Adapti, Inc 10-Q for FY2026 Q2
Adapti, Inc. (ADTI)
About this 10-Q
Adapti, Inc filed this 10-Q on November 19, 2025, covering the quarter ended September 30, 2025 (FY2026 Q2).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.13M
- up 104896.9% from $2030 a year earlier
- Net loss
- $2.6M
- compared with a net loss of $152.04K a year earlier
- Diluted EPS
- -$0.28
- compared with -$0.10 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
FOR
THE QUARTERLY PERIOD ENDED:
OR
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| ||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of common stock ($ par value) outstanding as of November 19, 2025 was .
Adapti, Inc.
Table of Contents
| Page | ||
| PART I | FINANCIAL STATEMENTS (unaudited) | 3 |
| Item 1. | Condensed Balance Sheets | 3 |
| Condensed Statements of Operations | 4 | |
| Condensed Statements of Changes in Stockholders’ Deficit | 5 | |
| Condensed Statements of Cash Flows | 6 | |
| Notes to Financial Statements | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 36 |
| Item 4. | Controls and Procedures | 36 |
| PART II | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 37 |
| Item 1A. | Risks Factors | 37 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 46 |
| Item 3. | Defaults Upon Senior Securities | 46 |
| Item 4. | Mine Safety Disclosures | 46 |
| Item 5. | Other Information | 46 |
| Item 6. | Exhibits | 47 |
| SIGNATURES | 48 | |
| 2 |
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Adapti, Inc.
Condensed Balance Sheets
| September 30, | March 31, | |||||||
| 2025 | 2025 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Contracts receivable- current | ||||||||
| ROU Current Asset | ||||||||
| Total Current Assets | ||||||||
| Fixed assets, net | ||||||||
| Contracts receivable- long term | ||||||||
| ROU Asset - long term | ||||||||
| Value of future contracts | ||||||||
| Intangible asset - brand name | ||||||||
| Total Long Term Assets | $ | $ | ||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Convertible notes payable, accrued interest | ||||||||
| Related party convertible notes payable, accrued interest | ||||||||
| Related party notes payable, accrued interest | ||||||||
| Commissions payable, current | ||||||||
| Due to related party | ||||||||
| Line of credit | ||||||||
| Operating lease liability, current | ||||||||
| Total Current Liabilities | ||||||||
| Related party convertible notes payable, long term | ||||||||
| Related party convertible note Payable, long term | ||||||||
| Commissions payable, long term | ||||||||
| Operating lease liability, long term | ||||||||
| EIDL Loans | ||||||||
| Total Long - Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred Stock, par value $, authorized issued at September 30, 2025 and March 31, 2025, respectively | ||||||||
| Common stock, $ par value, authorized , and shares outstanding at September 30, 2025 and March 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See accompanying notes to the condensed financial statements.
| 3 |
Adapti, Inc.
Condensed Statements of Operations
| Three Months Ended | For the Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Professional fees | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Expense | ||||||||||||||||
| Interest expense | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Other Expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss Per Common Share: Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average Number of Common Shares Outstanding: Basic and Diluted | ||||||||||||||||
See accompanying notes to the condensed financial statements.
| 4 |
Adapti, Inc.
Condensed Statements of Changes in Stockholders’ Deficit
For the Three and Six Months ended September 30, 2025 and 2024
| Common Stock | Additional | Total | ||||||||||||||||||
Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Stockholders’ Deficit | ||||||||||||||||
| Balance - March 31, 2024 - Audited | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common shares issued for stock compensation | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common shares issued for stock compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance - March 31, 2024 - Audited | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common shares issued for stock compensation | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance - March 31, 2025 Audited | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Adjustment | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common shares issued for acquisition | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance - March 31, 2025 Audited | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Adjustment | ( | ) | ||||||||||||||||||
| Common shares issued for acquisition | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the condensed financial statements.
| 5 |
Adapti, Inc.
Condensed Statements of Cash Flows
| For the six months ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Stock based compensation | ||||||||
| Accounts receivable | ||||||||
| Prepaid Expenses | ||||||||
| Contracts receivable | ||||||||
| Accrued interest | ||||||||
| Commissions payable | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Net Cash Provided by (used in) Operating Activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from related party notes payable | ||||||||
| Advances Jorgan Development | ||||||||
| Net Cash Used in Investing Activities | ||||||||
| FINANCING ACTIVITIES: | ||||||||
| Net cash (payments) proceeds line of credit | ( | ) | ||||||
| Issuance of related party convertible notes payable | ||||||||
| Net contributions from BSG | ( | ) | ||||||
| Proceeds/Issuance of/from notes payable | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net decrease in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | |||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash transactions: | ||||||||
| Issuance of convertible Notes Payable | $ | $ | ||||||
| Issuance of note payable | $ | $ | ||||||
See accompanying notes to the condensed financial statements.
| 6 |
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Adapti, Inc. (the “Company”) was incorporated in the State of Nevada on January 11, 2007. After undergoing several name changes, the Company changed its name to Adapti, Inc. on April 15, 2025, to reflect a strategic shift in focus away from health and beauty product sales and toward a technology-driven company operating in the sports management, marketing, and athlete representation industries.
On July 14, 2025, the Company completed the acquisition of The Ballengee Group, LLC (Ballengee”), a sports management agency representing approximately 200 professional athletes, 40 of which play Major League baseball. Ballengee primarily markets through a boots-on-ground model, with a team of five scouts covering the high school and collegiate athlete markets across the southern United States and Sunbelt region.
The Company is currently developing its technology platform, AdaptAI. AdaptAI, is a proprietary AI-driven tool designed to identify optimal alignment between brands and social media influencers. The platform, when completed, will create a data fingerprint for each athlete or brand, enabling precise matching with influencers whose audience and engagement metrics are best suited for targeted marketing campaigns. AdaptAI is being designed to continually analyze proprietary data for each specific marketing campaign along with public data sources as additional feedback to inform ongoing promotion. This strategic alignment is intended to maximize exposure and sponsorship value for its influencer and athlete clients, while maximizing response rates for partner brands. The AdaptAI tool is currently in the beta stage of development. We anticipate launching AdaptAI by December 31, 2026, subject to the Company securing sufficient funding.
With its recent acquisition of Ballengee Group, the Company is focused on integrating the operations of the Ballengee Group and with the Company.
While AdaptAI is currently being developed exclusively for brand and influencer matching, the Company plans to eventually expand AdaptAI’s capabilities to support automated content creation and enable end-to-end generative content workflows for social media publishing and campaign execution. The Company believes that these future capabilities will assist in streamlining the production and distribution of high-performing digital content across client campaigns.
The Company has ceased its efforts to market or sell health and beauty products, including the Dermacia brand, and subject to potential sales for retained inventory through its channels, will no longer be generating revenue from those lines. Future revenues are expected to be derived primarily from athlete representation fees, sponsorships, and platform-enabled brand integrations, utilizing the AdaptAI platform, when it is completed and operational.
Reverse Stock Split
Effective
May 28, 2025, the Company effected a
| 7 |
NOTE 2. GOING CONCERN
The Company accounts for going concern matters under the guidance of ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (“ASU 2014-15”). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt.
These
financial statements have been prepared on a going concern basis which assumes the Company will continue to realize its assets and
discharge its liabilities in the normal course of business. As of September 30, 2025, the Company has incurred losses totaling
$
NOTE 3. ACQUISISTIONS
The Company accounts for all business combinations in accordance with Financial Accounting Standards Board(“FASB”) ASC 805, “Business Combinations” (“ASC 805”), using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, may be made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period would be recorded as income. Results of operations of the acquired entity are included in the Company’s results from operations from the date of the acquisition onward and include amortization expense arising from acquired assets. The Company expenses all costs as incurred related to an acquisition in the condensed consolidated statements of operations.
| 8 |
Ballengee Group
Amended and Restated Membership Interest Purchase Agreement
On
July 14, 2025, the Company entered into an amended and restated membership interest purchase agreement (the
“Purchase Agreement”) with BSG Holdings, LLC and JBAH Holdings, LLC (“Sellers”), pursuant to which the Company
acquired, from the Sellers,
Pursuant
to the Purchase Agreement, as consideration for the acquisition of the Membership Interest, the Company is required to pay the Sellers,
pro rata, the following aggregate consideration (collectively, the “Consideration”): (i) shares of the Company’s
common stock, par value $ per share (“Common Stock”) valued at $
Participating Notes
The
Notes were issued on the Closing Date and have: (i) a maturity date of
Earnout Consideration
The
Earnout Consideration is payable in common stock over a four (
Ballengee continued its operations uninterrupted during closing and retained certain key employees. The Purchase Agreement included customary representations, warranties and covenants of the parties.
| 9 |
The Company has combined the acquisition effective June 30, 2025 to simplify the accounting under ASC 805 purchase accounting as it pertains to the acquisition of the Ballengee.
The following table summarizes the provisional unaudited purchase price allocations relating to the Ballengee acquisition:
SCHEDULE OF PURCHASE PRICE ALLOCATIONS
| Preliminary | ||||
| Purchase Price | ||||
| Allocation | ||||
| Cash | $ | |||
| Total assets | ||||
| Liabilities | ( | ) | ||
| Net assets acquired | $ | |||
| Preliminary | ||||
| Purchase Price | ||||
| Allocation | ||||
| Cash | $ | |||
| Total assets | ||||
| Present value of contract receivables | ||||
| Intangible asset- brand value | ||||
| Liabilities | ( | ) | ||
| Net | $ | |||
The
purchase price for the acquisition was allocated to the fair value of the assets acquired and liabilities assumed based on the
estimates of the fair values at the acquisition date. The Company’s share price for commons stock was quoted at $ per
share at closing dating which represents a
The unaudited pro forma information set forth above is for informational purposes only. The pro forma information should not be considered indicative of actual results that would have been achieved if the Ballengee acquisition had occurred on June 30, 2025. The unaudited supplemental pro forma financial information was calculated by combining the Company’s results with the stand-alone results of Ballengee for the identified periods, which were adjusted for certain transactions and other costs that would have occurred during this pre-acquisition period.
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America.
All figures are in U.S. Dollars. The Company’s fiscal year ends on March 31. Any reference to the period ended September 30, 2025 relates to the three months ended on such date. Any reference to a period ended March 31, 2025 relates to the fiscal year ended on such date.
Reclassifications
Certain amounts in the prior period have been reclassified to conform to the current period presentation. These reclassifications have no material effect on the reported financial results
| 10 |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated
Financial statements include, but are not limited to, stock-based compensation, derivate instruments, accounting for preferred stock, and the valuation of acquired assets and liabilities. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments
with original maturities of 90 days or less. The Company had cash on hand of $
Revenue Recognition
Under Financial Accounting Standards Board (“FASB”) Topic 606, “Revenue from Contacts with Customers” (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the products to be sold in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the products in the contract; and (v) recognize revenues when (or as) the Company delivers the contracted product to the customer.
The Company also recognizes Major League Baseball (“MLB”) Player Contract Commissions (arbitration revenues) – Ballengee negotiates single-year and multi-year MLB contracts for its represented athletes. Ballengee, as a subsidiary of the Company, earns a commission on all salaries, incentives, and bonuses stipulated in the contract. The MLB contracts negotiated by Ballengee are for guaranteed contracts only. The terms of the contracts signed between the Company and its represented athletes state that the athlete owes the Company its commission whether the athlete remains Ballengee’s client throughout the term of the contract or terminates their relationship with Ballengee to pursue alternative representation. Ballengee’s only performance obligation is to successfully negotiate the athlete’s contract. All minor league and major league baseball contracts are reviewed, approved and signed by the Commissioner of Baseball to ensure compliance with league rules. The MLB contract is not in effect until it is signed by the Commissioner of Baseball. A copy of the contract is sent to the Major League Baseball Players Association (MLBPA). As Ballengee has an unconditional right to consideration, the Company, as the parent corporation of Ballengee, recognizes all commissions on all current and future year salaries the player will earn throughout their contract at the point in time the contract is signed into effect.
From time to time, Ballengee will negotiate performance and award bonuses. Ballengee will recognize the revenues on those bonuses when the performance targets are achieved or they are awarded as the payments for those bonuses are guaranteed by the club and approved contractually by the MLB.
For each contract approved by the Commissioner of Baseball, for both major league and minor league contracts, the player enter into life insurance that covers a majority of the players’ salary. If a tragic event occurs the life insurance proceeds will be paid to the Club and in certain circumstances a portion to MLB.
| 11 |
MLB Player Marketing Commissions (marketing revenues) – Ballengee negotiates and secures marketing activities (personal appearances, exhibitions/clinics, books, films, media opportunities, etc.) for its represented athletes. Ballengee earns a commission on all athlete earnings from marketing activities. The terms of the contracts signed between Ballengee and its represented athletes state that the athlete owes Ballengee its commission on marketing activities negotiated by the Company whether the athlete remains the Ballengee’s client throughout the term of the marketing contract or terminates their relationship with Ballengee to pursue alternative representation. Ballengee’s only performance obligation is to successfully negotiate a marketing contract. As the Company has an unconditional right to consideration, the Company, pursuant to its consolidation with Ballengee recognizes all commissions on all current and future year earnings from marketing activities at the point in time the contract is signed into effect. Generally, marketing contracts are short-term in nature.
