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

Adapti, Inc. filed an amended 8-K to provide detailed financial statements and pro forma information for its $27.5 million acquisition of sports agency Ballengee Group, LLC, completed on July 14, 2025.

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, a $7.5 million participating promissory note, and up to $20 million in earnout consideration over four years based on Ballengee's EBITDA.
• Ballengee Group reported a net loss of $1,222,860 for the year ended December 31, 2024, an increase from a $1,023,500 net loss in 2023.
• For the six months ended June 30, 2025, Ballengee Group reported a net loss of $733,183, a significant decline from a net income of $71,119 for the same period in 2024.
• Pro forma combined statements show a net loss of $2,183,005 for the year ended March 31, 2025, and a net income of $58,666 for the three months ended June 30, 2025.
• Ballengee Group has incurred cumulative losses totaling $21,375,587 since inception as of June 30, 2025, raising going concern considerations.
• The company is involved in active negotiations regarding a $1,450,000 demand letter from a former consultant.

Sentiment

Score: 3

Explanation: The filing details an acquisition, which is a strategic positive, but the acquired entity (Ballengee Group) shows deteriorating financial performance, significant accumulated losses, and ongoing legal disputes, raising substantial concerns about its financial health and future contribution. The pro forma results also show a significant decline in profitability year-over-year for the combined entity's most recent quarter.

Positives

• Adapti, Inc. successfully completed the acquisition of Ballengee Group, LLC, expanding its business into the sports agency market.
• Ballengee Group's cash balance increased to $349,353 as of June 30, 2025, from $113,228 at December 31, 2024.
• The line of credit was paid off in full for $363,082 on October 3, 2025, releasing all personal guarantees and security interests.
• The pro forma combined statements show a net income of $58,666 for the three months ended June 30, 2025, indicating potential for profitability post-acquisition for the combined entity.

Negatives

• Ballengee Group's net loss increased from $1,023,500 in 2023 to $1,222,860 in 2024.
• Ballengee Group's performance significantly deteriorated in the first half of 2025, reporting a net loss of $733,183 compared to a net income of $71,119 in the same period of 2024.
• Ballengee Group has accumulated significant losses since inception, totaling $21,375,587 as of June 30, 2025, raising going concern issues.
• Marketing income for Ballengee Group decreased from $1,727,770 in 2023 to $1,125,320 in 2024, and slightly decreased from $407,041 (6 months 2024) to $396,046 (6 months 2025).
• A significant concentration risk exists as 5 out of 10 agents handled 90% of Ballengee's revenue and contracts in 2024 and 2023.
• A former agent with significant client relationships departed subsequent to year-end 2024, which could impact future revenue.
• Ballengee Group owed $795,735 to Jorgan Development, LLC (a related party) as of June 30, 2025, after repaying a previous advance.

Risks

• Going Concern: Ballengee Group has incurred substantial losses since inception, raising doubt about its ability to continue as a going concern.
• Agent Concentration Risk: A significant portion of Ballengee's revenue relies on a small number of agents, and the departure of a key agent could materially impact the business.
• Litigation/Consultant Dispute: A demand letter for $1,450,000 from a former consultant, with active negotiations, poses a potential financial liability.
• Integration Risk: The success of the acquisition depends on the effective integration of Ballengee Group into Adapti, Inc.'s operations and culture.
• Earnout Achievement Risk: The $20 million earnout consideration is contingent on Ballengee's EBITDA performance, which has been negative or low in recent periods, making achievement uncertain.
• Related Party Transactions: The existence of significant related party transactions (e.g., loans, lease agreements, equity conversions) could present conflicts of interest or impact financial transparency.

Future Outlook

The acquisition includes an earnout consideration of up to $20,000,000 over a four-year period (January 1, 2025, to December 31, 2028), contingent on Ballengee's EBITDA performance. The earnout structure provides incentives for Ballengee to achieve specific financial milestones, with payments ranging from zero for EBITDA below $2,000,000, to the full EBITDA amount between $2,000,000 and $5,000,000, and $5,000,000 for EBITDA of $5,000,000 or more per year.

Management Comments

• Management is responsible for evaluating whether there is substantial doubt about Ballengee Group's ability to continue as a going concern.
• Management believes historical loss information is a reasonable starting point for calculating the expected allowance for credit losses, as the represented athlete portfolio segment has remained constant.
• Management determined there is a variable lease as of December 31, 2024, and June 30, 2025.
• Management is currently evaluating the impact of recent accounting pronouncements (ASU 2023-07, ASU 2023-09, ASU 2024-03) on financial statements and disclosures.
• Management is in active negotiations with counsel for a former consultant regarding a $1,450,000 demand letter.

