SCHEDULE: Activist Group YZi Labs Seeks CEA Industries Board Seats

YZi Labs Management Ltd. and a group of investors have formed an activist group, acquiring a 9.2% stake in CEA Industries Inc. and plan to seek board representation and expansion.

Summary

• YZi Labs Management Ltd. and eight individuals (Changpeng Zhao, Max S. Baucus, David J. Chapman, Teresa Marie Goody Guillen, Jiajin "Jane" He, Alex Odagiu, Matthew Roszak, and Ling "Ella" Zhang) have formed a 'Group' to enhance stockholder value at CEA Industries Inc.
• The Group collectively beneficially owns 4,255,043 shares of CEA Industries Inc. Common Stock, representing approximately 9.2% of the outstanding shares.
• The Group intends to seek representation on the Board of Directors, including soliciting written consents to expand the size of the Board and elect certain nominated persons.
• YZi Labs acquired 2,150,481 shares at $10.10 per share, 7,750,510 Pre-Funded Warrants at $10.09999 per warrant, 9,900,991 Stapled Warrants at an exercise price of $15.15 per warrant, and 3,564,359 Strategic Advisor Warrants for services, all in connection with a Private Investment in Public Equity (PIPE) transaction.
• Jiajin He, a member of the Group, beneficially owns 2,099,644 shares (4.6%), including 1,188,120 shares underlying Stapled Warrants which are immediately exercisable and not subject to beneficial ownership limitations.
• Ms. He also sold 276,536 shares of Common Stock between October 26, 2025, and November 5, 2025, at prices ranging from $8.00 down to $6.00 per share.
• Warrants held by YZi Labs are subject to beneficial ownership limitations (e.g., 4.99% for Pre-Funded Warrants, 9.99% for Strategic Advisor Warrants, and variable for Stapled Warrants) which currently prohibit their exercise, thus these underlying shares are not included in YZi Labs' reported beneficial ownership.
• The Group Agreement stipulates that YZi Labs will bear all approved expenses related to the Group's activities, and other Nominees require YZi Labs' prior written consent for any transactions in CEA Industries securities.

Sentiment

Score: 6

Explanation: The sentiment is cautiously positive. The formation of an activist group and new capital infusion through a PIPE transaction could drive value creation and improved governance. However, the significant insider selling by a key group member prior to the filing and the potential for a disruptive proxy fight introduce elements of uncertainty and risk.

Positives

• The formation of an activist group with a significant stake (9.2%) could lead to increased scrutiny and initiatives aimed at enhancing shareholder value.
• The PIPE transaction brought new capital into CEA Industries Inc., indicating investor confidence in the company's long-term prospects by YZi Labs and other investors.
• The Group's stated intention to seek board representation and expand the board could introduce new perspectives and expertise to the company's governance structure.

Negatives

• A key member of the activist group, Jiajin He, sold a substantial number of shares (276,536) at declining prices (from $8.00 to $6.00) in the 60 days prior to the filing, which could signal a lack of confidence or a strategic divestment ahead of the activist campaign.
• The pursuit of board seats and board expansion through a consent solicitation could lead to a potentially disruptive and costly proxy fight, diverting management's attention and resources.
• The beneficial ownership limitations on YZi Labs' warrants mean a significant portion of their potential ownership is not immediately exercisable, which could limit their immediate influence.

Risks

• Potential for corporate governance disputes and a proxy contest, which can be costly and distracting for the company's management and operations.
• Uncertainty regarding the outcome of the consent solicitation and whether the Group's nominees will be successfully elected to the Board.
• The requirement for Nominees to obtain YZi Labs' prior written consent for securities transactions could create internal friction or limit individual investor flexibility.
• The significant insider selling by a Group member (Jiajin He) prior to the filing could be perceived negatively by the market and impact investor confidence.

Future Outlook

The Group intends to actively work to enhance stockholder value at CEA Industries Inc. This includes seeking representation on the Board of Directors and initiating a consent solicitation to expand the Board's size and elect their nominated candidates. YZi Labs will lead these efforts and cover associated expenses.

Management Comments

• The Group agrees to work together to enhance stockholder value at CEA Industries Inc., including seeking representation on the Board.
• The Group intends to solicit written consents to, among other things, expand the size of the Board and elect certain persons nominated for election to the Board (including those nominated by or on behalf of YZi Labs).
• YZi Labs will bear all approved expenses incurred in connection with the Group's activities.

Industry Context

This filing represents a classic example of activist investing, where a group of shareholders, often led by an investment firm, takes a significant stake in a company to influence its strategic direction and corporate governance. YZi Labs' stated focus on Web3, AI, and biotech suggests a potential push for strategic shifts or technological adoption within CEA Industries Inc. Such activism is a recurring trend, particularly in sectors where investors perceive undervalued assets or opportunities for operational improvements.

Comparison to Industry Standards

• NA

Corporate Governance

Related Party Transactions

• The PIPE transaction involved YZi Labs and Jiajin He, who are now part of the Reporting Group, acquiring shares and warrants from CEA Industries Inc.
• YZi Labs received 3,564,359 Strategic Advisor Warrants in connection with services provided under a Strategic Advisor Agreement, indicating a service-for-equity arrangement with a related party.

Stakeholder Impact

• Shareholders: Potential for enhanced shareholder value through activist engagement, but also risk of disruption and costs associated with a proxy fight. The insider selling by a group member could raise concerns.
• Current Management and Board: Likely to face increased pressure and potential challenge to their positions and strategic direction due to the Group's intent to seek board representation and expansion.
• Creditors: No direct impact mentioned, but significant corporate governance changes could indirectly affect financial stability or risk profile.
• Employees: No direct impact mentioned, but strategic shifts resulting from activist pressure could lead to operational changes.

Next Steps

• YZi Labs intends to file a revised preliminary consent statement on Schedule 14A with the SEC.
• The Group plans to solicit written consents from shareholders to expand the size of the Board and elect their nominated persons to fill the resulting vacancies.

Key Dates

Recommendation

The filing presents a mixed bag for investors. On one hand, the formation of an activist group with a substantial stake and a clear intent to enhance shareholder value, coupled with new capital from a PIPE, could be a catalyst for positive change. On the other hand, the significant insider selling by a key group member (Jiajin He) at declining prices prior to the filing raises concerns about internal confidence. The impending consent solicitation for board changes also introduces the risk of a costly and distracting proxy fight. A seasoned investor would likely 'hold' to observe the unfolding of the activist campaign, assess the company's response, and gain clarity on the potential for value creation versus the risks of corporate disruption before making a definitive investment decision.

Keywords

CEA Industries, YZi Labs, Schedule 13D, Activist Investor, Corporate Governance, Board Representation, Proxy Fight, PIPE, Warrants, Shareholder Value, Consent Solicitation