CEA Industries Inc.

Note 1 –Nature of Operations

Description of Business

CEA Industries Inc. (the “Company”) was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered in Louisville, Colorado. The Company has historically operated a portfolio of consumer and commercial businesses and recently undertook a significant strategic shift by adopting a digital asset treasury strategy focused on accumulation of the native cryptocurrency of the BNB Chain blockchain commonly referred to as “BNB” as its primary treasury asset.

The Company’s treasury business consists of acquiring BNB, holding BNB on its balance sheet, and engaging in income producing activities from the BNB held in the treasury, including, but not limited to, validation services, lending or other decentralized finance services. The Company initiated its BNB treasury operations on August 5, 2025, when the Company closed the private placement offering (or the “PIPE”) pursuant to the Securities Purchase Agreement, dated July 28, 2025, between the Company and the Purchasers thereto which provided for approximately $500,000,000 in gross proceeds plus up to an additional $750,000,000 of gross proceeds which may be received from the exercise of warrants exercisable for shares of Common Stock of the Company at a price of $15.15 per share. The intended use of net proceeds from the offering is to acquire BNB.

The Company’s operating businesses consist of selling environmental control and other technologies to the Controlled Environment Agriculture (“CEA”) industry and manufacturing and retailing e-cigarettes, vape devices and e-liquids.

In service of the CEA industry, through its subsidiary Surna Cultivation Technologies LLC, the Company provides climate control systems and air handling equipment to commercial indoor crop cultivation facilities. The Company’s customers include commercial, state- and provincial-regulated CEA growers in the U.S. and Canada, with facilities ranging from several thousand to more than 100,000 square feet. Customers typically engage the Company to assist with building new facilities or expanding or retrofitting existing facilities. The Company leverages its experience in the CEA space to bring value-added climate control solutions that help improve its customers’ overall crop quality and yield, optimize energy and water efficiency, and satisfy the evolving state and local codes, permitting and regulatory requirements.

The Company, through its subsidiary, Fat Panda Limited, is also one of central Canada’s largest retailers and manufacturers 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. The Company operates 33 retail locations, including 29 Fat Panda stores and four Electric Fog 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.

Being the earliest entrant in the Central Canadian market in 2013, Fat Panda was able to establish itself as the only dedicated retailer of vaping products at the time. As a result, the brand became synonymous with vaping goods in the region, paving the way for future success and recognition as Fat Panda expanded geographically outwards from Winnipeg.

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.

Changes to United States tariff and import/export regulations may have a material adverse effect on our business, financial condition and results of operations

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. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations. As the Peoples Republic of China (“PRC”) is a particular focus of the tariffs and trade policies, and the Company uses products from the PRC in its product offerings, we expect that there will be disruption in that aspect of our business. We are in the process of searching for alternative suppliers, but there is no assurance that we will be able to find other suppliers at a price that will be reasonable.

Per the US-CAN tariffs, we have yet to be majorly affected by this. The only potential effect could be from raw material sourcing where many of our flavorings, the empty bottles, and nicotine are sourced from the United States. That being said, we have purchased large amounts of these materials in the past that we should not be affected for over a year. From what we understand, the only items that are manufactured in the US are the flavorings, whereas the nicotine and bottles are sourced from other countries and simply wholesaled/distributed by American Companies.

Impact of Ukrainian and Israeli Conflicts

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, US domestic, and Canadian domestic inflation resulting from the conflict and government spending in relation to the conflicts. As our operations are not within or related to these regions of the world, nor within defense related industries, 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.

Inflation

Our operations are being influenced by the level of inflation in the larger economy and in the industries related to building renovations, retrofitting and new build CEA facilities in which we operate. We believe that we will continue to face inflationary increases in the cost of products and our operations, which will adversely affect our margins and financial results and the pricing of our service and product supply contracts. Inflation is reflected in higher wages, increased pricing of equipment, delivery and transportation costs, and general operational expenses. As we move forward, we plan to continuously monitor our various contract terms and may decide to add clauses that will permit us to adjust pricing if inflation and price increase pressures on us will impact our ability to perform our contracts and maintain our margins.

Note 2 –Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three months ended July 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2026. The balance sheet information as of April 30, 2025 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025.

On June 6, 2025 (the “Acquisition Date”), CEA Industries Inc. completed its acquisition of the Fat Panda Group of Companies (“Fat Panda”) (the “Fat Panda Acquisition”). As further described inNote 3 – Business Combination, CEA Industries Inc. has been identified as the accounting acquirer (the “Successor”) and Fat Panda as the accounting predecessor (the “Predecessor”) in accordance with the acquisition method of accounting under ASC 805,Business Combinations. This determination was based on an evaluation of the post-acquisition governance structure, management composition, and other indicators of control.

As a result of this designation, the financial statements reflect a change in reporting entity. Financial information for periods prior to the Acquisition Date represents the historical operations of Fat Panda and is labeled as “Predecessor.” Financial information for periods beginning on and after the Acquisition Date reflects the operations of the combined entity under the control of CEA Industries Inc. and is labeled as “Successor” since CEA Industries Inc.’s operations prior to the acquisition were insignificant relative to those of Fat Panda. The merger was accounted for as a business combination using the acquisition method of accounting. The Successor financial statements reflect a new basis of accounting based on the fair value of the identifiable net assets acquired. Determining the fair value of certain assets and liabilities assumed involves significant judgment and the use of estimates and assumptions. See Business Combinations below for additional information on the fair values of assets and liabilities recorded in connection with the Fat Panda Acquisition.

As a result of applying the acquisition method of accounting as of the Acquisition Date, the accompanying consolidated financial statements include a black line division to distinguish between the Predecessor and Successor reporting entities. These entities are presented on different bases and are therefore not comparable. The lack of comparability is primarily due to the impacts of the Fat Panda Acquisition, including the remeasurement of acquired assets and assumed liabilities at fair value in the Successor consolidated financial statements.

Liquidity

In assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Cash flow from investing and financing activities have been utilized to finance the working capital requirements of the Company. During the period June 7, 2025 through July 31, 2025, the Company had cash outflow from operating activities of approximately $1.7 million. As of July 31, 2025 the Company had cash of approximately $3 million and a working capital deficit of approximately $1 million.

In August 2025 subsequent to the end of the current quarter, the Company obtained $500 million in private investment in public equity (“PIPE”) investment commitments which is expected to provide sufficient liquidity to fund its operations for at least the next twelve months following the issuance of these consolidated financial statements. Based on the closing of the PIPE, the Company believes its working capital will be adequate to sustain the Company’s operations for the next twelve months.

***Principles of Consolidation ***

These consolidated statements include the financial statements of the Company and the following subsidiary companies from the date of their incorporation, formation, or acquisition.

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Key estimates include: allocation of transaction prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on remaining performance obligations under contracts with customers, valuation of intangible assets as it applies to impairment analysis and fair value of acquired assets, valuation of goodwill as it relates to acquisition, valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, allowances for excess and obsolete inventory, allowances for leases relating to incremental borrowing rates, allowances for gift cards based on breakage, and legal contingencies.

