
$
7,084 
Digital assets
304,507 
304,507 
— 
— 
304,507 
Liabilities:
Related party note payable, current
1,798 
— 
— 
1,798 
1,798 
Warrants
12,049 
— 
— 
12,049 
12,049 
$
325,438 
$
311,591 
$
— 
$
13,847 
$
325,438 
April 30, 2026 (Audited)
Assets:
Cash and cash equivalents
$
3,061 
$
3,061 
$
— 
$
— 
$
3,061 
Digital assets
319,622 
319,622 
— 
— 
319,622 
Liabilities:
Related party note payable, current
1,083 
— 
— 
1,083 
1,083 
Other current related party liabilities, at fair value
558 
— 
— 
558 
558 
Warrants
22,031 
— 
— 
22,031 
22,031 
Related party note payable, non-current
753 
— 
— 
753 
753 
$
347,108 
$
322,683 
$
— 
$
24,425 
$
347,108 
Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value.
The Company's liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:
Liabilities
Warrants
Cash Incentive Award(A)
April 30, 2026
$
22,031 
$
558 
Transfers(B)
Transfers to Level 3
— 
— 
Transfers from Level 3
— 
— 
Gains (losses) included in net income(C)
Gain on change in fair value of warrant liability
(9,982)
— 
Other affiliate operating expenses
— 
(20)
Payments, net
— 
(538)
July 31, 2026
$
12,049 
$
— 
A.See Note 10 for information regarding this affiliate agreement.
B.Transfers are assumed to occur at the beginning of the respective period.
C.Increases in the fair value of liabilities represent losses included in net income.
    37         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Liabilities Carried at Fair Value on a Recurring Basis
Stapled Warrants
The Company equally weights observed market pricing data of publicly-traded Stapled Warrants with a Monte-Carlo option pricing model to estimate their fair value, using the following inputs:
July 31,
2026
Stock price
$
2.66 
Expected volatility
105.0 
%
Risk-free interest rate
4.2 
%
Dividend yield
— 
%
Holding period (years)
2.0
Assets and Liabilities Carried at Fair Value on a Non-Recurring Basis
Identified Intangibles
In connection with the Company's tradename impairment assessment (Note 2), the Company estimates the cash flows that it does not need to pay to use a tradename to generate revenues using an estimated, market-based percentage of expected revenues. If the carrying amount of the intangible asset is higher than those aggregate, undiscounted cash flows, the Company impairs the intangible asset to its estimated fair value equal to those discounted cash flows.
The Company initially records identified intangibles at fair value at initial measurement and on the date of impairment, if any, else the Company reports finite-lived identified intangibles at their amortized cost basis, which may be different from their estimated fair value at a reporting date.
Goodwill
In connection with the Company's goodwill impairment assessment (Note 2), the Company valued its Fat Panda reporting unit using a weighted valuation methodology, which incorporated (a) an income approach using a discounted cash flow analysis, and (b) a market approach using publicly-traded companies similar to the Company. The Company records goodwill at its fair value at initial measurement and on the date of impairment, if any, else the Company reports goodwill at its lowest, last known fair value, which may be different from its estimated fair value at a reporting date.
Assets and Liabilities for which Fair Value Only Disclosed
Debt Obligations
The Company determined the carrying value of current debt and notes payable approximates fair value given the short-term nature of the borrowings.
Equity-based Compensation
Options
The fair value of each option grant is estimated at the grant date using the Black-Scholes option-pricing model. The following table summarizes the assumptions used to estimate the grant‑date fair value of options issued during the period from June 7, 2025 through July 31, 2025:
Stock price
$
7.74 
Expected volatility
132.4 
%
Risk-free interest rate
4.4 
%
Dividend yield
— 
%
Holding period (years)
1.0
    38         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
RSUs
The Company values RSU awards at the fair value of the underlying shares of the Company's common stock as such awards are entitled to dividends and are only subject to time-based vesting.
    39         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 9 — Taxes
The Company is subject to taxation in the United States (federal and various state jurisdictions), Canada (federal and provincial), and the Cayman Islands. The Cayman Islands does not impose corporate income tax, and, accordingly, the statutory income tax rate for the Company's Cayman Islands subsidiary is zero percent. The U.S. federal statutory rate is 21.0%, and the Canadian combined federal and provincial statutory rate is approximately 27.0% (Manitoba).
Effective Income Tax Rate Reconciliation
The Company's income (loss) before income taxes, income tax expense (benefit), and effective income tax rate were as follows:
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Income (loss) before income tax expense (benefit)
$
(11,305)
$
(1,246)
$
21 
Income tax expense (benefit)
95 
(60)
2 
Effective income tax rate
(0.8)
%
4.8 
%
10.7 
%
The change in the effective tax rate for the three months ended July 31, 2026, compared to the period from June 7, 2025 through July 31, 2025 and the period from May 1, 2025 through June 6, 2025, was primarily due to (i) the impact of foreign earnings, including earnings of the Company's Canadian subsidiary that are taxed at the Canadian combined federal and provincial statutory rate (which is higher than the U.S. statutory rate) and earnings of the Company's Cayman Islands subsidiary that are not subject to income tax, and (ii) changes in the valuation of warrants treated as liabilities under U.S. GAAP.
Net Operating Loss Carryforwards
At July 31, 2026, the Company had approximately $75.0 million of U.S. federal and state net operating loss ("NOL") carryforwards primarily related to its legacy U.S. operations. Approximately $11.2 million of these NOL carryforwards will expire, if not utilized, in calendar years 2034 through 2037. NOLs generated in tax years beginning after December 31, 2017 do not expire but may be used to offset no more than 80.0% of taxable income in any given year. State NOL carryforwards have varying expiration periods that range from 5 to 20 years, depending on the jurisdiction.
The Company's Canadian subsidiary had no material NOL carryforwards at July 31, 2026. The Company's Cayman Islands subsidiary is not subject to income tax and accordingly does not have NOL carryforwards.
Section 382 Considerations
Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, and applicable state law, the Company's ability to utilize its pre-change NOL carryforwards may be limited if the Company experiences an "ownership change," generally defined as a greater than 50.0% cumulative change in equity ownership by value over a rolling three-year period. The Company evaluated its equity transactions, including the PIPE Transaction, and determined that an ownership change occurred at the time of the PIPE Transaction. As a result, the Company’s ability to utilize a portion of its pre-change NOL carryforwards is subject to annual limitations under Section 382. Based on the application of these limitations and projected taxable income, management determined that approximately $3.0 million of such NOL carryforwards is expected to expire unutilized prior to expiration. Accordingly, the related tax benefits have not been recognized as deferred tax assets.
Valuation Allowance
The Company assesses, on a quarterly basis, whether it is more likely than not that its deferred tax assets will be realized. In making this determination, the Company considers all available positive and negative evidence, including its history of cumulative losses, projected future taxable income, the period over which deferred tax assets are expected to reverse, and the availability of tax-planning strategies. The weight given to each piece of evidence is commensurate with the extent to which it can be objectively verified.
    40         
Table of Contents    CEA Industries Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
At July 31, 2026, based primarily on the existence of cumulative losses in recent years and the inherent uncertainty of forecasting future taxable income for its U.S. operations, the Company concluded that it is more likely than not that its U.S. federal and state deferred tax assets will not be realized. Accordingly, the Company has recorded a full valuation allowance against its U.S. net deferred tax assets. The Company intends to maintain the valuation allowance until sufficient positive evidence exists to support its reversal. No valuation allowance has been recorded against the deferred tax assets of the Company's Canadian subsidiary, as the Company has determined it is more likely than not that those deferred tax assets will be realized.
Uncertain Tax Positions
At July 31, 2026 and April 30, 2026, the Company had no unrecognized tax benefits, and has recorded a $0.2 million reserve for Canadian excise taxes. The Company does not anticipate any significant change in its uncertain tax benefit balance during the twelve months following July 31, 2026.
The Company's policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company has not accrued any interest or penalties related to uncertain tax positions at July 31, 2026.
Open Tax Years
The Company files income tax returns in U.S. federal, various U.S. state, and Canadian federal and provincial jurisdictions. The following tax years remain subject to examination by the relevant taxing authorities:
Open Tax Years Ended
April 30,
JurisdictionFromThrough
United States
Federal
2022
2027
State
2021
2027
Canada(A)
2023
2027
Cayman Islands(B)
n.a.
n.a.
A.Includes both federal and provincial tax years.
B.No income taxes assessed in jurisdiction.
Tax Legislation
One Big Beautiful Bill Act
On July 4, 2025, the President signed H.R. 1, the One Big Beautiful Bill Act ("OBBB Act"), into law. The OBBB Act includes several changes to U.S. federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and experimental expenditures, reinstatement of 100.0% bonus depreciation, and more favorable rules for determining the limitation on business interest expense.
The OBBB Act also includes certain changes to the U.S. taxation of foreign activity, including changes to foreign tax credits, the global intangible low-taxed income ("GILTI") regime, the foreign-derived intangible income ("FDII") regime, and the base erosion and anti-abuse tax ("BEAT"), among other changes. These foreign-related changes are generally effective for tax years beginning after December 31, 2025.
The Company has accounted for the impact of the OBBB Act, where required, in the period of enactment. The OBBB Act did not have a material impact on the Company's consolidated financial statements for the fiscal period ended July 31, 2026, and the Company does not currently expect the OBBB Act to have a material impact on its consolidated income tax provision in future periods.
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 10 — Transactions with Affiliates and Affiliated Entities
CEO Transition Agreement
On March 16, 2026, the Company, Mr. David Namdar, its Chief Executive Officer, and Abound LLC, a Puerto Rico limited liability company pursuant to which Mr. Namdar performed services for the Company, entered into an agreement ("Transition Agreement"), approved by the Board, that awarded Mr. Namdar (a) a $375,000 consulting fee for services Mr. Namdar performed for the Company since August 5, 2025, but for which the Company had not provided any compensation, (b) a $50,000 monthly consulting fee as compensation for services provided from the date of the Transition Agreement until his separation from the Company in July 2026, and (c) a $538,318 lump sum cash payment ("Cash Incentive Award") in lieu of an equity incentive award. In addition, the Company paid Mr. Namdar $900,000 at the date of separation in July 2026 in exchange for restrictive conditions, including confidentiality, non-compete, non-solicitation, non-disparagement, and non-assistance to litigants restrictions.
The Company recorded compensation expense of $135,484 within "Selling, general and administrative expenses" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and paid $1,623,802 in cash to Mr. Namdar through Abound LLC during the three months ended July 31, 2026.
AMA Controlled by a Former Board Member
Mr. Hans Thomas, a member of the Board until March 2026, owns the majority of the Asset Manager. Under the AMA (Note 1), the Company incurred management fees of $1.1 million during the three months ended July 31, 2026, presented as "Management fees to affiliate" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). At July 31, 2026, the Company accrued unpaid asset management fees of $1.4 million within "Other current related party liabilities" in the Condensed Consolidated Balance Sheets, and the Asset Manager and its affiliates hold all of the Asset Manager Warrants. See Note 11 regarding AMA litigation.
Seller Note Payable to Employee
The Company issued the Tax Indemnification Note to, and created the Escrow Deposit for the potential benefit of, the Selling Fat Panda Shareholders, one of whom is the President of Fat Panda, a current employee of the Company. In addition, the Company issued the Fat Panda Promissory Notes to the President of Fat Panda (Note 2). During the three months ended July 31, 2026 and the period from June 7, 2025 through July 31, 2025, the Company incurred interest expense totaling $25,813 and $15,516, respectively, presented as "Interest expense to affiliate" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), of which the Company paid $12,853 and $7,758. See Note 5 for additional detail regarding these notes payable, which the Company presents as "Related party note payable" in the Condensed Consolidated Balance Sheets. The Company does not reflect the Escrow Deposit in these Unaudited Condensed Consolidated Financial Statements as a third-party administrator controls those funds; however, the release of the Escrow Deposit, which depends upon finalization of working capital adjustments at the Acquisition Date, may impact the purchase price the Company paid for Fat Panda in the Fat Panda Acquisition (Note 2).
Agreements and Transaction with a Board Member
On June 19, 2024, Mr. Nicholas J. Etten, a former member of the Board, and the Company entered into a consulting agreement (the "2024 Agreement"), which was replaced on July 28, 2025 with a new consulting agreement (the "2025 Agreement"), whereby Mr. Etten would provide advisory services related to acquisition sourcing, strategic consulting, and investor coordination, and would be compensated at a rate of $2,500 per week, subject to downward adjustment based on hours worked. During the period from June 7, 2025 through July 31, 2025, the Company paid $10,250 to Mr. Etten for consulting services under the 2025 Agreement. In January 2026, the Company identified excess payments totaling $6,300 made to Mr. Etten under the 2024 Agreement which Mr. Etten refunded to the Company in April 2026.
Mr. Etten terminated the 2025 Agreement with effect from January 1, 2026, and no amounts were payable to him thereunder at July 31, 2026. On June 10, 2026, Mr. Etten resigned from the Board and entered into a separation agreement providing for a payment of $85,000 and reimbursement of up to $50,000 of legal fees, in exchange for a release of claims and customary covenants. He will also assist with the Company's ongoing litigation matters for eighteen months at $450 per hour for time exceeding ten hours per month. No amounts were incurred under that provision during the three months ended July 31, 2026. The Company recognized $85,000 during the three months ended July 31, 2026, $20,750 during the period June 7, 2025 through July 31, 2025, and $10,500 during the period May 1, 2025 through June 6, 2025 of related expense within "Selling, general and administrative expenses," none of which remained unpaid at July 31, 2026 aside from reimbursable legal costs.
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Severance Agreement with a Former Officer and Board Member
On May 4, 2026, Mr. Anthony K. McDonald resigned as the Company's President and as a member of the Board. In connection with his departure, the Company and Mr. McDonald entered into a severance agreement under which, in exchange for a release of claims and customary post-employment covenants, the Company agreed to pay Mr. McDonald $250,000 in substantially equal bi-weekly installments over twelve months and reimbursement for legal fees of $10,000.
During the three months ended July 31, 2026, the Company recognized $250,000 of expense within "Selling, general and administrative expenses" related to the foregoing, of which $57,692 was paid. At July 31, 2026, $192,308 remained unpaid and is presented within "Accounts payable and accrued expenses" in the Condensed Consolidated Balance Sheets. All remaining amounts are payable within twelve months of July 31, 2026. Additionally, during the three months ended July 31, 2026, the company paid $10,000 for legal fees on behalf of Mr. McDonald incurred in connection with the negotiation of the severance agreement.
Cooperation Agreement with YZILabs
On June 23, 2026, the Company entered into a cooperation agreement (the "Cooperation Agreement") with YZi Labs Management Ltd. ("YZILabs") which held 2,150,481 shares of the Company's common stock and 21,215,863 warrants at each of July 31, 2026 and April 30, 2026. Under the Cooperation Agreement, YZILabs terminated its consent solicitation and withdrew its related demands, and the parties exchanged mutual releases of claims arising from events occurring prior to that date. The Company increased the size of the Board to six directors and appointed three directors designated by YZILabs, and agreed to form a chief executive officer search committee. YZILabs agreed to customary standstill restrictions and to vote its shares in accordance with the Board's recommendations, in each case subject to the exceptions set forth in the Cooperation Agreement, which remains in effect until the dates specified therein. Neither party paid any consideration to the other under the Cooperation Agreement, and each party bore its own costs. As a result of the board designation and replacement rights held by YZILabs, the Company considers YZILabs a related party. YZILabs has represented that neither it nor its affiliates has paid or will pay any compensation to any of the directors it designated in respect of their service on the Board.
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 11 — Commitments and Contingencies
The Company was subject to the following commitments and contingencies at July 31, 2026:
Indemnifications
In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and that provide general indemnifications, including indemnifications 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. The Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on the Company's experience, the Company expects the risk of material loss to be remote.
Litigation
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 reasonably estimated. An unfavorable outcome to any matter, if material, could adversely affect the Company's financial condition, liquidity, or results of operations.
AMA Litigation
The Company is party to the AMA with the Asset Manager, which by its terms continues for a twenty-year term expiring in 2045 and provides for a management fee representing a flat fee of 1.4% of the fair value of assets within the Company's DAT Strategy. The AMA provides that, if the Company terminates the AMA during the term for any reason, or if the Asset Manager terminates the AMA following a material breach by the Company, the Company shall pay the Asset Manager, as liquidated damages, all fees and other compensation that would have accrued through the end of the term, payable monthly in accordance with the agreement's payment provisions. The Asset Manager is controlled by Mr. Hans Thomas, who served as a member of the Company's Board of Directors until March 2026.
On May 22, 2026, the Company filed a complaint against the Asset Manager in the United States District Court for the District of Delaware seeking a declaration that the AMA is void from inception as unconscionable and that all fees paid under it be returned to the Company and, in the alternative, a declaration that the liquidated damages provision in Section 13(a) is an unenforceable penalty under Delaware law. On July 28, 2026, the Asset Manager moved to dismiss the complaint, contending among other things that Section 13(a) is an enforceable liquidated damages provision and that any amount payable under it would be paid monthly over the remainder of the term rather than in a single accelerated payment. The Company filed its opposition to the motion on August 14, 2026. The motion remains pending, and the Company cannot predict its outcome or the timing of any ruling.
The Company has not terminated the AMA, and no amount is presently due under Section 13(a). The provision nonetheless remains in effect and its enforceability has not been determined, which constrains the Board's ability to terminate or restructure the Company's treasury management arrangements and continues to affect the strategic alternatives available to the Company.
While the Company accrues current monthly management fees under the AMA (Note 10), it has not recorded a liability in respect of Section 13(a). Any obligation under the provision would arise only upon a termination that has not occurred. Further, the Company is unable to estimate the amount of any possible loss, or range of possible loss, since the amount of any such obligation would depend on the resolution of the pending litigation regarding the provision's enforceability. An adverse determination as to enforceability, followed by a termination of the AMA, could result in obligations material to the Company's financial condition, results of operations, and liquidity.
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Abraham Gomez Matter
In February 2026, Abraham Gomez, an individual, filed a civil complaint in the Superior Court of the State of California, County of Tulare, Abraham Gomez v. CEA Industries, Inc., et al. (Case No. VCU331863), against the Company and Mr. Hans Thomas, a former member of the Board. 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 $2.8 million), together with interest, attorneys' fees, costs and other relief.
On March 27, 2026, the Company removed the action to the United States District Court for the Eastern District of California, where it is pending as Case No. 1:26-cv-02403-KES-SAB. On April 3, 2026, the Company moved to dismiss the complaint for lack of personal jurisdiction and for failure to state a claim upon which relief can be granted. The motion was fully briefed, the court heard argument on August 26, 2026, and the court took the motion under submission. The Company intends to defend the action vigorously.
No liability has been recorded in respect of this matter. At this preliminary stage, the Company is unable to estimate the amount or range of any reasonably possible loss, if any, that may result from the proceeding.
Saad Naja Demand Letter
On July 17, 2026, counsel for Saad Naja delivered a pre-litigation demand letter to Mr. David Namdar, the Company's former Chief Executive Officer, addressed to him personally and in his capacity as an officer of the Company. Mr. Naja was part of the outside deal team that brought the private placement to the Company and is not affiliated with the Company. The letter asserts claims against Mr. Namdar personally arising out of Mr. Naja's alleged involvement in the transactions relating to the Company's July 2025 private placement, including alleged representations regarding an executive role and associated compensation, and demands a payment of $8.0 million by Mr. Namdar personally in resolution of those claims. No claim has been asserted against the Company, and no litigation has been commenced.
No liability has been recorded in respect of this matter. Because no claim has been asserted against the Company and the matter is at a preliminary stage, the Company is unable to estimate the amount or range of any reasonably possible loss, if any, arising from this matter, including in respect of any indemnification obligation.
Fat Panda
Customer Rewards Program
Fat Panda offers a "Buy 10, Get 1 Free" card redemption program that it started in the year ended 2022. Customers at Fat Panda's retail stores may collect redemption cards, which do not expire, upon purchase and redeem the card for a complimentary product after purchasing ten items. While the Company does not believe accumulated redemptions to be material, it cannot estimate its potential economic exposure and has not accrued a liability for such redemptions.
Fat Panda Acquisition
The Company has not recorded any net assets or liabilities in connection with the Escrow Deposit, which the Company and Selling Fat Panda Shareholders have not mutually released (Note 2), or the Tax Indemnification Note (Note 5).
Industrial Climate Control System Installation Contracts
The Company has not yet completed the delivery and installation of certain industrial climate control systems, for which the Company holds non-refundable deposit assets of $0.1 million, net of reserves. The Company does not have any material exposure to customers in excess of deposit assets held.
2025 Equity Incentive Plan Awards
Neither Mr. Etten's nor Mr. McDonald's restricted stock units, granted under the 2025 Equity Incentive Plan, were affected by their respective separation agreements. Because that plan did not receive the vote required for approval at the special meeting held July 22, 2026, no grant date has been established and no compensation expense has been recognized with respect to these awards in any period presented (Note 2).
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Leases
At July 31, 2026, the Company has 36 non-cancellable leases on retail, office, and manufacturing spaces, including a retail location not yet operational, expiring through March 2033, none of which the Company subleases. Leases held by the Company include renewal options and escalation clauses, though the Company has not considered such renewal provisions in the determination of the lease term as it is not reasonably certain that the Company will exercise these options. The terms of the leases do not impose any financial restrictions or covenants.
One lease pertains to 11,491 square feet of manufacturing and office space in Louisville, CO used for the Company's industrial climate control system operations that expires in January 2027 while the remaining leases relate to an aggregate 49,046 square feet of retail, office, and manufacturing space in Manitoba, Saskatchewan, and Ontario, Canada for Fat Panda's operations.
The Company made the following rent payments and incurred the following expense presented within "Selling, general and administrative expenses" in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Rent expense
$277 $142 $121 
Cash paid for operating leases
208 97 92 
The Company's operating right-of-use assets and lease liabilities are as follows:
Condensed Consolidated Balance Sheets Line ItemsJuly 31,
2026		April 30,
2026
(Unaudited)(Audited)
Operating lease right-of-use asset
Other current and non-current assets
$
1,672 
$
1,710 
Operating lease liability, current
Current portion of operating lease liability
621 
670 
Operating lease liability, long-term
Other non-current liabilities
1,111 
1,100 
Future undiscounted, minimum lease payments for the Company's non-cancellable operating leases at July 31, 2026 were as follows:
Fiscal Years Ending April 30,July 31,
2026
Remaining nine months during fiscal year 2027
$
572 
2028
569 
2029
393 
2030
265 
2031
175 
Thereafter
153 
Total undiscounted, minimum lease payments
2,127 
Less: imputed interest
(395)
Present value of minimum lease payments
$
1,732 
Other information related to the Company's leases includes:
July 31,
2026		April 30,
2026
(Unaudited)(Audited)
Weighted-average remaining lease term (years)
3.7
3.6
Weighted-average discount rate
6.1 
%
6.1 
%
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Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in tables in thousands, except per share amounts)
Note 12 — Subsequent Events
Developments in the Company's legal proceedings and Nasdaq matter occurring subsequent to July 31, 2026 are described in Note 11 and are not repeated here. The following events occurred subsequent to July 31, 2026 through the issuance date of these Unaudited Condensed Consolidated Financial Statements. Events subsequent to that date have not been considered in these financial statements.
Preferred Share Class Withdrawal
In September 2026, the Company filed certificates of withdrawal with the Nevada Secretary of State eliminating two series of preferred stock previously designated, no shares of which were issued or outstanding. The withdrawals did not affect the Company's authorized capital stock.



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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 Annual Report on Form 10-K for the year ended April 30, 2026, 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 Note Regarding Forward-Looking Statements" appearing elsewhere herein and the risks and uncertainties described or identified in "Item 1A – Risk Factors" in our Annual Report on Form 10-K for the year ended April 30, 2026, 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."
Introduction
CEA Industries Inc. is the largest publicly-traded digital asset treasury ("DAT") focused exclusively on BNB, the native token of the BNB Chain ecosystem. We seek to continue to build and manage the largest corporate treasury of BNB to provide institutional-grade exposure to BNB Chain and to generate income on our eligible BNB holdings through active treasury management, derivatives, or through the receipt of new tokens or coins distributed by a project to a wide range of individuals in the crypto community ("Airdrops") (the "DAT Strategy"). We may also generate returns through additional digital asset-related activities such as validation and staking services, lending, and other DeFi protocols in the future, though we have not staked any BNB through July 31, 2026. At July 31, 2026, we held 515,544 BNB tokens with an aggregate fair value of $302.3 million, and digital assets, primarily BNB, represented 93.1% of our total assets, while our Retail and Industry segment operating businesses represent a significantly smaller portion of our overall assets based on economic exposure.
Our strategy is built around a simple thesis: BNB is a scarce, utility-driven digital asset that serves as a core economic asset within one of the most active, and growing, blockchain ecosystems in the world. We seek to provide public equity market investors with exposure to BNB through a Nasdaq-listed, SEC-reporting company that combines direct BNB ownership, public company governance, audited financial reporting, treasury controls, custody infrastructure, and capital markets access. We view BNB as a strategic treasury asset and intend to continue evaluating opportunities to acquire additional digital assets as part of our capital allocation strategy.
We believe our platform is differentiated from direct token ownership, private digital asset vehicles, exchange-traded products, and operating companies that hold digital assets as part of a diversified treasury strategy. Our objective is not merely to hold BNB passively, but to build the leading public company platform for BNB ownership, treasury management, and participation in the BNB ecosystem.
We launched the DAT Strategy following the closing of a private placement on August 5, 2025, that raised approximately $500.0 million in cash and digital assets (the "PIPE Transaction") with up to $750.0 million of additional proceeds available through warrant exercises.
We acquired Fat Panda on June 6, 2025 and continue to operate its core retail nicotine vape operations in Canada.
We have prepared the discussion of our results of operations for the fiscal quarter ended July 31, 2025 by combining the Predecessor and Successor results of operations and cash flows during the three months ended July 31, 2025 ("Combined Quarterly Period") and comparing the combined data to the results of operations and cash flows of the Successor for the three months ended July 31, 2026. We believe that the discussion of our combined operational results, while on different bases of accounting related to the application of purchase accounting, is appropriate as we highlight operational changes for the Predecessor as well as accounting related items specific to the Successor.
Overview of DAT Strategy
Our DAT Strategy represents a significant departure from traditional corporate treasury strategies, which typically involve holding cash, cash equivalents, and short-term investments. Instead, our financial condition and results of operations are 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 our financial condition, results of operations, and the market price of our common stock. Investors should carefully consider the risks associated with our DAT Strategy described under Part II, Item 1A-Risk Factors.
We operate the DAT Strategy through our wholly-owned subsidiary, 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.
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Our BNB holdings are held in custody through Ceffu, a non-U.S. institutional digital asset custody platform operating within the Binance ecosystem. Ceffu uses 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.
Key Drivers of Results of Operations
Our results of operations are influenced by several key factors, including: changes in the market price of BNB and other ancillary digital assets held by us; fair value adjustments recognized under applicable accounting standards, including our issued warrants treated as liabilities; the generation of Airdrop income; operating expenses associated with maintaining our public company infrastructure; and strategic decisions regarding the acquisition, holding, or disposition of digital assets. Because we hold a substantial quantity of digital assets, particularly BNB, changes in the market price of BNB have significantly affected our reported earnings in the past and may continue to significantly affect our reported earnings. These fluctuations may not reflect changes in our operating performance but instead reflect market-driven changes in the value of our digital asset holdings.
Historically, our results of operations also included significant transactional expenses we incurred in connection with our acquisition of Fat Panda, the PIPE Transaction, and our shareholder advisory expenses in connection with our Board committee reconstitution and shareholder activism; however, we do not anticipate incurring such costs in connection with our ongoing operations.
BNB Holdings
Since the PIPE Transaction, we have accumulated 515,544 BNB. During this same period, the market price of BNB declined significantly by 32.3%, from the $865.99 weighted-average price we paid per BNB, to $586.36 per BNB at July 31, 2026. As a result, the aggregate fair value of our BNB holdings decreased from our $446.5 million cost basis to $302.3 million, driven by market price volatility rather than changes in the quantity of BNB held. The decline in BNB market prices had a materially greater impact on the carrying value of digital assets than the operating results of our Retail and Industry business during the same period.
In addition to changes in the market value of BNB tokens, we recognized a substantial decrease in Airdrop-related income associated with those holdings. We maintain eligibility to receive Airdrops distributed within the Binance ecosystem for those BNB tokens we hold at Ceffu, however Airdrop activity has declined since we launched our DAT Strategy. 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 since the PIPE Transaction.
A portion of our BNB treasury yield has historically been generated through participation in Binance Launchpool and HODLer Airdrops – platform programs through which BNB holders receive newly issued tokens by locking or holding BNB. Since we launched our DAT Strategy, the frequency and scale of these programs declined materially compared to historical program periods, contributing to a reduction in platform-delivered yield through July 31, 2026. Taken together with the decline in Airdrop activity described above, these trends reflect a broader moderation in yield generation during the period. We 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.
Warrant Liabilities
Our warrant liabilities were also a significant driver of our reported results of operations for the reported periods, and we believe they will continue to contribute meaningful volatility to our earnings, independent of our underlying operating performance. During the three months ended July 31, 2026, we recognized a non-cash gain of $10.0 million related to the liability for the stapled warrants issued in connection with the PIPE Transaction (the "Stapled Warrants"), which was a primary driver to partially offset net losses. Because the fair value of these out-of-the-money warrant liabilities generally fluctuates inversely with the trading price and volatility of our common stock and the underlying digital assets, as well as the passage of time and changes in our assumptions about warrant exercise behavior that can change significantly from period to period, the resulting fair value adjustments can produce substantial non-cash gains or losses that do not reflect our core operating performance, and we caution investors that our reported net income or loss for any given period may be disproportionately influenced by these mark-to-market changes rather than by the underlying profitability of our operating segments.
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Digital Asset Market Conditions
Our treasury strategy is designed to accumulate and compound BNB over time, with a focus on growing the 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 U.S. 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.
Since the PIPE Transaction, 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 we hold a significant quantity of BNB, changes in the market price of BNB had, and will continue to have, a substantial impact on our balance sheet and results of operations. Investors should consider that fluctuations in our financial results during the period were driven primarily by changes in digital asset market prices and Airdrop yield rather than changes in our operating activities.
Our Retail and Industry Business
We operate our Fat Panda and industrial climate control systems businesses within our Retail and Industry segment. At July 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 our industrial climate control systems business represents a relatively small portion of consolidated revenue, totaling $0.1 million and $0.2 million for the three months ended July 31, 2026 and the period from June 7, 2025 through July 31, 2025, respectively.
Recent Developments
Leadership Transition.
On July 22, 2026, Mr. David Namdar concluded his service as Chief Executive Officer in accordance with a transition agreement entered into in March 2026. The Board of Directors (the "Board") appointed William B. Miller, our Chief Financial Officer, to serve additionally as Interim Principal Executive Officer, without additional compensation, until the Board appoints a new or interim chief executive officer. Mr. Miller continues to serve as our principal financial officer and principal accounting officer. On July 20, 2026, the Company entered a consulting agreement with W4 LLC, an entity of which Alex Odagiu is the sole owner, providing that Mr. Odagiu would serve as the Company's Interim President, reporting to the Board. Anthony K. McDonald resigned as President and as a director on May 4, 2026. The Board's search for a new chief executive officer is ongoing.
Cooperation Agreement and Board Composition.
On June 23, 2026, we entered into a cooperation agreement (the "Cooperation Agreement") with YZi Labs Management Ltd. ("YZILabs") resolving the consent solicitation and related activism campaign commenced in November 2025 (the "Consent Solicitation"). Upon execution of the Cooperation Agreement, YZILabs terminated the Consent Solicitation and withdrew its related demands; Nicholas J. Etten resigned from the Board; the Board was reconstituted to six directors and Ling "Ella" Zhang, Alex Odagiu, and Matthew Roszak were appointed as directors; and the Board agreed to form a chief executive officer search committee (formed June 29, 2026) and to appoint a new independent director mutually agreeable to all parties (appointment remains pending). In addition, YZILabs agreed to standstill, voting, and mutual non-disparagement covenants for the term of the agreement. The Board also adopted amended and restated bylaws on June 23, 2026. See Note 10 to our Unaudited Condensed Consolidated Financial Statements for additional information.
2026 Special Meeting of Stockholders.
On July 22, 2026, we held our 2026 Special Meeting in Lieu of Annual Meetings of Stockholders. Stockholders elected six directors and ratified the appointment of our independent registered public accounting firm. Proposals to approve the 2025 Equity Incentive Plan and the 2026 Equity Incentive Plan did not receive the vote required for approval. Complete voting results are reported in our Current Report on Form 8-K filed on July 24, 2026 for additional information.
Nasdaq Listing Compliance.
On May 7, 2026, we received notice from The Nasdaq Stock Market LLC ("Nasdaq") that we did not comply with Listing Rule 5620(a) because we had not held an annual meeting within twelve months of our fiscal year end. We submitted a plan of compliance on June 22, 2026 and held the Special Meeting on July 22, 2026. On August 5, 2026, Nasdaq notified us that we had regained compliance and that the matter is closed.
Collateralized Borrowing.
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On April 30, 2026, we entered into an uncommitted master loan facility with BitGo Prime, LLC ("BitGo"), under which we borrowed $15.0 million during the three months ended July 31, 2026 and secured by pledged BNB. See Note 5 to our Unaudited Condensed Consolidated Financial Statements and "— Financial Condition, Liquidity and Capital Resources" for additional information.
Components of Results of Operations
Revenue
We earn revenues from the two operating businesses within our Retail and Industry segment:
●Retail sales of vaping products through our Fat Panda retail locations in Central Canada and e-commerce sales through Fat Panda's online platform and
●Sales of industrial climate control systems for the controlled environment agriculture industry.
Our revenues do not include any activities within our BNB Treasury Management segment, including the income we earn on our BNB holdings such as income earned from Airdrops.
Fat Panda
Revenues earned by Fat Panda from its retail stores at point of sale are presented at the stated sales price, gross of transaction costs such as credit card processing fees, and net of sales taxes and applicable sales discounts and promotions.
Industrial Climate Control System
We also earn revenue from the design, engineering, and sale of environmental control technologies and components for the controlled environment agriculture industry. Contracts may span multiple phases of a customer's project life cycle, from facility design and system engineering to equipment delivery and start-up, though we do not provide construction or installation services. Generally, we accept a customer's deposit to acquire the necessary equipment and recognize revenue only when we, or our supplier, ship the finished equipment and fulfill our contractual performance obligations.
Cost of Revenue
Like our revenues, our cost of revenue arises solely from our Fat Panda and Industrial Climate Control System businesses within our Retail and Industry segment that consists primarily of the cost of inventory sold, including certain labor costs and charges for inventory excess or obsolescence, shipping and handling costs, and applicable excise taxes.
Operating Expenses
Our operating expenses generally consist of fees we accrue to 10X Capital Partners LLC (the "Asset Manager"); selling, general and administrative expenses; and net realized and unrealized gains and losses on our digital assets, primarily on our BNB holdings. During the three months ended July 31, 2026, we also incurred significant advisory expenses in connection with the Consent Solicitation.
Management fees to affiliate
We expense contractual asset management fees incurred in connection with the Asset Management Agreement with the Asset Manager (the "AMA") for assets within our DAT Strategy on a monthly basis. Such fees are based on a fixed percentage of the value of assets subject to the AMA.
Selling, general and administrative expenses
Selling, general, and administrative expenses include costs incurred in the day-to-day operations of the business, including employee compensation and benefits, stock-based compensation issued to directors and employees, occupancy and facilities costs, professional and legal fees, insurance, advertising, and marketing.
Shareholder advisory expenses
We incurred significant legal, strategic, and investor communications advisor costs to protect shareholder interests in connection with our response to the Consent Solicitation through its resolution on June 23, 2026 when the Cooperation Agreement was executed. These matters required significant time and resources from the Board and management, but we do not expect to incur significant additional costs related to this matter after July 31, 2026.
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Unrealized and Realized Loss on Digital Assets
Unrealized and realized loss on digital assets represents net unrealized and realized fair value gains and losses on our digital assets, primarily BNB holdings. Unrealized gains and losses result from the remeasurement of digital assets at fair value at each reporting date using quoted prices, and are driven primarily by fluctuations in the market price of our digital assets rather than changes in the quantity of digital assets held. Realized gains and losses are recognized upon the sale or other disposition of digital assets and are determined using the specific identification method.
Other affiliate operating expenses
Other affiliate operating expenses represent a liability recognized for an incentive award granted to our former Chief Executive Officer in connection with a transition agreement in March 2026, payable in a variable amount of cash in lieu of an equity incentive award that we paid in July 2026 in satisfaction of this award.
Other Income (Loss), Net
Our other income represents the income or loss generated from non-operating activities, including the income we receive on our BNB holdings, as well as interest we pay on our debt obligations and changes in the fair value of warrants we have issued and treat as liabilities for accounting purposes. During the period from June 7, 2025 through July 31, 2025, we also incurred costs in connection with our acquisition of Fat Panda.
Airdrop income
Represents income generated from new tokens or coins distributed by projects within the Binance ecosystem to our eligible BNB holdings. We hold the majority of our BNB tokens with Ceffu, a non-U.S. institutional digital asset custody platform operating within the Binance ecosystem, which enables us to maintain eligibility to receive Airdrops. Airdrop income is measured at the fair value of the tokens received on the date of distribution. The timing, frequency, and magnitude of future airdrop allocations are determined by third-party projects and the Binance platform and are outside our control.
Gain on change in fair value of warrant liability
Non-cash gains or losses resulting from the remeasurement of our Stapled Warrants issued as part of the PIPE Transaction are treated as liabilities. Changes in fair value are driven primarily by fluctuations in the market price of the publicly-traded warrants as well as our assumptions around the implied volatility and other inputs used in our valuation model during periods when the publicly-traded warrants become less liquid. Generally, reductions in the market price of our common stock cause us to report unrealized gains since the warrants are more out-of-the-money and their value declines, and the reduced likelihood of warrant exercise reduces our expected liability. The fair value of the warrants is determined on a gross basis, and does not consider the value of the cash contribution to us upon exercise.
Interest expense
Interest expense represents the interest payable by us on our outstanding debt obligations, including borrowings under our collateralized loan facility.
Interest expense to affiliate
Interest expense to affiliate represents the interest payable by us on our outstanding debt obligations to affiliates including a $4.0 million bridge loan used to acquire Fat Panda that we paid in full in December 2025 and convertible and non-convertible note payables issued in connection with the Fat Panda acquisition. We include the amortization of debt discounts or premiums as well as applicable foreign currency translation adjustments associated with those instruments.
Business combination expenses
These expenses represent transaction costs incurred in connection with the acquisition of Fat Panda, including legal, advisory, and other professional fees directly attributable to the business combination. These costs are expensed as incurred and are not capitalizable as part of the purchase price allocation.
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Other income (loss), net
Other income and expense items include foreign currency transaction gains and losses arising from our Canadian retail vape operations, interest income on cash deposits, and other non-operating items.
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.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025		Combined Quarterly PeriodIncrease (Decrease)
$%
Revenue
$
7,165 
$
4,580 
$
2,928 
$
7,508 
$
(343)
(4.6)
%
Cost of revenue
5,201 
3,207 
2,002 
5,209 
(8)
(0.2)
Gross profit
1,964 
1,373 
926 
2,299 
(335)
(14.6)
Operating expenses
Management fees to affiliate
1,103 
— 
— 
— 
1,103 
n.m.
Selling, general and administrative expenses
5,427 
1,630 
905 
2,535 
2,892 
114.1 
Shareholder advisory expenses
1,391 
— 
— 
— 
1,391 
n.m.
Unrealized loss on digital assets
15,294 
— 
— 
— 
15,294 
n.m.
Other affiliate operating expenses
(20)
— 
— 
— 
(20)
n.m.
Total operating expenses
23,195 
1,630 
905 
2,535 
20,660 
815.0 
Operating income (loss)
(21,231)
(257)
21 
(236)
(20,995)
n.m.
Other income (loss), net
Airdrop income
284 
— 
— 
— 
284 
n.m.
Gain on change in fair value of warrant liability
9,982 
— 
— 
— 
9,982 
n.m.
Interest expense
(314)
(252)
— 
(252)
(62)
24.6 
Interest expense to affiliate
(26)
(16)
— 
(16)
(10)
62.5 
Business combination expenses
— 
(721)
— 
(721)
721 
n.m.
Total other income (loss), net
9,926 
(989)
— 
(989)
10,915 
n.m.
Income (loss) before income tax expense (benefit)
(11,305)
(1,246)
21 
(1,225)
(10,080)
822.9 
Income tax expense (benefit)
95 
(60)
2 
(58)
153 
n.m.
Net income (loss)
(11,400)
(1,186)
19 
(1,167)
(10,233)
876.9 
Other comprehensive income (loss)
Foreign currency translation adjustment
(215)
(47)
35 
(12)
(203)
n.m.
Total comprehensive income (loss)
$
(11,615)
$
(1,233)
$
54 
$
(1,179)
$
(10,436)
885.2 

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Revenues
While our revenues decreased $0.3 million for the three months ended July 31, 2026 compared to the Combined Quarterly Period, $0.1 million of the decrease relates to our Industrial Climate Control Systems business, which we omit from our historical results as those operations were not part of the Predecessor and therefore not comparable.
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025		Combined Quarterly PeriodIncrease (Decrease)
$%
Fat Panda
Retail
$
6,784 
$
4,192 
$
2,761 
$
6,953 
$
(169)
(2.4)
%
E-commerce
316 
223 
166 
389 
(73)
(18.8)
Other
— 
7 
1 
8 
(8)
n.m.
Total Fat Panda
7,100 
4,422 
2,928 
7,350 
(250)
(3.4)
Industrial Climate Control Systems
Equipment and systems sales
65 
108 
— 
108 
(43)
(39.8)
Other
— 
50 
— 
50 
(50)
n.m.
Total industrial climate control systems
65 
158 
— 
158 
(93)
(58.9)
Total revenue, net
$
7,165 
$
4,580 
$
2,928 
$
7,508 
$
(343)
(4.6)
Fat Panda
Revenue for the three months ended July 31, 2026 was $7.1 million, compared to $7.4 million for the Combined Quarterly Period, representing a decrease of $0.3 million, or approximately 3.4%. Retail revenue decreased by $0.2 million as a result of the discontinuance of a product line. The decrease was partially offset by higher revenue due to increased prices driven by increases in Canadian provincial excise taxes that led to higher excise taxes paid by our customers, partially offset by a decline in volume primarily related to the price increases. Fat Panda's e-commerce revenue declined $0.1 million from lower business to business sales resulting from a refocus to higher gross margin retail sales.
Industrial Climate Control Systems
We earned $0.1 million from the sale of Industrial Climate Control Systems during the three months ended July 31, 2026 and $0.2 million during the period from June 7, 2025 through July 31, 2025, a decrease of $0.1 million primarily representing the delivery of equipment systems under several smaller equipment orders.
Cost of Revenue
We recognized $0.1 million of associated costs during the three months ended July 31, 2026, and $0.2 million during the period June 7, 2025 through July 31, 2025 from our Industrial Climate Control Systems business. The nominal margin is a result of project management and manufacturing salaries and overhead offsetting the margin from equipment sales.
The following table presents the results of Fat Panda that relate to both the Predecessor and Successor periods:
Fat Panda
SuccessorPredecessorIncrease (Decrease)
Three Months Ended July 31, 2026Period from June 7, 2025 through July 31, 2025Period from May 1, 2025 through June 6, 2025Combined Quarterly Period$%
Fat Panda
$
5,089 
$
3,029 
$
2,002 
$
5,031 
$
58 
1.1 
%
Fat Panda's cost of revenue was $5.1 million for the three months ended July 31, 2026 compared to $5.0 million for the Combined Quarterly Period, an increase of $0.1 million, or 1.1%. The increase was primarily driven by the write off of inventory for a discontinued product line.

