BNC 10-K & 10-Q changes, risk factors and insider trading
BNB Standard Corp (also BNCWW, BNCWZ) · Nasdaq · Agricultural Services · CIK 1482541 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Relating to the DAT Strategy”
New heading “Risks Relating to Cryptocurrencies”
New heading “Risks Related to Investing in BNB”
New heading “Risk Related to Fat Panda Operations”
New heading “Risks Related to our Current Controlled Environment Agriculture Operations”
New heading “Risks Related to Our Business and Operations”
New heading “Our financial condition is highly dependent on the market price of BNB, which has historically been subject to significant volatility.”
New heading “Our DAT Strategy is concentrated primarily in a single asset, which subjects us to risks specific to the Binance ecosystem.”
New heading “Failures, vulnerabilities, or disruptions in the BNB Chain network could adversely affect the value of BNB and our digital asset holdings.”
New heading “The validator structure of the BNB Chain network may expose it to governance or operational risks.”
New heading “Certain of our digital assets are held at third-party exchanges and are subject to custodial and counterparty risks.”
New heading “Digital assets, including BNB, are subject to an evolving and uncertain regulatory landscape.”
New heading “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.”
New heading “Adverse publicity or developments involving the Binance ecosystem could negatively affect the value of BNB.”
New heading “While we report substantial digital asset holdings, the liquidity of these assets may be limited by market conditions.”
New heading “Fair value accounting for digital assets may cause significant volatility in our financial statements.”
New heading “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.”
New heading “Risks Related to Cryptocurrencies”
New heading “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.”
New heading “The digital asset trading platforms on which cryptocurrency trades are relatively new and largely unregulated or may not be complying with existing regulations.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “Crypto assets and blockchains are subject to various “attack” risks.”
New heading “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.”
New heading “The value of cryptocurrencies and other digital assets may be subject to momentum pricing risk.”
New heading “The emergence of DeFi subjects us to evolving risks and uncertainties relating to our investments and our services.”
New heading “Competition from central bank digital currencies and emerging payments initiatives involving financial institutions could adversely affect the value of BNB and other digital assets.”
New heading “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.”
New heading “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.”
New heading “The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.”
New heading “The state, local and non-U.S. tax treatment of digital assets is unclear.”
New heading “Risks Related to Investing in BNB”
New heading “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.”
New heading “BNB and BNB Chain have links to, and may be controlled by, Binance and its principals.”
New heading “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.”
New heading “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.”
New heading “If validators exit BNB Chain, it could increase the likelihood of a malicious actor obtaining control.”
New heading “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.”
New heading “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.”
New heading “BNB Chain’s decentralized governance structure may negatively affect its ability to grow and respond to challenges.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “Our DAT Strategy may subject us to enhanced regulatory oversight.”
New heading “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.”
New heading “Risks Related to Fat Panda Operations”
New heading “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.”
New heading “The market for vaporizer products and related items is a niche market, subject to a great deal of uncertainty and is still evolving.”
New heading “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.”
New heading “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.”
New heading “We may be unable to identify or contract with new suppliers in the event of a disruption to our supply.”
New heading “Demand for the products we distribute could decrease if the trend of our suppliers selling products directly to consumers or retailers continues or accelerates.”
New heading “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.”
New heading “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.”
New heading “If we fail to maintain proper inventory levels, our business could be harmed.”
New heading “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.”
New heading “Changes in our customer, product or competition mix could cause our product margin and results of operations to fluctuate.”
New heading “Our ability to distribute certain licensed brands and to use or license certain trademarks may be terminated or not renewed.”
New heading “We may not be successful in maintaining the consumer brand recognition and loyalty of our products.”
New heading “New products face intense media attention and public pressure.”
New heading “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.”
New heading “Damage to our reputation, or that of any of our key suppliers or their brands, could affect our business performance.”
New heading “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.”
New heading “If provinces continue the trend of imposing, expanding, and increasing taxes on vaporizer products, it could materially and adversely affect our business.”
New heading “We may become involved in regulatory or agency proceedings, investigations, prosecutions, and audits.”
New heading “We are subject to increasing international control and regulation.”
New heading “Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity.”
New heading “We face intense competition and may fail to compete effectively.”
New heading “Product defects could increase our expenses, damage our reputation or expose us to liability.”
New heading “We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.”
New heading “We may become subject to significant product liability litigation.”
New heading “The scientific community has not yet extensively studied the long-term health effects of the use of vaporizers, electronic cigarettes or e-liquids products.”
New heading “Reliance on information technology means a significant disruption could affect our communications and operations.”
New heading “Internet security poses a risk to our e-commerce sales.”
New heading “Security and privacy breaches may expose us to liability and cause us to lose customers.”
New heading “If the methodologies of internet search engines are modified, traffic to our websites and corresponding consumer origination volumes could decline.”
New heading “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.”
New heading “We are subject to the risks of exchange rate fluctuations.”
New heading “Risks Relating to Our Current Controlled Environment Agriculture Business”
New heading “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.”
New heading “Changes to United States tariff and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.”
New heading “We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.”
New heading “Our common stock may be delisted if we fail to comply with Nasdaq’s continued listing standards.”
New heading “Risks Related to Our Business and Operations”
New heading “Shareholder activism has caused and will continue to cause us to incur substantial costs and divert management’s attention and resources and could disrupt our operations and the trading price of our common stock.”
New heading “Our Stockholder Rights Plan could delay or prevent a change of control, which could limit the market price of our common stock.”
New heading “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.”
New heading “The Company has identified material weaknesses in its internal control over financial reporting.”
New heading “We are a holding company and depend upon our subsidiaries for our cash flow.”
Removed heading “Our revenues have been limited, and we will need to obtain financing for any substantive growth, and possibly our continued operations, which may not be available to us.”
Removed heading “Any future equity offering will result in dilution to our shareholders; obtaining borrowed capital may not be possible for us.”