Business Combinations

For acquisitions meeting the definition of a business combination, the acquisition method of accounting is used. The consideration transferred for the acquired business is allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets. Any excess of the amount paid over the estimated fair values of the identifiable net assets acquired is allocated to goodwill. Acquisition-related costs, such as professional fees, are excluded from the consideration transferred and are expensed as incurred. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially recorded in connection with a business combination as of the acquisition date.

Cash, Cash Equivalents, and Restricted Cash

All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents.

Cash includes deposits held in financial institutions which are insured by the Canada Deposit Insurance Corporation (CDIC) which automatically insures eligible deposits separately up to $100,000 Canadian dollars (“CAD”) per depositor, per insured bank, for each ownership category. As of July 31, 2025 (Successor), the Company had approximately $3,511,000 CAD in cash deposits in excess of the CDIC insurance limits at certain financial institutions.

The Company maintains deposits in U.S. financial institutions that exceed the federally insured amount of $250,000. As of July 31, 2025 *(Successor), the Company had approximately $153,000 in cash deposits in excess of the FDIC insurance limits at one financial institution.

The Company periodically monitors the financial condition of its financial institutions and considers strategies to mitigate credit risk exposure related to uninsured balances. The Company has not experienced any losses to date on depository accounts. The Company maintains its cash accounts with high credit quality financial institutions and therefore believes that its loss exposure is minimal.

Accounts Receivable and Allowance for Accounts Receivable

Accounts receivables are recorded at the invoiced amount 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. Each period, management assesses the appropriateness of the level of allowance for credit losses by considering credit risk inherent within its receivables as of the end of the period. The Company considers a receivable past due when a debtor has not paid us by the contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (debtor default), based on factors such as the debtor’s credit rating as well as the length of time the amounts are past due. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

As of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), the allowance for doubtful accounts was $86,000 (successor) and $0 (predecessor), respectively.

Goodwill

Goodwill represents the excess of the purchase price for an acquisition over the fair value of theidentifiable net assets acquired.

Goodwill is not amortized but rather is reviewed annually for impairment, at the reporting unit level, or when there is evidence that events or changes in circumstances indicate that the Company’s carrying amount may not be recovered. When testing goodwill for impairment, the Company first performs an assessment of qualitative factors. If qualitative factors indicate that it is more likely than not that the fair value of the relevant reporting unit is less than its carrying amount, the Company tests goodwill for impairment at the reporting unit level using a two-step approach. In step one, the Company determines if the fair value of the reporting unit exceeds the unit’s carrying value. If step one indicates that the fair value of the reporting unit is less than its carrying value, the Company performs step two, determining the fair value of goodwill and, if the carrying value of goodwill exceeds its implied fair value, an impairment charge is recorded.

Intangible assets:

As of July 31, 2025 (Successor), the Company has recognized two intangible assets: one with an indefinite useful life and one with a finite useful life.

The indefinite-lived intangible asset, a trade name, is not subject to amortization. Instead, it is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances suggest that the asset may be impaired. The impairment assessment involves estimating the fair value of the trade name using discounted future cash flows and comparing it to its carrying amount. If the carrying amount exceeds the estimated fair value, an impairment charge is recorded for the difference.

The finite-lived intangible asset, also a trade name, is recorded at historical cost less accumulated amortization. Amortization is recognized on a straight-line basis over the asset’s estimated useful life of 10 years, which is determined based on the expected economic benefit and usage of the asset. This asset is reviewed for impairment whenever indicators of potential impairment arise. The evaluation compares the carrying value to the estimated future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds those cash flows, the asset is considered impaired, and the impairment loss is measured as the excess of the carrying amount over its fair value.

Based on the carrying value of intangible assets at July 31, 2025, estimated amortization expense for the subsequent five years is as follows: remaining three quarters of 2026—$388,306; 2027—$523,543; 2028—$523,543; 2029—$523,543; 2030—$523,543; and thereafter—$2,674,065.

Income (Loss) Per Common Share

Basic income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and potentially dilutive common stock equivalents, including common stock issuable upon conversion of a convertible loan note – related party, the exercise of stock options, warrants and restricted stock units, except in cases where the effect of the common stock equivalents would be antidilutive. Potential common stock equivalents consist of common stock issuable upon conversion of a convertible loan note – related party, exercise of stock options and warrants and the vesting of restricted stock units using the treasury method.

As of July 31, 2025 and 2024, there were respectively 1,085,621 (Successor) and 0 (Predecessor), potentially dilutive equity instruments outstanding in respect of a convertible loan note – related party, warrants, restricted stock units and stock options that were convertible into shares of the Company’s common stock. Of these potentially dilutive equity instruments outstanding,496,803 (Successor) and 0 (Predecessor) related to warrants outstanding at July 31, 2025 and 2024, respectively, issued in connection with the sale of the Successor’s shares of series B Preferred stock and common stock,524,999 (Successor) and 0 (Predecessor) as of July 31, 2025 and 2024, respectively, related to restricted stock units issued to directors and employees as compensation,39,174 (Successor) and 0 (Predecessor) as of July 31, 2025 and 2024, respectively, related to shares of common share potentially issuable upon conversion a convertible loan note – related party and the remaining 24,645 (Successor) and 0 (Predecessor) potentially dilutive equity instruments outstanding as of July 31, 2025 and 2024, respectively, related to stock options that were convertible into shares of the Company’s common stock that had been issued to our directors and staff as compensation.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606Revenue from Contracts with Customers. Under the revenue standard, a performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. Most of the Company’s contracts contain multiple performance obligations that include engineering and technical services as well as the delivery of a diverse range of climate control system equipment and components, which can span multiple phases of a customer’s project life cycle from facility design and construction to equipment delivery and system installation and start-up. The Company does not provide construction services or system installation services. Some of the Company’s contracts with customers contain a single performance obligation, typically engineering only services contracts.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When there are multiple performance obligations within a contract, the Company allocates the transaction price to each performance obligation based on standalone selling price. When estimating the selling price, the Company uses various observable inputs. The best observable input is the Company’s actual selling price for the same good or service, however, this input is generally not available for the Company’s contracts containing multiple performance obligations. For engineering services, the Company estimates the standalone selling price by reference to certain physical characteristics of the project, such as facility size and mechanical systems involved, which are indicative of the scope and complexity of the mechanical engineering services to be provided. For equipment sales, the standalone selling price is determined by forecasting the expected costs of the equipment and components and then adding an appropriate margin, based on a range of acceptable margins established by management. Depending on the nature of the performance obligations, the Company may use a combination of different methods and observable inputs if certain performance obligations have highly variable or uncertain standalone selling prices. Once the selling prices are determined, the Company applies the relative values to the total contract consideration and estimates the amount of the transaction price to be recognized as each promise is fulfilled.

