Quarterly Report for Quarter Ending OCTOBER 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, which include additional information about our accounting policies, practices, and the transactions underlying our financial results, as well as with our audited consolidated financial statements included in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, as filed with the SEC. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under "Cautionary Statements" appearing elsewhere herein and the risks and uncertainties described or identified in "Item 1A - Risk Factors" in our Transitional Annual Report on Form 10-KT for the four months ended April 30, 2025, as updated from time to time in the Company's filings with the SEC, and Part II, Item 1A of this Quarterly Report entitled "Risk Factors."

Non-GAAP Financial Measures

To supplement our financial results on U.S. generally accepted accounting principles ("GAAP") basis, we use non-GAAP measures including net bookings, backlog, as well as adjusted net income (loss) which reflects adjustments for certain non-cash expenses such as stock-based compensation, certain debt-related items and depreciation expense. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. For purposes of this Quarterly Report, (i) "adjusted net income (loss)" and "adjusted operating income (loss)" mean GAAP net income (loss) and operating income (loss), respectively, after adjustment for non-cash equity compensation expense, debt-related items and depreciation expense, and (ii) "net bookings" means new sales contracts executed during the quarter for which we received an initial deposit, net of any adjustments including cancellations and change orders during the quarter.

Our backlog, remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog or remaining performance obligations will actually generate revenues or when the actual revenues will be generated.

Overview

CEA Industries Inc. (the "Company") was incorporated under the laws of the State of Nevada on October 14, 2009, and is headquartered in Louisville, Colorado. Historically, the Company operated a portfolio of consumer and commercial businesses, including climate control systems for controlled environment agriculture and retail operations in the vaping industry.

In August 2025, the Company initiated a strategic transformation by adopting a digital asset treasury strategy focused exclusively on Binance Coin ("BNB"), the native token of the BNB Chain blockchain. Through its wholly owned subsidiary, BNB Network Company ("BNC"), the Company seeks to build and manage the largest corporate treasury of BNB, providing institutional-grade exposure to blockchain infrastructure and decentralized finance (DeFi).

The Company's treasury operations include acquiring and holding BNB on its condensed consolidated balance sheet and generating income through activities such as validation services, lending, and other DeFi protocols. This strategy commenced on August 5, 2025, following the closing of a private placement that raised approximately $500 million, with up to $750 million in additional proceeds available through warrant exercises. This capital raise supports the implementation of the Company's BNB-focused Digital Asset Treasury ("DAT") strategy, under which BNB serves as the primary treasury reserve asset. The Company has publicly stated its goal to own approximately 1% of BNB's total supply by year-end 2025.

To support this strategy, the Company established CEA BRS LLC, a Delaware limited liability company, as a special purpose entity to hold and manage certain cryptocurrency assets in accordance with the DAT strategy. Additionally, the Company formed BNB Network Company (BNC) and BNB Cayman Sponsor, an exempted company organized under the laws of the Cayman Islands, to facilitate international operations and treasury management. These entities are wholly owned subsidiaries of the Company.

In connection with this strategic shift, the Company changed its Nasdaq ticker symbol from "VAPE" to "BNC" on August 6, 2025, reflecting its new identity as the BNB Network Company. The Company continues to operate its legacy business while building out its digital asset treasury platform, which is reflected in financial results beginning in the second fiscal quarter ending October 31, 2025.

Additionally, on June 6, 2025, the Company completed the acquisition of Fat Panda Ltd. and related entities ("Fat Panda), central Canada's largest retailer and manufacturer of e-cigarettes, vape devices and e-liquids. This acquisition aligns with the Company's strategy to focus on high-growth, regulated consumer markets and provides a vertically integrated infrastructure to support retail expansion and e-commerce capabilities.

Fat Panda operates 33 retail locations, including 29 Fat Panda branded stores and four Electric Fog branded vape outlets, in the provinces of Manitoba, Ontario and Saskatchewan. Fat Panda also serves a wide range of customers through its online e-commerce platform. Its retail footprint is complemented by a comprehensive portfolio of products, including its own line of premium e-liquids manufactured in-house, along with a robust portfolio of trademarks and intellectual property.

Fat Panda Group of Companies incorporated and commenced active operations on June 1, 2014 and its principal business activities include the manufacture, distribution and sale of vaping products and accessories. The Companies own and operate retail locations in Manitoba, Saskatchewan and Ontario. These locations have the following retail stores.