Removed heading “There is no assurance that we will be able to convert our backlog related to our CEA operations into revenue or make a profit.”
Removed heading “We may extend credit to our CEA customers in the future and, if we are unable to collect these accounts receivable, our future profitability could be adversely impacted.”
Removed heading “Because we currently do not maintain effective internal controls over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our common stock may, therefore, be adversely impacted.”
Removed heading “We have identified material weaknesses in our internal control over financial reporting and, if we do not remediate the material weakness or are unable to implement and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.”
Removed heading “To date, the majority of our revenues have been generated from clients that operate in the legal cannabis industry in the United States and Canada.”
Removed heading “The cannabis industry has been an emerging industry over the last several years, and cannabis has only been legalized in some states and remains illegal in other states and under U.S. federal law, making it difficult to accurately forecast the demand for our engineering and product solutions in this specific industry. Losing clients from the cannabis industry may have a material adverse effect on our revenues and the success of our business.”
Removed heading “There is heightened scrutiny by Canadian regulatory authorities related to the cannabis industry.”
Removed heading “We have a concentration of customers and suppliers, which could affect our financial results.”
Removed heading “We incur significant costs as a result of being a public company, which will make it more difficult for us to achieve profitability.”
Removed heading “Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.”
Removed heading “Our ability to use net operating losses to offset future taxable income may be subject to limitations.”
Removed heading “Risks Related to the Cannabis Industry”
Removed heading “Cannabis remains illegal under federal law, and therefore, strict enforcement of federal laws regarding cannabis, particularly against our customers, would likely result in our inability to execute our business plan.”
Removed heading “We are and will be subject to applicable anti-money laundering laws and regulations.”
Removed heading “We face risks related to civil asset forfeiture due to the regulatory environment of the cannabis industry in the United States.”
Removed heading “Public opinion and perception of the cannabis industry may have an adverse effect on our business reputation.”
Removed heading “We may have difficulty accessing bankruptcy courts.”
Removed heading “Our historical business efforts in Canada have presented opportunities, but no assurance can be given that our revenues and earnings will be improved on the basis of our addressing the Canadian business.”
Removed heading “Variations in state and local regulation and enforcement in states that have legalized cannabis may impose certain restrictions on cannabis-related activities that may adversely impact our revenue and earnings.”
Removed heading “The cannabis industry could face strong opposition from other industries.”
Removed heading “Changing legislation and evolving interpretations of law, could negatively impact our clients and, in turn, our operations.”
Removed heading “The fact that we provide products and services to companies in the cannabis industry may impact our ability to raise adequate capital for future expansion, which could hinder our growth potential as well as our revenue and earnings.”
Removed heading “Our success may be dependent on additional states legalizing recreational and/or medical cannabis use.”
Removed heading “Our customers may have difficulty accessing the service of banks, which may make it difficult for them to purchase our products and services.”
Removed heading “We are subject to certain federal regulations relating to cash reporting.”
Removed heading “State and municipal governments in which our customers do business or seek to do business may have or may adopt laws that adversely affect our ability to do business with such customers.”
Removed heading “Most, if not all, of our customers are impacted by Section 280E of the Code, which limits certain expenses marijuana companies can deduct. This negative impact could affect the financial condition of our customers, which in turn may negatively affect the ability of our customers to purchase our products and services.”
Removed heading “There may be difficulty enforcing certain of our commercial agreements and contracts.”
Removed heading “Due to our involvement in the cannabis industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability.”
Removed heading “A drop in the retail price of cannabis products may negatively impact our business.”
Removed heading “An active, liquid trading market for our common stock and warrants may not develop or be sustained, and as a result, investors may not be able to sell their common stock at or above their acquisition price, or at all.”
Largest changes
“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. …”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
“The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. For example, on February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act of 1977. …”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (429)
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.
Investing
in our securities involves significant risks. Certain factors may have a material adverse effect on our business, financial condition,
and results of operations. You should carefully consider the risks and uncertainties described below, in addition to other information
contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe
are not material, may also become important factors that adversely affect our business. If any of the following risks actually occur,
our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event,
the trading price of our securities could decline, and you could lose part or all of your investment.
Summary
Of of Risk Factors Relating to our Current CEA Operations
Our
CEA business is subject to a number ofnumerous risks and uncertainties, including those risks discussed atin lengthmore detail in the sectionfollowing below titled
“Risk Factors.”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.
●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.
●The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.
●The U.S. federal, the 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 Business and Operations
●Shareholder activism has caused and will continue to cause us to incur substantial costs and divert management’s attention and resources and could disrupt our operations and the trading price of our common stock.
●Our Stockholder Rights Plan 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.
●The Company has identified material weaknesses in its internal control over financial reporting.
Risks
Relating Related to Ourthe CurrentDAT CEA BusinessStrategy
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 April 30, 2026, we held 515,544 BNB tokens with an aggregate fair value of $317.3 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. Under our accounting policies, unrealized gains and losses from changes in the fair value of our digital asset holdings are recorded in our consolidated statements of operations. Accordingly, our reported net income or loss will be significantly affected by fluctuations in the market price of BNB, and these fluctuations could cause our financial results to vary substantially from period to period, independent of the performance of our operating businesses. A significant decline in the market price of BNB could adversely affect our ability to fund our operations, pursue strategic initiatives, pay dividends, service any indebtedness, or otherwise execute our business strategy. In addition, our stock price may be correlated with the price of BNB and other digital assets, and declines in the price of BNB could adversely affect the trading price of our common stock.
Our 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.
Failures, vulnerabilities, or disruptions in the BNB Chain network could adversely affect the value of BNB and our digital asset holdings.