Generally, satisfaction occurs when control of the promised goods is transferred to the customer or as services are rendered or completed in exchange for consideration in an amount for which the Company expects to be entitled. The Company recognizes revenue for the sale of goods when control transfers to the customer, which primarily occurs at the time of shipment. The Company has elected to exclude from the measurement of the transaction price all taxes (e.g., sales, use, value added, and certain excise taxes) that are assessed by a governmental authority in connection with a specific revenue-producing transaction and collected by the Company from the customer. Accordingly, the Company recognizes revenue net of sales taxes. The revenue and cost for freight and shipping is recorded when control over the sale of goods passes to the Company’s customers.

The Company also has performance obligations to perform certain engineering services that are satisfied over a period of time. Revenue is recognized from this type of performance obligation as services are rendered based on the percentage completion towards certain specified milestones.

The Company offers assurance-type warranties for its products and products manufactured by others to meet specifications defined by the contracts with customers and does not have any separate material performance obligations related to these warranties. The Company maintains a warranty reserve based on historical warranty costs.

Retail sales represent a single performance obligation to transfer goods to the customer, satisfied at the point of sale. The transaction price is allocated entirely to the product, and control transfers to the customer upon payment and delivery of the product. Revenue from retail sales is recognized at the point of sale, when control of the product transfers to the customer. Any sales taxes (e.g., GST and PST, where applicable) collected from customers are excluded from the transaction price and recorded as a liability on the balance sheet until remitted to the appropriate tax authority.

The company’s return policy is restrictive, and based on historical data and management’s judgment, no material liability for expected returns has been recorded for the period from June 7, 2025 to July 31, 2025 (Successor), the period from May 1, 2025 to June 6, 2025 (Predecessor) and the three months ended July 31, 2024 (Predecessor).

Gift card sales are recorded as a liability at the time of issuance. Revenue is recognized when gift cards are redeemed by customers or, if applicable, when the likelihood of redemption becomes remote (breakage), in accordance with applicable regulations. The Company monitors breakage rates for gift cards based on historical redemption patterns. Revenue related to breakage is recognized in proportion to the pattern of expected redemptions in accordance with ASC 606 guidance.

The Company also operates a customer loyalty program using promotional “buy 10, get 1 free” punch cards. Each punch card represents a performance obligation to provide a free product upon meeting the required threshold. At each reporting date, the company evaluates outstanding punch card obligations and records a liability based on the estimated redemption rate. For FY 2025 and 2024, management determined that the liability was immaterial to the financial statements. The loyalty program represents a separate performance obligation. Revenue allocated to loyalty points is deferred and recognized when points are redeemed or expired. Management evaluated the redemption rate annually and determined the liability to be immaterial as of July 31, 2025 (Successor) and April 30, 2025 (Predecessor).

Revenue is recognized according to FOB shipping point, where revenue is recognized when product ships from the warehouse. Historical return rates are minimal, and no material liability for returns has been recorded. Revenue is recognized when control of the product transfers to the customer, which occurs when product ships from the warehouse. Shipping and handling are considered fulfillment costs. There is no allowance for returns due to the historically low rate of returns.

Phone order sales are treated as e-commerce sales. Revenue is recognized when product ships from the warehouse, where control transfers to the customer.

Factory direct wholesale revenue follows the same recognition policy as e-commerce and phone order sales, with revenue recognized when product ships from the warehouse. Historical return rates are minimal, and no material liability for returns has been recorded.

Franchise royalty fees are variable consideration, based on a percentage of the franchisee’s sales. These are recognized as revenue in the period the sales occur. Initial franchise fees are recognized upon opening of the new franchise location.

Disaggregation of Revenue

In accordance with ASC 606-10-50-5 through 6, revenue is disaggregated by major products and services and geographic location, as it best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

The following table sets forth the Company’s revenue by source:

Geographic Information

The Company classifies sales by customers’ locations in two geographic regions: the United States and Canada.

Other Judgments and Assumptions

The Company typically receives customer payments in advance of its performance of services or transfers of goods. Applying the practical expedient in ASC 606-10-32-18, which the Company has elected, the Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Accordingly, the remaining performance obligations related to customer contracts does not consider the effects of the time value of money.

Applying the practical expedient in ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred since the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs include certain sales commissions and incentives, which are included in selling, general and administrative expenses, and are payable only when associated revenue has been collected and earned by the Company.

Contract Assets and Contract Liabilities

Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in its contracts.

Contract assets include unbilled amounts where revenue recognized exceeds the amount billed to the customer and the right of payment is conditional, subject to completing a milestone, such as a phase of a project. The Company typically does not have material amounts of contract assets since revenue is recognized as control of goods are transferred or as services are performed.

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 contract assetsby applying an expected credit loss model. Each period, management assesses the appropriateness of the level of allowance for credit losses by considering credit risk inherent within its contract assets as of the end of the period. As of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), the allowance for doubtful accounts was $1,000 and $0, respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

We expect to complete our performance obligations and bill the customer for this contract asset during 2025. As of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), the Company had contract assets of $233,274 and $0, respectively.

Contract liabilities consist of advance payments in excess of revenue recognized. The Company’s contract liabilities are recorded as a current liability in deferred revenue in the consolidated balance sheets since the Company generally expects to recognize revenue in less than one year. Non-refundable customer deposits are recognized as revenue when previously abandoned customer contracts have been forfeited and a period of three years has passed. As of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), deferred revenue, which was classified as a current liability, was $433,122 (Successor) and $0 (Predecessor), respectively.

Remaining Performance Obligations

Remaining performance obligations, or backlog, represents the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected not to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less. Accordingly, the information disclosed about remaining performance obligations includes all customer contracts, including those with an expected duration of one year or less.

Industry uncertainty, project financing concerns, and the licensing and qualification of our prospective customers, which are out of the Company’s control, make it difficult for the Company to predict when it will recognize revenue on its remaining performance obligations. There are risks that the Company may not realize the full contract value on customer projects in a timely manner or at all, and completion of a customer’s cultivation 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 customers to complete a project, which corresponds to when the Company is 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 system; (vii) the availability of power; and (viii) delays that are typical in completing any construction project. Further, based on the current economic climate, t and the Company’s recent cost cutting measures, there is no assurance that the Company will be able to fulfill its backlog, and the Company may experience contract cancellations, project scope reductions and project delays.

As of July 31, 2025 (Successor), the Company’s remaining performance obligations, or backlog, was approximately $630,000, a decrease of $96,000 from the June 6, 2025 (Successor) backlog of $726,000. The decrease was primarily the result of lower bookings for the period. 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.

The remaining performance obligations expected to be recognized through fiscal year 2026 are as follows (Successor):

***Product Warranty ***

The Company warrants the products that it manufactures for indoor cultivation facilities for a warranty period equal to the lesser of 12 months from start-up or 18 months from shipment. The Company’s warranty provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within stated specification. The Company’s third-party suppliers also warrant their products under similar terms, which are passed through to the Company’s customers.