For some marketing contracts it is industry standard that the player receives the full benefit for certain types of marketing activities, specifically, for personal appearances, signing baseball cards, exhibitions and clinics. The Company recognizes these events as gross revenues as they are the primary obligor in determining the pricing and timing of the event.
For marketing contracts, Ballengee exercises control over the marketing activities prior to their delivery to the player:
| 1. | Responsibility and Oversight: Ballengee is responsible for the strategy, approval, and execution of the marketing campaigns. It selects and manages vendors and ensures that deliverables meet contractual objectives. | |
| 2. | Control of the Service: Ballengee determines the design, content, and timing of marketing efforts, demonstrating control before transfer. | |
| 3. | Pricing and Contracting: Ballengee negotiates pricing with customers and vendors separately, retaining discretion in allocation and budgetary expenses for the event. | |
| 4. | Fulfillment Risk: If third-party vendors fail to perform, Ballengee remains responsible for performance, indicating fulfillment risk. |
Ballengee’s performance obligation is to provide an integrated marketing service rather than simply arranging for another party to do so. Accordingly, Ballengee controls the specified service before transfer to the customer, further supporting reporting marketing revenues gross.
Ballengee also represents a small group of players that play internationally in Japan. The terms of these contracts are similar to the MLB minor league and major league baseball. For their international players, the Company recognizes revenue in the same manner as their minor league and major league baseball contracts.
Disaggregation of Ballengee Revenue:
Ballengee disaggregates revenue based on the type of service and timing of revenue recognition. For the three months ended September 30, 2025, revenue was as follows:
SCHEDULE OF DISAGGREGATION OF REVENUE
| Agent Commissions on MLB Contracts: | $ | |||
| Marketing Income | ||||
| Total Ballengee revenue: | $ |
In
cost of revenues, Ballengee has recorded expenses related to marketing income of $
The Company also recognizes revenue (i) when they receive a purchase order from the Amazon online system (ii) each purchase order identifies the quantity and products to be purchased (iii) each purchase order has the price including discounts, (iv) there is no requirement for allocation as each sku has a separate price, and (v) the Company recognizes revenue when the customer receives the product from Amazon within a matter of days.
| 12 |
Major Customers and Concentration of Credit Risk
The
foundation of the Company relies on the relationships that Ballengee’s agents have with current MLB players, including minor
league players. During 2024, we had ten agents, of which five of those agents handled
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The
Company places its cash with high quality banking institutions. From time to time, the Company may maintain cash balances at certain
institutions in excess of the Federal Deposit Insurance Corporation limit of $
Accounts Receivable and Allowances
For Adapti, the Company does not currently maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. As of September 30, 2025 and March 31, 2025, the Company did not have an allowance for doubtful accounts.
For Ballengee, the Company’s trade accounts receivable are primarily derived from revenues earned on marketing agreements entered into by the athletes being represented and the commissions on the current year salary that athletes earn. At each balance sheet date, the Company recognizes an expected allowance for credit losses. In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist. Historically, the Company has had no credit losses as the MLB minor league and major league contracts are guaranteed.
The
allowance estimate is derived from a review of the Company’s historical losses based on the aging of receivables. This estimate
is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and
any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in
which to calculate the expected allowance for credit losses as the Company’s portfolio segment, represented athletes, has remained
constant since the Company’s inception. The allowance for credit losses for trade accounts receivable was $
When Ballengee negotiates athlete contracts and they are signed into effect by the Commissioner of Major League Baseball, Ballengee earns revenues on all current and future year salaries stipulated in the contract that will be paid to the athlete, which is guaranteed. Ballengee sends an invoice in August to remind the teams to pay the fees owed to players and the agents that work for Ballengee.
The Company recognizes the current portion of the contracts receivable to be collected in the next twelve months.
Equipment
Equipment
is carried at cost, less accumulated depreciation. Depreciation of equipment is provided using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives of property and equipment are
| 13 |
Routine maintenance and repairs are charged to operating expense, while the costs of improvements and replacements are capitalized. When an asset is retired or sold, its cost and related accumulated depreciation are removed from the accounts, and the difference between the net book value of the asset and proceeds from disposition is recognized as a gain or loss in the statement of operations.
Commissions payable
Commissions payable consist of the portion of commissions earned on current year athlete salaries that are due to the Ballengee’s agents. The Company records commissions payable to Ballengee agents, and the related commission expense, in the year that the salary will be paid to the athlete. Commissions are accrued at the time the player contracts are officially signed and approved by the MLB Commissioner. Agent commissions are guaranteed and are to be paid even if the agent leaves the agency, which is also industry standard.
The Company recognizes the current portion of the commissions payable in the next twelve months.
Convertible Debt
When the Company issues convertible debt, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity, and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815, Derivatives and Hedging. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations.
Stock-Based Compensation
ASC 718, “Compensation - Stock Compensation”, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity - Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
| 14 |
Income Taxes
Adapti accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Ballengee Group, LLC is organized as a limited liability company under the laws of Texas and is treated as a pass-through entity for U.S. federal and state income tax purposes. As a pass-through entity, Ballengee’s income, deductions, credits, and other tax attributes are generally passed through to its members, who report their respective shares of the Company’s taxable income or loss on their individual or corporate tax returns. Accordingly, Ballengee does not record a provision for federal or state income taxes in its financial statements, as income tax obligations are borne by the members.
ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of January 1, 2007 and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions.
Accounting for Tax Positions
For Adapti, we have identified the U.S. federal and California as our “major” tax jurisdictions. With limited exceptions, we remain subject to Internal Revenue Service (“IRS”) examination of our income tax returns filed within the last three (3) years, and to California Franchise Tax Board examination of our income tax returns filed within the last four (4) years. However, we have certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. For the periods ended September 30, 2025 and March 31, 2025, the Company recognized a full valuation allowance against the recorded deferred tax assets.
For Ballengee, we believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.
Ballengee follows the provisions of ASC 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Under ASC 740, a tax position is recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position will be sustained upon examination by tax authorities, based on the technical merits of the position. Recognized tax positions are measured at the largest amount of benefit that has a greater than 50% likelihood of being realized upon settlement. As a pass-through entity, the Company generally does not incur entity-level income tax liabilities. However, the Company evaluates any uncertain tax positions related to its operations, including those that may affect the members’ tax reporting or result in entity-level taxes in certain jurisdictions (e.g., state taxes, franchise taxes, or taxes in jurisdictions where pass-through status may not be fully recognized).
As of December 31, 2024, the Company has evaluated its tax positions and determined that there are no material uncertain tax positions requiring recognition or disclosure in the financial statements. The Company has not recorded any liabilities for unrecognized tax benefits, interest, or penalties related to uncertain tax positions.
Other Tax Considerations
The Company may be subject to certain state or local taxes, such as franchise taxes, gross receipts taxes, or other non-income-based taxes, which are recorded as operating expenses in the financial statements in accordance with ASC 720, Other Expenses.
For
Ballengee, for the years ended December 31, 2024 and 2023, the Company incurred $
| 15 |
The Company follows ASC 260, “Earnings per Share” (“EPS”), which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share are computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock or other contracts to issue common stock resulting in the issuance of common stock that would then share in the Company’s earnings subject to anti-dilution limitations. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact.
For the periods ended September 30, 2025 and March 31, 2025, potentially dilutive common shares consist of common stock issuable upon the conversion of convertible notes payable. All potentially dilutive securities were excluded from the computation of diluted weighted average number of shares of common stock outstanding as they would have had an anti-dilutive impact.
On
May 27, 2025, the Company received approval from FINRA for a number of corporate actions including a name change from Scepter Holdings,
Inc. to Adapti, Inc., a
Contingencies
The Company follows ASC 450-20, “Loss Contingencies” to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no loss contingencies as of September 30, 2025 and March 31, 2025.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes existing guidance on accounting for leases in “Leases (Topic 840).” The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company evaluated the effects of adopting ASU 2016-02 on its consolidated financial statements and determined that the Company currently has no leases for valuation.
| 16 |
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU enhances the disclosures related to segment reporting for public entities. It requires entities to disclose significant segment expenses for each reportable segment, providing greater transparency in segment performance. The ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating how this ASU will impact its consolidated financial statements and disclosures. The Company has evaluated this ASU and there was no impact the financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU enhances the transparency and decision usefulness of income tax disclosures. It is designed to provide more detailed information about an entity’s income tax expenses, liabilities, and deferred tax items, potentially affecting how companies report and disclose their income tax-related information. The ASU is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those fiscal years The Company is currently evaluating how this ASU will impact its consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses,” which requires the Company to disaggregate key expense categories such as employee compensation, depreciation and intangible asset amortization within its financial statements. ASU 2024-03 is effective for annuals periods beginning with the Company’s fiscal year 2027, and interim periods within the Company’s fiscal year 2028, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its Notes to the Financial Statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 5 – ACCOUNTS RECEIVABLE
Accounts Receivable at September 30, 2025 and March 31, 2025 consist of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
| September 30, 2025 | March 31, 2025 | |||||||
| Beginning | $ | $ | ||||||
| Add: New Balances | ||||||||
| Less: Payments | ( | ) | ||||||
| Accounts receivable | $ | $ | ||||||
| Less: Allowances | ( | ) | ||||||
| Net accounts receivable | $ | $ | ||||||
For Adapti, accounts receivable balances are primarily made up of sales through the third-party vendor and paid within thirty days.
Ballengee’s
trade accounts receivable is primarily derived from commissions earned on marketing agreements entered into by the athletes being represented
and the commissions on the current year salary that athletes earn. The allowance for credit losses for trade accounts receivable was
$
| 17 |
NOTE 6 – PREPAID ASSET
The prepaid asset at September 30, 2025 and March 31, 2025 consists of the following:
SCHEDULE OF PREPAID ASSET
| September 30, 2025 | March 31, 2025 | |||||||
| Prepaid asset | $ | $ | ||||||
Ballengee has a prepaid asset made up of a prepaid invoice for cleaning services as of September 30, 2025. There were prepaid assets as of March 31, 2025.
NOTE 7 – CONTRACTS RECEIVABLE
Contracts receivable at September 30, 2025 and March 31,2025 consists of the following:
SCHEDULE OF CONTRACTS RECEIVABLE
| September 30, 2025 | March 31, 2025 | |||||||
| Beginning | $ | $ | ||||||
| Add: New Balances | ||||||||
| Less: payments | ( | ) | ||||||
| Contracts receivable | $ | $ | ||||||
| Contracts receivable - current | ||||||||
| Contracts receivable - long term | ||||||||
When Ballengee negotiates athlete contracts and they are signed into effect, the Company earns revenues on all current signed contracts as agent fees are guaranteed. Performance and award bonuses are recognized in the year that the bonuses are achieved. Contracts receivable represent all signed contracts that were executed for athletes still unpaid as the fees are paid by the teams on an annual basis. Contract receivable is split between the fees to be collected in the next twelve months and long-term contract receivable for fees to be paid past twelve months. The Company does not record a reserve or allowance for bad debts as all contracts for the MLB in the minors and the major leagues are guaranteed.
NOTE 8 – EQUIPMENT
Equipment at September 30, 2025 and March 31, 2025 consists of the following:
SCHEDULE OF EQUIPMENT
| September 30, 2025 | March 31, 2025 | |||||||
| Equipment | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ||||||
| Equipment, net | ||||||||
| 18 |
Equipment
is carried at cost, less accumulated depreciation. Depreciation of equipment is provided using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives of equipment are
NOTE 9 – RIGHT OF USE ASSET
Right of use asset as of September 30, 2025 and March 31,2025 consists of the following:
SCHEDULE OF RIGHT TO USE ASSETS
| September 30, 2025 | March 31, 2025 | |||||||
| Beginning Balance | $ | $ | ||||||
| Less: Rent Expense | ( | ) | ||||||
| Add: Amortization of interest | ||||||||
| Ending Balance | $ | $ | ||||||
On
April 20, 2019, the Company entered into an operating lease with Bacchus Capital Trading, LLC (“Bacchus”), a related party
under common management, for the use of corporate office space with terms of
The
terms of the lease agreement classify the lease as an operating lease in accordance with FASB ASC 842. As such, the Company has recorded
a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate
for the calculation of future cash payments, the Company used the risk-free discount rate of
During
the three months ended September 30, 2025 and March 31, 2025, the Company paid WCC $
NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at September 30, 2025 and March 31, 2025 consist of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| September 30, 2025 | March 31, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accounts payable and accrued liabilities current | $ | $ | ||||||
Accounts payable are made up primarily to payments due to various vendors and for rent at Ballengee. As part of the agreement, the rent owed by Ballengee will be paid in shares of Adapti’s common stock based on the current stock price.