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Saskatchewan: in 2024, 7 locations, and 5 in 2025,

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Manitoba: 20 in both years, and

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Ontario: 8 in 2024, 9 in 2025.

The Company also continues to provide climate control systems for the controlled environment agriculture ("CEA") industry. CEA growers currently face a challenging business environment that includes high energy costs, water usage and conservation issues, continuously evolving waste removal regulations, inflationary pressures, and labor shortages.

Recent Developments

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

The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations. As the Peoples Republic of China ("PRC") is a particular focus of the tariffs and trade policies, and the Company uses products from the PRC in its product offerings, we expect that there will be disruption in that aspect of our business. We are in the process of searching for alternative suppliers, but there is no assurance that we will be able to find other suppliers at a price that will be reasonable.

Our Bookings, Backlog and Revenue- Successor

We generate backlog through our Retail and Industry segment. During the period from June 7, 2025 through October 31, 2025, we executed new sales contracts with a total contract value of $587,000. During this same period, there were no change orders or cancellations. Consequently, our net bookings were $587,000, representing a decrease of $502,000 (or 24%) from net bookings of $85,000 for the May 1, 2025 through June 6, 2025 period.

Our backlog at October 31, 2025 was $902,000, an increase of $176,000, or 24%, from our backlog of $726,000 at June 6, 2025. The increase in backlog is primarily the result of increased bookings that have not yet been fulfilled. While we expect to recognize all the revenue from the remaining backlog in 2025, there is significant uncertainty regarding the timing of the Company's recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. Therefore, investors should not view backlog as earned revenue.

The following table sets forth: (i) our beginning backlog (the remaining contract value of outstanding sales contracts for which we have received an initial deposit as of the previous period), (ii) our net bookings for the period (new sales contracts executed during the period for which we received an initial deposit, net of any adjustments including cancellations and change orders during the period),

(iii) our recognized revenue for the period, and (iv) our ending backlog for the period (the sum of the beginning backlog and net bookings, less recognized revenue). Based on the current economic climate and our cost-cutting measures, there is no assurance that we will be able to continue to obtain the level of bookings that we have had in the past and or fulfil our current backlog, and we may experience contract cancellations, project scope reductions and project delays.

		Successor
		For the Period 06/07/2025-10/31/2025
Backlog, beginning balance		$	726,000
Net bookings, current period			587,000
Recognized revenue, current period			(411,000	)
Backlog, ending balance		$	902,000

The completion of a customer's new build facility project is dependent upon the customer's ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes for these customers to complete a new build project, which corresponds to when we are able to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on the number of cultivators; (iv) the customer's need to obtain cultivation facility financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation systems; (vii) the availability of power; and (viii) delays that are typical in completing any construction project.

As has historically been the case for the Company at each quarter-end, there remains significant uncertainty regarding the timing of revenue recognition of our backlog as of October 31, 2025.

We have provided an estimate in our condensed consolidated financial statements for when we expect to recognize revenue on our remaining performance obligations (i.e., our Q2 2026 backlog). There continues to be significant uncertainty regarding the timing of our recognition of revenue on our Q2 2026 backlog. Refer to the Revenue Recognition section of Note 9 in our condensed consolidated financial statements, included as part of this Quarterly Report for additional information on our estimate of future revenue recognition on our remaining performance obligations.

Our backlog, remaining performance obligations, and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in backlog or remaining performance obligations will generate revenues or when the revenues will be generated. Net bookings and backlog are considered non-GAAP financial measures, and therefore, they should be considered in addition to, rather than as a substitute for, our GAAP measures for recognized revenue, deferred revenue, and remaining performance obligations. Further, we can provide no assurance as to the profitability of our contracts reflected in remaining performance obligations, backlog and net bookings.