The Company (Successor) assesses the historical warranty claims on its manufactured products and, since 2016, warranty claims have been approximately 1% of annual revenue generated on these products. Based on the Company’s warranty policy, an accrual is established at 1% of the trailing 18 months revenue. The Company continues to assess the need to record a warranty reserve at the time of sale based on historical claims and other factors. The VAPE business (Predecessor) does not have a warranty policy for its products. As of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), the Company had an accrued warranty reserve amount of $49,124 and $0, respectively, which are included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets.

Accounting for Share-Based Compensation

The Company recognizes the cost resulting from all share-based compensation arrangements, including stock options, restricted stock awards and restricted stock units that the Company grants under its equity incentive plan in its condensed consolidated financial statements based on their grant date fair value. The expense is recognized over the requisite service period or performance period of the award. Awards with a graded vesting period based on service are expensed on a straight-line basis for the entire award. Awards with performance-based vesting conditions, which require the achievement of a specific company financial performance goal at the end of the performance period and required service period, are recognized over the performance period. Each reporting period, the Company reassesses the probability of achieving the respective performance goal. If the goals are not expected to be met, no compensation cost is recognized and any previously recognized amount recorded is reversed. If the award contains market-based vesting conditions, the compensation cost is based on the grant date fair value and expected achievement of market condition and is not subsequently reversed if it is later determined that the condition is not likely to be met or is expected to be lower than initially expected.

The grant date fair value of stock options is based on the Black-Scholes Option Pricing Model (the “Black-Scholes Model”). The Black-Scholes Model requires judgmental assumptions including volatility and expected term, both based on historical experience. The risk-free interest rate is based on U.S. Treasury interest rates whose term is consistent with the expected term of the option. The Company determines the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year.

The grant date fair value of restricted stock and restricted stock units is based on the closing price of the underlying stock on the date of the grant.

The Company has elected to reduce share-based compensation expense for forfeitures as the forfeitures occur since the Company does not have historical data or other factors to appropriately estimate the expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations.

Concentrations

Three customers accounted for 53%,23% and 10% of the (Successor) Company’s revenue for the period June 7, 2025 through July 31, 2025.

Three customers accounted for 52%,26%, and 10% of the (Successor) Company’s accounts receivable as of July 31, 2025. The (Predecessor) Company’s accounts receivable from three customers made up 57%,33%, and 10% of the total accounts receivable balance as of April 30, 2025.

***Foreign Currency Translation ***

The Company’s condensed consolidated financial statements are presented in U.S. dollar (“USD”). Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment. Monetary assets and liabilities that are denominated in foreign currencies are translated at the rate prevailing at each reporting date. The U.S. dollar effects that arise from translating the net assets of these companies are recorded in other comprehensive income.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s senior management team in deciding how to allocate resources and in assessing performance. The Company has one operating segment that is dedicated to the manufacture and sale of its products.

Recently Issued Accounting Pronouncements

In July 2025, the FASB issued Accounting Standards Update No. 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”), which introduces a practical expedient (for all entities) and an accounting policy election for non-public entities when estimating expected credit losses for current receivables and contract assets under ASC 606. The standard is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years, and early adoption is permitted. The amendments are applied prospectively, and eligible entities can choose to apply the practical expedient and accounting policy election, with required disclosures. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements and disclosures.

In May 2025, the FASB issued ASU 2025-03,* Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity.*This standard clarifies the guidance in determining the acquirer in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a VIE that meets the definition of a business. The amendments require that an entity consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions. This guidance is effective for fiscal years beginning after December 15, 2026, and therefore will be effective beginning with the Company’s financial statements issued for the fiscal year ending April 30, 2028 and interim reporting periods beginning in fiscal 2029, with early adoption permitted. The amendments are required to be applied prospectively to any acquisition transaction that occurs after the initial application date. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and disclosures.

In January 2025, the FASB issued Accounting Standards Update No. 2025-01 to clarify the effective date of ASU 2024-03 (disaggregation of income statement expenses) for non-calendar year-end entities. The clarification ensures that initial adoption is required in an annual reporting period (rather than unintentionally in an interim period) for entities with non-calendar year ends. The amendments align with the effective dates stated in ASU 2024-03 (annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027) and early adoption is permitted. The Company is currently evaluating the potential impact of ASU 2024-03 (as clarified by ASU 2025-01) on its unaudited condensed consolidated financial statements and related disclosures.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-04 – Debt – Debt with Conversion and Other Options: Induced Conversions of Convertible Debt Instruments, which improves the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt-Debt with Conversion and Other Options. Specifically, the guidance is intended to clarify how to determine whether a settlement of convertible debt (particularly cash convertible instruments) at terms that differ from the original conversion terms should be accounted for under the induced conversion or extinguishment guidance. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The Company is currently evaluating the impact this guidance will have on the Company’s financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 22-40): Disaggregation of Income Statement Expenses. The ASU requires entities to provide enhanced disclosures related to certain costs and expenses in the notes to the financial statements. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on the Company’s financial statements and related disclosures.

In December 2023, FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is currently assessing the impact of ASU 2023-09 on its disclosures.

In November 2023, the FASB issued Accounting Standards Update 2023-07, Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 includes requirements that an entity disclose the title of the chief operating decision maker (CODM) and on an interim and annual basis, significant segment expenses and the composition of other segment items for each segment’s reported profit. The standard also permits disclosure of additional measures of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 has not had a material impact on the Company’s financial statements and related disclosures.

In August 2023, FASB issued ASU 2023-05, “Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement.” ASU 2023-05 requires certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The objectives of the amendments are to provide decision-useful information to investors and other allocators of capital in a joint venture’s financial statements and also to reduce diversity in practice. ASU 2023-05 should be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025. Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. The adoption of ASU 2023-05 has not had a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosure.

Note 3 Business Combinations

On June 6, 2025 (the “Acquisition Date”, the Company acquired the Fat Panda Group of Companies, a Central Canada’s leading retailer and manufacturer of vaping products, holding a significant market share across Manitoba, Ontario, and Saskatchewan. With 33 retail locations and a thriving e-commerce platform, the company offers a wide range of high-quality vape devices and e-liquids, including its own premium in-house line.

The purchase price was $12.8 million comprised of approximately $10.6 million in cash to the sellers,39,000 shares of VAPE common stock with an agreed value of $0.3 million and seller notes totaling $1.9 million. A portion of the purchase price was funded by a short-term loan from a United States based lender in the amount of $4.0 million, which is due in six months. In addition, $1.9 million has been placed in escrow to support post-closing adjustments, indemnity obligations, and employee-related matters.

The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their preliminary estimated fair values as of the Acquisition Date. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The goodwill is primarily attributable to the assembled workforce, synergies expected from combining operations, and future growth opportunities.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date and is based on the best estimate of management, which is subject to change within the measurement period.