Accrued liabilities are made up of the following as September 30, 2025 and March 31, 2025:
SCHEDULE OF ACCRUED LIABILITIES
| Accrued Liabilities | September 30, 2025 | March 31, 2025 | ||||||
| Management Fees | $ | $ | ||||||
| Legal Counsel | ||||||||
| Other accrued liabilities | ||||||||
| Accrued liabilities | $ | $ | ||||||
| 19 |
The
Company owes $
The
$
NOTE 11 – CONVERTIBLE NOTES PAYABLE
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
| September 30, 2025 | March 31, 2025 | |||||||
| Note 1 Convertible notes payable | $ | $ | ||||||
| Note 2 Convertible note payable | $ | $ | ||||||
| Total convertible notes payable | ||||||||
| Add: accrued interest | ||||||||
| Total convertible notes payable | $ | $ | ||||||
Convertible Notes Payable balances were $ as of September 30, 2025 (including a $ financing fee) and $ as of March 31, 2025 plus accrued interest of $ and $ for a total convertible note payable balance of $ and $ as of September 30, 2025 and March 31, 2025, respectively.
On
October 15, 2024, the Company entered into a convertible note payable with a vendor for cash advanced to the Company and bears a
This note is convertible into Common Stock of the
Company at a price per share of $
On
April 23, 2025, the Company entered into a convertible note payable with a vendor for cash advanced to the Company and bears a
| 20 |
NOTE 12 – RELATED PARTY CONVERTIBLE NOTES PAYABLE
Related party convertible Notes payable at September 30, 2025 and March 31, 2025 consist of the following:
SCHEDULE OF RELATED PARTY CONVERTIBLE NOTES PAYABLE
| September 30, 2025 | March 31, 2025 | |||||||
| Campbell Trust | $ | $ | ||||||
| Stuff International | ||||||||
| Total related party convertible notes payable | ||||||||
| Add: accrued interest | ||||||||
| Total related convertible notes payable, accrued interest | $ | $ | ||||||
On
September 15, 2025, in exchange for $
On September 24, 2025, the Company entered into a
convertible note payable with a vendor for cash advanced to the Company and bears a
On October 24, 2024, the Company entered into a convertible
note payable with a vendor for cash advanced to the Company and bears a
This note is convertible into Common Stock of the
Company at a price per share of $
As a result there is one convertible note payable
to Stuff International for $
As
of September 30, 2025 and March 31, 2025, there was a total of three convertible notes payable outstanding to Stuff International and
Campbell Trust representing a total related note payable balance of $
The CEO of Stuff International is also the CEO of the Company, Adam Nicosia. The trustee of Campbell Trust is also the executive chairman of the Company, Jeff Campbell. Please see the section of this Form 10-Q entitled “Risk Factors” for additional information.
NOTE 13 – RELATED PARTY NOTES PAYABLE
Related party notes payable at September 30, 2025 and March 31, 2025 consists of the following
SCHEDULE OF RELATED PARTY NOTES PAYABLE
| September 30, 2025 | March 31, 2025 | |||||||
| Campbell Note Payable | $ | $ | ||||||
| Stuff International | ||||||||
| Total Related Party Notes Payable | ||||||||
| Accrued Interest | ||||||||
| Related Party Notes Payable | $ | $ | ||||||
On
June 2, 2025, Ballengee entered into a note payable for $
| 21 |
The
remaining related party note payable is from Stuff International and totals $
There
was another note to MGI which was settled as of March 31, 2025. Per the terms of this note, it was fully settled for common stock. The
MGI note was fully converted for common stock in total settlement of note payable balance of $
On
March 31, 2025, the balance related to Market Group International is $
Market Group International is owned by Robert Van Boreum our ex – Chief Executive Officer and it holds of our outstanding common stock as of September 30, 2025 and March 31, 2025, respectively.
The
Stuff international Note payable represents a balance of $
NOTE 14 – COMMISSION PAYABLE
The Company has a line of commissions payable at September 30, 2025 and March 31, 2025 consisting of the following:
SCHEDULE OF COMMISSION PAYABLE
| September 30, 2025 | March 31, 2025 | |||||||
| Commissions payable | $ | $ | ||||||
| Total commissions payable | $ | $ | ||||||
| Commissions payable - current | $ | $ | ||||||
| Commissions payable – long term | $ | $ | ||||||
| 22 |
Commissions payable consist of the entire amount of commissions earned on executed contracts in the current year for athletes to the Ballengee’s agents. All commissions are expensed and booked as a payable in the year the contract is executed and offset as it is paid when amounts due under the contract are paid to Ballengee.
NOTE 15 – DUE TO RELATED PARTY
Amounts due to related parties at September 30, 2025 and March 31, 2025 consist of the following
SCHEDULE OF AMOUNT DUE TO RELATED PARTIES
| September 30, 2025 | March 31, 2025 | |||||||
| Edgeware Energy | ||||||||
| Jorgan Development, LLC | $ | $ | ||||||
| Total due to related party | ||||||||
| Accrued Interest | ||||||||
| Total due to related party | $ | $ | ||||||
Ballengee received operating loans from Jorgan Development, LLC (“Jorgan”), a Texas limited liability company owned by James
H. Ballengee (“James”), a manager of Ballengee. The loans have no stated repayment terms and are zero- interest bearing.
As of September 30, 2025, Ballengee owed a total of $
In
addition, James H Ballengee advanced $
NOTE 16 –LINE OF CREDIT
The Company has a line of credit balance at September 30, 2025 and March 31, 2025 consisting of the following:
SCHEDULE OF LINE OF CREDIT
| September 30, 2025 | March 31, 2025 | |||||||
| Line of credit | $ | $ | ||||||
| Total Line of credit | $ | $ | ||||||
On
March 2, 2020, Ballengee entered into a line of credit consisting of a loan and security agreement as well as an accompanying promissory
note for $
On
October 3, 2025, Ballengee paid off the line of credit in full for the remaining balance of $
| 23 |
NOTE 17 – RELATED PARTY CONVERTIBLE NOTES PAYABLE – LONG TERM
Related party convertible Notes payable at September 30, 2025 and March 31, 2025 consist of the following:
SCHEDULE OF RELATED PARTY CONVERTIBLE NOTES PAYABLE – LONG TERM
| September 30, 2025 | March 31, 2025 | |||||||
| Stuff International | $ | $ | ||||||
| Campbell Trust | ||||||||
| Brassington | ||||||||
| Total related party convertible notes payable | ||||||||
| Add: accrued interest | ||||||||
| Total related convertible notes payable, accrued interest | $ | $ | ||||||
On
August 14, 2025, we issued subordinated convertible promissory notes to Brassington, our interim CFO, in the principal amount of $
As
of September 30, 2025 and March 31, 2025, three long term convertibles notes, Nicosia Note, Campbell Note, and Brassington note, total
$
NOTE 18 – RELATED PARTY NOTES PAYABLE- LONG TERM
Related party notes payable at September 30, 2025 and March 31, 2025 consist of the following
SCHEDULE OF RELATED PARTY NOTES PAYABLE
| September 30, 2025 | March 31, 2025 | |||||||
| BSG Holdings, LLC | $ | $ | ||||||
| JBAH Holdings, LLC | ||||||||
| Total Related Party Notes Payable | ||||||||
| Accrued Interest | ||||||||
| Related Party Notes Payable | $ | $ | ||||||
| 24 |
As
part of the acquisition of Ballengee, the Company issued two participating promissory notes payable due
NOTE 19 – OPERATING LEASE LIABILITY
Right of use liability at September 30, 2025 and March 31, 2025 consist of the following:
SCHEDULE OF RIGHT OF USE LIABILITY
| September 30, 2025 | March 31, 2025 | |||||||
| Operating lease liability, current | $ | $ | ||||||
| Operating lease liability, long term | ||||||||
| Total operating lease liability | $ | $ | ||||||
On
April 20, 2019, Ballengee entered into an operating lease with Bacchus Capital Trading, LLC (“Bacchus”), a related party
under common management, for the use of corporate office space with terms of
The
terms of the lease agreement classify the lease as an operating lease in accordance with FASB ASC 842. As such, the Company has recorded
a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate
for the calculation of future cash payments, the Company used the risk-free discount rate of
During
the three months ended September 30, 2025 and March 31, 2025, the Company paid WCC $
Operating Lease Liabilities
Future minimum lease payments for each of the next five years and beyond are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total minimum lease payments | ||||
| Less: amount representing interest | ( | ) | ||
| Total lease obligation | ||||
| Less: current portion | ( | ) | ||
| Total lease obligation, less current portion | $ |
| 25 |
NOTE 20 – EIDL LOAN
EIDL Loan at September 30, 2025 and March 31, 2025 consists of the following:
SCHEDULE OF EIDL LOAN
| September 30, 2025 | March 31, 2025 | |||||||
| SBA LOAN | $ | $ | ||||||
| EIDL Loan | $ | $ | ||||||
| Total EIDL Loan | $ | $ | ||||||
On
April 21, 2020, Ballengee received an EIDL Advance of $
Note
payable to the Small Business Administration (“SBA”) dated July 17, 2020, with interest-only monthly payments of $
On November 5, 2025, this loan has been repaid in full by Ballengee.
NOTE 21: STOCKHOLDERS’ DEFICIT
Authorized Capital Stock
The Company’s authorized capital stock consists of (a) shares of Common Stock, $ par value per share (“Common Stock”), (b) shares of Preferred Stock, $ par value per share (“Preferred Stock”).
As of September 30, 2025 and March 31, 2025, the Company had shares and shares of Common Stock and shares of Preferred Stock issued and outstanding. All outstanding shares of Common Stock are fully paid and nonassessable.
Common Stock
The Nevada Revised Statues provide that the holders of the Common Stock shall have one vote per share. In addition, except as otherwise required by law, as provided in the Articles of Incorporation, and as otherwise provided in the resolution or resolutions, if any, adopted by the Board with respect to any series of the Preferred Stock, on any matter presented to the holders of Common Stock and Preferred Stock for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), the holders thereof shall vote together as a single class.
Holders of the Common Stock will have no preemptive or conversion rights or other subscription rights. The Bylaws of the Company provide that the holders of Common Stock shall not have a right to cumulative voting. The rights, preferences, and privileges of the holders of the Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate and issue in the future. Additionally, the Bylaws may be amended by the Company’s stockholders or the Board of Directors.
On
May 27, 2025, the Company received approval from FINRA for a number of corporate actions including a name change from Scepter Holdings,
Inc. to Adapti, Inc., a
Preferred Stock
There are shares of Preferred Stock outstanding as of September 30, 2025 and March 31, 2025. The Company’s Articles of Incorporation, as amended authorizes the issuance of up to shares of Preferred Stock
Common Stock
| 26 |
Preferred Stock
outstanding Preferred shares.
Issuance of Common Shares
During the quarter ended September 30, 2025, the Company issued restricted shares of common stock to BSG Holdings and JBAH Holdings as part of the consideration paid for the acquisitions of Ballengee Group.
Issuances of Common Stock from the Conversion of Notes
During
the quarter ended March 31, 2025, the Company issued restricted shares of common stock to MGI after reverse stock split, in full
settlement of MGI note payable balance of $
During
the quarter ended December 31, 2024, the Company issued restricted shares of common stock to Vasil Papov, in exchange for professional
services for a total value $
During
the quarter ended December 31, 2024, the Company issued restricted shares of common stock to Steven Davis in exchange for his professional
services at a price of $ per share for a total value of $
During
the quarter ended June 30, 2024, the Company issued restricted shares of common stock to EcoScientific Labs, in exchange for Adam
Nicosia’s Management services at a price of $ per share for total compensation costs of $
During the quarter ended March 31, 2024, the Company issued restricted shares of common stock to Vasil Popov in exchange for his professional services.
During
the quarter ended March 31, 2024, the Company issued restricted shares of common stock to EcoScientific Labs, in exchange for
Adam Nicosia’s Management services at a price of $ per share for total compensation costs of $
During
the quarter ended December 31, 2023, the Company issued restricted shares of common stock to Vasil Popov in exchange for his professional
services at a price of $ per share for total compensation costs of $
During
the quarter ended December 31, 2023, the Company issued restricted shares of common stock to EcoScientific Labs, in exchange for
Adam Nicosia’s Management services at a price of $ per share for total compensation costs of $
During
the quarter ended December 31, 2023, the Company issued restricted shares of common stock to Johannesen Consulting, Inc., in exchange
for Thomas Johannesen’s professional services at a price of $ per share for total compensation costs of $
During
the quarter ended December 31, 2023, the Company issued restricted shares of common stock to Johannesen Consulting, Inc., for
the conversion of $
During
the quarter ended December 31, 2023, the Company issued restricted shares of common stock to Market Group International in exchange
for Robert Van Boerum’s Management services at a price of $per share for total compensation costs of $
During
the quarter ended September 30, 2023, the Company issued restricted shares of common stock to Vasil Popov in exchange for his professional
services at a price of $ per share for total compensation costs of $
| 27 |
During
the quarter ended September 30, 2023, the Company issued restricted shares of common stock to EcoScientific Labs, in exchange
for Adam Nicosia’s Management services at a price of $ per share for total compensation costs of $
During
the quarter ended September 30, 2023, the Company issued restricted shares of common stock to Johannesen Consulting, Inc., in exchange
for Thomas Johannesen’s professional services at a price of $ per share for total compensation costs of $
During
the quarter ended September 30, 2023, the Company issued restricted shares of common stock to Johannesen Consulting, Inc., for
the conversion of $
During the quarter ended September 30, 2023, the Company issued restricted shares of common stock to Market Group International in exchange for Robert Van Boerum’s Management services.
