CEA Industries Inc. BNC US Equity☆

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report, which include additional information about our accounting policies, practices, and the transactions underlying our financial results. In addition to historical information, the following discussion and other parts of this Annual Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under "Cautionary Statements" appearing elsewhere herein and the risks and uncertainties described or identified in "Item 1A – Risk Factors" in this Annual Report.

Introduction

CEA Industries Inc. is the largest publicly-traded DAT focused exclusively on BNB, the native token of the BNB Chain ecosystem. We seek to continue to build and manage the largest corporate treasury of BNB to provide institutional-grade exposure to BNB Chain and to generate income on our eligible BNB holdings through active treasury management, derivatives, or through Airdrops. We may also generate returns through additional digital asset-related activities such as validation and staking services, lending, and other DeFi protocols in the future, though we have not staked or pledged any BNB through April 30, 2026 aside from BNB pledged for our debt obligations. At April 30, 2026, we held 515,544 BNB tokens with an aggregate fair value of $317.3 million, and digital assets, primarily BNB, represented 94.6% of our total assets, while our Retail and Industry segment operating businesses represent a significantly smaller portion of our overall assets based on economic exposure.

Our strategy is built around a simple thesis: BNB is a scarce, utility-driven digital asset that serves as a core economic asset within one of the most active, and growing, blockchain ecosystems in the world. We seek to provide public equity market investors with exposure to BNB through a Nasdaq-listed, SEC-reporting company that combines direct BNB ownership, public company governance, audited financial reporting, treasury controls, custody infrastructure, and capital markets access. We view BNB as a strategic treasury asset and intends to continue evaluating opportunities to acquire additional digital assets as part of its capital allocation strategy.

We believe our platform is differentiated from direct token ownership, private digital asset vehicles, exchange-traded products, and operating companies that hold digital assets as part of a diversified treasury strategy. Our objective is not merely to hold BNB passively, but to build the leading public company platform for BNB ownership, treasury management, and participation in the BNB ecosystem.

We acquired Fat Panda on June 6, 2025 and continue to operate its core retail nicotine vape operations in Canada.

We have prepared the discussion of our results of operations for the fiscal year ended April 30, 2026 by combining the Predecessor and Successor results of operations and cash flows during the year ended April 30, 2026 ("Combined Annual Period") and comparing the combined data to the results of operations and cash flows of the Predecessor for the year ended April 30, 2025. We believe that the discussion of our combined operational results, while on different bases of accounting related to the application of purchase accounting, is appropriate as we highlight operational changes for the Predecessor as well as accounting related items specific to the Successor.

Overview of DAT Strategy

Our DAT Strategy represents a significant departure from traditional corporate treasury strategies, which typically involve holding cash, cash equivalents, and short-term investments. Instead, our financial condition and results of operations are significantly influenced by changes in the market price of BNB. Digital asset markets have historically exhibited significant volatility and are subject to evolving regulatory frameworks and technological risks. As a result, fluctuations in the market price of BNB will have a material impact on our financial condition, results of operations, and the market price of our common stock. Investors should carefully consider the risks associated with our DAT Strategy described under "Part I, Item 1A – Risk Factors" in this Annual Report on Form 10-K.

On August 5, 2025, we launched the DAT Strategy following the closing of the PIPE Transaction that raised approximately $500.0 million in cash and digital assets, with up to $750.0 million of additional proceeds available through warrant exercises.

We operate the DAT Strategy through our wholly-owned subsidiary, CEA BRS LLC, a Delaware limited liability company, as a special purpose entity to hold and manage certain cryptocurrency assets in accordance with the DAT Strategy.

Our BNB holdings are held in custody through Ceffu, a non-U.S. institutional digital asset custody platform operating within the Binance ecosystem. Ceffu uses multi-party computation wallet infrastructure and maintains segregated account structures designed for institutional holders. While Ceffu operates as a separate entity from the Binance exchange, our custody arrangement creates concentration exposure to the broader Binance ecosystem. Disruptions to Ceffu’s operations, changes in its regulatory status, or adverse developments affecting the Binance ecosystem could materially impact our ability to access, transfer, or liquidate our BNB holdings.

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Key Drivers of Results of Operations

Our results of operations are influenced by several key factors, including: changes in the market price of BNB and other ancillary digital assets held by us; fair value adjustments recognized under applicable accounting standards, including our issued warrants treated as liabilities; the generation of Airdrop income; operating expenses associated with maintaining our public company infrastructure; and strategic decisions regarding the acquisition, holding, or disposition of digital assets. Because we hold a substantial quantity of digital assets, particularly BNB, changes in the market price of BNB may significantly affect our reported earnings. These fluctuations may not reflect changes in our operating performance but instead reflect market-driven changes in the value of our digital asset holdings.

Historically, our results of operations also included significant transactional expenses we incurred in connection with our acquisition of Fat Panda, the PIPE Transaction, and our shareholder advisory expenses in connection with our Board committee reconstitution and shareholder activism; however, we do not anticipate incurring such costs in connection with our ongoing operations.

BNB Holdings

During the period from June 7, 2025 through April 30, 2026, we accumulated 515,544 BNB. During this same period, the market price of BNB declined significantly by 28.9%, from $865.99 weighted-average price we paid per BNB, to $615.38 per BNB at April 30, 2026. As a result, the aggregate fair value of our BNB holdings decreased from our $446.5 million cost basis to $317.3 million, driven by market price volatility rather than changes in the quantity of BNB held. The decline in BNB market prices had a materially greater impact on the carrying value of digital assets than the operating results of our Retail and Industry business during the same period.

In addition to changes in the market value of BNB tokens, we recognized a substantial decrease in Airdrop-related income associated with those holdings. We maintain eligibility to receive Airdrops distributed within the Binance ecosystem for those BNB tokens we hold at Ceffu, however Airdrop activity has declined since we launched our DAT Strategy. This substantial decline in Airdrop-related income reflects reduced Airdrop activity within the Binance ecosystem during the current period. While airdrop income contributed positively to results, it did not offset the impact of the decline in BNB market prices during the period from June 7, 2025 through April 30, 2026.

In addition to Airdrops, a portion of our BNB treasury yield has historically been generated through participation in Binance Launchpool and HODLer Airdrops – platform programs through which BNB holders receive newly issued tokens by locking or holding BNB. Since we launched our DAT Strategy, the frequency and scale of these programs declined materially compared to historical program periods, contributing to a reduction in platform-delivered yield through April 30, 2026. Taken together with the decline in Airdrop activity described above, these trends reflect a broader moderation in yield generation during the period. We cannot predict the timing, frequency, or magnitude of future Launchpool or HODLer Airdrop allocations, and continued reduction in these programs may adversely affect our treasury yield and results of operations.

Warrant Liabilities

Our warrant liabilities were also a significant driver of our reported results of operations for the period, and we believe they will continue to contribute meaningful volatility to our earnings, independent of our underlying operating performance. During the period from June 7, 2025 through April 30, 2026, we recognized a non-cash gain of $282.9 million related to our stapled warrant liability, which was a primary driver of net income. Because the fair value of these out-of-the-money warrants generally fluctuate inversely with the trading price and volatility of our common stock and the underlying digital assets, as well as the passage of time and changes in our assumptions about warrant exercise behavior that can change significantly from period to period, the resulting fair value adjustments can produce substantial non-cash gains or losses that do not reflect our core operating performance, and we caution investors that our reported net income or loss for any given period may be disproportionately influenced by these mark-to-market changes rather than by the underlying profitability of our operating segments.

Digital Asset Market Conditions

Our treasury strategy is designed to accumulate and compound BNB over time, with a focus on growing the value of our digital asset holdings on a per-share basis as a key long-term measure of shareholder value creation. Digital asset markets are inherently cyclical, and short-term price fluctuations — while material to our GAAP-reported results in any given quarter — do not alter our management's conviction in the long-term trajectory of BNB and the broader Binance ecosystem. We believe our disciplined approach to treasury management positions the Company to benefit from market recoveries while managing risk through custody, yield optimization, and strategic capital allocation.

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During the period from June 7, 2025 through April 30, 2026, digital asset markets experienced periods of significant price volatility. The market price of BNB fluctuated in response to a variety of factors, including macroeconomic conditions, investor sentiment toward digital assets, developments affecting cryptocurrency exchanges and blockchain networks, and regulatory developments in the United States and other jurisdictions. Because we hold a significant quantity of BNB, changes in the market price of BNB had, and will continue to have, a substantial impact on our balance sheet and results of operations. Investors should consider that fluctuations in our financial results during the period were driven primarily by changes in digital asset market prices and Airdrop yield rather than changes in our operating activities.

Our Retail and Industry Business

We operate our Fat Panda and industrial climate control systems businesses within our Retail and Industry segment. At April 30, 2026, Fat Panda operates 34 retail locations, including 30 Fat Panda branded stores and 4 Electric Fog branded outlets, along with an e-commerce platform. Fat Panda also manufactures a proprietary line of premium e-liquids in-house and maintains a portfolio of trademarks and related intellectual property. Revenue from our industrial climate control systems business represents a relatively small portion of consolidated revenue, totaling $1.7 million for the period from June 7, 2025 through April 30, 2026.

Recent Developments

Restatements

On June 11, 2026, the management of the Company, with the concurrence of the Audit Committee of the Board of Directors, concluded that the previously issued condensed consolidated financial statements included in the Company's quarterly reports on Form 10-Q for the (i) three months ended October 31, 2025, the period from June 7, 2025 through October 31, 2025 (the “Second Quarter Successor” period) and the period from May 1, 2025 through June 6, 2025, originally filed with the SEC on December 15, 2025 (the “Second Quarter Form 10-Q”) and (ii) three months ended January 31, 2026 and the period from June 7, 2025 through January 31, 2026 (the “Third Quarter Successor” period) and the period from May 1, 2025 through June 6, 2025, originally filed with the SEC on March 16, 2026 (the “Third Quarter Form 10-Q” and together with the Second Quarter 10-Q, the “Quarterly Reports on Form 10-Q”) should no longer be relied upon.