As part of the purchase price allocation, the Company determined the identifiable intangible assets were a trade name. The fair value of the intangible assets was estimated using variations of the income approach. Specifically, the relief from royalty method was utilized to estimate the fair value of the trade name. The valuation of intangible assets incorporates significant unobservable inputs (Level 3 inputs) and requires significant judgment and estimates, including the amount and timing of future cash flows and discount rates. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

Due to the timing of the completion of the acquisition, the purchase price and related allocations are preliminary and could be revised as a result of adjustments made to the purchase price and additional information obtained regarding assets acquired and liabilities assumed. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.

The following table summarizes the acquired identifiable intangible assets, acquisition date estimated fair value and estimated useful lives:

The Company’s buyer transaction costs to acquire the Fat Panda Group of Companies totaled approximately $1,000,000 and are included within transaction costs in the condensed consolidated statement of operations for the period from June 7, 2025, through July 31, 2025 (Successor). Payments for buyer transaction costs were made on behalf of the Company by the Company’s controlling stockholder and have been included as contributed capital in the consolidated statement of stockholders’ equity.

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three months ended July 31, 2025 and 2024, as if the Fat Panda Acquisition and related financing had occurred on May 1, 2024.

This information gives effect to certain purchase accounting and financing adjustments and is based on the historical financial statements of CEA Industries Inc. It is presented for illustrative purposes only and is not necessarily indicative of the Company’s actual operating results had the Fat Panda Acquisition and related financing occurred on May 1, 2024, nor is it indicative of future results.

Pro forma financial information is presented as if the operations of Fat Panda had been included in the consolidated results of the Company since May 1, 2024, and reflects transactions that are directly attributable to the Fat Panda Acquisition and related financing. Pro forma adjustments to the three months ended July 31, 2025 and 2024 include adjustments for amortization of preliminary marketing-related intangible assets, elimination of non-recurring transaction costs incurred related to the acquisition, debt discount amortization and interest expense on the $4,000,000 bridge loan, and debt discount amortization and interest expense on the promissory notes issued to the sellers of Fat Panda.

Note 4 –Leases

The Company accounts for its leases in accordance with ASC 842. The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company has entered into various agreements to lease retail space, office and manufacturing space that have initial terms ranging from 1 to 10 years. Accordingly, the Company recognizes a right-of-use (“ROU”) asset representing the right to use an underlying asset and a lease liability representing the obligation to make lease payments over the lease term for substantially all leases with a lease term greater than 12 months. Operating lease cost is recognized on a straight-line basis over the lease term.

The Company’s operating and finance right-of-use assets and lease liabilities are as follows:

Future annual minimum lease payments under non-cancellable operating leases as of July 31, 2025, were as follows:

Note 5 –Inventory

Inventory consisted of the following:

Labor and overhead expenses of $621,403 and $617,982 were included in the inventory balance as of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), respectively.

Advance payments on inventory purchases are recorded in prepaid expenses until title for such inventory passes to the Company. Prepaid expenses included approximately $256,000 and $0 in advance payments for inventory as of July 31, 2025 (Successor), and April 30, 2025 (Predecessor), respectively.

Note 6 –Property and Equipment

Property and equipment consisted of the following:

Depreciation expense for the period from June 7, 2025 through July 31, 2025 (Successor) was $17,851. For the period from May 1, 2025 through June 6, 2025 (Predecessor) depreciation expense was $6,746 and for the three months ended July 31, 2024 (Predecessor), depreciation expense was $20,046.

Note 7 –Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:

Note 8 –Note Payable

In connection with the Company’s acquisition of Fat Panda Inc. on June 6, 2025, effective June 4, 2025, the Company entered into an interim loan facility with CEAD Panda Lender LLC, under which it borrowed USD$4,000,000. The loan due date is December 3, 2025, subject to the right of the Company to prepay any amount of the borrowed funds together with outstanding unpaid interest and a prepayment penalty. The loan is interest only, until the maturity date, payable monthly. The interest rate is 3% for the first three months and then 2% per month thereafter of the outstanding loan amount. The loan is secured by a first lien on all the assets of the Company,16728502 CANADA INC and Fat Panda Ltd., now amalgamated as Fat Panda Ltd., subject to certain exceptions and permitted liens and permitted dispositions. The vendor notes of the Fat Panda sellers are subordinate to the security interests granted under the security agreements related to the loan facility. The loan facility has typical representations and warranties of the borrower, default provisions, and various covenants, including the covenant to maintain at least $1,500,000 in cash and have a minimum of $4,000,000 in working capital (inclusive of any cash).

Prepaid interest and legal fees totaling $449,718 were incurred in respect of this promissory note and have been accounted for as debt discount costs and are being amortized over the life of the promissory note, prepaid interest as incurred and legal fees on a straight-line basis which equates to the effective interest rate method.

During the period June 7, 2025 – July 31, 2025, interest of $224,000 was incurred and debt discount of $27,912 was amortized in respect of the promissory note during the period.

Note 9 –Related Party Note Payable and Related Party Convertible Note Payable

In connection with the Company’s acquisition of Fat Panda Inc. on June 6, 2025, the Company issued three notes payable to selling shareholders, one of whom is now an employee of the Company.

The first note payable was issued in the principal amount of $360,850 ($500,000 CAD) to certain selling shareholders of Fat Panda Inc. The note is interest free and repayable in full within 15 days following the date that Canada Revenue Agency issues a letter confirming that there is no tax liability in respect of an issue identified in the Purchase Agreement for acquisition of the Fat Panda group of companies. If the letter from Canada Revenue Agency indicates that there is a tax liability in respect of an issue identified in the Purchase Agreement, the amount of the loan repayment will be reduced, dollar for dollar, by the amount of any tax liability assessed.

The second note payable was issued in the principal amount of $743,351 ($1,030,000 CAD) to the President of Fat Panda, a former owner and current employee of the Company. The note bears interest at 7% per annum, with interest payable monthly. The note has a maturity date of November 30, 2026.

As the rate of interest on the promissory note was considered to be less than market rate, the fair value of the loan was determined to be to be $634,974 ($879,831 CAD).

The difference of $108,377 ($150,169 CAD) between the face value of the promissory note and its fair value or the promissory has been treated as debt discount and is being amortized over the life of the note payable on a straight-line basis which equates to the effective interest rate method.

During the period June 7, 2025 – July 31, 2025, interest of $7,660 was incurred.

The third note payable, also issued to the President of Fat Panda, is a convertible promissory note with a principal amount of $743,351 ($1,030,000 CAD). The note bears interest at 7% per annum and is convertible, at the Lenders option, in shares of the Company’s common stock at a conversion price of $19 per share. If no conversion notice is submitted to the Company by the Lender before the due date of his intent to convert the principal amount, the entire principal plus interest shall become due on June 1, 2027.

Debt discount of$9,248 ($12,814 CAD) is being amortized over the life of the note payable on a straight-line basis which equates to the effective interest rate method.

During the period June 7, 2025 – July 31, 2025 (Successor), interest of $7,660 was incurred.