During
the quarter ended June 30, 2023, the Company issued shares of common stock to Paul Kison for the conversion of $
During
the quarter ended June 30, 2023, the Company issued restricted shares of common stock to Vasil Popov in exchange for his professional
services at a price of $per share for total compensation costs of $
During
the quarter ended June 30, 2023, the Company issued restricted shares of common stock to EcoScientific Labs, in exchange for Adam
Nicosia’s Management services at a price of $ per share for total compensation costs of $
During
the quarter ended June 30, 2023, the Company issued restricted shares of common stock to Johannesen Consulting, Inc., in exchange
for Thomas Johannesen’s professional services at a price of $ per share for total compensation costs of $
During
the quarter ended June 30, 2023, the Company issued restricted shares of common stock to Market Group International in exchange
for Robert Van Boerum’s Management services at a price of $ per share for total compensation costs of $
| 28 |
SCHEDULE OF STOCKHOLDERS EQUITY
| Date of Transaction | Transaction type (e.g., new issuance, cancellation, shares returned to treasury) | Number of Shares Issued (or cancelled) | Class of Securities | Value of shares issued ($/per share) at Issuance | Were the shares issued at a discount to market price at the time of issuance? (Yes/No) | Individual/ Entity Shares were issued to. *You must disclose the control person(s) for any entities listed. | Reason for share issuance (e.g. for cash or debt conversion) -OR- Nature of Services Provided | Restricted or Unrestricted as of this filing. | ||||||||||||||
| 3/31/23 | New Issuance | Common | $ | No | EcoScientific Labs (Adam Nicosia) | Professional Services | Restricted | |||||||||||||||
| 3/31/23 | New Issuance | Common | $ | No | Market Group International (Robert Van Boerum) | Professional Services | Restricted | |||||||||||||||
| 3/31/23 | New Issuance | Common | $ | No | Vasil Popov | Professional Services | Restricted | |||||||||||||||
| 3/31/23 | New Issuance | Common | $ | No | Johannesen Consulting, Inc. (Thomas Johannesen) | Professional Services | Restricted | |||||||||||||||
| 4/5/23 | New Issuance | Common | $ | Yes | Paul Kison | Debt Conversion | Restricted | |||||||||||||||
| 6/30/23 | New Issuance | Common | $ | No | EcoScientific Labs (Adam Nicosia) | Professional Services | Restricted | |||||||||||||||
| 6/30/23 | New Issuance | Common | $ | No | Market Group International (Robert Van Boerum) | Professional Services | Restricted | |||||||||||||||
| 6/30/23 | New Issuance | Common | $ | No | Vasil Popov | Professional Services | Restricted | |||||||||||||||
| 6/30/23 | New Issuance | Common | $ | No | Johannesen Consulting, Inc. (Thomas Johannesen) | Professional Services | Restricted | |||||||||||||||
| 8/29/23 | New Issuance | Common | $ | No | Johannesen Consulting, Inc. (Thomas Johannesen) | Debt Conversion | Restricted | |||||||||||||||
| 9/30/23 | New Issuance | Common | $ | No | EcoScientific Labs (Adam Nicosia) | Professional Services | Restricted | |||||||||||||||
| 9/30/23 | New Issuance | Common | $ | No | Market Group International (Robert Van Boerum) | Professional Services | Restricted | |||||||||||||||
| 9/30/23 | New Issuance | Common | $ | No | Vasil Popov | Professional Services | Restricted | |||||||||||||||
| 9/30/23 | New Issuance | Common | $ | No | Johannesen Consulting, Inc. (Thomas Johannesen) | Professional Services | Restricted | |||||||||||||||
| 10/27/23 | New Issuance | Common | $ | Yes | OC Sparkle | Debt Conversion | Restricted | |||||||||||||||
| 10/27/23 | New Issuance | Common | $ | Yes | OC Sparkle | Debt Conversion | Restricted | |||||||||||||||
| 10/27/23 | New Issuance | Common | $ | Yes | OC Sparkle | Debt Conversion | Restricted | |||||||||||||||
| 10/27/23 | New Issuance | Common | $ | Yes | CZA, Inc. | Debt Conversion | Restricted | |||||||||||||||
| 12/31/23 | New Issuance | Common | $ | No | EcoScientific Labs (Adam Nicosia) | Professional Services | Restricted | |||||||||||||||
| 12/31/23 | New Issuance | Common | $ | No | Market Group International (Robert Van Boerum) | Professional Services | Restricted | |||||||||||||||
| 12/31/23 | New Issuance | Common | $ | No | Vasil Popov | Professional Services | Restricted | |||||||||||||||
| 12/31/23 | New Issuance | Common | $ | No | Johannesen Consulting, Inc. (Thomas Johannesen) | Professional Services | Restricted | |||||||||||||||
| 3/31/24 | New Issuance | Common | $ | No | EcoScientific Labs (Adam Nicosia) | Professional Services | Restricted | |||||||||||||||
| 3/31/24 | New Issuance | Common | $ | No | Vasil Popov | Professional Services | Restricted | |||||||||||||||
| 6/30/24 | New Issuance | Common | $ | No | EcoScientific Labs (Adam Nicosia) | Professional Services | Restricted | |||||||||||||||
| 12/31/24 | New Issuance | Common | $ | No | SD Law Group | Professional Services | Restricted | |||||||||||||||
| 12/31/24 | New Issuance | Common | $ | No | Vasil Popov | Professional Services | Restricted | |||||||||||||||
| 3/31/25 | New Issuance | Common | $ | No | Market Group International (Robert Van Boerum) | Note Payable | Restricted | |||||||||||||||
| 6/30/25 | Rounding Adjustment from reverse split | Common | $ | No | N/A | N/A | Restricted | |||||||||||||||
| 7/1/2025 | New Issuance | Common | $ | No | JBAH HOLDINGS, LLC | Ballengee Group Acquisitions | Restricted | |||||||||||||||
| 7/14/2025 | New Issuance | Common | $ | No | BSG HOLDINGS, LLC | Ballengee Group Acquisitions | Restricted | |||||||||||||||
| Shares Outstanding on Date of This Report: | ||||||||||||||||||||||
| Date 9/30/2025 | Ending Balance Common: | |||||||||||||||||||||
| 29 |
NOTE 22 – COMMITMENTS
Lease Commitments
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable.
Operating lease right of use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met.
Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.
Variable
lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or
circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments are presented as operating
expenses in the Company’s income statement in the same line item as expense arising from fixed lease payments. As of September
30, 2025 and March 31, 2025, management determined that there were
Litigation
Except for routine litigation, there is no pending, threatened or actual legal proceedings in which the Company is a party.
NOTE 23: SUBSEQUENT EVENTS
On
October 3, 2025, the Company paid off the line of credit in full for the remaining balance of $
On October 17, 2025 the Company entered into a settlement agreement with a former Ballengee agent. There will be no impact to the contracts already recognized until September 30, 2025. The Company is to pay out commissions to this former agent as agreed in the settlement agreement. The Commissions are fully accrued.
On
November 6, 2025, Ballengee entered into a revolving line of credit for up to $
During November 2025, the Company agreed to extend the maturity dates of the following loans:
| ● | The
maturity date of a convertible promissory note entered into on | |
| ● | The
maturity date of a convertible promissory note entered into on | |
| ● | The
maturity date of a convertible promissory note entered into on |
On
November 5, 2025, the Company issued a consultant a warrant to purchase up to
On
November 5, 2025, this Ballengee has been repaid in full its line of credit. There is
| 30 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included elsewhere herein. Our historical results do not necessarily reflect what our historical financial position and results of operations would have been had we been a stand-alone public company during the years presented. In addition, our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of the results to be expected for the full year. We recommend investors read this entire Quarterly Report on Form 10-Q, including the “Risk Factors” Section, the consolidated financial statements, and related notes thereto. As used in this offering, unless the context otherwise requires or indicates, “Adapti,” “Company,” “we,” “us,” and “our” or similar designations refer to Adapti, Inc., a Nevada corporation. corporation and as applicable, our wholly owned subsidiary, Ballengee Group, LLC (which is also referred to as “Ballengee”).
Statements in this Quarterly Report on Form 10-Q that are not strictly historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. You can identify these forward-looking statements because they involve our expectations, intentions, beliefs, plans, projections, anticipations, or other characterizations of future events or circumstances. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements as a result of any number of factors. Some of these factors are more fully discussed in the section of this Quarterly Report on Form 10-Q entitled “Risk Factors” and elsewhere herein. We do not undertake to update any of these forward-looking statements or announce the results of any revisions to these forward-looking statements except as required by law.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided, in addition to the accompanying condensed consolidated financial statements and notes, to assist you in understanding our results of operations, financial condition and cash flows. The MD&A is organized as follows:
● Overview — Discussion of our business and overall analysis of financial and other items affecting our Company in order to provide context for the remainder of MD&A.
● Results of Operations — Analysis of our financial results comparing the three months ended September 30, 2025 and 2024.
● Liquidity and Capital Resources — An analysis of cash flows and discussion of our financial condition and future liquidity needs.
Overview
Adapti, Inc (fka Scepter Holdings, Inc.). (the “Company”) was incorporated under the laws of the State of Nevada on January 11, 2007. After undergoing several name changes, the Company changed its name to Adapti, Inc. on April 15, 2025, to reflect a strategic shift in focus away from health and beauty product sales and toward a technology-driven acquisition strategy consisting of companies operating in the sports management, sports marketing, and athlete representation industries.
The Company previously began developing an AI-driven platform for sue in the beauty and health industry. Subsequent to its acquisition of Ballengee Group, LLC (“Ballengee”) in July 2025, the Company shifted its focus to on: (i) acquiring and operating agencies that manage athletes, brands, and sports-related talent and (ii) continuing the development of the Company’s proprietary AI-driven influencer and brand optimization platform, called AdaptAI.
The Company’s wholly owned subsidiary, Ballengee, is a Texas-based Major League Baseball agency with approximately 200 professional clients, with more than 40 in the Major Leagues. Ballengee currently have seven (7) full time agents and a recruiting department. Ballengee primarily markets through a boots-on-ground model, with a team of five scouts covering the high school and collegiate athlete markets across the southern United States and Sunbelt region. The Company believes that AdaptAI, if and when completed, would assist the Company in attempting to consolidate and scale athlete representation and social monetization services.
The Company’s technology platform, AdaptAI, is a proprietary AI-driven tool being developed to identify optimal alignment between brands and social media influencers. The platform, if and when completed, will create a data fingerprint for each athlete or brand, enabling precise matching with influencers whose audience and engagement metrics are best suited for targeted marketing campaigns. AdaptAI is being designed to continually analyze proprietary data for each specific campaign along with public data sources as additional feedback to inform ongoing promotions and to further refine its algorithm and attempt to monetize accumulated data. This strategic alignment is intended to maximize exposure and sponsorship value for its influencer and athlete clients, while maximizing response rates for partner brands. As of November 10, 2025, AdaptAI is currently in its beta phase. Subject to the Company raising sufficient capital or having adequate free cash flow to cover development costs, which management estimates such development costs to be approximately $250,000, management believes that AdaptAI will be completed for the Company’s internal use by December 31, 2026.
While AdaptAI development currently focuses exclusively on brand and influencer matching, the Company has future plans to enhance its service offering by integrating generative AI capabilities. These enhancements will support automated content creation and enable end-to-end generative content workflows for social media publishing and campaign execution. These future capabilities are expected to streamline the production and distribution of high-performing digital content across client campaigns.
As a result of our acquisition of Ballengee and continued development of AdaptAI, The Company is ceasing its efforts to market or sell health and beauty products, including the Dermacia brand. The Company is currently in the process of selling retained inventory, but does not plan on generating any significant revenues in the future from those lines. Future revenues are expected to be derived primarily from athlete representation fees, sponsorships, and once completed and tested, our AdaptAI platform-enabled brand integrations.
On October 20, 2025, the Company announced that it has entered into a letter of intent to acquire Levelution Sports, a company that represents NIL athletes, along with providing compliance, brand partnerships, and athlete development services. The Company is working to complete the acquisition, subject to the completion of due diligence and entering into definitive documents.
The Company is additionally undertaking a process to identify potential acquisitions that would provide benefit to the Company’s current business plan.
| 31 |
Reverse Stock Split
Effective May 28, 2025, we effected a 1-for-4,000 reverse stock split of our issued and outstanding common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, our stockholders received one share of our common stock for every 4,000 shares each stockholder held immediately prior to the effective time of the Reverse Stock Split. Unless otherwise noted, all references to common stock shares, common stock per share data and shares of common stock underlying convertible instruments included in this Quarterly Report on Form 10-Q, including the exercise or conversion price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the Reverse Stock Split.
Six Months Ended September 30, 2025 and 2024
Results of Operations
Revenues
Revenues are primarily from revenues recognized on MLB contracts for its represented athletes. The Company earns a commission on all salaries, incentives, and bonuses stipulated in the contract on those bonuses when the performance targets are achieved or they are awarded as the payments for those bonuses are guaranteed by the club and approved contractually by the payments received for products shipped and sold through our vendors. Revenues for the six months ended September 30, 2025 increased to $2,129,123, or 71,499%, as compared to the six months ended September 30, 2024, primarily due revenues earned through the acquisitions of Ballengee.