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Operating Expenses
All of our operating expenses, other than certain selling, general and administrative costs, pertain to corporate and BNB Treasury Management business segment activities.
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025		Combined Quarterly PeriodIncrease (Decrease)
$%
Management fees to affiliate
$
1,103 
$
— 
$
— 
$
— 
$
1,103 
n.m.
Selling, general and administrative expenses
5,427 
1,630 
905 
2,535 
2,892 
114.1 
%
Shareholder advisory expenses
1,391 
— 
— 
— 
1,391 
n.m.
Unrealized loss on digital assets
15,294 
— 
— 
— 
15,294 
n.m.
Other affiliate operating expenses
(20)
— 
— 
— 
(20)
n.m.
Total operating expenses
$
23,195 
$
1,630 
$
905 
$
2,535 
$
20,660 
815.0 
Selling, General, and Administrative Expenses
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025		Combined Quarterly PeriodChange In
$%
Retail and Industry
Compensation expense
$
1,206 
$
518 
$
431 
$
949 
$
257 
27.1 
%
Professional and contractor fees
84 
549 
135 
684 
(600)
(87.7)
Advertising and marketing expense
43 
72 
63 
135 
(92)
(68.1)
Equity-based compensation
1 
7 
— 
7 
(6)
(85.7)
Other
1,063 
484 
276 
760 
303 
39.9 
Total Retail and Industry
2,397 
1,630 
905 
2,535 
(138)
(5.4)
BNB Treasury Management
Compensation expense
44 
— 
— 
— 
44 
n.m.
Other
82 
— 
— 
— 
82 
n.m.
Total BNB Treasury Management
126 
— 
— 
— 
126 
n.m.
Corporate
Compensation expense
726 
— 
— 
— 
726 
n.m.
Professional and contractor fees
1,359 
— 
— 
— 
1,359 
n.m.
Advertising and marketing expense
108 
— 
— 
— 
108 
n.m.
Equity-based compensation
66 
— 
— 
— 
66 
n.m.
Other
645 
— 
— 
— 
645 
n.m.
Total Corporate
2,904 
— 
— 
— 
2,904 
n.m.
Total
$
5,427 
$
1,630 
$
905 
$
2,535 
$
2,892 
114.1 
Retail and Industry
Our Retail and Industry segment includes the results of operations for both our Fat Panda and Industrial Climate Control Systems businesses. The Industrial Climate Control Systems operations, which we do not present in the Predecessor period and are therefore not comparable, incurred $0.3 million of compensation expense, $0.1 million of professional and contractor fees, and $0.1 million of other general and administrative expense during the three months ended July 31, 2026 and $0.4 million of compensation expense, $0.3 million of professional and contractor fees, and $0.1 million of other general and administrative expense for the period from June 7, 2025 through July 31, 2025.
The $0.2 million increase in selling, general, and administrative costs related to the operations of Fat Panda and includes increases of $0.4 million of compensation expense and $0.3 million of foreign currency translation adjustments, partially offset by a $0.4 million decrease in professional and contractor fees and a $0.1 million decrease in advertising and marketing expenses.
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BNB Treasury Management
We incurred $0.1 million of selling, general, and administrative costs comprised of compensation costs as well as custody and bank fees for the three months ended July 31, 2026.
Corporate
For the three months ended July 31, 2026, we incurred $2.9 million of selling, general, and administrative costs, which included $1.4 million of professional and contractor fees driven by legal, accounting, and advisory fees, $0.7 million of compensation expense, approximately $0.2 million of advertising, marketing and equity-based compensation, and $0.6 million of other corporate costs.
Operating Expenses Applicable Solely to the Successor Period
Management fees to affiliate
We incurred $1.1 million of management fees under the AMA, representing a flat fee of 1.4% of the fair value of assets within our DAT Strategy, which included our BNB holdings, with a weighted-average fair value of $312.8 million for the three months ended July 31, 2026.
Shareholder advisory expenses
We incurred $1.4 million of professional fees for legal, strategic, and communications advice for the three months ended July 31, 2026 as part of our response to an activist shareholder campaign that required significant time and resources from the Board and management until entry into a cooperation agreement with YZILabs in June 2026 that resolved the matter. We do not expect to incur additional material costs in connection with this matter.
Unrealized Loss on Digital Assets
For the three months ended July 31, 2026, we experienced unrealized losses of $15.3 million, of which $15.0 million related to a decline in the market value of our BNB holdings and $0.4 million related to a decline in the market value of Bitcoin ("BTC").
Other affiliate operating expenses
In March 2026, we granted a cash incentive award to Mr. David Namdar, our former Chief Executive Officer, in connection with a transition agreement, valued at an estimated $0.6 million at April 30, 2026. During the three months ended July 31, 2026, we adjusted the estimated fair value of that award to the actual, lower cash paid in satisfaction of that award in July 2026.
Other income (loss), net
Fat Panda did not have any other income or expense prior to our acquisition. However, we incurred $0.7 million of costs to acquire Fat Panda, expensed as business combination expenses as well as interest expense of $0.3 million in connection with a bridge loan used to acquire Fat Panda that we repaid in December 2025. Additionally, we continue to incur interest expense in connection with notes payable to a former owner and current employee of Fat Panda. Since the closing of the PIPE Transaction, we also generate income and incur expenses in connection with our DAT Strategy.
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025		Combined Quarterly PeriodIncrease (Decrease)
$%
Airdrop income
$
284 
$
— 
$
— 
$
— 
$
284 
n.m.
Gain on change in fair value of warrant liability
9,982 
— 
— 
— 
9,982 
n.m.
Interest expense
(314)
(252)
— 
(252)
(62)
24.6 
Interest expense to affiliate
(26)
(16)
— 
(16)
(10)
62.5 
Business combination expenses
— 
(721)
— 
(721)
721 
n.m.
Total other income (loss), net
$
9,926 
$
(989)
$
— 
$
(989)
$
10,915 
n.m.
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Airdrop income
For the three months ended July 31, 2026, we collected Airdrops valued at $0.3 million on our BNB holdings, based on the U.S. dollar equivalent of the tokens received. Generally, Airdrop activity has continued to decrease in the greater BNB ecosystem and there can be no assurance that activity will increase in the future as we cannot predict the timing or magnitude of future Airdrops, and continued reduction in Airdrops frequency or size could have an adverse effect on our results of operations.
Gain on change in fair value of warrant liability
We issued Stapled Warrants in connection with the PIPE Transaction, recognized as a liability under U.S. GAAP, and to which we allocated $305.0 million of value. Since the issuance, the market price of our common stock has declined and the Stapled Warrants began to trade separately on Nasdaq under the symbol "BNCWZ" in April 2026. Increases (decreases) in the market price of our common stock generally correspond to a higher (lower) value of the Stapled Warrants, resulting in a loss (gain) on such warrants, as it becomes more (less) likely warrant holders will exercise their warrants. The fair value of the Stapled Warrants represents a gross value and does not offset amounts by the cash we would receive upon exercise of such warrants.
During the three months ended July 31, 2026, the estimated fair value of the Stapled Warrants declined primarily as a result of lower traded prices of the Stapled Warrants, with a lower common stock price and a shorter remaining contractual term also contributing to the decrease.
Interest expense
For the three months ended July 31, 2026, we incurred $0.3 million of interest expense on $15.0 million borrowed under our new loan facility collateralized by BNB.
During the period from June 7, 2025 through July 31, 2025, we incurred $0.3 million of interest expense on a $4.0 million bridge loan we used to finance the acquisition of Fat Panda that we fully repaid in December 2025, which was unrelated to our DAT strategy.
Interest expense to affiliate
We incurred interest expense that included amounts paid as well as amortization of debt discount on a promissory note and convertible promissory note issued to the President of Fat Panda and current employee in connection with the Fat Panda Acquisition, outstanding over a longer period of time during the three months ended July 31, 2026 than during the period from June 7, 2025 through July 31, 2025.
Business combination expenses
We expensed $0.7 million of professional, advisory, and legal costs in connection with our acquisition of Fat Panda during the period from June 7, 2025 through July 31, 2025.
Income Tax Provision
Our income tax provision is generally not comparable between the Predecessor and Successor periods as the nature and amount of our pre-tax income substantially differs and the Predecessor is solely subject to Canadian federal and provincial tax jurisdictions whereas the Successor is also subject to U.S. federal, state and local taxes. Our effective tax rates were (0.8)%, 4.8%, and 10.7% for the three months ended July 31, 2026, the period from June 7, 2025 through July 31, 2025, and the period from May 1, 2025 through June 6, 2025, respectively. Our effective tax rate for the three months ended July 31, 2026 and the period from June 7, 2025 through July 31, 2025 differed from the U.S. federal statutory rate of 21.0% primarily due to foreign statutory tax rate differences, particularly in the Cayman Islands where our income was not generally subject to tax, the impact of non-taxable gains on our warrant liability, and changes in our valuation allowance against deferred tax assets such as net operating loss carryforwards, and nondeductible expenses. See Note 9 to our Unaudited Condensed Consolidated Financial Statements for further details.
Foreign Currency Translation Adjustment
Our Fat Panda business uses Canadian dollars as its functional currency while we use U.S. dollars as our reporting currency. As a result, we record other comprehensive income related to the difference of certain period-end amounts between the two currencies, though such adjustments have not historically been material.
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Financial Condition, Liquidity, and Capital Resources
At July 31, 2026, we held cash and cash equivalents of $7.1 million; 515,544 BNB tokens with a fair value of $302.3 million, of which we pledged 44,198 BNB, valued at $25.9 million, in exchange for $15.0 million in net debt proceeds; and other digital assets with an aggregate fair value of $2.2 million. We borrowed a total of $16.8 million consisting of the BNB collateralized debt facility and notes payable to the prior owners of Fat Panda issued in connection with the related acquisition.
Our primary sources of liquidity include cash we receive from the sale of retail vape products and, to a lesser extent, the sale of industrial climate control system; cash received from our debt obligations; proceeds from the sale of shares of our common stock through at-the-market offerings or other capital raise activities; and the cash we would receive from the exercise of our outstanding warrants if the market value of our common stock rises above the warrants' exercise price and such in-the-money warrants are not exercised on a cashless basis. We may also sell our digital assets, including BNB tokens, at their then-current market price for cash, but do not generally intend to sell BNB tokens for working capital purposes.
Our primary uses of liquidity include acquisitions of digital assets, primarily BNB tokens, repurchases of our common stock, repayment of our debt obligations, and payment of selling, general, and administrative costs to operate as a publicly-traded company. We may also use cash to acquire, or otherwise fund, operating or other businesses.
Historically, we have incurred substantial costs in connection with the PIPE Transaction and the Consent Solicitation defense advisory costs. While there can be no assurance that we will not incur such costs in the future, we do not expect to incur such costs on a recurring basis.
Digital Assets
We hold a significant portion of our liquid assets in digital assets, which are measured at fair value with changes recognized in earnings, further described in Note 4 to our Unaudited Condensed Consolidated Financial Statements.
Our liquidity and capital resources are subject to substantial 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 seek to manage this risk by maintaining fiat liquidity; however, these measures may not fully mitigate market, custodial, regulatory, or other risks. A 10.0% increase (decline) in the price of BNB at July 31, 2026, holding all other factors constant, would have resulted in an additional unrealized gain (loss) of approximately $30.2 million. These potential fluctuations significantly exceed the operating income or loss expected from our Retail and Industry segment.
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 our ability to sell digital assets at favorable prices. Our ability to generate liquidity from our digital assets may depend in part on our ability to sell digital assets in the market. If we were required to liquidate a significant portion of our BNB holdings to meet liquidity needs, such sales could adversely affect the market price of BNB and reduce the value of our 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
We have 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 market conditions affecting our 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. We continuously evaluate and update our risk management practices as our digital asset treasury strategy evolves.
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At-the-Market Program
In August 2025, we entered into an at-the-market offering agreement (the "ATM Program") with Cantor Fitzgerald & Co. ("ATM Agent"), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through the ATM Agent, acting as our sales agent or principal. Sales under the ATM Program, if any, will be made by means of ordinary brokers' transactions on Nasdaq or otherwise at market prices prevailing at the time of sale, or at prices related to prevailing market prices. Under the ATM Program, we have provided the ATM Agent with customary indemnification rights, and the ATM Agent will be entitled to a commission of up to 3.0% of the gross proceeds from each sale of shares made through, or to, the ATM Agent. Since the inception of the ATM Program, we have sold and issued 856,275 shares at a total dollar value of $13.1 million, gross of $0.2 million of transaction costs, under the ATM Program. We did not sell any shares under the ATM Program during the three months ended July 31, 2026.
Share Repurchase Program
In September 2025, our Board authorized a share repurchase program pursuant to which we may repurchase up to $250.0 million total dollar value of our common stock on a perpetual basis from the date of authorization. We fund these share repurchases through a combination of cash on hand, future cash flow from operations, and borrowings under our debt obligations. Under the share repurchase program, we may purchase common stock through open market purchases, privately-negotiated transactions, accelerated share repurchases, or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, or by any combination of such methods, in each case subject to compliance with all SEC rules and other legal requirements. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, debt covenant restrictions, general business conditions, the market price of our stock, self-imposed trading blackout periods, and the availability of alternative investment opportunities. There is no minimum number of shares required to be repurchased under the share repurchase program, and the share repurchase program may be suspended or discontinued at any time. We repurchased and cancelled 1,434,112 shares of common stock at an average price per share of $2.63 for a total dollar value of $3.8 million, excluding $— million transaction costs, during the three months ended July 31, 2026. By July 31, 2026, the Company had repurchased and retired a total of 4,676,322 shares equaling a total dollar value of $21.1 million, excluding transaction costs, under the program.
Debt Obligations
BitGo Facility
On April 30, 2026, we entered into an uncommitted master loan facility with BitGo pursuant to which the Company may borrow digital assets or cash from BitGo from time to time. BitGo is not obligated to make any loan, and we have no committed borrowing capacity. Each loan is documented in a separate loan agreement by the parties setting forth the specific terms, including principal amount, fees, collateral requirements, and the date on which the loan is to commence and mature. Each loan may have a fixed term, or may include a call option held by BitGo or prepayment option held by the Company, as specified in each loan agreement. Borrowings under the master loan agreement are secured by collateral in favor of BitGo. Collateral may include BNB, cash, or other forms agreed upon by the parties. The collateral’s required value is typically higher than the borrowed amount, subject to margin calls as set forth in the master loan agreement. If the value of posted collateral falls below the margin call threshold, the Company must promptly post additional collateral. Failure to maintain sufficient collateral can result in an event of default and remedies available to BitGo, including the right to liquidate pledged collateral. BitGo holds BNB collateral owned by the Company in a segregated custody account in the Company's name, and BitGo is not permitted to use such BNB to secure any other loan or account. The final stated maturity of the facility represents the greater of the maturity of the master loan agreement or the maturity of any fixed term loan agreement thereunder.
We pledged $25.5 million of BNB tokens at the time of borrowing, for which we received $15.0 million of USD Coin ("USDC"). Each loan bears a loan fee of 9.50% per annum. At July 31, 2026, $15.0 million aggregate principal amount was outstanding and our pledged BNB had a fair value of $25.9 million. Our ability to sell, transfer, or otherwise use the pledged digital assets is restricted for the duration of the borrowings, the proceeds of which we have used, and expect to use, for share repurchases and working capital.
Each borrowing is a fixed term loan. BitGo may not require repayment before maturity, and we have no contractual right to prepay. We therefore do not expect to be able to reduce these borrowings, or to release the pledged BNB, before the applicable maturity dates.
We are required to pledge collateral equal to 170% of the amount borrowed. If the value of our pledged collateral falls below 150% of the loan balance, BitGo may require us to post additional collateral immediately; if it falls below 120% of the amount loaned, BitGo may liquidate the collateral. Because BNB is also our principal treasury asset, such a decline would reduce the value of our collateral and our other digital asset holdings at the same time.
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The master loan agreement requires that our net equity, as defined, be at least $25.0 million at the end of each calendar month and that our ratio of total assets to net equity not exceed 200%. If either requirement is not satisfied, or if BitGo determines in its sole discretion that the assets loaned to us are at risk of being treated as a security, BitGo may require us to immediately repay all outstanding loans and accrued fees. Because share repurchases reduce our net equity, this requirement constrains the amount of our common stock that we are able to repurchase.
Promissory Note
In connection with the Fat Panda Acquisition, we issued an interest-only promissory note (the "Promissory Note") in the principal amount of $0.7 million to the President of Fat Panda, bearing interest at a rate of 7.0% per annum, payable monthly. The Promissory Note matures in November 2026.
Convertible Promissory Note
We issued a convertible promissory note in the principal amount of $0.7 million to the President of Fat Panda, bearing interest at a rate of 7.0% per annum. The holder has the right to convert the outstanding principal amount of the convertible promissory note into shares of our common stock at a conversion price of $19.00 per share at any time on or before June 1, 2027. If no conversion election is made by the holder on or prior to such date, we are required to repay the entire outstanding principal balance plus accrued and unpaid interest in cash. To the extent the holder elects conversion, the settlement would not require the use of cash and would instead result in the issuance of additional shares of common stock.
Tax Indemnification Note
We issued a non-interest-bearing note in the amount of $0.4 million to the former Fat Panda shareholders that does not have a fixed maturity date. We must repay the note in full within 15 days following the date that Canada Revenue Agency issues a letter confirming a certain tax liability does not exist in connection with the Fat Panda Acquisition. Conversely, the note payable is reduced in the amount of any tax liability assessed.
Summary of Cash Flows
The following summarizes our cash flow data for each of the periods presented:
SuccessorPredecessor
Three Months Ended July 31, 2026Period from
June 7, 2025
through
July 31, 2025		Period from
May 1, 2025
through
June 6, 2025
Net cash used in operating activities
$
(6,475)
$
(1,798)
$
(239)
Net cash used in investing activities
(123)
(10,571)
— 
Net cash provided by financing activities
10,684 
3,910 
— 
Cash Flow from Operating Activities
For the Three Months Ended July 31, 2026
Cash used in operating activities for the three months ended July 31, 2026 was $6.5 million. We received $7.1 million in cash from Fat Panda vape sales and $0.1 million from the sale of industrial climate control systems and related services. We paid $4.7 million for inventory (which includes excise tax paid on inventory items purchased from suppliers), and excise taxes on production of $0.4 million. We also paid $3.3 million for other professional fees, $2.0 million in cash compensation, other legal fees of $1.7 million, $0.7 million for shareholder advisory costs, $0.5 million for rent, utilities, insurance and other office expenses, $0.2 million for directors' and officers' insurance, and $0.2 million for advertising and marketing.
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For the Period from June 7, 2025 through July 31, 2025
Cash used in operating activities for the period from June 7, 2025 through July 31, 2025 was $1.8 million. We received $4.4 million in cash from Fat Panda vape sales and $0.2 million from the sale of industrial climate control systems and related services. We paid $3.6 million for inventory (which includes excise tax paid on inventory items purchased from suppliers), and excise taxes on production of $0.3 million. We also paid $1.1 million for other professional fees, $0.7 million for acquisition-related expenses, $0.5 million in cash compensation, $0.1 million for advertising and marketing, and $0.1 million for rent, utilities, insurance and other office expenses.
For the Period from May 1, 2025 through June 6, 2025
Cash used in operating activities for the period from May 1, 2025 through June 6, 2025 was $0.2 million. We received $2.9 million in cash from Fat Panda vape sales, for which we paid $2.4 million for inventory, including excise taxes on inventory items purchased from suppliers, $0.3 million in excise tax for produced items, and $0.4 million in cash compensation.
Cash Flow from Investing Activities
Cash used in investing activities for the three months ended July 31, 2026 was $0.1 million, representing cash paid to acquire property and equipment.
Cash used in investing activities for the period from June 7, 2025 through July 31, 2025 was $10.6 million, representing the cash paid to acquire Fat Panda.
Cash Flow from Financing Activities
Cash provided by financing activities for the three months ended July 31, 2026 was $10.7 million, including proceeds from notes payable of $15.0 million, partially offset by $4.3 million we paid to repurchase shares of our common stock under the Share Repurchase Program.
Cash provided by financing activities for the period from June 7, 2025 through July 31, 2025 was $3.9 million, representing the issuance of a $4.0 million bridge loan, net of issuance discounts, that we fully repaid in December 2025.
Fat Panda, our accounting Predecessor, did not receive or pay any cash for financing activities during the period from May 1, 2025 through June 6, 2025.
Other Changes in Financial Position
In addition to the changes in our financial position from April 30, 2026 to July 31, 2026 described in "—Results of Operations" and "—Summary of Cash Flows," the following activities also occurred:
●In connection with the BitGo Facility, we pledged $9.5 million worth of BNB at a cost basis of $13.2 million as collateral for USDC 15.0 million borrowings at the time of each draw, bringing the total fair value of BNB pledged to $25.9 million at July 31, 2026.
Commitments and Contingencies
See Note 11 to our Unaudited Condensed Consolidated Financial Statements, included as part of this Quarterly Report, for a discussion of commitments and contingencies, including contractual payment obligations.
Known Trends and Uncertainties Affecting Our Business
Management is aware of several trends and uncertainties that may affect our 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. Trends and uncertainties specific to the Company are described below.
Market Price of BNB
Our digital assets, primarily BNB, represented 93.1% of our total assets at July 31, 2026, and we carry them at fair value, so changes in the market price of BNB are recognized in the period of change and are the principal driver of period-to-period variability in our results. At July 31, 2026, our 515,544 BNB had a fair value of $302.3 million against a cost basis of $446.5 million. That price is volatile, unrelated to the operating performance of our Retail and Industry business, and outside our control, and we expect it to remain the most significant factor affecting our financial condition and results of operations.

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Collateral Obligations under the BitGo Facility
At July 31, 2026, $15.0 million was outstanding under the BitGo Facility, secured by pledged BNB with a fair value of $25.9 million against a 170% collateral requirement. If collateral value falls below 150% of the loan balance we must immediately post additional collateral, and below 120% BitGo may liquidate it. Because BNB is also our principal treasury asset, a price decline would reduce our collateral and our unpledged holdings at the same time. The facility also requires net equity, as defined, of at least $25.0 million at each month end and a ratio of total assets to net equity not exceeding 200%. We were in compliance with the collateral coverage, net equity and total assets to net equity requirements of the BitGo Facility at July 31, 2026. Further, the BitGo Facility has no committed borrowing capacity and no right to prepay.
Airdrop Activity
We recognized $0.3 million of Airdrop income for the three months ended July 31, 2026. Airdrop activity within the Binance ecosystem, including Launchpool and HODLer Airdrop allocations, has declined materially since we launched our DAT Strategy, and we expect that decline to continue to constrain our treasury yield. These distributions are not contractual and their timing and magnitude are outside our control, so amounts recognized in any period are not indicative of future periods and we do not regard them as a recurring source of income or liquidity.
The AMA
We incurred $1.1 million of management fees under the AMA for the three months ended July 31, 2026, calculated as a flat fee of 1.4% of the fair value of assets within our DAT Strategy, which accrues without regard to our results of operations. The AMA runs by its terms through 2045, and we are seeking a declaration that it is void from inception. Unless we obtain that relief, we expect to continue incurring the fee at this rate. See Note 11 to our Unaudited Condensed Consolidated Financial Statements.

Critical Accounting Estimates
The preparation of our Unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions that in certain circumstances affect amounts reported therein. In preparing these financial statements, our estimates and judgments are based on historical experience, information from third-party valuation professionals and various other assumptions, giving due consideration to materiality. We consider the accounting policies discussed below to be critical to the understanding of our consolidated financial statements. Actual results could differ from our estimates and assumptions, and any such difference could be material to our consolidated financial statements, particularly as many of the critical policies relate to our DAT Strategy, for which we have little history with which to compare the accuracy of our estimates. These significant accounting policies are described more fully in Note 2 to our Unaudited Condensed Consolidated Financial Statements.
Warrant Liabilities
We classify the Stapled Warrants issued in connection with the PIPE Transaction as liabilities measured at fair value. These were initially recorded at a fair value of $305.0 million at the date of issuance and are remeasured at each reporting period, with changes in fair value recognized in earnings. The determination of fair value requires significant estimates and assumptions, including expected volatility, risk-free interest rate, and expected term. During the three months ended July 31, 2026, we recognized a $10.0 million gain from changes in the fair value of warrant liabilities. Given the magnitude of changes in the estimated fair value of the warrant liability and the sensitivity of the valuation to changes in the underlying assumptions, small changes in these inputs could result in material differences in the reported fair value. In April 2026, the Stapled Warrants began trading on Nasdaq under the ticker symbol "BNCWZ." Since management does not believe the Stapled Warrants trade with sufficient liquidity on which we can solely rely on the traded market price, we equal-weight the traded market price with its internal valuation model, with assistance from an independent valuation agent.
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Digital Assets
We hold significant digital asset positions, including BNB, BTC, and Tether ("USDT"), which are accounted for at fair value with changes recognized in earnings in accordance with ASC 350-60. Fair value is determined using observable, quoted market prices on principal exchanges, classified within Level 1 of the fair value hierarchy. While the fair value measurements themselves rely on observable inputs, management judgment is required in evaluating the determination of the principal market for each digital asset and in the valuation of digital assets received through non-cash transactions, including Airdrops. Additionally, management periodically reassesses whether the selected principal market continues to represent the most advantageous market for each digital asset. Key indicators monitored by management in this assessment include changes in trading volume, liquidity, and the availability of reliable pricing data across exchanges. During the three months ended July 31, 2026, we recognized unrealized losses of $15.3 million. Given the inherent price volatility of digital assets, changes in fair value between reporting periods could be material to our Unaudited Condensed Consolidated Financial Statements.
Goodwill and Intangible Assets
We account for business combinations under the acquisition method of accounting and allocate the purchase price we pay to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. Any purchase consideration in excess of the fair value of net assets acquired is recorded as goodwill. We determine the fair value of tangible and identifiable intangible assets acquired and liabilities assumed using the best available information, which incorporates various estimates and assumptions, including, but not limited to, future expected cash flows, useful lives, discount rates, and royalty rates. These estimates are based on historical data, internal estimates, and external sources. Unanticipated events may affect the validity of these assumptions.
In connection with the Fat Panda Acquisition, we initially recorded $4.2 million of goodwill, reduced by $0.8 million of measurement period and foreign exchange rate adjustments, and $5.2 million of definite-lived intangible assets. The fair value of the intangible assets was determined based on the relief-from-royalty method that required significant assumptions including the discount rate, revenue projections, the selected royalty rate, and estimated useful life. While we believe these assumptions to be reasonable and appropriate, changes in these estimates could result in different fair value amounts.
Goodwill
Goodwill represents the excess of the purchase price we paid to acquire Fat Panda over the fair value of identifiable net assets acquired. Goodwill is denominated in CAD, the functional currency of the acquired entity, and translated into USD at each reporting date, with changes recognized in accumulated other comprehensive income (loss). Goodwill impairment testing is performed at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For goodwill impairment testing purposes, we have determined that there is one reporting unit. During the quarter ended April 30, 2026, management performed a quantitative goodwill impairment test with the assistance of an independent third-party valuation firm. For purposes of this assessment, management estimated the fair value of the reporting unit using an equal weighting of the discounted cash flow method (income approach) and the guideline public company method (market approach), and determined that the estimated fair value of the reporting unit exceeded its carrying value. Accordingly, no impairment was identified. At July 31, 2026, the carrying value of goodwill was $3.4 million.
Definite-lived intangible assets
Definite-lived intangible assets consist of the Fat Panda trade names, which are expected to contribute to the future cash flows of Fat Panda over their estimated useful life of 10 years, and are amortized on a straight-line basis over their remaining expected useful life. Management periodically evaluates the remaining useful life and carrying value of the intangible assets to determine whether events or changes in circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include significant adverse changes in the business climate, declines in revenue performance relative to historical results, changes to applicable legal, regulatory, or contractual provisions, and reductions in underlying operating cash flows. During the quarter ended April 30, 2026, management identified triggering events and performed a recoverability test under ASC 360-10 by comparing estimated future undiscounted cash flows of the asset group to its carrying value. Based on this analysis, management concluded that the undiscounted cash flows exceeded the carrying value and no impairment was recorded. At July 31, 2026, the carrying value of definite-lived intangible assets was $4.5 million, net of accumulated amortization.
Income Taxes
We recognize deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of assets and liabilities. Management evaluates the realizability of deferred tax assets on a jurisdictional basis and establishes a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
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During the three months ended July 31, 2026, we recorded a $1.0 million increase in our valuation allowance, primarily related to our results of operations in the United States, reflecting cumulative losses and updated forecasts of future taxable income. The valuation allowance remains affected by cumulative losses in certain jurisdictions and uncertainty about the timing of future reversals of deferred tax liabilities.
Future changes in the valuation allowance could materially affect our effective tax rate and results of operations.
We are subject to income taxes in the United States and Canada and subject to audit by taxing authorities. As part of the income tax provision, we evaluate our tax positions to determine whether it is more likely than not that such positions will be sustained upon examination based on their technical merits. For those positions that do not meet the recognition threshold, we record a liability for unrecognized tax benefits.
We account for uncertainty in income taxes under the recognition and measurement framework of ASC 740. An uncertain tax position is a position taken or expected to be taken in a tax return where there is uncertainty as to whether the relevant taxing authority would sustain the position upon examination.
Tax benefits are recognized only for positions that meet the more-likely-than-not recognition threshold, and the amount recognized is measured as the largest benefit that is greater than 50 percent likely to be realized upon settlement.
We record liabilities for unrecognized tax benefits related to these positions, as well as interest and penalties, where applicable. Changes in uncertain tax positions may result from new information, audit developments, expiration of statutes of limitation, or changes in tax law.
At July 31, 2026 and April 30, 2026, we had no unrecognized tax benefits under ASC 740.
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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
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure 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 Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we 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 upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of July 31, 2026 due in part to the material weakness in internal control over financial reporting described below, which has not been remediated.
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2026, 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 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, earnings per share computations, and other areas, and on which we place significant reliance for our financial reporting. This material weakness has not been remediated at July 31, 2026.
Additional Deficiencies in Disclosure Controls and Procedures
In connection with a review of our corporate records and periodic report exhibits conducted during and after the quarter ended July 31, 2026, management identified deficiencies in our controls over the preparation and review of non-financial disclosure in our Exchange Act reports. Specifically, we did not maintain effective controls to verify that (i) the exhibit index in our periodic reports is complete and current as against our corporate records and our filings with the Nevada Secretary of State, (ii) the description of our securities filed as an exhibit to our Annual Report on Form 10-K accurately describes our authorized and outstanding capital stock, and (iii) the cover pages of our periodic reports list all classes of securities registered under Section 12(b) of the Exchange Act.
As a result, certificates of designation and a charter amendment were omitted from the exhibit index to our Annual Report on Form 10-K for the fiscal year ended April 30, 2026, the description of securities filed as an exhibit to that report contained inaccuracies regarding our capital stock, and the cover pages of certain of our periodic reports omitted a class of securities registered under Section 12(b). These deficiencies did not affect our consolidated financial statements or the amounts reported therein.
Remediation
We are taking steps to remediate the material weakness and the additional deficiencies described above.
With respect to the material weakness, effective March 9, 2026, we appointed William B. Miller as Chief Financial Officer. We remain committed to improving our financial organization when we are able, including by expanding our accounting staff and improving our systems and controls to reduce reliance on the manual nature of our existing systems. However, due to our size and financial resources, remediating the identified weaknesses may not be economically feasible in the near term. We do not expect the material weakness to be remediated until we have improved our internal control over financial reporting, and we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting on an ongoing basis.
With respect to the additional deficiencies, we have engaged Nevada counsel to review and reconcile our charter documents against the records of the Nevada Secretary of State, and we are implementing procedures under which the exhibit index and cover page of each periodic report will be verified against our corporate records prior to filing.
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Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures that, by their nature, can only provide reasonable assurance regarding management's control objectives.
Changes in Internal Control over Financial Reporting
On July 22, 2026, our Chief Executive Officer concluded his service and the Board appointed our Chief Financial Officer to serve additionally as Interim Principal Executive Officer. As a result, the principal executive officer, principal financial officer, and principal accounting officer functions are currently performed by a single officer. Because our material weakness includes an inadequate supervisory review structure and inadequate segregation of duties, this change is reasonably likely to materially affect our internal control over financial reporting. As previously disclosed, the Board is currently conducting a search for a new chief executive officer, and management is evaluating what additional controls are appropriate pending appointment of the new chief executive officer once the search concludes.
Other than as described above, there were no changes in our internal control over financial reporting during the quarter ended July 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Other Information
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 11 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones we face. 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.
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties, discussed in more detail in the following section. These risks include, among others, the following key risks:
Risks Relating to the DAT Strategy
●Our financial condition is highly dependent on the market price of BNB, which has historically been subject to significant volatility.
●Our DAT Strategy is concentrated primarily in a single asset, which subjects us to risks specific to the Binance ecosystem.
●Our ability to generate yield on our BNB holdings depends primarily on Airdrops, which have declined and are unpredictable.
●Failures, vulnerabilities, or disruptions in the BNB Chain network could adversely affect the value of BNB and our digital asset holdings.
●Our digital asset holdings’ liquidity may be limited by market conditions.
●Certain of our digital assets are held at third-party exchanges and are subject to custodial and counterparty risks.
●We are subject to significant competition in the growing digital asset industry and the Company’s business, operating results and financial condition may be adversely affected if the Company is unable to compete effectively.
Risks Relating to Cryptocurrencies
●The further development and acceptance of BNB Chain and other cryptocurrency networks, which represent a relatively new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.
●The digital asset trading platforms on which cryptocurrency trades are relatively new and largely unregulated or may not be complying with existing regulations.
●The availability of spot exchange-traded products and futures exchange-traded funds for BNB and other digital assets may adversely affect the market price of our common stock.
●The trading prices of many digital assets, including BNB, have experienced extreme volatility in recent periods and may continue to do so.
●We may be subject to regulatory developments related to cryptocurrencies and cryptocurrency markets, which could adversely affect our business, financial condition, and results of operations and the price of our common stock.
●Loss or theft of private keys or breaches of our digital wallets could result in the permanent loss of our BNB and materially adversely affect our business.
●The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of BNB and adversely affect our business.
●We do not maintain insurance covering the theft or loss of our digital assets, and the lack of legal recourse increases the risk of total loss.
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●The U.S. federal, state, local and non-U.S. income tax treatment of transactions in digital assets is unclear.
Risks Related to Investing in BNB
●BNB is subject to extreme price volatility, and any sustained decline in the market price of BNB could lead to substantial losses on our digital asset holdings and could adversely affect the market price of our common stock.
●BNB and BNB Chain have links to, and may be controlled by, Binance and its principals.
●The value of our common stock depends on the development and acceptance of BNB Chain. The slowing or stopping of the development or acceptance of BNB Chain may adversely affect an investment in our common stock.
●Digital assets represent a new and rapidly evolving industry, and the price of our common stock would depend on the acceptance of BNB.
●Regulatory changes or actions in foreign jurisdictions may affect the price of our common stock or restrict the use of BNB, mining activity or the operation of their networks or the global BNB markets in a manner that adversely affects our business, financial condition and results of operations and the price of our common stock.
Risk Related to Fat Panda Operations
●There is uncertainty related to the regulation of vaporization products and certain other consumption accessories. Increased regulatory compliance burdens, no matter how they arise, could have a material adverse impact on our business development efforts and our operations.
●The market for vaporizer products and related items is a niche market, subject to a great deal of uncertainty and is still evolving.
●Our success depends, in part, on the quality and safety of our products, as well as the perception of quality and safety in the vaporization products and consumption accessories industry generally.
●If provinces continue the trend of imposing, expanding, and increasing taxes on vaporizer products, it could materially and adversely affect our business.
●We face intense competition and may fail to compete effectively.
●We may become subject to significant product liability litigation.
Risks Related to our Current Controlled Environment Agriculture Operations
●To the extent we continue in the controlled environment agriculture industry, we will need to expand our customer base, expand and develop our products and services and increase marketing and achieve timely contract execution.
●International trade disputes, tariffs, international shipping and domestic trucking issues all contribute to the challenges we face in obtaining the products we need for contract performance. We have experienced and are likely to continue to experience inflationary effects on the cost of products and labor, which is likely to adversely affect our margins. The failure to procure the products we need to satisfy our customer contracts would disrupt our business, harm our reputation, result in losses and potentially cause us to lose our market.
●The build side of the controlled environment agriculture industry is very competitive. To be able to compete successfully, we will need to offer a wide range of products, have adequate capital for expansion, supply and execution, and develop robust marketing.
Risks Related to Our Common Stock
●Our common stock may be delisted if we fail to comply with Nasdaq’s continued listing standards.
●Nasdaq may review our Board composition and our capital structure under its change of control, voting rights and business combination rules, and an adverse determination could result in the delisting of our common stock.
●Our securities prices may be volatile and may decrease substantially.
●Our Board is authorized to reclassify any unissued shares of our preferred stock into one or more classes, which could convey special rights and privileges to its owners.
●Registration rights and Rule 144 sales contain risks for shareholders.
●We have a substantial number of options and public warrants outstanding, which if exercised for shares of common stock, may put pressure on the market price of a share.
●We do not anticipate paying any cash dividends on our common stock in the foreseeable future.
●The market price of our securities may be adversely affected by the sale of shares by our management or large stockholders.
●Investors may be diluted by future issuances of preferred stock or additional common stock in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.
Risks Related to Our Business and Operations
●We do not currently have a permanent Chief Executive Officer, and our principal executive officer, principal financial officer, and principal accounting officer functions are performed by a single officer.
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●Our stockholders did not approve our 2025 Equity Incentive Plan and 2026 Equity Incentive Plan, which limits our ability to attract, retain and motivate personnel and could result in compensation expense materially greater than we would otherwise have recognized.
●Stockholder activism has disrupted our business and may recur.
●Our Stockholder Rights Agreement could delay or prevent a change of control, which could limit the market price of our common stock.
●We are party to the AMA which contains terms that are materially adverse to our stockholders, and we may be unable to reform or terminate the AMA without incurring substantial costs despite pending litigation against the Asset Manager.
●Our borrowings are secured by pledged BNB, and a decline in the price of BNB could require us to post additional collateral on short notice or permit our lender to liquidate our pledged BNB.
●The Company has identified a material weakness in its internal control over financial reporting.
Risk Factors
Risks Related to the DAT 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. At July 31, 2026, we held 515,544 BNB tokens with an aggregate fair value of $302.3 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 fiscal year ended April 30, 2026, we recognized an unrealized loss of $130.3 million and a realized loss of $1.3 million on digital assets primarily as a result of declines in the price of BNB. During the three months ended July 31, 2026, we recognized an additional unrealized loss of $15.3 million on digital assets. 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 may 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.
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Our DAT Strategy is concentrated primarily in a single asset, which subjects us to risks specific to the Binance ecosystem.
Our DAT 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 our Board. 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.
Our ability to generate yield on our BNB holdings depends primarily on Airdrops, which have declined and are unpredictable.
We do not currently stake our BNB or otherwise generate yield on our digital asset holdings other than through Airdrops. Airdrops are distributions of tokens made by projects building on BNB Chain to holders of BNB, typically in connection with a new token launch. We do not control whether, when, or on what terms any Airdrop occurs. Airdrops are made at the discretion of third-party projects, may be conditioned on holding requirements, custody arrangements, or participation mechanics that we do not satisfy or that change without notice, and may be discontinued entirely.
Airdrop activity in the BNB ecosystem has decreased for the last two quarters, and we cannot assure you that it will increase or that we will receive Airdrops of any particular size or frequency in the future. Airdrop activity is closely correlated with broader digital asset market conditions. New projects are launched, funded, and distributed more frequently during periods of rising digital asset prices, and launch activity contracts during periods of declining prices. As a result, Airdrop yield is likely to decline at the same time the market price of BNB declines rather than offsetting it, and we should not be expected to realize yield that mitigates a decline in the carrying value of our digital asset holdings. Because our borrowings are secured by pledged BNB, a decline in the price of BNB may increase our collateral obligations at the same time that our Airdrop yield decreases. See—Risks Related to Investing in BNB—BNB is subject to extreme price volatility, and any sustained decline in the market price of BNB could lead to substantial losses on our digital asset holdings and could adversely affect the market price of our common stock.
Tokens received in Airdrops may also be illiquid, thinly traded, subject to transfer restrictions or vesting, or of uncertain value, and we may be unable to sell them at prices we consider acceptable or at all. The tax treatment of Airdrop receipts is unclear in certain respects and may result in taxable income at the time of receipt without a corresponding realization of cash. Any continued reduction in the frequency, size, or value of Airdrops could adversely affect our results of operations.
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.
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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 do not maintain insurance covering losses of digital assets held at exchanges or custodians, and to the extent a custodian maintains its own insurance, we may have no direct rights under that coverage. 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, U.S. Department of the Treasury's Financial Crimes Enforcement Network ("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.
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.
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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.
At July 31, 2026, we held digital assets with an aggregate fair value of $304.5 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. 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.
We are subject to significant competition in the growing digital asset industry and the Company’s business, operating results and financial condition may be adversely affected if the Company is unable to compete effectively.
The Company is operating in a competitive environment and will compete against other companies and other entities with similar strategies, including companies with significant holdings in BNB and other digital assets, and the Company’s business, operating results and financial condition may be adversely affected if the Company is unable to compete effectively.
Risks Related to Cryptocurrencies
The further development and acceptance of BNB Chain and other cryptocurrency networks, which represent a relatively new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of BNB Chain and other cryptocurrency networks may adversely affect an investment in the Company.
Cryptocurrency such as BNB may be used, among other things, to buy and sell goods and services or to transfer and store value by users. The cryptocurrency networks and chains are a new and rapidly evolving industry of which BNB Chain is a prominent, but not unique, part. The growth of the cryptocurrency industry in general, and BNB Chain in particular, is subject to a high degree of uncertainty. The factors affecting the further development of the cryptocurrency industry, as well as BNB Chain, include:
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●continued worldwide growth in the adoption and use of BNB and other cryptocurrencies, including those competitive with BNB;
●government and quasi-government regulation of BNB and other cryptocurrencies and their use, or restrictions on or regulation of access to and operation of BNB Chain or similar cryptocurrency systems;
●the maintenance and development of the open-source software protocol of BNB Chain;
●changes in consumer demographics and public tastes and preferences;
●the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; and
●general economic conditions and the regulatory environment relating to cryptocurrencies and cryptocurrency service providers.
A decline in the popularity or acceptance of BNB Chain and other cryptocurrency networks may harm the price of our common stock. There is no assurance that BNB Chain, or the service providers necessary to accommodate it, will continue in existence or grow. Furthermore, there is no assurance that the availability of and access to cryptocurrency service providers will not be negatively affected by government regulation or supply and demand of BNB.
The digital asset trading platforms on which cryptocurrency trades are relatively new and largely unregulated or may not be complying with existing regulations.
Cryptocurrency markets, including spot markets for BNB, are growing rapidly. The digital asset trading platforms through which BNB and other cryptocurrencies trade are new and largely unregulated or may not be complying with existing regulations. These markets are local, national and international and include a broadening range of cryptocurrencies and participants. Significant trading may occur on systems and platforms with minimum predictability. Spot markets may impose daily, weekly, monthly or customer-specific transaction or withdrawal limits or suspend withdrawals entirely, rendering the exchange of BNB for fiat currency difficult or impossible. Participation in spot markets requires users to take on credit risk by transferring BNB from a personal account to a third-party’s account.
Digital asset trading platforms do not appear to be subject to, or may not comply with, regulation in a manner similar to other regulated trading platforms, such as national securities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed, are unregulated, operate without extensive supervision by governmental authorities, and do not provide the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those located outside the United States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Digital asset trading platforms may be out of compliance with existing regulations.
As a result, trading activity on or reported by these digital asset trading platforms is generally significantly less regulated than trading in regulated U.S. securities and commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues. Furthermore, many digital asset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on the platform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of cryptocurrencies such as BNB on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more traditional exchanges. Tools to detect and deter fraudulent or manipulative trading activities (such as market manipulation, front-running of trades, and wash-trading) may not be available to or employed by digital asset trading platforms or may not exist at all. As a result, the marketplace may lose confidence in, or may experience problems relating to, these venues and the digital assets that trade on these venues.
No digital asset trading platform on which cryptocurrency trades is immune from these risks. The closure or temporary shutdown of digital asset trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in cryptocurrency and can slow down the mass adoption of it. Further, digital asset trading platform failures can have an adverse effect on cryptocurrency markets and the price of cryptocurrency and could therefore have a negative impact on the performance of our common Stock.
Negative perception, a lack of stability in the digital asset trading platforms, manipulation of cryptocurrency trading platforms by customers and/or the closure or temporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in cryptocurrency generally and result in greater volatility in the market price of BNB and other cryptocurrency and our common stock. Furthermore, the closure or temporary shutdown of a cryptocurrency trading platform may impact the Company’s ability to determine the value of its cryptocurrency holdings.
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The availability of spot exchange-traded products (“ETPs”) and futures exchange-traded funds (“ETFs”) for BNB and other digital assets may adversely affect the market price of our common stock.
Although BNB and other digital assets have experienced a surge of investor attention since BNB was invented in 2017, until recently investors in the United States had limited means to gain direct exposure to BNB through traditional investment channels, and instead generally were only able to hold BNB through “hosted” wallets provided by digital asset service providers or through “unhosted” wallets that expose the investor to risks associated with loss or hacking of their private keys. Given the relative novelty of digital assets, general lack of familiarity with the processes needed to hold BNB directly, as well as the potential reluctance of financial planners and advisers to recommend direct BNB holdings to their retail customers because of the manner in which such holdings are custodied, some investors have sought exposure to BNB through investment vehicles that hold BNB and issue shares representing fractional undivided interests in their underlying BNB holdings. These vehicles, which were previously offered only to “accredited investors” on a private placement basis, have in the past traded at substantial premiums to net asset value, possibly due to the relative scarcity of traditional investment vehicles providing investment exposure to BNB.
Although we are a holding company, and we believe we offer a different value proposition than a BNB investment vehicle such as a spot BNB ETP or a BNB futures ETF, investors may nevertheless view our common stock as an alternative to an investment in a spot BNB ETP or BNB futures ETF, and choose to purchase shares of a spot BNB ETP or BNB futures ETF instead of our common stock. They may do so for a variety of reasons, including if they believe that ETPs or ETFs offer a “pure play” exposure to BNB that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours. Additionally, unlike spot BNB ETPs or BNB futures ETFs, we (i) do not seek for our shares of common stock to track the value of the underlying BNB we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Securities Exchange Act of 1934, as amended, including Regulation M, and other securities laws, which enable ETPs and ETFs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) are a Nevada corporation rather than a statutory trust and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives and (iv) are not required to provide daily transparency as to our BNB holdings or our daily net asset value. Furthermore, recommendations by broker-dealers to buy, hold or sell complex products and non-traditional ETPs or ETFs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable to broker-dealers making recommendations with respect to our common stock. Based on how we are viewed in the market relative to ETPs and ETFs, and other vehicles which offer economic exposure to BNB, futures BNB ETFs, and similar vehicles offered on international exchanges, any premium or discount in our common stock relative to the value of our BNB holdings may increase or decrease in different market conditions.
As a result of the foregoing factors, availability of spot ETPs or futures ETFs for BNB and other digital assets could have a material adverse effect on our business, financial condition and results of operations and the market price of our common stock.
A disruption of the Internet may affect the operation of the cryptocurrency networks, which may adversely affect the cryptocurrency industry and an investment in the Company.
The cryptocurrency networks rely on the Internet. A significant disruption of Internet connectivity could disrupt the cryptocurrency networks’ functionality until such disruption is resolved. A disruption in the Internet could adversely affect an investment in the Company. In particular, some variants of cryptocurrencies have experienced a number of denial-of-service attacks, which have led to temporary delays in block creation and cryptocurrency transfers.
Cryptocurrencies are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and miners are connected to one another to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues. If BGP hijacking occurs on any cryptocurrency network, participants may lose faith in the security of cryptocurrency, which could affect cryptocurrency’s value and consequently the value of our common stock.
Any Internet failures or Internet connectivity-related attacks that impact the ability to transfer cryptocurrency could have a material adverse effect on the price of cryptocurrency and the value of an investment in the Company.
The trading prices of many digital assets, including BNB, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading prices of BNB, could have a material adverse effect on the value of our common stock and our common stock could lose all or substantially all of their value.
The trading prices of many digital assets, including BNB, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets, including BNB, over the course of 2021, and multiple market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2022 in digital asset trading prices, including for BNB. These episodes of rapid price appreciation followed by steep drawdowns have occurred multiple times throughout BNB’s history. BNB prices have continued to exhibit extreme volatility.
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Extreme volatility may persist and the value of our common stock may significantly decline in the future without recovery. The digital asset markets may still be experiencing a bubble or may experience a bubble again in the future. For example, in the first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, FTX Trading Ltd. (“FTX”), one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former CEO. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC (“Genesis”). In response to these events (collectively, the “2022 Events”), the digital asset markets have experienced extreme price volatility and other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. The 2022 Events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices, including BNB, may continue to experience significant volatility or price declines and confidence in the digital asset markets may be further undermined.
Extreme volatility in the future, including further declines in the trading price of BNB, could have a material adverse effect on the value of our common stock and our common stock could lose all or substantially all of its value. Furthermore, negative perception and a lack of stability and standardized regulation in the cryptocurrency economy may reduce confidence in the cryptocurrency economy and may result in greater volatility in the price of BNB and other cryptocurrencies, including a depreciation in value.
We face significant risks relating to disruptions, forks, gain-of-control attacks, hacks, network disruptions, or other adverse events or other compromises to the cryptocurrency blockchains, which could materially and adversely impact our business, financial condition and results of operations.
Blockchain networks are maintained by decentralized networks of participants, and as such are susceptible and vulnerable to a variety of risks, including disruptions, security breaches, and fundamental technical issues. These networks are vulnerable to attacks by malicious actors who gain control of a significant portion of the network’s validating authority. In such an event, the attacker could potentially double-spend transactions, reverse previously confirmed transactions, or otherwise disrupt the normal operations of the network. Successful attacks have historically undermined trust in affected blockchain networks and could materially decrease the value of cryptocurrency assets.
Additionally, forks, or splits in the underlying protocol, may occur when participants fail to reach consensus on proposed upgrades or changes. Forks can lead to the creation of duplicate networks, confusion among market participants, dilution of the original network’s value, and disruption of the network’s operations. Hard forks, in particular, can materially and adversely impact the perceived stability and value of digital assets, leading to reduced demand and price declines.
Further, hacks and other security breaches targeting the core infrastructure of blockchain networks or major participants, such as exchanges and custodians, could severely impact the reputation and market confidence in these networks. Exploits of protocol-level vulnerabilities could also compromise the integrity of the cryptocurrency blockchains, resulting in a substantial loss of value.
The success and growth of cryptocurrency assets depend significantly on their continued security, stability, and scalability. Any technical failures, consensus breakdowns, governance disputes, or regulatory interventions that diminish confidence in the networks or impair their functionality could lead to a material decline in their market prices, which could materially and adversely impact our business, financial condition and results of operations. A sustained or significant decrease in the price or liquidity of cryptocurrencies, whether due to gain-of-control attacks, forks, hacks, network disruptions, or other adverse events, could negatively impact our business, financial condition, and results of operations. Furthermore, even the perception that any of these events could occur may lead to significant market volatility and price declines, adversely affecting our business, financial condition and results of operations.
Crypto assets and blockchains are subject to various “attack” risks.
All networked systems are vulnerable to various kinds of attacks. A blockchain may be vulnerable to several types of attacks, including:
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●a “33% attack,” where, if a validator or group of validators were to gain control of more than 33% of the total staked crypto asset on the applicable blockchain, a malicious actor could temporarily impede or delay block confirmation or even cause a temporary fork in the blockchain.
●a “50% attack” where, if a validator or group of validators acting in concert were to gain control of more than 50% of the total staked crypto asset on the blockchain, a malicious actor would be able to gain full control of the blockchain and the ability to manipulate the blockchain on a forward-looking basis, including censoring transactions following the achievement of threshold, double-spending and fraudulent block propagation, while the attacker maintains the threshold. In theory, the minority non-attackers might reach social consensus to reject blocks proposed by the malicious majority attacker, reducing the attacker's ability to engage in malicious activity, but there can be no assurance this would happen or that non-attackers would be able to coordinate effectively.
●a “>66% attack,” where, if a validator or group of validators acting in concert were to gain control of more than 66% of the total staked BNB on the blockchain, a malicious actor could permanently and irreversibly manipulate the blockchain, including censorship, double-spending, and fraudulent block propagation, both on a forward- and backward-looking basis. The attacker could unilaterally finalize their preferred chain without the votes of any other stakers and could also reverse past finalized blocks.
Further, smart contracts on the network may create systemic risk for the price of a crypto asset in the event of an exploit. If a significant portion of a crypto asset is held by a small number of holders sometimes referred to as “whales,” these holders have the ability to manipulate the price of the crypto asset.
Political or economic crises may motivate large-scale sales of digital assets, which would result in a reduction in values and materially and adversely affect us.
Cryptocurrencies, as an alternative to fiat currencies that are backed by central governments, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. For example, political or economic crises could motivate large-scale acquisitions or sales of digital assets either globally, regionally or locally. Large-scale sales of certain digital assets would result in a reduction in their value and could materially and adversely affect our investment and trading strategies, the value of our assets, our business, financial condition and results of operations, and the price of our common stock.
The value of cryptocurrencies and other digital assets may be subject to momentum pricing risk.
Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Cryptocurrency and other digital asset market prices are determined primarily using data from various digital asset trading platforms, over-the-counter markets and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and other digital assets, inflating and making their market prices more volatile, and such effects may be material and adverse. As a result, cryptocurrencies, including BNB, and other digital assets may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely materially affect the value of our cryptocurrency holdings and other digital asset inventory and thereby have a material adverse effect on our business, financial condition and results of operations and the market price of our common stock.
The emergence of DeFi subjects us to evolving risks and uncertainties relating to our investments and our services.
DeFi refers to a variety of blockchain-based applications or protocols that provide for peer-to-peer financial services using smart contracts and other technology rather than such services being offered by central intermediaries. There are various DeFi applications and protocols, each with its own unique risks and uncertainties. Common DeFi applications include borrowing/lending digital assets and providing liquidity or market making in digital assets and derivatives referencing digital assets. DeFi applications and ecosystems are demonstrating how public blockchains and smart contracts can revolutionize financial services, but the nascent technology comes with several risks that could materially and adversely affect our investments and trading strategies. It is difficult to quantify the amount of leverage that exists within the DeFi ecosystem and price volatility can result in deleveraging that moves asset prices dramatically. In addition, smart contracts may contain bugs which put funds at risk of theft or loss. Furthermore, in certain decentralized protocols, it may be difficult or impossible to verify the identity of a transaction counterparty necessary to comply with any applicable anti-money laundering, countering the financing of terrorism, or sanctions regulations or controls.
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The complexity and interconnectedness of digital asset networks, applications and economic systems enables new forms of malicious attacks that leverage a feature or vulnerability of one system to attack another. Such an attack may take the form of a temporary manipulation of the price of certain digital assets that trigger second order behaviors, such as automatic collateral liquidations on decentralized applications or digital asset trading platforms. Such an attack could adversely affect investments. A malicious actor can exploit the structure of one or a series of smart contracts or applications in ways that do not technically constitute exploitation of a “bug” or flaw in the smart contract or application. For example, such an exploit has occurred repeatedly in the Ethereum DeFi ecosystem, whereby a decentralized trading platform or lending application is designed to reference an external pricing source of a particular digital asset to determine when to liquidate collateral. By manipulating the price of the particular digital asset on a third-party platform (such as a digital asset trading platform), the pricing source used by the decentralized trading platform or application is consequently manipulated, which then leads to uneconomic collateral liquidations on the decentralized trading platform or application. Such liquidations may be processed automatically and could have a material adverse effect on our investments and trading strategies and an adverse impact on the price of our common stock.
Loss or theft of private keys or breaches of our digital wallets could result in the permanent loss of our BNB and materially adversely affect our business.
Digital assets such as BNB are controllable only by the possessor of the unique private keys relating to the digital wallet in which the assets are held. Safeguarding these private keys is critical. If our private keys are lost, destroyed, stolen, or otherwise compromised, we may be unable to access some or all our BNB. Likewise, if the digital wallets used to store our BNB are hacked or otherwise breached, our assets could be diverted, and such losses may be irreversible.
Recovery of lost or stolen assets may be impossible, and remedies against custodians or service providers may be limited. Even if recourse were theoretically available, litigation or enforcement in the jurisdictions where such custodians are located may be uncertain, costly and time-consuming. Any loss of BNB due to key mismanagement, wallet compromise or other security failure could materially adversely affect our financial condition, results of operations and the price of our common stock. We do not carry insurance against these losses.
Competition from central bank digital currencies and emerging payments initiatives involving financial institutions could adversely affect the value of BNB and other digital assets.
Central banks in various countries have introduced digital forms of legal tender (“CBDCs”). Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replace, BNB and other cryptocurrencies as a medium of exchange or store of value. Central banks and other governmental entities have also announced cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their payments and settlement activities, which could compete with, or reduce the demand for, BNB. As a result of any of the foregoing factors, the value of BNB could decrease, which could adversely affect the Company.
For example, China’s CBDC project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, BNB and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of BNB to decrease, which could have a material adverse effect on our business, prospects, financial condition and operating results and the price of our common stock.
The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of BNB and adversely affect our business.
As a result of our DAT Strategy, our assets will be concentrated in our BNB holdings. Accordingly, the emergence or growth of digital assets other than BNB may have a material adverse effect on our financial condition. There are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that do not use proof-of-work mining. For example, in late 2022, the Ethereum network transitioned to a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power than proof-of-work mining. The Ethereum network has completed other major upgrades since then and may undertake additional upgrades in the future.

