CEA Industries Inc.
For the period ended Jul 31, 2025. Filed Sep 22, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2025 · Filed Sep 22, 2025
BNC$4.87+6.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001641172-25-010831
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-07-31; filed 2025-09-22.
0001493152-25-014503
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 76 previous paragraphs and 90 current paragraphs.
32 unchanged; 24 reworded; 34 added; 20 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (34)
Current report
CEA Industries is headquartered in Colorado. Our operating businesses consist of selling environmental control and other technologies and services to the Controlled Environment Agriculture (“CEA”) industry, primarily in the US, and manufacturing and retailing e- cigarettes, vape devices and e-liquids, primarily in Canada.
Current report
As Central Canada’s first dedicated vaping product retailer, Fat Panda’s inventory consists of high-quality vaping goods. This allows for dedicated investment of funds toward vaping products, yielding a market-leading catalogue of hundreds of various devices, and a countless array of flavors to suit a diverse clientele base. Over the years, Fat Panda has established a highly loyal customer base by curating a product lineup that considers multiple factors including familiarity with vaping systems, previous nicotine dependence, and ergonomics, among other product elements.
Current report
Over the last decade, Fat Panda has invested heavily in its in-house manufacturing of e-liquids, allowing it to drastically reduce the cost of the highest value commodity in its product offering. With proprietary recipes, and exclusivity to only Fat Panda retail outlets (where applicable), consumer retention is high with the uptake of Fat Panda’s own house-line of products. Furthermore, wholesale of these goods are allowed to alternate retailers in regions where a Fat Panda is not located, which the company believes acts as a feeder for expanded representation and marketing of the Fat Panda brand.
Current report
Located in the geographic center of Canada, Fat Panda’s headquarters in Winnipeg, Manitoba also acts as the central distribution hub for all locations in the retail chain. Each satellite location receives at minimum one shipment from the warehouse per week for all goods manufactured in-house. Third party goods are shipped direct from external suppliers and can occur as often as necessary, allowing for enhanced turnover and manageable inventory levels per location.
Current report
Fat Panda’s webstore similarly operates from the warehouse, with an ever-expanding catalogue, online sales have increased significantly in recent years, currently grossing over $250,000.00 (CAD) per month with a dedicated employee and other shared resources with warehousing.
Current report
Fat Panda Group of Companies incorporated and commenced active operations on June 1, 2014 and its principal business activities include the manufacture, distribution and sale of vaping products and accessories. The Companies own and operate retail locations in Manitoba, Saskatchewan and Ontario. These locations have the following retail stores.
Current report
Recent Developments
Current report
Acquisition of Fat Panda
Current report
CEA closed the acquisition of Fat Panda on June 6, 2025.
Current report
Private Placement Offering
Current report
On July 28, 2025, CEA Industries Inc. entered into securities purchase agreements (the “Securities Purchase Agreements”) with certain accredited investors (the “Purchasers”) pursuant to which the Company agreed to sell and issue to the Purchasers in a private placement offering (the “Offering”) (i) an aggregate of 41,754,478 shares of Common Stock, at an offering price of $10.10 per share, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 7,750,510 shares of Common Stock (the “Pre-Funded Warrant Shares”) at an offering price of $10.09999 per Pre-Funded Warrant, and (iii) stapled warrants (the “Stapled Warrants”) to purchase an aggregate of 49,504,988 shares of Common Stock (the “Stapled Warrant Shares”) at an exercise price of $15.15 per Stapled Warrant. In the Offering, the Purchasers tendered U.S. dollars to the Company as consideration for the Common Stock, Stapled Warrants and Pre-Funded Warrants. The Company closed the Offering on August 5, 2025. The Offering delivered $500,000,000 in gross proceeds. Up to an additional $750,000,000 may be received by the Company from the exercise of the Stapled Warrants.
Current report
The Company intends to use the net proceeds from the Offering primarily to acquire the native cryptocurrency of the BNB Chain blockchain commonly referred to as “BNB” and contribute the BNB to the Company’s treasury operations. The Company further intends to engage in income producing activities from the BNB held in treasury, including but not limited to, validation services, lending or other decentralized finance services.
Current report
In connection with entering into the Securities Purchase Agreements, on July 28, 2025, the Company and the Purchasers entered into a Registration Rights Agreement, pursuant to which the Company agreed to file a registration statement with the U.S. Securities and Exchange Commission, within 30 days of the closing of the Offering registering the resale of the Common Stock sold in the Offering, the Pre-Funded Warrants, the Pre-Funded Warrant Shares, the Stapled Warrants, the Stapled Warrant Shares and certain securities to be issued to the Company’s Strategic Advisors (as defined below).
Current report
Asset Management Agreement
Current report
In connection with the Offering, on August 5, 2025, the Company entered into an asset management agreement (the “Asset Management Agreement”) with 10X Capital Partners LLC (the “Asset Manager”) pursuant to which the Company appointed the Asset Manager to provide asset management and related services with respect to the Company’s digital assets in accordance with a defined treasury strategy (the “Treasury Strategy”). The Treasury Strategy is primarily focused on BNB and BNB equivalents, primarily within the BNB ecosystem.