The conclusion was based on the identification of an error in the calculation of the weighted-average number of shares outstanding used in determining basic and diluted EPS. The error resulted in an understatement of basic and diluted weighted-average shares outstanding, which in turn understated or overstated basic and diluted EPS. For the three months ended October 31, 2025, basic and diluted weighted average number of shares were understated by 2,214,508 shares and as a result, basic and diluted EPS were overstated by $0.21. For the Second Quarter Successor period, basic weighted average shares were understated by 1,857,056 shares and diluted weighted average shares were understated by 857,057 shares and as a result, basic and diluted EPS were overstated by $0.45. For the three months ended January 31, 2026, basic and diluted weighted average number of shares were understated by 2,376,236 shares and as a result, basic and diluted EPS were understated by $0.08. For the Third Quarter Successor period, basic weighted average shares were understated by 21,806,662 shares and diluted weighted average shares were understated by 21,806,663 shares and as a result, basic EPS was overstated by $4.26 and diluted EPS was overstated by $4.21. The error did not impact the Company's net income (loss), total assets, total liabilities, stockholders’ equity, revenue, cash flows, or net income (loss) available to common stockholders in each affected period.

On June 23, 2026, we restated our previously issued unaudited condensed consolidated financial statements for the second and third fiscal quarters of 2026 resulting from an error in the computation of weighted-average shares used to compute basic and diluted earnings (loss) per share, which it deemed material on June 11, 2026.

Nasdaq Compliance

On May 7, 2026, we received a letter from the Staff of Nasdaq notifying us that we no longer comply with Nasdaq Listing Rule 5620(a) for continued listing of shares of our common stock, due to our failure to hold an annual meeting within 12 months of our fiscal year end. As a result, we have submitted a plan to Nasdaq to regain compliance. If Nasdaq accepts our plan, Nasdaq can grant an exception of up to 180 calendar days from the fiscal year ended April 30, 2026, or until October 27, 2026, to allow the Company to regain compliance

Our plan of compliance with respect to the foregoing requirement setting forth, among other things, a proxy statement preparation and proxy solicitation timeline leading to our annual meeting of our shareholders. We cannot provide any assurance that the Staff will accept our plan of compliance. In the event our plan is not accepted, our securities may be subject to delisting and we will have the opportunity to appeal the Staff’s delisting determination to a hearings panel. We expect to organize an annual meeting in the coming weeks to regain compliance with the applicable Nasdaq Listing Rules.

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AMA Litigation

On May 22, 2026, we filed a complaint against the Asset Manager, in the United States District Court for the District of Delaware, regarding the Asset Management Agreement. The complaint seeks a declaration that the Asset Management Agreement is void from inception as unconscionable and orders all fees paid by us to the Asset Manager under the Asset Management Agreement since inception be returned to the Company. Alternatively, the complaint seeks a declaration that a liquidated damages clause in the Asset Management Agreement, which would accelerate nearly 20 years of future fees upon termination, is an unenforceable penalty.

Board and Executive Changes

On May 4, 2026, Anthony K. McDonald, our President and a member of our Board, resigned as our President and as a director of the Company. In exchange for a release of claims and Mr. McDonald’s agreement to certain covenants, including cooperation, Mr. McDonald will receive an aggregate of $0.3 million payable over 12 months and reimbursement for legal fees of up to $10,000. Mr. McDonald’s outstanding equity awards will remain in effect in accordance with their terms.

On June 10, 2026, Nicholas J. Etten, a member of the Board, resigned as a director of the Company. In exchange for a release of claims and Mr. Etten's agreement to certain covenants, including cooperation, Mr. Etten received a payment of $85,000 and will receive reimbursement for legal fees of up to $50,000. Mr. Etten's outstanding equity award will remain in effect in accordance with its terms.

Components of Results of Operation

Revenue

We earn revenues from the two operating businesses within our Retail and Industry segment:

●Retail sales of vaping products through our Fat Panda retail locations in Central Canada and e-commerce sales through Fat Panda's online platform and

●Sales of industrial climate control systems for the controlled environment agriculture industry.

Our revenues do not include any activities within our BNB Treasury Management segment, including the income we earn on our BNB holdings such as income earned from Airdrops.

Fat Panda

Revenues earned by Fat Panda from its retail stores at point of sale are presented at the stated sales price, gross of transaction costs such as credit card processing fees, and net of sales taxes and applicable sales discounts and promotions.

Industrial Climate Control System

We also earn revenue from the design, engineering, and sale of environmental control technologies and components for the controlled environment agriculture industry. Contracts may span multiple phases of a customer's project life cycle, from facility design and system engineering to equipment delivery and start-up, though we do not provide construction or installation services. Generally, we accept a customer's deposit to acquire the necessary equipment and recognize revenue only when we, or our supplier, ship the finished equipment and fulfill our contractual performance obligations.

Cost of Revenue

Like our revenues, our cost of revenue arises solely from our Fat Panda and Industrial Climate Control System businesses within our Retail and Industry segment and consist primarily of the cost of inventory sold, including certain labor costs and charges for inventory excess or obsolescence, shipping and handling costs, and applicable excise taxes.

Operating Expenses

Our operating expenses generally consist of fees we pay to the Asset Manager; selling, general and administrative expenses; and net realized and unrealized gains and losses on our digital assets, primarily on our BNB holdings. During the period from June 7, 2025 through April 30, 2026, we also incurred elevated advisory expenses in connection with a shareholder action.

Management fees to affiliate

We expense contractual asset management fees incurred in connection with the AMA for assets within our DAT Strategy on a monthly basis. Such fees are based on a tiered percentage of the value of those assets.

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Selling, general and administrative expenses

Selling, general, and administrative expenses include costs incurred in the day-to-day operations of the business, including employee compensation and benefits, stock-based compensation issued to directors and employees, occupancy and facilities costs, professional and legal fees, insurance, advertising and marketing.

Shareholder advisory expenses

We incurred significant legal, strategic, and investor communications advisors costs in connection with our ongoing response to the shareholder activism campaign. YZi Labs filed preliminary consent solicitation materials seeking to expand the size of the Board and elect its own slate of director candidates, and stated its intent to nominate candidates at our next annual meeting of stockholders. As a result, we engaged advisors to protect shareholder interests and respond to the unsolicited proxy and consent solicitation activities. These matters have required significant time and resources from the Board and management and are expected to continue to do so in the near term.

Unrealized and Realized Loss on Digital Assets

Unrealized and realized loss on digital assets represents net unrealized and realized fair value gains and losses on our digital assets, primarily BNB holdings. Unrealized gains and losses result from the remeasurement of digital assets at fair value at each reporting date using quoted prices. Unrealized losses are driven primarily by fluctuations in the market price of our digital assets rather than changes in the quantity of digital assets held. Realized gains and losses are recognized upon the sale or other disposition of digital assets and are determined using the specific identification method.

Other affiliate operating expenses

Other affiliate operating expenses represent a liability recognized for an incentive award granted to our Chief Executive Officer in connection with a transition agreement, payable in a variable amount of cash in lieu of an equity incentive award.

Other Income, Net

Our other income represents the income or loss generated from non-operating activities, including the income we receive on our BNB holdings, as well as interest we pay on our debt obligations and changes in the fair value of warrants we've issued and treat as liabilities for accounting purposes. During the period from June 7, 2025 through April 30, 2026, we also incurred costs in connection with our acquisition of Fat Panda and our issuance of shares of our common stock and warrants as part of the PIPE Transaction.

Airdrop income

Represents income generated from new tokens or coins distributed by projects within the Binance ecosystem to our eligible BNB holdings. We hold the majority of our BNB tokens with Ceffu, a non-U.S. institutional digital asset custody platform operating within the Binance ecosystem, which enables us to maintain eligibility to receive airdrops. Airdrop income is measured at the fair value of the tokens received on the date of distribution. The timing, frequency, and magnitude of future airdrop allocations are determined by third-party projects and the Binance platform and are outside our control.

Gain on change in fair value of warrant liability

Non-cash gains or losses resulting from the remeasurement of our Stapled Warrants issued as part of the PIPE Transaction are treated as liabilities. Changes in fair value are driven primarily by fluctuations in the market price of the publicly-traded warrants as well as our assumptions around the implied volatility and other inputs used in our valuation model during periods when the publicly-traded warrants become less liquid. Generally, reductions in the market price of our common stock cause us to report unrealized gains since the warrants are more out-of-the-money and their value declines, and the reduced likelihood of warrant exercise reduces our liability. The fair value of the warrants are determined on a gross basis, and does not consider the value of the cash contribution to us upon exercise.

Interest expense, and interest expense to affiliate

Interest expense represents the interest payable by us on our outstanding debt obligations, including a $4.0 million bridge loan used to acquire Fat Panda, which we paid in full in December 2025, as well as convertible and non-convertible note payables also in connection with the Fat Panda acquisition. We include the amortization of debt discounts or premiums as well as applicable foreign currency translation adjustments associated with those instruments.

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PIPE transaction costs

Costs incurred in connection with the PIPE Transaction, including legal, advisory, placement agent, and other transaction-related fees allocable to the Stapled Warrants, which are classified as liabilities and carried at fair value. We allocated remaining costs to additional paid-in capital, which did not impact net income.

Business combination expenses

These expenses represent transaction costs incurred in connection with the acquisition of Fat Panda, including legal, advisory, and other professional fees directly attributable to the business combination. These costs are expensed as incurred and are not capitalizable as part of the purchase price allocation.

Other income (expense), net

Other income and expense items include foreign currency transaction gains and losses arising from the our Canadian retail vape operations, interest income on cash deposits, and other non-operating items.