BNB operates on the BNB Chain blockchain network, which relies on complex software, cryptographic protocols, and a distributed network of validators to process transactions and maintain the integrity of the blockchain. The BNB Chain network may be subject to technical failures, software bugs, consensus failures, or other vulnerabilities that could compromise the network’s security or functionality. In addition, blockchain networks have historically been targets of cyberattacks, including attempts to exploit vulnerabilities in network software or associated applications. Any successful attack or exploit affecting the BNB Chain network could disrupt network operations, reduce confidence in the network, or adversely affect the market price of BNB. Any such developments could materially and adversely affect the value of our digital asset holdings.
The validator structure of the BNB Chain network may expose it to governance or operational risks.
The BNB Chain network relies on a limited number of validators to confirm transactions and maintain the network. Compared to some other blockchain networks, the validator structure of BNB Chain may involve a relatively concentrated group of participants. Concentration among validators could increase the risk of coordinated actions, governance disputes, or operational disruptions affecting the network. If validators were to act in a manner that adversely affects the operation or perceived integrity of the network, confidence in the Binance ecosystem could decline. Any such decline in confidence could negatively affect the market price of BNB and the value of our digital asset holdings.
Certain of our digital assets are held at third-party exchanges and are subject to custodial and counterparty risks.
Certain of our digital assets are held at third-party exchanges or custodial platforms. These assets may be recorded as receivables rather than digital assets on our condensed consolidated balance sheet when they are held on such platforms. Digital asset exchanges and custodians have historically been subject to cyberattacks, fraud, insolvency, operational failures, and regulatory enforcement actions.
Ownership and control of digital assets are generally determined by possession of cryptographic private keys or other access credentials. We rely on third-party custodians to safeguard control of our digital assets, including the management of private keys. If the private keys or access credentials associated with our digital assets that are held by those third-party custodians were lost, destroyed, compromised, misused, or otherwise became inaccessible, we could lose access to our digital assets permanently. Unlike traditional financial accounts, digital asset transactions are generally irreversible, and there may be no central authority capable of restoring access to lost assets. Any loss or theft of our digital assets, including as a result of the foregoing, could materially and adversely affect our financial condition.
If any exchange or custodial platform that holds our digital assets were to become insolvent, experience a security breach, suspend withdrawals, or otherwise fail to safeguard our assets, we could experience delays in accessing our digital assets or suffer a partial or total loss of those assets. In the event of an insolvency of a custodial platform, we may be treated as an unsecured creditor and may not recover the full value of our assets. In addition, exchanges and custodial platforms may impose withdrawal limits, suspend trading, or otherwise restrict transfers of digital assets during periods of market volatility or regulatory uncertainty. Such restrictions could limit our ability to access or liquidate our digital assets in a timely manner. These assets are not maintained in segregated wallets under our exclusive control and may be pooled with assets of other customers of such exchanges. Unlike bank deposits, digital assets held at exchanges are generally not insured by the Federal Deposit Insurance Corporation or any other governmental agency. We are exposed to counterparty risk if these exchanges experience financial difficulty, security breaches, cyberattacks, operational failures, regulatory enforcement actions, or become insolvent. The digital asset industry has experienced significant exchange failures and insolvencies, including the collapse of FTX Trading Ltd. in November 2022, which resulted in substantial losses for customers and creditors. If an exchange at which we hold digital assets were to fail, enter bankruptcy, or become subject to regulatory seizure, we may be unable to recover some or all of our digital assets, and any recovery could be subject to significant delays and uncertainty. The loss of digital assets held at such exchanges could materially and adversely affect our financial condition, results of operations, and the trading price of our common stock.
Digital assets, including BNB, are subject to an evolving and uncertain regulatory landscape.
Digital assets, including BNB, are subject to evolving and uncertain regulatory frameworks in the United States and internationally. The regulatory status of digital assets and related activities is subject to significant uncertainty, and regulations may vary significantly among jurisdictions. Changes in laws, regulations, or enforcement priorities by U.S. or foreign regulators, including the SEC, CFTC, 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.
Management's Discussion & Analysis (MD&A)
New heading “Overview of DAT Strategy”
New heading “Key Drivers of Results of Operations”
New heading “Warrant Liabilities”
New heading “Digital Asset Market Conditions”
New heading “Our Retail and Industry Business”
New heading “Nasdaq Compliance”
New heading “Board and Executive Changes”
New heading “Components of Results of Operation”
New heading “Industrial Climate Control System”
New heading “Cost of Revenue”
New heading “Operating Expenses”
New heading “Unrealized and Realized Loss on Digital Assets”
New heading “Other Income, Net”
New heading “Interest expense, and interest expense to affiliate”
New heading “PIPE transaction costs”
New heading “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.”
New heading “Consolidated Statements of Operations and Comprehensive Income”
New heading “Industrial Climate Control Systems”
New heading “Cost of Revenue”
New heading “Selling, General, and Administrative Expenses”
New heading “Retail and Industry”
New heading “BNB Treasury Management”
New heading “Operating Expenses Applicable Solely to the Successor Period”
New heading “Unrealized and Realized Loss on Digital Assets”
New heading “Income Tax Provision”
New heading “Foreign Currency Translation Adjustment”
New heading “Digital Asset Treasury Risk Management”
New heading “At-the-Market Program”
New heading “Share Repurchase Program”
New heading “Promissory Note”
New heading “Convertible Promissory Note”
New heading “Tax Indemnification Note”
New heading “Other Debt Activities”
New heading “For the Period from June 7, 2025 through April 30, 2026”
New heading “For the Period from May 1, 2025 through June 6, 2025”
New heading “For the Year Ended April 30, 2025”
New heading “Other Changes in Financial Position”
New heading “Known Trends and Uncertainties Affecting Our Business”
New heading “Critical Accounting Estimates”
New heading “Warrant Liabilities”
New heading “Cash Incentive Award”
New heading “Goodwill and Intangible Assets”
New heading “Definite-lived intangible assets”
Removed heading “Please also refer to “Non-GAAP Financial Measures” discussed elsewhere in this Annual Report.”