Industry Context

The acquisition of Ballengee Group, an MLB athlete representation agency, by Adapti, Inc. positions Adapti to enter or expand its presence in the competitive sports agency market. This sector is characterized by reliance on key agent-client relationships, guaranteed contracts for athletes, and the negotiation of both playing contracts and marketing opportunities. The industry faces challenges related to agent retention and potential disputes with former personnel.

Comparison to Industry Standards

• Ballengee Group's reliance on a small number of agents (5 out of 10 agents handling 90% of revenue) indicates a high concentration risk, which is generally considered above industry average for diversified agencies.
• The accumulated deficit of over $21 million and recurring net losses for Ballengee Group suggest a financial performance below typical industry benchmarks for established, profitable sports agencies.
• The earnout structure, tied to EBITDA, is a common mechanism in acquisitions within service industries like sports agencies, aligning seller incentives with post-acquisition performance. However, the specific EBITDA targets ($2M-$5M) would need to be compared to similar-sized agencies to assess their aggressiveness.
• The 5-7% commission rate on MLB contracts and marketing deals is standard within the sports agency industry.

Management Changes

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. The company is in active negotiations and has accrued an amount for expected payment, including legal fees.

Related Party Transactions

• Ballengee Group had a 'Due from related party' balance of $760,552 from Jorgan Development, LLC (owned by James H. Ballengee, a manager of the Company) as of December 31, 2024, which was repaid by June 30, 2025.
• Ballengee Group owed $508,000 to Jorgan Development, LLC as of December 31, 2023, and owed $795,735 as of June 30, 2025. These loans have no stated repayment terms and are zero-interest bearing.
• Ballengee Group leases corporate office space from White Claw Crude (WCC), which acquired the lease from Bacchus Capital Trading, LLC (a related party under common management). Annual lease payments are $300,000.
• $220,000 of accounts payable to WCC was converted to an equity contribution in 2024, and $550,000 was converted in the six months ended June 30, 2025.
• Adapti, Inc. (the parent company post-acquisition) entered into a convertible note with Campbell Trust for $180,818 on September 15, 2025. Ballengee Group also entered a promissory note with Campbell Trust for $250,000 on June 2, 2025.

Stakeholder Impact

• Shareholders of Adapti, Inc. will see the company's strategic expansion into the sports agency market, but also inherit the financial risks and liabilities of Ballengee Group.
• Employees of Ballengee Group will continue operations under Adapti, Inc., with key employees retained.
• Creditors of Ballengee Group, such as the line of credit provider, have been paid off, but new related party debt has been incurred.
• Athletes represented by Ballengee Group are expected to continue receiving services, with their contracts being the primary revenue source.

Next Steps

• Adapti, Inc. will continue to integrate Ballengee Group, LLC into its operations.
• Ballengee Group is expected to work towards achieving EBITDA milestones to earn up to $20,000,000 in earnout consideration through December 31, 2028.
• Negotiations are ongoing regarding the $1,450,000 demand letter from a former consultant.
• Adapti, Inc. will evaluate the impact of new FASB accounting pronouncements (ASU 2023-07, ASU 2023-09, ASU 2024-03) on its financial statements and disclosures.

Key Dates

Recommendation

While the acquisition of Ballengee Group by Adapti, Inc. represents a strategic expansion, the financial performance of the acquired entity is concerning, with increasing net losses and significant accumulated deficits. The going concern warning for Ballengee Group and the ongoing $1.45 million consultant dispute introduce substantial risk. Although the pro forma combined entity shows a positive net income for the most recent quarter, the overall trend for Ballengee is negative, and the earnout targets appear challenging given past performance. Investors should hold to observe the integration process, the resolution of legal matters, and whether Ballengee can reverse its negative financial trends and achieve the earnout milestones to justify the acquisition price. The high concentration of revenue with a few agents also presents a notable risk.

Keywords

Adapti Inc., Ballengee Group, Acquisition, SEC Filing, 8-K/A, Financial Statements, Pro Forma, Sports Agency, MLB Athletes, Corporate Governance, Risk Factors, Merger, EBITDA, Earnout, Convertible Note, Related Party Transactions, Going Concern