Results of Operations

Because fair value changes in digital assets are recorded through our consolidated statements of operations, our BNB Treasury Management segment results—and consequently our consolidated net income—will be subject to significant volatility based on fluctuations in the market price of BNB. Investors should expect material period-to-period variations in our reported net income that may bear no relationship to the operating performance of our Retail and Industry segment.

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Consolidated Statements of Operations and Comprehensive Income

Successor Predecessor Predecessor

$ %

Operating expenses

Other affiliate operating expenses 558 — 558 — 558 n.m.

Other income (loss), net

Interest expense to affiliate (143) — (143) — (143) n.m.

Business combination expenses (970) — (970) — (970) n.m.

Other comprehensive income (loss)

Foreign currency translation adjustment 59 35 94 (1) 95 n.m.

Revenues

While our revenues increased $1.3 million for the Combined Annual Period compared to the year ended April 30, 2025, $1.7 million of the increase relates to our Industrial Climate Control Systems business, which we omit from our historical results as those operations were not part of the Predecessor and therefore not comparable.

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Successor Predecessor Predecessor

$ %

Fat Panda

Industrial Climate Control Systems

Total industrial climate control systems 1,712 — 1,712 — 1,712 n.m.

Fat Panda

Revenue for the Combined Annual Period was $27.6 million, compared to $28.0 million for the year ended April 30, 2025, representing a decrease of $0.4 million, or approximately 1.3%. Retail revenue increased by $1.0 million as a result of increased prices driven by increases in Canadian provincial excise taxes that led to higher excise taxes paid by our customers, partially offset by a decline in volume primarily related to the price increases. The changes in Canadian provincial excise taxes also necessitated substantial changes to our webstore, which experienced prolonged downtime as we redesigned the webstore to comply with the new regulations. As a result, Fat Panda's e-commerce revenue declined $1.0 million as customers were unable to access the Fat Panda webstore and visits to the webstore have not yet returned to levels Fat Panda experienced prior to the webstore redesign as well as impacts from the aforementioned increased excise taxes. Other revenue declined $0.3 million from reduced business-to-business wholesale sales that did not provide attractive margins.

Industrial Climate Control Systems

We earned $1.7 million from the sale of Industrial Climate Control Systems, with $1.5 million representing the delivery of equipment systems under three new contracts and $0.2 million earned from related services provided.

Cost of Revenue

We recognized $2.0 million of costs associated with the $1.7 million in revenues we earned from our Industrial Climate Control Systems business, both of which we omit from presentation during Predecessor periods. The negative margin is a result of project management and manufacturing salaries and overhead exceeding the margin from equipment sales.

The following table presents the results of Fat Panda that relate to both Predecessor and Successor periods:

Fat Panda

Successor Predecessor Predecessor Increase (Decrease)

Fat Panda's cost of revenue was $18.5 million for the Combined Annual Period, compared to $18.0 million for the year ended April 30, 2025, an increase of $0.5 million, or 2.7%. The increase was primarily driven by higher prices we paid for finished goods that we purchased for resale and are subject to increases in provincial excise taxes enacted in April 2025, partially offset by reduced purchases of discontined products.

Operating Expenses

All our operating expenses other than certain selling, general and administrative costs pertain to corporate and BNB Treasury Management business segment activities

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Successor Predecessor Predecessor

$ %

Management fees to affiliate $ 5,010 $ — $ 5,010 $ — $ 5,010 n.m.

Other affiliate operating expenses 558 — 558 — 558 n.m.

Selling, General, and Administrative Expenses

Successor Predecessor Predecessor

$ %

Retail and Industry

Equity-based compensation 34 — 34 — 34 n.m.

BNB Treasury Management

Professional and contractor fees 208 — 208 — 208 n.m.

Total BNB Treasury Management 725 — 725 — 725 n.m.

Corporate

Equity-based compensation 43 — 43 — 43 n.m.

Retail and Industry

Our Retail and Industry segment includes the results of operations for both our Fat Panda and Industrial Climate Control Systems businesses. The Industrial Climate Control Systems operations, which we do not present in the Predecessor period and are therefore not comparable, incurred $0.6 million of compensation expense, $0.1 million of professional and contractor fees, and $0.6 million of other general and administrative expense during the period from June 7, 2025 through April 30, 2026.

The remaining $0.9 million increase in selling, general, and administrative costs relate to the operations of Fat Panda and includes increased expenses comprised of $1.7 million of accounting, audit, and consulting expenses, directors' and officers' insurance, and board fees, $0.6 million related to amortization of our acquisition of Fat Panda trade names, and $0.1 million of increased compensation. The increases were partially offset by declines of $0.4 million in travel, office, and other benefits related to prior ownership, $0.4 million in advertising and marketing, $0.3 million in shipping, and $0.4 million in other general and administrative costs.

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BNB Treasury Management

We incurred $0.7 million of selling, general, and administrative costs that included $0.2 million in compensation expense for personnel supporting treasury operations, $0.2 million in professional and contractor fees related to custody and digital asset advisory services, and $0.3 million in other expenses, which included digital asset management fees and related operational costs, during the period from June 7, 2025 through April 30, 2026.

Corporate

During the period from June 7, 2025 through April 30, 2026, we incurred $14.8 million of selling, general, and administrative costs, which included $5.1 million of professional and contractor fees driven by legal, accounting, and advisory fees incurred for outsourced accounting integration support, public company reporting obligations, and other legal fees incurred in connection with ongoing legal matters, $4.9 million of advertising and marketing expenses incurred primarily in connection with our at-the-market program and investor relations activities, $2.2 million of compensation expense that included $1.4 million related to the transition agreement we entered into with our CEO on March 16, 2026 as well as the addition of other management. Additionally, we incurred other corporate expenses of $2.0 million in insurance costs associated with our expanded public company operations and $0.6 million of general corporate overhead.

Operating Expenses Applicable Solely to the Successor Period

Management fees to affiliate

We incurred $5.0 million of management fees under the AMA, representing tiered fees ranging from 1.4% to 1.8% of the fair value of assets within our DAT Strategy, which included our BNB holdings, with a weighted-average fair value of $330.2 million during the period from June 7, 2025 through April 30, 2026.

Shareholder advisory expenses

We incurred $4.6 million of professional fees for legal, strategic, and communications advice during the period from June 7, 2025 through April 30, 2026 as part of our ongoing response to an activist shareholder campaign, which have required significant time and resources from the Board and management.

Unrealized and Realized Loss on Digital Assets

We experienced unrealized losses of $130.3 million, of which $129.2 million related to a decline in the market value our BNB holdings and $1.1 million related to a decline in the market value of Bitcoin ("BTC"). In addition to these unrealized losses, we realized a loss of $1.3 millionupon our disposition of BTC.

Other affiliate operating expenses

Other affiliate operating expenses represent the $0.6 million estimated fair value of a cash incentive award granted to Mr. David Namdar, our Chief Executive Officer, in connection with a transition agreement, payable in a variable amount of cash in lieu of an equity incentive award.

Other income (expense), net

Aside from a $0.5 million impairment of a note receivable from a party related to Fat Panda during the year ended April 30, 2025, substantially all non-operating income and expense relates to our acquisition of Fat Panda, the PIPE Transaction, and our DAT Strategy.

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Successor Predecessor Predecessor

$ %

Interest expense to affiliate (143) — (143) — (143) n.m.

Business combination expenses (970) — (970) — (970) n.m.

Airdrop income

We collected Airdrops valued at $7.9 million on our BNB holdings, based on the U.S. dollar equivalent of the token received. During the period from June 7, 2025 through April 30, 2026, Airdrop activity has decreased in the greater BNB ecosystem and there can be no assurance that activity will increase in the future as we cannot predict the timing or magnitude of future Airdrops, and continued reduction in Airdrops frequency or size could have an adverse effect on our results of operations.

Gain on change in fair value of warrant liability

We issued Stapled Warrants in connection with the PIPE Transaction, recognized as a liability under U.S. GAAP, and to which we allocated $305.0 million of value. Since the issuance, the market price of our common stock has declined and the Stapled Warrants began to trade separately on Nasdaq under the symbol "BNCWZ" in April 2026. Increases (decreases) in the market price of our common stock generally corresponds to a higher (lower) value of the Stapled Warrants, resulting in a loss (gain) on such warrants, as it becomes more (less) likely warrant holders will exercise their warrants. The fair value of the Stapled Warrants represent a gross value and do not offset amounts by the cash we would receive upon exercise of such warrants.

Interest expense

We incurred $0.7 million of interest expense incurred on a $4.0 million bridge loan we used to finance the acquisition of Fat Panda that we fully repaid in December 2025.

Interest expense to affiliate

We incurred $0.1 million of interest expense that included amounts paid as well as amortization of debt discount on a promissory note and convertible promissory note issued to the President of Fat Panda and current employee in connection with the Fat Panda Acquisition.

PIPE transaction costs

We incurred $23.9 million of legal, underwriting, and other costs in connection with the PIPE Transaction, of which we allocated $14.6 million to the Stapled Warrants that we recognized in the Consolidated Statements of Operations and Comprehensive Income while we reduced additional paid-in capital by the remaining $9.3 million.

Business combination expenses

We expensed $1.0 million of professional, advisory, and legal costs in connection with our acquisition of Fat Panda.

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Income Tax Provision

Our income tax provision is generally not comparable between the Predecessor and Successor periods as the nature and amount of our pre-tax income substantially differs and the Predecessor is solely subject to Canadian federal and provincial tax jurisdictions whereas the Successor is also subject to U.S. federal, state and local taxes. Our effective tax rates were (0.3)%, 10.7%, and 19.4% for the period from June 7, 2025 through April 30, 2026, the period from May 1, 2025 through June 6, 2025, and the year ended April 30, 2025, respectively. Our effective tax rate for the period from June 7, 2025 through April 30, 2026 differed from the U.S. federal statutory rate of 21.0% primarily due to foreign statutory tax rate differences, particularly in the Cayman Islands where our income was not generally subject to tax, the impact of non-taxable gains on our warrant liability, and changes in our valuation allowance against deferred tax assets such as net operating loss carryforwards, and nondeductible expenses. See Note 9 to our Consolidated Financial Statements for further details.