Current report
The assets subject to the Asset Management Agreement consist of the net proceeds from the Offering as well as any other cash or digital assets designated by the Company as part of its treasury (the “Treasury Assets”). The Treasury Assets are held in cryptocurrency wallets established and controlled by the Company’s Asset Manager (or an affiliate), with custody maintained by a custodian acceptable to the Company’s Strategic Committee.
Current report
The Asset Manager is compensated according to a management fee schedule set forth in the Asset Management Agreement and is also entitled to a one-time issuance of warrants to purchase shares of the Company’s Common Stock equal to 2% of the aggregate number of shares and Pre-Funded Warrants issued in the Offering. The Company is responsible for all reasonable and documented expenses related to the operation of the Treasury Strategy, including custodial, banking, brokerage, transaction, and other related fees. The Asset Manager does not provide advice regarding securities, and the arrangement is structured to avoid the inclusion of securities as defined under the Investment Advisers Act of 1940.
Current report
The Asset Management Agreement has a term of twenty years. If the Company terminates the Asset Management Agreement prior to the end of the term, or if the Asset Manager terminates due to a material breach by the Company, the Company is required to pay the Asset Manager all fees and other compensation that would have accrued through the end of the term as liquidated damages, paid monthly. The Asset Manager may terminate the agreement at any time for any reason with at least 120 days’ prior written notice.
Current report
The Asset Manager is not authorized to act as custodian of the Company’s assets, nor to take possession or title to any assets, except for the direct withdrawal of fees as provided in the Asset Management Agreement. The Asset Manager may provide similar services to other clients, and the Asset Manager or its affiliates may engage in transactions for their own accounts. The Asset Management Agreement contains customary representations, warranties, confidentiality, indemnification and limitation of liability provisions, and is governed by the laws of the State of Delaware.
Current report
Strategic Advisor Agreements
Current report
On August 5, 2025, the Company entered into two Strategic Advisor Agreements (the “Strategic Advisor Agreements”) with each of 10X BNB Cayman Sponsor and YZi Management Labs Ltd. (the “Strategic Advisors”) pursuant to which the Company engaged the Strategic Advisors to provide strategic advice and guidance relating to the Company’s business, operations, growth initiatives and industry trends in the crypto technology sector for an initial term of six months, which may be extended by mutual written agreement of the Company and the Strategic Advisors. Either the Company or the Strategic Advisors may terminate the Strategic Advisor Agreements upon 90 days’ prior written notice or for cause, as such term is defined in the Strategic Advisor Agreements. Pursuant to the terms of the Strategic Advisor Agreements, the Company issued to the Strategic Advisors warrants (the “Strategic Advisor Warrants”) to purchase an aggregate of 6,930,697 shares of Common Stock. The exercise price per share of the Strategic Advisor Warrants is equal to the par value of the Common Stock. The Strategic Advisor Warrants are exercisable, in whole or in part, at any time and from time to time, for a period of seven years from the date of issuance. The Strategic Advisor Agreements also contain customary representations and warranties, confidentiality provisions and limitations on liability.
Current report
Non-GAAP Combined Three Months Ended July 31, 2025
Current report
Our financial results for the periods from May 1, 2025 through June 6, 2025 and the three months ended July 31, 2024 are referred to as those of the “Predecessor” period. Our financial results for the period from June 7, 2025 through July 31, 2025 are referred to as those of the “Successor” period. Our results of operations as reported in our Condensed Consolidated Financial Statements and Comprehensive Income (Loss) for these periods are prepared in accordance with U.S. GAAP. Although U.S. GAAP requires that we report our results for the period from May 1, 2025 through June 6, 2025 and the period from June 7, 2025 through July 31, 2025 separately, management views our operating results for the three months ended July 31, 2025 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods. We believe we cannot adequately benchmark the operating results of the period from June 7, 2025 through July 31, 2025 against any of the previous periods reported in our Condensed Consolidated Financial Statements and Comprehensive Income (Loss) without combining it with the period from May 1, 2025 through June 6, 2025, and do not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding our overall operating performance. Management believes that the key performance metrics for the Successor period when combined with the Predecessor period provide more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our Condensed Consolidated Financial Statements in accordance with U.S. GAAP, the tables and discussion below also present the combined results for the three months ended July 31, 2025. The combined results for the three months ended July 31, 2025 represent the sum of the reported amounts for the Predecessor period from May 1, 2025 through June 6, 2025 and the Successor period from June 7, 2025 through July 31, 2025. These combined results are not considered to be prepared in accordance with U.S. GAAP and have not been prepared as pro forma results per applicable regulations. The combined operating results do not reflect the actual results we would have achieved absent our acquisition of Fat Panda and are not necessarily indicative of future results. Accordingly, the results for the combined three months ended July 31, 2025 (prepared on a Non-GAAP basis) and three months ended July 31, 2024 (prepared on a GAAP basis) may not be comparable.