Note 10 –Commitments and Contingencies

Litigation

On October 20, 2023, Sweet Cut Grow, LLC and Green Ice, LLC (collectively, “Claimant”) a client of the Company with which it had an equipment contract and engineering contract, filed a demand for arbitration asserting claims for breach of contract, breach of warranty, and unjust enrichment, and a demand for $1,049,280 in damages, plus interest (“Claims”). The Company denies all the Claims and has asserted a counterclaim. The Company believes Claimant is owed nothing as the Company fulfilled all its obligations under the contracts to Claimant, and further, that the negligence of a third-party supplier is the basis of the Claims. We are defending the Claims on the basis that we promptly addressed all problems, and that any issues with defective HVAC equipment are the responsibility of the third-party equipment manufacturer. The Company’s equipment contract with Claimant requires the parties to arbitrate their disputes under the rules of the American Arbitration Association (“AAA”). The arbitration will be heard in Denver, Colorado, commencing October 13, 2025. The matter is in the discovery phase. The parties will pay their own legal fees and expenses. The Company intends to defend itself vigorously, believing there are no merits to the Claims as currently presented.

On or about April 17, 2024, Optima Consulting Services, LLC (the “Claimant”), a client of the Company with which it had an equipment contract and engineering contract, advised the Company of a potential claim related to work performed by the Company for Claimant and demanded mediation under the parties’ contract. On or about October 28, 2024, Claimant informed the Company it was asserting claims for negligent/defective design and breach of warranty, and alleges its damages exceeded $2,000,000 (Claims”). The Company denied all the Claims and that Claimant was entitled to any damages. The Company believed the Claimant was owed nothing as the Company fulfilled all its obligations under the contracts to Claimant and performed all work in line with all applicable standards. We believed all work was performed pursuant to the contract and any alleged issues that may have occurred were the result of actions by Claimant and/or third parties. The case was mediated with the American Arbitration Association (“AAA”).

Effective May 9, 2025, the Company entered into a settlement agreement whereby all Claims by Optima Consulting Services, LLC against the Company were settled in full upon the payment of $250,000 by the Company to Optima Consulting Services, LLC. This settlement payment was funded by the Company’s insurance coverage, except for $35,000 in deductibles which we paid by the Company itself.

From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount of the loss is known. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations.

Canadian Payroll Taxes

We have estimated approximately $200,000 of potential liability-based work with the Canadian Revenue Agency to remedy a tax issue for the period spanned from 2020-2025, other than this issue, no other losses and no other provision for loss contingency have been recorded to date.

As discussed inNote 9 Related Party Notes Payable and Related Pary Convertible Note Payable*****above,*the liability arising in respect of this issue will reduce the amount of the note repayment to the former owners of Fat Panda, dollar for dollar, by the amount of any tax liability assessed.

Leases

The Company has 35 agreements to lease retail space, office and manufacturing space in Manitoba, Saskatchewan, and Ontario, Canada. The total square footage of these facilities is approximately 49,076.

The Company has a lease agreement for its manufacturing and office space in Louisville, CO. The total square footage of the facility is 11,491.

Refer toNote 4 Leases above.

Other Commitments

In the ordinary course of business, the Company enters into commitments to purchase inventory and may also provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors, and employees of acquired companies, in certain circumstances.

**Note 11 –Shareholders’ Equity **

Successor

As of July 31, 2025 (Successor), the Company had 200,000,000 shares of common stock and 25,000,000 shares of preferred stock authorized at a $0.00001 par value.

As of July 31, 2025 (Successor),860,457 shares of common stock were issued and outstanding.

No shares of preferred stock were issued and outstanding at July 31, 2025.

During the period June 7, 2025 to July 31, 2025 (Successor), the following issuances of common stock occurred:

As further discussed inNote 17 Subsequent Events below:

Effective August 6, 2025,41,754,478 shares of common stock were issued pursuant to a Private Placement Offering for net proceeds of $481,469,924.

Effective August 13, 2025, a warrant holder exercised 1,756 warrants on a cashless basis resulting in the issuance of 66 shares of common stock.

Director Compensation Program

On December 16, 2024 (the “Effective Date”), the Board adopted a revised compensation plan for directors. The Plan was effective retroactively for the then current independent directors and provided compensation for subsequent directors elected or appointed after the Effective Date of the plan.

The Company will pay its independent directors an annual cash fee of $25,000, payable quarterly in advance on the first business day of each calendar quarter, prorated for the period of service in the year and which is consideration for their participation in: (i) any regular or special meetings of the Board or any committee thereof attended in person, (ii) any telephonic meeting of the Board or any committee thereof in which the director is a member, (iii) written consent actions, (iv) any non-meeting consultations with the Company’s management, and (iv) any other services provided by them in their capacities as directors (other than services as the Chairman of the Board, the Chairman of the Company’s Audit Committee, and the other Committees’ Chairman).

At the time of initial election or appointment, each independent director will receive an equity retention award in the form of restricted stock units (“RSUs”). The aggregate value of the RSUs at the time of grant will be $25,000, with the number of shares underlying the RSUs to be determined based on the closing price of the Company’s common stock on the trade date immediately prior to the date of grant. Vesting of the RSUs will be as follows: (i) 50% at the time of grant, and (ii) 50% on the first anniversary of the grant date.

In addition, on the first business day of January each year, each independent director who was not initially appointed or elected in the previous year will receive an equity retention award in the form of RSUs. The aggregate value of the RSUs at the time of grant will be $25,000, with the number of shares underlying the RSUs to be determined based on the closing price of the Company’s common stock on the trade date immediately prior to the date of grant. These RSUs will be fully vested at date of grant.

The Company will pay the Audit Committee Chairman an additional annual fee of $10,000, payable quarterly in advance on the first business day of each calendar quarter, prorated for the period of service in the year, for the services as the Audit Committee Chairman.

The Company will pay the Chairmen of any other committee of the Board an additional annual fee of $5,000, payable quarterly in advance on the first business day of each calendar quarter, prorated for the period of service in the year, for services as a Committee Chairman.

There is no additional compensation paid to members of any committee of the Board. Interested (i.e. Executive directors) serving on the Board do not receive compensation for their Board service.

Each director is responsible for the payment of any and all income taxes arising with respect to the issuance of common stock and the vesting and settlement of RSUs.

The Company will also reimburse directors for out-of-pocket expenses incurred in attending Board and committee meetings and undertaking certain matters on the Company’s behalf.

Predecessor

As of April 30, 2025, the Company was authorized to issue 1,410 shares of common stock.

As of April 30, 2025,1,410 shares of common stock were issued and outstanding

No shares of common stock were issued by the Predecessor Company in the periods May 1, 2025 to June 6, 2025 or the three months ended July 31, 2024.

Director Compensation Program

A new director compensation program for Canadian directors was adopted effective August 1, 2025. SeeNote 17 Subsequent Events below.

Note 12 –Equity Incentive Plans

Successor

2017 Equity Incentive Plan

Under the Company’s 2017 Equity Incentive Plan, as may be modified and amended by the Company from time to time (the “2017 Equity Plan”), the Board of Directors (the “Board”) (or the compensation committee of the Board, if one is established) may award stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017 Equity Plan allocates 27,778 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the 2017 Equity Plan. If any shares subject to an award are forfeited, expire, or otherwise terminate without issuance of such shares, the shares will, to the extent of such forfeiture, expiration, or termination, again be available for awards under the 2017 Equity Plan.