Removed heading “Executive Overview”
Removed heading “Impact of the COVID-19 Pandemic on Our Business”
Removed heading “Impact of Ukrainian and Israeli Conflicts”
Removed heading “Critical Accounting Policies and Estimates”
Removed heading “Comparison of Years ended December 31, 2024 and 2023”
Removed heading “Revenues and Cost of Goods Sold”
Removed heading “Cash and Cash Equivalents”
Removed heading “Capital Raising”
Removed heading “Contractual Payment Obligations”
Removed heading “Other Commitments”
Removed heading “Off-Balance Sheet Arrangements”
Largest changes
“We believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial reporting. …”see in full comparison
“Accounts receivable and allowance for accounts receivable. Accounts receivables are recorded at the invoiced amount or based on revenue earned for items not yet invoiced, and generally do not bear interest. In accordance with ASU No. 2016-13 (as amended), Measurement of Credit Losses on Financial Instruments, which the Company adopted on a prospective basis effective January 1, 2023, an allowance for doubtful accounts is recorded against the Company’s receivables by applying an expected credit loss model. …”see in full comparison
“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 Canadian dollars, the functional currency of the acquired entity, and translated into U.S. dollars 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. …”see in full comparison
“Remaining performance obligations. The revenue standard requires certain quantitative and qualitative disclosures about our remaining performance obligations, which are defined as performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period, including (i) the aggregate amount of the transaction price allocated to the remaining performance obligations, and (ii) when we expect to recognize as revenue with respect to such amounts on either: (x) a quantitative basis using appropriate time bands for the duration of the remaining performance …”see in full comparison
“From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount of the loss is known. …”see in full comparison
Full comparison: every changed paragraph (251)
The
following discussion should be read in conjunction with our consolidatedConsolidated financialFinancial statementsStatements and related notes and other financial information
included elsewhere in this Annual Report, which include additional information about our accounting policies, practices, and the transactions
underlying our financial results. In addition to historical information, the following discussion and other parts of this Annual Report containscontain forward-looking information that
involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information
due to the factors discussed under “"Cautionary Statements”" appearing elsewhere herein and the risks and uncertainties described
or identified in “"Item 1A – Risk Factors”" in this Annual Report.
Introduction
CEA Industries Inc. is the largest publicly-traded 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 Airdrops. 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 or pledged any BNB through April 30, 2026 aside from BNB pledged for our debt obligations. At April 30, 2026, we held 515,544 BNB tokens with an aggregate fair value of $317.3 million, and digital assets, primarily BNB, represented 94.6% 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 intends to continue evaluating opportunities to acquire additional digital assets as part of its 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 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 year ended April 30, 2026 by combining the Predecessor and Successor results of operations and cash flows during the year ended April 30, 2026 ("Combined Annual Period") and comparing the combined data to the results of operations and cash flows of the Predecessor for the year ended April 30, 2025. 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 I, Item 1A – Risk Factors" in this Annual Report on Form 10-K.
On August 5, 2025, we launched the DAT Strategy following the closing of the PIPE Transaction that raised approximately $500.0 million in cash and digital assets, with up to $750.0 million of additional proceeds available through warrant exercises.
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.
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 may 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
During the period from June 7, 2025 through April 30, 2026, we accumulated 515,544 BNB. During this same period, the market price of BNB declined significantly by 28.9%, from $865.99 weighted-average price we paid per BNB, to $615.38 per BNB at April 30, 2026. As a result, the aggregate fair value of our BNB holdings decreased from our $446.5 million cost basis to $317.3 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 during the period from June 7, 2025 through April 30, 2026.
In addition to Airdrops, a portion of our BNB treasury yield has historically been generated through participation in Binance Launchpool and HODLer Airdrops – platform programs through 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 April 30, 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 period, and we believe they will continue to contribute meaningful volatility to our earnings, independent of our underlying operating performance. During the period from June 7, 2025 through April 30, 2026, we recognized a non-cash gain of $282.9 million related to our stapled warrant liability, which was a primary driver of net income. Because the fair value of these out-of-the-money warrants generally fluctuate 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.
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 GAAP-reported results in any given quarter — do not alter our management's conviction in the long-term trajectory of BNB and the broader Binance ecosystem. We believe our disciplined approach to treasury management positions the Company to benefit from market recoveries while managing risk through custody, yield optimization, and strategic capital allocation.
During the period from June 7, 2025 through April 30, 2026, digital asset markets experienced periods of significant price volatility. The market price of BNB fluctuated in response to a variety of factors, including macroeconomic conditions, investor sentiment toward digital assets, developments affecting cryptocurrency exchanges and blockchain networks, and regulatory developments in the United States and other jurisdictions. Because 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 April 30, 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 $1.7 million for the period from June 7, 2025 through April 30, 2026.
Restatements
On June 11, 2026, the management of the Company, with the concurrence of the Audit Committee of the Board of Directors, concluded that the previously issued condensed consolidated financial statements included in the Company's quarterly reports on Form 10-Q for the (i) three months ended October 31, 2025, the period from June 7, 2025 through October 31, 2025 (the “Second Quarter Successor” period) and the period from May 1, 2025 through June 6, 2025, originally filed with the SEC on December 15, 2025 (the “Second Quarter Form 10-Q”) and (ii) three months ended January 31, 2026 and the period from June 7, 2025 through January 31, 2026 (the “Third Quarter Successor” period) and the period from May 1, 2025 through June 6, 2025, originally filed with the SEC on March 16, 2026 (the “Third Quarter Form 10-Q” and together with the Second Quarter 10-Q, the “Quarterly Reports on Form 10-Q”) should no longer be relied upon.
