Adapti, Inc. disclosed in a regulatory filing that its board of directors has determined the company's previously issued financial statements for two fiscal quarters contain material errors and should no longer be relied upon. The errors stem from the accounting treatment of its July 2025 acquisition of Ballengee Group, LLC.
A change in accounting acquirer
The central issue concerns which entity was the acquirer for accounting purposes. When Adapti acquired all outstanding equity of Ballengee Group on July 14, 2025, in exchange for 6.5 million shares of its common stock, the transaction was originally recorded as though Adapti was both the legal and accounting acquirer. That stock consideration represented approximately 81% of Adapti's outstanding shares after closing, effectively giving James Ballengee, the sole equity holder of Ballengee Group, voting control of the combined company.
After further analysis and discussions with its independent registered public accounting firm, Victor Mokuolu, CPA PLLC, and outside consultants, the board concluded that Ballengee Group should have been identified as the accounting acquirer. The transaction is now being treated as a reverse recapitalization of Ballengee Group rather than a straightforward acquisition by Adapti. The company noted that immediately before the deal closed, Adapti had minor operations but held an intangible asset that would be used in the combined entity's ongoing business.
Affected financial statements
The non-reliance determination applies to the unaudited condensed consolidated financial statements for the quarterly periods ended September 30, 2025, and December 31, 2025. Those reports were originally filed with the SEC on November 19, 2025, and February 17, 2026, respectively. The board reached its conclusion on July 14, 2026, while preparing the company's financial statements for the full fiscal year ended March 31, 2026.
The filing did not detail the specific quantitative impact of the restatement, and the company cautioned that additional adjustments could be required as the restatement process continues. Adapti stated that it does not intend to update forward-looking statements unless required by law.