During the period June 7, 2025 to July 31, 2025,1,111 non-qualifying stock options previously issued to certain directors expired, unexercised and 2,700 new non qualifying stock options were issued to new employees under the 2017 Equity Plan.

As of July 31, 2025, of the 27,778 shares authorized under the 2017 Plan for equity awards,13,641 shares have been issued, awards relating to 12,873 options remain outstanding, and 1,264 shares remain available for future equity awards.

2021 Equity Incentive Plan

On March 22, 2021, the Board approved the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which was approved by the stockholders on July 22, 2021. The 2021 Equity Plan permits the Board to grant awards of up to 55,556 shares of common stock. The 2021 Equity Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), non-qualified stock options, stock appreciation rights (“SARs”), restricted stock awards and restricted stock unit awards and other equity linked awards to our employees, consultants, and directors. If an equity award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the award receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that may be issued pursuant to this Plan.

During the period June 7, 2025 to July 31, 2025,1,529 shares of common stock were issued in settlement of vested restricted stock units issued to a director under the 2021 Equity Plan.

As of July 31, 2025, of the 55,556 shares authorized under the 2021 Equity Plan,33,267 shares have been issued in settlement of restricted stock units, awards relating to 8,370 non-qualified stock options,3,401 remain outstanding, and 10,517 shares remain available for future equity awards.

2025 Equity Incentive Plan

On July 27, 2025, the Board approved the 2025 Equity Incentive Plan (the “2021 Equity Plan”), subject to approval by the stockholders. The 2025 Equity Plan permits the Board to grant awards of up to 525,000 shares of common stock. The 2025 Equity Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), non-qualified stock options, stock appreciation rights (“SARs”), restricted stock awards and restricted stock unit awards and other equity linked awards to our employees, consultants, and directors. If an equity award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the award receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that may be issued pursuant to this Plan.

During the period June 7, 2025 to July 31, 2025,524,999 restricted stock units were issued to directors and employees under the 2025 Equity Plan, subject to shareholder approval. As management considers that shareholder approval of the 2025 Equity Plan is probable, the full expense related to the issuance has been recognized in the period

As of July 31, 2025, of the 525,000 shares authorized under the 2025 Equity Plan, subject to shareholder approval,524,999 have been issued as restricted stock units to directors and employees, subject to shareholder approval and 1 share remains available for future equity awards, subject to shareholder approval

There was $17,512 in unrecognized compensation expense for unvested restricted stock units as of July 31, 2025.

Predecessor

The Predecessor had no Equity Incentive Plans.

Non-Qualified and Incentive Stock Options

A summary of the non-qualified stock options and incentive stock options granted to employees and consultants under the 2017 and 2021 Equity Plans during the three months ended July 31, 2025, are presented in the tables below:

A summary of the nonvested non-qualified stock options and incentive stock options granted to employees and consultants under the 2017 and 2021 Equity Plans during the three months ended July 31, 2025, are presented in the tables below:

Effective June 11, 2025,2,700 stock options were issued to employees with an exercise price of $7.74, a 10-year term and a 1-year vesting period.

For the period from June 7, 2025 through July 31, 2025 (Successor), the Company recorded $2,780 as compensation expense related to vested options issued to employees and consultants, net of forfeitures of unvested options issued to employees and consultants.

No compensation expense related to vested options issued to employees and consultants, net of forfeitures of unvested options issued to employees and consultants respectively was recognized for the period May 1, 2025 to June 6, 2025 (Predecessor) in respect of the Predecessor company.

A summary of the non-qualified stock options granted to directors under the 2017 and 2021 Equity Plans, during the three months ended July 31, 2025 (Successor), are presented in the tables below:

There wereno non-qualified stock options issued to directors under the 2017 Equity Plan and the 2021 Equity Plan, for the period from June 7, 2025 through July 31, 2025 (Successor).

During the period June 7, 2025 to July 31, 2025 (Successor),1,111 options issued to directors under the 2021 Equity Plan expired, unexercised.

During the period June 7, 2025 through July 31, 2025 (Successor), and May 1, 2025 through June 6, 2025 (Predecessor), the Company incurredno compensation expense related to options issued to directors.

Restricted Stock Units

Effective July 27, 2025, the Company accelerate the vesting of 1,529 restricted stock units issued to a director and settled these units by the issuance of 1,529 shares of common stock.

Effective July 27, 2025,524,999 restricted stock units were issued to directors and employees under the 2025 Equity Plan, subject to shareholder approval. As management considers that shareholder approval of the 2025 Equity Plan is probable, the full expense related to the issuance has been recognized in the period

During the period June 7, 2025 through July 31, 2025 (Successor), the Company recorded $4,667,231 (Successor) as compensation expense related to vested and vesting RSUs issued to directors and employees.

Note 13 -Warrants

The following tables summarizes information with respect to outstanding warrants to purchase common stock during the three months ended July 31, 2025 (Successor):

The following tables summarizes information about warrants outstanding at June 6, 2025 (Predecessor) and July 31, 2025 (Successor):

During the period June 6, 2025 to July 31, 2025 (Successor), two warrant holders exercised a total 119,535 warrants on a cashless basis resulting in the issuance of 17,582 shares of common stock.

As further discussed inNote 17 Subsequent Events below:

Effective August 6, 2025, the Company issued 7,750,510 prefunded warrants and 49,504,988 stapled warrants in connection with its Private Placement Offering,990,100 warrants in connection with its Asset Management Agreement and 6,930,697 warrants in connection with its Strategic Advisor Agreement.

Effective August 13, 2025, a warrant holder exercised 1,756 warrants on a cashless basis resulting in the issuance of 66 shares of common stock.

Note 14 –Income Taxes

For the period from June 7, 2025 to July 31, 2025 (Successor), the period from May 1, 2025 to June 6, 2025 (Predecessor) and the three months ended July 31, 2024 (Predecessor), the Company’s earnings before income taxes, income tax expense and effective income tax rate were as follows:

The change in the effective tax rate for the period June 7, 2025 to July 31, 2025 (Successor), compared to the predecessor period for May 1, 2025 to June 6, 2025 (Predecessor), and the three months ended July 31, 2024 (Predecessor), was primarily due to the impact of non-deductible transaction costs and the valuation allowances on the legacy business of CEA Industries Inc. United States operations.

The Company completed the acquisition of Fat Panda Ltd. and related entities, tax as Canadian corporations, during the quarter. For Canadian federal income tax purposes, the transaction was treated as a stock acquisition with no step-up in tax basis. As a result, the goodwill and intangible assets recorded for financial reporting purposes are not deductible for tax purposes. This created a deferred tax liability of $1.2 million, which is included in the Company’s net deferred tax position.

