8-K/A: Adapti Files Acquisition Financials for Ballengee Group

Adapti, Inc. has filed amended financial statements detailing its $27.5 million acquisition of sports agency Ballengee Group, including pro forma results and Ballengee's recent losses.

Summary

• Adapti, Inc. completed the acquisition of Ballengee Group, LLC, a Texas-based sports agency, on July 14, 2025.
• The acquisition consideration was $27.5 million, comprising 6,500,000 shares of Adapti common stock valued at $20 million and a $7.5 million participating promissory note.
• An additional earnout consideration of up to $20 million is payable over four years (2025-2028) based on Ballengee's EBITDA performance.
• Ballengee Group reported a net loss of $1,222,860 for the year ended December 31, 2024, an increase from $1,023,500 in 2023.
• For the six months ended June 30, 2025, Ballengee Group incurred a net loss of $733,183, compared to a net income of $71,119 for the same period in 2024.
• Ballengee's revenue decreased from $7,553,631 in 2023 to $7,083,692 in 2024, primarily due to a decline in marketing income.
• Pro forma combined statements show Adapti, Inc. with a net loss of $2,183,005 for the year ended March 31, 2025, but a pro forma net income of $58,666 for the three months ended June 30, 2025.
• Ballengee Group has accumulated losses totaling $21,375,587 since inception as of June 30, 2025, raising going concern considerations.
• A former agent and a former consultant have initiated disputes, with a demand letter for $1,450,000 from the consultant.

Sentiment

Score: 4

Explanation: While the acquisition itself is a strategic move, Ballengee Group's historical and recent financial performance (increasing losses, declining gross profit, significant accumulated deficit, and ongoing disputes) presents substantial challenges. The pro forma profitability in the most recent quarter is a positive, but the underlying issues of the acquired entity and the concentration risks temper overall sentiment.

Positives

• Adapti successfully completed the acquisition of Ballengee Group, expanding its business into sports agency.
• Ballengee's cash balance increased to $349,353 as of June 30, 2025, from $113,228 at December 31, 2024.
• The line of credit balance for Ballengee Group was significantly reduced from $1,233,388 at December 31, 2024, to $511,272 at June 30, 2025, and subsequently paid off in full on October 3, 2025, for $361,272.
• Pro forma results for the three months ended June 30, 2025, show a net income of $58,666 for the combined entity, suggesting potential for profitability post-acquisition.
• Ballengee's contracts receivable are guaranteed by MLB, reducing credit risk.

Negatives

• Ballengee Group reported increasing net losses, from $1,023,500 in 2023 to $1,222,860 in 2024, and a loss of $733,183 for the first six months of 2025.
• Ballengee's gross profit significantly declined in H1 2025 to $913,878 from $1,990,905 in H1 2024.
• Ballengee's accumulated deficit reached $21,375,587 as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern prior to the acquisition.
• Revenue for Ballengee Group decreased year-over-year from $7,553,631 in 2023 to $7,083,692 in 2024, primarily driven by a decline in marketing income.
• A significant concentration risk exists with 5 out of 10 agents handling 90% of Ballengee's revenue and contracts.
• The departure of an agent with significant client relationships post-2024 year-end could negatively impact future revenue.
• New related party notes payable and due to related parties increased significantly for Ballengee in H1 2025, totaling $252,500 and $795,735 respectively.

Risks

• Going Concern: Ballengee Group has incurred significant losses since inception, raising substantial doubt about its ability to continue as a going concern.
• Agent Concentration Risk: A high percentage of Ballengee's revenue and contracts are dependent on a small number of agents (5 out of 10 agents handled 90% of revenue/contracts).
• Agent Departure Impact: The departure of an agent with significant client relationships subsequent to December 31, 2024, could materially impact Ballengee's business.
• Litigation/Disputes: A demand letter for $1,450,000 from a former consultant and a settlement agreement with a former agent indicate potential legal and financial liabilities.
• Related Party Transactions: Significant related party transactions, including loans with no stated repayment terms and zero-interest bearing, could pose governance and financial risks.
• Earnout Achievement: The $20 million earnout consideration is contingent on Ballengee's EBITDA performance, which has been negative historically, posing a risk to sellers receiving full consideration.