Results of Operations

Comparison of the Three Months Ended October 31, 2025 and October 31, 2024

		Successor				Predecessor
		Three months ended October 31,				Three months ended October 31,				Favourable (Unfavourable) ($)				Percentage Change
		2025				2024
Revenue		$	7,143,485			$	7,436,751			$	(293,266	)			-4	%
Cost of Revenue			5,050,228				4,591,637				(458,591	)			-10	%
Gross profit			2,093,257				2,845,114				(751,857	)			-26	%
Operating (income) expenses :
Advertising and marketing expenses			4,655,063				184,013				(4,471,050	)			-2430	%
Unrealized (gain)/loss on digital assets			(114,033,718	)			-				114,033,718				100	%
Selling, general and administrative expenses			21,666,564				2,284,433				(19,382,131	)			-848	%
Total operating (income) expenses			(87,712,091	)			2,468,446				90,180,537				3653	%
Operating Income (Loss)			89,805,348				376,668				89,428,680				23742	%
Other income (expense), net
Airdrop income			5,827,578				-				5,827,578				100	%
Gain on change in fair value of warrant liability			206,818,087				-				206,818,087				100	%
Interest expense/amortization of debt discount			(392,228	)			-				(392,228	)			100	%
Other income (expense), net			(254,515	)			-				(254,515	)			100	%
Total Other Income/(Expense)			211,998,922				-				211,998,922				100	%
Income before provision for income taxes			301,804,270				376,668				301,427,602				80025	%
Provision for income taxes			18,161,497				85,051				18,076,446				21254	%
Net income (Loss)		$	283,642,773			$	291,617			$	283,351,156				97165	%

Revenues and Cost of Goods Sold

Revenue for the three months ended October 31, 2025 was $7,143,485, compared to $7,436,751 for the three months ended October 31, 2024, representing a decrease of $293,266, or 4%. The decrease was primarily due to the discontinuation of one of the product lines.

Cost of revenue increased by $458,591 or 10%, from $4,591,637 for the three months ended October 31, 2024 to $5,050,228 for the three months ended October 31, 2025. The increase was primarily due to higher material costs due to an increase in the cost per unit of many products for the newly enacted federal and provincial excise taxes.

Total Operating Income (Expenses)

Operating income was $87,712,091 for the three months ended October 31, 2025, compared to operating expenses of $2,468,446 for the three months ended October 31, 2024, representing an increase of $90,180,537 to, or 3653%.

The increase was primarily driven by an unrealized gain of $114,033,718 on the remeasurement of digital assets during the current quarter. This gain was partially offset by higher selling, general and administrative expenses, which increased by $ 19,382,131 to $ 21,666,564. The increase in SG&A was mainly attributable to a one-time warrant issuance cost of $14,551,125 and accrued asset management fees of $1,798,357, an increase of $825,684 in professional fees, and $875,886 in additional insurance costs associated with BNB treasury operations. Advertising and marketing expenses also increased by $ 4,471,050 from $184,013 during the three months ended October 31, 2024 to $4,655,063 during the three months ended October 31, 2025 as the Company incurred additional marketing costs in connection with PIPE transaction and ATM sales during the current quarter.

Other Income (Expense)

We recognized other income of $211,998,922 for the three months ended October 31, 2025, compared to $0 for the three months ended October 31, 2024. Other income for the current period consisted of airdrop income, gain on change in fair value of warrant liability, currency translation, interest expense and debt discount amortization on notes related to the acquisition.

Non-GAAP Combined Six Months Ended October 31, 2025

Our financial results for the periods from May 1, 2025 through June 6, 2025 and the six months ended October 31, 2024 are referred to as those of the "Predecessor" period. Our financial results for the period from June 7, 2025 through October 31, 2025 are referred to as those of the "Successor" period. Our results of operations as reported in our Condensed Consolidated Financial Statements and Comprehensive Income (Loss) for these periods are prepared in accordance with U.S. GAAP. Although U.S. GAAP requires that we report our results for the period from May 1, 2025 through June 6, 2025 and the period from June 7, 2025 through October 31, 2025 separately, management views our operating results for the six months ended October 31, 2025 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods. We believe we cannot adequately benchmark the operating results of the period from June 7, 2025 through July 31, 2025 against any of the previous periods reported in our Condensed Consolidated Financial Statements and Comprehensive Income (Loss) without combining it with the period from May 1, 2025 through June 6, 2025, and do not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding our overall operating performance. Management believes that the key performance metrics for the Successor period when combined with the Predecessor period provide more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our Condensed Consolidated Financial Statements in accordance with U.S. GAAP, the tables and discussion below also present the combined results for the six months ended October 31, 2025. The combined results for the six months ended October 31, 2025 represent the sum of the reported amounts for the Predecessor period from May 1, 2025 through June 6, 2025 and the Successor period from June 7, 2025 through October 31, 2025. These combined results are not considered to be prepared in accordance with U.S. GAAP and have not been prepared as pro forma results per applicable regulations. The combined operating results do not reflect the actual results we would have achieved absent our acquisition of Fat Panda and are not necessarily indicative of future results. Accordingly, the results for the combined six months ended October 31, 2025 (prepared on a Non-GAAP basis) and six months ended October 31, 2024 (prepared on a GAAP basis) may not be comparable.