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Other alternative digital assets that compete with BNB in certain ways include “stablecoins,” which are designed to maintain a constant price because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. Stablecoins have grown rapidly as an alternative to BNB and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms. On July 18, 2025, the GENIUS Act was passed and signed into law of the United States, which directs for a federal regulatory framework for the issuance of “payment stablecoins” that are designed to be used as a means of payment and settlement. The GENIUS Act prescribes a regulatory framework that would further reduce uncertainty of the legal status and treatment of “payment stablecoins” or other digital assets in general and clarify in certain instances that such digital assets would not be treated or regulated as “securities.”
The reliance on open-source code by digital asset networks exposes us to risks related to competitive networks and products built on such code, the failure of individuals to maintain that code and discovery of security vulnerabilities that could threaten the ability of such networks to operate.
Digital asset networks are open-source projects and, although there may be an influential group of leaders in the network community, generally there is no official developer or group of developers that formally controls the digital asset network. Without guaranteed financial incentives, there may be insufficient resources to address emerging issues, upgrade security or implement necessary improvements to the network in a timely manner. If the digital asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies and reduced trust, all of which could negatively impact the digital assets’ long-term viability and have a material adverse effect on our business, financial condition and results of operations and the price of our common stock.
We do not maintain insurance covering the theft or loss of our digital assets, and the lack of legal recourse increases the risk of total loss.
We do not maintain cybersecurity, crime, specie or other insurance covering the theft, loss or destruction of our digital assets, and we may be unable to obtain such coverage on commercially reasonable terms or at all. Coverage of this type is available on a limited basis and is typically subject to high premiums, low limits relative to the value of our holdings, and broad exclusions. To the extent an exchange or custodian holding our assets maintains its own insurance, we may have no direct rights under that coverage and any limits may be shared among all of that platform's customers.
If we lose digital assets, whether through a cyberattack, an unauthorized transfer, the compromise of private keys, fraud or a custodial failure, we would bear the full amount of that loss with no insurance recovery. Digital asset transactions are generally irreversible and no central authority can restore access, so we may have no viable legal recourse. Unlike funds held at insured banking institutions, our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, and if another party is liable there is no guarantee it will have the resources to compensate us.
Our digital assets represented 93.1% of our total assets as of July 31, 2026. A single successful attack or custodial failure could result in the loss of substantially all of our assets and cause our stockholders to lose their entire investment.
The state, local and non-U.S. tax treatment of digital assets is unclear.
The taxing authorities of certain states (i) have announced that they will follow Notice 2014-21 issued by the Internal Revenue Service with respect to the treatment of digital assets for state income tax purposes and/or (ii) have issued guidance exempting the purchase and/or sale of digital assets for fiat currency from state sales tax. It is unclear what further guidance on the treatment of digital assets for state tax purposes may be issued in the future. Any future guidance on the treatment of digital assets for state or local tax purposes could result in adverse tax consequences to us and could adversely affect the price of digital assets.
The treatment of digital assets for tax purposes by non-U.S. jurisdictions may differ from the treatment of digital currency for U.S. federal, state or local tax purposes. It is possible, for example, that a non-U.S. jurisdiction would impose sales tax or value-added tax on purchases and sales of digital assets for fiat assets. For instance, if a foreign jurisdiction with a significant share of the market of a digital assets users imposes onerous tax burdens on digital asset users, or imposes sales or value-added tax on purchases and sales of digital assets for fiat assets, such actions could result in decreased demand for digital currency in such jurisdiction, which could adversely affect the price of digital assets.
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Risks Related to Investing in BNB
BNB is subject to extreme price volatility, and any sustained decline in the market price of BNB could lead to substantial losses on our digital asset holdings and could adversely affect the market price of our common stock.
Historical prices of BNB have exhibited sudden and significant fluctuations due to shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions, and regulatory announcements. Because digital asset trading markets are relatively new, largely unregulated, and, at times, subject to limited liquidity, BNB may experience larger or more frequent price swings than traditional asset classes and may not be complying with existing regulations. As a result, trading activity on or reported by these digital asset trading platforms is generally significantly less regulated than trading in regulated U.S. securities and commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues. Furthermore, many digital asset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on the platform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of cryptocurrencies such as BNB on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more traditional exchanges. A rapid decrease in the price of BNB—whether the result of negative perception, a lack of stability in the digital asset trading platforms, market manipulation of cryptocurrency trading platforms by customers, a cyber-security incident, regulatory action, or other factors—could materially reduce the value of any BNB we hold, force us to recognize impairment charges, trigger defaults or covenant breaches in any future financing arrangements, and depress the market price of our securities.
Additionally, a significant majority of the daily BNB trading volume occurs on the Binance Exchange, which is controlled by Binance, the original distributor of BNB. Most of the BNB in circulation has been reported to be held by the founder and former controller of Binance. As a result, trading activity by these parties could have a material impact on the price and trading volume of BNB on the Binance Exchange. While Binance and its former controller have indicated that they and their respective related entities do not actively trade BNB or undertake gross or net purchasing activities to support its price or increase trading volume, publicly available information is insufficient to enable a conclusion as to whether trading activity in BNB on the Binance Exchange by such parties (or others) is occurring in compliance with the Binance Exchange’s policies and procedures or having a material impact on the price or trading volume of BNB on the Binance Exchange or other secondary markets. Further, to the Company’s knowledge, Binance and its founder are not subject to trading restrictions in respect of BNB going forward; as such, prior conduct and indications of current intent are not necessarily indicative of future trading activities by these parties. Any allegations of BNB price or volume manipulation could result in regulatory actions against such parties and/or loss of confidence in BNB, and/or Binance generally, which could negatively impact the price of our common stock.
BNB and BNB Chain have links to, and may be controlled by, Binance and its principals.
Binance has links to BNB and BNB Chain, and Binance has historically played a major role in BNB Chain’s development. Binance typically has among the highest trading volume of BNB for any global trading platform. Users of the Binance trading platform who pay trading fees in BNB receive a trading discount, and users who maintain a certain minimum balance of BNB on Binance’s trading platform may qualify to receive additional benefits, such as additional reduced fees, lower interest rates, higher borrowing limits, and other benefits, from Binance. (Binance, Fee Schedule, https://www.binance.com/en/fee/schedule (last visited October 15, 2025)). Concurrent with the launch of the Binance’s exchange in July 2017, Binance or its affiliates minted 200 million BNB tokens on the Ethereum blockchain using Ethereum’s ERC-20 functionality. These tokens were initially created for the purpose of allowing the holder of BNB to pay for fees incurred from the use of the Binance exchange, among other uses. Binance according to the Binance Exchange white paper V 1.1 (the “BNB white paper”) issued the 200 million BNB as follows: 10% (20 million BNB) to angel investors in Binance Ltd., 40% (80 million BNB) to the founding employees of Binance exchange subject to a 4 year schedule, and 50% (100 million BNB) in what the BNB white paper termed an “ICO” (an abbreviation of “Initial Coin Offering”) in exchange for Ethereum (ETH) or the equivalent Ethereum price in Bitcoin in three consecutive tranches from July 1, 2017 to July 21, 2017. Neither the Asset Manager nor the Company is aware of the precise extent that the employees, principals and angel investors of Binance and its affiliates have retained their BNB that they originally received in the BNB ICO, or what percentage of outstanding BNB is currently owned by Binance and its associated persons (following open-market purchases or otherwise), but there can be no assurance that they do not currently control a majority of outstanding BNB. If Binance and persons associated with it did in fact possess control of a majority of outstanding BNB, it would give them the corresponding ability to control validator selection via voting, and numerous other governance decisions relating to the future of BNB Chain and BNB, such as forks, future development roadmaps, scaling decisions, etc., which they could in theory choose to exercise in a way that benefits themselves or their interests. In the BNB white paper, Binance represented it would use the proceeds of the BNB ICO to develop the Binance exchange. Moreover, Binance has been responsible for operating the deflationary burning program for BNB tokens, which was a significant force in their market value. U.S. regulators have scrutinized burn mechanisms in past enforcement actions, with the SEC citing issuer-controlled burn programs as evidence of efforts to influence a cryptocurrency’s value consistent with securities characteristics. If regulators were to reach a similar conclusion regarding BNB’s burn mechanism, it could increase the likelihood that BNB would be classified as a security and subject to heightened regulatory restrictions, adversely affecting its liquidity and price.
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Apart from the risks of potential centralized control, the perception that BNB Chain and BNB are associated with Binance could cause BNB’s value to be affected by developments involving or affecting Binance. For example, in 2023 the SEC filed a lawsuit against Binance, alleging, inter alia, that the offering and sale of BNB by Binance was an unregistered securities offering. The district court’s decision in SEC v. Binance Holdings Ltd. et al., 738 F.Supp.3d 20, 48-58 (D.D.C. Aug. 23, 2024), ruled that, while the SEC’s allegations regarding the manner in which Binance offered and sold BNB as part of the initial distribution of BNB were sufficient at the motion to dismiss stage, the SEC’s complaint did not include sufficient facts to support a plausible inference that any particular secondary sales of BNB satisfy the Howey test for an investment contract. In 2023, the Department of Justice, the Office of Foreign Assets Control, the Financial Crimes Enforcement Network, and the CFTC reached a series of settlements with Binance for charges involving violations of U.S. laws governing money laundering, sanctions, registration as a money services business, and registration under the Commodity Exchange Act, among others. If Binance were to be subject to operating restrictions or was no longer able to facilitate trading in BNB, the liquidity and market value of BNB would be negatively affected, causing our common stock to decline in value. If BNB were no longer able to be used for trading fee discounts on Binance, the demand for BNB would be negatively affected, which would likewise negatively impact BNB’s market value and therefore the price of our common stock. Likewise, negative developments, publicity, or sentiment relating to Binance or its principals could affect market demand for, and value of, BNB.
Proof-of-stake blockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period of time as traditional proof-of-work blockchains.
Certain digital assets, such as Bitcoin, use a “proof-of-work” consensus algorithm. Bitcoin’s blockchain has been in continual operation since its “genesis” block was mined in 2009. Many newer blockchains that enable smart contract functionality are built on a consensus algorithm known as “proof-of-stake,” including the current Ethereum network following the completion of its transition to a “proof-of-stake” model in 2022. Proponents believe that there are certain advantages to the use of “proof-of-stake” models; however, the “proof-of-stake” consensus mechanisms and governance systems underlying many newer blockchain protocols, including BNB Chain, and their associated digital assets (including the BNB held by the Company), have not been tested at scale over as long of a period of time or subject to as widespread use or adoption. This is in contrast with, for example, Bitcoin’s proof-of-work consensus mechanism.
“Proof-of-stake” blockchains, and their associated digital assets, may have undetected vulnerabilities, structural design flaws, suboptimal incentive structures for network participants (e.g., validators), technical disruptions, or a wide variety of other problems, that might otherwise be apparent for a consensus protocol with a longer operational history, such as the bitcoin blockchain. If such problems were to occur, they could result in disrupted functions, or other unintended outcomes, which could further lead to (i) an outright failure that causes a total outage or disruption of network activity, or (ii) other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value of the associated digital assets, including the Company’s assets. Over the long term, there can be no assurance that the “proof-of-stake” blockchain on which the Company’s assets rely will achieve widespread scale or adoption or perform successfully; any failure to do so could negatively impact our business, financial condition and results of operations and the price of our common stock.
The value of our common stock depends on the development and acceptance of BNB Chain. The slowing or stopping of the development or acceptance of BNB Chain may adversely affect an investment in our common stock.
Digital assets such as BNB were only introduced within the past 15 years, and the medium-to-long-term value of our common stock is subject to a number of factors over time relating to the capabilities and development of blockchain technologies, such as the recentness of their development, their dependence on the internet and other technologies, their dependence on the role played by users, developers, validators and the potential for malicious activity. BNB itself was launched only in 2017. For example, the realization of one or more of the following risks could materially adversely affect the value of our common stock: digital asset networks, including BNB Chain, and the software used to operate them are in the early stages of development. Given the recentness of the development of digital asset networks, digital assets may not function as intended and parties may be unwilling to use digital assets, which would dampen the growth, if any, of digital asset networks. Because BNB is a digital asset, the value of our common stock is subject to a number of factors relating to the fundamental investment characteristics of digital assets, including the fact that digital assets are bearer instruments and loss, theft, compromise, or destruction of the associated private keys could result in permanent loss of the asset.
BNB Chain, including the cryptographic and algorithmic protocols associated with the operation of BNB Chain, has only been in existence since 2017, and BNB markets have a limited performance record, making them part of a new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate. For example, the following are some of the risks that could materially adversely affect the value of our common stock:
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●Digital assets, including BNB, are controllable only by the possessor of both the unique public key and private key or keys relating to the BNB Chain address, or “wallet”, at which the digital asset is held. Private keys must be safeguarded and kept private in order to prevent a third party from accessing the digital asset held in such wallet. The loss, theft, compromise or destruction of a private key required to access a digital asset may be irreversible. If a private key is lost, stolen, destroyed or otherwise compromised and no backup of the private key is accessible, the owner would be unable to access the digital asset corresponding to that private key and the private key will not be capable of being restored by the digital asset network, resulting in the total loss of the value of the digital asset linked to the private key.
●Digital asset networks are dependent upon the internet. A disruption of the internet or a digital asset network, such as BNB Chain, would affect the ability to transfer digital assets, including BNB, and, consequently, their value.
●The foregoing notwithstanding, BNB Chain’s protocol is informally overseen by a collective of core developers who propose amendments to the relevant network’s source code. Core developers’ roles evolve over time, largely based on self-determined participation. If a significant majority of users and validators were to adopt amendments to BNB Chain based on the proposals of such core developers, BNB Chain would be subject to new protocols that may adversely affect the value of BNB.
●To the extent that any validators cease to record transactions that do not include the payment of a transaction fee in solved blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on BNB Chain until a block is validated by a validator who does not require the payment of transaction fees or is willing to accept a lower fee. Any widespread delays in the recording of transactions could result in a loss of confidence in a digital asset network.
●Many digital asset networks, including BNB Chain, face significant scaling challenges and are being upgraded with various features designed to increase the speed of digital asset transactions and the number of transactions that can be processed in a given period (known as “throughput”). These attempts to increase the volume of transactions may not be effective, and such upgrades may fail, resulting in potentially irreparable damage to BNB Chain and the value of BNB.
●Moreover, in the past, bugs, defects and flaws in the source code for digital assets have been exposed and exploited, including flaws that disrupted normal blockchain network or DApp and smart contract operations or disabled related functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. The cryptography underlying BNB Chain or BNB as an asset could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective. In any of these circumstances, a malicious actor may be able to compromise the security of BNB Chain or take the treasury’s BNB, which would adversely affect the value of our common stock. Moreover, normal operations and functionality of BNB Chain may be negatively affected. Such losses of functionality could lead to BNB Chain losing attractiveness to users, nodes, validators, or other stakeholders, thereby dampening demand for BNB. Even if another digital asset other than BNB were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore adversely affect the value of our common stock.
●BNB Chain is still in the process of developing and making significant decisions that will affect policies that govern the supply and issuance of BNB as well as other BNB Chain protocols. The open-source nature of many digital asset network protocols, such as the protocol for BNB Chain, means that developers and other contributors are generally not directly compensated for their contributions in maintaining and developing such protocols. As a result, the developers and other contributors of a particular digital asset may lack a financial incentive to maintain or develop the network, or may lack the resources to adequately address emerging issues. Alternatively, some developers may be funded by companies whose interests are at odds with other participants in a particular digital asset network. If BNB Chain does not successfully develop its policies on supply and issuance, and other major design decisions or does so in a manner that is not attractive to network participants it could lead to a decline in adoption of BNB Chain and price of BNB.
●Software applications running on top of BNB Chain (often referred to as “decentralized applications” or “Dapps”, whether or not decentralized in fact) and smart contract developers depend on being able to obtain BNB to be able to run their programs and operate their businesses. In particular, decentralized applications and smart contracts require BNB in order to pay the transaction fees needed to pay validators to execute transactions and smart contract operations. As such, they represent a significant source of demand for BNB. BNB’s price volatility (particularly where BNB prices increase), or BNB Chain’s wider inability to meet the demands of decentralized applications and smart contracts in terms of inexpensive, reliable, and prompt transaction execution (including during congested periods), or to solve its scaling challenges or increase its throughput, may discourage such decentralized application and smart contract developers from using BNB Chain as the foundational infrastructure layer for building their applications and smart contracts. If decentralized application and smart contract developers abandon BNB Chain for other blockchain or digital asset networks or protocols for whatever reason, the value of BNB could be negatively affected.
Moreover, because digital assets, including BNB, have been in existence for a short period of time and are continuing to develop, there may be additional risks in the future that are impossible to predict as of date hereof.
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If validators exit BNB Chain, it could increase the likelihood of a malicious actor obtaining control.
Validators exiting the network could make BNB Chain more vulnerable to a malicious actor obtaining control of a large percentage of staked BNB, which might enable them to manipulate BNB Chain by censoring or manipulating specific transactions. If BNB Chain suffers such an attack, the price of BNB could be negatively affected, and a loss of confidence in BNB Chain could result. Any reduction in confidence in the transaction confirmation process or staking power of BNB Chain may adversely affect an investment in our common stock.
Blockchain technologies are based on theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly. These premises may be incorrect or may become incorrect due to technological advances.
Blockchain technologies are premised on theoretical conjectures as to the impossibility, in practice, of solving certain mathematical problems quickly. Those conjectures remain unproven, however, and mathematical or technological advances could conceivably prove them to be incorrect. Blockchain technology companies may also be negatively affected by cryptography or other technological or mathematical advances, such as the development of quantum computers with significantly more power than computers presently available, that undermine or vitiate the cryptographic consensus mechanism underpinning BNB Chain and other distributed ledger protocols. If either of these events were to happen, markets that rely on blockchain technologies, such as BNB Chain, could quickly collapse, and an investment in our common stock may be adversely affected.
Due to the nature of private keys, BNB transactions are irrevocable and stolen or incorrectly transferred BNB may be irretrievable. As a result, any incorrectly executed BNB transactions could adversely affect our business, financial condition and results of operations and the price of our common stock.
BNB transactions are typically not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been signed with private keys, verified and recorded in a block that is added to BNB Chain, an incorrect transfer of cryptocurrency, such as BNB, or a theft of BNB generally will not be reversible and the Company may not be capable of seeking compensation for any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, the Company’s BNB or other assets could be transferred from the Company’s custodial accounts in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. To the extent that the Company is unable to successfully seek redress for such error or theft, such loss could adversely affect our business, financial condition and results of operations and the price of our common stock.
If a custodian’s internal procedures and controls are inadequate to safeguard the Company’s BNB holdings, and the Company’s private key(s) is (are) lost, destroyed or otherwise compromised and no backup of the private key(s) is (are) accessible, the Company will be unable to access its BNB, which could adversely affect our business, financial condition and results of operations and the price of our common stock. In addition, if the Company’s private key(s) is (are) misappropriated and the Company’s BNB holdings are stolen, including from or by a custodian, the Company could lose some or all of its BNB holdings, which could adversely impact our business, financial condition and results of operations and the price of our common stock.
Such events have occurred in connection with digital assets in the past. For example, in October 2022, an unidentified hacker or hackers found a bug in the BNB Smart Chain bridge’s code and used it to mint and withdraw about US$570 million worth of BNB tokens. Binance and the crypto community reacted quickly and were able to freeze most of the stolen money. However, around US$100 million worth of stolen assets were moved off-chain. To the extent that the Company is unable to seek a corrective transaction with such third party or is incapable of identifying the third party which has received the Company’s BNB through error or theft, the Company will be unable to revert or otherwise recover incorrectly transferred BNB. The Company will also be unable to convert or recover its BNB transferred to uncontrolled accounts. To the extent that the Company is unable to seek redress for such error or theft, such loss could adversely affect our business, financial condition and results of operations and the price of our common stock.
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BNB Chain’s decentralized governance structure may negatively affect its ability to grow and respond to challenges.
The governance of decentralized networks, such as BNB Chain, is by voluntary consensus and open competition. In other words, BNB Chain has no central decision-making body or clear manner in which participants can come to an agreement other than through voluntary, widespread consensus. As a result, a lack of widespread consensus in the governance of BNB Chain may adversely affect the network’s utility and ability to adapt and face challenges, including technical and scaling challenges. If a significant majority of users and validators adopt amendments to a decentralized network based on the proposals of core developers, such network will be subject to new protocols that may adversely affect the value of the relevant digital asset. However, BNB Chain would cease to operate successfully without both validators and users, and the core developers cannot formally compel them to adopt the changes to the source code desired by core developers, or to continue to render services or participate in BNB Chain. As a general matter, the governance of BNB Chain generally depends on most of members of the BNB Chain community ultimately reaching some form of voluntary agreement on significant changes.
The decentralized governance of BNB Chain may make it difficult to find or implement solutions or marshal sufficient effort to overcome existing or future problems, especially protracted ones requiring substantial directed effort and resource commitment over a long period of time, such as scaling challenges. BNB Chain’s failure to overcome governance challenges could exacerbate problems experienced by the network or cause the network to fail to meet the needs of its users, and could cause users, validators, and developer talent to abandon BNB Chain or to choose competing blockchain protocols, or lead to a drop in speculative interest, which could cause the value of BNB to decline. If the BNB Chain community is unable to reach consensus in the future, it could have adverse consequences for the network or lead to a fork, which could affect the value of BNB.
We face risks relating to the potential compromise of BNB Chain and other cryptocurrencies’ network security by emerging technologies, including artificial intelligence and quantum computing, which may materially and adversely impact our operations and financial condition.
The security and integrity of BNB Chain and other cryptocurrencies’ network are fundamentally dependent on the robustness of its cryptographic algorithms. BNB and other cryptocurrencies’ protocol relies heavily on public key cryptography and hashing algorithms to secure transactions, safeguard private keys, and prevent double-spending. Advances in emerging technologies, particularly artificial intelligence (“AI”) and quantum computing may pose significant risks to BNB Chain and other cryptocurrencies’ network’s security and operational stability.
Quantum computing, in particular, presents a long-term threat to the cryptographic assumptions underpinning BNB Chain and other cryptocurrencies. Should quantum computing achieve sufficient maturity, it could undermine the effectiveness of the cryptographic algorithms used to secure the blockchain, such as elliptic curve digital signature algorithms (ECDSA). A sufficiently powerful quantum computer could potentially reverse-engineer private keys from public addresses or compromise the blockchain’s consensus mechanism, leading to the theft of digital assets, double-spending, and other forms of fraud. Although current quantum computing capabilities are not yet at this level, advancements in quantum technologies could materialize more rapidly than anticipated, creating significant systemic risks for BNB Chain.
AI may also pose indirect security risks. AI-driven cyberattacks, including advanced phishing schemes, autonomous malware, and intelligent blockchain analysis tools, could increase the sophistication and success rate of attacks targeting BNB and other cryptocurrencies’ users, exchanges, custodians, and node operators. The use of AI to exploit vulnerabilities in software, validator hardware, or network protocols could threaten the stability and reliability of the BNB and other cryptocurrencies’ ecosystem.
There can be no assurance that BNB and other cryptocurrencies’ current cryptographic safeguards will be sufficient to protect against future technological advances. While research and development efforts are ongoing to develop quantum-resistant cryptographic protocols, BNB Chain and other cryptocurrencies’ network may face challenges in adopting such technologies at scale, particularly given its decentralized governance structure. Any successful attack or perceived vulnerability arising from AI or quantum computing could materially and adversely affect the price, liquidity, and adoption of BNB and other cryptocurrencies and could negatively impact our business, financial condition and results of operations.
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Any name change and any associated rebranding initiative by the core developers of BNB may not be favorably received by the digital asset community, which could negatively impact the value of BNB, our business, financial condition and results of operations and the price of our common stock.
From time to time, digital assets may undergo name changes and associated rebranding initiatives. For example, Bitcoin Cash may sometimes be referred to as Bitcoin ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi Vision, and in August 2024, MakerDAO, one of the largest decentralized finance protocols, rebranded to "Sky" and introduced new tokens to replace its established MKR governance token and DAI stablecoin. We cannot predict the impact of any name change and any associated rebranding initiative on BNB. After a name change and an associated rebranding initiative, a digital asset may not be able to achieve or maintain brand name recognition or status that is comparable to the recognition and status previously enjoyed by such digital asset. The failure of any name change and any associated rebranding initiative by a digital asset may result in such digital asset not realizing some or all of the anticipated benefits contemplated by the name change and associated rebranding initiative, and could negatively impact the value of BNB, our business, financial condition and results of operations and the price of our common stock.
Banks, financial institutions and BNB exchanges that our DAT Strategy relies on, may be located outside the United States, may not be subject to U.S. regulation, and may be less reliable than U.S.-equivalents.
In connection with the implementation of our DAT Strategy and the PIPE Transaction, the Company and/or Asset Manager entered into agreements with one or more U.S. state-chartered bank or other U.S. regulated financial institution to provide custodial, trading, and exchange-access services on our behalf. These banks or financial institutions may not be subject to U.S. federal regulation. These arrangements serve as an initial setup for our digital asset and certain fiat activities, including a cash deposit account for U.S. dollars. To increase yield, our service providers may subsequently migrate a substantial portion of related fiat and digital asset custody, trading, and yield-generation activities to offshore custodians or DeFi trading platforms, including U.S. dollar deposits. In addition, our trading and yield-generation activities, whether or not our accounts are held in custody at a U.S. regulated or regulated offshore custodian, are likely to require us to transfer digital assets and fiat currency to counterparties who may be unregulated and who may be located offshore. The use of such onshore unregulated or offshore custodians, banks, counterparties, and DeFi platforms, which may not be subject to U.S. regulation, would expose our assets to heightened risks, including: (i) counterparty risk and the potential insolvency of such custodians or DeFi trading platform operators, which may not be subject to capital, segregation, or supervisory requirements commensurate with those of the initial U.S. custodial, trading, and exchange-access service providers; (ii) regulatory and jurisdictional uncertainty, which could result in sudden changes to access or withdrawal rights; and (iii) increased risk of loss of, or inaccessibility to, our fiat or digital assets in the event of a custodial or bank failure, exchange freeze, government intervention or fraud. Any of these risks could materially and adversely affect our ability to safeguard our assets, reduce expected yields, and negatively impact our business, financial condition and results of operations as well as the price of our common stock.
Additionally, to the extent any of the Company’s activities involving BNB are conducted on BNB trading platforms outside the United States, trading on such exchanges is not regulated by any U.S. governmental agency and may involve certain risks not applicable to trading on U.S. exchanges. Certain foreign markets may be more susceptible to disruption than U.S. exchanges. These factors could adversely affect the performance of the Company and its common stock.
Our DAT Strategy may subject us to enhanced regulatory oversight.
Several spot BNB ETPs have received approval from the SEC to list their shares on a national securities exchange with continuous share creation and redemption at net asset value. Even though we are not, and will not expect to function in the manner of, a spot BNB ETP, it is possible that we nevertheless could face regulatory scrutiny from the SEC or other federal or state agencies due to our BNB holdings.
In addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine. If we are found to have purchased any of our BNB from bad actors that have used BNB to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in BNB by us may be restricted or prohibited.
We may incur indebtedness or enter into other financial instruments in the future that may be collateralized by our BNB holdings. We may also consider pursuing strategies to create income streams or otherwise generate funds using our BNB holdings. These types of BNB-related transactions are the subject of enhanced regulatory oversight. These and any other BNB-related transactions we may enter into, beyond simply acquiring and holding BNB, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.
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Additional laws, guidance and policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX in November 2022. The FTX collapse may have increased regulatory focus on the digital assets industry. Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting BNB, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in BNB.
In addition, private actors that are wary of BNB or the regulatory concerns associated with BNB have in the past taken and may in the future take further actions that may have an adverse effect on our business, financial condition and results of operations and the market price of our common stock.
Regulatory changes or actions in foreign jurisdictions may affect the price of our common stock or restrict the use of BNB, validator activity or the operation of their networks or the global BNB markets in a manner that adversely affects our business, financial condition and results of operations and the price of our common stock.
Various foreign jurisdictions have, and may continue to adopt laws, regulations or directives that affect digital asset networks (including BNB Chain), the digital asset markets (including the BNB market), and their users, particularly digital asset exchanges and service providers that fall within such jurisdictions’ regulatory scope. For example, if China or other foreign jurisdictions were to ban or otherwise restrict validating activity, including by regulating or limiting manufacturers’ ability to produce or sell semiconductors or hard drives in connection with BNB validating activities, it would have a material adverse effect on digital asset networks (including BNB Chain), the digital asset market, and as a result, adversely impact our business, financial condition and results of operations and the price of our common stock.
A number of foreign jurisdictions have recently taken regulatory action aimed at digital asset activities. China has made transacting in cryptocurrencies illegal for Chinese citizens in mainland China, and additional restrictions may follow. Both China and South Korea have banned initial coin offerings entirely and regulators in other jurisdictions, including Canada, Singapore and Hong Kong, have opined that initial coin offerings may constitute securities offerings subject to local securities regulations. In May 2021, the Chinese government announced renewed efforts to restrict cryptocurrency trading and mining activities. Regulators in the Inner Mongolia and other regions of China have proposed regulations that would create penalties for companies engaged in cryptocurrency mining activities and introduce heightened energy saving requirements on industrial parks, data centers and power plants providing electricity to cryptocurrency miners. The United Kingdom’s Financial Conduct Authority published final rules in October 2020 banning the sale of derivatives and exchange traded notes that reference certain types of digital assets, contending that they are “ill- suited” to retail investors citing extreme volatility, valuation challenges and association with financial crime. A new bill, the Financial Services and Markets Bill (“FSMB”), became law in 2023. The FSMB brings digital asset activities within the scope of existing laws governing financial institutions, markets and assets. In addition, the European Council of the European Union approved the text of MiCA in October 2022. MiCA came into effect in 2024, establishing a regulatory framework for digital asset services across the European Union. MiCA is intended to serve as a comprehensive regulation of digital asset markets and imposes various obligations on digital asset issuers and service providers. The main aims of MiCA are industry regulation, consumer protection, prevention of market abuse and upholding the integrity of digital asset markets.
Foreign laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance of one or more digital assets by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability of the digital asset economy in the European Union, China, Japan, Russia and the United States and globally, or otherwise negatively affect the value of BNB. Moreover, other events, such as the interruption in telecommunications or internet services, cyber-related terrorist acts, civil disturbances, war or other catastrophes, could also negatively affect the digital asset economy in one or more jurisdictions. For example, Russia’s invasion of Ukraine on February 24, 2022 led to volatility in digital asset prices, with an initial steep decline followed by a sharp rebound in prices. The effect of any future regulatory change on the Company or BNB is impossible to predict, but such change could be substantial and adverse to our business, financial condition and results of operations and the price of our common stock.
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Risks Related to Fat Panda Operations
If we fail to manage our business and growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.
Our success in the Fat Panda business will depend, in part, on our ability to manage our business and its growth. Any growth in, expansion of, or shift in the focus of our business, is likely to place a strain on our management and administrative resources, infrastructure and systems. As with acquired businesses, we expect that we will need to further refine and expand our business development capabilities, our systems and processes and our access to financing sources. We will also need to hire, train, supervise, and manage existing and new employees. Prior to the acquisition our operations have been handled by a limited number of persons at one location. The acquisition brings into our company over thirty retail locations and a wide range of different products. Learning the new business and its processes will be time consuming and will increase management responsibilities and divert management attention from the historical business. We cannot assure that we will be able to:
●optimize our product offerings effectively or efficiently or in a timely manner, if at all;
●achieve expected synergies or other anticipated benefits;
●allocate our human resources optimally;
●meet our capital needs;
●identify and hire qualified employees or retain valued employees;
●effectively incorporate the components of any business or product line that we may acquire in our effort to achieve growth and income; or
●continue to grow our business.
Our inability or failure to manage our business and its growth effectively could harm our business and materially adversely affect our operating results and financial condition. As a result of our rapid growth, we may find it difficult to build and maintain our business, which could limit our ability to innovate and operate effectively. Any failure to preserve our business could also negatively affect our ability to retain current and recruit new personnel, continue to perform at current levels or execute on our business strategy.
The market for vaporizer products and related items is a niche market, subject to a great deal of uncertainty and is still evolving.
Vaporizer products and related accessories comprise a significant portion of our product offerings through our retail outlets and within our manufacturing line up. These products represent core components of a niche market that is evolving rapidly, is characterized by a number of market participants and is subject to regulatory oversight and a potentially fluctuating regulatory framework. Rapid growth in the use of, and interest in, vaporizer products is recent, and may not continue on a lasting basis. The demand and market acceptance for these products is subject to a high level of uncertainty, including, but not limited to, changes in governmental regulation, developments in product technology, perceived safety and efficacy of our products, perceived advantages of competing products and sale and use of materials that can be vaporized. Therefore, we are subject to many of the business risks associated with a new enterprise in a niche market. Continued technical evolution, market uncertainty, evolving regulation and the resulting risk of failure of our new and existing product offerings in this market could have a material adverse effect on our ability to build and maintain market share and on our business, results of operations and financial condition. Further, there can be no assurance that we will be able to continue to compete effectively in this marketplace.
We depend on third-party suppliers for many of our products and may experience supply shortages which could have a material adverse effect on our business.
We depend on third-party suppliers for many of our vaporization products and accessory consumption products that we sell in our retail outlets. Our customers associate certain characteristics of our products, including the weight, feel, draw, flavor, packaging and other unique attributes, to the brands we market, distribute and sell. The selection of our inventory is important. In the future, we may have difficulty obtaining the products we need from our suppliers as a result of unexpected demand or production difficulties that might extend lead times, as well as constraints relating to our low cash position. Also, products may not be available to us in quantities sufficient to meet our customer demand. Any interruption in supply and/or consistency of these products may adversely impact our ability to deliver products to our customers, may harm our relationships and reputation with our customers, and may have a material adverse effect on our business, results of operations and financial condition. Interruptions in supply or consistency of products could arise for a number of reasons, including but not limited to economic and civil unrest, public health crises, embargoes, and sanctions.
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We may enter into new markets or lines of business that offer new products, or may expand existing lines of business, which may subject us to additional risks.
From time to time, we may enter into new markets or lines of business that entail offering new products, or may expand existing lines of business. Our historical experience does not necessarily ensure that we will be able to successfully operate expanded lines of business or will be successful in launching new products or entering new markets. In addition, external factors, such as competitive alternatives, potential conflicts of interest, either real or perceived, and shifting market preferences, in addition to our lack of experience with or knowledge of new lines of business or markets may impact our implementation, expansion and operation of new and existing lines of business. Other related risks include:
●the potential diversion of management’s attention, available cash, and other resources from our existing businesses;
●unanticipated liabilities or contingencies;
●compliance with additional regulatory burdens;
●potential damage to existing customer relationships, lack of customer acceptance or an inability to attract new customers; and
●the inability to compete effectively in the new line or expanded line of business or in a new market.
Failure to successfully manage these risks in the implementation, expansion or operation of new and existing lines of business and markets or the offering of new products or services could have a material adverse effect on our reputation, business, results of operations and financial condition.
We may be unable to identify or contract with new suppliers in the event of a disruption to our supply.
In the event of a disruption to our supply of product inventory and in respect of the products we manufacture, we would have to identify new suppliers that can meet our needs. Only a limited number of suppliers may have the ability to produce certain products we sell at the volumes we need, and it could be costly or time-consuming to locate and approve such alternative sources. Moreover, it may be difficult or costly to find suppliers to produce small volumes of products in the event we are looking only to supplement our current supply as suppliers may impose minimum order requirements. In addition, we may be unable to negotiate pricing or other terms with our existing or new suppliers as favorable as those we currently enjoy. We cannot guarantee that a failure to adequately replace or supplement our existing suppliers would not have a material adverse effect on our business, results of operations and financial condition.
Demand for the products we distribute could decrease if the trend of our suppliers selling products directly to consumers or retailers continues or accelerates.
Retailers and consumers of vaporization products and consumption accessories have historically purchased certain amounts of these products directly from suppliers. Recently, direct to consumer sales of vaporization products and consumption accessories have accelerated, consistent with broader sales trends. If our customers were to increase their purchases of products directly from suppliers, or if suppliers further increase their efforts to sell such products directly to consumers or retailers, we could experience a significant decrease in our business, results of operations and financial condition. These, or other developments that remove us from, or limit our role in, the distribution chain, may harm our competitive position in the marketplace and reduce our sales and earnings and adversely affect our business.
We are vulnerable to third-party transportation risks, including governmental laws and common carriers’ policies that prevent the shipment of the types of products we sell.
We depend on fast and efficient shipping services to obtain our inventory and distribute our products that we manufacture. Any prolonged disruption of these services may have a material adverse effect on our business, financial condition and results of operations. Rising costs associated with transportation services used by us to receive or deliver our products, including tariffs, as well as delays as a result of factors outside of our control have had and may continue to have a material adverse effect on our business, financial condition and results of operations.
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The loss of a significant supplier would require us to rely more heavily on our other existing suppliers or to develop relationships with new suppliers. Such a loss may have an adverse effect on our product offerings and our business.
We generally make our purchases through purchase orders. As a result, we have experienced and may in the future experience inventory shortages or price increases on certain products. Furthermore, our industry occasionally experiences significant product supply shortages, and we sometimes experience customer order backlogs due to the inability of certain suppliers to make available to us certain products as needed. We cannot provide assurances that suppliers will maintain an adequate inventory of products to fulfill our orders on a timely basis, or at all, or that we will be able to obtain particular products on favorable terms, or at all. Additionally, we cannot provide assurances that product lines currently offered by suppliers will continue to be available to us. A decline in the supply or continued availability of the products of our suppliers, or a significant increase in the price of those products, could reduce our sales and negatively affect our operating results.
In addition, some of our suppliers have the ability to terminate their relationships with us at any time, or to decide to sell, or increase their sales of, their products through other resellers or channels. Although we believe there are numerous suppliers with the capacity to supply the products we distribute, the loss of one or more of our major suppliers could have an adverse effect on our product offerings and our business. Such a loss would require us to rely more heavily on our other existing suppliers, develop relationships with new suppliers or undertake our own manufacturing, which may cause us to pay higher prices for products due to, among other things, a loss of volume discount benefits currently obtained from our major suppliers. Any termination, interruption or adverse modification of our relationship with a key supplier or a significant number of other suppliers would likely adversely affect our operating income, cash flow and future prospects.
If we fail to maintain proper inventory levels, our business could be harmed.
We often purchase key products in quantity from suppliers to maintain inventory. We do this to minimize purchasing costs, the time necessary to stock our retail outlets and ameliorate the risk of non-delivery. However, we may be unable to sell the products we have purchased. Inventory levels in excess of customer demand have previously and may in the future, result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and have a material adverse effect on our business, results of operations and financial condition. Conversely, if we underestimate demand for our products or if we fail to acquire the products that we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to customers, reduce revenue, negatively impact customer relationships and diminish brand loyalty, which in turn could have a material adverse effect on our business, results of operations and financial condition.
Our success is dependent in part upon our ability to distribute popular products from new suppliers, as well as the ability of our existing suppliers to develop and market products that meet changes in market demand or regulatory requirements.
Many of the products we sell are generally subject to rapid changes in marketplace demand and regulatory requirements. For example, recent laws and regulations have prohibited the sale of certain types of products that we previously sold. Our success is dependent, in part, upon the ability of our suppliers to develop and market products that meet these changes. Our success is also dependent on our ability to develop relationships with and sell products from new suppliers that address these changes in market demand or regulatory requirements. To the extent products that address recent changes are not available to us, or are not available to us in sufficient quantities or on acceptable terms, we could encounter increased competition, which would likely adversely affect our business, results of operations and financial condition.
Changes in our customer, product or competition mix could cause our product margin and results of operations to fluctuate.
From time to time, we may experience changes in our customer mix, our product mix or our competition mix. Changes in our customer mix may result from geographic expansion or contractions, legislative, regulatory or enforcement priority changes affecting the products we distribute, selling activities within current geographic markets and targeted selling activities to new customer sectors. Changes in our product mix may result from marketing activities to existing customers, the needs of existing and prospective customers and from regulatory and legislative changes. Changes in our competition mix may result from new competitors entering into our business segment or existing competitors growing their operations. If customer demand for lower-margin products increases and demand for higher-margin products decreases, our business, results of operations and financial condition may suffer.
Our ability to distribute certain licensed brands and to use or license certain trademarks may be terminated or not renewed.
We are reliant upon brand recognition in the markets in which we compete, as the industry is characterized by a high degree of brand loyalty and a reluctance of consumers to switch to substitute or unrecognizable brands. Any loss in brand-name appeal to our existing customers as a result of product offerings changes could have a material adverse effect on our business, results of operations and financial condition.
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We may not be successful in maintaining the consumer brand recognition and loyalty of our products.
We compete in a market that relies on innovation and the ability to react to evolving consumer preferences. The vaporization products and consumption accessories industry is subject to changing consumer trends, demands and preferences. Therefore, products once favored may, over time, become disfavored by consumers or no longer perceived as the best option. Consumers in the vaporizer market have demonstrated a degree of brand loyalty, but suppliers must continue to adapt their products in order to maintain their status among customers as the market evolves. Our continued success depends in part on our ability and our supplier’s ability to continue to differentiate the brand names we carry at our locations and those that we own or license. Trends within the vaporization products and consumption accessories industry change often and our failure to anticipate, identify or react to changes in these trends could, among other things, lead to reduced demand for our products. Factors that have previously and may continue to affect consumer perception of our products include health trends and attention to health concerns associated with herbs, oils or other materials used with vaporizers, price-sensitivity in the presence of competitors’ products or substitute products and trends in favor of new vaporization products or technology consumption accessories products that are currently being researched and produced by participants in our industry. For example, in recent years, we have witnessed a shift in consumer purchases from vaporizers designed for dry herbs to those designed for liquids or wax type concentrates. A failure to react to similar trends in the future could enable our competitors to grow or establish their brands’ market share in these categories before we have a chance to respond.