Future Outlook

The earnout consideration for the Ballengee Group acquisition is tied to future EBITDA performance, with targets ranging from $2 million to $5 million annually over four years (2025-2028). Management is actively negotiating a settlement with a former consultant regarding a $1,450,000 demand.

Industry Context

The acquisition of a sports agency like Ballengee Group by Adapti, Inc. suggests a strategic move into the sports representation and marketing industry. This sector is highly competitive and relies heavily on key agent-athlete relationships and contract negotiation expertise. The concentration of revenue among a few agents is typical but also a risk factor. The earnout structure is a common mechanism in acquisitions to align seller incentives with post-acquisition performance.

Comparison to Industry Standards

• The reliance on a few key agents for 90% of revenue is a common characteristic in boutique sports agencies but represents a significant concentration risk compared to larger, more diversified agencies.
• The guaranteed nature of MLB contracts for commissions is a positive industry standard, providing revenue stability for agencies.
• The earnout structure based on EBITDA is a standard practice in M&A, aligning with performance-based compensation models seen across various industries for acquired entities.
• Ballengee Group's persistent net losses and accumulated deficit are below industry standards for a healthy, growing business, indicating significant operational challenges prior to the acquisition.

Corporate Governance

Legal Proceedings

• Ballengee Group entered into a settlement agreement with a former agent on October 17, 2025, with commissions fully accrued.
• Ballengee Group terminated an agreement with a former consultant on August 27, 2025, and received a demand letter for $1,450,000 on September 12, 2025. Active negotiations are ongoing, and an amount has been accrued.

Related Party Transactions

• Ballengee Group leased corporate office space from Bacchus Capital Trading, LLC (a related party under common management), which was later assigned to White Claw Crude (WCC).
• Ballengee Group had advances to/from Jorgan Development, LLC, owned by James H. Ballengee (a manager). As of December 31, 2024, Ballengee was owed $760,552 from Jorgan, which was repaid by June 30, 2025. By June 30, 2025, Ballengee owed Jorgan $795,735. These loans are zero-interest bearing with no stated repayment terms.
• $220,000 (2024) and $550,000 (H1 2025) of accounts payable to WCC were converted into equity contributions.
• Ballengee Group entered into a $250,000 promissory note with Campbell Trust (a related party) on June 2, 2025, at 12% interest.
• Adapti, Inc. (the parent company) entered into a $180,818 convertible note with Campbell Trust on September 15, 2025, at 17.5% interest.

Stakeholder Impact

• Shareholders (Adapti): The acquisition introduces a new business segment (sports agency) with potential for growth but also inherits a history of losses and ongoing disputes. The earnout structure aligns seller incentives with future performance.
• Sellers (BSG Holdings, LLC and JBAH Holdings, LLC): Received $27.5 million in stock and debt, with potential for an additional $20 million earnout based on Ballengee's EBITDA.
• Employees (Ballengee Group agents): The business continued uninterrupted, and key employees were retained. However, the departure of a significant agent and disputes with former agents/consultants highlight potential instability.
• Creditors: The line of credit was paid off, reducing immediate debt obligations. However, new related party notes and ongoing legal disputes could impact future financial stability.

Next Steps

• Adapti will integrate Ballengee Group's operations and work towards achieving the earnout EBITDA targets.
• Management will continue active negotiations to settle the $1,450,000 demand from a former consultant.
• Adapti will need to manage the risks associated with agent concentration and the departure of key personnel.

Key Dates

Recommendation

The acquisition of Ballengee Group represents a strategic expansion for Adapti, Inc. into the sports agency sector. While the pro forma results for the most recent quarter show a positive net income, Ballengee Group's historical performance indicates significant losses and an accumulated deficit. The concentration of revenue among a few agents and ongoing disputes with former personnel introduce considerable risks. The earnout structure provides a performance-based incentive, but its achievement is uncertain given past results. Investors should hold to observe the integration of Ballengee Group, the resolution of legal disputes, and the ability of the combined entity to achieve sustained profitability and realize the strategic benefits of the acquisition. The significant related party transactions also warrant close monitoring.

Keywords

Adapti Inc, Ballengee Group, SEC Filing, 8-K/A, Acquisition, Sports Agency, MLB, Financial Statements, Pro Forma, Corporate Governance, Risk Management, Earnout, Convertible Note, Related Party Transactions