Foreign Currency Translation Adjustment

Our Fat Panda business uses Canadian dollars as its functional currency while we use U.S. dollars as our reporting currency. As a result, we record other comprehensive income related to the difference of certain period-end amounts between the two currencies, though such adjustments have not historically been material.

Financial Condition, Liquidity and Capital Resources

At April 30, 2026, we held cash and cash equivalents of $3.1 million; 515,544 BNB tokens with a fair value of $317.3 million, of which we pledged 27,588, or $17.0 million, to borrow $10.0 million on May 1, 2026; and other digital assets with an aggregate fair value of $2.4 million, and we borrowed a total of $1.9 million consisting of notes payable to the prior owners of Fat Panda issued in connection with the related acquisition.

Our primary sources of liquidity include cash we receive from the sale of retail vape products and, to a lesser extent, the sale of industrial climate control system; cash received from our debt obligations; proceeds from the sale of shares of or common stock through at-the-market offerings or other capital raise activities; the cash we would receive from the exercise of our outstanding warrants if the market value of our common stock rises above the warrants' exercise price and such in-the-money warrants are not exercised on a cashless basis. We may also sell our digital assets, including BNB tokens, at their then-current market price for cash, but do not generally intend to sell BNB tokens for working capital purposes.

Our primary uses of liquidity include acquisitions of digital assets, primarily BNB tokens, repurchases of our common stock, repayment of our debt obligations, and payment of selling, general, and administrative costs to operate as a publicly-traded company. We may also use cash to acquire, or otherwise fund, operating or other businesses.

Historically, we have incurred substantial costs in connection with the PIPE Transaction and shareholder advisory costs in connection with recent shareholder activism. While there can be no assurance that we will not incur such costs in the future, we do not expect to incur such costs on a recurring basis over the long-term.

Digital Assets

We hold a significant portion of our liquid assets in digital assets, which are measured at fair value with changes recognized in earnings, further described in Note 4 to our Consolidated Financial Statements.

Our liquidity and capital resources are subject to substantial volatility in the market price of BNB and other digital assets. A decline in the market price of BNB or other digital assets would reduce the fair value of our digital assets and could adversely affect our ability to fund operations, invest in growth, or meet obligations as they come due. We manage this risk by maintaining fiat liquidity; however, these measures may not fully mitigate market, custodial, regulatory, or other risks. A 10.0% increase (decline) in the price of BNB at April 30, 2026, holding all other factors constant, would have resulted in an additional unrealized gain (loss) of approximately $31.7 million. These potential fluctuations significantly exceed the operating income or loss expected from our Retail and Industry segment.

Although digital assets may be traded on various cryptocurrency exchanges, the liquidity of these assets may vary depending on market conditions. Periods of significant volatility or market stress may reduce liquidity, widen bid-ask spreads, and limit our ability to sell digital assets at favorable prices. Our ability to generate liquidity from our digital assets may depend in part on our ability to sell digital assets in the market. If we were required to liquidate a significant portion of our BNB holdings to meet liquidity needs, such sales could adversely affect the market price of BNB and reduce the value of our remaining holdings. Management evaluates the Company's liquidity requirements on an ongoing basis and may determine to sell or otherwise utilize portions of its digital asset holdings to fund operations, pursue strategic opportunities, or satisfy other capital requirements.

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Digital Asset Treasury Risk Management

We have implemented policies and procedures designed to manage risks associated with holding digital assets. These measures include the use of institutional custodial platforms, internal controls governing the authorization and execution of digital asset transactions, and monitoring market conditions affecting our digital asset holdings. Despite these measures, digital assets are subject to risks that differ from traditional financial assets, including cybersecurity risks, technological risks associated with blockchain networks, and the potential for rapid changes in market conditions. We continuously evaluate and update our risk management practices as our digital asset treasury strategy evolves.

At-the-Market Program

In August 2025, we entered into an at-the-market offering agreement (the "ATM Program"), under which we may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through our agent acting as our sales agent or principal. Sales under the ATM Program, if any, will be made by means of ordinary brokers' transactions on Nasdaq or otherwise at market prices prevailing at the time of sale, or at prices related to prevailing market prices. Under this program, we have provided our agent with customary indemnification rights, and they are entitled to a commission of up to 3.0% of the gross proceeds from each sale of shares made through, or to, the agent. We sold and issued 856,275 shares for $13.1 million in cash, gross of $0.2 million transaction costs, during the period from June 7, 2025 through April 30, 2026.

Share Repurchase Program

In September 2025, our Board authorized a share repurchase program pursuant to which we may repurchase up to $250.0 million of our common stock on a perpetual basis period from the date of authorization. We intend to fund the share repurchases through a combination of cash on hand, future cash flow from operations, and borrowings under our debt obligations. Under the share repurchase program, we may purchase common stock through open market purchases, privately-negotiated transactions, accelerated share repurchases, or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, or by any combination of such methods, in each case subject to compliance with all SEC rules and other legal requirements. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, debt covenant restrictions, general business conditions, the market price of our stock, self-imposed trading blackout periods, and the availability of alternative investment opportunities. There is no minimum number of shares required to be repurchased under the share repurchase program, and the share repurchase program may be suspended or discontinued at any time. We repurchased and cancelled 3,242,210 shares of common stock at an average price per share of $5.36 for a total of $17.4 million, excluding $0.1 million transaction costs, during the period from June 7, 2025 through April 30, 2026.

Debt Obligations

Promissory Note

In connection with the Fat Panda Acquisition, we issued an interest-only promissory note in the principal amount of $0.8 million to the President of Fat Panda, bearing interest at a rate of 7.0% per annum, payable monthly. The Promissory Note matures in November 2026. We expect to satisfy this debt obligation at maturity with available cash on hand.

Convertible Promissory Note

We issued a convertible promissory note in the principal amount of $0.8 million to the President of Fat Panda, bearing interest at a rate of 7.0% per annum. The holder has the right to convert the outstanding principal amount of the convertible promissory note into shares of our common stock at a conversion price of $19.00 per share at any time on or before June 1, 2027. If no conversion election is made by the holder on or prior to such date, we are required to repay the entire outstanding principal balance plus accrued and unpaid interest in cash. To the extent the holder elects conversion, the settlement would not require the use of cash and would instead result in the issuance of additional shares of common stock.

Tax Indemnification Note

We issued a non-interest-bearing note in the amount of $0.4 million to the former Fat Panda shareholders that does not have a fixed maturity date. Within 15 days following the date on which the Canada Revenue Agency issues a letter confirming that a certain tax liability does not exist in connection with our acquisition of Fat Panda, we are required to repay the note, reduced by any taxes assessed, if any.

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Other Debt Activities

We entered into a collateralized loan agreement on April 30, 2026 and pledged $17.0 million of BNB tokens, for which received $10.0 million USDC on May 1, 2026. Our ability to sell, transfer, or otherwise use the pledged digital assets is restricted for the duration of the borrowing, the proceeds from which we expect to use for share repurchases and working capital.

Summary of Cash Flows

The following summarizes our cash flow data for the each of the periods presented:

Successor Predecessor

Net cash provided by (used in) operating activities $ (26,622) $ (239) $ 171

Net cash used in investing activities (387,694) (2) (97)

Net cash provided by financing activities 405,779 — —

Cash Flow from Operating Activities

For the Period from June 7, 2025 through April 30, 2026

Cash used in operating activities for the period from June 7, 2025 through April 30, 2026 was $26.6 million. We received $24.7 million in cash from Fat Panda vape sales and $1.7 million from the sale of industrial climate control system and related services, as well as $0.7 million in income tax refunds. We paid $19.9 million for inventory (which includes excise tax paid on inventory items purchased from suppliers), and excise taxes on production of $1.8 million. We also paid $7.6 million in cash compensation, $5.1 million for advertising and marketing, $4.6 million for asset management fees, $3.9 million for shareholder advisory costs, $5.1 million for other professional fees, $2.0 million for directors' and officers' insurance, other legal fees of $1.8 million, and $1.9 million for rent, utilities, insurance and other office expenses.

For the Period from May 1, 2025 through June 6, 2025

Cash used in operating activities for the period from May 1, 2025 through June 6, 2025 was $0.2 million. We received $2.9 million in cash from Fat Panda vape sales, for which we paid $2.4 million for inventory, including excise taxes on inventory items purchased from suppliers, $0.3 million in excise tax for produced items, and $0.4 million in cash compensation.

For the Year Ended April 30, 2025

Cash provided by operating activities for the year ended April 30, 2025 was $0.2 million. We received $26.8 million in cash from Fat Panda vape sales, for which we paid $16.2 million for inventory, including excise tax paid for finished items purchased from suppliers, and excise taxes on produced items of $1.4 million. Additionally, we paid $5.0 million in cash compensation, $1.2 million for rent, utilities, insurance and office expenses, $0.7 million in accounting, consulting and legal fees, $0.6 million in advertising and marketing, $0.4 million for shipping and postage, $0.4 million in travel and vehicle expenses, $0.3 million in income taxes paid, and $0.3 million for bank and credit card fees, and other expenses.

Cash Flow from Investing Activities

Cash used in investing activities for the period from June 7, 2025 through April 30, 2026 was $387.7 million, including $380.9 million paid to purchase digital assets and $10.6 million paid to acquire Fat Panda, partially offset by $3.7 million we received from the sale of digital assets.

Additionally, we purchased $— million, $— million, and $0.1 million of property and equipment during the period from June 7, 2025 through April 30, 2026, the period from May 1, 2025 through June 6, 2025, and the year ended April 30, 2025, respectively.