Regulations have recently been and are likely to continue to be enacted in the future that would make it more difficult to appeal to consumers or to leverage the brands that we distribute, own or license. Furthermore, even if we are able to continue to distinguish our products, there can be no assurance that the sales, marketing and distribution efforts of our competitors will not be successful in persuading consumers of our products to switch to their products. Some of our competitors have greater access to resources than we do, which better positions them to conduct market research in relation to branding strategies or costly marketing campaigns. Any loss of consumer brand loyalty to our products or in our ability to effectively brand our products in a recognizable way will have a material effect on our ability to continue to sell our products and maintain our market share, which could have a material adverse effect on our business, results of operations and financial condition.
New products face intense media attention and public pressure.
Many of the vaporizers and other products are new to the marketplace as they change over time. Certain members of the media, politicians, government regulators and advocacy groups, including independent doctors, have called for the adoption of regulation for limiting sale of certain products and in some cases, an outright ban of such products pending increased regulatory review and a further demonstration of safety. Product bans would likely have the effect of adversely affecting our sales and marketing efforts of certain products in locations.
Our success depends, in part, on the quality and safety of our products, as well as the perception of quality and safety in the vaporization products and consumption accessories industry generally.
Our success depends, in part, on the quality and safety of the products we sell, including manufacturing issues, health concerns about the substances consumed using the products we sell, and unforeseen product misuse. Even a single incident of product defect or misuse, whether relating to products sold by us or just to our industry generally, could result in significant harm to our reputation. If any of our product offerings are found to be, or are perceived to be, defective or unsafe, or if they otherwise fail to meet our customers’ standards, our sales may be affected, and we could lose market share for our stores and/or become subject to liability claims to the extent a retailer could be responsible, any of which could result in a material adverse effect on our business, results of operations and financial condition.
Damage to our reputation, or that of any of our key suppliers or their brands, could affect our business performance.
The success of our business depends in part upon the positive image that consumers have of the brands we distribute. Incidents, publicity or events arising accidentally or through deliberate third-party action that harm the integrity or consumer support of the products we sell could affect the demand for those products. Unfavorable media, whether accurate or not, related to our industry, to us, or to the products we sell could negatively affect our sales, and consequently adversely affect our corporate reputation, stock price, ability to attract high-quality talent, or the performance of our business. Additional negative publicity or commentary on social media outlets also could cause consumers to react rapidly by avoiding the products we produce and those we sell, which could have a material adverse effect on our business, results of operations and financial condition.
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Significant increases in state and local regulation of our vaporizer products have been proposed and enacted, and are likely to continue to be proposed and enacted in numerous jurisdictions.
There has been increasing activity on the provincial and local regulatory levels with respect to scrutiny of vaporizer products. National, provincial and local governmental bodies have indicated that vaporization products and certain other consumption accessories may become subject to new laws and regulations. If one or more of the provinces in which we operate bring actions that prevent us from selling certain or all of our vaporizer products, we would be required to cease sales and distribution of those products at locations therein, which could have a material adverse effect on our business, results of operations and financial condition.
The Canadian federal government, as well as certain provincial governments have passed or propose to pass legislation which will restrict the extent to which e-cigarettes, e-liquid and other vaping products may be displayed or sold. Additionally, Canadian laws require health warnings to be placed on certain vaporizer products, which could reduce the appeal of these products. These regulations and future regulations could have a material adverse effect on our business, results of operations and financial condition.
Based on regulations surrounding health-related concerns related to the use of some of our vaporizer products, possible new or increased taxes by government entities intended to reduce use of our products or to raise revenue, additional governmental regulations concerning the marketing, labeling, packaging or sale of some of our products, negative publicity resulting from actual or threatened legal actions against us or other companies in our industry, all may reduce demand for, or increase the cost of, certain of our products, which could adversely affect our profitability and ultimate success.
If provinces continue the trend of imposing, expanding, and increasing taxes on vaporizer products, it could materially and adversely affect our business.
Supply of our products and increased sales taxes and economic conditions will affect our sales. Many customers buy our products with their discretionary income. To the extent taxes make our offered products more expensive, such as on vaporization products and consumption accessories, there may be a decline in sales during recessionary periods or at other times when disposable income is lower and taxes may be higher.
We may become involved in regulatory or agency proceedings, investigations, prosecutions, and audits.
Our business, and the businesses of the suppliers from which we acquire products we sell, requires compliance with many laws and regulations. Failure to comply with these laws and regulations could subject us or suppliers to regulatory or agency proceedings, investigations, or prosecutions, and could also lead to damage awards, fines and penalties. We or such suppliers may become involved in a number of government proceedings, investigations and audits. The outcome of any government proceedings, investigations, prosecutions, audits, and other contingencies could harm our reputation or the reputations of the brands that we sell, require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management’s attention and resources or have a material adverse impact on our business, financial condition and results of operations.
We are subject to increasing international control and regulation.
The World Health Organization’s Framework Convention on Tobacco Control (“FCTC”) is the first international public health treaty that establishes a global agenda to reduce initiation of tobacco use and regulate tobacco in an effort to encourage tobacco cessation. Over 180 governments worldwide have ratified the FCTC, including Canada. The FCTC has led to increased efforts to reduce the supply of and demand for tobacco products and to encourage governments to further regulate the tobacco industry. The tobacco industry and others expect significant regulatory developments to take place over the next few years, driven principally by the FCTC.
To the extent our existing or future products become subject to international regulatory regimes that we are unable to comply with or fail to comply with, they may have a material adverse effect on our business, results of operations and financial condition.
Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity.
Changes in our credit profile may affect the way our suppliers view our ability to make payments and may induce them to shorten the payment terms of their invoices. Given the large dollar amounts and volume of our purchases from suppliers, a change in payment terms may have a material adverse effect on our liquidity and our ability to make payments to our suppliers and, consequently, may have a material adverse effect on us.
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We face intense competition and may fail to compete effectively.
The vaporization products and consumption accessories industry is characterized by brand recognition and loyalty, with product quality features, price, marketing and packaging constituting the primary methods of competition. Competition in the vaporization products and consumption accessories industry is particularly intense, and the market is highly fragmented.
Product defects could increase our expenses, damage our reputation or expose us to liability.
We may not be able to adequately address product defects. Product defects in vaporizers and other accessories may harm the health or safety of our end-consumers. In addition, remedial efforts could be particularly time-consuming and expensive if product defects are only found after we have sold the defective product in volume. Any actual or perceived defects in our products could result in unsold inventory, product recalls, repairs or replacements, damage to our reputation, increased customer service costs and other expenses, as well as divert management attention and expose us to liabilities. Furthermore, a product liability claim brought against us by our customers or end-consumers could be time-consuming and costly to defend and, if successful, could require us to make significant payments.
We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
In the ordinary course of business, we may become the subject of various claims, lawsuits and governmental proceedings seeking damages or other remedies concerning our commercial operations, the products we distribute, our employees and other matters, including potential claims by individuals alleging injury or other harm caused by the products we distribute. Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to our acquisition of the businesses. The products we distribute may contain lithium ion or similar type batteries that can explode or release hazardous substances. In addition, defects in the products we distribute could result in death, personal injury, property damage, pollution, release of hazardous substances or damage to equipment and facilities. Actual or claimed defects in the products we distribute may give rise to claims against us for losses and expose us to claims for damages.
We maintain insurance to cover certain of our potential losses, and we are subject to various self-retentions, deductibles and caps under our insurance. We face the following risks with respect to our insurance coverage:
●we may not be able to continue to obtain insurance on commercially reasonable terms;
●we may incur losses from interruption of our business that exceed our insurance coverage;
●we may be faced with types of liabilities that will not be covered adequately or at all by our insurance;
●our insurance carriers may not be able to meet their obligations under the policies; or
●the dollar amount of any liabilities may exceed our policy limits.
Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on us. Finally, even in cases where we maintain insurance coverage, our insurers may raise various objections and exceptions to coverage that could make uncertain the timing and amount of any possible insurance recovery.
We may become subject to significant product liability litigation.
The tobacco and e-cigarette industries have experienced and continue to experience significant product liability litigation and other claims, such as those related to marketing of tobacco and e-cigarettes to minors. As a result of their relative novelty, electronic cigarette, vaporizer product and other consumption product manufacturers, suppliers, distributors and sellers have only recently become subject to litigation. While we have not been a party to any product liability litigation, several lawsuits have been brought against other manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. We may be subject to similar claims in the future relating to our vaporizer products. We may also be named as a defendant in product liability litigation against one of our suppliers by association, including in class action lawsuits. In addition, we may see increasing litigation over our vaporizer products or the regulation of our products as the regulatory regimes surrounding these products develop. We may face substantial costs due to increased product liability litigation relating to new regulations or other potential defects associated with our vaporizer and other consumption products, including litigation arising out of faulty devices or improper usage, which could have a material adverse effect on our business, results of operations and financial condition.
There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products.
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The scientific community has not yet extensively studied the long-term health effects of the use of vaporizers, electronic cigarettes or e-liquids products.
Vaporizers, electronic cigarettes and related products were recently developed, and therefore the scientific community has not had a sufficient period of time to study the long-term health effects of their use. Currently, there is no way of knowing whether these products are safe for their intended use. If the scientific community were to determine conclusively that use of any or all of these products poses long-term health risks, market demand for these products and their use could materially decline. Such a determination could also lead to litigation and significant regulation. Loss of demand for our product, product liability claims and increased regulation stemming from unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations and financial condition.
Reliance on information technology means a significant disruption could affect our communications and operations.
We increasingly rely on information technology systems for our internal communications, controls, reporting and relations with customers, vendors and suppliers, and information technology is becoming a significantly important tool for our sales staff. Our marketing and distribution strategy is dependent upon our ability to closely monitor consumer and market trends on a highly specified level, for which we are reliant on our sophisticated data tracking systems, which are susceptible to disruption or failure. In addition, our reliance on information technology exposes us to cyber-security risks, which could have a material adverse effect on our ability to compete. Security and privacy breaches may expose us to liability and cause us to lose customers, or may disrupt our relationships and ongoing transactions with other entities with whom we contract throughout our supply chain. The failure of our information systems to function as intended, or the penetration by outside parties intent on disrupting business processes, could result in significant costs, loss of revenue, assets or personal or other sensitive data and reputational harm.
Internet security poses a risk to our e-commerce sales.
At present, we generate a portion of our sales through e-commerce sales on our own websites. We manage our websites and e-commerce platform internally and, as a result, any compromise of our security or misappropriation of proprietary information could have a material adverse effect on our business, results of operations and financial condition. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure Internet transmission of confidential information, such as credit and other proprietary information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the technology used by us to protect client transaction data. Anyone who is able to circumvent our security measures could misappropriate proprietary information or cause material interruptions in our operations. We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches. To the extent that our activities or the activities of others involve the storage and transmission of proprietary information, security breaches could damage our reputation and expose us to a risk of loss and/or litigation. Our security measures may not prevent security breaches. Our failure to prevent these security breaches may result in consumer distrust and may adversely affect our business, results of operations and financial condition.
Security and privacy breaches may expose us to liability and cause us to lose customers.
Provincial and national laws require us to safeguard our customers’ financial information, including credit information, as well as our employees’ information. Although we have established security procedures to protect against identity theft and the theft of information of our customers, distributors, consumers, and employees, our security and testing measures may not prevent security breaches and breaches of privacy may occur, which would harm our business. Typically, we rely on encryption and authentication technology licensed from third parties to enhance transmission security of confidential information in relation to financial and other sensitive information that we have on file. Advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or breach of the technology used by us to protect customer data. Any compromise of our security could harm our reputation or financial condition and therefore, our business. In addition, a party who is able to circumvent our security measures or exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary information, cause interruptions in our operations or expose customers and other entities with which we interact to computer viruses or other disruptions. Actual or perceived vulnerabilities may lead to claims against us. To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.
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If the methodologies of internet search engines are modified, traffic to our websites and corresponding consumer origination volumes could decline.
We depend in part on various internet search engines, including Google® and others to direct traffic to our websites. Our ability to maintain the number of visitors directed to our websites by search engines through which we distribute our content is not entirely within our control. Our competitors’ search engine optimization (“SEO”) efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies, which could adversely affect the placement of our search result page ranking. If search engine companies modify their search algorithms in ways that are detrimental to our consumer growth or in ways that make it harder for our customers to access or use our websites, or if our competitors’ SEO efforts are more successful than ours, our consumer engagement and number of consumers could decline. Any reduction in the number of consumers directed to our websites could negatively affect our ability to earn revenue. If traffic on our websites declines, we may need to employ more costly resources to replace lost traffic, and such increased expense could adversely affect our business, results of operations and financial condition.
Our intellectual property may be infringed and we may be unable to secure or maintain all the intellectual property required to sell all of our offerings.
We currently rely on trademark and other intellectual property rights to establish and protect the brand names and logos we own or license on some of the products we distribute. Third parties have in the past infringed, and may in the future infringe, on these trademarks and our other intellectual property rights. Our ability to maintain and further build brand recognition is dependent on the continued use of these trademarks, service marks and other proprietary intellectual property, including the names and logos we own or license. Despite our attempts to ensure these intellectual property rights are protected, third parties may take actions that could materially and adversely affect our rights or the value of this intellectual property. Any litigation concerning our intellectual property rights or the intellectual property rights of our suppliers, whether successful or unsuccessful, could result in substantial costs to us and diversions of our resources. Expenses related to protecting our intellectual property rights or the intellectual property rights of our suppliers, the loss or compromise of any of these rights or the loss of revenues as a result of infringement could have a material adverse effect on our business, results of operations and financial condition, and may prevent the brands we own or license, or are owned or licensed by our suppliers, from growing or maintaining market share. There can be no assurance that any trademarks or common marks that we own or license, or are owned or licensed by our suppliers, will not be challenged in the future, invalidated or circumvented or that the rights granted thereunder or under licensing agreements will provide us or our suppliers competitive advantages. We are dependent on the validity, integrity and intellectual property of our suppliers and their efforts to appropriately register, maintain and enforce intellectual property in all jurisdictions in which their products are sold.
We devote a portion of our resources to the registration and protection of our trademarks and to anti-counterfeiting efforts. Despite these efforts, we regularly discover products that infringe on our proprietary rights or that otherwise seek to mimic or leverage our intellectual property or the intellectual property of our suppliers. Counterfeiting and other infringing activities typically increase as brand recognition increases. Counterfeiting and other infringement of our intellectual property could divert away sales, and association of our brands with inferior counterfeit reproductions or third party labels could adversely affect the integrity and reputation of our brands.
We are subject to the risks of exchange rate fluctuations.
Currency movements and suppliers’ price increases relating to currency exchange rates are significant factors affecting our cost of sales. Some of our products are purchased from suppliers located in foreign countries and we make payments for our products in numerous currencies. Thus, we bear certain foreign exchange rate risk for certain of our inventory purchases. In addition, we recently expanded our footprint in Canada, and as part of our strategy, we may undertake further international expansion. As a result, in the future, we may be more sensitive to the risks of exchange rate fluctuations, which may have a material adverse effect on our business, results of operations and financial condition.
Our failure to comply with certain environmental, health and safety regulations could materially and adversely affect our business.
The storage, distribution and transportation of some of the products that we sell are subject to a variety of national, provincial and local environmental regulations. We are also subject to operational, health and safety laws and regulations. Our failure to comply with these laws and regulations could cause a disruption in our business, an inability to maintain our warehousing resources, additional and potentially significant remedial costs and damages, fines, sanctions or other legal consequences that could have a material adverse effect on our business, results of operations and financial condition. In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
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Risks Relating to Our Current Controlled Environment Agriculture Business
There is no assurance that we will be able to convert our backlog related to our controlled environment agriculture operations into revenue or make a profit.
While we continue our controlled environment agriculture business, we may be unable to convert the full contract value of our backlog in a timely manner, or at all. We inconsistently convert our backlog into revenue on a quarter-to-quarter basis. The performance of our obligations under a sales contract, and the timing of our revenue recognition, is dependent upon our customers’ ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can use our services and take possession of the equipment we provide. Our sales contracts currently are not time specific as to when our customers are required to take delivery of our services and equipment. More recently, we determined that some of our new construction facility projects are becoming larger and more complex and, as a result, delays were more likely due to licensing and permitting, lack of, or delay in, funding, staged facility construction, and/or the shifting priorities of certain customers with multiple facility projects in progress at one time. Even if we obtain more customers, or increase the average size of our projects, there is no guarantee that we will be able to generate a profit. Because we are a small company with limited capital, limited products and services, and limited marketing activities, we may not be able to generate sufficient revenue to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
Our operating results may fluctuate significantly based on customer acceptance of our services and products, industry uncertainty, project financing concerns, and regulatory requirements. As a result, period-to-period comparisons of our results of operations are unlikely to provide a good indication of our future performance.
Management expects that, under typical operating conditions, we will experience substantial variations in our revenues and operating results from quarter to quarter. This variance may change with fundamental changes in our operations.
In our controlled environment agriculture operations, we have been experiencing a decline in revenues, which has also affected our operating results. Our revenue recognition in our controlled environment agriculture operations is dependent upon shipment of the equipment portions of our sales contracts, which, in many cases, may be delayed while our customers complete permitting, prepare their facilities for equipment installation or obtain project financing. Uncertainty in the controlled environment agriculture industry, project financing concerns, and the licensing and qualification of our prospective customers, which are out of our control, make it difficult for us to predict when we will recognize revenue. If customers are unable to obtain licensing, permitting or financing, our sales and revenue will decline, resulting in a reduction in our operating income or possible increase in losses.
If we do not successfully have additional products and services, or if those products and services are not successfully commercialized, we could lose revenue opportunities.
Our future success depends, in part, on our ability to expand our product and service offerings in our current operational sector or otherwise expand or change our operations. The processes of identifying and commercializing products are complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological or other trends, then our business could be harmed. We have already and may have to continue to commit significant resources to commercializing products before knowing whether our investments will result in products the market will accept. We may be unable to differentiate our products from those of our competitors, and our products may not be accepted by the market. There can be no assurance that we will successfully identify additional product opportunities, develop and bring products to market in a timely manner, or achieve market acceptance of our products or that products and technologies developed by others will not render our products or technologies obsolete or non-competitive. Furthermore, we may not execute successfully on commercializing those products because of errors in product planning or timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources. This could result in competitors providing those solutions before we do and a reduction in revenue and earnings.
Our future success depends on our ability to grow and expand our customer base. Our failure to achieve such growth or expansion could materially harm our business.
Our success depends on us achieving greater and broader acceptance of our products and services in our current and proposed business operations. This will require us to expand our industrial customer base and win larger contracts. There can be no assurance that customers will purchase our services or products or that we will continue to expand our customer base. If we are unable to effectively market or expand our product and service offerings, we will be unable to grow and expand our business or implement our business strategy. This could materially impair our ability to increase sales and revenue, and materially and adversely affect our margins, which could harm our business and cause our stock price to decline.
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Our suppliers in our controlled environment agriculture operations could fail to fulfil our orders for parts used to assemble our products, which would disrupt our business, increase our costs, harm our reputation, and potentially cause us to lose our market.
We depend on third party suppliers around the world, including those in The People’s Republic of China ("PRC"), for materials used in our controlled environment agriculture operations, to assemble our products. Any of these suppliers could fail to produce products to our specifications or in a workmanlike manner and may not deliver the material or products on a timely basis. Our suppliers may also have to obtain inventories of the necessary parts and tools for production. Any change in our suppliers’ approach to resolving production issues could disrupt our ability to fulfil orders and could also disrupt our business due to delays in finding new suppliers, providing specifications and testing initial production.
Equipment failures or poor performance may negatively impact our business.
We rely on third party manufacturers for equipment used in controlled environment agriculture operations which we sell or lease. From time to time, such equipment may not perform to specifications or to our customers’ satisfaction. Such equipment deficiencies may lead to down time impacting our revenue. Further, frequent downtime at customers’ sites due to equipment failures may result in such customers generating less revenue and increasing credit default risk. In addition, these failures may also result in additional time spent by our personnel, decreasing profit margins on certain ancillary services.
The failure of equipment supplied by third parties may also result in breach of contract and warranty claims from our customers. Whether or not we will be able to pass the responsibility for equipment failures that are not of our making will depend on many factors. We, however, will take all action necessary to identify the correct responsible party and pass through any responsibility in respect of an equipment or other failure. We may not be successful in such action and may ultimately be responsible for damages.
Changes in U.S. and international trade policies, including tariffs and other trade restrictions, could adversely affect our business, results of operations and supply chain.
The United States has recently implemented significant changes to its trade policies, including new and increased tariffs and other trade restrictions affecting imports from numerous countries, and additional changes remain under consideration. In February 2026, the United States Supreme Court held that the International Emergency Economic Powers Act of 1977 did not authorize certain tariffs previously imposed by the Trump Administration pursuant to that statute. Following that decision, the Trump Administration imposed a temporary 10% import surcharge pursuant to Section 122 of the Trade Act of 1974, which expired in July 2026. The United States has continued to impose, pursue and consider tariffs and other trade measures under other statutory authorities. In July 2026, the U.S. Trade Representative took final action following certain Section 301 investigations, imposing additional tariffs generally ranging from 10% to 12.5% on imports from numerous U.S. trading partners, subject to certain exemptions and adjustments. Additional trade investigations and negotiations remain ongoing, including with respect to China.
There remains substantial uncertainty regarding the scope, duration and ultimate effect of existing and potential tariffs and other trade restrictions and whether the United States or its trading partners will impose additional tariffs, retaliatory measures or other trade barriers. Changes in trade policy could increase the cost of imported products and components, disrupt supply chains, affect pricing and demand and contribute to volatility in global economic and financial conditions.
We source certain products and components used in our product offerings from the PRC and other foreign suppliers. Although such products and components currently represent a limited portion of our overall business, tariffs and other trade restrictions applicable to these products have increased, and could continue to increase, our costs and could disrupt the availability of certain products or components. We are evaluating alternative suppliers for certain affected products and components; however, alternative suppliers may not be available on commercially reasonable terms or may require additional time and expense to identify and qualify. To the extent we are unable to mitigate increased costs or supply disruptions resulting from tariffs or other trade restrictions, including through alternative sourcing or pricing adjustments, such developments could adversely affect the affected portions of our business and our profit margins. In addition, to the extent we increase prices to offset higher costs, our products could become less competitive or customer demand could decline. A significant escalation in global trade tensions could also have broader adverse effects on economic conditions, financial markets and customer demand, which could adversely affect our business, financial condition and results of operations.
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Our inability to effectively protect our intellectual property would adversely affect our ability to compete effectively, our revenue, our financial condition, and our results of operations.
We may be unable to obtain intellectual property rights to effectively protect our branding, products, and other intangible assets. Our ability to compete effectively may be affected by the nature and breadth of our intellectual property rights. While we intend to defend against any threats to our intellectual property rights, there can be no assurance that any such actions will adequately protect our interests. If we are unable to secure intellectual property rights to effectively protect our branding, products, and other intangible assets, our revenue and earnings, financial condition, or results of operations could be adversely affected.
We also rely on non-disclosure and non-competition agreements to protect portions of our intellectual property portfolio. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that third parties will not otherwise gain access to our trade secrets or proprietary knowledge, or that third parties will not independently develop competitive products with similar intellectual property.
We may become subject to additional regulation of controlled environment agriculture facilities.
Our engineering and design services and solutions are focused on controlled environment agriculture facilities that are able to grow a wide variety of crops, such as leafy greens (kale, Swiss chard, mustard, cress), microgreens (leafy greens harvested at the first true leaf stage), ethnic vegetables and small fruits (such as strawberries, blackberries and raspberries), bell peppers, cucumbers, and tomatoes. Some of these crops and their growing methodologies are subject to regulation by the United States Food and Drug Administration, environmental agencies, public utility agencies and other federal, state or foreign agencies. Changes to any regulations and laws that complicate the design and engineering of a subject controlled environment agriculture facility, such as wastewater treatment and electricity-related mandates, make it possible that potential related zoning and enforcement could decrease the demand for our services, and in turn negatively impact our revenues and business opportunities.
The controlled environment agriculture industry is highly competitive, and we have less capital and resources than many of our competitors, which may give them an advantage in developing and marketing services and products similar to ours or make our services and products obsolete.
There are many competitors in the controlled environment agriculture industry. These companies generally offer products and services similar or the same as those offered by us. There can be no guarantees that in the future other companies will not enter this arena by developing products that are in direct competition with us or even superior in quality or price. The barriers to entry into the controlled environment agriculture industry are not insignificant. Over time we anticipate growth and intensity in our competition. Some of our current and future competition may have longer operating histories, greater name recognition, larger client bases and significantly greater financial, technical, sales and marketing resources. One or more of these qualities may allow them to respond more quickly than us to market opportunities. They may be able to devote greater resources to the marketing, promotion and sale of their products and/or services. Competitors may also adopt more aggressive pricing policies and make more attractive offers to clients, employees, strategic partners, distribution channels and advertisers. Increased competition is likely to result in price reductions, reduced gross margins and a potential loss of market share.
We will be required to have top quality talent to compete in the marketplace.
We believe our success will depend in part on our ability to have skilled managerial, product development, sales and marketing, and finance personnel. Our ability to attract and retain personnel with the requisite credentials, experience and skills will depend on several factors including, but not limited to, our ability to offer competitive wages, benefits and professional growth opportunities. There can be no assurance of success in attracting and retaining such personnel. Shortages in qualified personnel could limit our ability to increase sales of existing products and services and launch new product and service offerings.
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We are dependent upon certain key sales, managerial and executive personnel for our future success. If we lose any of our key personnel, our ability to implement our business strategy could be significantly harmed.
We depend on the industry knowledge, technical and financial skill, and network of business contacts of certain key employees. Our future success will depend on the continued service of these key employees or our ability to engage others who are similarly situated in the industry. While we may have employment agreements with certain of these key employees, they are free to terminate their employment with us at any time, although they may be subject to certain restrictive covenants on their post-termination activities. We do not carry key-man life insurance on the lives of our key employees. The departure of any one of our key employees could have a material adverse effect on our ability to achieve our business objective and maintain the specialized services that we offer our customers.
We have a limited number of employees that may not be sufficient to service our contracts.
As a result of various factors affecting the controlled environment agriculture industry in which we operate, we have made employee reductions from time to time in the last several years. We believe we are operating as leanly as needed to be able to service our contract obligations. The mix of our current employees and their number may not be sufficient for our current needs and if we increase our business we will need additional employees, which may not be available. If we are not able to service our contract obligations, our business will suffer and we may be liable for contract damages.
System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or services provided to customers, and any such disruption could reduce our expected revenue, increase our expenses, damage our reputation and adversely affect our stock price.
Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack or otherwise exploit any security vulnerabilities of the products that we may sell in the future, especially our SentryIQ® sensors, controls and automation platform. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers may impede our engineering, sales, manufacturing, distribution or other critical functions.
Portions of our IT infrastructure may also experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource intensive. Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales, lower profits, or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.
We may not be able to successfully identify, consummate or integrate acquisitions or to successfully manage the impacts of such transactions on our operations.
Part of our business strategy includes evaluating and pursuing synergistic and other acquisitions. We have recently completed the acquisition of Fat Panda. Material acquisitions and other strategic transactions, such as the acquisition of Fat Panda involve a number of risks, including: (i) the potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing business activities; (iii) incurring additional indebtedness; (iv) the anticipated benefits and cost savings of those transactions not being realized fully, or at all, or taking longer to realize than anticipated; (v) an increase in the scope and complexity of our operations; (vi) the disruption of a significant reorganization of the company; and (vii) the loss or reduction of control over certain of our assets.
The pursuit of any acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions.
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We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
In the ordinary course of business, we have and in the future may become the subject of various claims, lawsuits and governmental proceedings seeking damages or other remedies concerning our commercial operations, the products we distribute, our employees and other matters, including potential claims by individuals alleging injury or other harm caused by the products we distribute. Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to our acquisition of the businesses. The products we distribute may contain lithium ion or similar type batteries that can explode or release hazardous substances. In addition, defects in the products we distribute could result in death, personal injury, property damage, pollution, release of hazardous substances or damage to equipment and facilities. Actual or claimed defects in the products we distribute may give rise to claims against us for losses and expose us to claims for damages.
We maintain insurance to cover certain of our potential losses, and we are subject to various self-retentions, deductibles and caps under our insurance. We face the following risks with respect to our insurance coverage:
●we may not be able to continue to obtain insurance on commercially reasonable terms;
●we may incur losses from interruption of our business that exceed our insurance coverage;
●we may be faced with types of liabilities that will not be covered adequately or at all by our insurance;
●our insurance carriers may not be able to meet their obligations under the policies; or
●the dollar amount of any liabilities may exceed our policy limits.
Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on us. Finally, even in cases where we maintain insurance coverage, our insurers may raise various objections and exceptions to coverage that could make uncertain the timing and amount of any possible insurance recovery.
Risks Related to Our Common Stock
Our common stock may be delisted if we fail to comply with Nasdaq’s continued listing standards.
On May 7, 2026, we received written notice from Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5620(a) for continued listing of shares of our common stock, due to our failure to hold an annual meeting within 12 months of our fiscal year end. As a result, we submitted a plan to Nasdaq to regain compliance and held our 2026 Special Meeting in Lieu of Annual Meetings of Stockholders on July 22, 2026. On August 5, 2026, we received written notice from Nasdaq that we had regained compliance with Listing Rule 5620(a) and that matter is closed.
If our common stock ultimately were to be delisted from Nasdaq for any reason, it could negatively impact us by (i) reducing the liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use a registration statement to offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets; and (iv) impairing our ability to provide equity incentives to its employees.
Nasdaq may review our Board composition and our capital structure under its change of control, voting rights and business combination rules, and an adverse determination could result in the delisting of our common stock.
Nasdaq Listing Rule 5635(b) requires stockholder approval before an issuance of securities that results in a change of control of a listed company. Nasdaq Listing Rule 5640 and related Nasdaq interpretive guidance limit an investor’s board representation rights to a level proportionate to its ownership of securities entitled to vote in the election of directors. Nasdaq Listing Rule 5110(a) requires a listed company that experiences a change of control in combination with a change in its business to satisfy Nasdaq’s initial listing requirements. Nasdaq applies these rules through the exercise of broad discretionary authority, and its application of them to companies that have adopted digital asset treasury strategies has become more restrictive since 2025.
In August 2025 we issued common stock and warrants in a private placement and used the proceeds to acquire BNB. We did not seek stockholder approval in connection with that issuance, and Nasdaq’s receipt of our listing of additional shares notifications does not constitute a determination that the transaction complied with its rules. Under the Cooperation Agreement, YZILabs has the right to designate three of our six directors, and its ownership consists principally of warrants, which do not carry the right to vote in the election of directors. Our Board may in the future determine to dispose of or discontinue one or more of our legacy operating businesses.
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Nasdaq could determine that stockholder approval was required for the private placement or is required for the exercise of outstanding warrants, that YZILabs’ designation rights exceed the representation proportionate to its voting ownership, which stockholder approval would not remedy, or that we experienced a change of control in combination with a change in our business, in which case we would be required to satisfy Nasdaq’s initial listing requirements and submit an initial listing application, and Nasdaq could suspend trading in our common stock before any hearing. Remedying certain of these determinations may require a reduction in YZILabs’ Board representation, which the Cooperation Agreement does not give us the right to compel. Any such determination would have the consequences described in the preceding risk factor.
Our securities prices may be volatile and may decrease substantially.
The public trading prices of our securities fluctuate, in some cases substantially, and we expect that they will continue to do so. The price of our securities in the market on any particular day depends on many factors including, but not limited to, the following:
●our ability to maintain the listing of our securities on Nasdaq, and our ability to satisfy current continued listing standards;
●price and volume fluctuations in the overall stock market from time to time;
●investor demand for our shares and warrants;
●variations in our operating results and market conditions specific to our business;
●the emergence of new competitors or new technologies;
●operating and market price performance of other companies that investors deem comparable;
●changes in our Board or management;
●sales or purchases of our securities by insiders, including sales of our common stock issued to employees, directors and consultants under our equity incentive plans which were registered under the Securities Act under our S-8 registration statement;
●commencement of, or involvement in, litigation;
●actual or anticipated changes in our earnings, and fluctuations in our quarterly operating results;
●general economic conditions and trends; and
●departures of any of our key employees.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our securities prices, we may therefore be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
In addition, if the market for equity stocks of companies in our industry, or the stock market in general, experiences a loss of investor confidence, the market price of our securities could decline for reasons unrelated to our business, financial condition, or results of operations. If any of the foregoing occurs, it could cause the price of our securities to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to our Board and management.
Our Board is authorized to reclassify any unissued shares of our preferred stock into one or more classes, which could convey special rights and privileges to its owners.
Our articles of incorporation permit our Board to reclassify any authorized but unissued shares of preferred stock into one or more classes. Our Board will generally have broad discretion over the size and timing of any such classification, subject to a finding that the classification and issuance of preferred stock is in our best interests. In the event our Board opts to classify a portion of our unissued shares of preferred stock into a class of preferred stock, those preferred shares would have a preference over our common stock with respect to dividends and liquidation. The class voting rights of any preferred shares we may issue could make it more difficult for us to take some actions that may, in the future, be proposed by the Board and/or the holders of our common stock, such as a merger, exchange of securities, liquidation, or alteration of the rights of a class of our securities, if these actions were perceived by the holders of preferred shares as not in their best interests. These effects, among others, could have an adverse effect on your investment in our common stock.
Registration rights and Rule 144 sales contain risks for shareholders.
From time to time, we issue our securities on an unregistered basis, which may be eligible for resale under SEC Rule 144 promulgated under the Securities Act or may require us to register with the SEC the securities for resale. In the event there are securities outstanding that can be sold under Rule 144 or under a registration statement for resale, there may be market pressure on our stock to absorb the securities in respect of the then market value of the company.
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We have a substantial number of options and public warrants outstanding, which if exercised for shares of common stock, may put pressure on the market price of a share.
We have sold to public investors a substantial number of warrants to purchase common stock that may be exercised from time to time over the next several years. In addition, we have a substantial number of options and public warrants outstanding held by investment bankers who provided us with underwriting and placement services that were issued warrants and employees that were issued options. To the extent that these are exercised for shares, there may be pressure on our stock price while the market absorbs them. The potential of exercise may also have the same effect. Investors should expect that the options and warrants will be exercised when the stock price is substantially above the exercise price.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future.
We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund our business. We do not intend to pay any dividends to holders of our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs, plans for expansion, any legal or contractual limitations on our ability to pay dividends under our loan agreements or otherwise. As a result, if our Board does not declare and pay dividends, the capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock, and you may have to sell some or all of your common stock to generate cash flow from your investment.
The market price of our securities may be adversely affected by the sale of shares by our management or large stockholders.
Sales of our shares of common stock by our officers or senior managers through 10b5-1 plans or otherwise or by large stockholders could adversely and unpredictably affect the price of our common stock. Additionally, the price of our shares of common stock could be affected even by the potential for sales by these persons. We cannot predict the effect that any future sales of our common stock, or the potential for those sales, will have on our share price. Furthermore, due to relatively low trading volume of our stock, should one or more large stockholders seek to sell a significant portion of their stock in a short period of time, the price of our stock may decline.
Investors may be diluted by future issuances of preferred stock or additional common stock in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.
Our articles of incorporation authorize us to issue shares of our common stock and options, rights, warrants and appreciation rights relating to our common stock for the consideration and on the terms and conditions established by our Board in its sole discretion. We could issue a significant number of shares of common stock in the future in connection with investments or acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our common stock.
The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of shares of our common stock, either by diluting the voting power of our common stock if the preferred stock votes together with the common stock as a single class, or by giving the holders of any such preferred stock the right or ability to block an action on which they have a separate class vote, even if the action were approved by the holders of our shares of our common stock.
The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock, when compared to the rights of the common stockholders, could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price, causing economic dilution to the holders of common stock.
Risks Related to Our Business and Operations
We do not currently have a permanent Chief Executive Officer, and our principal executive officer, principal financial officer, and principal accounting officer functions are performed by a single officer.
Our former Chief Executive Officer concluded his service during the quarter, and our Board appointed our Chief Financial Officer to serve additionally as Interim Principal Executive Officer. This concentration of responsibility compounds the components of our previously disclosed material weakness relating to inadequate segregation of duties and an inadequate supervisory review structure, and the demands of both roles may limit the attention available to either.
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Our Board is currently conducting a search for a permanent Chief Executive Officer. Under the terms of the Cooperation Agreement, the Board is required to appoint a permanent Chief Executive Officer and an additional independent director by specified deadlines. The Board may not complete either appointment by the applicable deadlines, which would permit YZILabs to terminate its standstill obligations under the Cooperation Agreement. The search process and the transition to a permanent Chief Executive Officer may also divert management and Board attention from our operations.
Our stockholders did not approve our 2025 Equity Incentive Plan and 2026 Equity Incentive Plan, which limits our ability to attract, retain and motivate personnel and could result in compensation expense materially greater than we would otherwise have recognized.
At our 2026 Special Meeting in Lieu of Annual Meetings of Stockholders (the "Special Meeting") held on July 22, 2026, proposals to approve our 2025 Equity Incentive Plan and our 2026 Equity Incentive Plan did not receive the vote required for approval. As a result, we cannot issue awards under either plan.
Approval of each plan required the affirmative vote of a majority of shares represented and entitled to vote at the Special Meeting. Under our bylaws in effect at the time of the meeting, broker non-votes were treated as votes cast and therefore had the effect of votes against approval. The 2025 Equity Incentive Plan would not have received the vote required for approval even if broker non-votes had not been counted as present and entitled to vote while the 2026 Equity Incentive Plan would have. We can give no assurance that either plan would be approved if resubmitted for a subsequent vote.
Equity compensation is a principal component of the compensation we offer to our executive officers, directors and employees, and our ability to grant equity awards is limited to the shares remaining available under our existing plans, including our 2026 Inducement Plan, which may be used only for awards to newly hired employees in accordance with Nasdaq Listing Rule 5635(c)(4). We are conducting a search for a new Chief Executive Officer, and our ability to offer a competitive compensation package to that candidate and to other prospective executives may be constrained by the limited equity available for grant. Our shares available for grant may also be insufficient to retain and motivate our existing personnel, particularly following a period of significant decline in the market price of our common stock, which has reduced the realizable value of outstanding awards. If we are unable to offer competitive compensation, we may lose key personnel or be required to increase cash compensation, which would increase our operating expenses and use cash that would otherwise be available for our business.
Certain awards were granted subject to stockholder approval of the 2025 Equity Incentive Plan. Because stockholder approval is a condition to the establishment of a grant date under applicable accounting guidance, no grant date has been established for those awards and no compensation expense has been recognized with respect to them. If stockholder approval is subsequently obtained, a grant date will be established at that time and the awards will be measured based on the fair value of our common stock on that date, which may differ materially from the value on the date the awards were made and could result in compensation expense materially greater than we would otherwise have recognized. If approval is not obtained, those awards will not become effective, and the affected recipients may seek alternative compensation or terminate their service with us, as applicable.
Stockholder activism has disrupted our business and may recur.
Beginning in November 2025, YZILabs, one of our stockholders, conducted a stockholder activism campaign against the Company, including filing preliminary consent solicitation materials seeking to expand the size of our Board and to elect seven YZILabs nominees (the "Consent Solicitation"). Responding to the Consent Solicitation required substantial attention from our Board and management, diverted resources from our operations and strategic plans, caused us to incur significant advisory costs, and created perceived uncertainty as to our future direction, strategy and leadership.
On June 23, 2026, we entered into a Cooperation Agreement with YZILabs resolving the Consent Solicitation, under which YZILabs has certain Board designation rights and is subject to standstill and voting commitments. Those commitments are subject to termination or release in specified circumstances and in any event expire at the end of the agreement's term, after which YZILabs would again be free to seek to influence or control the Company. We may face renewed activism from YZILabs or from other stockholders in the future.
A change in the composition of a majority of our Board, whether resulting from the exercise of designation rights under the Cooperation Agreement, future stockholder activism, or may impact our business strategy and operations and may result in a default, acceleration or other consequence under certain of our debt instruments, equity plans, employment and other agreements, which could negatively affect our business and trading price of our common stock,
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Our Stockholder Rights Agreement could delay or prevent a change of control, which could limit the market price of our common stock.
On December 26, 2025, in connection with defending against the Consent Solicitation in the best interest of all shareholders, the Board adopted a stockholder rights agreement (the “Stockholder Rights Agreement”), which is currently scheduled to expire on December 26, 2026. While in force or if otherwise extended, the Stockholder Rights Agreement may have certain anti-takeover effects. Specifically, the rights issued pursuant to the Stockholder Rights Agreement 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.
The Stockholder Rights Agreement contains an exception for holders whose beneficial ownership equaled or exceeded the threshold immediately prior to the public announcement of the Stockholder Rights Agreement, so long as they do not thereafter increase their beneficial ownership beyond the limits specified in the Stockholder Rights Agreement. YZILabs, our largest stockholder, is subject to that exception. As a result, the Stockholder Rights Agreement does not cause dilution to YZILabs in respect of its existing position, including shares issuable upon exercise of the warrants it holds. YZILabs is separately prohibited from acquiring additional voting securities under the Cooperation Agreement described above, subject to an exception permitting exercise of warrants it already holds, and those restrictions continue for the term of that agreement, which extends beyond the scheduled expiration of the Stockholder Rights Agreement.
The Stockholder Rights Agreement is not intended to interfere with any merger or other business combination approved by the Board, but the Stockholder Rights Agreement may deter certain parties from pursuing strategic transactions involving us, including potential acquisitions, and may make it more difficult for stockholders to change our management or Board. Following expiration of the Stockholder Rights Agreement, we would no longer have these protections unless our Board adopts a new rights plan, and we can give no assurance that we would do so or that any new plan would be adopted on comparable terms.
We are party to the AMA which contains terms that are materially adverse to our stockholders, and we may be unable to reform or terminate the AMA without incurring substantial costs despite pending litigation against the Asset Manager.
We are party to the AMA with the Asset Manager, pursuant to which the Asset Manager provides asset management and related services with respect to our digital assets in exchange for a management fee based on the fair value of the assets within our DAT Strategy, calculated at a flat rate of 1.4%. The AMA has a term of 20 years from its original execution date and contains a liquidated damages provision that, upon a termination by us for any reason, would accelerate and render payable fees representing nearly 20 years of future management fees. We believe these terms are not consistent with market practice for comparable asset management arrangements and are materially adverse to the interests of our stockholders.

Our Board sought to renegotiate the AMA to align its terms with market standards, including by proposing reductions to the management fee rate, a substantially shortened term and a commensurate reduction in liquidated damages. The Asset Manager did not agree to any of these proposed amendments and did not engage constructively or in good faith with our renegotiation efforts. Due to the restrictive terms of the AMA as currently in effect, our Board does not have the ability to unilaterally amend the AMA and cannot terminate the AMA without incurring a substantial break fee.
On May 22, 2026, we commenced litigation against the Asset Manager in the United States District Court for the District of Delaware, seeking a declaratory judgment that the AMA is void from inception as unconscionable and that all fees paid to the Asset Manager since inception be returned to us. Alternatively, we are seeking a declaration that the liquidated damages provision in the AMA constitutes an unenforceable penalty under applicable law. We cannot predict the outcome of this litigation or the timeframe in which it will be resolved. Litigation is inherently uncertain, costly and time-consuming, and an adverse outcome could leave us bound by the AMA’s existing terms for the remainder of its 20-year term, obligate us to continue paying fees that we believe are above market, and expose us to the liquidated damages provision in the event of any future termination. Even if we prevail in whole or in part, the litigation process may divert significant management attention and resources from our business operations.
We have not paid management fees invoiced under the AMA since April 10, 2026, while continuing to accrue those fees. Our non-payment may constitute a breach of, or an event of default under, the AMA, and may give the Asset Manager the right to terminate the AMA or to pursue other remedies against us. If the Asset Manager terminates the AMA or we are otherwise found to be in breach, we may become obligated to pay the accrued unpaid fees together with amounts under the liquidated damages provision described above, which would have a material adverse effect on our financial condition. We can give no assurance that we will prevail in our litigation against the Asset Manager or that a court will find the AMA or its liquidated damages provision unenforceable.
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For so long as the AMA remains in effect on its current terms, we will continue to incur management fees that we believe are excessive relative to market standards, which may adversely affect our financial condition and the value of our digital assets. Our inability to reform or terminate the AMA on acceptable terms could have a material adverse effect on our business, financial condition, results of operations and the market price of our common stock.
Our borrowings are secured by pledged BNB, and a decline in the price of BNB could require us to post additional collateral on short notice or permit our lender to liquidate our pledged BNB.
At July 31, 2026, we had $15.0 million of borrowings outstanding under our master loan agreement with BitGo, secured by pledged BNB with a fair value of $25.9 million. If the value of our pledged collateral falls below 150.0% of the loan balance, BitGo may require us to immediately post additional collateral. If it falls below 120.0% of the amount loaned, BitGo may liquidate the collateral. Because BNB trades continuously, a margin call may arise outside of business hours, and the cure period may not afford us sufficient time to raise capital or transfer assets.
Our borrowings are fixed term loans maturing October 30, 2026 and January 21, 2027. We have no contractual right to repay them early and therefore cannot reduce our exposure or release the pledged collateral before maturity. The facility is uncommitted, and BitGo has no obligation to extend additional credit or to renew the loans at maturity.
Because BNB serves as both our principal treasury asset and our collateral, a decline in its price would reduce the value of our collateral and our other holdings at the same time. Satisfying a margin call could require us to pledge additional BNB or to sell digital assets at depressed prices, and a liquidation by BitGo would occur at times and prices we do not control.
The master loan agreement also requires that our net equity, as defined, be at least $25.0 million as of the end of each calendar month and that our ratio of total assets to net equity not exceed 200%. If either requirement is not satisfied, or if BitGo determines in its sole discretion that the assets loaned to us are at risk of being treated as a security, BitGo may require immediate repayment of all outstanding borrowings. Because share repurchases reduce our net equity, this requirement also limits the amount of our common stock we are able to repurchase.
The Company has identified a material weakness in its internal control over financial reporting.
We have identified a material weakness in our internal control over financial reporting. Specifically, we lack a sufficient complement of personnel with accounting expertise and an adequate supervisory review structure commensurate with our financial reporting requirements, we have inadequate segregation of duties due to our limited number of accounting personnel, and we have insufficient controls to verify the accuracy and completeness of spreadsheets on which we place significant reliance for financial reporting, including with respect to revenue, taxes, stock-based compensation, earnings per share computation and other areas. This material weakness has not been remediated as of July 31, 2026.
This material weakness could result in errors or misstatements in our financial statements that are not detected in a timely manner. It contributed to an error in our calculation of weighted-average shares outstanding and earnings per share, and we filed amendments to our Quarterly Reports on Form 10-Q for the quarterly periods ended October 31, 2025 and January 31, 2026 to restate our previously issued financial statements.
We appointed a Chief Financial Officer effective March 9, 2026 and continue to work to remediate the material weakness by enhancing our control environment. On July 22, 2026, our Chief Executive Officer concluded his service and our Board appointed our Chief Financial Officer to serve additionally as Interim Principal Executive Officer. As a result, the principal executive officer, principal financial officer and principal accounting officer functions are currently performed by a single officer, which may adversely affect our supervisory review structure and segregation of duties while that arrangement continues. We cannot assure you that our remediation measures will be sufficient to address the material weakness or prevent future control deficiencies, particularly given our limited financial resources and the constraints associated with expanding our accounting staff and improving our financial systems.
We have also identified deficiencies in our controls over the preparation and review of non-financial disclosure in our periodic reports, including our exhibit indices, our description of securities and the cover pages of our periodic reports. As a result of these deficiencies, our disclosure controls and procedures were not effective as of July 31, 2026.
The existence of the material weakness and control deficiencies could adversely affect our ability to accurately report our financial condition and results of operations and to comply with our reporting obligations. It may also impact investor confidence, potentially leading to a decline in our stock price and increased scrutiny from regulatory authorities.
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We are a holding company and depend upon our subsidiaries for our cash flow.
We are a holding company. Our subsidiaries conduct all of our operations and own substantially all of our tangible assets. Consequently, our cash flow and our ability to meet our obligations or to make other distributions in the future will depend upon the cash flow of our subsidiaries and our subsidiaries’ payment of funds to us in the form of distributions, dividends, tax sharing payments or otherwise.
The ability of our subsidiaries to make any payments to us will depend on their earnings and cash flow, the terms of their current and future indebtedness, tax considerations and legal and contractual restrictions on their ability to make distributions.
Our subsidiaries are separate and distinct legal entities. Any right that we have to receive any assets of or distributions from any of our subsidiaries upon the bankruptcy, dissolution, liquidation or reorganization, or to realize proceeds from the sale of their assets, will be junior to the claims of that subsidiary’s creditors, including trade creditors and holders of debt that the subsidiary issued.