The conclusion was based on the identification of an error in the calculation of the weighted-average number of shares outstanding used in determining basic and diluted EPS. The error resulted in an understatement of basic and diluted weighted-average shares outstanding, which in turn understated or overstated basic and diluted EPS. For the three months ended October 31, 2025, basic and diluted weighted average number of shares were understated by 2,214,508 shares and as a result, basic and diluted EPS were overstated by $0.21. For the Second Quarter Successor period, basic weighted average shares were understated by 1,857,056 shares and diluted weighted average shares were understated by 857,057 shares and as a result, basic and diluted EPS were overstated by $0.45. For the three months ended January 31, 2026, basic and diluted weighted average number of shares were understated by 2,376,236 shares and as a result, basic and diluted EPS were understated by $0.08. For the Third Quarter Successor period, basic weighted average shares were understated by 21,806,662 shares and diluted weighted average shares were understated by 21,806,663 shares and as a result, basic EPS was overstated by $4.26 and diluted EPS was overstated by $4.21. The error did not impact the Company's net income (loss), total assets, total liabilities, stockholders’ equity, revenue, cash flows, or net income (loss) available to common stockholders in each affected period.
On June 23, 2026, we restated our previously issued unaudited condensed consolidated financial statements for the second and third fiscal quarters of 2026 resulting from an error in the computation of weighted-average shares used to compute basic and diluted earnings (loss) per share, which it deemed material on June 11, 2026.
Nasdaq Compliance
On May 7, 2026, we received a letter from the Staff of Nasdaq notifying us that we no longer comply 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 have submitted a plan to Nasdaq to regain compliance. If Nasdaq accepts our plan, Nasdaq can grant an exception of up to 180 calendar days from the fiscal year ended April 30, 2026, or until October 27, 2026, to allow the Company to regain compliance Our plan of compliance with respect to the foregoing requirement setting forth, among other things, a proxy statement preparation and proxy solicitation timeline leading to our annual meeting of our shareholders. We cannot provide any assurance that the Staff will accept our plan of compliance. In the event our plan is not accepted, our securities may be subject to delisting and we will have the opportunity to appeal the Staff’s delisting determination to a hearings panel. We expect to organize an annual meeting in the coming weeks to regain compliance with the applicable Nasdaq Listing Rules.
AMA Litigation
On May 22, 2026, we filed a complaint against the Asset Manager, in the United States District Court for the District of Delaware, regarding the Asset Management Agreement. The complaint seeks a declaration that the Asset Management Agreement is void from inception as unconscionable and orders all fees paid by us to the Asset Manager under the Asset Management Agreement since inception be returned to the Company. Alternatively, the complaint seeks a declaration that a liquidated damages clause in the Asset Management Agreement, which would accelerate nearly 20 years of future fees upon termination, is an unenforceable penalty.
Board and Executive Changes
On May 4, 2026, Anthony K. McDonald, our President and a member of our Board, resigned as our President and as a director of the Company. In exchange for a release of claims and Mr. McDonald’s agreement to certain covenants, including cooperation, Mr. McDonald will receive an aggregate of $0.3 million payable over 12 months and reimbursement for legal fees of up to $10,000. Mr. McDonald’s outstanding equity awards will remain in effect in accordance with their terms.
On June 10, 2026, Nicholas J. Etten, a member of the Board, resigned as a director of the Company. In exchange for a release of claims and Mr. Etten's agreement to certain covenants, including cooperation, Mr. Etten received a payment of $85,000 and will receive reimbursement for legal fees of up to $50,000. Mr. Etten's outstanding equity award will remain in effect in accordance with its terms.
Components of Results of Operation
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.
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 and consist 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 pay to 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 period from June 7, 2025 through April 30, 2026, we also incurred elevated advisory expenses in connection with a shareholder action.
We expense contractual asset management fees incurred in connection with the AMA for assets within our DAT Strategy on a monthly basis. Such fees are based on a tiered percentage of the value of those assets.
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.
We incurred significant legal, strategic, and investor communications advisors costs in connection with our ongoing response to the shareholder activism campaign. YZi Labs filed preliminary consent solicitation materials seeking to expand the size of the Board and elect its own slate of director candidates, and stated its intent to nominate candidates at our next annual meeting of stockholders. As a result, we engaged advisors to protect shareholder interests and respond to the unsolicited proxy and consent solicitation activities. These matters have required significant time and resources from the Board and management and are expected to continue to do so in the near term.
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. Unrealized losses 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 represent a liability recognized for an incentive award granted to our Chief Executive Officer in connection with a transition agreement, payable in a variable amount of cash in lieu of an equity incentive award.
Other Income, 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've issued and treat as liabilities for accounting purposes. During the period from June 7, 2025 through April 30, 2026, we also incurred costs in connection with our acquisition of Fat Panda and our issuance of shares of our common stock and warrants as part of the PIPE Transaction.
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.
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 liability. The fair value of the warrants are determined on a gross basis, and does not consider the value of the cash contribution to us upon exercise.
Interest expense, and interest expense to affiliate
What changed in the latest 10-Q
Risk Factors
New heading “Summary of Risk Factors”
New heading “Risks Relating to Cryptocurrencies”
New heading “Risks Related to Investing in BNB”
New heading “Risk Related to Fat Panda Operations”
New heading “Risks Related to our Current Controlled Environment Agriculture Operations”
New heading “Risks Related to Our Common Stock”
New heading “Risks Related to Our Business and Operations”
New heading “Risks Related to the DAT Strategy”
New heading “Our ability to generate yield on our BNB holdings depends primarily on Airdrops, which have declined and are unpredictable.”
New heading “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.”
New heading “Risks Related to Cryptocurrencies”
New heading “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.”
New heading “The digital asset trading platforms on which cryptocurrency trades are relatively new and largely unregulated or may not be complying with existing regulations.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “Crypto assets and blockchains are subject to various “attack” risks.”
New heading “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.”
New heading “The value of cryptocurrencies and other digital assets may be subject to momentum pricing risk.”
New heading “The emergence of DeFi subjects us to evolving risks and uncertainties relating to our investments and our services.”
