NOTE 6. CAPITAL STOCK AND SHARE-BASED COMPENSATION

PREFERRED STOCK

Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of June 30, 2026 and December 31, 2025. The Company’s Board of Directors shall determine the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of any series.

COMMON STOCK

Effective February 15, 2022, the number of authorized shares of common stock, $0.001 par value, was increased to 500,000,000 shares.

In February 2026, the Company issued a net total of 2,748,971 shares of common stock pursuant to the cashless exercise of warrants by a director and a significant beneficial owner. These transactions involved the exercise of warrants for 2,269,583 and 705,417 shares, respectively, resulting in the net issuance of 2,097,740 and 651,231 shares after the forfeiture of 226,029 shares to satisfy the aggregate exercise price.

On February 6, 2026, the Company issued 19,223 shares of common stock upon the conversion of $8,579 in principal and accrued interest outstanding under a convertible promissory note dated September 30, 2024. This conversion fully satisfied the Company’s obligations under the note.

During the six months ended June 30, 2026, the Company issued 9,574 restricted shares of common stock to its investor relations firm, all of which shares were vested as of June 30, 2026 (see “RESTRICTED STOCK AWARDS” below).

Subscription Agreements

On March 13, 2026, the Company issued 80,000 shares of restricted common stock to two accredited investors (the “March 2026 investors”) at $5.00 per share for total proceeds of $400,000. This issuance included 50,000 shares sold for $250,000 to the Boreta Lifetime Trust, an entity affiliated with Ronald S. Boreta, the Company’s President, Chief Executive Officer, and Director. These shares were issued in a private placement.

On April 28, 2026, the Company entered into a Subscription Agreement with Investments AKA, LLC, a limited liability company indirectly controlled by former professional tennis player Andre K. Agassi, 8-time Grand Slam winner, and the Company’s largest beneficial stockholder (“Investments AKA”), pursuant to which Investments AKA purchased an aggregate of 50,000 shares of restricted common stock from the Company, for $5.00 per share, or a total of $250,000. The Subscription Agreement included customary representations and warranties of AKA and the Company and piggyback registration rights.

During the three months ended June 30, 2026, the Company issued an additional 249,000 shares of restricted common stock at $5.00 per share for gross proceeds of $1,245,000 pursuant to Subscription Agreements. Together with the Investments AKA subscription, total common stock issued during the period was 299,000 shares for gross proceeds of $1,495,000.

Private Placement Subscription

On March 30, 2026, the Company issued 50,000 shares of restricted common stock to an accredited investor at $5.00 per share for aggregate gross proceeds of $250,000 pursuant to a Subscription Agreement. The investor was granted three-year piggyback registration rights and, pursuant to a side letter agreement, demand registration rights if the shares are not registered or eligible for resale under Rule 144 within one year of issuance, certain first opportunity rights related to future World Series of Pickleball events, and a complimentary sponsorship placement at the Company’s inaugural World Series of Pickleball event.

There were 13,051,824 shares of common stock issued and outstanding as of June 30, 2026 and 9,785,056 shares of common stock issued and outstanding as of December 31, 2025.

RESTRICTED STOCK AWARDS

In May 2026, the Company issued 60,000 restricted shares of common stock to Business Funding Group at $5.50 per share, for an aggregate fair value of $330,000, pursuant to a consulting agreement. These shares vest monthly over a six-month period from May 9, 2026 through November 9, 2026. As of June 30, 2026, 20,000 of these shares were vested and 40,000 shares remained unvested, and the Company recorded stock-based compensation expense of $110,000 related to these shares in the statements of operations for the three and six months ended June 30, 2026.

In April 2026, pursuant to a letter agreement with an investor relations firm, the Company issued 9,574 restricted shares of common stock to the investor relations firm at $4.70 per share, for an aggregate fair value of $45,000, all of which shares were vested as of June 30, 2026. The Company recorded stock-based compensation expense of $45,000 related to these shares in the statements of operations for the three and six months ended June 30, 2026.