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 July 31, 2026:
Total Number of Shares Purchased(A)
Average Price Paid per Share(B)
Total Number of Shares Purchased as Part of Publicly Announced Plan or ProgramApproximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
May 1, 2026 to May 31, 2026
699,996 
$
2.92 
699,996 
$
230,599 
June 1, 2026 to June 30, 2026
734,116 
2.39 
734,116 
228,860 
July 1, 2026 to July 31, 2026
— 
— 
— 
228,860 
Total for the Quarter Ended July 31, 2026
1,434,112 
2.65 
1,434,112 

A.On September 22, 2025, our Board of Directors announced it had authorized a stock repurchase program providing for the repurchase of up to $250.0 million of our outstanding common stock (the “Repurchase Plan”), with no expiration from the date of authorization. The Repurchase Plan will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. Repurchases under the Repurchase Plan may be made from time to time through open market transactions, privately-negotiated transactions, accelerated share repurchases, or otherwise in accordance with applicable federal securities laws, including under Rule 10b-18, subject to market conditions. Repurchases will be funded through a combination of cash on hand, future cash flow from operations, and borrowings.
B.Average price paid per share includes broker commissions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended July 31, 2026, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS

EXHIBIT INDEX
Exhibit
Number		Description of Exhibit
3.1
3.2
3.3
10.1
10.2+
10.3*+
10.4
10.5+
10.6*
10.7*+
10.8*+
10.9*
31.1*
31.2*
32.1**
32.2**
101.INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Schema
101.CAL*
Inline XBRL Taxonomy Calculation Linkbase
101.DEF*
Inline XBRL Taxonomy Definition Linkbase
101.LAB*
Inline XBRL Taxonomy Label Linkbase
101.PRE*
Inline XBRL Taxonomy Presentation Linkbase
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
+    Indicates a management contract or compensatory plan.
*Filed herewith.
**Furnished herewith.
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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: September 11, 2026
By:
/s/ William B. Miller
William B. Miller
Interim Principal Executive Officer and Chief Financial Officer
(Interim Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer)
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Execution Version 187382661.10 SEPARATION AGREEMENT This Separation Agreement (the “Agreement”) is effective as specified below and is entered into by and between CEA Industries, Inc., a Nevada corporation (the “Company”), and Nicholas J. Etten (the “Director”). The Company and the Director are collectively referred to herein as the “Parties.” TERMS AND CONDITIONS 1. Resignation from Board of Directors. The Director hereby resigns from the Board of Directors of the Company (the “Board”), which resignation shall be effective immediately after the execution and delivery of the Cooperation Agreement by and among the Company and YZILabs Management Ltd. (such that the Director will still be a current director of the Company at the time the Cooperation Agreement is executed and delivered) (such date and time, the “Resignation Date”). This Section 1 shall constitute a resignation notice for such purpose. 2. Separation Payment. The Company shall make a payment to the Director of an aggregate of $85,000 (the “Separation Payment”) promptly following the Resignation Date, but in any event no later than five (5) business days following the Resignation Date. The Director acknowledges and agrees that the Separation Payment constitutes all of the Director’s rights with respect to compensation for services as a director of the Company and for services as a consultant of the Company, other than the Restricted Stock Unit Agreement addressed in Section 4 herein. In addition, following the Resignation Date, the Company shall directly pay the Director’s reasonable and documented legal fees and costs of Akin Gump Strauss Hauer & Feld LLP actually incurred in connection with the negotiation of this Agreement in an amount not to exceed $50,000. 3. Release of Claims. (a) Release by Director. As of the Resignation Date, in consideration of the payments and benefits provided under this Agreement, the sufficiency of which the Director expressly acknowledges, the Director, on behalf of himself and his heirs, executors, administrators, trustees, legal representatives, successors, and assigns (all of the foregoing collectively, the “Director 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, stockholders, 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 Director 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 service of the Director, in his capacity as a director and as a consultant, to the

 
- 2 - 187382661.10 Company, from the beginning of time through the date of execution of this Agreement, including without limitation the following claims (with the exceptions specifically delineated below): (i) any and all claims arising out of or relating to the service of the Director, in his capacity as a director and as a consultant, to 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 or local 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, the Uniformed Services Employment and Reemployment Rights Act, the Colorado Anti-Discrimination Act; the Colorado Wage Act, Colorado’s Lawful Activities Statute, the Colorado Chance to Compete Act, the Colorado Healthy Families and Workplaces Act, Colorado FAMLI, the Public Health Emergency Whistleblower Act, the Colorado Personnel Files Employee Inspection Right Statute, the Colorado Job Application Fairness Act; the Colorado Labor Peace Act, the Colorado Labor Relations Act, the Colorado Wage Act, any Colorado Overtime and Minimum Pay Standards Order, the Colorado Equal Pay Act, any other Colorado Labor Statutes, or the Constitutions of the State of Colorado and the United States; provided, however, the identification of specific statutes is for purposes of example only, and the omission of any specific statute or law shall not limit the scope of this general release in any manner; (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. Notwithstanding the foregoing, this Release shall not apply to: (A) any rights, obligations and/or claims arising under this Agreement, including the Company’s payment obligations hereunder; (B) any rights and/or claims of the Director in his capacity as a stockholder of the Company; (C) any rights, obligations and/or claims under the Indemnification Agreement (defined below), including for indemnification, advancement and any of the Director’s other rights under that Indemnification Agreement; (D) any rights, obligations and/or claims under the July RSU

 
- 3 - 187382661.10 Agreement (defined below); (E) any claims arising from events occurring after the date of execution of this Agreement; or (F) any other claims that the Director cannot release as a matter of law. The Director understands and agrees that (subject to the foregoing exceptions) this Release is intended to include all claims, if any, covered herein that any Director Releasing Party may have and not now know or suspect to exist in his/its favor against any Company Released Party and that this Release extinguishes such claims. Thus, the Director expressly waives all rights under any statute or common law principle in any jurisdiction that provides, in effect, that a general release does not extend to claims which the releasing party does not know or suspect to exist in the Director’s favor at the time of executing the release, which if known by the Director must have materially affected the Director’s settlement with the party being released. The Parties agree that nothing contained herein, and no action taken by any Party hereto with regard to this Release, shall be construed as an admission by any Party of liability or of any fact that might give rise to liability for any purpose whatsoever. The Director represents and warrants that he has 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. The Director further represents and warrants that he is 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 3(a) is intended to be as broad as the law permits (subject to the exceptions specifically listed herein), and the Director expressly waives any right to assert, and covenant not to sue upon, any claim released herein. In addition to any other remedies available under applicable law, in the event that the Director has committed, threatens to commit, and/or commits a breach of any term, condition, or covenant in this Agreement, including, but not limited to, this covenant not to sue, the Director shall, to the extent permitted by applicable law, repay the gross monetary value of any previously paid Separation Payment, and further pay to the Company all of their reasonable costs and expenses, including reasonable fees, incurred in enforcing the terms of this Agreement and/or defending any action(s). The Parties agree that such repayment is reasonable in light of the damages that the Company would incur and is not a penalty. (b) Release by Company. As of the Resignation Date, the Company, on behalf of itself and its subsidiaries and affiliates (the “Company Releasing Parties”), hereby releases and discharges the Director from any and all claims, demands, actions, and causes of action, known or unknown, arising out of or relating to the service of the Director, in his capacity as a director and as a consultant, to the Company, through the date of the Company’s execution of this Agreement; provided, however, that this release shall not apply to: (i) any obligations of the Director 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); violation of applicable stock exchange listing requirements; breach of fiduciary duty owed to the Company, its affiliates, or any third-parties (including, without limitation, the obligation to avoid self-dealing or undisclosed conflicts of interest as part of the fiduciary duty of loyalty); unlawful harassment, discrimination, or retaliation against any employee, contractor, or other individual;

 
- 4 - 187382661.10 gross negligence; or criminal conduct by the Director; or (iii) any claims for breach of the surviving obligations set forth in this Agreement. (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). 4. Outstanding Equity Award. The Company and the Director acknowledge and agree that the Director’s Restricted Stock Unit Agreement dated July 27, 2025 (the “July RSU Agreement”) remains in full force and effect, and that the Director has no other outstanding Company equity awards and no rights to any other Company equity awards. The Company will seek shareholder approval of the Company’s 2025 Equity Incentive Plan in accordance with the July RSU Agreement. 5. Indemnification Agreement. The Company and the Director acknowledge and agree that the Director’s December 2, 2025 Indemnification Agreement (the “Indemnification Agreement”) remains in full force and effect. 6. Knowing and Voluntary Agreement. The Director agrees and acknowledges that he has been given a reasonable and sufficient period of time to consider this Agreement before signing, that he has been advised to consult with an attorney of his choice prior to executing this Agreement, and has done so to the extent he deemed appropriate, and that he enters into this Agreement knowingly, voluntarily, and of his own free will. 7. Exceptions. Notwithstanding anything in this Agreement that could be construed to the contrary, nothing in this Agreement shall limit the ability of the Company or the Director (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 and the Director 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 or the Director from testifying truthfully in an administrative, legislative or judicial proceeding when compelled by law

 
- 5 - 187382661.10 or from providing documents pursuant to a court order, subpoena, or other compulsory legal process, provided that the Company or the Director (unless prohibited by law) first provides the Company or the Director, 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 or the Director from discussing or disclosing information about any alleged discriminatory or unfair employment practice, and the Director represents and warrants that the Director is not aware of any such alleged discriminatory or unfair employment practice. The Director hereby understands, acknowledges, and agrees that this Agreement does not contain a “nondisclosure provision” as that term is defined under Colorado law, C.R.S.A. § 24-34-407. Further, the Company shall not be restricted from making truthful statements with respect to the Director 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. 8. Non-Assistance to Litigants. The Director agrees that he 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; provided, however, that the preceding language shall not limit the Director’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; (v) enforce this Agreement or any other agreement between the Director and the Company; (vi) exercise the Director’s rights as a stockholder of the Company; or (vii) testify truthfully in an administrative, legislative or judicial proceeding when compelled by law, or complying with any court order, subpoena, or other compulsory legal process in any such proceeding. The Director shall promptly notify the Company if, at any time within the twelve (12) month period following the Resignation Date, the Director is approached by any Potential Adverse Party to provide assistance or receives a court order, subpoena or other compulsory legal process, in either case concerning any such matters. 9. Confidentiality. The Director agrees that the facts and matters giving rise to this Agreement and all board proceedings, deliberations and actions, and all business and operational plans, contracts, marketing and sales programs, financial statements and projections, possible acquisitions and divestitures, actions relating to the Company’s stock, information about the Company’s customers, employees, suppliers, or vendors, and technical and other Company information that the Company customarily treats as confidential (collectively, “Company Confidential Information”) are and shall remain confidential to the maximum extent permitted by applicable law. The Director shall not, directly or indirectly, discuss, disclose, or publish the Company Confidential Information to anyone, in any forum, through any means. The Director may disclose the Company Confidential Information as permitted in Section 7 of this Agreement. Only if compelled by lawful court order or subpoena may the Director otherwise disclose the Company Confidential Information. The Director may not utilize others to disclose the Company Confidential Information on the Director’s behalf, and the Director may not post, blog, use social media, or otherwise participate in or contribute to any book, article, interview, podcast, or other

 
- 6 - 187382661.10 media that would result in the disclosure of Company Confidential Information. Nothing in this Section 9 shall prohibit the Director from publicly stating or discussing his dates of service to the Company, the positions he held while on the Board, a general description of his duties and accomplishments, or the general fact that the Parties separated on mutually agreeable terms. Company Confidential Information does not include information that is now or subsequently becomes available to the public through no fault of the Director or that is furnished by the Company to third parties without restriction on disclosure. The Company agrees that the facts and matters giving rise to this Agreement and all personal financial information, personal identifying information and other information about the Director that the Director customarily treats as confidential (collectively, “Director Confidential Information”) are and shall remain confidential to the maximum extent permitted by applicable law. The Company shall not, directly or indirectly, discuss, disclose, or publish the Director Confidential Information to anyone, in any forum, through any means. The Company may disclose the Director Confidential Information as permitted in Section 7 of this Agreement. Only if compelled by lawful court order or subpoena may the Company otherwise disclose the Director Confidential Information. The Company may not utilize others to disclose the Director Confidential Information on the Company’s behalf, and the Company may not post, blog, use social media, or otherwise participate in or contribute to any book, article, interview, podcast, or other media that would result in the disclosure of Director Confidential Information. Nothing in this Section 9 shall prohibit the Company from publicly stating or discussing the Director’s dates of service to the Company, the positions he held while on the Board, a general description of his duties and accomplishments, or the general fact that the Parties separated on mutually agreeable terms. Director Confidential Information does not include (a) the contents and terms of this Separation Agreement, (b) any other information regarding the Director’s board service, compensation from the Company, equity holdings information, or other information regarding the Director that the Company is required to include in public disclosures, reports or other filings made with the Securities and Exchange Commission or Nasdaq, or (c) information that is now or subsequently becomes available to the public through no fault of the Company or that is furnished by the Director to third parties without restriction on disclosure. 10. Return of Company Materials. The Director agrees to promptly return or destroy (without retaining any copies, summaries, files or notes derived from source materials) all information and records regarding the Company, whether or not created by the Director including, but not be limited to: all financial, sales and purchase data for the Company and the Company’s customers, all financial statements and projections, all marketing surveys and analyses, all strategic planning material, all data on the Company’s competitors, all customer information, all records regarding prospective customers of the Company, all documents regarding pending or threatened litigation involving the Company, all legal opinions, all personnel evaluations for the Company’s employees and outside vendors and contractors, all computer hardware and software, all price lists and formulas, all pricing quotations or proposals, all lists or compilations of customers and prospects, all promotional materials, all internal operating reports, all budgets and projections, all information related to the Company’s product development and intellectual property, all product designs, specifications, drawing, engineering, bills of material and other information related to the Company’s products, all corporate and equipment manuals and policies, all contracts with customers and suppliers, all supplier prices and quotations, all business correspondence, all

 
- 7 - 187382661.10 catalogs and product samples, all sensitive customer information, all sales reports and invoices, and all tangible and intangible property owned by the Company. 11. Non-Disparagement. The Director shall not knowingly, directly or indirectly, make negative comments or otherwise disparage the Company, any of its affiliates, or any of their respective officers, directors, employees, shareholders, agents or businesses in any manner likely to be harmful to them or their business reputations or personal reputations, or encourage others to do so. The Company shall direct its officers, directors and senior management team not to knowingly, directly or indirectly, make negative comments or otherwise disparage the Director in any manner likely to be harmful to him or his business reputation or personal reputation, or encourage others to do so. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including depositions in connection with such proceedings), provided that the Party making the statement has given the other Party prompt written notice of any such legal process and cooperated with the other Party’s efforts to seek a protective order. 12. Entire Agreement. This Agreement 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 and the Director with respect to the subject matter hereof. Notwithstanding the foregoing, this Agreement does not supersede, amend, replace, or limit the July RSU Agreement or the Indemnification Agreement, each of which shall remain in full force and effect in accordance with its terms. 13. Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Colorado, without regard to the principles of conflicts of law thereof; provided, however, that any questions regarding the construction, validity and interpretation of any claims released, and exceptions and exclusions thereto, pursuant to Section 3 shall be governed by applicable state or federal law under which such claims arise. 14. Cooperation in Future Matters. The Director hereby agrees that for a period of eighteen (18) months following the Resignation Date, the Director shall cooperate reasonably with the Company’s reasonable requests relating to matters that pertain to the Director’s service to the Company, including, without limitation, providing information or limited consultation as to such matters, participating in legal proceedings, investigations or audits on behalf of the Company, or otherwise making himself reasonably available to the Company for other related purposes. Any such cooperation shall be performed at scheduled times taking into consideration the Director’s other commitments. To the extent that such cooperation requires substantive work beyond 10 hours per calendar month, the Director shall be reasonably compensated for such cooperation time exceeding 10 hours per month in the amount of the lesser of $450 per hour and the hourly rate of his then-current salary; provided, however, that in no case shall the Director be compensated for providing testimony, depositions or preparation time for testimony or depositions. The Director’s travel costs related to any such cooperation that are pre-approved by the Company in accordance with its standard practices and policies shall be covered by the Company. The Director shall not be required to perform such cooperation to the extent it conflicts with any requirements of

 
- 8 - 187382661.10 exclusivity of services for an employer or otherwise, nor in any manner that in the good faith belief of the Director would conflict with the Director’s rights under or ability to enforce this Agreement. 15. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Company’s successors and assigns and the Director’s personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall not be assignable by the Director, it being understood and agreed that this is a contract for the Director’s personal services. This Agreement shall not be assignable by the Company, except that the Company may assign it to an affiliate of the Company and shall assign it in connection with a transaction involving the succession by a third party to all or substantially all of the Company’s business and/or assets (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise). When assigned to a successor, the assignee shall assume this Agreement and expressly agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of such an assignment and the Company shall be released of all obligations hereunder. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets that executes and delivers the assumption agreement described in the immediately preceding sentence or that becomes bound by this Agreement by operation of law. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns as provided in this Section 15 and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except as otherwise set forth in this Agreement. 16. 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. 17. Execution and Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. SIGNATURES ON FOLLOWING PAGE

 
- 9 - 187382661.10 IN WITNESS WHEREOF, the Parties or authorized representatives thereof have duly executed this Agreement as of the dates set forth below. COMPANY: By: Date: Name: David Namdar Title: Chief Executive Officer DIRECTOR: Date: Nicholas J. Etten June 10, 2026 June 10, 2026

 
Exhibit 10.6
FORM OF INDEMNIFICATION AGREEMENT
(Directors and Officers)
THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of [  ], by and between CEA Industries Inc., a Nevada corporation (the “Company”), and the undersigned (“Indemnitee”).
WHEREAS, at the request of the Company, Indemnitee serves or has agreed to serve as a director and/or executive officer of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of such service;
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the interests of the Company and its stockholders are best served by attracting and retaining experienced and capable persons to serve as directors and officers of the Company, and that it is reasonable, prudent and necessary for the Company to indemnify, and to advance Expenses to, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern regarding personal liability;
WHEREAS, Chapter 78 of the Nevada Revised Statutes (the “NRS”) expressly authorizes the Company to indemnify and advance expenses to its directors and officers, and provides that the indemnification and advancement of expenses permitted thereunder are not exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any agreement, and the Company desires that Indemnitee be indemnified and have Expenses advanced to the fullest extent permitted thereby;
WHEREAS, as an inducement to Indemnitee to serve or to continue to serve as a director and/or executive officer of the Company, the Company has agreed to indemnify and to advance Expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the fullest extent permitted by law, except as otherwise expressly provided for herein;
WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of Expenses; and
WHEREAS, Indemnitee may have entered into one or more prior indemnification agreements with the Company, and the parties intend that this Agreement supersede and replace any such agreement in its entirety while preserving in full Indemnitee’s rights in respect of all periods of Indemnitee’s service and all acts and omissions occurring, and states of facts existing, at any time on or after the date Indemnitee first began such service.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Definitions. For purposes of this Agreement:
(a) “Board” means the Board of Directors of the Company.
(b) “Change of Control” shall mean the occurrence of any of the following events after the Reference Date:
(i) the sale or other disposition of all or substantially all of the Company’s assets; or
(ii) the acquisition, whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) or of record, as a result of a merger, consolidation or otherwise, of securities of the Company representing fifteen percent (15%) or more of the aggregate voting power of the Company’s then-outstanding Common Stock by any “person” (within the meaning of Sections 13(d) and 14(d) of the 1934 Act), including, but not limited to, any corporation or group of persons acting in concert, other than (i) the Company or its subsidiaries and/or (ii) any employee pension benefit plan (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974) of the Company or its subsidiaries, including a trust established pursuant to any such plan; or
1
Exhibit 10.6
(iii) the individuals who were members of the Board as of the Reference Date (the “Incumbent Board”) cease to constitute at least two-thirds (2/3) of the Board; provided, however, that any director appointed by at least two-thirds (2/3) of the then Incumbent Board or nominated by at least two-thirds (2/3) of the Board or the Corporate Governance / Nominating Committee of the Board (a majority of the members of the Corporate Governance / Nominating Committee shall be members of the then Incumbent Board or appointees thereof), other than any director appointed or nominated in connection with, or as a result of, a threatened or actual proxy or control contest, shall be deemed to constitute a member of the Incumbent Board.
(c) “Corporate Status” means the status of a person who is or was a director, trustee, officer, employee, fiduciary or agent of the Company or is or was serving at the request of the Company as a director, trustee, officer, partner, manager, managing member, employee, fiduciary or agent of any other Enterprise, in each case including any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for which such person is or was serving at the request of the Company.
(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(e) “Effective Date” means the date set forth in the first paragraph of this Agreement.
(f) “Enterprise” means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other entity or enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, officer, partner, manager, managing member, employee, fiduciary or agent. For purposes of this Agreement, if Indemnitee is serving or has served as a director, officer, employee, fiduciary or agent of any subsidiary or affiliate of the Company, Indemnitee shall be deemed to be doing so at the request of the Company.
(g) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel and lodging expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, e-discovery costs, document hosting costs, fees and expenses of forensic accountants, experts and consultants, public relations and crisis management costs, appeal and supersedeas bonds and premiums, bail bonds, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payment under this Agreement, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding, or otherwise participating in a Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, and Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, under any other agreement, under any provision of the Charter or Bylaws, under any directors’ and officers’ liability insurance policy, or under applicable law.
(h) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. If a Change of Control has not occurred, Independent Counsel shall be selected by the Board with the approval of Indemnitee, which approval will not be unreasonably withheld. If a Change of Control has occurred, Independent Counsel shall be selected by Indemnitee. The Company shall pay the reasonable fees and expenses of Independent Counsel and indemnify Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or Independent Counsel’s engagement hereunder.
(i) “Other Indemnitors” means any person or entity, other than the Company or an Enterprise, that has agreed to, or is otherwise obligated to, indemnify Indemnitee or advance expenses to Indemnitee in respect of Indemnitee’s Corporate Status, including any stockholder of the Company, or any affiliate of such stockholder, with
2
Exhibit 10.6
which Indemnitee is affiliated or by which Indemnitee was designated, nominated or appointed to serve as a director or officer of the Company.
(j) “Prior Agreement” means any indemnification agreement between the Company and Indemnitee that was in effect at any time prior to the Effective Date.
(k) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative, legislative or investigative (including on appeal), and whether formal or informal, except one initiated by Indemnitee to enforce Indemnitee’s rights under this Agreement.
(l) “Reference Date” means the date set forth on the signature page hereto or, if no such date is set forth, the Service Commencement Date.
(m) “Service Commencement Date” means the date on which Indemnitee first began to serve in any capacity giving rise to Corporate Status, as set forth on the signature page hereto or, if not so set forth, as reflected in the records of the Company.
(n) “Side A DIC Policy” shall mean a dedicated directors’ and officers’ liability insurance policy, including a difference-in-conditions policy, that indemnifies the individual director or officer for non-indemnifiable losses and for which the Company has no right of reimbursement or subrogation.
(o) “Side A Non-Indemnifiable Loss Policies” shall mean insurance policies that indemnify the Indemnitee directly for losses for which the Company is not permitted or is not able to provide indemnification.
Section 2. Services by Indemnitee. Indemnitee will serve as a director and/or executive officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.
Section 3. Indemnification — General. The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the fullest extent permitted by Nevada law in effect on the date hereof and as amended from time to time; provided, however, that no change in Nevada law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Nevada law as in effect on the date hereof. The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Chapter 78 of the NRS.
Section 4. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to or a witness or other participant in any threatened, pending or completed Proceeding, other than a Proceeding by or in the right of the Company. Pursuant to this Section 4, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding, unless it is established by way of a final adjudication from which there is no further right of appeal that (i) the act or omission of Indemnitee constituted a breach of Indemnitee’s fiduciary duties as a director or officer of the Company and such breach involved intentional misconduct, fraud or a knowing violation of law, (ii) Indemnitee actually received an improper personal benefit in money, property or services to which Indemnitee was not legally entitled, or (iii) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.
Section 5. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 5 if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to or a witness or other participant in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 5, Indemnitee shall be indemnified against all amounts paid in settlement and all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding unless it is established by way of a final adjudication from which there is no further right of appeal that the act or omission of Indemnitee
3
Exhibit 10.6
constituted a breach of Indemnitee’s fiduciary duties as a director or officer of the Company and such breach involved intentional misconduct, fraud or a knowing violation of law.
Section 6. Court-Ordered Indemnification. Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification in the following circumstances:
(a) if it determines Indemnitee is entitled to reimbursement under Chapter 78 of the NRS, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the expenses of securing such reimbursement; or
(b) if it determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Chapter 78 of the NRS or (ii) has been adjudged liable for receipt of an improper personal benefit under Chapter 78 of the NRS, the court may order such indemnification as the court shall deem proper.
Section 7. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, made a party to and is successful, on the merits or otherwise, in the defense of any Proceeding, Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 8. Advance of Expenses. The Company shall advance all reasonable Expenses to the fullest extent permitted by law incurred by or on behalf of Indemnitee in connection with any Proceeding to which Indemnitee is, or is threatened to be, made a party or a witness or other participant, within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established by way of a final adjudication from which there is no further right of appeal that the standard of conduct has not been met and which have not been successfully resolved as described in Section 7. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor. Indemnitee shall not be required to reimburse the Company for any advanced Expenses until a final adjudication from which there is no further right of appeal is made with respect thereto, and Indemnitee’s entitlement to advancement of Expenses shall not be conditioned on any determination of entitlement to indemnification under Section 9.
Section 9. Procedure for Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section
4
Exhibit 10.6
9(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Directors, or (B) if a quorum of the Board consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.
Section 10. Presumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption by clear and convincing evidence in connection with the making of any determination contrary to that presumption. (b) The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification. (c) Neither the knowledge, actions nor failure to act of any other director, officer, agent or employee of the Company or any Enterprise shall be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. (d) For purposes of this Agreement, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company or any Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Company or any Enterprise in the course of their duties, or on the advice of legal counsel for the Company or any Enterprise, or on information or records given or reports made to the Company or any Enterprise by an independent certified public accountant or by an appraiser, investment banker, compensation consultant or other expert selected by or on behalf of the Company or any Enterprise. The provisions of this Section 10(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct. (e) If the person, persons or entity empowered or selected under Section 9 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 30 days after receipt by the Company of the request therefor, the requisite determination shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.
Section 11. Remedies of Indemnitee. (a) If (i) a determination is made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 9(b) of this Agreement within 30 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Nevada, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. (b) In any judicial proceeding or arbitration commenced pursuant to this Section 11, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be, and the Company may not refer to or
5
Exhibit 10.6
introduce into evidence any determination pursuant to Section 9(b) of this Agreement adverse to Indemnitee for any purpose. Any such judicial proceeding or arbitration shall be conducted in all respects as a de novo trial, or arbitration, on the merits. (c) If a determination shall have been made pursuant to Section 9(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 11, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification. (d) In the event that Indemnitee, pursuant to this Section 11, seeks a judicial adjudication of or an award in arbitration to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by Indemnitee in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. (e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 11 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
Section 12. Defense of the Underlying Proceeding. (a) Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced. (b) Subject to the provisions of the last sentence of this Section 12(b) and of Section 12(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 12(a) above. The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, (ii) imposes any non-monetary obligations or any sanction against the Indemnitee, or (iii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 12(b) shall not apply to a Proceeding brought by Indemnitee under Section 11 above or Section 20 below. (c) Notwithstanding the provisions of Section 12(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) a conflict of interest exists or is reasonably likely to exist, (ii) there are multiple defendants who have or may have differing defenses, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice at the expense of the Company, provided that such counsel’s rates are reasonable. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company (subject to Section 11(d)), to represent Indemnitee in connection with any such matter.
Section 13. Non-Exclusivity; Survival of Rights; Primacy of Indemnification; Subrogation; Insurance.
(a) The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Articles of Incorporation of the Company (as amended from time to time, the “Charter”) or the bylaws of the Company (as amended from time to time, the “Bylaws”), any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof, nor any amendment, alteration or repeal of the Charter or Bylaws, shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal, and any such amendment, alteration or
6
Exhibit 10.6
repeal shall not apply to or have any effect on Indemnitee’s rights hereunder without Indemnitee’s explicit written consent.
(b) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more Other Indemnitors. The Company agrees that, as between the Company and the Other Indemnitors, the Company is the indemnitor of first resort (i.e., its obligations to Indemnitee under this Agreement are primary and any obligation of the Other Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), and the Company shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all such expenses and liabilities, without regard to any rights Indemnitee may have against the Other Indemnitors. The Company irrevocably waives, relinquishes and releases the Other Indemnitors from any and all claims against the Other Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof, and shall not be entitled to contribution or subrogation from or against any Side A DIC Policy. No advancement or payment by the Other Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing, and the Other Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Other Indemnitors are express third-party beneficiaries of the terms of this Section 13(b).
Section 14. Insurance. The Company shall use its reasonable best efforts to acquire and maintain in effect, during the entire period for which the Company is obligated to indemnify Indemnitee under this Agreement, with Side A coverage for non-indemnifiable loss with reputable insurers, whether under a Side A DIC Policy or under one or more Side A layers of the Company’s directors’ and officers’ liability insurance program, providing for at least $10,000,000 in the aggregate. The Company shall, upon a Change of Control, purchase a runoff “tail” policy for a period of not less than six (6) years covering acts or omissions occurring prior thereto, on terms with respect to coverage and amount no less favorable in the aggregate than those of the policies then in effect. Upon the Indemnitee’s departure from the Company, the Company shall maintain coverage for Indemnitee in respect of acts or omissions occurring during Indemnitee’s service on the same terms as coverage is maintained for the Company’s then-serving directors and officers. The failure to use such reasonable best efforts shall be deemed a material breach of this Agreement. The erosion or exhaustion of aggregate limits by payment of loss or defense costs shall not constitute a failure to maintain coverage for purposes of this Section 14. Upon request, the Company shall provide Indemnitee with copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials, and shall promptly notify Indemnitee of any material change in, cancellation of or lapse in such coverage. Upon receipt of notice of a Proceeding, the Company shall give prompt notice thereof to the insurers in accordance with the procedures set forth in the applicable policies and shall thereafter take all necessary action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding. Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and reasonable Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in this Section 14.
Section 15. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness in, or is otherwise asked to participate in, any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party, Indemnitee shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
Section 16. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount of judgments, penalties, fines, amounts paid in settlement and Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding, in such proportion as is deemed fair and reasonable in light of all of the circumstances in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events or transactions giving rise to such Proceeding, and (ii) the relative fault of the Company (and its other directors, officers, employees and agents) and
7
Exhibit 10.6
Indemnitee in connection with such events or transactions. The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee. The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by any other director, officer, employee or agent of the Company who may be jointly liable with Indemnitee.
Section 17. Prior Agreements; Continuity of Coverage. (a) This Agreement supersedes and replaces in its entirety any Prior Agreement, and from and after the Effective Date no Prior Agreement shall be of any further force or effect. (b) The rights of Indemnitee under this Agreement shall apply to, and Indemnitee shall be indemnified and have Expenses advanced under this Agreement in respect of, any Proceeding relating to or arising out of any act or omission occurring, or any state of facts existing, at any time on or after the Service Commencement Date, whether or not such act or omission occurred or such state of facts existed prior to the Effective Date, whether or not any Prior Agreement was then in effect, and whether or not Indemnitee holds Corporate Status at the time indemnification or advancement of Expenses is sought. This Agreement shall apply to any Proceeding pending or threatened as of the Effective Date. (c) Notwithstanding Section 17(a), the supersession of any Prior Agreement shall not be construed to limit, restrict or otherwise adversely affect any right of Indemnitee under this Agreement in respect of any act or omission occurring, or any state of facts existing, prior to the Effective Date, all of which are within the scope of this Agreement pursuant to Section 17(b). (d) The parties intend that there be no lapse, gap or reduction in Indemnitee’s rights to indemnification, advancement of Expenses or insurance as a result of the execution and delivery of this Agreement, and this Agreement shall be construed accordingly.
Section 18. Duration of Agreement; Binding Effect. (a) This Agreement shall continue indefinitely for the longest period permitted by law; provided, that the rights of Indemnitee hereunder shall continue until the final resolution of any Proceeding commenced or threatened during or after Indemnitee’s service in respect of which Indemnitee is granted rights of indemnification or advance of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 11 of this Agreement relating thereto. (b) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to have Corporate Status, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives. (c) The Company shall require and cause any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
Section 19. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 20. Exception to Right of Indemnification or Advance of Expenses. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification or advance of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, unless (a) the Proceeding is brought to enforce indemnification or advancement of Expenses under this Agreement or otherwise, (b) the Company’s Bylaws, the Charter, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board or an agreement approved by the Board to which the Company is a party expressly provide otherwise, or (c) Indemnitee is making a counterclaim, cross-claim or affirmative claim or defense that is reasonably related to a defense strategy, provided that Indemnitee gives the Board notice of such claim, or (d) the Board authorized the Proceeding (or any part thereof) prior to its initiation.
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Exhibit 10.6
Section 21. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement. Electronic signatures or signatures contained in a portable document format (PDF) of this Agreement shall be deemed an original signature.
Section 22. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 23. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 24. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, or (iii) sent by a nationally recognized overnight courier, on the next business day after the date on which it is so sent:
(a) If to Indemnitee, to: The address set forth on the signature page hereto.
(b) If to the Company, to:
CEA Industries Inc.
385 S Pierce Ave, Suite C
Louisville, Colorado 80027
Attention: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
Section 25. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Nevada applicable to contracts formed and to be performed entirely within the State of Nevada, without regard to its conflicts of laws rules, to the extent such rules would require or permit the application of the laws of another jurisdiction.
Section 26. Interpretation. For purposes of this Agreement, references to the masculine, feminine or neuter gender shall include each other gender, references to the singular shall include the plural and vice versa, and the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” References to any statute or rule shall be deemed to refer to such statute or rule as amended from time to time and to any successor thereto. This Agreement shall be construed liberally in favor of Indemnitee to the fullest extent permitted by law, and any ambiguity shall be resolved in favor of indemnification and advancement of Expenses.
[SIGNATURE PAGE FOLLOWS]
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Exhibit 10.6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

CEA INDUSTRIES INC.
By:  _________________________________
Name:
Title:
INDEMNITEE
By:  _________________________________
Name:
Title:
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Exhibit 10.6
EXHIBIT A
FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED
To: The Board of Directors of CEA Industries Inc.
Re: Undertaking to Repay Expenses Advanced
Ladies and Gentlemen:
This undertaking is being provided pursuant to that certain Indemnification Agreement (the “Indemnification Agreement”) dated ___ day of _______________, 202__, by and between CEA Industries Inc. (the “Company”) and the undersigned Indemnitee (“Indemnitee”), pursuant to which I am entitled to advance of expenses in connection with [Description of Proceeding] (the “Proceeding”).
Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.
I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm that at all times, insofar as I was involved as a director and/or officer of the Company, in any of the facts or events giving rise to the Proceeding, I (1) acted in good faith and honestly, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.
In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established, by way of a final adjudication from which there is no further right of appeal, that (1) an act or omission by me constituted a breach of my fiduciary duties as a director or officer of the Company and such breach involved intentional misconduct, fraud or a knowing violation of law or (2) I actually received an improper personal benefit in money, property or services to which I was not legally entitled or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established and which have not been successfully resolved as described in Section 7 of the Indemnification Agreement. To the extent that Advanced Expenses do not relate to a specific claim, issue or matter in the Proceeding, I agree that such Expenses shall be allocated on a reasonable and proportionate basis.
IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this ___ day of ____________, 202__.

INDEMNITEE
By:  _________________________________
Name: _________________________________
Title: _________________________________
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SURNA INC. 2017 EQUITY INCENTIVE PLAN 1. Purpose. The purpose of this Surna Inc. 2017 Equity Incentive Plan (the “Plan”) is to assist Surna, Inc., a Nevada corporation (the “Company”), and its Related Entities (as hereinafter defined) in attracting, motivating, retaining, and rewarding high-quality executives and other employees, officers, directors, consultants, and other persons who provide services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and providing such persons with performance incentives to expend their maximum efforts in the creation of stockholder value. 2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof. (a) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Share granted as a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based Award, or Performance Award, together with any other right or interest, granted to a Participant under the Plan. (b) “Award Agreement” means any written agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder. (c) “Beneficiary” means the person, persons, trust, or trusts that have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant’s death or to which Awards or other rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person, persons, trust, or trusts entitled by will or the laws of descent and distribution to receive such benefits. (d) “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule. (e) “Board” means the Company’s Board of Directors. (f) “Cause” shall, with respect to any Participant, have the meaning specified in the Award Agreement. In the absence of any definition in the Award Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) an act or acts of personal dishonesty, fraud, or embezzlement by the Participant, (ii) violation by the Participant of the Participant’s obligations under the Award Agreement, any proprietary rights and restrictive covenant agreement with the Company or a Related Entity, or any employment, consulting, or other similar agreement with the Company or a Related Entity, if any, which are demonstrably willful and deliberate on the Participant’s part and which are not remedied in a reasonable period of time after receipt of written notice from the Company, (iii) any willful or deliberate refusal to follow the requests or instructions of the Company’s Chief Executive Officer or of the Board, or (iv) the conviction of the Participant for any criminal act which is a felony or a crime involving moral turpitude causing material harm to the standing and reputation of the Company. The good faith determination by the Committee of whether the Participant’s Continuous Service was terminated by the Company for “Cause” shall be final and binding for all purposes hereunder.

 
2    (g) “Change in Control” means a Change in Control as defined in Section 9 hereof. (h) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto. (i) “Committee” means the Compensation Committee of the Board or such other committee as may be designated by the Board. If the Board does not designate the Committee, references herein to the “Committee” shall refer to the Board. (j) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity. (k) “Continuous Service” means the uninterrupted provision of services to the Company or any Related Entity in any capacity of Employee, Director, Consultant, or other service provider. Continuous Service shall not be considered to be interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entities, or any successor entities, in any capacity of Employee, Director, Consultant, or other service provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director, Consultant, or other service provider (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. (l) “Covered Employee” means the person who, as of the end of the taxable year, either is the principal executive officer of the Company or is serving as the acting principal executive officer of the Company, and each other person whose compensation is required to be disclosed in the Company’s filings with the Securities and Exchange Commission by reason of that person being among the four highest compensated officers (other than the chief executive officer) of the Company as of the end of a taxable year, or such other person as shall be considered a “covered employee” for purposes of Section 162(m) of the Code. No person shall be considered a Covered Employee during the applicable reliance period under Treasury Regulation 1.162-27(f). (m) “Director” means a non-Employee member of the Board or the board of directors of any Related Entity. (n) “Disability” means a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medical doctor satisfactory to the Committee. (o) “Dividend Equivalent” means a right, granted to a Participant under Section 6(g) hereof, to receive cash, Shares, other Awards, or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments. (p) “Effective Date” means the date this Plan is first adopted by the Board. (q) “Eligible Person” means each officer, Director, Employee, Consultant, and other person who provides services to the Company or any Related Entity. The foregoing notwithstanding, only employees of the Company, or any parent corporation or subsidiary corporation of the Company (as those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible Persons for purposes of receiving any Incentive Stock Options. An Employee on leave of absence may be considered as still in the employ of the Company or a Related Entity for purposes of eligibility for participation in the Plan.

 
3    (r) “Employee” means any person, including an officer or Director, who is an employee of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company. (s) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto. (t) “Fair Market Value” means the fair market value of Shares, Awards, or other property as determined in good faith by the Committee, or under procedures established by the Committee, and where applicable in accordance with the requirements of the Code, provided that, if the Common Stock is traded publicly, the Fair Market Value of a share of Common Stock on any date shall be the last reported sale price for Common Stock or, in case no such reported sale takes place on such date, the average of the closing bid and asked prices for the Common Stock for such date, in either case on the principal securities exchange on which the Common Stock is listed or admitted to trading, or if the Common Stock is not listed or admitted to trading on any securities exchange, but is traded in the over-the-counter market, the closing sale price of the Common Stock or, if no sale is publicly reported, the arithmetic mean of the high and low prices, as quoted on the over-the-counter market or any comparable system, for the date in question, or, if the Common Stock is listed on a national stock exchange, the officially quoted closing price on such exchange on the date in question. If applicable, the Committee’s determination of Fair Market Value shall be conclusive for purposes of this Plan. (u) “Incentive Stock Option” means any Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code or any successor provision thereto. (v) “Independent” when referring to either the Board or members of the Committee, shall have the same meaning as used in the rules of the Listing Market or any national securities exchange on which any securities of the Company are listed for trading, and if not listed for trading or otherwise quoted on the over-the-counter market, by the rules of the NASDAQ Stock Market. (w) “Listing Market” means the over-the-counter market or any other national securities exchange on which any securities of the Company are listed for trading. (x) “Option” means a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other Awards at a specified price during specified time periods. (y) “Optionee” means a person to whom an Option is granted under this Plan or any person who succeeds to the rights of such person under this Plan. (z) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(i) hereof. (aa) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. (bb) “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person. (cc) “Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Section 6(h). (dd) “Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.

 
4    (ee) “Performance Share” means any grant pursuant to Section 6(h) of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. (ff) “Performance Unit” means any grant pursuant to Section 6(h) of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. (gg) “Prior Plan” means the 2014 Stock Ownership Plan of Safari Resource Group, Inc., as amended. (hh) “Related Entity” means any Parent or Subsidiary. (ii) “Restricted Stock” means any Share issued with such risks of forfeiture and other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate. (jj) “Restricted Stock Award” means an Award granted to a Participant under Section 6(d) hereof. (kk) “Restricted Stock Unit” means a right to receive Shares, including Restricted Stock, cash measured based upon the value of Shares, or a combination thereof, at the end of a specified deferral period. (ll) “Restricted Stock Unit Award” means an Award of Restricted Stock Units granted to a Participant under Section 6(e) hereof. (mm) “Restriction Period” shall have the meaning ascribed to such term in Section 6(d) hereof. (nn) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. (oo) “Securities Act” means the Securities Act of 1933, as amended from time to time, including rules thereunder and successor provisions and rules thereto. (pp) “Shares” means the shares of common stock of the Company, par value $0.00001 per share, and such other securities as may be substituted (or resubstituted) for Shares pursuant to Section 10(c) hereof. (qq) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c) hereof. (rr) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code. (ss) “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, Awards previously granted, or the right or obligation to

 
5    make future Awards, by a company acquired by the Company or any Related Entity or with which the Company or any Related Entity combines. 3. Administration. (a) Administration of the Plan. The Plan shall be administered by the Committee. Any action of the Committee shall be final, conclusive, and binding on all persons, including the Company, its Related Entities, Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through a Participant, and stockholders. The Committee may issue rules and regulations for administration of the Plan. (b) Composition of Committee. To the extent necessary or desirable to comply with applicable regulatory regimes, any action by the Committee shall require the approval of Committee members who are (i) Independent; (ii) a non-employee director within the meaning of Rule 16b-3 under the Exchange Act; and (iii) an outside director pursuant to Section 162(m) of the Code. The Board may designate one or more directors as alternate members of the Committee who may replace any absent or disqualified member at any meeting of the Committee. The Committee may delegate to officers or managers of the Company or any Related Entity, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify. The Committee may appoint agents to assist it in administering the Plan. (c) Authority of the Committee. Subject to the terms of the Plan and applicable law, the Committee (or its delegate) shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards (including Substitute Awards) to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights, or other matters are to be calculated in connection with) Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other Awards, other property, net settlement, or any combination thereof, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other Awards, other property, and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be required to follow past practices, act in a manner consistent with past practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of other Eligible Persons or Participants. (d) Dodd-Frank Clawback. The Committee shall have full authority to implement any policies and procedures that it determines to be necessary or appropriate to comply with Section 10D of the Exchange Act and any rules promulgated thereunder, including without limitation, including in any Award Agreement, or amending any outstanding Award Agreement to include, language for the clawback (recapture) by the Company of any benefits under the Award Agreement that the Committee deems necessary or appropriate to comply with that statutory provision and those rules.

 
6    (e) Limitation of Liability. The Committee and the Board, and each member thereof, shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or Employee, the Company’s independent auditors, Consultants, or any other agents assisting in the administration of the Plan. Members of the Committee and the Board, and any officer or Employee acting at the direction or on behalf of the Committee or the Board, shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. 4. Shares Subject to Plan. (a) Limitation on Overall Number of Shares Allocated for Delivery under Plan. Subject to adjustment as provided in Section 10(c) hereof, the total number of Shares allocated for delivery under the Plan shall be 50,000,000. Any Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury shares. (b) Application of Limitation to Grants of Awards. No Award may be granted if the number of Shares to be delivered in connection with such an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of Shares deliverable in settlement of or relating to then outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards), and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award. (c) Availability of Shares Not Delivered under Awards and Adjustments to Limits. (i) If any Shares subject to an Award are forfeited, expire, or otherwise terminate without issuance of such Shares, or any Award that could have been settled with Shares is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement, or non-issuance, again be available for Awards under the Plan. (ii) In the event that any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or withholding tax liabilities arising from such option or other award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then only the number of Shares issued net of the Shares tendered or withheld shall be counted for purposes of determining the maximum number of Shares available for grant under the Plan. (iii) Substitute Awards shall not reduce the Shares authorized for grant under the Plan or authorized for grant to a Participant in any period. Additionally, in the event that a company acquired by the Company or any Related Entity or with which the Company or any Related Entity combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for delivery pursuant to the terms of such pre- existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery under the Plan; provided that, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination.

 
7    (iv) Notwithstanding anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 10(c) hereof, the maximum aggregate number of Shares that may be issued under the Plan as a result of the exercise of the Incentive Stock Options shall be 10,000,000 shares. In no event shall any Incentive Stock Options be granted under the Plan after the tenth anniversary of the Effective Date. (d) No Further Awards under Prior Plan. In light of the adoption of this Plan, no further awards shall be made under the Prior Plan after the Effective Date. 5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to Eligible Persons. Subject to adjustment as provided in Section 10(c), in any fiscal year of the Company during any part of which the Plan is in effect, no Participant may be granted (a) Options or Stock Appreciation Rights with respect to more than such number of Shares as may be determined from time to time by the Committee, or (b) Restricted Stock, Restricted Stock Units, Performance Shares, and/or Other Stock-Based Awards with respect to more than such number of Shares as may be determined from time to time by the Committee. 6. Specific Terms of Awards. (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of the Participant’s Continuous Service and terms permitting a Participant to make elections relating to his or her Award. Except as otherwise expressly provided herein, the Committee shall retain full power and discretion to accelerate, waive, or modify, at any time, any term or condition of an Award that is not mandatory under the Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the requirements of Nevada law, no consideration other than services may be required for the grant (as opposed to the exercise) of any Award. (b) Options. The Committee is authorized to grant Options to any Eligible Person on the following terms and conditions: (i) Exercise Price. Other than in connection with Substitute Awards, the exercise price per Share purchasable under an Option shall be determined by the Committee; provided that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of the Option and shall not, in any event, be less than the par value of a Share on the date of grant of the Option. If an Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than 110% of the Fair Market Value a Share on the date such Incentive Stock Option is granted. Other than pursuant to Section 10(c)(i) and (ii), the Committee shall not be permitted to (A) lower the exercise price per Share of an Option after it is granted, (B) cancel an Option when the exercise price per Share exceeds the Fair Market Value of the underlying Shares in exchange for another Award (other than in connection with Substitute Awards), or (C) take any other action with respect to an Option that may be treated as a repricing pursuant to the applicable rules of the Listing Market, without approval of the Company’s stockholders. (ii) Time and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based

 
8    on achievement of performance goals and/or future service requirements), the time or times at which Options shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the methods by which the exercise price may be paid or deemed to be paid (including, in the discretion of the Committee, a cashless exercise procedure), the form of such payment, including, without limitation, cash, Shares (including, without limitation, the withholding of Shares otherwise deliverable pursuant to the Award), other Awards, or awards granted under other plans of the Company or a Related Entity, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis provided that such deferred payments are not in violation of the Sarbanes-Oxley Act of 2002, as amended, or any rule or regulation adopted thereunder or any other applicable law), and the methods by or forms in which Shares will be delivered or deemed to be delivered to Participants. (iii) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options (including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended, or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code, unless the Participant has first requested, or consents to, the change that will result in such disqualification. Thus, if and to the extent required to comply with Section 422 of the Code, Options granted as Incentive Stock Options shall be subject to the following special terms and conditions: (A) the Option shall not be exercisable more than ten years after the date such Incentive Stock Option is granted; provided, however, that if a Participant owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant, the term of the Incentive Stock Option shall be (to the extent required by the Code at the time of the grant) for no more than five years from the date of grant; and (B) the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted under the Plan and all other option plans of the Company (and any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) that become exercisable for the first time by the Participant during any calendar year shall not (to the extent required by the Code at the time of the grant) exceed $100,000. (c) Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights to any Eligible Person in conjunction with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (a “Tandem Stock Appreciation Right”), or without regard to any Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms and conditions as the Committee may establish in its sole discretion, not inconsistent with the provisions of the Plan, including the following: (i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the Stock Appreciation Right as determined by the Committee. The grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of a Share on the date of grant, in the case of a Freestanding Stock Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem Stock Appreciation Right.

 
9    (ii) Other Terms. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Participants, whether or not a Stock Appreciation Right shall be in tandem or in combination with any other Award, and any other terms and conditions of any Stock Appreciation Right. (iii) Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or, for Options that are not Incentive Stock Options, at any time thereafter before exercise or expiration of such Option. Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the exercise price at which Shares can be acquired pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation Right shall no longer be exercisable to the extent the related Option has been exercised. (d) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock Awards to any Eligible Person on the following terms and conditions: (i) Grant and Restrictions. Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture, and other restrictions, if any, as the Committee may impose, or as otherwise provided in this Plan, covering a period of time specified by the Committee (the “Restriction Period”). The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to a Restricted Stock Award, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the Restriction Period, subject to Section 10(b) below, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined, or otherwise encumbered by the Participant. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable Restriction Period, the Participant’s Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to Restricted Stock Awards shall be waived in whole or in part in the event of terminations resulting from specified causes and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.

 
10    (iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock. (iv) Dividends and Splits. As a condition to the grant of a Restricted Stock Award, the Committee may require or permit a Participant to elect that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted Stock or applied to the purchase of additional Awards under the Plan. Unless otherwise determined by the Committee, Shares distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other property have been distributed. (e) Restricted Stock Unit Award. The Committee is authorized to grant Restricted Stock Unit Awards to any Eligible Person on the following terms and conditions: (i) Award and Restrictions. Satisfaction of a Restricted Stock Unit Award shall occur upon expiration of the deferral period specified for such Restricted Stock Unit Award by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, a Restricted Stock Unit Award shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. A Restricted Stock Unit Award may be satisfied by delivery of Shares, cash equal to the Fair Market Value of the specified number of Shares covered by the Restricted Stock Units, or a combination thereof, as determined by the Committee at the date of grant or thereafter. Prior to satisfaction of a Restricted Stock Unit Award, a Restricted Stock Unit Award carries no voting or dividend or other rights associated with Share ownership. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Stock Unit Award), the Participant’s Restricted Stock Unit Award that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Restricted Stock Unit Award shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of any Restricted Stock Unit Award. (iii) Dividend Equivalents. Unless otherwise determined by the Committee at the date of grant, any Dividend Equivalents that are granted with respect to any Restricted Stock Unit Award shall be either (A) paid with respect to such Restricted Stock Unit Award at the dividend payment date in cash or in Shares of unrestricted stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Stock Unit Award and the amount or value thereof automatically deemed reinvested in additional Restricted Stock Units, other Awards, or other investment vehicles, as the Committee shall determine or permit the Participant to elect. The applicable Award Agreement shall specify whether any Dividend Equivalents shall be paid at the dividend payment date, deferred, or deferred at the election of the Participant. If the Participant may elect to defer the Dividend Equivalents, such election shall be made within 30 days after the grant date of the Restricted Stock Unit Award, but in no event later than 12 months before the first date on which any portion of such Restricted

 
11    Stock Unit Award vests (or at such other times prescribed by the Committee as shall not result in a violation of Section 409A of the Code). (f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Shares to any Eligible Persons as a bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements; provided that, in the case of Eligible Persons subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Shares or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. (g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to any Eligible Person entitling the Eligible Person to receive cash, Shares, other Awards, or other property equal in value to the dividends paid with respect to a specified number of Shares, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify. (h) Performance Awards. The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash, Shares, or other Awards, on terms and conditions established by the Committee, subject to the provisions of Section 8 if and to the extent that the Committee shall, in its sole discretion, determine that an Award shall be subject to those provisions. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award; provided, however, that a Performance Period shall not be longer than 5 years. Except as provided in Section 9 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 8(b), or in the case of an Award that the Committee determines shall not be subject to Section 8 hereof, any other criteria that the Committee, in its sole discretion, shall determine should be used for that purpose. The amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis, in each case in a manner that does not violate the requirements of Section 409A of the Code. (i) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to any Eligible Person such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan. Other Stock-Based Awards may be granted to Participants either alone or in addition to other Awards granted under the Plan, and such Other Stock- Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(i) shall be purchased for such consideration (including, without limitation, loans from the Company or a Related Entity provided that such loans are not in violation of the Sarbanes Oxley Act of 2002, as amended, or any rule or regulation adopted thereunder or any other applicable law) paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards, or other property, as the Committee shall determine. 7. Certain Provisions Applicable to Awards.

 
12    (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Related Entity, or any business entity to be acquired by the Company or a Related Entity, or any other right of a Participant to receive payment from the Company or any Related Entity. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which the value of Shares subject to the Award is equivalent in value to the cash compensation (for example, Restricted Stock or Restricted Stock Units), or in which the exercise price, grant price, or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Stock minus the value of the cash compensation surrendered (for example, Options or Stock Appreciation Right granted with an exercise price or grant price “discounted” by the amount of the cash compensation surrendered), provided that any such determination to grant an Award in lieu of cash compensation must be made in a manner intended to comply with Section 409A of the Code. (b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided, that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten years (or, in the case of an Incentive Stock Option, such shorter term as may be required under Section 422 of the Code). (c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Related Entity upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Shares, other Awards, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. Any installment or deferral provided for in the preceding sentence shall, however, be subject to the Company’s compliance with the provisions of the Sarbanes-Oxley Act of 2002, as amended, the rules and regulations adopted by the Securities and Exchange Commission thereunder, and all applicable rules of the Listing Market. Subject to Section 7(e) hereof, the settlement of any Award may be accelerated, and cash paid in lieu of Shares in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control). Any such settlement shall be at a value determined by the Committee in its sole discretion, which, without limitation, may in the case of an Option or Stock Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement date exceeds the exercise or grant price. Installment or deferred payments may be required by the Committee (subject to Section 10(e) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee. The acceleration of the settlement of any Award, and the payment of any Award in installments or on an deferred basis, all shall be done in a manner that is intended to be exempt from or otherwise satisfy the requirements of Section 409A of the Code. Payments may include, without limitation, provisions for the payment or crediting of a reasonable interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Shares. (d) Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant of any Awards to or other transaction by a Participant, whether or not such Participant is subject to Section 16 of the Exchange Act, shall be exempt from Section 16 pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if

 
13    any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b). (e) Code Section 409A. (i) The Award Agreement for any Award that the Committee reasonably determines to constitute a “nonqualified deferred compensation plan” under Section 409A of the Code (a “Section 409A Plan”), and the provisions of the Section 409A Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A of the Code, and the Committee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement (and the provisions of the Plan applicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with the requirements of Section 409A of the Code. (ii) If any Award constitutes a Section 409A Plan, then the Award shall be subject to the following additional requirements, if and to the extent required to comply with Section 409A of the Code: (A) Payments under the Section 409A Plan may be made only upon (1) the Participant’s “separation from service”, (2) the date the Participant becomes “disabled”, (3) the Participant’s death, (4) a “specified time (or pursuant to a fixed schedule)” specified in the Award Agreement at the date of the deferral of such compensation, (5) a “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets” of the Company, or (6) the occurrence of an “unforeseeble emergency”; (B) The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service; (C) Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of Section 409A(a)(4) of the Code; and (D) In the case of any Participant who is a “specified employee”, a distribution on account of a “separation from service” may not be made before the date which is six months after the date of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death). For purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award. (iii) Notwithstanding the foregoing, or any provision of this Plan or any Award Agreement, the Company does not make any representation to any Participant or Beneficiary that any Awards made pursuant to this Plan are exempt from, or satisfy, the requirements of, Section 409A of the Code, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any Beneficiary for any tax, additional tax, interest, or penalties that the Participant or any Beneficiary may incur in the event that any provision of this Plan, or any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A of the Code.