New heading “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.”
New heading “Competition from central bank digital currencies and emerging payments initiatives involving financial institutions could adversely affect the value of BNB and other digital assets.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “The state, local and non-U.S. tax treatment of digital assets is unclear.”
New heading “Risks Related to Investing in BNB”
New heading “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.”
New heading “BNB and BNB Chain have links to, and may be controlled by, Binance and its principals.”
New heading “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.”
New heading “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.”
New heading “If validators exit BNB Chain, it could increase the likelihood of a malicious actor obtaining control.”
New heading “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.”
New heading “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.”
New heading “BNB Chain’s decentralized governance structure may negatively affect its ability to grow and respond to challenges.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “Our DAT Strategy may subject us to enhanced regulatory oversight.”
New heading “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.”
New heading “Risks Related to Fat Panda Operations”
New heading “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.”
New heading “The market for vaporizer products and related items is a niche market, subject to a great deal of uncertainty and is still evolving.”
New heading “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.”
New heading “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.”
New heading “We may be unable to identify or contract with new suppliers in the event of a disruption to our supply.”
New heading “Demand for the products we distribute could decrease if the trend of our suppliers selling products directly to consumers or retailers continues or accelerates.”
New heading “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.”
New heading “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.”
New heading “If we fail to maintain proper inventory levels, our business could be harmed.”
New heading “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.”
New heading “Changes in our customer, product or competition mix could cause our product margin and results of operations to fluctuate.”
New heading “Our ability to distribute certain licensed brands and to use or license certain trademarks may be terminated or not renewed.”
New heading “We may not be successful in maintaining the consumer brand recognition and loyalty of our products.”
New heading “New products face intense media attention and public pressure.”
New heading “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.”
New heading “Damage to our reputation, or that of any of our key suppliers or their brands, could affect our business performance.”
New heading “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.”
New heading “If provinces continue the trend of imposing, expanding, and increasing taxes on vaporizer products, it could materially and adversely affect our business.”
New heading “We may become involved in regulatory or agency proceedings, investigations, prosecutions, and audits.”
New heading “We are subject to increasing international control and regulation.”
New heading “Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity.”
New heading “We face intense competition and may fail to compete effectively.”
New heading “Product defects could increase our expenses, damage our reputation or expose us to liability.”
New heading “We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.”
New heading “We may become subject to significant product liability litigation.”
New heading “The scientific community has not yet extensively studied the long-term health effects of the use of vaporizers, electronic cigarettes or e-liquids products.”
New heading “Reliance on information technology means a significant disruption could affect our communications and operations.”
New heading “Internet security poses a risk to our e-commerce sales.”
New heading “Security and privacy breaches may expose us to liability and cause us to lose customers.”
New heading “If the methodologies of internet search engines are modified, traffic to our websites and corresponding consumer origination volumes could decline.”
New heading “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.”
New heading “We are subject to the risks of exchange rate fluctuations.”
New heading “Our failure to comply with certain environmental, health and safety regulations could materially and adversely affect our business.”
New heading “Risks Relating to Our Current Controlled Environment Agriculture Business”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “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.”
New heading “Equipment failures or poor performance may negatively impact our business.”
New heading “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.”
New heading “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.”
New heading “We may become subject to additional regulation of controlled environment agriculture facilities.”
New heading “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.”
New heading “We will be required to have top quality talent to compete in the marketplace.”
New heading “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.”
New heading “We have a limited number of employees that may not be sufficient to service our contracts.”
New heading “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.”
New heading “We may not be able to successfully identify, consummate or integrate acquisitions or to successfully manage the impacts of such transactions on our operations.”
New heading “We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.”
New heading “Risks Related to Our Common Stock”
New heading “Our common stock may be delisted if we fail to comply with Nasdaq’s continued listing standards.”
New heading “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.”
New heading “Our securities prices may be volatile and may decrease substantially.”
New heading “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.”
New heading “Registration rights and Rule 144 sales contain risks for shareholders.”
New heading “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.”
New heading “We do not anticipate paying any cash dividends on our common stock in the foreseeable future.”
New heading “The market price of our securities may be adversely affected by the sale of shares by our management or large stockholders.”
New heading “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.”
New heading “Risks Related to Our Business and Operations”
New heading “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.”
New heading “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.”
New heading “Stockholder activism has disrupted our business and may recur.”
New heading “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.”
New heading “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.”
New heading “The Company has identified a material weakness in its internal control over financial reporting.”
New heading “We are a holding company and depend upon our subsidiaries for our cash flow.”
Removed heading “Risks Related to Shareholder Rights Plan and Activist Investors”
Largest changes
“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. …”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (412)
In
addition to the other information set forth in this Quarterly Report on Form 10-Q, youYou should carefully consider the risk factors discussed
in Part I, Item 1A of our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025. Those risk factors, together
with the risk factors set forth below, could materially affect our business, financial condition, operating results, or prospects. The
risks described inbelow ourbefore Formmaking 10-KTan investment decision. The risks and uncertainties described below are not the only risksones facingwe us.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
Related Relating to Ourthe Digital Asset TreasuryDAT 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.
●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.
●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. As
ofAt JanuaryJuly 31, 2026, we held 515,544 BNB tokens with aan aggregate fair value of $402.8$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 threefiscal monthsyear ended JanuaryApril 31,30, 2026, we recognized an unrealized loss of $159.8$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 willmay 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.