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Cash Flow from Financing Activities

Cash provided by financing activities for the period from June 7, 2025 through April 30, 2026 was $405.8 million, including $433.8 million received from issuance of common stock and warrants from the PIPE Transaction, less $23.9 million paid for related costs, and $12.9 million received from the sale of our common stock under our at-the-market program, partially offset by $17.0 million we paid to repurchase shares of our common stock under our share repurchase program. Additionally, we received $3.9 million, net of issuance discounts, on $4.0 million bridge loan that we fully repaid during the period from June 7, 2025 through April 30, 2026.

Fat Panda, our accounting Predecessor, did not receive or pay any cash for financing activities during the period from May 1, 2025 through June 6, 2025 or the year ended April 30, 2025.

Other Changes in Financial Position

In addition to the changes in our financial position from April 30, 2025 to April 30, 2026 described in "—Results of Operations" and "—Summary of Cash Flows," the following activities also occurred:

●In connection with the PIPE Transaction, we received approximately $66.3 million of in-kind digital asset contributions from investors in exchange for the issuance of common stock and warrants.

●We issued 39,000 shares of our common stock, valued at $0.3 million, and issued related party seller notes totaling $1.4 million, net of discounts and a $0.4 million non-interest-bearing tax indemnification note as non-cash transactions in connection with our acquisition of Fat Panda. Our acquisition of Fat Panda also resulted in our acquisition of $5.2 million of identifiable intangible assets and $4.2 million of goodwill, reduced by $0.7 million of measurement period and foreign exchange rate adjustments that also resulted in corresponding adjustments to the estimated fair values of certain assets acquired and liabilities assumed.

●We repurchased $0.5 million of our common stock in connection with our share repurchase program that we had not yet settled with our broker at April 30, 2026.

●We issued 2,393,884 shares of our common stock upon cashless exercise of 3,831,719 warrants.

Commitments and Contingencies

See Note 11 to our Consolidated Financial Statements, included as part of this Annual Report, for a discussion of commitments and contingencies, including contractual payment obligations.

Known Trends and Uncertainties Affecting Our Business

Management is aware of several trends and uncertainties that may affect our financial condition and results of operations, including: continued volatility in digital asset markets; evolving regulatory frameworks governing digital assets and cryptocurrency exchanges; technological developments affecting blockchain networks and decentralized applications; and macroeconomic conditions affecting investor demand for digital assets. These trends may influence the market value and liquidity of BNB and other digital assets and may therefore materially affect our financial condition and results of operations.

Critical Accounting Estimates

The preparation of our Consolidated Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions that in certain circumstances affect amounts reported therein. In preparing these financial statements, our estimates and judgments are based on historical experience, information from third-party valuation professionals and various other assumptions, giving due consideration to materiality. We consider the accounting policy discussed below to be critical to the understanding of our consolidated financial statements. Actual results could differ from our estimates and assumptions, and any such difference could be material to our consolidated financial statements, particularly as many of the critical policies relate to our DAT Strategy, for which we have little history with which to compare the accuracy of our estimates. These significant accounting policies are described more fully in Note 2 of our Consolidated Financial Statements.

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Warrant Liabilities

We classify the Stapled Warrants issued in connection with the PIPE Transaction as liabilities measured at fair value. These were initially recorded at a fair value of $305.0 million at the date of issuance and are remeasured at each reporting period, with changes in fair value recognized in earnings. The determination of fair value requires significant estimates and assumptions, including expected volatility, risk-free interest rate, expected term. During the period from June 7, 2025 through April 30, 2026, we recognized a $282.9 million gain from changes in the fair value of warrant liabilities. Given the magnitude of the warrant liability and the sensitivity of the valuation to changes in the underlying assumptions, small changes in these inputs could result in material differences in the reported fair value. In April 2026, the Stapled Warrants began trading on Nasdaq under the ticker symbol "BNCWZ." Since management does not believe the Stapled Warrants trade with sufficient liquidity on which we can solely rely on the traded market price, we equal-weight the traded market price with its internal valuation model, with assistance from an independent valuation agent.

Digital Assets

We hold significant digital asset positions, including BNB, Bitcoin, Tether, and USDC, which are accounted for at fair value with changes recognized in earnings in accordance with ASC 350-60. Fair value is determined using observable, quoted market prices on principal exchanges, classified within Level 1 of the fair value hierarchy. While the fair value measurements themselves rely on observable inputs, management judgment is required in evaluating the determination of the principal market for each digital asset and in the valuation of digital assets received through non-cash transactions, including Airdrops. Additionally, management periodically reassesses whether the selected principal market continues to represent the most advantageous market for each digital asset. Key indicators monitored by management in this assessment include changes in trading volume, liquidity, and the availability of reliable pricing data across exchanges. During the period from June 7, 2025 through April 30, 2026, we acquired $455.0 million of digital assets, including $7.9 million of Airdrops for which we recognized non-cash income, and recognized unrealized and realized losses of $130.3 million and $1.3 million, respectively. Given the inherent price volatility of digital assets, changes in fair value between reporting periods could be material to our Consolidated Financial Statements.

Cash Incentive Award

We awarded a cash-settled incentive award that is classified as a liability and remeasured at fair value at each reporting period, with changes in fair value recognized in net income. The determination of fair value requires the use of observable inputs, including quoted market prices of our common stock, as well as significant unobservable inputs, including adjusted historical volatility of our common stock, for which we classify the cash incentive award within Level 3 of the fair value hierarchy and engage an independent valuation agent to assist us with these valuations. Changes in the assumptions used to determine fair value, particularly volatility, could result in materially different fair value amounts in future periods.

Goodwill and Intangible Assets

We account for business combinations under the acquisition method of accounting and allocate the purchase price we pay to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. Any purchase consideration in excess of the fair value of net assets acquired is recorded as goodwill. We determine the fair value of tangible and identifiable intangible assets acquired and liabilities assumed using the best available information, which incorporates various estimates and assumptions, including, but not limited to, future expected cash flows, useful lives, discount rates, and royalty rates. These estimates are based on historical data, internal estimates, and external sources. Unanticipated events may affect the validity of these assumptions.

In connection with the Fat Panda Acquisition, we initially recorded $4.2 million of goodwill, reduced by $0.7 million of measurement period and foreign exchange rate adjustments, and $5.2 million of definite-lived intangible assets. The fair value of the intangible assets was determined based on the relief-from-royalty method, which required applying significant assumptions including the discount rate, revenue projections, the selected royalty rate, and estimated useful life. While we believe these assumptions to be reasonable and appropriate, changes in these estimates could result in different fair value amounts.

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Goodwill

Goodwill represents the excess of the purchase price we paid to acquire Fat Panda over the fair value of identifiable net assets acquired. Goodwill is denominated in Canadian dollars, the functional currency of the acquired entity, and translated into U.S. dollars at each reporting date, with changes recognized in accumulated other comprehensive income (loss). Goodwill impairment testing is performed at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For goodwill impairment testing purposes, we have determined that there is one reporting unit. During the quarter ended April 30, 2026, management performed a quantitative goodwill impairment test with the assistance of an independent third-party valuation firm. For purposes of this assessment, management estimated the fair value of the reporting unit using an equal weighting of the discounted cash flow method (income approach) and the guideline public company method (market approach), and determined that the estimated fair value of the reporting unit exceeded its carrying value. Accordingly, no impairment was identified. At April 30, 2026, the carrying value of goodwill was $3.5 million.

Definite-lived intangible assets

Definite-lived intangible assets consist of Fat Panda trade names, which are expected to contribute to the future cash flows of Fat Panda over its estimated useful life of 10 years, are amortized on a straight-line basis over its remaining expected useful life. Management periodically evaluates the remaining useful life and carrying value of the intangible asset to determine whether events or changes in circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include significant adverse changes in the business climate, declines in revenue performance relative to historical results, changes to applicable legal, regulatory, or contractual provisions, and reductions in underlying operating cash flows. During the quarter ended April 30, 2026, management identified triggering events and performed a recoverability test under ASC 360-10 by comparing estimated future undiscounted cash flows of the asset group to its carrying value. Based on this analysis, management concluded that the undiscounted cash flows exceeded the carrying value and no impairment was recorded. As of April 30, 2026, the carrying value of definite-lived intangible assets was $4.8 million, net of accumulated amortization.

Income Taxes

We recognize deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of assets and liabilities. Management evaluates the realizability of deferred tax assets on a jurisdictional basis and establishes a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

At April 30, 2026, we recorded a $4.0 million increase in our valuation allowance, primarily related to our results of operations in the United States, reflecting cumulative losses and updated forecasts of future taxable income. The valuation allowance remains affected by cumulative losses in certain jurisdictions and uncertainty about the timing of future reversals of deferred tax liabilities.

Future changes in the valuation allowance could materially affect our effective tax rate and results of operations.

We are subject to income taxes in the United States and Canada and subject to audit by taxing authorities. As part of the income tax provision, we evaluate our tax positions to determine whether it is more likely than not that such positions will be sustained upon examination based on their technical merits. For those positions that do not meet the recognition threshold, we record a liability for unrecognized tax benefits.

We account for uncertainty in income taxes under the recognition and measurement framework of ASC 740. An uncertain tax position is a position taken or expected to be taken in a tax return where there is uncertainty as to whether the relevant taxing authority would sustain the position upon examination.

Tax benefits are recognized only for positions that meet the more-likely-than-not recognition threshold, and the amount recognized is measured as the largest benefit that is greater than 50 percent likely to be realized upon settlement.

We record liabilities for unrecognized tax benefits related to these positions, as well as interest and penalties, where applicable. Changes in uncertain tax positions may result from new information, audit developments, expiration of statutes of limitation, or changes in tax law.

At April 30, 2026 and April 30, 2025, we had no unrecognized tax benefits under ASC 740.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, therefore are not required to provide the information under this item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CEA Industries Inc.