Cost of Revenues
Cost of revenues primarily Commissions earned on executed contracts in the current year for the athletes to the Company’s agents. All commissions are expensed and booked as a payable in the year the contract is executed and offset as it is paid when amounts due under the contract are paid to the Company. Cost of revenues for the six months ended September 30, 2025 were $1,333,525 and zero for the six months ended September 30, 2024, as the acquisition of Ballengee did not occur until July 2025.
General and administrative expenses
General and administrative expense include the costs associated with personnel to manage the sports agency. General and administrative expenses increased for the six months ended September 30, 2025 by $587,514, or 1,164%, as compared to the six months ended September 30, 2025, primarily due to the acquisitions of Ballengee Group during the quarter ended September 30, 2025.
Professional fees
Professional fees include the costs with professional consultants to help manage the public entity. Professional fees increased for the six months ended September 30, 2025 by 2,488,870 or 686%, as compared to the six months ended September 30, 2025, primarily due to increased consultants compensation to assist in the acquisition of Ballengee.
Other expense
Other expense includes interest expense on note payables and on Ballengee’s secured line of credit. Other expense increased for the six months ended September 30, 2025 by $179,721, or 879%, as compared to the six months ended September 30, 2024, primarily due to the issuance of promissory notes bearing interest in 2025, that were not outstanding for the six months ended September 30, 2024.
Liquidity and Capital Resources
Our cash flow activities were as follows for the periods presented:
Six Months Ended September 30, | ||||||||||||
| 2025 | 2024 | Change | ||||||||||
| Net cash flows used for operating activities | $ | (603,450 | ) | $ | 167,970 | $ | (435,480 | ) | ||||
| Net cash flows used for investing activities | 257,000 | - | 257,000 | |||||||||
| Net cash flows provided by financing activities | 1,886,289 | 203,431 | 1,682,858 | |||||||||
Operating activities
Net cash flows used for operating activities was ($603,450) and $167,970 for the six months ended September 30, 2025 and 2024, respectively. The decrease of net cash flows used for operating activities of $435,480 was primarily due to the Company increase in commissions payable related to contracts entered into by the Ballengee.
Investing activities
Net cash flows used for investing activities is primarily made up of the assets acquired in the Ballengee group acquisition for the six months ended September 30, 2025. There were no investing activities for the six months ended September 30, 2024, respectively.
Financing activities
Net cash flows from financing activities is primarily made up of the purchase price paid for the acquisition of Ballengee Group. In additional the company issued convertible notes during the six months ended September 30, 2025. There were no financing activities by the Company for the comparable period in 2024.
| 32 |
September 30, 2025 | March 31, 2025 | Change | ||||||||||
| Cash | $ | 1,540,411 | $ | 572 | $ | 1,539,839 | ||||||
| Current liabilities | 6,125,348 | 1,031,987 | 4,985,025 | |||||||||
The Company’s primary sources of liquidity are from cash flows generated from operations and to a lesser extend financing activities. As of September 30, 2025 and March 31, 2025, the Company had cash of $1,540,411 and $572, respectively. The increase in cash as of September 30, 2025 is due to cash received from contracts entered into by Ballengee. As of September 30, 2025 and March 31, 2025, the Company had current liabilities of $6,125,348 and $1,031,987, respectively.
The Company believes its existing cash and expected cash flows from operations will not be sufficient to meet our working capital, capital expenditures, and expected cash requirements from known contractual obligations for the next twelve months and beyond. It will need to raise additional capital to continue operations.
Net Loss
As a result of the foregoing, for the six months ended September 30, 2025, we incurred a net loss of $2,741,382 compared to a comprehensive net loss of $430,875 for the six months ended September 30, 2024. The increase in net loss is primarily the result of increased professional fees.
The Company is expending working capital to further their business plan.
Three Months Ended September 30, 2025 and 2024
Results of Operations
Revenues
Revenues are primarily from revenues recognized on MLB contracts for its represented athletes. The Company earns a commission on all salaries, incentives, and bonuses stipulated in the contract on those bonuses when the performance targets are achieved or they are awarded as the payments for those bonuses are guaranteed by the club and approved contractually by the payments received for products shipped and sold through our vendors. Revenues for the three months ended September 30, 2025 increased $2,129,407, or 104,906%, as compared to the three months ended September30, 2024, primarily due revenues earned through the acquisitions of Ballengee.
Cost of Revenues
Cost of revenues primarily Commissions earned on executed contracts in the current year for the athletes to the Company’s agents. All commissions are expensed and booked as a payable in the year the contract is executed and offset as it is paid when amounts due under the contract are paid to the Company. Cost of revenues for the three months ended September 30, 2025 were $1,333,525 consistently zero compared to the three months ended September 30, 2024, due to the acquisition of Ballengee Group.
General and administrative expenses
General and administrative expense include the costs associated with personnel to manage the sports agency. General and administrative expenses increased for the three months ended September 30, 2025 by $586,354, or 13357%, as compared to the three months ended September 30, 2024, primarily due to the acquisitions of Ballengee Group during the quarter ended September 30, 2025.
| 33 |
Professional fees
Professional fees include the costs with professional consultants to help manage the public entity. Professional fees increased for the three months ended September 30, 2025 by 2,481,131 or 1786%, as compared to the three months ended September 30, 2025, primarily due to increased consultant compensation to assist in the acquisition of Ballengee.
Other expense
Other expense includes interest expense on note payables and on Ballengee’s secured line of credit. Other expense increased for the three months ended September 30, 2025 by $172,673, or 1610%, as compared to the three months ended September 30, 2025, primarily due to the issuance of promissory notes bearing interest in 2025 that are not outstanding for the three months ended September 30, 2024.
Net Loss
As a result of the foregoing, for the three months ended September 30, 2025, we incurred a net loss of $2,596,318 compared to a comprehensive net loss of $152,042 for the three months ended September 30, 2024. The increase in net loss is primarily the result of increased professional fees.
The Company is expending working capital to further their business plan.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. Based on this definition, the Company has identified the critical accounting policies and judgments addressed below. Estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Recently Issued Accounting Standards
The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position, or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements. See Note 3 to the consolidated statements in this Annual Report for a complete discussion of our significant accounting policies and estimates
Other Estimates
See Note 1 to the accompanying condensed consolidated financial statements included herein and starting on page F-1 for further discussion.
| 34 |
Off-Balance Sheet Arrangements
As of September 30, 2025 and March 31, 2025, the Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Recently Issued and Adopted Accounting Pronouncements
See Note 1 to the accompanying audited financial statements included herein and starting on page F-1 for further discussion.
Future Liquidity Needs
The Company has met its current capital requirements primarily through the issuance of its debt securities. Management views the working capital that is raised in its promissory notes as being equivalent to raising working capital via common equity subscriptions. Certain of our promissory notes / debt securities have conversion features whereby the holder can convert the principal and accrued interest into shares of our common stock. Any conversion of debt into equity could occur at a higher equity valuation than the Company currently has.
Going Concern
The Company’s financial statements are prepared using GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Since the Company has not generated significant revenue or gross profits adequate to cover operating costs, has negative cash flows from operations, and negative working capital, the Company has included a reference to the substantial doubt about our ability to continue as a going concern in connection with our condensed financial statements for the period ended September 30, 2025. Our total accumulated deficit as of September 30, 2025 was approximately $16 million.
The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales notes payable. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce the scope of or eliminate one or more of the Company’s research and development activities or commercialization efforts or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying condensed financial statements. The accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, and expenses and the disclosure of contingent assets and liabilities. We use assumptions that we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. We believe there have been no significant changes in accounting policies for the period ended September 30, 2025. See Note 3 to the statements in this Quarterly Report for a complete discussion of our significant accounting policies and estimates.
Recently Issued Accounting Standards
The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its condensed results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements. See Note 3 to the statements in our 2025 Annual Report for a complete discussion of our significant accounting policies and estimates.
| 35 |
Off-Balance Sheet Transactions
At September 30, 2025, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are not required to provide the information required by this item as we are considered a smaller reporting company, as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Management, with the participation of our Chief Executive Officer and interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of September 30, 2025 were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A control system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management’s Quarterly Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 36 |
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. Before investing in our securities, you should carefully consider the risks and uncertainties discussed under “Risk Factors” in our latest annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. Before making an investment decision, you should carefully consider each of the following risks described below, together with all other information set forth in or incorporated in this Quarterly Report on Form 10-Q, including the condensed consolidated financial statements and the related notes. The risks described in this Quarterly Report on Form 10-Q are not the only ones we face, but those that we consider to be material. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations and could result in a complete loss of your investment. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If any of the following risks actually occur, our business, financial condition, results of operations or cash flow could be seriously harmed. This could cause the market price of our common stock to decline, and you could lose all or part of your investment.
Risks Related to our Operating History; Integration of Acquired Businesses; and Business Plan
We have a limited operating history and recently changed our business plan, which makes it difficult to evaluate our future prospects and increases the risk of your investment.
We are an early-stage company with a limited operating history, and our historical financial results provide little basis to evaluate our current or future business prospects. Until recently, our primary focus was on consumer products, but we have shifted our strategy to operate Ballengee, our recently acquired baseball agency, and to continue to develop our AdaptAI artificial intelligence platform. Our ability to successfully implement this new business plan is unproven and involves substantial risks and uncertainties, including:
| ● | Successfully integrating and growing Ballengee, in a competitive and regulated industry; | |
| ● | Developing and commercializing AdaptAI, which is intended to match social media influencers with Ballengee athletes and other products and services; and | |
| ● | Demonstrating that these two different lines of business can operate synergistically to produce meaningful revenue growth. |
If we are unable to successfully operate our new business plan, develop and achieve successful results for AdaptAI, for the benefit of our athletes, or realize synergies with Ballengee Group, we may fail to generate meaningful revenue or achieve profitability. Investors in our securities may lose some or all of their investment.
As part of our business plan, we may from time to time enter into binding and nonbinding term sheets or letters of intent to acquire other businesses that relate to our operations.
Periodically, pursuant to our business plan, we may enter into term sheets or letters of intent, both binding and nonbinding, to acquire businesses that relate to the operations of Adapti and Ballengee. For example in October 2025, we entered into a letter of intent to acquire Levelution Sports, which represents NIL athletes, along with providing compliance, brand partnerships, and athlete development services. There can be no assurances that we will complete any of these transactions, and if completed, whether we will be able to integrate such businesses into the Company.
Our business depends on the success of new and unproven initiatives, including the development of our AdaptAI AI platform, and our ability to generate revenues is highly uncertain.
Our revenue model is unproven and difficult to predict. We intend to generate revenue primarily through:
| ● | Athlete representation and related fees from Ballengee; and | |
| ● | Commissions or fees earned through social media promotions and influencer marketing, which we have yet to achieve. |
Each of these strategies involves significant uncertainty. If developed, the success of our AdaptAI platform will depend on a number of factors outside our control, including:
| ● | The willingness of influencers and athletes to retain our marketing and representation services.; | |
| ● | The ability of the platform to derive and provide meaningful data regarding influencer / athlete activity and engagement; | |
| ● | The effectiveness of social media promotions in generating consumer engagement and sales; and | |
| ● | Rapidly changing public tastes and technology trends in both sports representation and influencer marketing. |
| 37 |
There is no guarantee that we will be able to successfully operate Ballengee Group or that the assumed synergies will be successful.
We recently completed the acquisition of Ballengee, which we believe has the potential to be transformative for our Company. Management anticipates that Ballengee could contribute significantly to our revenues and help us achieve profitability. However, there can be no assurance that we will be able to maintain or grow Ballengee’s historical business operations, revenues, or profitability.
Successfully realizing the anticipated synergies from this acquisition depends on our ability to:
| ● | Integrate Ballengee’s operations into our Company without significant disruption; | |
| ● | Retain key athlete clients and personnel critical to Ballengee’s business; and | |
| ● | Successfully develop and leverage our AdaptAI AI software to generate social media promotional opportunities for Ballengee’s athletes. |
Because AdaptAI is still in development and unproven in the market, there is no guarantee that it will generate the expected incremental revenues or competitive advantages. If we fail to integrate Ballengee Group effectively or achieve the assumed synergies, our business, financial condition, and results of operations could be materially adversely affected, and investors could lose part or all of their investment.
As a result, the Company believes that its results of operations may fluctuate significantly, and it is possible that the Company’s operating results could be below the expectations of investors.
Our AI based Social Media Software, AdaptAI, is critical for the marketing and growth of our products
We have spent the past 3 years developing our AdaptAI technology platform to assist in locating and negotiating promotional arrangements with social media influencers. Although the AdaptAI platform has successfully completed beta testing, there is no guarantee that the software will operate as expected in a production environment or be able to provide us with assistance in obtaining the correct influencer to successfully market our services and clients. Further, there can be no assurance that the AdaptAI will be as valuable to our business as we anticipate. If the software does not work as expected, the ability to promote our clients will be negatively impacted.