Management's Discussion & Analysis (MD&A)
New heading “Warrant Liabilities”
New heading “Components of Results of Operations”
New heading “Industrial Climate Control System”
New heading “Cost of Revenue”
New heading “Operating Expenses”
New heading “Unrealized and Realized Loss on Digital Assets”
New heading “Other Income (Loss), Net”
New heading “Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)”
New heading “Industrial Climate Control Systems”
New heading “Selling, General, and Administrative Expenses”
New heading “Retail and Industry”
New heading “BNB Treasury Management”
New heading “Operating Expenses Applicable Solely to the Successor Period”
New heading “Unrealized Loss on Digital Assets”
New heading “Income Tax Provision”
New heading “Foreign Currency Translation Adjustment”
New heading “At-the-Market Program”
New heading “Share Repurchase Program”
New heading “Debt Obligations”
New heading “Promissory Note”
New heading “Convertible Promissory Note”
New heading “Tax Indemnification Note”
New heading “For the Three Months Ended July 31, 2026”
New heading “For the Period from June 7, 2025 through July 31, 2025”
New heading “For the Period from May 1, 2025 through June 6, 2025”
New heading “Other Changes in Financial Position”
New heading “Market Price of BNB”
New heading “Collateral Obligations under the BitGo Facility”
New heading “Airdrop Activity”
New heading “Warrant Liabilities”
New heading “Goodwill and Intangible Assets”
New heading “Definite-lived intangible assets”
Removed heading “Non-GAAP Financial Measures”
Removed heading “Our backlog or remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog or remaining performance obligations will actually generate revenues or when the actual revenues will be generated.”
Removed heading “Comparison of the Three Months Ended January 31, 2026, and January 31, 2025”
Removed heading “Total operating expenses”
Removed heading “Other income (expense), net”
Removed heading “Non-GAAP Combined Nine Months Ended January 31, 2026”
Removed heading “Comparison of the Nine Months Ended January 31, 2026, and January 31, 2025”
Removed heading “Revenues and Cost of revenue”
Removed heading “Other income (expense), net”
Removed heading “Contractual Payment Obligations”
Removed heading “Off-Balance Sheet Arrangements”
Largest changes
“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. …”see in full comparison
“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. …”see in full comparison
“Our backlog or remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog or remaining performance obligations will actually generate revenues or when the actual revenues will be generated.”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (216)
The
following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included
elsewhere in this Quarterly Report, which include additional information about our accounting policies, practices, and the transactions
underlying our financial results, as well as with our audited consolidated financial statements included in our Transitional Annual Report
on Form 10-KT10-K for the four monthsyear ended April 30, 2025,2026, 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 Transitional Annual Report on Form 10-KT10-K for the four monthsyear ended April 30, 2025,2026, as updated from time to time in the Company’s
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.
Non-GAAP
Financial Measures
To
supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures
including net bookings, backlog, as well as adjusted net income (loss) which reflects adjustments for certain non-cash expenses such
as stock-based compensation, unrealized loss on digital assets, gain on change in fair value of warrant liability, airdrop income, certain
debt-related items and depreciation and amortization expense. We believe these non-GAAP measures are helpful in understanding our past
performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be
considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information
prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects
of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our
business. For purposes of this Quarterly Report, (i) “adjusted net income (loss)” and “adjusted operating income (loss)”
mean GAAP net income (loss) and operating income (loss), respectively, after adjustment for non-cash equity compensation expense, unrealized
loss on digital assets, airdrop income, certain debt-related items and depreciation & amortization expense, and (ii) “net bookings”
means new sales contracts executed during the quarter for which we received an initial deposit, net of any adjustments including cancellations
and change orders during the quarter.
Our
backlog or remaining performance obligations and net bookings may not be indicative of future operating results, and our customers
may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project
financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the
backlog or remaining performance obligations will actually generate revenues or when the actual revenues will be
generated.
Overview
CEA
Industries Inc. (the “Company”) was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered
in Louisville, Colorado. Historically, the Company operated a portfolio of consumer and commercial businesses, including climate control
systems for controlled environment agriculture and retail operations in the vaping industry.
In August 2025, the Company initiated a strategic transformation by adopting
a digital asset treasury strategy focused on BNB, the native token of the Binance blockchain. Through its wholly owned subsidiary, CEA
BRS LLC, a Delaware limited liability company and the sole stockholder of BNC BNB Cayman, a Cayman Islands exempt company, the Company
seeks to build and manage a substantial corporate treasury of BNB, providing institutional-grade exposure to blockchain infrastructure.
Overview
of Digital Asset TreasuryDAT Strategy
The
Company has recently implemented a treasury strategy focused on acquiring and holding digital assets, primarily BNB. As of January 31,
2026, the Company held 515,544 BNB tokens with an aggregate fair value of $402.8 million. These digital asset holdings
represent the substantial majority of the Company’s total assets. Management views BNB as a strategic treasury asset and intends
to continue evaluating opportunities to acquire additional digital assets as part of its capital allocation strategy.
The
Company’sOur strategyDAT Strategy represents a significant departure from traditional corporate treasury strategies, which typically involve holding
cash, cash equivalents, and short-term investments. Instead, the Company’sour financial condition and results of operations are now
significantly influenced by changes in the market price of BNB. Digital asset markets have historically exhibited significant volatility
and are subject to evolving regulatory frameworks and technological risks. As a result, fluctuations in the market price of BNB will have
a material impact on the Company’sour financial condition, results of operations, and the market price of itsour common stock. Investors
should carefully consider the risks associated with theour Company’sDAT digital asset holdings and treasury strategyStrategy described under
“ Part II, Item 1A1A-Risk – Risk Factors” in this Quarterly Report on Form 10-Q.Factors.
The Company may in the future
generate returns through additional digital asset-related activities such as validation services, lending, and other decentralized
finance protocols, though no BNB is currently staked or pledged. The Company’s BNB-focused DAT strategy was launched on August
5, 2025, following the closing of the PIPE Transaction that raised approximately $500 million in cash and digital assets, with up to
$750 million in additional proceeds available through warrant exercises. Under the DAT strategy, BNB is the primary treasury reserve
asset.
To
supportWe this strategy,operate the CompanyDAT establishedStrategy 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. Additionally, the Company formed BNC BNB Cayman, an exempted
company organized under the laws of the Cayman Islands, to facilitate international operations and treasury management. These entities
are wholly owned subsidiaries of the Company.Strategy.