In total, the Company recorded stock-based compensation expense of $155,000 related to restricted stock issuances in the statements of operations for the three and six months ended June 30, 2026, and unrecognized stock compensation outstanding on these grants was $220,000 as of June 30, 2026. As of June 30, 2026, 69,574 restricted shares had been issued pursuant to these awards, of which 40,000 shares remained unvested.

WARRANTS

The following is a summary of warrants for the six months ended June 30, 2026.

 SCHEDULE OF WARRANT ACTIVITY

The weighted-average remaining term of the warrants outstanding was 3.57 years as of June 30, 2026.

In connection with lock-up agreements entered into with certain of its stockholders, on June 19, 2026, the Company granted to such stockholders warrants to purchase an aggregate of 657,876 shares of the Company’s common stock, at an exercise price of $5.00 per share of common stock. The warrants are exercisable in whole or in part immediately and expire on June 19, 2028. The warrants may be exercised only on a cash basis and include a 4.999% beneficial ownership limitation, which may be increased to 9.999% by a holder upon at least 61 days’ prior written notice to the Company.

In connection with the Name and Likeness License Agreement discussed in greater detail under Note 5, on June 4, 2026, the Company granted Darren Cahill warrants to purchase 250,000 shares of the Company’s common stock. The warrants have an exercise price of $5.00 per share and a five-year term, expire on June 4, 2031, and may be exercised on a cash or cashless basis. The warrants are exercisable as to one half of the shares of common stock immediately, and exercisable as to the remaining half of the shares of common stock one year following the grant date of the warrants.

The Company, in consideration for legal services provided to the Company, on May 29, 2026, granted to the Company’s outside legal counsel, warrants to purchase up to 100,000 shares of the Company’s common stock, at the exercise price of $5.00 per share of common stock. The warrants are exercisable in whole or in part immediately, expire on May 29, 2031, and may be exercised on a cash or cashless basis. The grant-date fair value of these warrants was charged to additional paid-in capital as a direct and incremental cost of the Company’s 2026 equity offerings in accordance with SEC Staff Accounting Bulletin Topic 5A, rather than recognized as compensation expense.

The Company, in consideration for services agreed to be rendered, on April 27, 2026, granted a financial advisor to the Company, warrants to purchase up to 50,000 shares of the Company’s common stock, at the exercise price of $5.00 per share of common stock. The warrants vested immediately, expire on April 26, 2031 and may be exercised on a cash or cashless basis. The grant-date fair value of these warrants was likewise charged to additional paid-in capital as a direct and incremental cost of the Company’s 2026 equity offerings in accordance with SEC Staff Accounting Bulletin Topic 5A.

The Company, for consulting services agreed to be rendered, on February 3, 2026, granted a consultant warrants to purchase up to 200,000 shares of the Company’s common stock, at the exercise price of $5.00 per share of common stock. The warrants expire on February 2, 2029. The warrants are exercisable as to one half of the shares of common stock immediately, and exercisable as to the remaining half of the shares of common stock one year following the grant date of the warrants.

The Company, for consulting services agreed to be rendered, on March 6, 2025, granted to Darren Cahill, warrants to purchase up to 250,000 shares of the Company’s common stock, at the exercise price of $1.70 per share of common stock. The warrants expire on March 5, 2030. The warrants are exercisable as to one half of the shares of common stock immediately, and exercisable as to the remaining half of the shares of common stock one year following the grant date of the warrants.

The Company, for consulting services agreed to be rendered, on March 6, 2025, granted a consultant warrants to purchase up to 500,000 shares of the Company’s common stock, at the exercise price of $1.70 per share of common stock. The warrants expire on March 5, 2030. The warrants are exercisable as to one half of the shares of common stock immediately, and exercisable as to the remaining half of the shares of common stock one year following the grant date of the warrants.

The Company, for services agreed to be rendered as the Company’s Chief Financial Officer, on March 6, 2025, granted to Shawn Cable, warrants to purchase up to 100,000 shares of the Company’s common stock, at the exercise price of $1.70 per share of common stock. The warrants expire on March 5, 2030. The warrants are exercisable as to one half of the shares of common stock immediately, and exercisable as to the remaining half of the shares of common stock one year following the grant date of the warrants.