Current report
Revenue for the three months ended July 31, 2025 was $7,507,000, compared to $6,958,000 for the three months ended July 31, 2024, representing an increase of $549,000, or 8%. The increase was primarily due to an increase in the price per unit of many products to cover the cost of newly enacted federal and provincial excise taxes along with an increase due to the acquisition.
Current report
Cost of revenue increased by $1,155,000 or 28%, from $4,054,000 for the three months ended July 31, 2024 to $5,209,000 for the three months ended July 31, 2025. The increase was primarily due to higher material costs of approximately $700,000 due to an increase in the cost per unit of many products for the newly enacted federal and provincial excise taxes. Additionally, the higher cost of sales was driven by an increase in revenue and approximately $200,000 was a result of the acquisition.
Current report
The higher material costs, increased revenue, and the impact of the acquisition drove a decrease in gross profit of $605,000, or 21%, from $2,904,000 for the three months ended July 31, 2024 to $2,299,000 for the three months ended July 31, 2025. Our gross margin decreased by 11 percentage points, from 42% for the three months ended July 31, 2024 to 31% for the three months ended July 31, 2025
Current report
Our increase in SG&A expenses for the three months ended July 31, 2025, compared to the three months ended July 31, 2024, was primarily due to (i) a one-time increase of $4,670,000 for stock-based compensation to directors and certain employees, related to the implementation of our Treasury operations, (ii) higher accounting and legal fees of $1,018,000, related to the Fat Panda acquisition, and (iii) approximately $200,000 in salaries and other expenses due to the acquisition.
Current report
The increase in advertising and marketing expenses was primarily due to an increase in free product giveaways and in store promotions.
Current report
The decrease in product development was due to a management decision regarding product development investment.
Current report
We recognized other expense of $267,000 for the three months ended July 31, 2025, compared to $0 for the three months ended July 31, 2024. Other expense for the current period consisted of interest and debt discount amortization on notes related to the acquisition.
Current report
As of July 31, 2025 we had total accounts payable and accrued expenses of $2,989,000, short term notes payable of $4,163,000, deferred revenue of $433,000, income tax payable of $47,000, current portion of operating lease liability of $662,000, and royalty liabilities of $13,000 (Successor). As of July 31, 2025, we had a working capital deficit of $1,011,000 (Successor), compared to working capital of $3,550,000 as of April 30, 2025 (Predecessor). The decrease in our working capital was primarily related to notes payable and higher deferred revenue, both as a result of the acquisition of Fat Panda.
Current report
Cash used in operations for the period from June 7, 2025 through July 31, 2025 (Successor) was $1,725,000 compared to cash used in operations of $238,000 for the period May 1, 2025 through June 6 (Predecessor), 2025 and cash used in operations of $2,000 for the three months ended July 31, 2024 (Predecessor).
Current report
The increase in cash used in operating activities was primarily the result of a higher net loss, higher stock-based compensation and higher accounts payable and accrued liabilities, offset by lower prepaid expenses.
Current report
Cash used for investing activities for the period from June 7, 2025 through July 31, 2025 (Successor) was $10,644,000 compared to cash used in investing activities of $2,000 for the period May 1, 2025 through June 6, 2025 (Predecessor) and $7,000 for the three months ended July 31, 2024. The increase was the result of cash paid for the acquisition of Fat Panda.
Removed paragraphs (20)
Previous report
Recent Developments – Acquisition of Fat Panda
Previous report
Completion of the acquisition is subject to a number of conditions, which include the preparation and delivery of the Fat Panda companies audited consolidated financial statements and unaudited interim consolidated financial statements, satisfaction of the financial condition of Fat Panda, completion of due diligence by the Company, receipt of all necessary government approvals and licenses, and continuation and reformation of the various retail location leases. Completion is also subject to the Company obtaining financing for a portion of the cash purchase price. The acquisition agreement also provides for the selling persons to make representations and warranties and undertake certain covenants about many aspects of the business of Fat Panda that shall be true and correct and performed at or prior to closing. The representations, warranties and covenants are those that are typical in relation to the acquisition of an operating business. The Company has also made certain representations, warranties and covenants, the principal one of which is to obtain financing for a part of the purchase price, which if not obtained will permit the Company to terminate the purchase agreement.
Previous report
CEA Industries Inc. (“Company”) has received preliminary unaudited financial information about Fat Panda Ltd. (“Fat Panda”) that is a condition to the completion of its acquisition of Fat Panda. Based on preliminary, unaudited financial data, in its fiscal year ended April 30, 2024 Fat Panda generated CAD $38.5 million (USD $28.5 million) in revenue with 39% gross margins and CAD $8.4 million (USD $6.2 million) in adjusted EBITDA. Both revenue and adjusted EBITDA grew over 10% from fiscal year ended April 30, 2023, while gross margin declined by 15% from fiscal year 2023. The Company continues to expect to complete the acquisition in the first half of 2025, subject to fulfillment of customary closing conditions which includes completion of the audit of Fat Panda’s financial statements.