The Company’sOur BNB holdings are held in custody through
Ceffu, ana non-U.S. institutional digital asset custody platform operating within the Binance ecosystem. Ceffu utilizesuses multi-party computation
wallet infrastructure and maintains segregated account structures designed for institutional holders. While Ceffu operates as a
separate entity from the Binance exchange, our custody arrangement creates concentration exposure to the broader Binance ecosystem. Disruptions
to Ceffu’s operations, changes in its regulatory status, or adverse developments affecting the Binance ecosystem could materially impact
our ability to access, transfer, or liquidate our BNB holdings.
As
a result of the implementation of our BNB focused DAT strategy, digital assets, primarily BNB, now represent 93.7% of our total
assets, while our Retail and Industry segment operating businesses represent a significantly smaller portion of our overall asset
base on economic exposure.
The Company’sOur results of operations are influenced by several key factors,
including: changes in the market price of BNB and other ancillary digital assets held by the Companyus; fair value adjustments recognized
under applicable accounting standardsstandards, forincluding digitalour assetsissued warrants treated as liabilities; the generation of airdropAirdrop income; operating expenses associated with maintaining
the Company’sour public company infrastructure; and strategic decisions regarding the acquisition, holding, or disposition of digital assets.
Because thewe Company holdshold a substantial quantity of digital assets, particularly BNB, changes in the market price of BNB mayhave significantly
affect affected our reported earnings in the Company’spast and may continue to significantly affect our reported earnings. These fluctuations may not reflect changes in the Company’sour operating performance but instead
reflect market-driven changes in the value of itsour 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
DuringSince the periodPIPE fromTransaction, Octoberwe 31,have 2025 to January 31, 2026, the Company’s
BNB token holdings increased modestly by 0.7%, from 511,932 tokens toaccumulated 515,544 tokens, reflecting incremental change of 3,612 tokens in holdings during the period.BNB. During this same period, the market price of BNB declined significantly
by 28.3%,32.3%, from $1,089the $865.99 weighted-average price we paid per token,BNB, to $781$586.36 per token.
BNB at July 31, 2026. As a result, the aggregate fair value of the Company’sour BNB holdings decreased from $557.4our $446.5 million
cost basis to $402.8$302.3 million, driven by market price volatility rather than changes in the tokenquantity 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 theour Company’s
retailRetail and industryIndustry business during the same period.
In addition to changes in token prices during this period, the Companymarket value of BNB tokens, we recognized a substantial decrease in airdrop-related
Airdrop-related income associated with its digital assetthose holdings. The Company holds the majority of its BNB assets in Ceffu, an institutional custodian
operating within the Binance ecosystem, which enables the Company toWe maintain eligibility to receive airdropsAirdrops distributed within the Binance
ecosystem. Duringecosystem thefor threethose monthsBNB endedtokens Januarywe 31,hold 2026,at airdropCeffu, incomehowever totaledAirdrop $1.3activity million,has representingdeclined asince decreasewe oflaunched 77.6%our compared
toDAT $5.8 million recognized during the three months ended October 31, 2025.Strategy. This substantial decline in airdrop-relatedAirdrop-related income reflects
reduced airdropAirdrop activity within the Binance ecosystem during the current period. While airdropAirdrop income contributed positively to results,
it did not offset the impact of the decline in BNB market prices duringsince the quarter.PIPE Transaction.
In addition to airdrops, aA 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. DuringSince thewe quarterlaunched endedour JanuaryDAT 31, 2026,Strategy, the frequency and scale of these programs declined materially compared to priorhistorical program periods,
contributing to a reduction in platform-delivered yield.yield through July 31, 2026. Taken together with the decline in airdropAirdrop activity described above, these trends
reflect a broader moderation in yield generation during the period. The CompanyWe 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.
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’smanagement'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.
DuringSince the threePIPE months ended January 31, 2026,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 thewe Company holdshold a significant quantity of BNB, changes in the market
price of BNB hadhad, and will continue to havehave, a substantial impact on the Company’sour balance sheet and results of operations. Investors should
consider that fluctuations in the Company’sour financial results during the period were driven primarily toby changes in digital asset market
prices and airdropAirdrop yield rather than changes in the Company’sour operating activities.
Our
Retail &and Industry Business
TheWe Companyoperate operatesour itsFat controlledPanda environmentand agricultureindustrial (“CEA”)
businessclimate control systems businesses within theour Retail and Industry segment, which includes the provision of climate control systems for CEA industry. In June 2025,
the Company acquired Fat Panda which also operates within this segment. AsAt of JanuaryJuly 31, 2026, Fat Panda operates 34 retail locations,
including 30 Fat Panda branded stores and 4 Electric Fog branded outlets, along with an e-commerce platform. Fat Panda also manufactures
a proprietary line of premium e-liquids in-house and maintains a portfolio of trademarks and related intellectual property. Revenue from
CEA equipmentour andindustrial climate control systems business represents a relatively small portion of consolidated revenue, totaling $1.1$0.1 million for the nine months ended
January 31, 2026 and $0.7$0.2 million for the three months ended JanuaryJuly 31, 2026.2026 and the period from June 7, 2025 through July 31, 2025, respectively.
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.
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
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.
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.
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 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.
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.
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.
BNC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-17 | Yzilabs Management Ltd. |
Option exercise | 2,180,631 | — | — |
| 2026-09-17 | Yzilabs Management Ltd. |
Option exercise | 5,418,633 | — | — |
| 2026-09-17 | Yzilabs Management Ltd. |
Option exercise | 2,180,631 | — | — |
| 2026-09-17 | Yzilabs Management Ltd. |
Option exercise | 5,418,633 | — | — |
Well-known investors holding BNC (13F)
None of the 59 investors we track reported a position in their latest 13F.