 
14    8. Code Section 162(m) Provisions. (a) Covered Employees. Unless otherwise determined by the Committee, the provisions of this Section 8 shall be applicable to any Award granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee. (b) Performance Criteria. If an Award is subject to this Section 8, then the lapsing of restrictions thereon and the distribution of cash, Shares, or other property pursuant thereto, as applicable, shall be contingent upon achievement of one or more objective performance goals. Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” One or more of the following business criteria for the Company, on a consolidated basis, and/or for Related Entities, or for business or geographical units of the Company and/or a Related Entity (except with respect to the total stockholder return and earnings per share criteria), shall be used by the Committee in establishing performance goals for such Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest expense and before extraordinary or special items; operating income; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of the Company; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) total stockholder return; (13) debt reduction; (14) market share; (15) entry into new markets, either geographically or by business unit; (16) net new members of the Company; (17) member retention and satisfaction; (18) strategic plan development and implementation, including turnaround plans; and/or (19) and/or the Fair Market Value of a Share. Any of the above goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of companies that are comparable to the Company. In determining the achievement of the performance goals, unless otherwise specified by the Committee at the time the performance goals are set, the Committee shall exclude the impact of an event or occurrence which the Committee determines should appropriately be excluded, on account of (i) restructurings, discontinued operations, extraordinary items, (as defined pursuant to generally accepted accounting principles), and other unusual or non-recurring charges, or (ii) a change in accounting standards required by generally accepted accounting principles. (c) Performance Period; Timing for Establishing Performance Goals. Achievement of performance goals in respect of Performance Awards shall be measured over a Performance Period no longer than 5 years, as specified by the Committee. Performance goals shall be established not later than 90 days after the beginning of any Performance Period applicable to such Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code. (d) Adjustments. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with Awards subject to this Section 8, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of an Award subject to this Section 8. The Committee shall specify the circumstances in which such Awards shall be paid or forfeited in the event of termination of Continuous Service by the Participant prior to the end of a Performance Period or settlement of Awards.

 
15    (e) Committee Certification. No Participant shall receive any payment under the Plan that is subject to this Section 8 unless the Committee has certified, by resolution or other appropriate action in writing, that the performance criteria and any other material terms previously established by the Committee or set forth in the Plan, have been satisfied to the extent necessary to qualify as “performance based compensation” under Section 162(m) of the Code. 9. Change in Control. The Committee may, in its discretion, provide for vesting acceleration in connection with a Change in Control in any individual Award Agreement. Unless otherwise specified in an Award Agreement, a “Change in Control” shall mean: (a) The acquisition by any Person (within the meaning of Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and including a “group” as defined in Section 13(d) thereof) of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (i) the value of the then outstanding equity securities of the Company (the “Outstanding Company Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided, however, that for purposes of this Section 9, the following acquisitions shall not constitute or result in a Change in Control: (A) any acquisition directly from the Company; (B) any acquisition by the Company; (C) any acquisition by any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest; (D) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (E) any acquisition by any entity pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (c) below; or (b) During any period of two (2) consecutive years (not including any period prior to the Effective Date) individuals who constitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of (i) a reorganization, merger, statutory share exchange, or consolidation or similar transaction involving (A) the Company or (B) any of its Subsidiaries, but in the case of this clause (B) only if equity securities of the Company are issued or issuable in connection with the transaction (each of the events referred to in this clause (i) being hereinafter referred to as a “Business Reorganization”), or (ii) a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company or any of its Subsidiaries (each an “Asset Sale”), in each case, unless, following such Business Reorganization or Asset Sale, (1) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior to such Business Reorganization or Asset Sale beneficially own, directly or indirectly, more than fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the board of directors (or comparable governing body of an entity that does not have such a board), as the case may be, of the entity resulting from such Business Reorganization or Asset Sale (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Continuing Entity”) in substantially the same

 
16    proportions as their ownership, immediately prior to such Business Reorganization or Asset Sale, of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be (excluding any outstanding equity or voting securities of the Continuing Entity that such Beneficial Owners hold immediately following the consummation of the Business Reorganization or Asset Sale as a result of their ownership, prior to such consummation, of equity or voting securities of any company or other entity involved in or forming part of such Business Reorganization or Asset Sale other than the Company), (2) no Person (excluding any employee benefit plan (or related trust) of the Company or any Continuing Entity or any entity controlled by the Continuing Corporation or any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the value of the then outstanding equity securities of the Continuing Entity or the combined voting power of the then outstanding voting securities of the Continuing Entity except to the extent that such ownership existed prior to the Business Reorganization or Asset Sale, and (3) at least a majority of the members of the Board of Directors or other governing body of the Continuing Entity were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Reorganization or Asset Sale; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 10. General Provisions. (a) Compliance with Legal and Other Requirements. The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration or qualification of such Shares or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Shares or other Company securities are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information, and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. Each Participant who receives an Award shall comply with any insider trading policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or Directors of the Company. (b) Limits on Transferability; Beneficiaries. No Award or other right or interest granted under the Plan shall be pledged, hypothecated, or otherwise encumbered or subject to any lien, obligation, or liability of such Participant to any party, or assigned or transferred by such Participant otherwise than (i) by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, or (ii) to a “family member” (as defined in Rule 701(c)(3) under the Securities Act) through gifts or domestic relations orders if permitted by the Committee. Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, or if such Award or right is transferred in accordance with this Section 10(b), by the transferee of such Award or right in accordance with the terms of such Award. A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee. Incentive Stock Options (and Stock Appreciation Rights in tandem therewith) shall be transferable only to the extent provided in Section 10(b)(i). (c) Adjustments.

 
17    (i) Adjustments to Awards. Other than as provided in subsection (ii) below, in the event that any extraordinary dividend or other distribution (whether in the form of cash, Shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution, or other similar corporate transaction or event affects the Shares and/or such other securities of the Company or any other issuer such that a substitution, exchange, or adjustment is determined by the Committee to be appropriate, then the Committee may, in such manner as it may deem equitable, substitute, exchange, or adjust any or all of (A) the number and kind of Shares which may be delivered in connection with Awards granted thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under Section 5 hereof, (C) the number and kind of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price, or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E) any other aspect of any Award that the Committee determines to be appropriate. (ii) Adjustments in Case of Certain Corporate Transactions. In the event of any merger, consolidation, or other reorganization in which the Company does not survive, or in the event of any Change in Control, any outstanding Awards may be dealt with in accordance with any of the following approaches, without the requirement of obtaining any consent or agreement of a Participant as such, as determined by the agreement effectuating the transaction or, if and to the extent not so determined, as determined by the Committee: (A) the continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (B) the assumption or substitution for, as those terms are defined below, the outstanding Awards by the surviving entity or its parent or subsidiary, (C) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (D) settlement of the value of the outstanding Awards in cash or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Options or Stock Appreciation Rights, shall be measured by the amount, if any, by which the Fair Market Value of a Share exceeds the exercise or grant price of the Option or Stock Appreciation Right as of the effective date of the transaction). For the purposes of this Plan, an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award shall be considered assumed or substituted for if following the applicable transaction the Award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award immediately prior to applicable transaction, on substantially the same vesting and other terms and conditions as were applicable to the Award immediately prior to the applicable transaction, the consideration (whether stock, cash, or other securities or property) received in the applicable transaction by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the applicable transaction is not solely common stock of the successor company or its parent or subsidiary, the Committee may, with the consent of the successor company or its parent or subsidiary, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award, for each Share subject thereto, will be solely common stock of the successor company or its parent or subsidiary substantially equal in fair market value to the per share consideration received by holders of Shares in the applicable transaction. The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. The Committee shall give written notice of any proposed transaction referred to in this Section 10(c)(ii) a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that Participants may have a reasonable period of time prior to the closing date of such transaction within which to exercise any Awards that are then exercisable (including any Awards that may become exercisable upon the closing date of such transaction). A Participant may condition his or her exercise of any Awards upon the consummation of the transaction.

 
18    (iii) Other Adjustments. The Committee (and the Board if and only to the extent such authority is not required to be exercised by the Committee to comply with Section 162(m) of the Code) is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards, or performance goals relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity, or any business unit, or the financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations, or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Related Entity, or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Performance Awards granted pursuant to Section 8(b) hereof to Participants designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and the regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder. (d) Taxes. The Company and any Related Entity are authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company or any Related Entity and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Shares or other property and to require the Participant to make cash payments to the Company in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee. Each Participant shall be solely responsible for all of the tax consequences to the Participant of any Award issued under the Plan, including any consequences arising under Section 409A of the Code. The Company provides no guaranty or assurance concerning the tax consequences to the Participants of any Award issued under the Plan. (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue, or terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the consent of stockholders or Participants, except that any amendment or alteration to the Plan shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Board action if such stockholder approval is required by any federal or state law or regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate any Award theretofore granted and any Award Agreement relating thereto, except as otherwise provided in the Plan; provided that, except as otherwise provided in this Plan or in any Award Agreement, without the consent of an affected Participant, no such Committee or the Board action may materially and adversely affect the rights of such Participant under such Award. (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken hereunder or under any Award shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a Related Entity; (ii) interfering in any way with the right of the Company or a Related Entity to terminate any Eligible Person’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other

 
19    Participants and Employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company including, without limitation, any right to receive dividends or distributions, any right to vote or act by written consent, any right to attend meetings of stockholders or any right to receive any information concerning the Company’s business, financial condition, results of operation, or prospects, unless and until such time as the Participant is duly issued Shares on the stock books of the Company in accordance with the terms of an Award. None of the Company, its officers, or its directors shall have any fiduciary obligation to the Participant with respect to any Awards unless and until the Participant is duly issued Shares on the stock books of the Company in accordance with the terms of an Award. Neither the Company nor any of the Company’s officers, directors, representatives, or agents are granting any rights under the Plan to the Participant whatsoever, oral or written, express or implied, other than those rights expressly set forth in this Plan or the Award Agreement. (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Shares pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Shares, other Awards, or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law. (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable including incentive arrangements and awards which do not qualify under Section 162(m) of the Code. (i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or other consideration. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (j) Governing Law. Except as otherwise provided in any Award Agreement, the validity, construction, and effect of the Plan, any rules and regulations under the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Colorado without giving effect to principles of conflict of laws, and applicable federal law. (k) Non-U.S. Laws. The Committee shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Subsidiaries may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan. (l) Plan Effective Date and Stockholder Approval; Termination of Plan. The Plan shall become effective on the Effective Date, subject to and conditioned upon, approval, within 12 months of its adoption by the Board, by stockholders of the Company eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3

 
20    under the Exchange Act (if applicable), applicable requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed or quoted, and other laws, regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject to stockholder approval, but may not be exercised or otherwise settled in the event the stockholder approval is not obtained. The Plan shall terminate at the earliest of (a) such time as no Shares remain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of the Effective Date. Awards outstanding upon expiration of the Plan shall remain in effect until they have been exercised or terminated, or have expired.

 
Page 1 of 3 Board Committee Extraordinary Service Compensation Policy CEA Industries Inc. (NASDAQ: BNC) is a publicly traded mid-cap company with an equity market capitalization in the mid- hundreds of millions of dollars, typical of dynamic growth and special situation profiles that require elevated director engagement beyond routine governance. Purpose This policy establishes a clear framework for compensating Independent Directors serving on Board Committees for extraordinary services performed outside the scope of routine Board and Committee duties. While adopted in connection with the Company’s current shareholder activist defense and related strategic matters, this policy applies to any future special situation or extraordinary event that requires materially increased director engagement. This Policy is intended to ensure fair compensation for material, incremental work arising from extraordinary circumstances; clearly distinguish such work from routine Board service; provide objective structure related to additional compensation; and maintain appropriate oversight and transparency. 1.Definition: Regular Board Duties This policy is not meant to cover services that are part of standard Board and Committee obligations and responsibilities, including: • Preparation for and participation in regular Board meetings • Preparation for and participation in Committee meetings • Routine review of financial and operational disclosures (10-Q, 10-K, earnings releases) • Standard oversight communications with management • Ordinary Committee responsibilities, governance and compliance activities Guiding principle: If the duty exists in typical Board and Committee service without extraordinary events, it does not justify additional compensation. This policy is dynamic. To the extent extraordinary commitments increase or decrease over time for any Committee, the Compensation Committee will monitor activity levels and advise the Board of the need to adjust the monthly extraordinary Committee service payments accordingly. 2.Basis for Committee Additional Compensation for Extraordinary / Special Situations Activities Committee members may receive additional compensation when they devote a material amount of time to extraordinary activities that: a. Occur outside scheduled Board or Committee meetings;

 
Page 2 of 3 b. Are outside the scope of normal Board duties; and c. Arise from special situations or extraordinary events involving the Company. Extraordinary activities may include, without limitation, activities such as: i. Activist or Significant Shareholder Engagement • Calls or meetings with activist investors or their representatives • Preparation and strategy related to settlement, defense or negotiations, including calls with advisory teams (e.g., legal and communications) ii. Crisis or Special Situation Work • Unscheduled organization-wide strategy calls or special Committee calls outside the normal meeting cycle • Rapid response planning or heightened oversight during material events • Additional diligence or review driven by crisis-related or time-sensitive needs iii. Legal / Advisory Coordination • Meetings with outside counsel, proxy advisors, bankers, auditors • Participation in formal investigations, dispute resolution or threatened claims • Negotiation of material agreements and other crisis activity including those involving Company’s treasury assets iv. Extraordinary Governance • Director candidate vetting due to board restructuring • Strategic reviews triggered by special external pressures or special circumstances 3.Authorization Upon adoption of this Policy, monthly extraordinary Committee payments are authorized in addition to standard Board and Committee compensation, subject to ongoing review by the Compensation Committee and the Board as circumstances warrant. 4.Reasonable & Fair Rates (Benchmarked) Given CEA’s market cap profile and current governance demands, the following monthly rates are authorized, effective February 1, 2026 except as indicated: Role / Service Type Monthly Rate Audit Committee $8,000 Compensation Committee $8,000

 
Page 3 of 3 Nominating and Governance Committee $8,000 Special Litigation Committee (eff. July 1, 2026) $8,000 Strategic Committee $8,000 These rates align with market practice for boards with elevated strategic demands, appropriately compensating for significant time beyond typical Board and Committee service. 5.Review & Disclosure • The Compensation Committee will review, at least quarterly, the appropriateness of the monthly extraordinary fee for each Committee based on actual time commitments, and report to the full Board. Any finding that the monthly rate requires adjustment for any or all committees will be documented in writing by the Chairman of the Compensation Committee and shared with the Company’s CEO, CFO and Controller. • Public disclosure of such compensation will be made in accordance with SEC and proxy statement requirements under “Additional compensation for extraordinary services rendered outside the scope of normal Board duties.”

 
Ceffu Terms of Use Last updated: 8 June 2026 This agreement is for Clients who are onboarding with Ceffu Digital Pte Ltd. Download the PDF version here. 1.​ INTRODUCTION 1.1.​ These terms of use (hereinafter referred to as “Terms”) are entered into between you (hereinafter referred to as “you” or the “Client”) and Ceffu Digital Pte. Ltd. (hereinafter referred to as the “Custodian”, “us” or “we”). 1.2.​ By accessing, downloading, using or clicking on “I agree” to accept the Services (as defined below) provided by the Custodian, you confirm that you have read, understood, accepted and agree to be bound by all of the terms and conditions stipulated in these Terms as well as our Privacy Notice at https://www.ceffu.com/legal/privacy. In addition, when using some features in connection with the Services, you may be subject to specific additional terms and conditions (the “Additional Terms”) applicable to those features, set out in the respective Exhibits to these Terms and which form part of these Terms. If you do not agree to any terms and conditions stipulated in these Terms, Privacy Notice, or Additional Terms, do not access or utilize the Services or Additional Services. 1.3.​ Ceffu Digital Pte. Ltd. is a private company with its registered office at GT1-1791, Phendey Str, ChoeGo, Gelephu, Gelephu Mindfulness City, Bhutan. The Custodian has obtained a Financial Services Licence from the Gelephu Financial Services Office to conduct the following activities: (i) providing custody; (ii) arranging credit; and (iii) dealing in investment as agent. 1.4.​ In addition to the Services described in these Terms, other additional services listed in Exhibit A (“Additional Services”) may be made available to Clients by the Custodian, at its sole and absolute discretion. 1.5.​ The terms and conditions for the Additional Services set out in the respective Exhibits to these Terms form part of these Terms and are agreed by you by accepting these Terms as described in Article 1.2. If you do not use any Additional Services, then such Additional Services’ terms and conditions will not apply to you. All the provisions of these Terms are applicable for the Additional Services (which for the avoidance of doubt shall include Article 19), unless otherwise expressly provided for in the Additional Terms. 1.6.​ Please read these Terms carefully as they govern your use of the Services. These Terms explain many of your responsibilities to us and our responsibilities to you, how and when these Terms can be terminated and the extent of your and our liability. The Terms, which are currently in force, are always available on https://www.ceffu.com/legal/terms. We urge you to always consult the online version of these Terms for the most current information for future reference, as these Terms may change from time to time. 1.7.​ Risk Warning. As with any asset, the value of Virtual Assets can fluctuate significantly and there is a material risk of economic loss when buying, selling, holding or investing in Virtual Assets. You should therefore consider whether trading or holding Virtual Assets is suitable for you in light of your financial circumstances. We are not your broker, intermediary, agent or advisor and we have no fiduciary relationship or obligation to you in connection with any transactions or other activities you

 
undertake when using the Services, except to the limited extent expressly set forth in any applicable Exhibit or Addendum to these Terms. We do not provide investment or consulting advice of any kind and no communication or information that we provide to you is intended as, or should be construed as, advice of any kind. It is your responsibility to determine whether any investment, investment strategy or related transaction is appropriate for you according to your personal investment objectives, financial circumstances and risk tolerance and you are responsible for any associated loss or liability. We do not recommend that any Virtual Asset should be bought, earned, sold or held by you. Before making the decision to buy, sell or hold any Virtual Asset, you should conduct your own due diligence and consult your financial advisor. We are not responsible for the decisions you make to buy, earn, sell or hold Virtual Assets based on the information provided by us, including any losses you incur arising from those decisions. You acknowledge that Virtual Assets held or controlled by us do not benefit from any form of deposit protection. You understand that there is a risk of loss resulting from a failure of the services provided by us. We have implemented measures to mitigate the risk of loss where appropriate, but you should be aware that these measures do not eliminate all risks. You should carefully consider these risks before engaging in any transactions involving Virtual Assets. 2.​ Definitions 2.1.​ Additional Regulations:​ means all relevant or applicable statutes, laws, principles of equity, rules, regulations, regulatory principles and requirements, notices, orders, writs, injunctions, judgements, bye-laws, rulings, directives, proclamations, circulars, mandatory codes of conduct, guidelines, practice notes and interpretations (whether of a governmental body, regulatory or other authority, or self-regulatory organization of which Custodian is a member), that are applicable to the provision, receipt or use of the Services, or any other products or deliverables provided, used or received in connection with the Services, these Terms, or any Additional Terms. 2.2.​ AML/CTF:​ means anti-money laundering and counter-terrorism financing. 2.3.​ Business Day:​ refers to any day except any Saturday, any Sunday, or any day which is a national legal holiday in Bhutan. 2.4.​ Custody Account or Accounts:​ refers to the custody accounts, including main accounts and subaccounts, which are opened, controlled and secured by the Custodian to store certain supported Virtual Assets on the Client's behalf and/or for Clients to record their usage of Services, transactions and basic information. 2.5.​ Clients:​ refer to all entities (legal persons or organizational units not being legal persons which have been granted the legal capacity by virtue of statutory law) that use Services and who meet the eligibility criteria and conditions stipulated by Custodian. 2.6.​ Digital or Virtual Assets:​ means a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology, including, but not limited to, cryptocurrencies, stablecoins, non-fungible tokens and tokenised derivatives of

 
any other digital asset. By Digital or Virtual Assets we do not mean Fiat Currencies, e-money or financial instruments. 2.7.​ Fiat Currencies:​ means Government issued currency that is designated as legal tender in its country of issuance through government decree, regulation or law. 2.8.​ Mobile Application:​ means any mobile application developed or provided by us that enables you to use or otherwise access Services. 2.9.​ Restricted Person:​ means a person or legal entity who (a) is included in any trade embargoes or economic sanctions list (such as the United Nations Security Council Sanctions List, the list of specially designated nationals maintained by the office of foreign assets control of the U.S. Department of the Treasury (OFAC), or the denied persons or entity list of the U.S. Department of Commerce), or (b) resides, or is established, in any country listed in the List of Prohibited Countries. 2.10.​ Security Breach: means a situation where (a) your Account(s) or any of your access IDs have been compromised; (b) the loss, theft, or unauthorised use of any of your access IDs or any unauthorised access to and use of your Account or the Services on your behalf; or (c) any other security incident (including a cyber-security attack) affecting you and/or Custodian. 2.11.​ Services:​ refer to Virtual Assets custodial services provided to you by Custodian that are based on Internet and/or blockchain technologies and offered via the Website, Mobile Application, and other forms (including new ones enabled by future technological development), enabling you to receive, store, convert and transfer your balances of supported Virtual Assets. 2.12.​ Website:​ refers to our website https://www.ceffu.com including all its sub-domains. 3.​ General Provisions About These Terms 3.1.​ Contractual Relationship These Terms constitute a legal agreement and create a binding contract between you and the Custodian. 3.2.​ Supplementary Terms Due to the rapid development of Virtual Assets and the Custodian, these Terms between you and the Custodian do not enumerate or cover all rights and obligations of each party, and do not guarantee full alignment with needs arising from future development. Therefore, Custodian’s Privacy Notice, additional regulations, and all other agreements entered into separately between you and the Custodian are deemed supplementary terms that are an integral part of these terms and shall have the same legal effect. Your use of Services is deemed your acceptance of the above supplementary terms. If you do not agree to any of the supplementary terms, do not access or utilize the Services. 3.3.​ Prohibition of Use

 
By accessing and using the Services, you represent and warrant that you are not and/or have not been included in any trade embargoes or economic sanctions list (such as the United Nations Security Council sanctions list), the list of specially designated nationals maintained by OFAC (the Office of Foreign Assets Control of the U.S. department of the treasury), or the denied persons or entity list of the U.S. department of commerce. The Custodian reserves the right to choose markets and jurisdictions to conduct business, and may restrict or refuse, in its absolute and sole discretion, the provision of Services in certain countries or regions. 4.​ Interpretation In these Terms: ●​ a singular word includes the plural and vice versa; ●​ a word which suggests one gender includes the other gender; ●​ if a word or phrase is defined, its other grammatical forms have a corresponding meaning; ●​ a reference to a document or an agreement (including a reference to this document) is to that document or agreement as amended, supplemented, varied or replaced; ●​ a reference to legislation or to a provision of legislation (including subordinate legislation) is to that legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it; and ●​ words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. 5.​ In General 5.1.​ As further detailed in Article 6 below, Clients must register and open an Account with the Custodian in order to use our Services. 5.2.​ All Clients shall: a)​ act in good faith and adhere to these Terms, any Additional Regulations as well as other provisions governing the use of our Services, and timely as well as properly fulfill their obligations to us; b)​ provide us with information, documents and data which is accurate, correct, up to date, not misleading and free of viruses or other computer programs or files that could interfere with the normal functioning of the Account and/or Services and/or related applications; c)​ ensure that any unauthorized or suspicious activity on your Account is identified and notified to us as soon as possible. You acknowledge that any breach of security may result in unauthorized access to your Account by third parties and the loss or theft of any Virtual Assets and/or funds held in your Account; d)​ take all reasonable measures necessary to prevent illegal disclosure, appropriation, or use of your data related to transactions in Virtual Assets; and e)​ at all times comply with all applicable laws and regulations. 5.3.​ We reserve the right to exercise our discretion at any time to develop, improve, and otherwise modify the Website and/or Mobile Application and/or the applications comprising your Account or other programs related to our Services provision, the

 
functions and functionality of the Website and/or of our Mobile Application and/or of our system, including, but not limited to quantity of functions (by both increasing and decreasing it), their scope (by both increasing and decreasing it), procedure for use of the Services, scope of data required for your identification and identification procedures etc. We will use our best efforts to publish information about the changes described in this Article on the Website and/or our Mobile Application. We assume no responsibility for any losses and inconveniences suffered by you and/or any third parties, which may be sustained as a result of exercising our right indicated in this Article. 6.​ Account Registration and Requirements 6.1.​ Registration 6.1.1.​ All Clients must complete their Account registration before obtaining access to the Services. Application for Account registration may be submitted through the Custodian’s Mobile Application. Alternatively, Clients may ask us to contact them by submitting a request through the Contact Us form available on the Website. 6.1.2.​ When you register an Account, you must provide us with the requested information and documents, and accept these Terms, the Privacy Notice and any Additional Regulations. In case of third party representation, the representative must provide us with documents proving his authorization. 6.1.3.​ You agree to provide complete and accurate information when opening an Account, and agree to notify us immediately, no later than within ten (10) calendar days, of any changes to any information you have provided to us in connection with these Terms and/or of any circumstances that have or are likely to have a negative impact on the due discharge of your obligations to us and/or of any circumstances that are material for the performance of these Terms, e.g. names of authorized persons, your name/title, code, registered office address, place and nature of business, email address, shareholders’ structure, restructuring, bankruptcy or liquidation proceedings, etc. At our request, you must submit any documents (originals, duly certified paper copies or scanned copies or in any other form requested by us) supporting such changes in information or circumstances, irrespective of whether such information or documents have been provided to public registers. 6.1.4.​ The Custodian may, in its absolute and sole discretion and without specifying any reasons, refuse to open an Account for you. 6.2.​ Eligibility, Warranties and Representations 6.2.1.​ By registering to use an Account and Services, you represent and warrant that: a)​ you have read and commit to be bound by these Terms; b)​ as a legal person, or other organization, you have full legal capacity and sufficient authorizations to enter into these Terms. If you act as an employee or agent of a legal entity, and enter into these Terms on a legal entity’s behalf, you represent and warrant that you have all the necessary rights and authorizations to bind such legal entity; c)​ as a legal person or other organization, you are duly established and operate in a country in which our Services are legally accessible; d)​ you have not been previously suspended or removed from using our Services;

 
e)​ you have no tax reporting requirements deriving from the laws of the U.S. or any other country or region where we will be obliged to be registered or licensed locally to provide our Services; nor are you acting on behalf of such persons; nor you or a person you represent reside/is incorporated in a country in which our Services are not legally accessible. In case you are a Canada or Netherlands based person, you understand and acknowledge that you shall not use the Additional Services and that these Additional Services will not be made available to you by us; f)​ your financial status allows you to accept the risks relating to Virtual Assets; g)​ you have provided accurate and complete information and documents requested by us; h)​ your use of Services will not violate any and all laws and regulations applicable to you, including but not limited to regulations on anti-money laundering, anti-corruption, and counter-terrorist financing; i)​ you are not a Restricted Person; j)​ you will not use / intend to use the Services for anything that is unlawful, abusive, malicious or that could disable, overburden, or impair the proper working of the Services or may hurt our reputation or otherwise pose any threat to us; k)​ at all times you comply with these Terms, any Additional Regulations as well as all applicable laws and regulations; l)​ any and all actions (transactions) performed by you using your Account or our Services, the use of our other Services and/or discharge of other provisions of these Terms shall be valid and shall have the same legal effect as the actions (transactions) formalized by a paper document signed by you, and if you are acting on behalf of a legal entity, then also by a paper document signed by you and endorsed with the stamp or seal of such entity, if any; m)​ you have sufficient knowledge relating to Virtual Assets to use our Services, and understand that you are solely responsible for determining the nature, potential value, suitability, risks and appropriateness of our Services; and n)​ all Virtual Assets owned by you are yours and have been obtained from legitimate sources. 6.2.2.​ By registering for an Account and/or using the Services, you represent and warrant that all of the above is true and accurate on the day of registering for an Account and shall remain true and accurate until you cease to use our Services. 6.2.3.​ During the term of these Terms, the Custodian: shall maintain a business continuity plan that will support its ability to conduct business in the event of a significant business disruption. 6.3.​ Clients Identity Verification 6.3.1.​ By registering for an Account, you agree to provide required entity and/or personal information for entity and identity verification. Such information will be used to verify your identity, identify traces of money laundering, terrorist financing, fraud and other financial crimes, or for other lawful purposes stated by Custodian.

 
6.3.2.​ We will collect, use, disclose, process and share such information in accordance with our Privacy Notice. 6.3.3.​ In addition to providing such information, you agree to allow us to keep a record of that information during the period for which your account is active and for regulatory purposes necessary after your account is closed, or such other period as prescribed by applicable law. You also authorise us to make enquiries, whether directly or through third parties, that we consider necessary to verify your identity, and that of any permitted users, or protect you and/or us against fraud, money laundering, terrorist financing or other financial crime, and to take any action we deem necessary based on the results of such enquiries. When we carry out enquiries, you acknowledge and agree that your personal information, and that of any permitted users, may be disclosed for identity verification, compliance data recordation, credit reference, fraud prevention, or financial crime agencies and that these agencies may respond to our enquiries in full. 6.3.4.​ In order for you to obtain an Account and access our Services, we have to be satisfied with the outcome of any identity, fraud and background checks including but not limited to all other AML/CTF checks which we may conduct in relation to you at any time during the term of your relationship with us. 6.3.5.​ If we have any grounds for believing that any of the information or documents you provided are incorrect, false, outdated or incomplete, the Custodian reserves the right to send you a notice to demand correction, directly delete the relevant information, and, as the case may be, terminate all or part of Services we provide to you. 6.3.6.​ If we are unable to reach you with the contact information you provided, you shall be fully liable for any loss or expense caused to the Custodian as a direct or indirect result of that inability. 6.3.7.​ You acknowledge and agree that you have the obligation to update all the information, if there is any change, in a timely manner, as described in Articles above. 6.3.8.​ We have the right to terminate a business relationship with you and/or a legal entity you represent at any time if we determine that we are not satisfied with the outcome of any identity, fraud and background checks including all other AML/CTF checks. 6.3.9.​ We may be required under applicable law or under Additional Services features to share information about your Account and Account history with third parties or with affiliates of the Custodian. You acknowledge and agree that we are entitled to disclose such information. 6.3.10.​ We have the right to request any additional information about your end-users as we deem it necessary or to comply with any applicable laws. 6.4.​ AML/CTF requirements 6.4.1.​ You are required to complete certain AML/CTF identification and identity verification procedures before you are permitted to start using our Services. 6.4.2.​ We seek to comply with all relevant legal requirements in the field of AML/CTF. For the purposes of know-your-customer, it is necessary for us to obtain from you and retain the required documents, information and data confirming your identity and/or the identity of a legal entity you represent and any other relevant

 
documents and/or information. 6.4.3.​ We will perform an identification and a risk assessment procedure of/on you and/or a legal entity you represent. 6.4.4.​ For the purpose of identification and risk assessment, you must submit to us the required information and documents. We shall have the right to take other legitimate measures for the purpose of identification and risk assessment of you and/or a legal entity you represent. Failure to submit required information and/or documents or provision of incorrect or incomplete information and documents, or failure to comply with our other instructions will result in our Services being unavailable to you. 6.4.5.​ At the moment of establishing a business relationship with us and/or before and/or after the execution of any particular transaction in Virtual Assets, we shall have the right to demand from you any documents and/or information, including, but not limited to those confirming the legal grounds as well as sources (origin) of your Virtual Assets and other assets and the purpose and planned nature of your business relationships with us, the nature of business and management (shareholding) structure of a legal entity you represent, beneficial owners and/or other documents and information to the extent necessary for us to adequately fulfill the requirements of relevant legal acts in the field of AML/CTF. 6.4.6.​ You may also be required to undergo additional (enhanced) due diligence, where we may request that you submit additional information about yourself or your business, provide relevant records, and arrange for meetings with our staff so that we may, among other things, establish the source of your wealth and source of Virtual Assets for any transactions carried out in the course of your use of our Services. We reserve the right to charge you costs and fees associated with such additional due diligence. 6.4.7.​ We shall have the right to restrict or terminate the provision of our Services if, before and/or after the execution of any particular transaction in Virtual Assets, you do not submit to us or avoid, or refuse to submit to us the requested documents and/or information, or conceal the requested documents and/or information, or provide incorrect or incomplete requested information, or otherwise fail to comply with any other instructions we give. 6.4.8.​ We shall have the right to verify the information provided by you using reliable and independent sources of information and other lawful methods. You authorize us to make enquiries, whether directly or through third parties, that we consider necessary to verify your identity or protect you and/or us against fraud or other financial crime, and to take action we reasonably deem necessary based on the results of such enquiries. You acknowledge and agree that we may disclose your personal information to credit reference, fraud prevention or financial crime agencies which we use to assist with the enquiries. This is an identity check only and should have no adverse effect on your credit rating. Additionally, we may require you to wait for some amount of time after the completion of a transaction before permitting you to use further Services and/or before permitting you to engage in transactions beyond certain volume limits. 6.4.9.​ We shall monitor your transactions and in the case of a suspicious and/or unusual operation or transaction, we shall have the right to suspend it, including, but not limited to, the suspension or withdrawal of your Virtual Assets, for a certain period of time. This includes any decision we take to suspend a transaction where we reasonably believe that its acceptance would, or is reasonably likely to, expose us or any affiliate to any liability (contingent or

 
otherwise) or where we consider that the acceptance or transfer of the Virtual Asset may involve or result in a violation of any applicable law. In that case, we shall not be liable to you for any default on any contractual obligations and/or for any damages or losses sustained by you. 6.4.10.​ We shall have a general duty to report any suspicious activity identified during the business relationship with you to the relevant authorities as well as other reporting duties deriving from relevant legal acts. We shall not be liable to you for the execution of such duties. 6.4.11.​ We shall be entitled to terminate a business relationship with you and/or a legal entity you represent at any time if we determine that continuing such a business relationship with you and/or a legal entity you represent exposes us to a money laundering and/or terrorist financing risk that we no longer deem acceptable. 6.5.​ Account Usage Requirements The Account can only be used by the Account registrant. The Custodian reserves the right to suspend, freeze or cancel the Account if used by persons other than the Account registrant. If you suspect or become aware of any unauthorized use of your Account, you should notify us immediately. The Custodian assumes no liability for any loss or damage arising from the use of the Account and/or Services by you or any third party with or without your authorization. 6.6.​ Account Security 6.6.1.​ The Custodian is committed to maintain the security of Virtual Assets entrusted to the Custodian by Clients and has implemented industry standard protection for the Services offered, however, the actions of individual Clients may pose risks. 6.6.2.​ You agree to treat your access credentials (such as Client's email address and password) as Confidential Information, and not to disclose such information to any third party. You also agree to be solely responsible for taking the necessary security measures to protect your Account and personal information. 6.6.3.​ You are responsible for keeping the electronic device through which you access our Services safe and maintaining adequate security and control of any and all security details that you use to access our Services. This includes taking all reasonable steps to avoid the loss, theft or misuse of such an electronic device and ensuring that such an electronic device is both encrypted and password protected. 6.6.4.​ Any loss or compromise of your electronic device or your security details may result in unauthorized access to your Account by third parties and the loss or theft of any of your Virtual Asset. You must always keep your security details safe. For example, you should not write them down or otherwise make them visible to others. 6.6.5.​ You are solely responsible for keeping your Account and password safe, and are responsible for all the transactions under your Account. The Custodian assumes no liability for any loss or consequences caused by authorized or unauthorized use of your account credentials, including but not limited to information disclosure, information release, etc. You are fully responsible for any possible adverse consequences. 6.6.6.​ We reserve the right to terminate or suspend the use of your Account if we believe that the security of your Account has been compromised or we suspect

 
unauthorized or fraudulent use of your Account. This includes any decision by us to suspend the use of your Account if we reasonably believe that the continued use of the Account and/or the Services would or is likely to expose us or any of our affiliates to any liability (contingent or otherwise) or if we believe that the continued use of the Account and/or the Services may involve a violation of or result in non-compliance with any applicable law. We will not be liable to you for any loss incurred by you as a result of our suspending your access to your Account and will not be liable to you for any damages or compensation in such circumstances. 6.6.7.​ By creating the Account, you hereby agree that: a)​ you will notify us immediately if you are aware of any unauthorized use of your Account or any other violation of security rules; b)​ you will strictly abide by all mechanisms or procedures of the Custodian regarding security and authentication; and c)​ you will take appropriate steps to log out from your Account at the end of each visit. 6.7.​ Login to your Account 6.7.1.​ Login to your Account requires verification of your email, access credentials such as Client's email address, password as well as successful completion of two factors authentication. More information on this may be found on our Mobile Application. 6.7.2.​ Clients are solely responsible for keeping electronic devices through which our Services are accessed safe and maintaining adequate security and control of any and all security details that are used to access our Services. This includes taking all reasonable steps to avoid the loss, theft or misuse of said electronic devices and ensuring that said electronic devices are encrypted and password protected. Any loss or compromise of personal electronic devices or security details may result in unauthorized access of a Client’s Account by third parties and the loss or theft of any Virtual Asset held therein. The Custodian shall not be responsible and liable for any such adverse consequences. 6.8.​ Services 6.8.1.​ Upon completion of the registration and identity, AML/CTF verifications for your Account, you may use Services in accordance with the provisions of these Terms (including Additional Regulations and other individual agreements). The Custodian, in its sole absolute discretion, has the right to: a)​ provide, modify or terminate any Services; and b)​ allow or prohibit any Clients’ use of any Services. 6.8.2.​ For the purposes of Services’ provision, you authorize us to take any actions that we deem necessary to provide our Services to you and to comply with any applicable law and these Terms. 6.8.3.​ We reserve the right to set at any time the minimum and the maximum amounts of Virtual Assets to be received, stored, converted and transferred in a given period by indicating such restrictions on the Website and/or Mobile Application and/or your Account.

 
6.8.4.​ The amount of time required to process a receipt or transfer transaction in Virtual Assets will depend on various factors, including the performance of third parties. Once submitted to a Virtual Assets network, a Virtual Asset transaction will be unconfirmed for a period of time pending sufficient confirmation of the transaction by the Virtual Asset network. A Virtual Asset transaction is not complete while it is in a pending state. Virtual Assets associated with Virtual Assets transactions that are in a pending state will be still shown in your balance of Virtual Asset with the Custodian, but will remain unavailable (until Virtual Assets transaction is completed) – please be aware of this while checking your current balance. We make no guarantee as to when the received Virtual Assets will appear in your Account as well as when the transferred Virtual Assets will reach the payee. 7.​ Service Usage Guidelines 7.1.​ License 7.1.1.​ Provided that you comply with the express terms and conditions stated in these Terms, the Custodian grants you a revocable, limited, royalty-free, non-exclusive, non-transferable, and non-sublicensable license to access and use Services through your computer or Internet compatible devices for your personal/internal purposes. 7.1.2.​ You are prohibited to use Services for resale or commercial purposes, including holding Virtual Assets on behalf of other persons or entities, unless you are their authorized representative and this is properly disclosed to us. The above acts are expressly prohibited and constitute a material violation of these Terms. The content layout, format, function and access rights regarding Services should be stipulated at the discretion of the Custodian. The Custodian reserves all rights not expressly granted in these Terms. Therefore, you are hereby prohibited from using Services in any way not expressly authorized by these Terms. 7.1.3.​ These Terms only grant a limited license to access and use Services. Therefore, you hereby agree that when you use Services, the Custodian does not transfer Services or the ownership of intellectual property rights of any of the Custodian’s intellectual property to you or anyone else. All the text, graphics, Clients interfaces, visual interface, photos, sounds, process flow diagrams, computer code (including HTML code), programs, software, products, information and documents, as well as the design, structure, selection, coordination, expression, look and feel, and layout of any content included in the Services or provided through the Services, are exclusively owned, controlled and/or licensed by Custodian or related companies, licensors or affiliates. 7.1.4.​ The Custodian owns any feedback, suggestions, ideas, or other information or materials (hereinafter collectively referred to as “Feedback”) about Custodian or Services that you provide through email, Services, or other ways. You hereby transfer all rights, ownership and interests of the Feedback and all related intellectual property rights to the Custodian. You have no right and hereby waive any right to acknowledgment of or compensation based on any feedback or any modifications arising directly or indirectly from any feedback. 7.2.​ Restriction 7.2.1.​ When you use the Services, you agree and undertake to comply with the following provisions: a)​ during the use of Services, all activities you carry out must comply with the requirements of applicable laws and regulations, these Terms, and various

 
guidelines of the Custodian as made available to you from time to time; b)​ your use of Services should not violate public interests, public morals, or the legitimate interests of others, or interfere with, disrupt, negatively affect, or prohibit other Clients from using Services; c)​ without prior written consent from the Custodian, you may not modify, replicate, duplicate, copy, download, store, further transmit, disseminate, transfer, disassemble, broadcast, publish, remove or alter any copyright statement or label, or license, sub-license, sell, mirror, design, rent, lease, private label, grant security interests in the properties or any part of the properties, or create their derivative works or otherwise take advantage of any part of the properties; and d)​ you may not (i) use any deep linking, web crawlers, bots, spiders or other automatic devices, programs, scripts, algorithms or methods, or any similar or equivalent manual processes to access, obtain, copy or monitor any part of the properties, or replicate or bypass the navigational structure or presentation of Services in any way, in order to obtain or attempt to obtain any materials, documents or information in any manner not purposely provided through Services; (ii) attempt to access any part or function of the properties without authorization, or connect to Services or any Custodian’s servers or any other systems or networks of any Services provided through the Services by hacking, password mining or any other unlawful, abusive or prohibited means; (iii) probe, scan or test the vulnerabilities of Services or any network connected to the properties, or violate any security or authentication measures on Services or any network connected to Services; (iv) reverse look-up, track or seek to track any information of any other Clients or visitors of Services; (v) take any actions that impose an unreasonable or disproportionately large load on the infrastructure of systems or networks of Services or the Custodian, or the infrastructure of any systems or networks connected to Services; (vi) use any devices, software or routine programs to interfere with the normal operation of Services or any transactions on Services, or any other person’s use of Services; (vii) forge headers, impersonate, or otherwise manipulate identification, to disguise your identity or the origin of any messages or transmissions you send to Custodian, or (viii) use Services in an illegal way. 7.2.2.​ By accessing Services, you agree that the Custodian has the right to investigate any violation of these Terms, unilaterally determine whether you have violated these Terms, and take actions under applicable laws and regulations without your consent or prior notice. Examples of such actions include, but are not limited to: a)​ blocking and closing order requests for the transfer of your Virtual Assets; b)​ freezing your account and related Virtual Assets; c)​ reporting the incident to the authorities; d)​ publishing the alleged violations and actions that have been taken; and e)​ deleting any information you published that are found to be violations. 7.2.3.​ It is strictly prohibited to use any of the Services for any of the following: a)​ to conduct or engage in any illegal or unlawful activity;

 
b)​ to hide or disguise the proceeds of any illegal or unlawful activity; c)​ to engage in any fraudulent or malicious activity; d)​ to control or use an Account that is not yours; e)​ to allow anyone who is not a duly authorized person to have access to or use your Account; f)​ to act in a way which imposes an unreasonable or disproportionately large load on our infrastructure, or detrimentally interfere with, intercept, or expropriate any our system, data, or information; g)​ to transmit or upload any material to our system or the Website or the Mobile Application that contains viruses, trojan horses, worms, or any other harmful or deleterious programs; h)​ to attempt to gain unauthorized access to our system or the Website or the Mobile Application, Accounts of other Clients, computer systems or networks connected to our system or the Website or the Mobile Application, through password mining or any other means; i)​ to use the Account information of other Clients to access or use our system or the Website or the Mobile Application; j)​ to infringe on our proprietary intellectual property; k)​ to conduct or engage in activity in a way that we reasonably believe might harm our ability to provide our Services; and l)​ to engage in any other use or activity that breaches these Terms or is not in conformity with sustainable activities of Custodian, ensuring of human rights, transparency, gender equality, moral and ethics, or other activity deemed unacceptable by Custodian. 7.2.4.​ We reserve the right, without any prior notice or explanation, to refuse any person from using our Services or to terminate an existing relationship with anyone if we have a reasonable doubt that the activity being carried out by that person/you is in violation of the prohibitions specified in this Article. 7.2.5.​ We also reserve the right at all times to monitor, review, retain and/or disclose any information as necessary to satisfy any applicable law, regulation, sanctions programs, legal process or governmental request. 7.3.​ API The Custodian may provide an Application Programming Interface (“API”) which enables the Client to integrate custodian Services within its own application. The Custodian reserves the right to add or suspend or delete some of the Services provided through the API in its sole discretion. 7.3.1.​ The Custodian grants a limited, revocable, non-exclusive, non-transferable, non-sublicensable right to use the API solely for the purposes of the custodian Services described above and subject to the Client’s compliance with these Terms and any other agreement between the parties. The Client undertakes to not misuse the API notably by (a) interfering with or

 
disrupting the API or the servers or networks providing the API, (b) reverse engineering or disassembling any aspect of the Website or the API in an effort to access any source code, underlying concepts and algorithms, (c) performing any unauthorized vulnerability, penetration or similar testing on the API, (d) sublicensing an API for use by a third party, or (e) using the API or data provided through the API for any other purpose. 7.3.2.​ In order to use the API, the Client must create its own API Key and Secrets by logging into its Custody account. The Client agrees that (a) the access and use of the API are entirely at its own risk, (b) loss of API Key and Secrets may result in critical losses, (c) it needs to manage its own security control and risk management in order to protect its API usage and (d) it is responsible for any and all orders, trades, and other instructions entered into advanced trading including identifiers, permissions, passwords, and security codes associated with their Account. 7.3.3.​ The Custodian is not responsible for any liabilities that the Client incur as a result of the use of the API or actions you take based on the API. 7.3.4.​ The Custodian has the right to immediately suspend or terminate Client’s access to the API without notice if the Custodian believes you are in violation of these Terms or any other agreement which may be in place between the parties. 7.3.5.​ The Custodian may, at its sole discretion, set limits on the number of API calls that the Client is able to make. The Client acknowledges and agrees that if the limits are exceeded, the Custodian may moderate the Client’s activity or cease offering access to the API in its sole discretion. 8.​ Custody Account The Custodian shall provide the following wallet Services: 8.1.​ Qualified Wallet. The Custodian shall provide one or more individual on-chain addresses dedicated to the Clients (“Qualified Wallet”), secured by the Custodian, to store certain supported Virtual Assets on Client's behalf. The Virtual Assets held to the credit of the Client's Qualified Wallets are not treated as the assets of the Custodian. The Virtual Assets stored in Client's Qualified Wallet are segregated from Virtual Assets that Custodian custodies for its other Clients or Virtual Assets of Custodian. Within the Qualified Wallet, the keys shares giving access to the Virtual Assets are managed across different geographical regions and held by the Custodian's employees. 8.2.​ Prime Wallet. The Custodian may provide access, at the Client's request, to the omnibus wallet, with individual deposit addresses and centralized withdrawal addresses, operated by the Custodian in connection with the MirrorX Service in which Virtual Assets of one Client are pooled together with those held by the Custodian for other Clients (“Prime Wallet”). The Client hereby declares that, by: (i) acknowledging and accepting these Terms; (ii) binding the Prime Wallet to an account with the Exchange Operator; and (iii) delegating the Eligible Virtual Assets, it is constituting those Virtual Assets as trust property (“MirrorX Trust”) and is the settlor of such MirrorX Trust, in accordance with the terms of the MirrorX Declaration of Trust. Custodian accepts its appointment as trustee, holding the assets solely under the terms of the MirrorX Trust set out in the MirrorX Declaration of Trust. By delegating the Virtual Assets in the Prime Wallet to an account with the Exchange Operator, Client expressly confirms it has legal title to such assets, intends to constitute the MirrorX Trust for the benefit of the designated beneficiary, and agrees to be bound by the MirrorX Declaration of Trust. Custodian’s role is strictly as