Previous report
The Company continues to expect to complete the acquisition in the first half of 2025, subject to fulfillment of customary closing conditions.
Previous report
Impact of Ukrainian and Israeli Conflicts
Previous report
We believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial reporting. We believe the conflicts will have only a general impact on our operations in the same manner as it is having a general impact on all businesses that have their operations limited to North America resulting from international sanction and embargo regulations, possible shortages of goods and goods incorporating parts that may be supplied from countries involved in the conflicts, supply chain challenges, and the international and US domestic inflation resulting from the conflict and government spending in relation to the conflicts. As our operations are related only to the North American controlled agricultural industry, largely within the cannabis space, we do not believe we will be specifically targeted for cyber-attacks related to the conflicts. We have no operations in the countries directly involved in the conflict or are specifically impacted by any of the sanctions and embargoes specifically related to those conflicts, as we principally operate in the United States and Canada. We do not believe that the conflicts will have any impact on our internal control over financial reporting. Other than general securities market trends, we do not have reason to believe that investors will evaluate the company as having special risks or exposures related to the conflicts.
Previous report
Our recognized revenue for the quarters ended March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025, in the table below, excludes $31,000, $12,000, $0, $46,000, and $25,000 respectively, in revenue arising from the forfeiture of non-refundable deposits from former customers on previously cancelled contracts. The contracts were removed from the backlog at the time of cancellation.
Previous report
Revenue for the three months ended March 31, 2025 was $713,000, compared to $235,000 for the three months ended March 31, 2024, representing an increase of $478,000, or 203%. The increase was primarily due to higher bookings for the current and previous quarter for each year.
Previous report
Cost of revenue increased by $285,000 or 73%, from $389,000 for the three months ended March 31, 2024 to $674,000 for the three months ended March 31, 2025. The increase was primarily due to an increase in revenue, along with a decrease in fixed costs, offset by an increase in variable costs, as discussed below.
Previous report
During the three months ended March 31, 2025, we recognized a gross profit of $39,000 compared to a gross loss of $154,000 for the three months ended March 31, 2024, an increase in profit of $193,000 or 125%. Our gross margin increased by 71 percentage points from a gross loss margin of 66% for the three months ended March 31, 2024 to a gross profit margin of 6% for the three months ended March 31, 2025 primarily due to higher revenue, a decrease in fixed costs as a percent of revenue, offset by higher variable costs as a percent of revenue, as described below. Additionally, total revenue in the three months ended March 31, 2025 and March 31, 2024 included $25,000 and $31,000, respectively, from forfeited, non-refundable deposits from former customers on previously cancelled contracts.
Previous report
Our fixed costs (which include engineering, service, manufacturing and project management salaries and benefits and manufacturing overhead) totaled $88,000, or 12% of total revenue, for the three months ended March 31, 2025, as compared to $254,000, or 108% of total revenue, for the three months ended March 31, 2024. The decrease of $166,000 was due to a decrease in salaries and benefits of $159,000 and a decrease in fixed overhead of $7,000.
Previous report
Our variable costs (which include the cost of equipment, outside engineering costs, shipping and handling, travel and warranty costs) totaled $586,000, or 82% of total revenue, during the three months ended March 31, 2025, as compared to $135,000, or 58% of total revenue, in the three months ended March 31, 2024. The decrease in variable costs was primarily due to: (i) an increase in equipment costs of $409,000 driven by higher revenue, (ii) a decrease in the reduction of the warranty accrual of $87,000, (iii) a decrease in excess and obsolete inventory expense of $53,000, (iv) a reduction in outside engineering services $12,000, offset by (v) increased expense for third party site visits of $18,000.
Previous report
Our increase in SG&A expenses for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to: (i) and increase of $361,000 for accounting and other fees, (ii) an increase in investor relations costs of $59,000, (iii) an increase in bad debt expense of $35,000 (due to Q1 2024 including collections on previously reserved receivables), (iv) increased insurance expense of $6,000, (v) higher business taxes and licenses of $6,000, and (vi) miscellaneous other expenses of $5,000. The increases were offset by(i) a decrease in salaries and benefits (including stock compensation) of $92,000, (ii) lower losses on asset disposals of $13,000, (iii) a decrease in facilities and office supplies of $11,000, and (iv) a decrease in depreciation of $6,000.
Previous report
The decrease in advertising and marketing expenses was primarily due to (i) a decrease in advertising and promotion and trade show related expense of $9,000, offset by (ii) an increase of $3,000 for web development.
Previous report
We recognized other income of $5,000 for the three months ended March 31, 2025, compared to other income of $7,000 for the three months ended March 31, 2024. Other income for both periods consisted of interest income from a money market account.