Management estimates that we will need approximately $250,000 complete development of AdaptAI. There is no certainty that we will raise sufficient capital or have sufficient profits to complete development of AdaptAI. In addition, if AdaptAI does not work as expected, we might be required to spend additional capital in software development. There are no guarantees that we will have the capital to spend in development or be able to get the software to work as desired even if we do spend additional capital. We also expect that we will need to spend additional capital in the future to further improve and maintain our software. There are no guarantees that we will have this capital to spend nor be able to successfully make the improvement as desired even if we do spend such capital.
| 38 |
Risks Related to Our Business
We depend on the relationships of our agents, managers, and other key personnel with clients in professional sports and sponsorships and brands related thereto.
We depend upon relationships that our agents, managers, and other key personnel have developed with clients across the baseball industry. The relationships that our agents, managers, and other key personnel have developed with studios, brands, and other key business contacts help us to secure access to sponsorships, endorsements, professional contracts, and other opportunities for our clients. Due to the importance of those industry contacts to us, a substantial deterioration in these relationships, or substantial loss of agents, managers, or other key personnel who maintain these relationships, could adversely affect our business. In particular, our client management business is dependent upon the highly personalized relationships between our agents and respective clients. A substantial deterioration in the Ballengee Group’s management of a client may result in a deterioration in our relationship with, or the loss of, the clients represented by that agent or manager. The substantial loss of multiple agents or managers and their associated clients could have an adverse effect on our business, financial condition, and results of operations. Most of our agents, managers, and other key personnel are not party to long-term contracts and, in any event, can leave our employment with little or no notice. We can give no assurance that all or any of these individuals will remain with us or will retain their associations with key business contacts.
Because our success depends substantially on our ability to maintain a professional reputation, adverse publicity concerning us, one of our businesses, our clients, or our key personnel could adversely affect our business.
Our professional reputation is essential to our continued success and any decrease in the quality of our reputation could impair our ability to, among other things, recruit and retain qualified and experienced agents, managers, and other key personnel, retain or attract agency clients or customers, or enter into multimedia, licensing, and sponsorship engagements for the benefit of our clients. Our overall reputation may be negatively impacted by a number of factors, including negative publicity concerning us, members of our management or our agents, managers, and other key personnel. In addition, we are dependent for revenue, on the relationships between clients that we represent and key brands, such as sports leagues and other consumer facing brands. Certain of our clients are public personalities with social media followings whose actions generate publicity and public interest. Any adverse publicity relating to such individuals, or to our company, including from reported or actual incidents or allegations of illegal or improper conduct, such as harassment, discrimination, or other misconduct, could result in significant media attention, even if not directly relating to or involving Ballengee or Adapti, and could have a negative impact on our professional reputation. This could result in termination of licensing or other contractual relationships, or our employees’ ability to attract new customer or client relationships, or the loss certain clients, all of which could adversely affect our business, financial condition, and results of operations.
Our success depends, in part, on our continuing ability to identify, recruit, and retain qualified and experienced agents and managers.
If we fail to recruit and retain suitable agents or if our relationships with our agents change or deteriorate, it could adversely affect our business. Our success depends, in part, upon our continuing ability to identify, recruit, and retain qualified and experienced agents and managers. There is great competition for qualified and experienced agents and managers in the sports industry, and we cannot assure you that we will be able to continue to hire or retain a sufficient number of qualified persons to meet our requirements, or that we will be able to do so under terms that are economically attractive to us. Any failure to retain certain agents and managers could lead to the loss of our baseball clients, their sponsorships, and potential licensing agreements, and other engagements and have an adverse effect on our business, financial condition, and results of operations.
Our failure to identify, sign, and retain clients could adversely affect our business.
We derive substantial revenue from the engagements, sponsorships, licensing rights, and distribution agreements entered into by the baseball clients with whom we represent. We depend on identifying, signing, and retaining as clients those athletes whose identities are in high demand by the public and, as a result, are deemed to be favorable candidates for engagements. Our competitive position is dependent on our continuing ability to attract, develop, and retain clients whose work is likely to achieve a high degree of value and recognition by sponsors as well as our ability to provide such clients with sponsorships, endorsements, professional contracts, and other opportunities. Our failure to attract and retain these clients, an increase in the costs required to attract and retain such clients, or an untimely loss or retirement of these clients could adversely affect our financial results and growth prospects. These clients may decide to discontinue their relationship with us at any time and without notice. In addition, the clients with whom we have entered into written contracts may choose not to renew their contracts with us on reasonable terms or at all or they may breach or seek to terminate these contracts. If any of our clients decide to discontinue their relationships with us, whether they are under a contract or not, we may be unable to recoup costs expended to develop and promote them and our financial results may be adversely affected. Further, the loss of such clients could lead other of our clients to terminate their relationships with us.
Our professional athlete clients are also members of certain unions that are signatories to collective bargaining agreements. Any expiration, termination, revocation or non-renewal of these franchises, collective bargaining agreements, or licenses and any work stoppages or labor disturbances could adversely affect our business.
Our professional athlete clients are subject to collective bargaining and/or franchise agreements. These collective bargaining and/or franchise agreements regularly expire and require negotiation in the ordinary course of business. Upon the expiration of any of these collective bargaining and/or franchise agreements, with no assurance that the unions will be able to negotiate new collective bargaining and/or franchise agreements on satisfactory terms or at all. Our operations may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating. Certain of such unions have in the past gone on strike, and in the future may do so again. We cannot predict the effect that a potential work stoppage would have on our business. The Ballengee Group business is a signatory to certain agreements with the unions that represent certain of its clients (for example, with the Major League Baseball Players association).
| 39 |
Unauthorized disclosure of sensitive or confidential client or customer information could harm our business and standing with our clients and customers.
We seek to protect trade secrets, confidential information, personal information and other proprietary information, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such information, such as our employees, collaborators, contractors, consultants, advisors and other third parties. However, we cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology, information and processes. Further, despite these efforts, no assurance can be given that these agreements will be effective in controlling access to and distribution of our products and proprietary information as any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Prosecuting a claim that a party illegally disclosed or misappropriated a trade secret or confidential information is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts within and outside of the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position could be materially and adversely harmed.
Changes in public and consumer tastes and preferences and industry trends could reduce demand for our services and adversely affect our business.
Our ability to generate revenues is highly sensitive to rapidly changing consumer preferences and industry trends, as well as the popularity of the talent, brands, and owners of intellectual property we represent, and the assets we own. Our success depends on our ability to represent influencers and athletes and successfully match them with endorsements and marketing opportunities that meet the changing preferences of the broad consumer market. With respect to endorsements and marketing of our athletes and influencers, our operations and revenues will be affected by consumer tastes and entertainment trends. Changes in consumers’ tastes or a change in the perceptions of marketing and endorsements, whether as a result of the social and political climate or otherwise, could adversely affect our operating results. The failure of our represented clients to avoid a negative perception among consumers could result in reduced demand for our marketing and endorsement services, which could have an adverse effect on our business, financial condition and results of operations.
We, including our subsidiaries, may be unsuccessful in our strategic acquisitions, investments and commercial agreements, and we may pursue acquisitions, investments or commercial agreements for their strategic value in spite of the risk of lack of profitability.
We, including our subsidiaries, face significant uncertainty in connection with acquisitions, investments, and commercial agreements. To the extent we choose to pursue certain commercial, investment, or acquisition strategies, we may be unable to identify suitable targets for these deals, or to make these deals on favorable terms. If we identify suitable acquisition candidates, investments, or commercial partners, our ability to realize a return on the resources expended pursuing such deals, and to successfully implement or enter into them will depend on a variety of factors, including our ability to obtain financing on acceptable terms, requisite governmental approvals, as well as the factors discussed below. Additionally, we may decide to make or enter into acquisitions, investments, or commercial agreements with the understanding that such acquisitions, investments, or commercial agreements will not be profitable, but may be of strategic value to us. Our current and future acquisitions, investments, including existing investments accounted for under the equity method, or commercial agreements may also require that we make additional capital investments in the future, which would divert resources from other areas of our business. We cannot provide assurances that the anticipated strategic benefits of these deals will be realized in the long-term or at all.
We may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring a company, making an investment or entering into a commercial agreement and, as such, may not obtain sufficient warranties, indemnities, insurance, or other protections. This could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes, a loss of anticipated tax benefits, or other adverse effects on our business, operating results, or financial condition. Additionally, some warranties and indemnities may give rise to unexpected and significant liabilities. Future acquisitions and commercial arrangements that we may pursue could result in dilutive issuances of equity securities and the incurrence of further debt.
| 40 |
Risks Related to Competition; Personnel; and Financial Condition
We face competition from substantially larger and better-financed competitors in both our baseball agency and technology businesses.
We operate in two highly competitive industries: sports representation and technology/software development. In the baseball agency sector, numerous established sports agencies represent athletes, many with significantly greater resources, broader client rosters, and stronger relationships with teams and sponsors. In the technology sector, numerous companies market software and digital solutions for social media influencer management, including large, well-capitalized enterprises. The size, number, and resources of these competitors make it challenging for us to achieve and maintain market share in either business segment.
We depend on our management team to succeed, and the loss of their services could harm our business.
To achieve our objectives, we require a management team with expertise in software development, product development, sports representation, and sales and marketing. Although we recently appointed Jeff Campbell as our executive chairman, who has experience in sports agencies, the fitness industry, marketing and technology, we still have a limited management team. Although we have agreements with certain executive officers and outsourced programming consultants, these agreements may be terminated at any time. We do not maintain “key person” insurance for any of our executives or other employees, and competition for qualified personnel in our industries is intense. If we cannot attract and retain qualified personnel on acceptable terms, our growth and operations could be adversely affected.
We also owe accrued salary to our Chief Executive Officer and Chief Financial Officer, which may impact their continued service and create financial and reputational risks. As of September 30, 2025, our Chief Executive Officer, Adam Nicosia, is owed approximately $150,000 in accrued but unpaid salary, and our chief accounting officer and interim Chief Financial Officer, Marilu Brassington, is owed approximately $95,000 There is no assurance that either executive will continue to provide services to the Company if delays in paying their full compensation persist. As of the date of this Quarterly Report on form 10-Q, we do not have sufficient capital to pay these accrued amounts. If either officer were to resign or reduce his or her involvement due to nonpayment, our operations, strategic direction, and ability to attract investors or key partners could be materially and adversely affected. Moreover, failure to pay accrued compensation may raise legal, accounting, and reputational concerns and could expose us to claims or liabilities under employment laws. We expect to attempt to satisfy the unpaid balances once we achieve sufficient profitability or raise additional capital, but there can be no assurance as to when or whether we will be able to do so.
Our Chief Executive Officer and Chief Financial Officer hold executive positions with other companies and may have limited time to devote to our business.
Our Chief Executive Officer and Chief Financial Officer each work on a part-time basis for us and also serve as officers of other companies. As a result, they divide their professional time among multiple business interests. This arrangement may limit the time and attention they can devote to our operations, strategic initiatives, and day-to-day management. Their other professional obligations could create actual or potential conflicts of interest and may delay or hinder decision-making, responsiveness to business opportunities, or the execution of our growth strategies, any of which could materially and adversely affect our business and results of operations.
Obligations under the participating promissory notes issued in the Ballengee acquisition will reduce the proceeds available from future capital raises and may limit the use of our cash flows.
In connection with our acquisition of the Ballengee, we issued a participating promissory notes in the aggregate principal amount of $7,500,000 to the sellers. These notes require us to make mandatory repayments equal to (i) 10% of the gross proceeds from any offering of our equity securities that results in at least $250,000 in gross proceeds, and (ii) 50% of the free cash flows generated by Ballengee Group’s operations each calendar quarter, with the percentage reducing over time as principal is repaid.
As a result, if we complete any equity offering, or if Ballengee generates positive cash flow, a portion of those proceeds or cash flows will be required to be paid to the former Ballengee owners rather than being available to fund our operations, invest in growth initiatives, or pursue other strategic opportunities. This repayment obligation could materially and adversely affect our liquidity, limit our ability to reinvest in the business, and reduce our financial operations. In addition, because the amount and timing of these payments depend on our capital-raising activities and Ballengee’s performance, we may be required to make payments at times when we would otherwise use those funds for other purposes, which could further strain our working capital and operating resources.
| 41 |
We may be required to pay certain earnout consideration payable to the former Ballengee Group owners could result in significant future stock issuances and dilution to our stockholders.
Under the terms of the acquisition of Ballengee, the former owners of Ballengee are entitled to receive up to $20,000,000 in additional earnout consideration over a four-year period beginning January 1, 2025 and ending December 31, 2028, payable in shares of our common stock if certain EBITDA targets are met by Ballengee Group’s operations as follows: for each earnout year, (i) no payment will be made if Ballengee’s EBITDA is below $2,000,000, (ii) a payment equal to actual EBITDA will be made if EBITDA is between $2,000,000 and $5,000,000, and (iii) a payment of $5,000,000 will be made if EBITDA is at least $5,000,000.
If Ballengee achieves the specified EBITDA metrics above, we will be required to issue a potentially substantial number of shares of our Common Stock, which would dilute the ownership interests of our existing stockholders. This dilution could be significant, particularly if our stock price declines, as more shares would be required to satisfy the earnout obligation. The possibility of future substantial issuances of our Common Stock in connection with the earnout may also create downward pressure on our stock price. In addition, the earnout obligation could incentivize management to focus on achieving the specific EBITDA targets at the expense of other strategic initiatives or long-term value creation.