Index to Consolidated Financial Statements

Financial Statements Page

Report of Independent Registered Public Accounting Firm (PCAOB ID NO: 3627) 68

Consolidated Balance Sheets 70

Consolidated Statements of Operations and Comprehensive Income 71

Consolidated Statements of Changes in Shareholders' Equity 72

Consolidated Statements of Cash Flows 73

Notes to Consolidated Financial Statements 74

Note 1 — Nature of Operations 74

Note 2 — Basis of Presentation and Significant Accounting Policies 76

Note 3 — Revenue 91

Note 4 — Digital Assets 92

Note 5 — Debt Obligations 94

Note 6 — Equity and Earnings Per Share 95

Note 7 — Variable Interest Entities 102

Note 8 — Fair Value Measurement 103

Note 10 — Transactions with Affiliates and Affiliated Entities 111

Note 11 — Commitments and Contingencies 112

Note 12 — Subsequent Events 115

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of CEA Industries Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CEA Industries Inc. (“the Company”) as of April 30, 2026 (Successor Company), and 2025 (Predecessor Company), the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for each of the periods from June 7, 2025 through April 30, 2026 (Successor Company), and the period from May 1, 2025 through June 6, 2025, and the year ended April 30, 2025 (Predecessor Company), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2026 (Successor Company) and 2025 (Predecessor Company), and the results of its operations and comprehensive income and its cash flows for each of the periods from June 7, 2025 through April 30, 2026 (Successor Company), and the period from May 1, 2025 through June 6, 2025, and the year ended April 30, 2025 (Predecessor Company), in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combination

Critical Audit Matter Description

On June 6, 2025, the Company acquired Fat Panda, Ltd., for an aggregate purchase price of $12.7 million. The Company accounted for this acquisition as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed at fair value as of the transaction date. The Company utilized a third-party valuation specialist to assist in determining the fair value of the consideration granted and intangible assets acquired. We identified the estimation of the fair value of the consideration granted, assets acquired, and liabilities assumed in this acquisition as a critical audit matter.

We identified the valuation of the consideration given, assets acquired, and liabilities assumed as a critical audit matter due to the significant estimates and assumptions management made in determining the fair value of certain of these elements. This required a high degree of auditor judgment and increased effort when performing audit procedures to evaluate the reasonableness of the valuation methodologies applied and the assumptions used. In addition, the audit effort involved professionals with specialized skills and knowledge.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the following:

●Obtaining an understanding of management’s processes used to determine the fair value of assets acquired and liabilities assumed, including obtaining the valuation report prepared by a valuation specialist engaged by management to assist in the purchase price allocation, including determination of fair values assigned to acquired intangible assets, and examining the valuation methods used and the qualifications of the specialist.

●Evaluating whether significant assumptions used by management and the valuation specialist were reasonable and whether such assumptions were consistent with evidence obtained in other areas of the audit.

●Examining the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation report, including historical and projected financial information.

●Evaluating the accuracy and completeness of the financial statement presentation and disclosure of the acquisition.

Additionally, the Firm utilized professionals with specialized skills and knowledge to assist in the performance of these procedures.

Valuation of Warrants

Critical Audit Matter Description

As described in Notes 2, 6, and 8 to the consolidated financial statements, the Company issued stapled warrants during the period that are classified as liabilities and are required to be measured at fair value at each reporting period. At issuance and as of April 30, 2026, the warrant liabilities had fair values of approximately $305 million and $22 million, respectively.

We identified the valuation of these warrants as a critical audit matter due to the significant estimates and assumptions management made in determining their fair value, including the appropriateness of the valuation models utilized and the respective weighting between various models as applicable, and the appropriateness of model inputs, including market pricing information for the underlying shares and warrant, when applicable, expected volatility, the risk-free interest rate, and the expected holding period (term). This required a high degree of auditor judgment and greater effort when performing audit procedures to evaluate the reasonableness of such estimates and assumptions. In addition, the audit effort involved professionals with specialized skills and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the following:

●Obtaining an understanding of management’s process for developing the valuation model and assumptions applied, as well as the use of a third-party valuation expert.

●Evaluating the reasonableness of the significant assumptions used in the valuation model, including market pricing information for the underlying shares and warrants, as applicable, expected volatility, the risk-free interest rate, the expected holding period (term), and the volume-weighted average price exercise threshold.

●Independently recalculating the fair value of the warrants using the contractual terms and the assumptions we tested, and comparing the results to the Company’s estimate.

Additionally, the Firm utilized professionals with specialized skills and knowledge to assist in the performance of these procedures.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2020.

Draper, UT

June 23, 2026

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Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

Successor Predecessor

ASSETS

Current assets

Cash and cash equivalents $ 3,061 $ 2,149

Non-current assets

Digital assets, net of current portion 317,256 —

Intangible assets, net 4,800 —

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES

Current liabilities

Accounts payable and accrued expenses $ 5,290 $ 2,255

Current portion of operating lease liability 670 529

Related party note payable 1,083 —

Other current related party liabilities, at fair value 558 —

Other current related party liabilities 365 —

Other current liabilities 678 124

Non-current liabilities

Related party note payable 753 —

Other non-current liabilities 1,642 1,375

Commitments and contingencies (Note 11)

SHAREHOLDERS’ EQUITY

Additional paid-in capital 231,274 —

Accumulated other comprehensive income (loss) 59 (77)

Total Liabilites and Shareholders' Equity $ 337,846 $ 9,044

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Operations and Comprehensive Income

(dollars in thousands, except per share amounts)

Successor Predecessor

Operating expenses

Management fees to affiliate 5,010 — —

Selling, general and administrative expenses 25,618 905 8,819

Shareholder advisory expenses 4,644 — —

Unrealized loss on digital assets 130,315 — —

Realized loss on digital assets 1,293 — —

Other affiliate operating expenses 558 — —

Other income (loss), net

Airdrop income 7,863 — —

Gain on change in fair value of warrant liability 282,920 — —

Interest expense (697) — —

Interest expense to affiliate (143) — —

PIPE Transaction costs (14,551) — —

Business combination expenses (970) — —

Other income (expense), net 18 — (453)

Total other income (loss), net 274,440 — (453)

Income before income tax expense (benefit) 114,873 21 707

Income tax expense (benefit) (372) 2 137

Other comprehensive income (loss)

Foreign currency translation adjustment 59 35 (1)

Net income per share of common stock attributable to common shareholders

Weighted average number of common shares outstanding

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Changes in Shareholders' Equity

(dollars in thousands)

Successor

Shares Amount Shares Amount

Issuance of common stock, net

Exercise of warrants 2,393,884 — — — — — — —

Equity-based compensation 4,189 — — — 77 — — 77

Foreign currency translation adjustment — — — — — — 59 59

Predecessor

Shares Amount

Foreign currency translation adjustment — — — — 35 35

Net income — — — 19 — 19

Predecessor

Shares Amount

Foreign currency translation adjustment — — — — (1) (1)

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Cash Flows

(dollars in thousands)

Successor Predecessor

Cash flows from operating activities

Adjustments to reconcile net income to net cash used in operating activities

Equity-based compensation 77 — —

Non-cash income from airdrops (7,863) — —

Deferred tax liabilities (798) — (134)

PIPE transaction costs 14,551 — —

Realized loss on digital asset 1,293 — —

Unrealized loss on digital assets 130,315 — —

Change in fair value of warrant liabilities (282,920) — —

Other, net 229 — —

Changes in operating assets and liabilities:

Income taxes payable 952 2 (13)

Accounts payable and accrued liabilities 1,191 35 (759)

Lease liabilities — — (639)

Deferred revenue (373) — —

Royalty — (5) (21)

Related parties — — 434

Net cash provided by (used in) operating activities (26,622) (239) 171

Cash flows from investing activities

Cash paid for acquisition of Fat Panda (10,571) — —

Purchase of digital assets (380,857) — —

Sale of digital assets 3,743 — —

Purchases of property and equipment (9) (2) (97)

Net cash used in investing activities (387,694) (2) (97)

Cash flows from financing activities

Proceeds from notes payable 3,910 — —

Proceeds from issuance of common stock and warrants in PIPE offering 433,755 — —

Issuance cost of common stock and warrants in PIPE offering (23,860) — —

Proceeds from issuance of common stock 12,928 — —

Repurchase of shares (16,954) — —

Repayments from notes payable (4,000) — —

Net cash provided by financing activities 405,779 — —

Net increase (decrease) in cash and cash equivalents (8,537) (241) 74

Effect of exchange rate changes on cash and cash equivalents 129 14 (2)

Cash and cash equivalents, end of period $ 3,061 $ 1,922 $ 2,149

Supplemental cash flow information

Cash paid for interest $ 647 $ — $ —

Cash paid for income taxes — — 285

Non-cash Investing and Financing Activities:

Issuance of common stock to acquire Fat Panda $ (314) $ — $ —

Accrued share repurchase liability (480) — —

CRA indemnity note 365 — —

Issuance of related party notes for Fat Panda acquisition 1,394 — —

In-kind digital assets acquired from PIPE offerings proceeds (66,281) — —

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Note 1 — Nature of Operations

Description of Business

CEA Industries Inc. ("CEAI," or, together with its subsidiaries, the "Company" or "BNC") is a digital asset treasury ("DAT") focused exclusively on BNB, the native token of the BNB blockchain network ("BNB Chain"). Its primary business is to build and manage the largest corporate treasury of BNB to provide institutional-grade exposure to blockchain infrastructure and decentralized finance ("DeFi") and to generate income, such as new tokens or coins distributed by a project to a wide range of individuals in the crypto community ("Airdrops"), including to BNC in connection with its eligible BNB holdings, as well as continue its core retail nicotine vape operations. The Company may generate returns through additional digital asset-related activities such as validation services, lending, and other DeFi protocols in the future, though it has not staked any BNB thereto aside from BNB pledged for the Company's debt obligations (Note 5), through April 30, 2026.

As more fully described in "—Segment Reporting," the Company operates the following two business segments:

●BNB Treasury Management — Operations directly related to the Company's DAT strategy, including the acquisition, disposition, and management of the Company's BNB holdings or other digital assets such as Airdrops.