Previous report
As of March 31, 2025 we had total accounts payable and accrued expenses of $515,000, deferred revenue of $475,000, and the current portion of operating lease liability of $138,000. As of March 31, 2025, we had working capital of $8,071,000, compared to working capital of $9,064,000 as of December 31, 2024. The decrease in our working capital was primarily related to (i) a decrease in cash of $745,000, (ii) a decrease in prepaid and other expenses of $187,000, (iii) an increase in deferred revenue of $131,000, and (iv) a decrease in the current portion of our right-of-use asset of $28,000, (v) an increase in accounts receivable (net) of $44,000, and (vi) a decrease in accounts payable and accrued liabilities of $36,000.
Previous report
Cash used in operations for the three months ended March 31, 2025 was $745,000 compared to cash used in operating activities of $909,000 for the three months ended March 31, 2024, a decrease of $164,000.
Previous report
The decrease in cash used in operating activities during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily attributable to: (i) a decrease in cash used to fund working capital of $351,000, (ii) an increase in net loss of $152,000, and (iii) a decrease in non-cash operating charges of $35,000.
Previous report
The decrease in our working capital was primarily related to (i) a decrease in cash of $745,000, (ii) a decrease in prepaid and other expenses of $186,000, (iii) an increase in deferred revenue of $131,000, and (iv) a decrease in the current portion of our right-of-use asset of $28,000, (v) an increase in accounts receivable (net) of $44,000, and (vi) a decrease in accounts payable and accrued liabilities of $36,000.
Previous report
There were no cash flows from investing activities during the three months ended March 31, 2025 or the three months ended March 31, 2024.
Reworded paragraphs (24)
Previous wording
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, which include additional information about our accounting policies, practices, and the transactions underlying our financial results, as well as with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Cautionary Statements” appearing elsewhere herein and the risks and uncertainties described or identified in “Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, as updated from time to time in the Company’s filings with the SEC, and Part II, Item 1A of this Quarterly Report entitled “Risk Factors.”
Current wording
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, which include additional information about our accounting policies, practices, and the transactions underlying our financial results, as well as with our audited consolidated financial statements included in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, as filed with the SEC. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Cautionary Statements” appearing elsewhere herein and the risks and uncertainties described or identified in “Item 1A – Risk Factors” in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, as updated from time to time in the Company’s filings with the SEC, and Part II, Item 1A of this Quarterly Report entitled “Risk Factors.”
Previous wording
CEA Industries, through our subsidiary, Surna Cultivation Technologies LLC, is focused on selling environmental control and other technologies and services to the Controlled Environment Agriculture (“CEA”) industry. The CEA industry aims tooptimize the use of horticultural resources such as water, energy, space, capital, and labor, to create an agriculture business that is more efficient and more productive than those that use traditional farming methods. Typically, the CEA industry is focused on indoor agriculture and vertical farming.
Current wording
We sell to the CEA industry through our subsidiary, Surna Cultivation Technologies LLC. The CEA industry aims tooptimize the use of horticultural resources such as water, energy, space, capital, and labor, to create an agriculture business that is more efficient and more productive than those that use traditional farming methods. Typically, the CEA industry is focused on indoor agriculture and vertical farming.
Previous wording
Headquartered in Colorado, we aim to provide customers with a variety of value-added technology solutions that help improve their overall crop quality and yield, optimize energy and water efficiency, and satisfy the evolving state and local codes, permitting and regulatory requirements. We do this by offering our customers a variety of service and product offerings that include: (i) air handling equipment and systems, (ii) air sanitation products, (iii) LED lighting, and (iv) benching and racking solutions for indoor cultivation.
Current wording
We aim to provide customers with a variety of value-added technology solutions that help improve their overall crop quality and yield, optimize energy and water efficiency, and satisfy the evolving state and local codes, permitting and regulatory requirements. We do this by offering our customers a variety of product offerings that include air handling equipment and systems for indoor cultivation.
Previous wording
CEA growers currently face a challenging business environment that includes high energy costs, water usage and conservation issues, continuously evolving waste removal regulations, inflationary pressures, and labor shortages. In addition to these issues, our cannabis growing customers face increasingly rigorous quality standards and declining cannabis prices in a growing industry whose standards are constantly evolving. The part of the CEA industry focused on by the Company has been food related crops, a segment that is also facing disruption from evolving market demand, competition, and reorganization, including the lack of growth capital and several noteworthy bankruptcies.
Current wording
CEA growers currently face a challenging business environment that includes high energy costs, water usage and conservation issues, continuously evolving waste removal regulations, inflationary pressures, and labor shortages. The part of the CEA industry focused on by the Company has been food related crops, a segment that is facing disruption from evolving market demand, competition, and reorganization, including the lack of growth capital and several noteworthy bankruptcies.
Previous wording
Fat Panda, we believe, is central Canada’s largest retailer and manufacturer of e-cigarettes, vape devices and e-liquids, with a market share exceeding 50% in the region. Fat Panda operates 33 retail locations, including 29 Fat Panda stores and four Electric Fog vape outlets. Fat Panda also serves a wide range of customers through its online e-commerce platform. Its retail footprint is complemented by a comprehensive portfolio of products, including its own line of premium e-liquids manufactured in-house, along with a robust portfolio of trademarks and intellectual property.