In addition to our outstanding indebtedness, we also have pledged substantially all of the assets of Ballengee pursuant to loan agreement. and our debt obligations expose us to risks that could adversely affect our business, operating results and financial condition. We will need to raise additional capital to pay our indebtedness as it comes due.
On November 6, 2025, Ballengee entered into a revolving line of credit for up to $3,000,000 (“Revolving Loan”) with Texas Security Bank. Additionally, 2278 Monitor, LLC (“2278”), an entity controlled by James Ballengee, our majority shareholder, entered into a revolving line of credit for up to $2,000,000, secured by 2278’s real property holdings. As of November 15, 2025, zero dollars have been drawn down off of the Revolving Loan by Ballengee. All amounts due under the Revolving Loan are secured by substantially all of the assets of Ballengee. Additionally, Ballengee entered into a cross collateralization agreement whereby any default under loans entered into by 2278, by real property will result in a default under the Revolving Loan. Commencing in December 2025, we are required to begin making interest payments on such indebtedness until February 28, 2027 (the “Maturity Date”), at which time all principal is due and payable. As security for such indebtedness, Ballengee pledged substantially all of its assets, including current and future receivables, inventory, intellectual property, etc.
In addition, we have as of November 15, 2025, we have approximately $689,549 in outstanding convertible notes including accrued interest that are due and payable at various times in 2026. While the holders may convert these instruments into capital stock of the Company, we may be required to make substantial interest and principal payments at maturity. Given that the Company is not currently profitable, there can be no assurance that we will generate sufficient revenue or cash flow, or obtain additional financing on favorable terms, for us to satisfy these obligations when due. If we are unable to repay, refinance, or restructure our outstanding indebtedness, we could be forced to sell assets, issue additional equity securities at dilutive prices, or seek protection under bankruptcy or insolvency laws. Any such events could materially and adversely affect our business, financial condition, results of operations, and the value of your investment.
Additionally, in the event that we fail to make payments when due under the Revolving Loan or our majority shareholder fails to make payments under the 2278 loans, or if we fail to comply with the various requirements and covenants to the Revolving Loan, we would be in default, which would permit the lender to accelerate the maturity and require immediate repayment. Additionally, the Revolving Loan contains a number of affirmative and restrictive covenants, including reporting requirements, and certain limitations. Our failure to comply with such requirements could result in an event of default that, if not cured or waived, could result in the acceleration of the debt and potential foreclosure on the assets pledged to secure the debt. If we are unable to refinance or repay our indebtedness as it becomes due or upon an event of default, we may become insolvent and be unable to continue operations.
We have expressed substantial doubt about our ability to continue as a going concern.
Management has determined that there is substantial doubt about our ability to continue as a going concern for a period of one year following the issuance of this report. This determination was based on conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued, including the probability that significant changes to our anticipated level of operations, due to factors that are within or outside of our control, would cause our available cash as of the date of this filing to not be sufficient to fund our anticipated level of operations for the next 12 months. Our future consolidated financial statements may include a similar qualification about our ability to continue as a going concern. Our year-end and interim consolidated financial statements were prepared assuming that it will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.
If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
Our auditors’ report on our consolidated financial statements for the year ended March 31, 2025 expressed an opinion that we had a working capital deficit of $1,030,775 as the year end and have incurred losses and not yet generated significant revenue from our operations and that we will require additional funds to maintain our operations. Our current cash level raises substantial doubt about our ability to continue as a going concern past the quarter ending on September 30, 2025. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and may need to cease operations which means that our shareholders will lose their entire investment.
Our business requires a substantial investment of capital, and we have limited working capital and limited access to financing;
The promotion and marketing of our products and services, along with the continued development and enhancement of our AdaptAI software platform, require significant capital. Following the closing of our acquisition of the Ballengee, we also require substantial additional capital to operate and grow the sports agency business. Our cash requirements are expected to exceed the level of cash generated by operations for the foreseeable future, and we may have limited working capital. Capital available for growth initiatives will be reduced to the extent we must use funds budgeted for investment to fund day-to-day operations. Sustained reductions in investment could materially and adversely affect future operating results and cash flows. In addition, a significant amount of time may elapse between our expenditure of funds and the receipt of revenues from our operations, particularly in the baseball agency business, where contract cycles and commission payments may occur months or years after player representation efforts begin. This timing gap requires us to fund a significant portion of our capital needs from operating cash flow and other financing sources.
| 42 |
Our ability to obtain additional financing on satisfactory terms may be limited. For equity financing, our ability to raise capital depends on general market conditions and investor demand for our securities. We may be unable to raise capital through equity offerings, and any such financing could cause substantial dilution to our existing stockholders. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to those of our common stock. If adequate financing is not available at all or is unavailable on acceptable terms, we may be unable to fund expansion, sustain operations, pursue acquisitions, develop or enhance products and services, or respond effectively to competitive pressures. Any of these outcomes could materially and adversely affect our business, financial condition, results of operations, liquidity, and prospects.
Risks Related to Technology
Use of Artificial Intelligence in AdaptAI Presents Operational, Legal, Ethical, and Competitive Risks.
We are developing our AdaptAI platform to incorporates artificial intelligence and machine learning technologies to provide certain features and functionality. The development, training, and operation of AI models depend on the quality, accuracy, and representativeness of the data used. Inaccurate, incomplete, or biased data sets may result in flawed outputs, which could reduce the effectiveness of our services, lead to incorrect conclusions or recommendations, and harm our reputation.
The use of AI presents emerging legal and regulatory risks. Governments in the United States, the European Union, and other jurisdictions are considering or have enacted legislation regulating the development and use of artificial intelligence. These evolving laws and regulations could impose additional compliance obligations, increase costs, restrict certain applications, or potentially subject us to fines, penalties, or other liabilities.
Artificial intelligence technologies are rapidly evolving, and competitors, including those with greater resources, may develop more advanced tools or features. Our ability to maintain a competitive advantage depends on our ongoing investment in research and development related to our AdaptAI platform, access to high-quality training data, and protection of our intellectual property. Additionally, some aspects of AdaptAI may not be eligible for copyright protection, and we may face claims from third parties alleging that our platform infringes on their rights.
Cybersecurity Breaches, Data Loss, or System Failures Could Disrupt AdaptAI’s Operations, Compromise Sensitive Information, and Harm Our Reputation.
Our AdaptAI platform relies on the secure collection, storage, processing, and transmission of proprietary, confidential, and personal data. We face cybersecurity risks, including malware, ransomware, denial-of-service attacks, phishing, supply chain attacks, and other unauthorized attempts to gain access to our systems or data. Cyberattacks are becoming increasingly sophisticated and may be conducted by well-funded state-sponsored actors, organized crime groups, or other threat actors.
A successful breach of our systems, or those of our third-party service providers, could result in the theft, destruction, loss, unauthorized disclosure, or alteration of proprietary or confidential information, including personal data of clients, users, and employees. Such an event could disrupt the operation of AdaptAI, result in legal and regulatory liability, damage our reputation, lead to a loss of clients or business opportunities, and require significant resources to investigate and remediate.
We also rely on third-party hosting and cloud service providers to operate AdaptAI. Outages, vulnerabilities, or security incidents at these providers could likewise result in downtime, data loss, or compromise. While we have implemented security measures designed to protect our systems and data, these measures may be inadequate or may become outdated as threats evolve. Our insurance coverage may be insufficient to compensate for any losses resulting from a cybersecurity incident. Any significant disruption or security breach could materially and adversely affect our business, financial condition, and results of operations.
Risk Related to Ownership of our Securities and Government Regulation
Concentration of Ownership Following the Ballengee Group Acquisition Gives Certain Stockholders the Ability to Control or Significantly Influence Corporate Decisions.
Following the completion of the Ballengee Group acquisition, the former principals of Ballengee Group own in excess of 80% of our outstanding Common Stock, giving them the ability to control or significantly influence the election of directors, approval of significant corporate transactions, and other matters requiring stockholder approval. This concentration of ownership may delay, deter, or prevent a change in control of our Company, even if such a change of control would benefit our other stockholders, and could limit your ability to influence corporate matters.
In addition, this level of ownership concentration could discourage potential acquirers from making an offer to purchase our Company, may result in the approval of actions that other stockholders do not view as beneficial, and could adversely affect the market price of our common stock if investors perceive the ownership concentration as limiting the value or liquidity of their shares.
Our authorized capital structure allows for the issuance of a substantial number of additional shares, which could result in significant dilution to existing stockholders.
Our articles of incorporation, as amended, authorizes the issuance of up to 40,000,000,000 shares of Common Stock and 20,000,000 shares of “blank check” preferred stock. The preferred stock may be issued in one or more series, with such rights, preferences, privileges, and restrictions (including voting, dividend, conversion, redemption, and liquidation rights) as may be determined by our board of directors without further stockholder approval. As of November 1, 2025, we had 8,039,259 shares of Common Stock outstanding and no preferred stock outstanding. In addition, we had approximately $284,520 in outstanding convertible promissory notes and $2,574,910 in outstanding related party notes payable, which are convertible, including accrued interest, into approximately 928,386 shares of Common Stock as of that date.
| 43 |
In addition, pursuant to our acquisition of the Ballengee, we are obligated to issue shares of Common Stock up to a maximum of $20,000,000 in value as part of potential earnout consideration if certain EBITDA performance targets are achieved by the Ballengee. The number of shares to be issued will be based on the then-current volume weighted average trading price of our Common Stock for the ten (10) day period immediately preceding the end of each calendar year. A decline in our stock price during the earnout measurement periods could result in the issuance of a significantly greater number of shares, increasing dilution to our existing stockholders.
Because our board of directors has broad authority to issue additional common stock, preferred stock, or securities convertible into or exercisable for such shares without further stockholder action (except as may be required by applicable law or the rules of any securities exchange on which our securities may be listed), any such issuances could dilute the ownership interests of existing stockholders, adversely affect the trading price of our Common Stock, and, in the case of preferred stock, grant rights superior to those of the holders of our Common Stock.
It is likely that we will need to issue a large number of additional securities to raise capital in order to further our business plans. It is also likely that we will issue a large number of additional securities to directors, officers, employees and consultants as compensatory grants in connection with their services. These issuances would dilute the percentage ownership interest of our current shareholders, which would have the effect of reducing your influence on matters on which our stockholders vote, and might dilute the net tangible book value per share of our common stock.
The market for our common stock has historically been illiquid and our investors may be unable to sell their shares.
Our Common Stock has historically traded with limited volume on the pink tier of the OTC Markets. Accordingly, although there is a public market for our Common Stock, it still is, and has, historically been relatively illiquid compared to that of a seasoned issuer. Prior to making an investment in our securities, you should consider the historically limited market for our Common Stock. No assurances can be given that the trading volume of our Common Stock will increase or remain the same.
We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future.
We have never paid cash dividends on our Common Stock and do not anticipate paying cash dividends on our Common Stock in the foreseeable future. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if the market price of our Common Stock appreciates.
Our operations are subject to federal, state and local laws, statutes, rules, regulations, policies, and procedures in the United States, which are subject to change at any time, governing matters such as our representation of professional baseball players, licensing laws for athlete agents, and compliance with cybersecurity laws.
Noncompliance with these laws could subject us to complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, reputational harm, and other collateral consequences. Multiple or repeated failures by us to comply with these laws and regulations could result in increased fines or proceedings against us, including suspension or revocation proceedings relating to licenses we are required to maintain to conduct the business of Ballengee Group. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations, and financial condition. There can be no assurance that a law or regulation will not be interpreted or enforced in a manner contrary to our current understanding. In addition, the promulgation of new laws, rules, and regulations could restrict or unfavorably impact our business, which could decrease demand for our services, reduce revenue, increase costs, or subject us to additional liabilities.
We may have direct and indirect interactions with government agencies and state affiliated entities in the ordinary course of operating the Ballengee Group business. In the event that we fail to comply with the regulations of a particular jurisdiction, whether through our acts or omissions or those of third parties, it may have an adverse effect on our business, financial condition, and results of operations.
| 44 |
We may be unable to comply with our reporting and other requirements under federal securities laws.
The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the United States Securities and Exchange Commission, or SEC, and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, would be expected to materially increase the Company’s legal and financial compliance costs and make some activities more time-consuming and more burdensome. Presently we qualify as a non-accelerated filer. Accordingly, we are exempt from the requirements of Section 404(b) and our independent registered public accounting firm is not required to audit the design and operating effectiveness of our internal controls and management’s assessment of the design and the operating effectiveness of such internal controls. In the event that we become an accelerated filer, we will be required to expend substantial capital in connection with compliance.
We do not have effective internal controls over our financial reporting.
Because of our limited resources, management has concluded that our internal control over financial reporting may not be effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Effective internal controls over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial and other reports and effectively prevent fraud. If we cannot provide reliable financial or SEC reports or prevent fraud, investors may lose confidence in our SEC reports, our operating results and the trading price of our common stock could suffer materially, and we may become subject to litigation.
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses and will divert time and attention away from revenue generating activities.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team invests significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from developing our business to compliance activities which could have an adverse effect on our business.
We are a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our securities less attractive to investors.