●Retail and Industry — Fat Panda's retail and distribution operations along with revenue and operating costs related to designing, engineering, and selling industrial climate control systems for controlled environment agriculture.

Formation and Organization

CEAI was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered in Louisville, Colorado. Historically, CEAI operated a portfolio of consumer and industrial businesses, including industrial climate control systems for controlled environment agriculture.

On June 6, 2025 (the "Acquisition Date"), CEAI completed the acquisition of Fat Panda Ltd., a Canadian corporation, and its related entities ("Fat Panda") (the "Fat Panda Acquisition"), entering the Canadian retail nicotine vape industry. The Fat Panda Acquisition, completed before the Company commenced its DAT strategy, aligned with the Company's then-current strategy to focus on high-growth, regulated consumer markets and provide a vertically integrated infrastructure to support retail expansion and e-commerce capabilities. The Company changed its Nasdaq ticker symbol from "CEAD" to "VAPE" on June 13, 2025 in connection with its acquisition of Fat Panda.

In August 2025, the Company initiated a strategic transformation to adopt the current BNB-focused DAT strategy that commenced on August 5, 2025, following the closing of a private placement that raised $500.0 million (the "PIPE Transaction"), with up to $750.0 million additional proceeds available through warrant exercises (Note 6), and execution of an Asset Management Agreement ("AMA") to provide asset management and related services with respect to the Company's DAT strategy with 10X Capital Partners LLC ("Asset Manager") (Note 10). In connection with this strategic shift, the Company changed its Nasdaq ticker symbol from "VAPE" to "BNC" on August 6, 2025, reflecting the Company's strategic focus on BNB as its primary treasury reserve asset held by BNC BNB Cayman, a Cayman Islands exempt company, indirectly owned through the Company's wholly owned subsidiary, CEA BRS LLC, a Delaware limited liability company and the sole stockholder of BNC BNB Cayman (Note 8).

See Note 12 regarding the Company's entry into litigation with its Asset Manager after April 30, 2026.

Segment Reporting

During the second fiscal quarter of 2026, the Company introduced a new business line focused on the Company's DAT strategy, and appointed a new Chief Executive Officer, who serves as the chief operating decision maker ("CODM"). These changes triggered a reassessment of the Company's operating segments under the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") ASC 280, Segment Reporting. As a result of this reassessment, the Company determined that it operates two reportable segments: BNB Treasury Management and Retail and Industry (see "—Description of Business"). Comparative periods have been recast to reflect this change in segment composition. The CODM evaluates the financial performance of the business and makes resource allocation decisions based on these two distinct sources of business activity.

The CODM uses income (loss) from operations before provision for income taxes as the primary measure to assess segment performance. This measure is reviewed regularly by examining period-over-period trends, benchmarking against competitors, and monitoring budget versus actual results. The CODM also considers this metric when evaluating income generated from segment assets to determine whether to reinvest profits within the segment or allocate resources elsewhere within the Company.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

The following tables present, for each segment and consolidated total, the Company's revenues and significant expenses regularly provided to the CODM, reconciled to income (loss) from operations before provision for income taxes for each of the periods presented. Total segment assets provided to the CODM are also disclosed in the tables below for each period presented. Corporate activities are not considered an operating segment consisting primarily of corporate support functions that include capital and funding to support the business activities of the Company as well as costs and expenses not allocated to a line of business.

Successor

Retail and Industry BNB Treasury Management Corporate Total

Unrealized gain (loss) on digital assets — (130,315) — (130,315)

Realized gain (loss) on digital assets — (1,293) — (1,293)

Other income from Airdrops — 7,863 — 7,863

Advertising and marketing expense (193) — (4,938) (5,131)

Management fees to affiliate — (5,010) — (5,010)

Equity-based compensation (34) — (43) (77)

Gain from change in fair value of warrant liabilities — — 282,920 282,920

Interest expense and other income, net (822) — — (822)

Predecessor

Retail and Industry BNB Treasury Management Corporate Total

Total revenue, net $ 2,928 $ — $ — $ 2,928

Advertising and marketing expense (63) — — (63)

Compensation expense (431) — — (431)

Professional and contractor fees (135) — — (135)

Other segment expenses(A) (276) — — (276)

Income (loss) from operations before provision for income taxes 21 — — 21

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Predecessor

Retail and Industry BNB Treasury Management Corporate Total

Advertising and marketing expense (622) — — (622)

Professional and contractor fees (704) — — (704)

Other segment expenses(A) (2,996) — — (2,996)

Income (loss) from operations before provision for income taxes 707 — — 707

A.Includes other selling, general, and administrative expenses such as occupancy expenses, maintenance expenses, utilities, depreciation and amortization expenses. Starting in the second quarter of 2026, other segment items also include business combination expenses, PIPE Transaction costs, insurance fees, and advisory fees.

Note 2 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

On the Acquisition Date, the Company acquired Fat Panda, Central Canada's leading retailer and manufacturer of vaping products, holding a significant market share across Manitoba, Ontario, and Saskatchewan. With 34 retail locations and an e-commerce platform, Fat Panda offers a wide range of high-quality vape devices and e-liquids, including its own premium in-house line.

The Company has been identified as the accounting acquirer ("Successor") in the Fat Panda Acquisition, and Fat Panda as the accounting predecessor ("Predecessor") in accordance with the acquisition method of accounting under ASC 805, Business Combinations. As a result of this designation, the financial statements reflect a change in reporting entity. Financial information for periods prior to the Acquisition Date represents the historical operations of Fat Panda because CEAI's operations prior to the acquisition were insignificant relative to those of Fat Panda. Financial information for periods beginning on and after the Acquisition Date reflects the operations of the combined entities under the control of the Company. The merger was accounted for as a business combination using the acquisition method of accounting. The Successor's financial statements reflect a new basis of accounting based on the fair value of the identifiable net assets acquired. Determining the fair value of certain assets and liabilities assumed involves significant judgment and the use of estimates and assumptions. See "—Business Combinations" below for additional information on the fair values of assets and liabilities recorded in connection with the Fat Panda Acquisition.

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

The accompanying consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the accounts of CEA Industries Inc. and its consolidated subsidiaries.

In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations, and cash flows have been included and are of a normal and recurring nature. All intercompany balances and transactions have been eliminated.

Certain prior period amounts have been reclassified to conform to the current period's presentation. In particular, the Company has separated components of selling, general, and administrative expenses related to depreciation and amortization as well as management fees to affiliate.

Consolidation

The Company consolidates those entities over which it controls significant operating, financial, and investing decisions of the entity as well as those entities deemed to be variable interest entities ("VIEs") in which the Company is determined to be the primary beneficiary.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

The analysis as to whether to consolidate an entity is subject to a significant amount of judgment. Some of the criteria considered are the determination as to the degree of control over an entity by its various equity holders, the design of the entity, how closely related the entity is to each of its equity holders, the relation of the equity holders to each other and a determination of the primary beneficiary in entities in which the Company has a variable interest. These analyses involve estimates, based on the assumptions of management, as well as judgments regarding significance and the design of entities.

VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company monitors investments in VIEs and analyzes the potential need to consolidate the related entities pursuant to the VIE consolidation requirements. These analyses require considerable judgment in determining whether an entity is a VIE and determining the primary beneficiary of a VIE since they involve subjective determinations of significance with respect to both power and economics. The result could be the consolidation of an entity that otherwise would not have been consolidated or the deconsolidation of an entity that otherwise would have been consolidated. See Note 7 for more information regarding the VIEs in which the Company holds an interest.

Segments

The Company operates through two operating and reportable segments, which reflects how the CODM allocates resources and assesses performance. (Note 1)

Risks and Uncertainties

In the normal course of business, the Company is subject to risks and uncertainties common to companies in its industries, including, but not limited to, changes in general economic conditions, customer demand, supplier relationships, regulatory developments, competition, liquidity, and access to capital. The Company’s operating results and financial condition may also be affected by volatility in digital asset markets, including changes in the fair value and liquidity of its BNB holdings and other digital assets held by the Company, as well as evolving laws, regulations, custody practices, exchange practices, and accounting guidance applicable to digital assets. These factors could materially affect the Company’s future results of operations, cash flows, liquidity, and financial position.

Concentrations

BNB Holdings

The Company’s digital asset holdings were substantially concentrated in its BNB holdings, which is its primary treasury reserve asset. Since a significant portion of the Company’s assets consists of BNB, adverse changes in the market price, liquidity, custody environment, regulatory treatment, or broader adoption of BNB or the BNB ecosystem could have a material adverse effect on the Company’s financial condition, results of operations, cash flows, and liquidity.

All of the Company's BNB holdings not pledged as collateral are held in custody through the Company’s sole custodian, Ceffu, a non-U.S. institutional digital asset custody platform operating within the Binance ecosystem. Ceffu utilizes a multi-party computation wallet infrastructure and maintains segregated account structures designed for institutional holders. While Ceffu operates as a separate entity from the Binance exchange, the Company's custody arrangement creates concentration exposure to the broader Binance ecosystem. Disruptions to Ceffu's operations, changes in its regulatory status, or adverse developments affecting the Binance ecosystem could materially impact the Company's ability to access, transfer, or liquidate its BNB holdings.

Fat Panda Suppliers

Fat Panda sources inventory, including raw materials and finished goods, from multiple suppliers. However, two suppliers accounted for 42.0% and 37.0% for the period June 7, 2025 through April 30, 2026, 42.0% and 37.0% for the period May 1, 2025 through June 6, 2025, and 42.0% and 39.0% during the year ended April 30, 2025, respectively, of inventory purchases. Loss of one, or both, suppliers could have a material adverse effect on the Company’s financial condition, results of operations, cash flows, and liquidity.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Foreign Currency Translation

The Company's consolidated financial statements are presented in U.S. dollars ("USD"). Financial statements of foreign subsidiaries are translated into USD using period-end exchange rates for assets and liabilities and average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive income (loss) within the consolidated financial statements. The Company's functional currency is USD, except for Fat Panda that uses Canadian dollars ("CAD").