As of July 31, 2025, the Company has U.S. federal and state net operating losses (“NOLs”) related to the legacy CEA Industries, Inc. United States operations of approximately $33,054,000, of which $11,196,000 will expire, if not utilized, in the years 2034 through 2037, however, NOLs generated subsequent to December 31, 2017 do not expire but may only be used against taxable income to 80%. In addition, pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, use of the Company’s NOLs carryforwards may be limited in the event of cumulative changes in ownership of more than 50% within athree-year period. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. The securities sales we completed in September 2021 and February 2022 and the Private Placement Offering discussed inNote !7 Subsequent Events below will need to be evaluated for determination of any “ownership change” that we may have undergone during a determination period. If an ownership change has occurred, our ability to use our net operating loss carryforwards is materially limited and it would harm our future post tax results by effectively increasing our future tax obligations.

The Company must assess the likelihood that its net deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management’s judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets. The Company recorded a full valuation allowance related to CEA Industries Inc. United States operations as of July 31, 2025. Based on the available evidence, the Company believes it is more likely than not that it will not be able to utilize its net deferred tax assets in the foreseeable future related to its United States operations. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s plans. Should the actual amounts differ from the Company’s estimates, the carrying value of the Company’s deferred tax assets could be materially impacted.

The Company regularly assesses the adequacy of its provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. The Company records uncertain tax positions on the basis of a two-step process in which: (i) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with the related tax authority. The Company currently has recorded a $200,000 tax reserve for uncertain tax positions in Canada.

On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expense of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense.

The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, GILTI, FDII, and BEAT, amongst other changes. These changes are generally effective for tax years beginning after Dec. 31, 2025.

The Company is currently assessing the impact of the One Big Beautiful Bill but does not expect the passing of this legislation will have a material impact on the tax provision.

Note 15 –Related Party Transactions

Agreements and Transaction with a Company Director and previous director

The Company entered into a manufacturer representative agreement with RSX Enterprises (“RSX”) in March 2021 to become a non-exclusive representative for the Company to assist in marketing and soliciting orders. James R. Shipley, one of our independent directors, has a significant ownership interest in RSX.

Under the manufacturer representative agreement, RSX will act as a non-exclusive representative for the Company within the United States, Canada and Mexico and may receive a commission for qualified customer leads. The agreement had an initial term through December 31, 2021 with automatic one-year renewal terms unless notice is given 90 days prior to each annual expiration. No payments were made for commissions under this agreement for the three months ended July 31, 2025 (Successor).

On June 19, 2024, the Company engaged Nicholas J. Etten, a director of the Company, to provide services covering transaction sourcing and evaluation, in the Company’s effort to arrange for a merger, acquisition, combination or other strategic transaction. Mr. Etten has a background in corporate development and investment banking in multiple industries. Mr. Etten will be paid a weekly fee of $2,500. It is expected that Mr. Etten will provide a minimum of 10 hours per week, up to a maximum of 40 hours a month, as determined by the Company and Mr. Etten. The consulting agreement will be on a month-to-month basis, and either the Company or Mr. Etten may terminate the arrangement on five days’ notice. The Company has agreed to indemnify Mr. Etten in respect of his services to the Company under the agreement. During the period from June 7, 2025 through July 31, 2025 (Successor), the Company paid Mr. Etten $10,250 in respect of services related to this agreement.

Promissory notes to former owner/current employee

In connection with the Company’s acquisition of Fat Panda Ltd. on June 6, 2025, the Company issued a promissory note with a principal amount of $743,351 ($1,030,000 CAD) to Jordan Vedoya, President of Fat Panda Ltd., who is an employee of the Company and was a selling shareholder of Fat Panda Ltd. SeeNote 9 Related Party Note Payable and Related Party Convertible Note Payable above.

Additionally, a convertible promissory note was issued to Mr. Vedoya with a principal amount of $743,351 ($1,030,000 CAD). SeeNote 9 Related Party Note Payable and Related Party Convertible Note Payable above.

In connection with the Company’s acquisition of Fat Panda Ltd. on June 6, 2025, the Company issued a promissory note with a principal amount of $360,850 ($500,000 CAD) to the selling shareholders of Fat Panda Ltd, one of which continues to be an employee of the Company. SeeNote 9 Related Party Note Payable and Related Party Convertible Note Payable above.

Note 16 –Segment

The Company hasone operating segment and thereforeone reportable segment relating to its business selling environmental control and other technologies for the CEA industry. The Company’s chief operating decision maker (“CODM”), the CEO, manages the Company’s operations on a consolidated basis as one operating segment for the purpose of evaluating financial performance and allocating resources.

The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker uses net income (loss), as reported on the Consolidated Statements of Income, to assess performance and allocate resources. The significant segment expense categories regularly provided to the chief operating decision maker are the same as those included on the Consolidated Statements of Operations. The measure of segment assets is total assets as reported on the Consolidated Balance Sheets.

The chief operating decision maker uses net income to assess performance by examining period-over-period trends, benchmarking to the Company’s competitors, and monitoring budget versus actual results. The chief operating decision maker uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity.

Note 17 –Subsequent Events

In accordance with ASC 855,Subsequent Events, the Company has evaluated all subsequent events through the date of issuance of these financial statements issued. No material subsequent events occurred after July 31, 2025, other than as set out below:

Private Placement Offering

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.

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.

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).

Asset Management Agreement

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.

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.

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.

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.

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.

Strategic Advisor Agreements

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.

Director Compensation Program

On August 1, 2025 (the “Effective Date”), the Board adopted a compensation policy for Canadian directors of.

The Company will pay its independent directors an annual cash fee of $40,000 CAD, payable quarterly in arrears for general availability and participation in meetings and conference calls of our Board of Directors. This amount may be in the discretion of the Board of Directors (“the Board”), if applicable, pro-rated, based on the number of actual days served by the director during such calendar quarter. No additional compensation will be paid for attending individual meetings of the Board of Directors. The annual retainer is a guideline only and shall be applied on an individual basis in the discretion of the Board of Directors.

The Board may in its discretion provide equity awards in replacement of or addition to cash payments. The awards include an initial, one-time stock option award to purchase shares of the Company’s common stock to be granted to each new Outside Director upon his or her election to the Board. The value is to be determined by the Board annually and will vest over three years as long the director remains on the Board. The awards expire 10 years from the grant date.

On each date of each Annual Meeting of Stockholders, each continuing Outside Director, other than a director receiving an initial award, will receive an annual stock option award to purchase shares of the Company’s common stock with a value to be determined by the Board annually. The options will vest upon the earlier of (i) the first anniversary of the grant or (ii) the date of the next Annual Meeting as long as the director remains on the Board. Annual awards will expire after 10 years and will have a exercise price equal to the fair market value of the Company’s common stock on the date of grant.

All outstanding awards held by an Outside Director will become fully vested and exercisable upon an event resulting in change of control of the Corporation.

The Company will reimburse all reasonable out-of- pocket expenses incurred in attending meetings of the Board of Directors or any committee of the Board.