 
trustee with no beneficial interest in the assets. 8.3.​ Co-sign Wallet. The Custodian may provide, at Client’s request, wallets with individual on-chain addresses dedicated to the Client, where the Client retains control over one key share, while the other two key shares are retained by the Custodian (“Co-sign Wallet”). Two key shares out of three key shares are required to sign a transaction. The Virtual Assets stored in Client's Co-Sign Wallet are segregated from Virtual Assets that Custodian custodies for its other Clients or Virtual Assets of Custodian. Key share held by Client: This will be generated on the Client’s device and managed solely by the Client. In the event that the Client loses the key share or the device holding the key share, the Custodian will require the Client’s representative to provide the Custodian with a signed directors’ resolution confirming the request before the Custodian will proceed with reissuing a new key share. You acknowledge and agree that you are solely responsible for any losses suffered by you and/or any third parties, which may be sustained as a result of you losing your key share or the device holding the key share. This includes but is not limited to losses as a result of your key share being compromised. Key shares held by Custodian: This will be managed across the Custodian’s different servers. Under ordinary circumstances, the Custodian will not utilize the third key share. The third key share shall only be utilized in the event that the Client loses their key share or the device holding the key share. All Client Virtual Assets held in custody by the Custodian under any wallet service—whether Qualified Wallet, Prime Wallet, or Co-sign Wallet—remain the sole property of the Client. The Custodian acts solely as a custodian (and trustee for the purposes of MirrorX services) of such Virtual Assets and does not acquire any ownership rights over them. The Custodian holds and manages these Virtual Assets exclusively on behalf of the Client in accordance with the applicable agreements, including these Terms, and trust arrangements where applicable, provided that this paragraph shall be subject to the terms of the MirrorX Declaration of Trust, when applicable. 9.​ Receiving Virtual Assets 9.1.​ Upon completion of the registration and identity, AML/CTF verifications for your Account, you may receive supported Virtual Assets to your dedicated deposit wallet address held with the Custodian in accordance with the provisions of these Terms and any Additional Regulations. 9.2.​ Each Client has his dedicated deposit wallet address, which is visible on the Client's Account (deposit page of Custodian Website or Mobile Application). 9.3.​ Each Client can choose to have multiple deposit wallets. 9.4.​ Deposits received will only be made available after verification checks have been made in accordance with applicable law. Where we have insufficient information to meet our requirements we may reject or return any transferred assets received. 9.5.​ A Client, having noticed that Virtual Assets have been credited to its Account by mistake or in other ways that have no legal basis, is obliged to immediately notify the Custodian. The Client has no right to dispose of Virtual Assets that do not belong to him and must follow the Custodian’s instructions with respect to any Virtual Assets received without legal basis. 10.​ Storing Virtual Assets 10.1.​ The Client’s Virtual Assets shall be held and stored by the Custodian. The Custodian may

 
rely on technology and a platform provided by a third party to provide Services. Any relations regarding holding and storing Client’s Virtual Assets shall be between a Client and the Custodian only. 10.2.​ Subject to Article 16, the Client may store different supported Virtual Assets with the Custodian. By keeping different Virtual Assets in the Account, the Client undertakes responsibility for possible depreciation of different Virtual Assets due to fluctuations in the price of such Virtual Assets and shall not have a right to raise claims against the Custodian in this respect. The list of currently supported Virtual Assets is available at the dashboard of the Mobile Application or at https://www.ceffu.com/supported-assets. 10.3.​ In order to check the current balance of Virtual Assets, the Client should log in to their Account. 10.4.​ The Client may select to view its Virtual Assets balance in different Fiat Currencies. The Client acknowledges that (a) the Fiat Currencies displayed may be used for information purpose only; (b) the Custodian does not guarantee the accuracy of the Fiat Currency data vis-a-vis the exchange rates that the Client may get from other market value information sources, (c) and the Custodian only holds the Virtual Assets and not the displayed amount of Fiat Currencies. 10.5.​ Account statements will be made available upon request, an electronic account statement in csv or similar format will be made available to the Client. Each account statement will identify the amount of each Virtual Asset in Client's Custodial Account at the end of last month and set forth all transactions in Client's account during that period. Each statement may be provided via email to the Client or other means disclosed to Client. 11.​ Transferring Virtual Assets 11.1.​ In order for a Client to initiate the transfer of its Virtual Assets with the Custodian, the Client must submit a transfer request to the Custodian. The transfer request may require the approval of multiple approvers in the Client’s systems before it is submitted to Custodian, according to pre-set rules, and it must specify the type and amount of Virtual Asset to be transferred, the payee's wallet address and any other details we may request from you. The Custodian will only process transfer requests to whitelisted addresses. Once the transfer request is received and confirmed by the Custodian, the transfer transaction will be approved in accordance with the respective wallet signing rules and thresholds. Once approved, the transfer transaction cannot be canceled, reversed or modified and will be executed on the blockchain (broadcast to the relevant Virtual Asset network). 11.2.​ Subject to any agreement between the Client and the Custodian, each transfer must be initiated by the Client and a transfer request must pass the respective multi-approval scheme set by the Client to be submitted to the Custodian. 11.3.​ We will process transfers in accordance with the requests we receive from you – please verify all transaction information prior to submitting the transfer requests to us. We do not guarantee the identity of any Client, receiver, requestee or other third party and we will have no liability or responsibility for ensuring that the information you provide is accurate and complete. 11.4.​ Custodian reserves the right to refuse to process or to execute any pending Virtual Assets transactions if the Custodian reasonably believes that the processing of the transaction would or is likely to expose us or any of our affiliates to any liability (contingent or otherwise) or may be in contravention of applicable law. We may also refuse to process or cancel any pending Virtual Asset transaction as required by law,

 
regulation or any court or other authority to which the Custodian is subject in any jurisdiction, including but not limited to instances where there is suspicion of money laundering, terrorist financing, fraud, or any other financial crime. 11.5.​ The Client acknowledges and agrees that during the provision of the Services, the Client’s Virtual Assets that are allocated to be transferred may, for the purposes of Virtual Assets’ transfer, be commingled with other Clients’ Virtual Assets to be transferred. 11.6.​ Transactions in Virtual Assets are irreversible and the Client is fully responsible for specifying the correct wallet address of payee - the Client who made a transfer in Virtual Assets bears all risks of losses attached thereto. The Custodian cannot retrieve the Virtual Assets if the Client erroneously transfers its Virtual Assets into the wrong wallet address. We take no responsibility and no liability for transfers erroneously made by the Clients. 12.​ Withdrawal and Return of Virtual Assets 12.1.​ General Provisions. Clients may request the withdrawal of Virtual Assets held in custody at any time, subject to compliance with security protocols, verification procedures, and applicable laws. In cases where the Custody Services are terminated, the Client must request the return of Virtual Assets within the specified period, as outlined below. 12.2.​ Regular Withdrawals. Clients can withdraw Virtual Assets at their discretion by: a)​ submitting a withdrawal request through the following Custodian’s platform: web, Mobile Application and API; b)​ providing a whitelisted wallet address for the transfer of Virtual Assets; and c)​ completing any required security verifications, such as multi-factor authentication or additional approval processes. 12.3.​ Withdrawal Upon Termination of Custody Services. In the event of termination of the Services (whether initiated by the Client or the Custodian), the Client must: a)​ submit a withdrawal request within seven (7) days of receiving termination notice; b)​ provide a whitelisted wallet address for asset transfer; and c)​ ensure that all outstanding fees and obligations are settled prior to withdrawal. 12.4.​ Restrictions on Withdrawal and Return. The Custodian may suspend or delay a withdrawal request under the following circumstances: a)​ Regulatory or Legal Hold: if required by a court order, law enforcement, or regulatory authority. b)​ Suspicious Activity or Compliance Review: if the transaction raises concerns related to fraud, anti-money laundering (AML), or counter-terrorism financing (CTF) regulations. c)​ Technical or Operational Issues: if there are network delays, security incidents, or system maintenance affecting withdrawal operations. 13.​ Control and Liability of Virtual Assets 13.1.​ Clients acknowledge and agree that on their instructions, Virtual Assets may, at times, be transferred or delegated to third-party service providers or counterparties, including but not limited to liquidity providers, staking services, and security custodians. In such cases, the control of the Virtual Assets may be temporarily or permanently transferred to such entities.

 
13.2.​ The Custodian will notify clients, via their registered contact details, whenever control of any Virtual Asset is transferred to another entity as part of an authorized transaction or operational requirement. 13.3.​ Client Acknowledgment and Risk Disclosure 13.3.1.​ Clients acknowledge that certain transactions or operational activities may require the Custodian to relinquish control over Virtual Assets, and liability may shift to another identified entity. 13.3.2.​ The Custodian will not be liable for any losses incurred due to actions or omissions of third-party service providers unless explicitly stated in a separate agreement. 13.3.3.​ Clients are responsible for understanding the implications of transferring Virtual Assets out of custody and should conduct their own due diligence on any third parties involved in such transactions. 14.​ Settlement Finality and Discharge of Obligations 14.1.​ Finality of Withdrawals and Transfers. A withdrawal or transfer of Virtual Assets shall be deemed final and irrevocable when: a)​ the Custodian has broadcasted the transaction to the relevant Virtual Asset network; b)​ the transaction has received the required number of confirmations on the blockchain, as determined by the Custodian based on industry standards and security protocols; and c)​ the Virtual Asset has been debited from the Client’s Custody Account, and the Custodian’s books and records reflect the completed transfer. 14.1.1.​ Once these conditions are met: a)​ the Custodian is fully discharged of any obligations related to the withdrawn/transferred Virtual Assets; and b)​ the Client assumes full responsibility for the Virtual Assets, including their security, storage, and use. 14.2.​ Impact of Settlement Finality 14.2.1.​ The Custodian shall not be liable for any delays, losses, or failures after settlement is achieved. 14.2.2.​ The Custodian cannot reverse, recover, or modify transactions once finality is reached. 14.2.3.​ If the Client provides an incorrect wallet address or interacts with a compromised third-party, the Custodian assumes no liability for resulting losses. 15.​ Fees 15.1.​ We shall charge you, and you agree and undertake to pay us, the fees for the Services and Additional Services as specified in the fee schedule at www.ceffu.com/download/Ceffu-Digital-BT-Fee-Structure-EN.pdf, or in a separate fees letter entered into between Custodian and Client.

 
15.2.​ The Custodian reserves the right to update the fees applicable to various Services and Additional Services at any time. The Custodian will inform the Client via email notification at least twenty-one (21) days in advance of any updated fees and the effective date they become applicable for any Service and Additional Services provided by the Custodian. The Client may terminate the Terms immediately (without the notice period) until the date of entry into force of the updated fees. Failure to terminate the Terms will mean that the Client has agreed to the updated fees. By continuing to use the Services and Additional Services, you agree and undertake to pay us the updated fees. 15.3.​ We will issue monthly invoices for the fees, which are payable within thirty (30) days from the date of the invoice. Payments shall be made according to the details provided in the invoice. You may choose the cryptocurrency of choice for payment from the list of payment tokens supported by the Custodian. The value of the fees in cryptocurrency shall be the definitive amount to be paid by the Client. Any fiat exchange rate provided in the monthly invoice is solely for the Client’s reference and informational purposes and shall not affect the cryptocurrency value. 15.4.​ Any fees not paid by the due date will incur a late payment fee of 5% of your overdue fees per month. If your account becomes grossly overdue, you may be charged further collection fees that we incur in administering your account, including but not limited to legal fees and collection agency charges. 15.5.​ Please ensure that the required fees due from you are available to us by the due date. We reserve the right to suspend the provision of our Services and Additional Services to you until such fees due are paid to us. 16.​ Supported Virtual Assets 16.1.​ Our Services are available only in connection with those Virtual Assets that we support, and this may change from time to time. The list of supported Virtual Assets is available at https://www.ceffu.com/supported-assets. The Client should refer to this list to determine the specific Virtual Assets supported by the Custodian. The Client may also inquire with the Custodian for any additional information regarding supported Virtual Assets. 16.2.​ Under no circumstances should you attempt to use your Account to receive, store or transfer Virtual Assets in any form that we do not support. We assume no responsibility or liability in connection with any attempt to use your Account for Virtual Assets that we do not support. You acknowledge and agree that we bear no responsibility and are not liable for any unsupported Virtual Assets that are sent to a wallet associated with your Account. 16.3.​ We may in our absolute and sole discretion terminate support for any Virtual Asset (delisting). We will provide you no less than twenty-one (21) calendar days’ notice via email to announce the end of such support for you to transfer/withdraw your Virtual Assets that are subject to delisting. If you do not transfer/withdraw such Virtual Asset from your Account during this time you may lose access to your Virtual Assets. 16.4.​ You acknowledge and agree that supplemental protocols and/or other functionalities are excluded from Accepted Virtual Asset and that we have no liability for any losses related to supplemental protocols. This exclusion includes but is not limited to: metacoins, colored coins, side chains, or other derivative, enhanced, or forked protocols, tokens, or coins or other functionality, such as staking, protocol governance, and/or any smart contract functionality, which may supplement or interact with a supported Virtual Asset. Do not use your Account to attempt to receive, store, transfer or engage in any other type of transaction or functionality involving any such supplemental protocols, as the Account is not configured to detect, secure, or process these transactions and functionalities. Any attempted transactions in such items will result in loss of the item.

 
16.5.​ In the event of an airdrop or fork of a Virtual Asset, the Custodian will provide Client with prompt notice of any determination to provide services with respect to any airdropped or forked Virtual Assets. Custodian may, in its sole discretion, determine whether or not to support (or cease supporting) an airdropped or forked Virtual Asset for the purposes of this agreement. 17.​ Virtual Asset Protocols 17.1.​ We do not own or control the underlying software protocols which govern the operation of Virtual Assets supported by us. Generally, the underlying protocols are ‘open source’ and anyone can use, copy, modify, and distribute them. 17.2.​ We assume no responsibility for the operation of the underlying protocols and we are not able to guarantee the functionality or security of network operations. You acknowledge and accept the risk that underlying software protocols relating to any Virtual Asset you store in your Account may change. 17.3.​ In particular, the underlying protocols are likely to be subject to sudden changes in operating rules (including “forks”). Any such material operating changes may materially affect the availability, value, functionality, and/or the name of the Virtual Asset you store in your Account. We do not control the timing and features of these material operating changes. It is your responsibility to make yourself aware of upcoming operating changes and you must carefully consider publicly available information and information that may be provided by the Custodian in determining whether to continue to transact in the affected Virtual Asset using your Account. In the event of any such operational change, we reserve the right to take such steps as may be necessary to protect the security and safety of Virtual Assets held on Accounts, including temporarily suspending operations for the involved Virtual Asset, and other necessary steps; we will use our best efforts to provide you notice of our response to any material operating change; however, such changes are outside of our control and may occur without notice to us. Our response to any material operating change is subject to our absolute and sole discretion and includes decisions not to support any new Virtual Asset, fork, or other actions. 17.4.​ In the event of any material operating change, including forks, we will take the following steps to notify you: 17.4.1.​ If we decide not to support the original source code version, we will notify you as soon as practicable, providing details of the decision and any actions you may need to take. 17.4.2.​ If we decide to continue supporting the original source code version, we will notify you of our decision and any relevant information regarding the continued support. 17.4.3.​ If the original source code version will no longer exist, is not reasonably expected to continue to exist, or will no longer function securely and/or as originally intended, we will notify you immediately, providing details of the situation and any actions you may need to take. 17.5.​ Our response to any material operating change is subject to our absolute and sole discretion and may include the following actions: 17.5.1.​ Temporarily suspending operations for the involved Virtual Asset to protect the security and safety of Virtual Assets held on Accounts. 17.5.2.​ Evaluating the impact of the change and deciding whether to support any new Virtual Asset or fork.

 
17.5.3.​ Using our best efforts to provide you notice of our response to any material operating change, including any decisions made and actions taken. 17.5.4.​ If we decide not to support a new Virtual Asset or fork, we will provide guidance on how you can manage or transfer your unsupported Virtual Assets. 17.6.​ You acknowledge and accept the risks of operating changes to Virtual Asset protocols and agree that we are not responsible for such operating changes and are not liable for any loss of value you may experience as a result of such changes in operating rules. You acknowledge and accept that we have absolute and sole discretion to determine our response to any operating change and that we have no responsibility to assist you with unsupported Virtual Asset or protocols. 18.​ Availability and Accuracy of our Services 18.1.​ Access to our Services may be restricted, limited, degraded or unavailable for a variety of reasons. This could result in limitations on access to your Account, including the inability to initiate or complete transactions in Virtual Assets and may also lead to delays in support response times. 18.2.​ We do not guarantee that our Services will be available without interruption, and we do not guarantee that any transaction in Virtual Assets will be executed or that your Account will be accessible at all times. 19.​ Liabilities 19.1.​ Disclaimer of Warranties 19.1.1.​ No representation or warranty. The Services and any information provided on the Website and/or the Mobile Application are provided on an “as is” and “as available” basis without any representation or warranty, whether express or implied, to the maximum extent permitted by applicable law. Specifically, we disclaim any implied warranties of title, merchantability, fitness for a particular purpose and/or non-infringement. We do not make any representations or warranties that access to your Account, the Services, or any of the materials contained therein, will be continuous, uninterrupted, timely or error-free. 19.1.2.​ Suspension of access. We may, from time to time, suspend access to your Account and/or the Services, for both scheduled and emergency maintenance. 19.1.3.​ Third-party websites. Links to third-party websites (including, without limitation, content, materials, and/or information in the third-party websites and/or mobile applications) may be provided as a convenience but they are not controlled by us. You acknowledge and agree that we are not responsible for any aspect of the content, materials, information or services contained in any third-party websites accessible or linked from the website. 19.1.4.​ Network access and compatibility. You are responsible for obtaining the data network access necessary to use the Services. You are responsible for acquiring and updating compatible hardware or devices necessary to access and use the Services. We do not guarantee that the Services, or any portion thereof, will function on any particular hardware or devices. The Services may be subject to malfunctions and delays inherent in the use of the internet and electronic communications. 19.2.​ Limitations of Liability 19.2.1.​ Neither we, nor any of our affiliates or service providers, or any of our or their

 
respective officers, directors, agents, employees and representatives, will be liable for any amount greater than the fees paid by you under these Terms in the twelve-month period immediately preceding the event giving rise to the claim for liability. 19.3.​ Limitation of Loss 19.3.1.​ Notwithstanding any other Article or sub-provision in these Terms, in no event shall we, any affiliates or our service providers, or any of our or their respective officers, directors, agents, employees or representatives, be liable for any of the following types of loss or damage arising under or in connection with this Agreement or otherwise: a)​ any loss of profits or loss of expected revenue or gains, including any loss of anticipated trading profits and/or any actual or hypothetical trading losses, even if we are advised of or knew or should have known of the possibility of the same; b)​ any loss of or damage to reputation or goodwill; any loss of business or opportunity, customers, or contracts; any loss or waste of overheads, management, or other staff time; or any other loss of revenue or actual or anticipated savings, even if we are advised of or knew or should have known of the possibility of the same; c)​ any loss of use of hardware, software or data and/or any corruption of data; including but not limited to any losses or damages arising out of or relating to any inaccuracy, defect or omission of Virtual Asset price data; any error or delay in the transmission of such data; and/or any interruption in any such data; d)​ any losses, damages, liabilities, costs or expenses whatsoever suffered or incurred by you in connection with any Service performed or action taken under these Terms unless caused by our gross negligence, wilful default or fraud; e)​ any loss or damage whatsoever which is in excess of that which was caused as a direct result of our breach of these Terms (whether or not you are able to prove such loss or damage); and/or f)​ any breach of security of your email account or a Security Breach. 19.3.2.​ However, nothing in these Terms purports to exclude or limit liability which cannot be excluded or limited under applicable law. 19.4.​ Indemnification 19.4.1.​ You agree to indemnify us, any affiliate, and each of our or their respective officers, directors, agents, employees and representatives, in respect of any liabilities, losses and costs (including attorney fees and any fines, fees or penalties imposed by any regulatory authority) that have been reasonably incurred in connection with any claims, demands or damages arising out of or related to your breach and/or our enforcement of these Terms or any of our policies, or your violation of any law, rule or regulation or the rights of any third party. 19.5.​ Custody and bankruptcy 19.5.1.​ Except to the extent of mandatory provisions of applicable law, the Custodian

 
undertakes, as long as the Virtual Assets are held in the Qualified Wallet or Co-Sign Wallet and are, by matter of fact and technology, segregated from the Custodian owns assets and other Custodian Client assets, that these Virtual Assets are not part of the Custodian insolvency estate. 20.​ Announcements 20.1.​ Please be aware that all official announcements, news, promotions, competitions and airdrops will be listed on our Website. 20.2.​ Clients undertake to refer to these materials regularly and promptly. The Custodian shall bear no liability in relation to losses incurred by Client and arising from ignorance or negligence of the announcements. 21.​ Termination of Agreement 21.1.​ Suspension of Accounts 21.1.1.​ You agree that the Custodian shall have the right to immediately and unilaterally suspend your Account (and any Accounts beneficially owned by related entities or affiliates), freeze or lock the Virtual Assets in all such accounts, and suspend your access to the Services for any reason including if the Custodian suspects any such accounts to be in violation of these Terms, our Privacy Notice, any Additional Regulations or any applicable laws and regulations. You agree that the Custodian shall not be liable to you for any permanent or temporary modification of your Account, or suspension or termination of your access to all or any portion of Services. The Custodian shall reserve the right to keep and use the transaction data, data on Virtual Assets balances or other information related to such Accounts. The above account controls may also be applied in the following cases (including, but not limited to): a)​ the Account or further use of the Account is subject to any pending, ongoing or threatened litigation, investigation, or judicial, governmental or regulatory governmental proceedings and/or we perceive a heightened risk of legal or regulatory non-compliance associated with your Account activity; b)​ we detect unusual activities in the Account; c)​ we detect unauthorized access to the Account; d)​ we are required to do so by applicable law, or any court order or command to which we are subject in any jurisdiction; and/or; e)​ there are any circumstances specified in the Article below (Cancellation of Accounts). 21.2.​ Cancellation of Accounts 21.2.1.​ In case of any of the following events, the Custodian shall have the right to immediately and unilaterally terminate these Terms by giving you email notice and by canceling your Account, and shall have the right but not the obligation to permanently freeze (cancel) the authorizations of your Account and withdraw the corresponding Account thereof: a)​ we are required to do so by a court order or command by a regulatory/government authority, or by legal acts; b)​ after the Custodian terminates Services to you;

 
c)​ you allegedly register or register in any other person’s name as our Clients again, directly or indirectly; d)​ the information or documents that you have provided to the Custodian is untruthful, inaccurate, outdated, misleading or incomplete; e)​ you do not provide, conceal, avoid, or refuse to provide any required information or documents to us, or submit documents where the veracity or authenticity is in doubt, or the submitted documents and/or information are not in conformity with requirements established by legal acts and/or the Custodian; f)​ you fail to provide sufficient evidence and/or documents supporting the lawful basis of the acquisition and/or the source (origin) of your Virtual Assets and/or other assets and/or any previously (currently) performed transactions, and/or avoid or refuse to provide the aforementioned evidence and/or documents, and/or there being other circumstances that indicate you are (or may be) related to money laundering and/or terrorist financing; g)​ you fail to notify the Custodian about changes in the information provided to the Custodian and/or about the circumstances which have or are likely to have a negative impact on the due discharge of your obligations to the Custodian and/or of any circumstances that are material for the performance of these Terms and/or, upon the Custodian’s request, fail to submit the documents supporting such information or circumstances; h)​ you have defaulted on your obligations assumed and/or representations and warranties made under these Terms and/or to other creditors and/or no longer meet the eligibility requirements laid down in these Terms; i)​ you by your unlawful or abusive acts have inflicted losses on us and/or have caused a real threat of such losses and/or damaged the reputation of the Custodian; j)​ in our opinion, you engage in the field of activity with a high level of risk of money laundering and/or terrorist financing; k)​ according to the information available to the Custodian, you are related or were related in the past to criminal organizations; l)​ you are or were prosecuted or convicted for criminal offenses or misdemeanors; m)​ according to the information available to the Custodian, you are related or were related in the past with activities prohibited by international or national legal acts (e.g., trafficking in people, trafficking in human organs, exploitation of children, smuggling, illicit trade in weapons, ammunition or explosives, illegal trade in narcotic or psychotropic substances, prostitution, management of brothels, etc.); n)​ according to the information available to the Custodian, you engage in activities without holding the required licenses or other authorizations issued by competent public authorities (e. g. organization of games of chance, trade in precious stones and/or precious metals, etc., without holding the required licenses (authorizations); o)​ you use the Services for illegal, fraudulent and/or unfair activities;

 
p)​ you are included in the list of persons who are suspected of local or international terrorism and/or terrorist financing; q)​ you are a person who is subject to sanctions for any reasons or who is established in a country that is subject to sanctions; r)​ you are from a country that is not a member of the Financial Action Task Force (“FATF”) for Combating Money Laundering and Terrorist Financing or of the international organization that has the FATF observer’s status and engages in the activities of combating money laundering and terrorist financing; s)​ you engage (or plan to engage) in another activity that is not in conformity with: sustainable activities of the Custodian, ensuring of human rights, transparency, gender equality, moral and ethics, or other activity deemed unacceptable by the Custodian; t)​ you are a person whose Account is used by third parties without legal grounds, or, in our opinion, the Virtual Assets held in or credited to such Account do not belong to you, except where there is a special agreement between you and us; u)​ you have registered (created an Account) in our system more than once, except with our permission; v)​ we have concerns about the security of your Account, or we suspect that you use our Services in a fraudulent, abusive or unlawful manner; w)​ your Account is subject to any pending litigation, investigation and/or we perceive a risk of regulatory non-compliance associated with your Account; x)​ when these Terms are amended, you state your unwillingness to accept the amended Terms by applying for cancellation of your Account or by other means; y)​ you request that Services be terminated; and/or z)​ any other circumstances where the Custodian deems it should terminate Services, including for violation of these Terms and if any of the conditions for the Temporary Deactivation are not fulfilled pursuant to Article 22.3. 21.2.2.​ Should your Account be terminated, the Account and transactional information that meet data retention standards will be securely stored for at least eight (8) years or such other period as permitted by applicable law. 21.2.3.​ If a transaction is unfinished during the Account termination process, the Custodian shall have the right to notify your counterparty of the situation at that time. 21.2.4.​ You acknowledge that a Clients-initiated account cancellation (including the right to erasure under General Data Protection Regulation 2016/679 or other equivalent regulations) will also be subjected to the termination protocol stated above. 21.2.5.​ If the Custodian is informed that any Virtual Assets held in your Account are stolen or otherwise are not lawfully possessed by you, the Custodian may, but has no obligation to, place a hold on the affected Virtual Assets and your Account. If the Custodian does lay down a hold on some or all of your Virtual

 
Assets or Account, the Custodian may continue such hold until such time as the dispute has been resolved and evidence of the resolution acceptable to the Custodian has been provided to the Custodian in a form acceptable to the Custodian. The Custodian will not involve itself in any such dispute or the resolution of the dispute. You agree that the Custodian will have no liability or responsibility for any such hold, or for your inability to manage your Virtual Assets held with the Custodian or execute any transactions during the period of any such hold. 21.2.6.​ You shall have the right to terminate these Terms (and close your Account) unilaterally and for any reason by giving us one (1) month’s emailed notice, sent to: support@ceffu.com in advance. 21.3.​ Remaining Funds After Account Termination The Client is fully responsible for a transfer/withdrawal of his Account remaining balance prior to his Account being closed/withdrawn. If the Account is closed/withdrawn and the value of remaining balance for each token/coin is less than USD 10, then such remaining balance(s) shall pass to the Custodian as a termination fee. If Account is closed/withdrawn and the value of the remaining balance for at least one token/coin is more than USD 10, then the Custodian shall continue to apply its fees to such remaining balance(s) and shall have a right to deduct applicable fees directly from such remaining balance(s) until the value of remaining balance for each token/coin becomes less than USD 10 (and automatically passes to the Custodian as a termination fee). 21.4.​ Remaining Funds After Account Termination Due to Fraud, Violation of Law, or Violation of These Terms 21.4.1.​ In the event of Accounts’ suspension/closure as a result of, or during, investigations of fraud, violation of law, or violation of these Terms, the Custodian takes over full custody of the Virtual Assets and Client’s data/information which may be turned over as required by law, regulation or any court or other authority to which the Custodian is subject in any jurisdiction. 21.4.2.​ This Article has priority over the above Article (Remaining Funds After Account Termination). 21.5.​ Consequences of Account Cancellation 21.5.1.​ Once an Account is closed/withdrawn and these Terms are terminated: (a) all rights granted herein shall terminate immediately; (b) the Client shall promptly return to the Custodian, or destroy and certify the destruction of all Confidential Information to the Custodian, if any; (c) any provision of these Terms that by its very nature or context is intended to survive any termination, cancellation hereof, shall so survive; and (d) all other performance obligations of both parties under these Terms shall cease. 21.5.2.​ We shall not be held liable for consequences arising after we legally suspend or restrict the provision of our Services, suspend, close or restrict your Account or terminate these Terms. 21.5.3.​ Termination of the Terms shall not exempt you from the due discharge of all your obligations to us arising before the date of termination. 21.5.4.​ Transactions initiated under the Terms before their termination shall be completed in accordance with the provisions of the Terms applicable before their termination, unless otherwise agreed by you and us.

 
21.5.5.​ The termination of these Terms shall always result in the closure of the respective Account. 22.​ Temporary Account Deactivation 22.1.​ Purpose and Eligibility. Clients who, for internal business, operational, or market reasons, wish to temporarily suspend access to the Services and Additional Services (as applicable) may request a temporary Account deactivation (“Temporary Deactivation”). Temporary Deactivation is a voluntary suspension of Services and Additional Services (as applicable) that preserves the Client’s registration status while disabling all operational functionality. Each Client may request Temporary Deactivation only once during the lifetime of its Account, and only upon prior written approval by the Custodian. 22.2.​ Temporary Deactivation Request Procedure. A Temporary Deactivation request shall be submitted in the manner prescribed by the Custodian, including through the electronic form or equivalent channel designated by the Custodian from time to time. The request must specify the intended duration of the Temporary Deactivation and outline, in brief, the Client’s indicative plan or anticipated timeframe for resumption of activity. Temporary Deactivation shall take effect only after the Custodian confirms in writing that all pre-conditions under Article 22.3 have been satisfied. 22.3.​ Pre-Conditions to Temporary Deactivation. Temporary Deactivation shall not proceed unless all of the following conditions are met to the Custodian’s satisfaction: a)​ all outstanding invoices and fees have been settled in full; b)​ all Virtual Assets have been completely withdrawn or unstaked such that the Account provided that any remaining assets do not fulfil the minimum withdrawal requirement; c)​ all MirrorX and MirrorRSV sub-accounts or bindings have been unbound; d)​ the Client has fulfilled any know-your-business or customer due-diligence review (“KYB/CDD Review”) or other requirement that is due or in progress at the time of the request; and e)​ no deposit, test transaction, or other account activity occurs during the review or after Temporary Deactivation has been approved. 22.3.1.​ If any of the above conditions are not fulfilled, the Custodian may reject or defer the request. If the Client fails to remedy the deficiencies within a reasonable period specified by the Custodian, the Custodian may treat the request as withdrawn or proceed to full offboarding under Article 21.2. 22.4.​ Duration and Reactivation Fees. Clients may select an intended Temporary Deactivation period of up to twelve (12) months (“Temporary Deactivation Period”), subject to the following fee framework: a)​ Temporary Deactivation of up to six (6) months may be reactivated by the Client without charge; b)​ Temporary Deactivation exceeding six (6) months but not more than twelve (12) months shall be subject to a reactivation fee of $USDT 1,000; and c)​ any Temporary Deactivation exceeding twelve (12) months shall be treated as an Account cancellation and require a new Account registration process in accordance with Article 6. 22.4.1.​ Reactivation fees form part of the Custodian’s fee schedule available at

 
www.ceffu.com/download/Ceffu-Digital-BT-Fee-Structure-EN.pdf or as otherwise notified to the Client. 22.5.​ Effect of Temporary Deactivation. Upon confirmation of Temporary Deactivation by Custodian, and during the Temporary Deactivation Period: a)​ all deposit, withdrawal, transaction functionalities, and access to the Custodian’s platforms, including the Website and the Mobile Application, shall be suspended; b)​ no new Services or Additional Services may be accessed by the Client; and c)​ the Account shall remain registered solely for compliance and record-keeping purposes. 22.5.1.​ Temporary Deactivation does not discharge any existing payment or compliance obligations that accrued prior to its effective date. 22.5.2.​ In the event further deposits are received, fees shall begin to accrue at the time of deposit and such fees will become payable at the point of reactivation. 22.6.​ Obligations During Temporary Deactivation Period 22.6.1.​ The Client remains subject to all ongoing obligations during the Temporary Deactivation Period, including completion of any KYB/CDD Reviews and responses to regulatory or information requests. 22.6.2.​ Failure to cooperate with any requirements within the timeframe reasonably specified by the Custodian constitutes a material breach and may result in immediate cancellation of Account in accordance with Article 21.2. 22.7.​ Breach During Temporary Deactivation. Any deposit, transaction, or other Account activity during the Temporary Deactivation Period constitutes a breach of these Terms. In such case: a)​ any entitlement to a fee-free reactivation shall automatically lapse; b)​ standard custody fees, including applicable minimum fees, shall accrue on the total value of any assets under custody during the Temporary Deactivation Period; and c)​ the Account shall not be reactivated until all reactivation and custody fees have been paid in full. 22.8.​ Reactivation. At the end of the Temporary Deactivation Period, or upon earlier written request by the Client, the Client may apply for reactivation. Reactivation shall take effect only upon (a) payment of any applicable fees; and (b) completion of any compliance or operational checks the Custodian considers necessary, including KYB/CDD Reviews. The Custodian may, in its sole discretion, refuse reactivation where regulatory, legal, or risk considerations so require. 23.​ No Financial Advice 23.1.​ No communication or information provided to you by the Custodian is intended as, or shall be considered or construed as, investment advice, financial advice, trading advice, or any other sort of advice. You are solely responsible for determining whether any transactions or just holding your Virtual Assets with the Custodian is appropriate for you according to your individual circumstances and risk tolerance, and you shall be solely responsible for any loss or liability therefrom.

 
23.2.​ You should consult legal or tax professionals regarding your specific situation. 23.3.​ The Custodian does not recommend that any Virtual Assets should be received, converted, transferred, or held by you. 23.4.​ Before making the decision to receive, transfer, convert or hold any Virtual Assets, you should conduct your own due diligence and consult your financial advisors prior to making any transactions. The Custodian will not be held liable and responsible for the decisions you make to receive, transfer, convert or hold Virtual Assets based on the information provided by the Custodian. 24.​ Compliance with local laws 24.1.​ It is Clients’ responsibility to abide by local laws in relation to the legal usage of Services in their local jurisdiction as well as other laws and regulations applicable to Clients. Clients must also factor, to the extent of their local laws, all aspects of taxation, the withholding, collection, reporting and remittance to their appropriate tax authorities. 24.2.​ The Client acknowledges and declares that its Virtual Assets come from legitimate sources and do not originate from illegal activities and authorizes the Custodian to collect the necessary information and materials as per relevant laws or government orders to verify the legality of the sources and use of their Virtual Assets. 24.3.​ The Custodian maintains a stance of cooperation with law enforcement authorities globally and will not hesitate to seize, freeze, terminate Clients’ Accounts and Virtual Assets which are flagged out or investigated by legal mandate. 25.​ Privacy Notice Access to Services requires the submission of certain personally identifiable information. Please review the Custodian's Privacy Notice available on https://www.ceffu.com/legal/privacy to learn about how we collect and use personal information. 26.​ Cybersecurity 26.1.​ If you suspect a Security Breach, you must ensure that: a)​ we are notified through support@ceffu.com immediately and continue to be provided with accurate and up to date information throughout the duration of the Security Breach; and b)​ you take any other steps that we may reasonably require to reduce, manage or report any Security Breach. 26.2.​ We reserve the right to request, and you agree to provide, any and all information and documents we deem relevant or necessary in connection with an actual or suspected Security Breach, and may provide such information to any third party that we deem necessary in order to resolve any Security Breach. 27.​ Resolving Disputes: Forum, Arbitration, Class Action Waiver 27.1.​ Notice of Claim and Dispute Resolution Period 27.1.1.​ Please contact the Custodian first if you have any concerns with the Services. The Custodian wants to address your concerns without resorting to formal legal proceedings, if possible. A ticket number will be assigned to you if your concerns cannot be addressed to your satisfaction at first instance. The issuance of the

 
ticket number commences the internal dispute resolution procedure. The Custodian will attempt to resolve the dispute internally as soon as possible. The parties agree to negotiate in good faith to resolve the dispute (which discussions shall remain confidential and be subject to applicable rules protecting settlement discussions from use as evidence in any legal proceeding). 27.1.2.​ Unless you are a sole proprietorship user, and except to the extent mandatory provisions of applicable law do not permit the same, any dispute arising out of or relating to these Terms will be finally settled in accordance with this Article 27. 27.1.3.​ In the event the dispute cannot be resolved satisfactorily, and you wish to assert a legal claim against the Custodian, then you agree to set forth the basis of such claim in writing in a “Notice of Claim”, as a form of prior notice to the Custodian. The Notice of Claim must (a) describe the nature and basis of the claim or dispute, (b) set forth the specific relief sought, (c) provide the original ticket number, and (d) include the email registered with your Account. The Notice of Claim should be submitted to the following email address: support@ceffu.com. After you have provided the Notice of Claim to the Custodian, the dispute referenced in the Notice of Claim may be submitted by either the Custodian or you to arbitration in accordance with the following Article (Agreement to Arbitrate and Governing Law). 27.1.4.​ For the avoidance of doubt, the submission of a dispute to the Custodian for amicable resolution and the delivery of a Notice of Claim to the Custodian are prerequisites to commencement of an arbitration proceeding (or any other legal proceeding). 27.1.5.​ During the arbitration, the amount of any settlement offer made by you or the Custodian shall not be disclosed to the arbitrator. 27.2.​ Agreement to Arbitrate and Governing Law 27.2.1.​ Except where local law stipulates differently or provides you with an alternative option, both you and the Custodian concur that, adhering to the immediately preceding Article (Notice of Claim and Dispute Resolution Period), any claim shall be decided by compulsory final and binding individual (not group) arbitration conducted by the Singapore International Arbitration Centre (“SIAC”), following the prevailing Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”), which are considered integrated within this Article. 27.2.2.​ The seat of arbitration shall be Singapore. 27.2.3.​ The Tribunal shall consist of one (1) arbitrator to be appointed in accordance with the SIAC Rules for the time being in force. 27.2.4.​ The arbitration proceedings will be conducted in English. 27.2.5.​ You and the Custodian agree that the arbitrator will have the sole authority to decide on their jurisdiction, including any objections regarding the presence, extent, or validity of the Agreement to Arbitrate, or any claim's arbitrability. 27.2.6.​ The arbitration provisions set forth in this Article will survive termination of these Terms. 27.2.7.​ Filing Limitation Period: Any arbitration initiated against the Custodian must commence by filing and serving a Notice of Arbitration in line with the SIAC Rules within one (1) year from the date when the user filing the claim first discovered or

 
reasonably should have discovered the alleged act, omission, or default leading to the claim (“Limitation Period”). It includes the Dispute Resolution Period referred to in Article 27.1. No remedy or relief will be available for any user claim if the Notice of Arbitration for that claim is not filed and served on the Custodian within the Limitation Period. If the Limitation Period contradicts applicable law, the user shall be mandated to bring any claim against the Custodian within the shortest timeframe allowed by the applicable law. A Notice of Arbitration can be served on the Custodian abiding by the applicable laws and service rules. 27.2.8.​ Notice: If the Custodian initiates arbitration against you, you will be notified at the email address or physical address you have provided. You acknowledge that any notices sent to this email or physical address will be considered effective for all purposes, including assessing the adequacy of service. It is your responsibility to ensure that the email address and/or physical address on record with the Custodian is current and accurate. 27.2.9.​ Governing Law: These Terms (including this arbitration agreement), inclusive of but not limited to, any non-contractual rights or obligations arising from or related to them, shall be interpreted and enforced in accordance with the laws of Singapore. Regardless of the foregoing, any regulated segments of the services rendered pursuant to these Terms, shall be governed by and construed in alignment with the relevant Bhutanese local regulations. 27.3.​ Class Action Waiver You and the Custodian agree that any claims relating to these Terms or to your relationship with the Custodian as a Client (whether based in contract, tort, statute, fraud, misrepresentation, or any other legal theory, and whether the claims arise during or after the termination of these Terms) shall be brought against the Custodian in an arbitration on an individual basis only and not as a plaintiff or class member in a purported class or representative action. You further agree to waive any right for such claims to be brought, heard, or arbitrated as a class, collective, representative, or private attorney general action, to the extent permissible by applicable law. Combining or consolidating individual arbitrations into a single arbitration is not permitted without the consent of the Custodian. 28.​ Modifications The Custodian reserves the right to update, modify, revise, suspend, or make any future changes to Article 27.2 (Agreement to Arbitrate and Governing Law), subject to applicable law. Subject to the applicable law, your continued use of your Account shall be deemed to be your acceptance of any modifications to the above Article 27.2 (Agreement to Arbitrate and Governing Law). You agree that if you object to the modifications to the above Article 27.2 (Agreement to Arbitrate and Governing Law), the Custodian may block access to your Account pending closure of your Account. In such circumstances, these Terms prior to modification shall remain in full force and effect pending closure of your Account. 29.​ Severability If any portion of these Terms are adjudged to be invalid or unenforceable for any reason or to any extent, the remainder of these Terms will remain valid and enforceable, and the invalid or unenforceable portion will be given effect to the greatest extent permitted by law. 30.​ Complaints 30.1.​ If the Client has a complaint, it shall be submitted to the Custodian in writing by:

 
a)​ email to complaints@ceffu.com by providing subject: Official Complaint; Body: to provide your full name, email address and phone number registered with Custodian along with the substance of the Client's complaint. b)​ mailing address: GT1-1791, Phendey Str, ChoeGo , Gelephu, Gelephu Mindfulness City, Bhutan 30.2.​ Once the complaint has been submitted, the Custodian will send an acknowledgement email to the complainant within one (1) week of receipt of the complaint, and diarise the handling of the complaint, noting the receipt date, acknowledgement date, and future response deadline. The Custodian is required to inform the Client about our complaints process and keep the Client updated on the progress of the complaint. The Custodian shall provide, within four (4) weeks of receipt: a)​ a final response; or b)​ a response explaining Custodian’s position and how Custodian proposed to deal with the complaint, including an indicative timeline for providing a final response. 30.3.​ All complaints should be resolved no later than eight (8) weeks from when the complaint was made. Should the complainant not be satisfied with the response received after investigation, the Client may also raise a Dispute in accordance with sub-clause ‎27.1. 31.​ Communication 31.1.​ Any communication between you and us shall take place primarily via e-mails. 31.2.​ Disclosure of any information via e-mails shall be considered as duly submitted only if such information is sent to and from the e-mail addresses that are disclosed under these Terms: (a) Custodian’s e-mail address that should be used for communication is support@ceffu.com; (b) Client’s email address that should be used for the communication should be disclosed during the registration for Custody Account. Communication via other email addresses shall not be considered appropriate unless otherwise agreed by the Parties. 31.3.​ Notices and other communications sent by e-mails shall be deemed delivered to and received by the Party on the same Business Day it was sent (in case it is sent on a non-Business Day - on the next earliest Business Day). 31.4.​ Under certain circumstances, especially in emergency cases, we may also contact you by using any other means of communication and contact details you have provided to us. 31.5.​ You must immediately inform us about changes in your contact details. At the request of the Custodian, you must provide the respective documents supporting the change of any contact details. If you do not fulfill your duties referred to in this Article, the notifications communicated on the basis of the most recent details specified by you to Custodian shall be deemed as duly sent and any obligation fulfilled on the basis of such details shall be deemed as duly discharged by the Custodian. 31.6.​ Client who fails to receive from the Custodian any notifications which it was to receive under these Terms or for the provision of which the Clients has submitted a separate request to the Custodian, the Client must immediately inform the Custodian. 31.7.​ We shall not be responsible for any mistake, inaccuracy, technical defect or damage caused by incorrect, outdated contact details of Clients and their subsequent use by us. 31.8.​ We shall have the right to require Client to provide original documents and/or copies certified by a notary or any other person authorized by the relevant country. We shall also

 
have a right to require that documents drawn up abroad be translated into English and/or legalized and/or attached with an apostille, unless international treaties concluded between the Kingdom of Bhutan and the respective foreign country establish otherwise. 31.9.​ You are fully liable for the correctness of data, orders and documents submitted to us. 31.10.​ All costs of drafting, delivery, certification, notarization, legalization, apostillization and translation of documents to be provided to the Custodian shall be borne by the Client. 31.11.​ If documents provided by Client to the Custodian are inconsistent with the requirements established by legal acts and/or by Custodian, and/or if the Custodian has reasonable doubt as to the authenticity or accuracy of the submitted documents, the Custodian shall have the right to suspend the provision of Services to the Clients and/or to demand from the Clients the submission of additional documents. 31.12.​ It is your responsibility to regularly check the proper functioning of your e-mail and other methods of communication that you use to communicate with us and to retrieve and read messages relating to our Services provided to you. We shall not be liable for any loss arising out of your failure to do so. 32.​ Confidentiality 32.1.​ The Client acknowledges that, from time to time, the Custodian may disclose to the Clients either directly or indirectly by way of using/rendering the Services, electronically, in writing, orally or otherwise, information which is proprietary or confidential or which would, under the circumstances, be understood by a reasonable person to be proprietary and non-public, including without limitation, security requirements related to transactions with Virtual Assets, technical data, know-how, the non-public Custodian information and all unpublished service manuals, information, data and other similar materials or records provided by Custodian to the Clients pursuant to these Terms or otherwise (“Confidential Information”). 32.2.​ The Client shall use such Confidential Information solely for fulfilling its responsibilities and obligations under these Terms and for no other purposes. The Clients shall retain such Confidential Information in strict confidence and shall not disclose it to any third party without Custodian’s written consent. 32.3.​ The Client shall use at least the same procedures and degree of care which it uses to protect its own Confidential Information of like importance, and in no event less than reasonable care, and shall be responsible and liable for any use or disclosure of the Confidential Information, including by its employees or other related persons, in violation of these Terms. 32.4.​ The Client shall immediately notify the Custodian of any unauthorized use or disclosure, or suspected unauthorized use or disclosure of Confidential Information. 32.5.​ In the event that any disclosure of the Confidential Information is required by you pursuant to applicable law, you shall provide us reasonable notice and opportunity to contest the need for such disclosure, or to seek a protective order therefor. If we fail to contest the need for such disclosure or to obtain a protective order, you may disclose only that portion of the Confidential Information that is legally so required to be disclosed, provided that any Confidential Information so disclosed shall maintain its confidentiality protection for all purposes other than such legally required disclosure. 33.​ Miscellaneous 33.1.​ Independent Parties

 
The Custodian is an independent contractor. These Terms shall not be interpreted as facts or evidence of an association, joint venture, partnership, or franchise between the parties. 33.2.​ Entire Agreement These Terms and Additional Terms constitute the entire agreement between the parties regarding the use of Services and will supersede all prior written or oral agreements between the parties. No usage of trade or other regular practice or method of dealing between the parties will be used to modify, interpret, supplement, or alter the terms herein. 33.3.​ Interpretation Section headings in these Terms are for convenience only and shall not govern the meaning or interpretation of any provision of these Terms. 33.4.​ Changes of these Terms The Custodian reserves the right to alter, revise, modify, and/or change these Terms at any time. The Custodian will inform the Client via email at least twenty-one (21) days in advance of any changes and the effective date. The Client may terminate the Terms immediately (without the notice period) until the date of entry into force of the changes. Failure to terminate the Terms will mean that the Client has agreed to the changes. By continuing to use the Services and Additional Services, you agree to the changes. If you do not agree to any such modifications, your only remedy is to terminate your use of the Services and cancel/withdraw your Account. You agree that, unless otherwise expressly provided in these Terms, the Custodian shall not be responsible or liable for any modification or termination of the Services to you or any third party, or suspension or termination of your access to the Services. 33.5.​ Force Majeure 33.5.1.​ Each party shall be released from the liability for failure to fulfill obligations under these Terms where they are not fulfilled due to force majeure circumstance, which was beyond the control of the party and impossible to reasonably predict at the moment of concluding these Terms, and the occurrence of the circumstances or consequences whereof could not have been prevented. Insufficient financial resources of the party or violation of obligations of party’s thereof shall not be considered as force majeure. At the moment of concluding these Terms the parties are not aware of any force majeure circumstances that may have an impact on the performance of these Terms. 33.5.2.​ If the circumstances, due to which it is impossible to fulfill these Terms, are temporary, the party may be released from liability for such a period which is reasonable taking into consideration the impact of those circumstances on fulfillment of these Terms. 33.5.3.​ The party failing to fulfill these Terms due to force majeure circumstance shall notify the other party of occurrence of force majeure circumstance and its impact on fulfillment of these Terms within five (5) calendar days as of the date when such circumstances have become known or should have become known to the party failing to fulfill these Terms. If the other party does not receive the mentioned notification within the specified term, the party failing to fulfill these Terms shall compensate damages/losses incurred by another party due to non-receipt of the notification.