We are a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including “emerging growth companies” such as, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Our status as a smaller reporting company is determined on an annual basis. We cannot predict if investors will find our securities less attractive or our Company less comparable to certain other public companies because we will rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future financial results may not be as comparable to the financial results of certain other companies in our industry that adopted such standards.
| 45 |
Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
| 1. | On September 15, 2025, in exchange for $150,000, the Company entered into a 17.5% original issue discount senior convertible promissory note for a face value of $181,818. The Note has a maturity date of December 14, 2025, and begins to accrue interest at 20% per 90 day period, beginning on the maturity date, if not repaid or converted into common stock of the Company. The conversion price per share is equal to the lesser of (i) $3.08 and (ii) 70% of the closing price of the Common Stock on the date of conversion. The note was repaid in full for $181,818 on November 5, 2025, |
| 2. | In connection with the extension of maturity dates of three (3) convertible promissory notes, on November 14, 2025, the Company issued the following shares of Common Stock to the respective lenders: |
| ● | 5,000 shares of Common Stock valued at $14,500 on the date of issuance in exchange for extending the maturity date of a convertible promissory note issued on October 10, 2024 to extend the maturity from October 10, 2025 to April 10, 2026. | |
| ● | 10,000 shares of Common Stock valued at $29,000 on the date of issuance in exchange for extending the maturity date of a convertible promissory note issued on October 30, 2024 to extend the maturity from October 30, 2025 to October 30, 2026. The shares were issued to Stuff International, Inc., an entity controlled by Adam Nicosia, our CEO. | |
| ● | 10,000 shares of Common Stock valued at $29,000 on the date of issuance in exchange for extending the maturity date of a convertible promissory note issued on September 24, 2024 to extend the maturity from September 24, 2025 to September 24, 2026. The shares were issued to The Campbell Trust. Jeff Campbell, our executive chairman serves as the trustee for The Campbell Trust. |
| 3. | On November 5, 2025, the Company issued a consultant a warrant to purchase up to 8,000 shares of Common Stock at a price per share of $3.08, and a term of five (5) years. Of the shares underlying the warrant, 2,666 vest immediately, and 5,334 vest in eight (8) equal quarterly periods beginning on the one (1) year anniversary of the issuance date and ending on the three (3) year anniversary of the issuance date. The warrants were valued at an aggregate of $24,640 on the date of issuance. | |
| 4. | Pursuant to the acquisition Ballengee, the Company may make rent monthly rent payments of $25,000 to an entity owned by James Ballengee in lieu of cash. Accordingly, for the months ending July, August, and September 2025, we issued an aggregate of 34,469 shares to Waskom Enterprises, LLC. The Shares were valued in the aggregate at a blended value of approximately $2.18 per share. The shares issued are subject to the lock-up agreement entered into by the Company and James Ballengee’s entities in connection with the acquisition of Ballengee Group, LLC. |
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Not applicable
| 46 |
Item 6. Exhibits
* Filed herewith
** Furnished herewith.
+ Indicates management contract or compensatory plan.
| 47 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 19, 2025
Adapti, Inc.
| By: | /s/ Adam Nicosia | |
| Adam Nicosia | ||
| Title: | Chief Executive Officer |
| 48 |
Exhibit 10.11
FIRST AMENDMENT TO CONVERTIBLE PROMISSORY NOTE
This first Amendment to Convertible Promissory Note (“Amendment”) is effective as September 24, 2025 (“Effective Date”), between Adapti, inc. (formerly known as Scepter Holdings, Inc.), Inc., a Nevada corporation (“Borrower”), and the holder identified on the signature page here, (“Lender”). Collectively the parties may be referred to herein each as a “Party” and together, the “Parties.”
WHEREAS, pursuant to a securities purchase agreement (“Purchase Agreement”) dated [*], the Borrower has previously issued a Convertible Promissory Note to Lender (the “Note”);
WHEREAS, the Note is due and payable on [*] (“Maturity Date”);
WHEREAS, the Parties hereto desire to amend the Note to extend the Maturity Date for an additional twelve (12) months in exchange for Borrower issuing shares of its common stock, par value $0.001 per share (“Common Stock”), to Lender, as set forth herein.
NOW, THEREFORE, in consideration of the promises and conditions and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Definitions. Capitalized terms used and not defined in this Amendment have the respective meanings ascribed to them in the Note.
2. Amendments to the Note. As of the Effective Date, the Note is hereby amended or modified as follows:
(a) The first paragraph of the Note is amended and restated in its entirety as follows:
“FOR VALUE RECEIVED, ADAPTI, INC., (fka Scepter Holdings, Inc.) a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of [*], or registered assigns (the “Holder”), the sum of one hundred thousand dollars ($100,000) together with any interest as set forth herein, on the date that is [*] months from the date hereof (the “Maturity Date”); and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Convertible Promissory Note (the “Note”) may be prepaid in whole or in part as set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365-day year.” Interest shall commence accruing quarterly on the Issue Date and shall be payable on the Maturity Date.”
3. Common Stock Issuance to Lender. As consideration for the extension of the Maturity Date, as set forth in Section 2, Borrower agrees to issue [*] shares of Common Stock (the “Shares”) to Lender within five (5) business days of the date of last signature of this Amendment. The Shares will be issued as fully paid and non-assessable, shall bear the Borrower’s standard restricted legend and will only be transferrable in compliance with applicable United States federal and state securities law.
4. Date of Effectiveness; Limited Effect. This Amendment will be deemed effective on the Effective Date. Except as expressly provided in this Amendment, all of the other terms and provisions of the Note are and will remain in full force and effect and are hereby ratified and confirmed by the Parties. Without limiting the generality of the foregoing, the amendments contained herein will not be construed as an amendment to or waiver of any other provision of the Note or as a waiver of or consent to any further or future action on the part of either Party that would require the waiver or consent of the other Party.
5. Representations, Warranties and Acknowledgments. Each Party hereby represents and warrants to the other Party that:
(a) It has the full right, power and authority to enter into this Amendment and to perform its obligations hereunder and under the Note as amended by this Amendment.
(b) The execution of this Amendment by the individual whose signature is set forth at the end of this Amendment on behalf of such Party, and the delivery of this Amendment by such Party, have been duly authorized by all necessary corporate action on the part of such Party.
(c) This Amendment has been executed and delivered by such Party and (assuming due authorization, execution and delivery by the other Party hereto) constitutes the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms.
6. Miscellaneous.
(a) Any necessary undertaking or changes to the Purchase Agreement and Note in order to affect the intent of this Amendment are hereby approved by the Parties.
(b) This Amendment is governed by, and construed in accordance with, the laws of the State of Nevada, without regard to the conflict of laws provisions of such state.
(c) This Amendment shall inure to the benefit of and be binding upon each of the Parties and each of their respective successors and assigns.
(d) The headings in this Amendment are for reference only and do not affect the interpretation of this Amendment.
(e) This Amendment may be executed in counterparts, each of which is deemed an original, but all of which constitutes one and the same agreement. Delivery of an executed counterpart of this Amendment electronically or by facsimile shall be effective as delivery of an original executed counterpart of this Amendment.
(f) This Amendment constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
(g) Each Party shall pay its own costs and expenses in connection with this Amendment (including the fees and expenses of its advisors, accounts and legal counsel).
[Remainder of Page Intentionally Left Blank]
| 2 |
[Signature Page to Amendment]
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first written above.
| BORROWER: ADAPTI, INC. | ||
| By | ||
| Name: | Adam Nicosia | |
| Title: | CEO | |
| Dated: | ||
| LENDER: [*] | ||
| By | ||
| Name: | ||
| Title: | ||
| Dated: | ||
| 3 |
Exhibit 10.12
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
ADAPTI, Inc.
| Warrant Shares: 8,000 | Initial Exercise Date: November 5, 2025 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [*] (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, including the vesting conditions contained in Section 2(f), at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five (5) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Adapti, Inc., a Nevada corporation (the “Company”), up to eight thousand (8,000) shares (the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of California are authorized or required by law or other governmental action to close.
| 1 |
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which the New York Stock Exchange is open for trading.
“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, and the OTC Markets Group.
“Transfer Agent” means Pacific Stock Transfer Company, the current transfer agent of the Company with a mailing address of 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV 89119 and any successor transfer agent of the Company.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within 3 Business Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Business Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
| 2 |
b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $3.08, subject to adjustment hereunder (the “Exercise Price”).
c) Exercise Limitations.
i. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent periodic or annual report, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
| 3 |
ii. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, until such time as the Company receives approval from its primary Trading Market for the listing of the Warrant Shares.
d) Mechanics of Exercise.
i. Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be by physical delivery to the address specified by the Holder in the Notice of Exercise within 15 Business Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (the “Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(v) prior to the issuance of such shares, have been paid.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the transfer agent of the Company to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise.
iv. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
| 4 |
v. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
vi. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(f) Vesting. This Warrant shall vest in an amount equal to (i) 2,666 shares on the Initial Exercise Date and (ii) 5,334 shares over (8) quarterly periods beginning on the one (1) year anniversary of the Initial Exercise Date and ending on the three (3) year anniversary of the Initial Exercise Date, so long as Holder continues to services to the Company as a consultant or employee. In the event Holder ceases to provide such services to the Company, any portion of this Warrant which is not yet vested shall immediately terminate and not be exercisable. Notwithstanding the vesting provisions contained in this Section 2(f), in the event that there is a “Change of Control” of the Company, any unvested portion of this Warrant will immediately vest in full. For purposes of this Warrant, “Change of Control” means (i) a sale of all or substantially all of the Company’s assets other than to an Excluded Entity (as defined below), (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, limited liability company or other entity other than an Excluded Entity, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of all of the Company’s then outstanding voting securities. Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if its primary purpose is to (A) change the jurisdiction of the Company’s incorporation, (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction, or (C) obtain funding for the Company in a financing that is approved by the Company’s Board. An “Excluded Entity” means a corporation or other entity of which the holders of voting capital stock of the Company outstanding immediately prior to such transaction are the direct or indirect holders of voting securities representing at least a majority of the votes entitled to be cast by all of such corporation’s or other entity’s voting securities outstanding immediately after such transaction
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
| 5 |
b) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
c) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Notwithstanding the foregoing, in the event the Company makes a public disclosure with regard to the Exercise Price adjustment, such disclosure shall be deemed notice to the Holders.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice. Notwithstanding the foregoing, in the event the Company makes a public disclosure with regard to the subject matter of this Section 3(d)(ii), such disclosure shall be deemed notice to the Holders.
| 6 |
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. Notwithstanding the foregoing, upon request by Holder, the Company will issue a new Warrant or Warrants in the names of any assignee(s) of Holder at no charge to Holder or the assignee(s).
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a) and 4(d), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be eligible for resale without volume or manner-of-sale restrictions pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, may be required by the Company to provide an opinion of counsel with regard to such assignment or transfer.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(e)(i).
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
| 7 |
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
| 8 |
e) Governing Law and Venue. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the state of California. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the state of California for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of this Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceedings or questions concerning the construction, validity, enforcement and interpretation of this Warrant.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile prior to 5:30 p.m. (California time) on a Trading Day, (b) the date of transmission, if such notice or communication is delivered via electronic mail prior to 5:30 p.m. (California time) on a Trading Day, (c) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or electronic mail on a day that is not a Trading Day or later than 5:30 p.m. (California time) on any Trading Day, the date of the public disclosure if such notice is communicated via public disclosure (d) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (e) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be: (i) if to Holder, at its address of records as contained in the Warrant Register, and (ii) if to Company, at its corporate headquarters.
| 9 |
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Pages Follow)
| 10 |
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| ADAPTI, inc. | ||
| By: | ||
| Name: | Jeff Campbell | |
| Title: | Executive Chairman | |
| 11 |
NOTICE OF EXERCISE
To: adapti, inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of:
[ ] in lawful money of the United States
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered by the physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4) [If required by applicable regulations] Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
| Holder’s Signature: | _____________________________ | |
| Holder’s Address: | _____________________________ | |
| _____________________________ |
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
EXHIBIT 31.1
SECTION 302
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
I, Adam Nicosia, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Adapti, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its unconsolidated investments, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 19, 2025 | By: | /s/ Adam Nicosia |
|
Adam Nicosia, Chief Executive Officer Principal Executive Officer |
EXHIBIT 31.2
SECTION 302
CERTIFICATION OF THE PRINCIPAL ACCOUNTING OFFICER
I, Adam Nicosia, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Adapti, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its unconsolidated investments, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 19, 2025 | By: | /s/ Marilu Brassington |
|
Marilu Brassington Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350 AND EXCHANGE ACT RULES 13a-14(b) AND 15d-14(b)
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report of Adapti, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Adam Nicosia, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of the operation of the Company. |
Date: November 19, 2025
| /s/ Adam Nicosia | |
|
Chief Executive Officer Principal Executive Officer |
|
| Adapti, Inc. |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER PURSUANT TO
18 U.S.C. SECTION 1350 AND EXCHANGE ACT RULES 13a-14(b) AND 15d-14(b)
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report of Adapti, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marilu Brassington, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of the operation of the Company. |
Date: November 19, 2025
| /s/ Marilu Brassington | |
|
Chief Financial Officer Principal Financial and Principal Accounting Officer |
|
| Adapti, Inc. |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.