Use of Estimates and Assumptions

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management makes subjective estimates of project installations, warranty claims, product returns, promotional programs, and other variable consideration that significantly impacts revenue; inventory obsolescence, cost allocation, and impairment that significantly impacts costs of revenue; determinations of fair value of digital assets, including the value of tokens received from Airdrops that impact realized and unrealized digital asset gains or losses; volatility of the Company's stock that significantly impacts the fair value of warrants accounted as liabilities as well as warrants and other forms of compensatory equity awards that impacts such compensation expense or changes in liability fair value; the fair value of acquired tangible and intangible assets and liabilities assumed that significantly impacts goodwill and amortization of definite-lived intangible assets; estimates regarding trade accounts receivable that impact impairment and allowances for related losses; the useful lives of tangible and intangible assets; estimates of future taxable income and deductibility of compensatory warrants that impact current and deferred tax assets and liabilities and related tax provisions; and the outcome of litigation that may impact losses, expenses, or other items, including transactions with the Company's Asset Manager. Actual results may ultimately differ materially from those estimates.

Accounting Changes

Change in Accounting Principle for Payment Stablecoins

In April 2026, the Company voluntarily elected to change its method of accounting for certain payment stablecoins that (a) provide holders with enforceable rights to, or claims on, underlying cash and cash equivalents, (b) are readily convertible into known amounts of cash, and (c) present insignificant risk of changes in value because of changes in interest rates. Specifically, the Company now classifies such payment stablecoins as cash equivalents instead of crypto assets.

USD Coin ("USDC") is a digital dollar fully reserved by highly liquid cash and cash-equivalent assets as a covered stablecoin, as defined by the U.S. Securities and Exchange Commission ("SEC"), and is thus readily redeemable for USD on a 1:1 basis. Circle, a blockchain-based treasury and payments financial technology provider reserved the majority of USDC in the Circle Reserve Fund (USDXX), a SEC-registered 2a-7 government money market fund, and the Company primarily transacts USDC on Circle Mint.

The Company believes the reclassification of USDC to cash equivalents is preferable because it better reflects its economic substance, risks, and liquidity characteristics of cash equivalents and has applied this change in accounting principle retrospectively to all periods presented, including in the Consolidated Statements of Cash Flows; however, all such changes occurred within the period from June 7, 2025 through April 30, 2026. This reclassification had no effect on previously reported total assets, total liabilities, equity, net income, or earnings per share for any period presented.

Significant Accounting Policies

Fair Value Measurement

U.S. GAAP requires the categorization of the fair value of financial instruments into three broad levels that form a hierarchy, based on the transparency of inputs to the valuation to estimate the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Level Measurement

The Company follows this hierarchy for the fair value measurement of applicable assets and liabilities, with classifications based on the lowest level of input that is significant to the fair value measurement. The following summarizes the Company's asset and liability fair value hierarchy at April 30, 2026:

Level Asset or Liability Measurement

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Valuation Process — On a quarterly basis, with assistance from an independent valuation firm, management estimates the fair value of the Company's Level 3 financial instruments. The Company's determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. When an independent valuation firm expresses an opinion on the fair value of assets or liabilities in the form of a range, management selects a value within the range provided by the independent valuation firm to assess the reasonableness of management’s estimated fair value for that asset or liability. At April 30, 2026, the Company's valuation process for Level 3 measurements, as described below, was conducted internally or by an independent valuation firm and reviewed by management.

Valuation of Digital Assets — The Company has designated the Binance exchanges as its principal markets for its digital assets as the markets to which it has access and that provides the greatest volume and level of orderly transactions for its respective digital assets. The Company reassesses its principal market when facts and circumstances change, including but not limited to when new markets become accessible, or the volume/activity in the current principal market declines. For digital assets that trade continuously across global markets, the Company applies a consistent valuation cut-off at midnight Coordinated Universal Time ("UTC") on the reporting date to determine fair value. All of the Company's digital assets are held by BNC BNB Cayman, and the principal market for each asset is determined based on the markets accessible to this subsidiary.

Valuation of Warrant Liabilities — Management considers the Stapled Warrants (Note 6) issued together with shares in connection with the PIPE Transaction and redeemable for the Company's equity as Level 3 liabilities in the fair value hierarchy as liquid markets exist for such liabilities, but the instruments do not actively trade. On a quarterly basis, management engages an independent valuation firm to estimate the fair value of the Company's warrants, which includes a Monte-Carlo model using estimates of volatility, contractual terms, discount rates, dividend rates, expiration dates, and risk-free rates. Management estimates fair value of warrants on an equal-weighted basis between the observed market trades and model outputs.

Valuation of Cash Incentive Award — Management considers the Cash Incentive Award issued under the Transition Agreement (Note 10) as Level 3 liability in the fair value hierarchy as no market exists for the agreement and management uses a model with unobservable inputs to estimate the award value. On a quarterly basis, management engages an independent valuation firm to estimate the fair value of the Cash Incentive Award, which includes a Monte-Carlo model using estimates of volatility, contractual terms, discount rates, dividend rates, expiration dates, and risk-free rates.

Valuation of Intangibles and Goodwill — The Company carries intangible assets, excluding applicable digital assets, and goodwill at the lower of their carrying value or fair value. Significant assumptions and estimates used in the valuation of intangible assets and goodwill includes future expected cash flows, including projected revenues and expenses, and applicable discount rates. These assumptions and estimates were Level 3 inputs and based on assumptions that the Company believes to be reasonable.

Other Valuation Matters — For Level 3 assets acquired and liabilities assumed during the calendar month immediately preceding a quarter end that were conducted in an orderly transaction with an unrelated party, management generally believes that the transaction price provides the most observable indication of fair value given the illiquid nature of these financial instruments, unless management is aware of any circumstances that may cause a material change in the fair value through the remainder of the reporting period. For instance, significant changes in a counterparty’s intent or ability to make payments on a financial asset may cause material changes in the fair value of that financial asset.

The Company's financial assets and liabilities consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt. The carrying value of cash and cash equivalents; accounts receivable, net of allowances for doubtful accounts; accounts payable; accrued expenses; and current debt approximates fair value due to the short-term nature of those instruments.

See Note 8 for additional information regarding the valuation of the Company's assets and liabilities.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Leases

The Company recognizes right-of-use assets and lease liabilities at the commencement date of the lease based on the present value of remaining fixed and determinable lease payments over the lease term. The Company calculates the present value of future payments by using an estimated incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis and over a similar term, and recognizes lease expense for operating leases on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to control the use of an identified asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company uses the incremental borrowing rate on the commencement date in determining the present value of the lease payments. See Note 11 for additional information regarding the Company's leases.

Balance Sheet Measurement

Cash and Cash Equivalents

Cash and cash equivalents consist of bank checking accounts and USDC. The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Substantially all amounts on deposit with major financial institutions exceed insured limits.The Company reported cash and cash equivalents in the following line items of its Consolidated Balance Sheets, which totals the aggregate amount presented in the Company's Consolidated Statements of Cash Flows:

Successor Predecessor

See "—Accounting Changes" for changes in the Company's accounting for payment stablecoins included as cash equivalents.

Digital Assets

The Company holds digital assets, primarily BNB as part of its DAT strategy, including stablecoins, digital assets received from Airdrops, and other digital assets. Digital assets that meet the scope criteria in ASC 350-60, Intangibles—Goodwill and Other—Crypto Assets, are accounted for as crypto intangible assets. The Company initially recognizes these digital assets, whether restricted or not, at cost or at fair value when received in a non-cash transaction, and subsequently remeasures such digital assets at fair value at each reporting date, with changes in fair value recognized in the Consolidated Statements of Operations and Comprehensive Income within "Unrealized loss on digital assets." The Company classifies digital assets, or receivables thereon, that it does not expect to hold for more than twelve months as current assets. Generally, the Company expects to hold BNB holdings longer than twelve months and classifies such digital assets as non-current assets.

Digital Assets Held by Third Parties

The Company may deposit certain digital assets with certain third-parties (e.g. exchanges or custodians) to facilitate digital asset treasury activities. Digital assets held by these third parties may not be maintained in segregated wallets under the Company's exclusive control and may be pooled with assets of other customers. The Company evaluates such arrangements to determine whether it has ownership of, and control over, the underlying digital assets.

●Digital assets held under arrangements for which the Company retains ownership and unrestricted control are presented as digital assets in the Consolidated Balance Sheets.

●If the Company retains ownership of digital assets held under such arrangements, but the Company may not freely control those assets, the Company reports restricted digital assets (Note 4). See Note 5 for more information regarding the Company's pledge of BNB under its debt facility.

●If, due to the lack of sufficient regulatory oversight or the Company's inability to prevent a third party from using digital assets for purposes other than those directed by the Company, the Company concludes that it would not retain sufficient control over the deposited assets, the Company derecognizes the digital assets and records a receivable from the third party in the Consolidated Balance Sheets. The Company did not record any digital asset receivables at April 30, 2026.

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Notes to Consolidated Financial Statements

(dollars in tables in thousands, except per share amounts)

Digital Asset Purchases and Sales

The Company recognizes any realized gains and losses from the sale, exchange, conversion, or other derecognition of digital assets in the Consolidated Statements of Operations and Comprehensive Income within "Realized loss on digital assets." The Company uses the specific identification method to calculate the realized gains/losses on digital assets.

Sales and purchases of digital assets are reflected as cash flows from investing activities in the Consolidated Statements of Cash Flows whereas contributions of digital assets received as part of the consideration received in the PIPE Transaction (Note 6) are presented within supplemental information for non-cash investing and financing activities.

See Note 4 for additional information regarding the Company's digital assets.

Inventory