Comparison of the Six Months Ended October 31, 2025 and October 31, 2024

		Successor				Predecessor				Non-GAAP Combined				Predecessor
		Period from June 7 through October 31, 2025				Period from May 1 through June 6,				Six months ended October 31,				Six months ended October 31,				Favourable (Unfavourable) ($)				Percentage Change
		2025				2025				2025				2024
Revenue		$	11,720,973			$	2,927,689			$	14,648,662			$	14,405,418			$	243,244				2	%
Cost of Revenue			8,256,041				2,001,537				10,257,578				8,652,017				(1,605,561	)			-19	%
Gross profit			3,464,932				926,152				4,391,084				5,753,401				(1,362,317	)			-24	%
Operating (income) expenses:
Advertising and marketing expenses			4,726,687				63,202				4,789,889				297,205				(4,492,684	)			-1512	%
Product development costs			-				-				-				-				-				-
Unrealized (gain)/loss on digital assets			(114,033,718	)			-				(114,033,718	)			-				114,033,718				100	%
Selling, general and administrative expenses			28,604,021				842,348				29,446,369				4,215,452				(25,230,917	)			-599	%
Total operating expenses / (income)			(80,703,010	)			905,550				(79,797,460	)			4,512,657				84,310,117				1868	%
			-				-				-				-
Operating Income (Loss)			84,167,942				20,602				84,188,544				1,240,744				82,947,800				6685	%
Other income (expense), net
Airdrop income			5,827,578				-				5,827,578				-				5,827,578				100	%
Gain on change in fair value of warrant liability			206,818,087				-				206,818,087				-				206,818,087				100	%
Interest expense/amortization of debt discount			(664,257	)			-				(664,257	)			-				(664,257	)			100	%
Other income (expense), net			(254,513	)			-				(254,513	)			-				(254,513	)			100	%
Total Other Income/(Expense)			211,726,895				-				211,726,895				-				211,726,895				100	%
Income before provision for income taxes			295,894,837				20,602				295,915,439				1,240,744				294,674,695				23750	%
Provision for income taxes			18,100,461				1,589				18,102,050				240,704				17,861,346				7420	%
Net income (Loss)		$	277,794,376			$	19,013			$	277,813,389			$	1,000,040			$	276,813,349				27680	%

Revenues and Cost of Goods Sold

Revenue for the six months ended October 31,2025 was $14,648,662, compared to $14,405,418 for the six months ended October 31, 2024, representing an increase of $243,244, or 2%. The increase was primarily due to an increase in the price per unit of many products to cover the cost of newly enacted federal and provincial excise taxes, mitigated by a decrease due to the discontinuation of one of the product lines.

Cost of revenue increased by $1,605,561 or 19%, from $8,652,017 for the six months ended October 31, 2024 to $10,257,578 for the six months ended October 31, 2025. The increase was primarily due to higher material costs due to an increase in the cost per unit of many products for the newly enacted federal and provincial excise taxes.

Total Operating (Income) Expenses

Total operating income was $80,703,010 for the six months ended October 31, 2025, compared to operating expenses of $ 4,512,657 for the six months ended October 31, 2024, an increase of $84,310,117, or 1868%. The increase was primarily driven by an unrealized gain of $114,033,718 on the remeasurement of digital assets during the six months ended October 31, 2025. This gain was partially offset by higher selling, general and administrative expenses, which increased by $25,230,917 to $28,604,021. The increase in SG&A was mainly attributable to stock-based compensation of $4,699,197 issued to directors and certain employees related to the implementation of our BNB treasury operations, a one-time warrant issuance cost of $ 14,551,125, accrued asset management fees of $1,798,357, an increase of $825,624 in professional fees, and $875,886 in additional insurance costs associated with BNB treasury operations. Advertising and marketing expenses also increased by $4,492,683 from $297,205 during the six months ended October 31, 2024 to $4,789,889 during the six months ended October 31, 2025 as the Company incurred additional marketing costs in connection with PIPE transaction and ATM sales during the current quarter.

Other Income (Expense)

We recognized other expense of $211,726,895 for the six months ended October 31, 2025, compared to $0 for the six months ended October 31, 2024. Other expense for the current period consisted of airdrop income, gain on change in fair value of warrant liability, currency translation, and interest and debt discount amortization on notes related to the acquisition.