Current wording
The Company is also central Canada’s largest retailer and manufacturer of e-cigarettes, vape devices and e-liquids, with a market share exceeding 50% in the region. The Company entered this business through the acquisition of Fat Panda Limited (Fat Panda) which closed June 6, 2025. Fat Panda operates 33 retail locations, including 29 Fat Panda branded stores and four Electric Fog branded vape outlets, in the provinces of Manitoba, Ontario and Saskatchewan. Fat Panda also serves a wide range of customers through its online e-commerce platform. Its retail footprint is complemented by a comprehensive portfolio of products, including its own line of premium e-liquids manufactured in-house, along with a robust portfolio of trademarks and intellectual property.
Previous wording
We have entered into an acquisition agreement to acquire a group of Manitoba corporations that own all the assets used in the business of Fat Panda Ltd. (“Fat Panda”). Fat Panda is engaged in the manufacture, distribution and retail sale of e-cigarettes, vape devices and e-liquids and related products through multiple retail locations in the provinces of Manitoba, Ontario, and Saskatchewan, Canada, as well as through its online e-commerce site.
Current wording
On February 7, 2025, we entered into a purchase agreement with the several owners of all the equity of a group of Manitoba corporations that own all the assets used in the business of Fat Panda Ltd.”).
Previous wording
The acquisition will include all the assets of Fat Panda, including among other things, the leases for the retail outlets, intellectual property, inventory, government licenses and permits, franchise agreements, manufacturing facilities and supply agreements, which are necessary for the ongoing manufacturing and retail operations of Fat Panda. The acquisition will continue the employment of the current management and of the production and retail staff, for the uninterrupted, continuous operations of the business. The sellers will enter into non-competition agreements at closing. Certain of the senior management persons will enter into employment agreements for their continued employment after the closing of the acquisition.
Current wording
The acquisition included all the assets of Fat Panda, including among other things, the leases for the retail outlets, intellectual property, inventory, government licenses and permits, franchise agreements, manufacturing facilities and supply agreements, which are necessary for the ongoing manufacturing and retail operations of Fat Panda. The acquisition will continue the employment of the current management and of the production and retail staff, for the uninterrupted, continuous operations of the business. The Company will enter into non-competition agreements at closing. Certain of the senior management persons will enter into employment agreements for their continued employment after the closing of the acquisition.
Previous wording
The purchase price is CAD$18,000,000 (approximately, US$12,600,000), payable in cash, securities and seller loans. The Company also expects to borrow part of the cash portion of the purchase price, in an amount yet to be determined, which will be secured by the assets of Fat Panda. The purchase price includes an initial cash payment of CAD$13,900,000, issuance of 39,000 shares of the common stock of the Company with an agreed aggregate value of CAD$700,000 (approximately CAD$18.00 per share), and issuance of notes to the sellers in the aggregate principal amount of CAD$2,060,000, and release of a CAD$100,000 due diligence deposit. The Company is also agreeing to pay certain financial statement audit expenses of the selling parties. Of the notes to be issued by Fat Panda to the selling parties, one of the notes in the principal amount of CAD$1,030,000, is convertible into the common stock of the Company at a conversion rate of USD$19.00 per share. At closing the following will occur: first, a portion of the cash purchase price in the amount of CAD$1,375,000 will be held in a joint escrow account for 120 days after closing as a working capital adjustment escrow; second, the sum of CAD$1,240,000, will be paid into escrow for possible indemnity claims to be held for 18 months; and third, the purchase price will be reduced by CAD$112,500 and the sum of CAD$112,500 will be paid into escrow to be held for 18 months, both in relation to employee obligation claims under Canadian employment law.
Current wording
The purchase price was CAD$18,000,000 (approximately USD$12,900,000), paid in cash, securities and our loans. Cash payments totaled CAD$14,627,500, of which CAD$1,375,000 was paid into a joint escrow account to be held for 120 days after closing as a working capital adjustment and CAD$1,240,000 was paid into a joint escrow account to be held for 18 months after closing for possible general indemnity claims. CEA also issued 39,000 shares of the common stock of CEA with an agreed aggregate value of CAD$700,000 (approximately CAD$18.00 per share). CEA also issued notes in the aggregate principal amount of CAD$2,560,000, of which the aggregate principal amount of CAD$1,030,000 is convertible into the common stock of CEA at a conversion rate of USD$19.00 per share and up to the aggregate principal amount of CAD$500,000 is forgivable against possible tax indemnity claims. CEA also had an adjustment to reduce the purchase price in the amount of CAD$112,500 in relation to employee obligation claims under Canadian employment law.