In connection with the Trademark Purchase Agreement discussed in greater detail under Note 5, the Company granted the Sellers warrants to purchase 50,000 shares of the Company’s common stock. The warrants have an exercise price of $5.75 per share (the closing sales price of the Company’s common stock on the last trading day prior to the entry into the Trademark Acquisition Agreement) and a three-year term and are exercisable only on a cash basis. The warrants include a 4.999% beneficial ownership limitation, which can be increased to 9.999% by either holder, with at least 61 days prior written notice to the Company.

The Company, for consulting services agreed to be rendered, on October 31, 2025, granted to Stefanie Graf, the spouse of Andre K. Agassi, a significant beneficial owner of the Company’s common stock, warrants to purchase 1,000,000 shares of the Company’s common stock, at the exercise price of $5.50 per share of common stock. The warrants expire on October 31, 2030. The warrants are exercisable as to one half of the shares of common stock immediately, and exercisable as to the remaining half of the shares of common stock one year following the grant date of the warrants.

The aggregate fair value of the warrants was $7,075,592 and $1,724,064, respectively, during the six months ended June 30, 2026 and 2025, which was valued using the Black-Scholes pricing model using the range of inputs as indicated below:

SCHEDULE OF WARRANTS VALUATION ASSUMPTIONS

The Company capitalized $1,743,829 in intangible assets pertaining to these warrants on June 4, 2026, based on the vesting conditions noted above. The Company recognized $981,455 in stock-based compensation expense pertaining to warrants granted to consultants and service providers during the six months ended June 30, 2026, based on the vesting conditions noted above. In addition, the aggregate grant-date fair value of $801,798 of the warrants granted to the Company’s outside securities counsel on May 29, 2026 and to its financial advisor on April 27, 2026 was determined to be a direct and incremental cost of the Company’s 2026 equity offerings and was charged to additional paid-in capital in accordance with SEC Staff Accounting Bulletin Topic 5A. The warrants granted to stockholders in consideration for lock-up agreements were granted to the holders in their capacity as stockholders and, accordingly, were accounted for as an equity transaction rather than as compensation expense; the aggregate grant-date fair value of $3,548,508 was recorded as a deemed dividend, which increases the net loss attributable to common stockholders for purposes of computing loss per share (see Note 2).

2026 Equity Incentive Plan

On March 23, 2026, the Board of Directors adopted the Agassi Sports Entertainment Corp. 2026 Equity Incentive Plan, which became effective on the same date (the “2026 Plan”).

The 2026 Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to limitations provided by federal or state securities laws, to receive (i) nonqualified stock options; (ii) stock appreciation rights; (iii) restricted stock awards; (iv) restricted stock units; (v) shares in performance of services; (vi) other awards of equity or equity based compensation; or (vii) any combination of the foregoing. In making such determinations, the Board or Compensation Committee may take into account the nature of the services rendered by such person, his or her present and potential contribution to the Company’s success, and such other factors as the Board or Compensation Committee, in its discretion shall deem relevant.

Subject to adjustment in connection with the payment of a stock dividend, a stock split or subdivision or combination of the shares of common stock, or a reorganization or reclassification of the Company’s common stock, the aggregate number of shares of common stock which may be issued pursuant to awards under the 2026 Plan is 1,500,000.

RESTRICTED STOCK UNITS

In May 2026, the Company granted 300,000 restricted stock units (“RSUs”) under the 2026 Plan to its Chief Executive Officer pursuant to the terms of his employment agreement. The RSUs vest in three equal annual installments on December 31, 2026, 2027 and 2028. The Company recorded stock-based compensation expense of approximately $80,799 in the statements of operations for the three and six months ended June 30, 2026. Total unrecognized compensation cost related to non-vested restricted common stock amounted to approximately $1,344,201 as of June 30, 2026, which is expected to be recognized over 2.51 years. As of June 30, 2026, 300,000 RSUs remained unvested.

The following is a summary of RSU activity for the six months ended June 30, 2026: 

SCHEDULE OF RESTRICTED STOCK UNITS VALUATION ASSUMPTIONS