 
33.5.4.​ The grounds for releasing the party from liability shall arise from the moment of occurrence of force majeure circumstance provided that the term for delivery of notification, specified in paragraph above, was complied with. 33.5.5.​ If the period of force majeure exceeds thirty (30) calendar days each party has the right to terminate these Terms by sending written notice to the other party. These Terms are considered as terminated from the date of receipt of such notification. 33.6.​ Assignment You may not assign or transfer any of your rights or obligations under these Terms without prior written consent from the Custodian, including any right or obligation related to the enforcement of laws or the change of control. The Custodian may assign or transfer any or all of its rights or obligations under these Terms, including, without limitation, in connection with any merger, acquisition, or other corporate reorganization. 33.7.​ No Waiver No delay or omission by us in exercising any right or remedy under the Terms shall operate as a waiver of the future exercise of that right or remedy or of any other rights or remedies under the Terms. The rights and remedies provided in the Terms are cumulative and not exclusive of any rights or remedies provided by law. 33.8.​ Taxes 33.8.1.​ It is your own responsibility to determine what, if any, taxes apply to the payments you make or receive in relation to using our Services. It is your responsibility to collect, report, and remit correct tax to the appropriate tax authority. 33.8.2.​ You acknowledge that we are not responsible for determining whether any taxes apply to your use of the Services, or for collecting, reporting or remitting any taxes arising from your use of the Services. 33.8.3.​ The fees we are charging are exclusive from Value-added tax (VAT). 33.8.4.​ In case we are obliged under applicable law or voluntarily decide to report to any competent authorities any information that is related to your tax obligations, you undertake to provide us with the requested documents, data and information. 33.9.​ Information Storage 33.9.1.​ We store essential information related to the use of our Services for our own needs for at least eight (8) years in durable media of our choice. 33.9.2.​ On the other hand, in order to have proof of actions taken by you or by us in fulfillment of these Terms, you should save corresponding information and store it in durable media of your choice. 33.9.3.​ While we will take all practicable steps to protect the information in our possession against unauthorized or accidental access, processing, erasure, loss or use, we cannot guarantee the total security of your information and data. 33.10.​ Marketing and Custodian logos For the avoidance of doubt, notwithstanding anything to the contrary in these Terms, any marketing, publicity, press release and/or public announcement, or any use of the

 
Custodian trade name, logo or trademarks, is not permitted except with the prior written consent of the Custodian and shall always be subject to the Custodian branding guidelines and instructions. 33.11.​ Third-Party Website Disclaimer Any links to third-party websites accessible when using our Services does not imply endorsement by the Custodian of any product, service, information or disclaimer presented therein, nor does the Custodian guarantee the accuracy of the information contained therein. If you suffer loss from using such third-party products and Services, the Custodian shall not be liable for such loss. In addition, since the Custodian has no control over the terms of use or privacy policies of third-party websites, you should read and understand those terms and policies carefully. 33.12.​ Language These Terms may be translated into a language other than the English language. Any such translation is provided solely for your convenience. In the event of inconsistency or ambiguity, the English text shall prevail. You agree that the language used in these Terms as well as any communication between you (or any person authorized by you) and us will be in English. 33.13.​ Contact Information For more information, feel free to consult the Website and Mobile Application. If you have questions regarding these Terms and/or the Services, please feel free to contact the Custodian for clarification via our Customer Support team at support@ceffu.com.

 
EXHIBIT A List of Additional Services In addition to the Services described in the Terms, these Additional Services may be made available by the Custodian at its sole and absolute discretion: ●​ MirrorX Terms of Use - Exhibit B ●​ Escrow Service - Exhibit C ●​ Staking - Exhibit D ●​ MirrorRSV Services - Exhibit E

 
EXHIBIT B MirrorX Terms of Use 1.​ Introduction 1.1.​ These MirrorX Terms of Use (these “MirrorX Terms”) form part of and are subject to the Ceffu Terms of Use (the “Terms”) entered into between the Client and the Custodian and shall include as an additional party the exchange with which Custodian partnered to provide these MirrorX services (hereinafter referred to as the “Exchange Operator”) and govern your use of the “MirrorX Services”, as described in these MirrorX Terms. For the avoidance of doubt, “Client” shall have the same meaning as “you” or “your” under the Terms, “Custodian” shall have the same meaning as “Custodian” and “we” under the Terms, and “Additional Services” under the Terms include the MirrorX Services. 1.2.​ These MirrorX Terms consist of: (a) this Exhibit B; (b) the MirrorX Declaration of Trust set out in Annex 1 to this Exhibit B; and (c) the Terms (each as amended from time to time). Defined terms used in these MirrorX Terms shall have the meaning given to those terms in the Terms. In the event of a conflict between the terms of these MirrorX Terms and the Terms, these MirrorX Terms shall prevail. 1.3.​ In order to subscribe for the MirrorX Services, the Client: a)​ has to open an account on the exchange platform (“Exchange”) and shall agree to comply with all applicable procedures, requirements, and terms of use established by the Exchange Operator in order to become and remain a client of the Exchange. The relationship between the Exchange Operator and the Client shall be governed by and subject to the applicable terms, conditions, and agreements established by the Exchange Operator (collectively, the “Exchange Terms”); b)​ has to open a Prime Wallet with the Custodian and transfer Eligible Virtual Assets into the Prime Wallet; and c)​ hereby acknowledges and agrees that the Prime Wallet shall be subject to the MirrorX Declaration of Trust. 1.4.​ The Custodian's contact email address (including for the provision of notices) is support@ceffu.com. 2.​ Definitions 2.1.​ “Amount”, in relation to Virtual Assets, means the quantity (in terms of the number of units or denominations) of such Virtual Assets and not their market value or price in any other currency or asset. 2.2.​ “Designated MirrorX Exchange Account” means an Exchange account controlled by the Client to which MirrorX Virtual Assets have been delegated. 2.3.​ “Eligible Virtual Assets” means any Virtual Assets designated as such by the Custodian in its sole and absolute discretion, as listed on https://www.ceffu.com/supported-assets. 2.4.​ “Material Adverse Effect” means a material adverse effect on (a) the business, operations, performance, assets, condition (financial or otherwise) or prospects of the Client; or, (b) the ability of the Client to perform its obligations under these MirrorX Terms; or (c) the validity or enforceability of, or the effectiveness of these MirrorX Terms or the rights or remedies of the Exchange Operator hereunder.

 
2.5.​ “MirrorX Declaration of Trust” means the declaration establishing the MirrorX Trust set out in Annex 1 of this Exhibit B, and which forms part of these MirrorX Terms. 2.6.​ “MirrorX Trust” means the trust declared pursuant to the MirrorX Declaration of Trust. 3.​ MirrorX Services 3.1.​ Subject to the terms in these MirrorX Terms, by subscribing for the MirrorX Services, the Client shall be entitled on one or more occasions from time to time to: a)​ nominate an Amount (whether some or all) of its available Eligible Virtual Assets stored in the Prime Wallet (“Locked Virtual Assets”); and b)​ upon such nomination pursuant to item “a” above, the Amount of the Locked Virtual Assets will be delegated to the Client’s Designated MirrorX Exchange Accounts (“MirrorX Virtual Assets”). 3.2.​ The Locked Virtual Assets and MirrorX Virtual Assets shall be of the same type of Eligible Virtual Assets. 3.3.​ The Client acknowledges that pursuant to Clause 8.3 of the Terms immediately upon: 3.3.1.​ the acceptance of this MirrorX Terms and the Declaration of Trust; 3.3.2.​ binding the Prime Wallet to the Designated MirrorX Exchange Account; 3.3.3.​ the nomination of an Amount of Eligible Virtual Assets pursuant to item “a” of Article 3.1. above; and 3.3.4.​ the delegation of the Locked Virtual Assets as MirrorX Virtual Assets pursuant to item “b” of Article 3.1 above it will be declaring the MirrorX Trust, and the Locked Virtual Assets will be held on trust by the Custodian pursuant to the MirrorX Declaration of Trust. 3.4.​ The Custodian and the Exchange Operator shall be responsible for reconciling the difference between the Locked Virtual Assets and the MirrorX Virtual Assets. The reconciliation process is executed regularly and may result in the following scenarios: a)​ if the net balance (including realised trading profits and losses) of the Amount of MirrorX Virtual Assets is less than the Amount of the Locked Virtual Assets, the Client will be notified of the discrepancy and the need to reconcile. In such case, the Custodian shall transfer the required amount of Locked Virtual Assets from the Prime Wallet to the Exchange Operator to restore alignment; or b)​ if the balance of the Amount of Locked Virtual Assets falls below the Amount of the MirrorX Virtual Assets (including realised trading profits and losses), the Exchange shall transfer the required amount of MirrorX Virtual Assets to the Prime Wallet to restore alignment and such assets shall immediately be deemed nominated in accordance with clause 3.1(a) above and constitute Locked Virtual Assets. 3.5.​ The Client is entitled to withdraw, transfer out, access or use the available balance of the MirrorX Virtual Assets directly on the Exchange, subject and in accordance with the Exchange Terms. The Client further agrees that if the balance of Virtual Assets in the Designated MirrorX Exchange Accounts falls below the value of the Locked Virtual Assets, reconciliation of the difference between the Locked Virtual Assets and the MirrorX Virtual Asset as set out in Article 3.4 shall be automatically initiated. In such a case, the Custodian shall transfer the relevant Amount of Locked Virtual Assets deposited by the

 
Client in the Prime Wallet to the Exchange Operator. 3.6.​ In the event of a dispute between the Client and the Custodian or the Exchange Operator in connection with any Virtual Assets under these MirrorX Terms or the Terms, the Custodian will continue to hold such dispute Eligible Virtual Assets on trust until the dispute is resolved in accordance with the dispute resolution Article in the Terms, which the Exchange Operator hereby also agrees and accepts. 3.7.​ If (a) the Exchange Operator enters insolvency proceedings under any applicable law, or (b) the Client’s Virtual Assets in any of Client's Designated MirrorX Exchange Account (i) are frozen for more than thirty (30) days (other than in accordance with applicable law or the Exchange Terms); or (ii) are subject to a write-down; or (iii) are no longer available for transfer, the Custodian shall as soon as reasonably practicable calculate or establish the account balance in each of the Client's Designated MirrorX Exchange Accounts (“Final Balance”). For these purposes, the Custodian may rely exclusively and without further inquiry on the records and data provided by the Exchange Operator, save in case of manifest error. 3.8.​ The Custodian shall then establish the Final Balance in BTC and, subject to Article 3.9 below, release to the Client an Amount of Locked Virtual Assets with a value in BTC equivalent to the Final Balance. With immediate effect, such Amount shall no longer be held on trust by the Custodian for the Exchange Operator, but shall instead be held on trust by the Custodian for the Client. At the same time, the balance of any relevant Designated MirrorX Exchange Account shall be reduced by the same Amount that is released from the Locked Virtual Assets. 3.9.​ The maximum Amount of Virtual Assets that shall be released from the Prime Wallet shall never exceed the Amount of the Locked Virtual Assets. In the event that the Final Balance exceeds the value of the Locked Virtual Assets, the Custodian can only release the Locked Virtual Assets to the Client. Any excess will have to be recovered by the Client from the Exchange Operator and the Custodian shall have no liability to the Client in respect of such excess. 3.10.​ Each of the following events shall constitute an “Acceleration Event” and upon the occurrence of any such event, the Client shall be required to satisfy all liabilities owing to the Exchange Operator in respect of the MirrorX Virtual Assets: a)​ any event or series of events occurs which, in the opinion of the Exchange Operator, acting reasonably, has or might have a Material Adverse Effect; or b)​ the Custodian or the Exchange Operator becomes unable to provide the MirrorX Services due to changes in applicable law or due to any action from regulators. 3.11.​ Upon any Acceleration Event pursuant to Article 3.10, the Custodian or the Exchange Operator (as applicable) shall be entitled, without prior notice to you to take any or all of the following action: a)​ terminate these MirrorX Terms; b)​ discharge your obligations to the Exchange Operator in respect of the MirrorX Virtual Assets, by transferring the relevant Amount of Locked Virtual Assets from the Prime Wallet to the Exchange Operator to the extent it is beneficially entitled thereto in accordance with the MirrorX Declaration of Trust; c)​ sell or charge in any way any or all Locked Virtual Assets and to apply the proceeds in or towards satisfaction of any obligation or liability (including any contingent or prospective liability) you may have to the Custodian and/or the Exchange Operator;

 
d)​ use relevant key shares held by the Custodian in order to sign independently any transaction allowed under items “b” and “c” above to facilitate the set off by the Exchange Operator of: (i) any sum or obligation (whether matured or unmatured and irrespective of the currency, type of Virtual Assets, place of payment or settlement or booking office of the sum or obligation) owed by the Client to the Exchange Operator; against (ii) any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured and irrespective of the currency, type of Virtual Assets, place of payment or settlement or booking office of the sum or obligation) owed by Exchange Operator to the Client; and (iii) transfer the relevant Amount of Virtual Assets deposited by the Client in the Prime Wallet to the Exchange Operator, and where relevant, the Client’s Qualified Wallet and/or Co-Sign Wallet; e)​ the Exchange Operator may close out, replace or reverse any transaction or position in any Designated MirrorX Exchange Account and to convert any Virtual Assets at such prices, rates and times as the Exchange Operator conclusively determines to be appropriate in order to meet obligations incurred by you in respect of the MirrorX Virtual Assets and/or enter into any other transaction or take, or refrain from taking, such other action at such time or times and in such manner as, the Exchange Operator considers necessary or appropriate (in its sole discretion); and f)​ reserve the right to pass your details on to a third party for debt collection purposes if we reasonably believe that any amount owing to the Custodian or the Exchange Operator by you will not be paid. 3.12.​ The products and services made available to you by the Exchange Operator when using the Designated MirrorX Exchange Account may differ from the full suite of the Exchange Operator’s products and services. The Custodian does not guarantee access or availability of any products or services of the Exchange Operator. 3.13.​ By subscribing to the MirrorX Services and entering into these MirrorX Terms, the Client hereby expressly and irrevocably authorises the Custodian and the Exchange Operator to exercise all rights, powers, and remedies granted to them under these MirrorX Terms, including but not limited to those set out in Articles 3.1 through 3.11, without requiring any further consent or prior notice from the Client at the time of such exercise. 3.13.1.​ The Client acknowledges that the Custodian and Exchange Operator may take any actions reasonably necessary or incidental to the management, reconciliation, transfer, withdrawal, enforcement, and administration of the Client’s Virtual Assets as described in the MirrorX Terms. 3.13.2.​ The Client confirms that the pre-authorised instructions provided herein are sufficiently detailed, accurate, and relevant to enable the Client to understand the circumstances under which such instructions will be relied upon by the Custodian and Exchange Operator, and the nature of the actions that may be taken pursuant to these instructions. 3.13.3.​ The Client confirms that this pre-authorisation is given voluntarily, is informed, and is a material condition of the Client’s participation in the MirrorX Services. 3.13.4.​ The Custodian and Exchange Operator shall exercise their rights and powers under this pre-authorisation in good faith and in accordance with applicable laws and the terms of this Agreement. 4.​ Fees In addition to any fees charged by the Custodian to the Client for the MirrorX Services in accordance with Article 12 of the Terms, the Custodian shall be entitled to charge the Client

 
customary gas fees that may vary from time to time to conduct transactions using the MirrorX Services. All other fees and charges, as set out in the Terms shall also apply to the MirrorX Services. 5.​ Termination of MirrorX Services 5.1.​ The Client may cancel the MirrorX Services on reasonable notice, with or without cause, provided that to cancel the MirrorX Services, Clients must have (a) satisfied all liabilities owing to the Exchange Operator in respect of the MirrorX Virtual Assets, (b) satisfied all liabilities owing to the Custodian in respect of the MirrorX Services and (c) contacted the Custodian at the Custodian’s email address above to notify the Custodian of its desire to terminate. 5.2.​ The Custodian or the Exchange Operator may cancel the MirrorX Services at their convenience upon notice to the Client, provided that either party provides no less than seven (7) days’ written notice to the respective parties. Upon expiry of the relevant notice period, the Client shall be required to satisfy all liabilities owing to the Exchange Operator in respect of the MirrorX Virtual Assets and the provisions of Article 3.11 above shall apply. 5.3.​ The Client authorizes the Custodian to deduct any or all Eligible Virtual Assets from the Prime Wallet (thereby using relevant key shares held by the Custodian), for the purposes of satisfying all liabilities to the Exchange Operator and/or the Custodian, before releasing any Locked Virtual Assets to the Client. 5.4.​ Without prejudice to any rights that the Custodian or the Exchange Operator may have under Article 5.2, the Custodian may establish any risk rating rules or policies that, whether communicated to the Client or not, may determine if the Custodian or the Exchange Operator will exercise its right to terminate these MirrorX Services. Such risk rating rules or policies may refer to (a) the value of the Exchange Accounts held to the credit of the Client, (b) the Client's trading history, or (c) any other matters. For the purposes of dispelling any ambiguity, the existence and communication or non-communication of any rating rules or policies does not fetter the Custodian’s or the Exchange Operator’s right to terminate pursuant to this Article. 6.​ Risk Warning 6.1.​ Clients acknowledge and understand that the MirrorX Virtual Assets may be subject to various risks, which could result in partial or total loss of such assets. These risks include, but are not limited to: a)​ Market Risk: The value of the MirrorX Virtual Assets may fluctuate significantly due to market volatility, regulatory changes, or other external factors. b)​ Operational Risk: Risks arising from failures or errors in technology, security breaches, cyber-attacks, or human error affecting the safekeeping or management of Virtual Assets. c)​ Legal and Regulatory Risk: Changes in laws, regulations, or enforcement actions that may affect the availability, transferability, or legality of Virtual Assets or MirrorX Services. d)​ Co-Mingling Risk: The Locked Virtual Assets will be held in Prime Wallets, which could affect the segregation and immediate availability of individual Client Virtual Assets. e)​ Liquidity Risk: The possibility that Virtual Assets cannot be readily converted to cash

 
or other assets without significant loss in value. 6.2.​ The likelihood and severity of losses may vary depending on market conditions, operational circumstances, and other factors beyond the control of the Custodian and Exchange Operator. Clients should carefully consider these risks and seek independent advice if necessary before subscribing to the MirrorX Services. 6.3.​ Clients should also be aware of the full Custodian Risk Disclaimer. 6.4.​ By subscribing to the MirrorX Services, Clients acknowledge that they have read, understood, and accepted these risks. 6.5.​ Clients acknowledge and agree that in certain limited circumstances, the ownership of its Virtual Assets may be affected, including but not limited to Virtual Assets that have been lawfully settled pursuant to the terms of MirrorX Services or MirrorRSV Service. In such case, the Client’s ownership rights may be limited or suspended as specified in the relevant agreements or by law. 7.​ Miscellaneous 7.1.​ Custodian does not receive any remuneration, discount, commission, or other benefits from the Exchange Operator or any other third party in connection with the provision of MirrorX Service. Custodian acts independently and solely in the interest of safeguarding Clients Virtual Assets, without any financial incentives from third parties that could influence the provision of these services. 7.2.​ These MirrorX Terms and any contractual or non-contractual claims arising out of or in connection with them shall be governed by and construed in accordance with the laws of Singapore. 7.3.​ Article 27 of the Terms (Resolving Disputes: Forum, Arbitration, Class Action Waiver) shall apply to these MirrorX Terms, save that in that Article any references to Kingdom of Bhutan shall be replaced by references to “Singapore”, except that any references to Bhutanese regulations governing regulated segments of the services shall remain unchanged and shall not be replaced by references to Singapore. 7.4.​ All modifications or amendments to these MirrorX Terms shall be effective when communicated by the Custodian to the Client. The Client may state its unwillingness to accept the amended Terms by applying to terminate these MirrorX Terms and these MirrorX Services in accordance with Article 5. 7.5.​ No agency or partnership is intended to be created by these MirrorX Terms, and nothing in these MirrorX Terms, or in any other agreements entered between the Custodian and the Client in any relation to these MirrorX Terms, shall constitute the Client an agent, partner or representative of the Custodian.

 
Annex 1 to Exhibit B MirrorX Declaration of Trust THIS MIRRORX DECLARATION OF TRUST (“DECLARATION”) IS INCORPORATED BY REFERENCE INTO AND BINDING UNDER THE MIRRORX TERMS BY THE CLIENT: (I) ACCEPTING THIS DECLARATION; (II) ACCEPTING THE TERMS OF USE; (III) BINDING THE PRIME WALLET TO THE DESIGNATED MIRRORX EXCHANGE ACCOUNT; AND (IV) DELEGATING LOCKED VIRTUAL ASSETS. THE CLIENT ACKNOWLEDGES, AND AGREES TO, THIS DECLARATION AND CONFIRMS ITS ROLE AS SETTLOR.      This Declaration is made by: Client, in its capacity as settlor of the MirrorX Trust (“Settlor”); Ceffu Digital Pte. Ltd., a private company incorporated under the laws of Gelephu Mindfulness City, Bhutan, whose company registration number is A5921565Z, in its capacity as trustee on behalf of the Beneficiaries (the “Trustee”); and Exchange Operator, as a beneficiary of the MirrorX Trust. BACKGROUND: (A)​ Trustee provides the MirrorX Services to the Settlor. (B)​ Trustee and the Exchange Operator have entered into a separate agreement through which the Exchange Operator acknowledges and agrees to be bound to the terms of this Declaration. (C)​ As provided in the MirrorX Terms, as part of the MirrorX Services, the Settlor has transferred and will transfer Eligible Virtual Assets held in custody by the Trustee into one or more Prime Wallets. The Settlor may, pursuant to the relevant documentation in connection with the MirrorX Services, nominate an Amount (whether some or all) of its available Eligible Virtual Assets stored in the Prime Wallet(s), to be Locked Virtual Assets. Upon such nomination, an Amount of Eligible Virtual Assets equal to the Amount of Locked Virtual Assets will be delegated to the Settlor’s respective Designated MirrorX Exchange Account, as MirrorX Virtual Assets. In accordance with these instructions, the Locked Virtual Assets in the Prime Wallet(s) will be held on trust for the Beneficiaries pursuant to this Declaration. (D)​ The intention and effect of this Declaration is to create absolute beneficial interests in favour of each Beneficiary in, or in relation to, the Locked Virtual Assets held in the Prime Wallet(s) from time to time. Accordingly, the Trustee agrees to hold the MirrorX Trust Property on a bare trust and subject to the terms of this Declaration. (E)​ The Trustee shall hold the MirrorX Trust Property on a bare trust subject to the terms of this Declaration, and shall not use such MirrorX Trust Property for any purpose other than in accordance with the purposes set out in this Declaration. The Trustee makes no representation or warranty regarding other Virtual Assets held in the Prime Wallet. NOW IT IS WITNESSED AND DECLARED as follows: 1.​ DEFINITIONS AND INTERPRETATION 1.1​ Incorporation of Definitions

 
Capitalised terms in this Declaration shall, except where the context otherwise requires and save where otherwise defined in this Declaration, have the meanings given to them in the MirrorX Terms of Use (the “MirrorX Terms”), entered into between the Trustee, the MirrorX Clients and the Exchange Operator, forming part of Ceffu Terms of Use, as available on www.ceffu.com/download/Ceffu-Digital-BT-Terms-Of-Use.pdf (the “Terms”), entered into between the Trustee and the MirrorX Clients. 1.2​ Additional Definitions In this Declaration: “Beneficial Share” has the meaning given to it in Clause 3.1. “Beneficiaries” means (i) the Settlor, in its capacity as a user of the MirrorX Services who delegates Locked Virtual Assets to Designated MirrorX Exchange Accounts; and (ii) the Exchange Operator, in its capacity as the entity entitled to a Beneficial Share as defined under Clause 3.1. “MirrorX Account Records” means the account records of the Settlor maintained by the Trustee in cooperation with the Exchange Operator that relate to the Amount of Virtual Assets owed by the Settlor to the Exchange Operator (and vice versa) pursuant to the MirrorX Services. “MirrorX Trust” has the meaning given to it in Clause 2.1(a). “MirrorX Trust Property” has the meaning given to it in Clause 2.1(a). 2.​ MIRRORX TRUST 2.1​ Declaration of Trust (a)​ The Settlor hereby declares that all rights, title, interest and benefit, present and future, in, to and under the Amount of all Locked Virtual Assets from time to time are to be held on trust by the Trustee for the benefit of each of the Beneficiaries (the “MirrorX Trust”, and all such assets shall hereinafter be referred to as “MirrorX Trust Property”), and the Trustee hereby confirms and gives notice that it shall hold on trust the MirrorX Trust Property in accordance with this Declaration.     (b)​ The Settlor acknowledges that this Declaration is effective upon Settlor (i) accepting this Declaration; (ii) accepting the Terms of Use; (iii) binding the Prime Wallet to the Designated MirrorX Exchange Account; and (iv) delegating the Locked Virtual Assets, and is irrevocable while the Settlor is receiving the MirrorX Services.      (c)​ The Trustee shall hold the MirrorX Trust Property at the instruction of the Beneficiaries. (d)​ It is hereby declared that the interests and entitlements of the Beneficiaries in and to the MirrorX Trust Property shall be vested and indefeasible, such that the Beneficiaries are each absolutely entitled to the assets comprised in the MirrorX Trust Property (as applicable) as they are received and as income thereon arises. (e)​ All MirrorX Trust Property is held by the Trustee for the Beneficiaries as tenants in common each absolutely entitled to their respective Beneficial Share. (f)​ No Beneficiary shall be entitled to demand or receive a particular Locked Virtual Asset or any other asset comprising a part of the MirrorX Trust Property, save that the Beneficiaries acting together and between them holding the entirety of the beneficial interests in the MirrorX Trust may, at any time, in reliance on their absolute beneficial

 
interest in the MirrorX Trust Property, call for the transfer to them or vesting in them (or at their direction) of the legal estate and/or beneficial interest in all of the MirrorX Trust Property. 2.2​ Disposals of interests in the MirrorX Trust The Settlor may not transfer, assign, exchange, place in any custodial arrangement for security purposes or otherwise convey or dispose of, its beneficial entitlement in the MirrorX Trust Property or create any encumbrance thereover without the prior consent of the Exchange Operator. 3.​ APPLICATION OF MIRRORX TRUST PROPERTY 3.1​ Beneficial Shares ​​Each Beneficiary’s “Beneficial Share” means the portion of the MirrorX Trust Property to which such Beneficiary is entitled from time to time, as determined by the Trustee by reference to this MirrorX Declaration of Trust, the MirrorX Terms and the MirrorX Account Records and the outcome of the reconciliation and netting process described in Article 3.4 of the MirrorX Terms. The Exchange Operator’s Beneficial Share at any time shall comprise only the portion of the MirrorX Trust Property that the Settlor would be obligated to transfer to the Exchange Operator following such reconciliation if it were to occur at that time, provided that upon the occurrence of an Acceleration Event, the Beneficial Share of the Exchange Operator shall immediately comprise the equivalent of all Settlor’s liabilities owing to the Exchange Operator in respect of the MirrorX Virtual Assets. The Settlor’s Beneficial Share shall comprise all remaining MirrorX Trust Property after deduction of the Exchange Operator’s Beneficial Share. For the avoidance of doubt, the aggregate of the Beneficial Shares of all Beneficiaries shall at all times be equal to the total balance of the MirrorX Trust Property. 3.2​ Application of MirrorX Trust Property (a)​ Each Beneficiary’s Beneficial Share shall be determined by the Trustee by reference to the MirrorX Account Records, which shall in the absence of manifest error, be conclusive evidence of each Beneficiary’s respective beneficial interest in or in relation to the MirrorX Trust Property under this Declaration. (b)​ In accordance with the requirements set forth in the MirrorX Terms, the Trustee shall transfer to the Beneficiaries on a pro rata and pari passu basis, their respective Beneficial Share of the MirrorX Trust Property (their respective “Distribution Amount”). (c)​ The Beneficiaries undertake with each other that if one of them (the “Excess Beneficiary”) receives an amount in excess of their Distribution Amount as a result of the Trustee transferring more of the MirrorX Trust Property to that Beneficiary than it is entitled to receive under Clause 3.2(b) above (such amount an “Excess Distribution”), then promptly upon the Trustee confirming the amount of such Excess Distribution, the Excess Beneficiary will transfer to the other Beneficiary the amount of such Excess Distribution that it should have received in accordance with Clause 3.2(b) above. 4.​ BENEFICIARY INSTRUCTION TO TRUSTEE ​​The Beneficiaries shall (collectively) be entitled to instruct the Trustee in the application of the MirrorX Trust Property. Wherever any provision of this Declaration refers to the Trustee agreeing or consenting to any request, agreement or action, or where this Declaration refers to any action being taken at the direction of the Trustee or the Beneficiaries, such references shall be deemed to refer to the Trustee agreeing, consenting or acting, as applicable, on, or pursuant to, the instructions of the Beneficiaries acting together.

 
5.​ TRUSTEE PROVISIONS 5.1​ Instructions from Beneficiaries (a)​ In respect of the MirrorX Trust, each of the Beneficiaries hereby directs the Trustee to take all necessary steps and do everything which each of the Beneficiaries (acting together) may request or direct it to do in order to give effect to the terms of this Declaration. (b)​ The Trustee will not be bound and shall have no power to take any proceedings, actions or steps under or in connection with any of this Declaration unless: (i)​ it has been granted the power and discretion to do so under any express provision of this Declaration; and (ii)​ it shall have been indemnified or pre-funded to its satisfaction against all liabilities, proceedings, claims and demands to which it may be or become liable and all costs, charges and expenses which may be incurred by it in connection therewith and the terms of such indemnity may include the provision of a fighting fund, non-recourse loan or other similar arrangement. (c)​ In the event that the Trustee is required to obtain or otherwise seeks an instruction from the Beneficiaries before taking any proceedings, actions or steps under or in connection with this Declaration, it shall as soon as reasonably practicable, provide sufficient information to the relevant Beneficiaries as they may require in order to be able to give such instructions. 5.2​ Notwithstanding any provision to the contrary in this Declaration or any rule of law, the provisions of the Singapore Trustee Act 1967 (the “Act”) shall not apply to this Trust or the Trustee, except to the extent that any provision of the Act is expressly incorporated by reference in this Declaration. The Trustee shall have all the powers, duties, and discretions conferred upon them by this Declaration and shall not be subject to any of the restrictions or obligations imposed by the Act, except as expressly provided herein. In the event of any conflict between the provisions of this Declaration and the Act, the provisions of this Declaration shall prevail. 5.3​ Powers of Contribution Save as expressly provided for in this Declaration, the Trustee shall have no further or other powers of investment with respect to the MirrorX Trust Property and neither the Trustee Act 2000 nor any other provision relating to trustee powers of investment implied by statute or general law shall apply to the MirrorX Trust and, for the avoidance of doubt, the statutory power to accumulate income conferred on trustees by Section 31 of the Trustee Act 1925 is expressly excluded. 5.4​ No Replacement The Settlor shall not, at any time, remove or purport to remove and/or replace the Trustee as the trustee of the MirrorX Trust. 5.5​ No Implied Duties The duties and obligations of the Trustee under the MirrorX Trust shall be determined solely by the express provisions of this Declaration. The Trustee shall not be liable under this Declaration except for the performance of such duties and obligations as shall be specifically set forth herein or therein respectively. No implied covenants or obligations shall be read into this Declaration against the Trustee, and the permissible right of the Trustee to do things set out in this Declaration shall not be construed as a duty.

 
5.6​ No Liability The rights and obligations of the Trustee and each of the Beneficiaries are several and independent. None of the Trustee or the Beneficiaries is responsible for the obligations of any other person which is a party to this Declaration. None of the Trustee or the Beneficiaries shall be liable to each other, in the absence of wilful default, negligence or breach of the terms of this Declaration, in respect of any loss or damage which arises out of the exercise or attempted or purported exercise or failure to exercise any of their respective powers. 5.7​ Reliance on Certificates The Trustee may rely on and shall be protected in acting on, or in refraining from acting in accordance with, any resolution, officer’s certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to this Declaration by the proper party or parties. 5.8​ Reliance on Third Parties The Trustee may, in relation to these presents, act on the opinion or advice of or a certificate or any information obtained from any lawyer, banker, valuer, broker, accountant, financial adviser, securities dealer, merchant bank, computer consultant or other expert and shall not, provided that it shall not have acted fraudulently or in breach of any of the provisions of this Declaration, be responsible for any loss occasioned by so acting. Any such opinion, advice, certificate or information may be sent or obtained by letter, e-mail or other electronic means and the Trustee shall not be liable for acting on any opinion, advice, certificate or information purporting to be so conveyed although the same shall contain some error or shall not be authentic. 6.​ WAIVER OF CONFLICT Settlor waives any conflict that the Trustee has or may have as a result of acting in its capacity as trustee of different trusts. 7.​ SUPERSESSION This Declaration supersedes and replaces any previous declarations of trust or agreements related to the MirrorX Trust Property. 8.​ GOVERNING LAW AND JURISDICTION 8.1​ Governing law This Declaration and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with the laws of Singapore. 8.2​ Resolving Disputes: Forum, Arbitration, Class Action Waiver Article 27 of the Terms (Resolving Disputes: Forum, Arbitration, Class Action Waiver) shall apply to this Declaration, save that in that Article (1) any reference to the Terms shall be read as a reference to this Declaration, and (2) any references to “Kingdom of Bhutan” shall be replaced by references to “Singapore”.

 
EXHIBIT C Escrow Service In order to subscribe to Escrow Service, the Client must make a request to the Custodian, which may provide the Client with a three parties agreement framing this service.

 
EXHIBIT D Staking 1.​ Overview of the Staking Services By holding certain Supported Virtual Assets with the Custodian, you can stake your assets. Staking is defined as committing assets to network validators within a Proof of Stake (POS) network, facilitated by third-party Validators. The Custodian provides you access to these staking Services via its digital platform. For the purposes of this Exhibit D, “Validator” means a node operator, staking infrastructure provider, or other third-party entity that participates in a blockchain network’s consensus mechanism by validating transactions, producing blocks, or otherwise supporting network security, and which may be selected (directly or indirectly) by you through Custodian for the purpose of staking. For clarity, “Validator” includes any third-party staking services provider engaged by Custodian or integrated into Custodian, but expressly excludes the Custodian itself unless otherwise specified. Please be aware that once your assets are staked, your relationship concerning these assets is directly with the Validators or third-party provider, not the Custodian. The Custodian's role is strictly as an intermediary, facilitating the process of staking services through its digital platform. It is crucial to understand that the Custodian is NOT involved in the direct staking contract between Validator(s) or third-party provider and the Client. To stake your Virtual Assets, you must access the staking service compatible with specific Virtual Assets listed on our platform. Upon selecting a Virtual Asset, a list of Validators operating under the same network protocol will be presented. The staking service enables you to choose from this selection of Validators to stake directly per your preference. Depending on the third-party provider chosen, you may be required to separately review and accept such provider’s terms of use, including specific risk disclosures and eligibility conditions, as a prerequisite to using those services. Your relationship for such staking services will then also be governed by those provider terms in addition to these Terms. Staking may be available from Prime Wallet, Qualified Wallet, and Co-sign Wallet. Where staking occurs from a Co-sign Wallet, you retain one key share and are solely responsible for its safekeeping, device security and any operational actions you initiate. Loss, compromise or misuse of your key share may result in loss of access to assets or Rewards; the Custodian is not liable for such losses. If you initiate a transaction via Custodian application or web platform, the transaction will be signed using the key shard held by you and one of the key shards held by the Custodian. If you initiate a transaction via an API call, the Custodian will use both key shards held by the Custodian to sign the transaction. The Custodian shall ensure that there are sufficient safeguards in place to protect the respective key shards. This includes that the Custodian shall ensure that signing nodes via API calls shall only be callable by a specific microservice. This microservice shall be protected by an API gateway, ensuring that only requests that pass the OpenAPI credentials validation can access the internal microservice. Depending on the asset, network and provider, your Virtual Assets may remain in your wallet or be moved on-chain to a protocol smart contract, validator address, or wrapped/liquid staking contract. 2.​ Service Limitations It is important to understand that every POS network, with which you intend to stake your Virtual Assets, operates under separate rules and requirements that you must accept:

 
a.​ Should the network need the transfer of your Virtual Assets to a Validator, the Custodian takes no responsibility, nor liability for any possible losses or damages focused on the principal or Rewards. Where the provider operates a mechanism where your Virtual Assets remain under your control (e.g., through a non-custodial or delegated staking model), you acknowledge that all risks associated with key management, wallet access, and protocol operations rest solely with you and the third-party provider. b.​ If, alternatively, the network accommodates your Virtual Assets to remain in your Qualified Wallet, the Custodian is only accountable for any damages directly caused by it. This follows the Terms, and the Custodian doesn't accept any responsibility for losses or damages related to the Rewards. c.​ Where the provider operates a non-custodial or delegated model, you are solely responsible for key management, wallet access, transaction approvals, and any signing policies. d.​ Some Virtual Assets may be staked via wrapped/liquid staking arrangements (e.g., issuance of a liquid staking token (“LST”)). Your use of liquid staking arrangements will result in a transfer of your staked tokens from Ceffu’s custody to the staking contract. Ceffu’s custodial services and the corresponding obligations in relation to your staked assets will cease when the interaction with the liquid staking interaction is broadcasted onto the blockchain. Ceffu disclaims all custodial responsibility for assets that are staked via wrapped/liquid staking arrangements. e.​ LSTs are third-party instruments and may carry smart-contract risk, redemption/queue risk, liquidity risk, and market price divergence from the underlying asset. Redemption, conversion, or unwrapping is not guaranteed within any timeframe and may be subject to provider/network limits or fees. f.​ For Virtual Assets that are not natively Proof-of-Stake (e.g., staking enabled through third-party protocols), additional protocol, bridge, smart-contract and operational risks apply. The Custodian disclaims responsibility for such risks and any associated losses. g.​ The Custodian may add, suspend, or discontinue staking support for any asset, network, wallet type, or provider at any time for any reason (including risk, technical, or compliance reasons). Your responsibility is to manage any required unstake/restake steps. h.​ The Custodian is not a party to and assumes no liability under any third-party provider’s terms of use that may govern your access to or use of specific staking services. Your acceptance of such provider terms is solely between you and the relevant provider. Please be distinctly aware that we, as the Custodian, have no liability for any potential losses or damages pertaining to your Staked Assets or associated Rewards. This limitation extends to situations involving the transfer of Virtual Assets and scenarios where the network enables your assets to remain in your Qualified Wallet. 3.​ Rewards For each network, the staking Annual Percentage Rate (APR) for available Validators, along with the Validators' commissions, is disclosed on the network's main page accessible through our platform. The Custodian does not provide any guarantees for the receipt of staking Rewards or the rates of these Rewards—these elements solely depend on the network and the chosen Validators and third-party provider. Staking Rewards, APRs, and Validator commissions displayed on our platform are provided by third-party providers (including via API integrations). Such information may be delayed, incomplete, or inaccurate, and the Custodian makes no representation or warranty regarding its accuracy, reliability, or timeliness. The Custodian shall not be liable for any reliance by you on such information.

 
The Custodian does not have administrative oversight or control over the distribution of Rewards. Therefore, we are not liable for fluctuations, delayed, partial, or non-delivery of anticipated Rewards. Where Rewards are distributed directly by the relevant third-party provider or network to your designated wallet, the Custodian shall not be involved in, nor responsible for, the flow of such Rewards. Rewards may be denominated in tokens different from the staked asset and may accrue via rebase, on-chain claim, price appreciation of an LST, or other protocol-specific mechanisms. Compounding, auto-restake and claiming (if available) are provider/network features and not guaranteed. Net Rewards may be reduced by validator commissions, network fees, slashing or downtime. The Custodian is not responsible for market price movements of any LST or reward token. 4.​ Unstaking Information Some Virtual Assets Networks impose a compulsory waiting period, the “Unstaking Period”, during which your staked assets endure transfer or sale limitations. During the Unstaking Period, should you instruct a Validator via the Custodian's platform to unstake your assets, these assets remain inaccessible until the period comes to an end. The Custodian may invoke supplementary waiting periods to systematize the transfer of your assets to your Qualified Wallet post the Unstaking Period expiration. To initiate the unstaking of your assets, follow the precisely outlined steps provided in our user manual, available on the platform. Please note that the communication with the Validators should be conducted through the specified channels and could take up to forty-eight (48) hours to be processed before your assets are unstaked. The accrual of your staking rewards may be subject to bonding or “warm-up” periods, and end of rewards to unstaking queues imposed by the network/provider. Certain networks may require manual claims and restrict your restaking to defined windows. The Custodian may implement reasonable operational batching or holds to process unstaking/transfer events. 5.​ Slashing Reimbursements and Missed Rewards Certain Proof-of-Stake networks and/or Validators may, from time to time, provide monetary or in-kind compensation for penalties applied to staked assets (“Slashing Reimbursements”) or for rewards not received due to validator downtime or other service interruptions (“Missed Rewards”). Where such Slashing Reimbursements or Missed Rewards are paid directly to the Custodian by the applicable network, Validator, or third-party staking services provider in relation to your Staked Virtual Assets, the Custodian will, on a periodic basis, distribute the corresponding amounts to you, net of any applicable fees, taxes, or costs of transfer. The Custodian shall have no obligation to verify, pursue, claim, or enforce the payment of any Slashing Reimbursements or Missed Rewards on your behalf, and shall only distribute such amounts to the extent actually received by the Custodian from the relevant network, Validator, or third-party provider. The Custodian makes no representation or warranty that any Slashing Reimbursements or Missed Rewards will be available, nor that they will be paid in full or within any particular timeframe. The determination of whether any amounts qualify as Slashing Reimbursements or Missed Rewards, and the calculation of such amounts, shall be made solely by the relevant network, Validator, or third-party provider and shall be final and binding for all purposes. 6.​ Protocol Changes and Forks Blockchain networks underlying the Staked Virtual Assets may, from time to time, undergo changes to their protocol, including but not limited to updates, upgrades, modifications, hard forks, soft forks, or other alterations to network rules or consensus mechanisms (“Protocol

 
Changes”). In the event the Custodian receives notice from a network, Validator, or third-party staking services provider of any known or anticipated Protocol Change, the Custodian will use commercially reasonable efforts to provide you with notice of such change as soon as practicable, using the communication methods available under these Terms. You acknowledge and agree that Protocol Changes may materially affect the operation of the Staking Services, the performance of Validators, the availability or calculation of Staking Rewards, and the value, functionality, or transferability of your Staked Virtual Assets. The Custodian shall have no responsibility or liability for any losses, damages, costs, or expenses incurred by you, or by any clients to whom you may delegate staking rights, arising out of or in connection with any Protocol Change, including without limitation any impact on staking operations, Validator performance, reward distribution, or asset availability. 7.​ Governance and Voting Protocols underlying certain Virtual Assets may offer stakers voting rights concerning matters of protocol-level governance. As such, the Custodian reserves the right at its discretion to either support or discontinue voting for these particular assets. Please note that Validators could vote on your behalf in situations where the operating protocol doesn't facilitate delegated voting. The Custodian bears NO responsibility, legal or otherwise, for any voting decisions or actions taken by the Validators or third party staking service providers on behalf of the stakers. 8.​ Validator Discontinuance Validators or third-party staking services providers supporting a particular Proof-of-Stake network or the Custodian may, at their sole discretion, cease operating validator nodes or otherwise discontinue their participation in such network (“Discontinuance”) at any time, subject to any notice requirements imposed by the relevant network or provider. In the event of a Discontinuance affecting your Staked Virtual Assets, the Custodian will use commercially reasonable efforts to provide you with notice as soon as practicable after becoming aware of such event. You acknowledge and agree that it is your responsibility to initiate any actions necessary to unstake, restake, or otherwise manage your Staked Virtual Assets in connection with a Discontinuance. The Custodian shall have no responsibility or liability for any Damages arising from or in connection with a Discontinuance, including without limitation any loss of Staking Rewards, missed rewards, penalties, or inability to access or transfer Staked Virtual Assets. 9.​ Indemnification; Exclusions and Limitations of Liability The Custodian has no indemnification obligation for any acts or omissions of any Validator, third-party staking services provider, or blockchain network, or for any matters relating to the staking process, staking performance, or distribution of Rewards, Slashing Reimbursements, or Missed Rewards, and Missed Rewards incurred in connection with Jailing. For the purposes herein, “Jailing” means the removal of a Validator node from the active set on a Supported Blockchain in connection with a Slashing Penalty. To the maximum extent permitted by law, in no event will the Custodian be liable to you or any other person for: (i) any incidental, indirect, consequential, special, exemplary, or punitive damages of any kind; or (ii) any loss of actual or anticipated profits or revenues (whether direct or indirect), in each case arising out of or relating to the Staking Services, regardless of the theory of liability (contract, tort, or otherwise) and even if the Custodian knew or should have known of the possibility of such damages. To the maximum extent permitted by Law, the Custodian’s aggregate liability for all damages of any kind arising under or in connection with the Staking Services shall not exceed the total value of the affected Staked Virtual Assets at the time of the event giving rise to the claim, or, in the

 
case of Slashing Reimbursements or Missed Rewards, the actual amount of such reimbursement or missed reward received by the Custodian from the relevant Validator, provider, or network for the specific event, net of applicable fees, taxes, and costs. Any indemnification, compensation, or reimbursement payable by the Custodian to you in connection with a claim will be net of any insurance proceeds or other recoveries you receive for the same matter. You agree to: (i) make any applicable insurance claim before seeking recovery from the Custodian; (ii) apply all such proceeds or recoveries to reduce the amount of your claim; and (iii) promptly refund to the Custodian any amounts the Custodian has paid to you that, together with such proceeds or recoveries, exceed your actual damages. You shall defend, indemnify, and hold harmless the Custodian, its Affiliates, and their respective officers, directors, employees, and agents from and against all claims, damages, losses, liabilities, costs, and expenses (including reasonable legal fees) arising from: (i) your breach of these Terms; (ii) your acts or omissions; (iii) any violation by you of applicable laws or regulations. 10.​ Staking Service Disclaimers Ceffu’s platform gives you access to third party Staking Services provided and governed by independent third-party providers. When you access or utilize these Staking Services, you will work with a third-party provider that stakes specific Virtual Assets (“Staked Virtual Assets”) for validating transactions on the related blockchain network. Successful validations may yield a network-issued reward (“Staking Reward”). When using the Staking Service, you acknowledge, agree, and consent to the following: a.​ Ceffu does not control or assume any liability for your use of the Staking Services. We expressly disclaim all liability for any potential issues or losses related to your use of the Staking Services, including any loss of Staked Virtual Assets, failure to obtain Staking Rewards, or fees incurred during the process. b.​ Ceffu cannot guarantee uninterrupted Staking operations. Interruptions in service can occur due to many factors beyond our control, such as codebase updates, network protocol changes, actions from third-party providers or network congestion. c.​ Ceffu cannot ensure the staking or ongoing staking of any specific Virtual Asset. The feasibility of staking certain Virtual Assets is based on the respective blockchain network's rules and the third-party staking services provider's terms and conditions. d.​ Ceffu bears no control over or responsibility for the Staking Rewards provided by the relevant blockchain network. Decisions about the distribution of Staking Rewards, including frequency and amount, solely rest with the respective networks and not Ceffu. e.​ Ceffu does not provide advice or make any predictions about the potential value or suitability of any specific Virtual Asset or the Staking Service. Any decision to use the Staking Service is your own, and Ceffu assumes no responsibility for this. f.​ Ceffu will never take custody of any of your rewards or assets and has no control over any Proof-of-Stake network or delegated mechanism where Ceffu may exercise validation rights delegated by you, or where a third-party provider facilitates staking while you retain key control. g.​ Ceffu does not guarantee that you will receive Staking Rewards or any Staking Reward rates. The successful transfer of the rewards is subject to the Proof-of-Stake networks and is not under Ceffu's control. h.​ Ceffu is not responsible for any failure by any supported Proof-of-Stake (POS) network to transfer rewards or for the loss of rewards due to reasons such as transfer to an incorrect

 
wallet address or other risks like “slashing”. i.​ Ceffu does not guarantee uninterrupted or error-free operation of the staking services, nor does it ensure that it will rectify all defects or prevent disruptions caused by third parties or unauthorized third party access. j.​ Ceffu is not liable for any breaches committed by the user in relation to third-party Staking Services agreements. It is the user's responsibility to ensure compliance with those terms and conditions. k.​ You are responsible for all network, gas, and transaction fees related to staking, claiming, restaking, or unstaking. Fees may change without notice and may be deducted from Rewards or require separate payment/funding. l.​ Access to staking may be limited by sanctions, KYC/AML, licensing, or other legal restrictions. The Custodian may restrict or terminate access where it considers it necessary for legal, risk, or compliance reasons. m.​ Airdrops, rebates, MEV, and other protocol-level distributions are not guaranteed and may be unsupported. Where supported, the Custodian has no obligation to claim, process, or distribute unless and until it actually receives such amounts from the relevant network/provider and functionality exists to support the distribution. n.​ Your use of any Staking Services is subject to the separate terms and conditions of the third-party provider you select, which you must review and accept independently. The Custodian has no responsibility for such terms or for your compliance with them. By choosing to use the Staking Services, you acknowledge these conditions and understand the inherent risks, including but not limited to the risk of loss, reduction, or penalty. Before staking, conduct thorough research and careful analysis to ensure alignment with your financial goals, risk tolerance, and understand the staking process. If you have any doubts or misunderstandings regarding the staking process and involved risks, we strongly recommend seeking advice from an independent financial advisor before proceeding with the services.

 
EXHIBIT E MirrorRSV Services In order to subscribe to MirrorRSV Service, the Client must make a request to the Custodian, which may provide the Client with a three parties agreement framing this service.

 

Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Willam B. Miller, the Interim Principal 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 July 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: September 11, 2026.
By:
/s/ William B. Miller
William B. Miller
Interim Principal 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, William B. Miller, the 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 July 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: September 11, 2026.
By:
/s/ William B. Miller
William B. Miller
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 July 31, 2026 (the “Report”), of CEA Industries Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, William B. Miller, the Interim Principal Executive Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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/ William B. Miller
Name:
William B. Miller
Interim Principal Executive Officer
Date:September 11, 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 July 31, 2026 (the “Report”), of CEA Industries Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, William B. Miller, the Principal Financial Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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/ William B. Miller
Name:
William B. Miller
Principal Financial Officer
Date:September 11, 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.