Financial Condition, Liquidity and Capital Resources

Our primary sources of liquidity include cash and cash equivalents, and, beginning in August 2025, digital assets held in our treasury. As of October 31, 2025, we had cash and cash equivalents of $36.6 million, digital assets measured at fair value of $547.1 million and a digital asset receivable of $16.8 million, as presented in our condensed consolidated balance sheets. We did not have any borrowings outstanding under a credit facility as of October 31, 2025.

We hold a significant portion of our liquid assets in digital assets, which are measured at fair value with changes recognized in earnings. As further described in Note 3 - Digital Assets to our condensed consolidated financial statements, our digital assets consist primarily of BNB. A portion of our digital assets is held at third-party venues that do not permit us to control the private keys to the wallets; amounts held at such venues are recorded as a digital asset receivable. While these receivables are on balance sheet, they expose us to counterparty and custodial risks that could adversely affect our liquidity if those counterparties fail to perform.

Our liquidity and capital resources are subject to volatility in the market price of BNB. A decline in the market price of BNB 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 or regulatory risks.

Summary of Cash Flows

The following summarizes our approximate cash flows for the period from June 7, 2025 through October 31, 2025 (Successor), for the period May 1, 2025 through Jun 6, 2025 (Predecessor) and for the six months ended October 31, 2024 (Predecessor):

		Successor				Predecessor
		Period from June 7 through October 31,				Period from May 1 through June 6,				For Six Months Ended October 31,
		2025				2025				2024
Net cash provided by (used in) operating activities		$	(24,114,556	)		$	(238,000	)		$	267,803
Net cash used in investing activities			(185,235,121	)			(2,000	)			(19,749	)
Net cash provided by financing activities			230,367,326				-				-
Net increase / (decrease) in cash		$	21,017,649			$	(240,000	)		$	248,054

Operating Activities

Cash used in operations for the period from June 7, 2025 through October 31, 2025 (Successor) was $24,114,556 compared to cash used in operations of $238,000 for the period May 1, 2025 through June 6 (Predecessor), 2025 and cash provided in operations of $267,803 for the six months ended October 31, 2024 (Predecessor). The increase in cash used in operating activities was partially offset by unrealized gains on digital assets, gain on change in fair value of warrant liability, income from airdrop digital assets, changes in digital asset receivables and prepaid expenses.

Investing Activities

Cash used in investing activities for the period from June 7, 2025 through October 31, 2025 (Successor) was $185,235,121 compared to cash used investing activities of $2,000 for the period May 1, 2025 through June 6 (Predecessor), 2025 and $19,749 for the six months ended October 31, 2024. The increase was the result of cash paid for the acquisition of Fat Panda and purchase of digital assets.

Financing Activities

Cash provided by financing activities for the period from June 7, 2025 through October 31, 2025 (Successor) was $230,367,326. There were no cash flows from financing activities for the period May 1, 2025 through June 6, 2025 (Predecessor) or for the six months ended October 31, 2024 (Predecessor). The increase was primarily attributable to proceeds from a note payable related to the acquisition of Fat Panda, proceeds from the Company's private placement and prefunded warrants, and proceeds from the Company's ATM offering and cash used for share repurchases.

Contractual Payment Obligations

As of October 31, 2025, our contractual payment obligations consisted of a building lease. Refer to Note 5 - Leases of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of our building lease.

Commitments and Contingencies

Refer to Note 12 - Commitments and Contingencies of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of commitments and contingencies.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our liquidity or capital resources. As further described in Note 3 - Digital Assets, certain digital assets are held at third-party venues and recorded as receivables; while not off-balance sheet, these arrangements expose us to counterparty and custodial risk. As of October 31, 2025, we had no off-balance sheet arrangements. During the quarter ended October 31, 2025, we did not engage in any off-balance sheet financing activities other than those included in the discussed above and those reflected in Note 12 - Commitments and Contingencies of our condensed consolidated financial statements.

Critical Accounting Estimates

This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers, and information available from other outside sources, as appropriate. Actual results could materially differ from those estimates. Key estimates include: allocation of transaction prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on remaining performance obligations under contracts with customers, valuation of intangible assets, valuation of equity- based compensation, valuation of deferred tax assets and liabilities, warranty accruals, accounts receivable and inventory allowances, and legal contingencies.