Previous wording
Our Bookings, Backlog and Revenue
Current wording
Our Bookings, Backlog and Revenue- Successor
Previous wording
During the three months ended March 31, 2025, we executed new sales contracts with a total contract value of $1,045,000. During this same period, we had positive change orders of $1,000 and cancellations of $4,000. Consequently, our net bookings in the three months ended March 31, 2025 were $1,042,000, representing an increase of $532,000 (or 104%) from net bookings of $510,000 in the fourth quarter of 2024.
Current wording
During the period from June 7, 2025 through July 31, 2025, we executed new sales contracts with a total contract value of $61,000. During this same period, there were no change orders or cancellations. Consequently, our net bookings were $61,000, representing a decrease of $24,000 (or 28%) from net bookings of $85,000 for the May 1, 2025 through June 6, 2025 period.
Previous wording
Our backlog at March 31, 2025 was $844,000, an increase of $354,000, or 72%, from our backlog of $490,000 at December 31, 2024. The increase in backlog is primarily the result of increased bookings in the first quarter that have not yet been fulfilled. While we expect to recognize all the revenue from the remaining backlog in 2025, there is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. Therefore, investors should not view backlog as earned revenue.
Current wording
Our backlog at July 31, 2025 was $630,000, a decrease of $96,000, or 13%, from our backlog of $726,000 at June 6, 2025. The increase in backlog is primarily the result of increased bookings in the first quarter that have not yet been fulfilled. While we expect to recognize all the revenue from the remaining backlog in 2025, there is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. Therefore, investors should not view backlog as earned revenue.
Previous wording
The completion of a customer’s new build facility project is dependent upon the customer’s ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes for these customers to complete a new build project, which corresponds to when we are able to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor cannabis cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on the number of cultivators; (iv) the customer’s need to obtain cultivation facility financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation systems; (vii) the availability of power; and (viii) delays that are typical in completing any construction project.
Current wording
The completion of a customer’s new build facility project is dependent upon the customer’s ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes for these customers to complete a new build project, which corresponds to when we are able to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on the number of cultivators; (iv) the customer’s need to obtain cultivation facility financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation systems; (vii) the availability of power; and (viii) delays that are typical in completing any construction project.
Previous wording
We have provided an estimate in our condensed consolidated financial statements for when we expect to recognize revenue on our remaining performance obligations (i.e., our Q1 2025 backlog), using separate time bands, with respect to engineering only paid contracts and partial equipment paid contracts. There continues to be significant uncertainty regarding the timing of our recognition of revenue on our Q1 2025 backlog. Refer to theRevenue Recognition section ofNote 1 in our condensed consolidated financial statements, included as part of this Quarterly Report for additional information on our estimate of future revenue recognition on our remaining performance obligations.
Current wording
We have provided an estimate in our condensed consolidated financial statements for when we expect to recognize revenue on our remaining performance obligations (i.e., our Q1 202 backlog). There continues to be significant uncertainty regarding the timing of our recognition of revenue on our Q1 202 backlog. Refer to theRevenue Recognition section ofNote 2 in our condensed consolidated financial statements, included as part of this Quarterly Report for additional information on our estimate of future revenue recognition on our remaining performance obligations.
Previous wording
Operating expenses increased to $1,113,000 for the three months ended March 31, 2025, from $769,000 for the three months ended March 31, 2024, an increase of $344,000, or 45%. The operating expense increase consisted of: (i) an increase in selling, general and administrative expenses (“SG&A expenses”) of $350,000, offset by (ii) a decrease in advertising and marketing expenses of $6,000. The increase is primarily due to higher professional fees in relation to a potential acquisition.
Current wording
Operating expenses increased to $7,919,000 for the three months ended July 31, 2025, from $2,040,000 for the three months ended July 31, 2024, an increase of $5,879,000, or 288%. The operating expense increase consisted of (i) an increase in selling, general and administrative expenses (“SG&A expenses”) of $5,895,000, (ii) an increase advertising and marketing expenses of $54,000, and (iii) a decrease in product development costs of $71,000.
Previous wording
We recognized an operating loss of $1,074,000 for the three months ended March 31, 2025, as compared to an operating loss of $924,000 for the three months ended March 31, 2024, an increase of $150,000 or 16%. The operating loss for the three months ended March 31, 2025 included $78,000 of non-cash, stock-based compensation and $1,000 in depreciation, compared to $77,000 in non-cash stock-based compensation and $6,000 of depreciation expense for the three months ended March 31, 2024. Excluding these non-cash items, our operating loss increased by $155,000.
Current wording
We recognized an operating loss of $5,620,000 for the three months ended July 31, 2025, as compared to an operating profit of $864,000 for the three months ended July 31, 2024, a decrease in profit of $6,484,000 or 751%. The operating loss for the three months ended July 31, 2025 included $4,670,000 of non-cash, stock-based compensation, $60,000 for the income tax provision, $28,000 for debt related costs, and $18,000 in depreciation, compared to $0 in non-cash stock-based compensation and $27,000 of depreciation expense for the three months ended July 31, 2024. Excluding these non-cash items, our operating profit decreased by $1,708,000.
Previous wording
Overall, we recognized a net loss of $1,069,000 for the three months ended March 31, 2025, as compared to a net loss of $917,000 for the three months ended March 31, 2024, an increase of $152,000 or 17%. The net loss for the three months ended March 31, 2025 included $78,000 of non-cash stock-related compensation and $1,000 in depreciation, compared to $77,000 in non-cash stock-related compensation and $6,000 of depreciation expense for the three months ended March 31, 2024. Excluding these non-cash items, our net loss increased by $157,000.
Current wording
Overall, we recognized a net loss of $5,829,000 for the three months ended July 31, 2025, as compared to a net profit of $708,000 for the three months ended July 31, 2024, a decrease in profit of $6,537,000 or 923%. The net loss for the three months ended July 31, 2025 included $4,670,000 of non-cash stock-related compensation, $60,000 for the income tax provision, $28,000 for debt related costs, and $18,000 in depreciation, compared to $0 in non-cash stock-related compensation and $27,000 of depreciation expense for the three months ended July 31, 2024. Excluding these non-cash items, our net profit decreased by $1,761,000.
Previous wording
As of March 31, 2025, we had cash and cash equivalents of $8,707,000, compared to cash and cash equivalents of $9,453,000 as of December 31, 2024. The $745,000 decrease in cash and cash equivalents during the three months ended March 31, 2025, was the result of cash used in operations. Our cash is held in bank depository accounts in a financial institution. During the three months ended March 31, 2025, we held deposits in this financial institution that exceeded the federally insured amount.
Current wording
As of July 31, 2025 (Successor), we had cash and cash equivalents of $3,020,000, compared to cash and cash equivalents of $2,149,000 as of April 30, 2025 (Predecessor). Our cash is held in bank depository accounts in financial institutions. As of July 31, 2025, we held deposits in this financial institution that exceeded the federally insured amount.
Previous wording
As of March 31, 2025, we had accounts receivable (net of allowance for doubtful accounts) of $57,000, contract assets (net of allowance for doubtful accounts) of $234,000, inventory (net of excess and obsolete allowance) of $20,000, and prepaid expenses and other assets of $179,000. While we typically require advance payment before we commence engineering services or ship equipment to our customers, we have made exceptions requiring us to record accounts receivable, which carry a risk of non-collectability especially since most of our customers are funded on an as-needed basis to complete facility construction.
Current wording
As of July 31, 2025, we had accounts receivable (net of allowance for doubtful accounts) of $189,000, contract assets (net of allowance for doubtful accounts) of $233,000, inventory (net of excess and obsolete allowance) of $3,375,000, and prepaid expenses and other assets of $480,000 (Successor).
Previous wording
The following summarizes our approximate cash flows for the three months ended March 31, 2025 and March 31, 2024:
Current wording
The following summarizes our approximate cash flows for the period from June 7, 2025 through July 31, 2025 (Successor), for the period May 1, 2025 through July 31, 2025 (Predecessor) and for the three months ended July 31, 2024 (Predecessor):
Previous wording
We incurred a net loss for the three months ended March 31, 2025 of $1,069,000 and have an accumulated deficit of $41,405,000 as of March 31, 2025.
Current wording
We incurred a net loss for the period from June 7, 2025 through July 31, 2025 (Successor) of $5,829,000 and have an accumulated deficit of $47,650,000 as of July 31, 2025 (Successor).
Previous wording
There were no cash flows from financing activities during the three months ended March 31, 2025 and March 31, 2024.
Current wording
Cash provided by financing activities for the period from June 7, 2025 through July 31, 2025 (Successor) was $3,910,000. There were no cash flows from financing activities for the period May 1, 2025 through June 6, 2025 (Predecessor) or for the three months ended July 31, 2024 (Predecessor). The increase was the result of proceeds from the note payable in relation to the acquisition of Fat Panda.
Previous wording
As of March 31, 2025, our contractual payment obligations consisted of a building lease. Refer toNote 2 –Leases of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of our building lease.
Current wording
As of July 31, 2025, our contractual payment obligations consisted of a building lease. Refer toNote 4 –Leases of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of our building lease.
Previous wording
Refer toNote 6 – Commitments and Contingencies of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of commitments and contingencies.
Current wording
Refer toNote 10 – Commitments and Contingencies of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of commitments and contingencies.
Previous wording
We are required to disclose any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. As of March 31, 2025, we had no off-balance sheet arrangements. During the three months ended March 31, 2024, we did not engage in any off-balance sheet financing activities other than those included in the “Contractual Payment Obligations” discussed above and those reflected inNote 6 of our condensed consolidated financial statements.
Current wording
We are required to disclose any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. As of July 31, 2025, we had no off-balance sheet arrangements. During the three months ended July 31, 2025, we did not engage in any off-balance sheet financing activities other than those included in the discussed above and those reflected inNote 10 of our condensed consolidated financial statements.