10-Q: Adapti Shifts to Sports Tech, Reports Q2 Loss Amid Ballengee Integration

Adapti, Inc. reports a significant net loss in Q2 2025 as it transitions from health and beauty to sports management and AI, following the acquisition of Ballengee Group.

Summary

• Adapti, Inc. has undergone a strategic shift, moving away from health and beauty product sales to focus on technology-driven sports management, marketing, and athlete representation.
• The company completed the acquisition of The Ballengee Group, LLC on July 14, 2025, a sports management agency representing approximately 200 professional athletes, including 40 Major League Baseball players.
• Adapti is developing AdaptAI, a proprietary AI-driven tool designed to identify optimal alignment between brands and social media influencers, which is currently in beta stage and anticipated to launch by December 31, 2026, subject to sufficient funding.
• Revenues for the six months ended September 30, 2025, increased significantly to $2,132,101, compared to $2,978 for the same period in 2024, primarily due to the Ballengee acquisition.
• The net loss for the six months ended September 30, 2025, was $2,891,382, a substantial increase from the $430,875 loss reported in the prior year, mainly driven by increased professional fees and operating expenses.
• As of September 30, 2025, the company had an accumulated deficit of $12,403,776 and a working capital deficit of $781,054.
• Management has expressed substantial doubt about the company's ability to continue as a going concern for the next twelve months without securing additional financing.
• Subsequent to the reporting period, Adapti entered into a letter of intent to acquire Levelution Sports, an NIL athlete representation company.

Sentiment

Score: 3

Explanation: While the company has made a significant strategic shift and achieved substantial revenue growth through acquisition, it faces severe financial distress, including a large net loss, accumulated deficit, working capital deficit, and a going concern warning. The ineffectiveness of internal controls and reliance on future capital raises contribute to a negative sentiment, despite the potential of the new business model and AI platform.

Positives

• Successfully completed the acquisition of The Ballengee Group, LLC, a sports management agency with approximately 200 professional athlete clients.
• Reported a significant increase in revenues to $2,132,101 for the six months ended September 30, 2025, up from $2,978 in the prior year, primarily attributable to the Ballengee acquisition.
• Continued development of AdaptAI, a proprietary AI-driven platform for brand and influencer matching, which is currently in its beta phase.
• Cash balance increased substantially to $1,540,411 as of September 30, 2025, from $572 as of March 31, 2025.
• Paid off a $361,272 line of credit in full on October 3, 2025, releasing personal guarantees and security interests.
• Entered into a letter of intent to acquire Levelution Sports, indicating further strategic expansion in the NIL athlete representation market.

Negatives

• Incurred a net loss of $2,891,382 for the six months ended September 30, 2025, a significant increase from the $430,875 loss in the comparable prior-year period.
• Reported an accumulated deficit of $12,403,776 as of September 30, 2025.
• Maintained a working capital deficit of $781,054 as of September 30, 2025.
• Management has expressed substantial doubt about the company's ability to continue as a going concern for the next twelve months without additional financing.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025.
• The CEO, Adam Nicosia, is owed approximately $150,000 in accrued but unpaid salary, and the interim CFO, Marilu Brassington, is owed approximately $95,000.
• The AdaptAI platform requires an estimated $250,000 to complete development, contingent on securing sufficient funding.
• Experienced significant increases in professional fees ($2,851,793 for six months ended Sep 30, 2025 vs $362,923 for same period 2024) and general and administrative expenses ($637,994 vs $50,480).
• The CEO and CFO work part-time and hold executive positions with other companies, potentially limiting their dedicated time and attention to Adapti.
• Obligations under participating promissory notes from the Ballengee acquisition mandate repayment of 10% of gross proceeds from future equity offerings (over $250,000) and 50% of Ballengee's free cash flow, reducing available capital.
• Potential future stock issuances for earnout consideration (up to $20,000,000) could lead to significant dilution for existing stockholders.
• Substantially all assets of Ballengee are pledged as security for a new $3,000,000 revolving line of credit.

Risks

• The company has a limited operating history and a recently changed business plan, making future prospects difficult to evaluate and increasing investment risk.
• There is no assurance of successfully integrating and growing Ballengee Group or realizing assumed synergies, which could materially adversely affect the business.
• The success of the new and unproven AdaptAI AI platform is highly uncertain and depends on factors outside the company's control, including influencer willingness and platform effectiveness.
• The business is highly dependent on the relationships of its agents, managers, and other key personnel with clients, and the loss of these individuals could adversely affect operations.
• Adverse publicity concerning the company, its businesses, clients, or key personnel could harm its professional reputation and business.
• Failure to identify, recruit, and retain qualified and experienced agents and managers could adversely affect the business.
• Failure to identify, sign, and retain high-demand athlete clients could adversely affect financial results and growth prospects.
• The company faces intense competition from substantially larger and better-financed competitors in both the baseball agency and technology sectors.
• The loss of key management services or their limited time commitment due to other executive positions could harm the business.
• Unpaid accrued salaries to the CEO ($150,000) and interim CFO ($95,000) may impact their continued service and create financial and reputational risks.
• Obligations under participating promissory notes issued in the Ballengee acquisition will reduce proceeds from future capital raises and limit the use of cash flows.
• Earnout consideration payable to the former Ballengee Group owners could result in significant future stock issuances and dilution to stockholders.
• Substantial debt obligations, including pledged assets of Ballengee, expose the company to risks of default, acceleration, and potential foreclosure.
• Management has expressed substantial doubt about the company's ability to continue as a going concern, which may deter future financing.
• The business requires a substantial investment of capital, and the company has limited working capital and limited access to financing.
• The use of Artificial Intelligence in AdaptAI presents operational, legal, ethical, and competitive risks, including potential for flawed outputs, evolving regulations, and competition from more advanced tools.
• Cybersecurity breaches, data loss, or system failures could disrupt AdaptAI's operations, compromise sensitive information, and harm the company's reputation.
• Concentration of ownership (over 80% by former Ballengee principals) gives certain stockholders control, potentially delaying or preventing a change in control and limiting the influence of other stockholders.
• The authorized capital structure allows for the issuance of a substantial number of additional shares, which could result in significant dilution to existing stockholders.
• The market for the company's common stock has historically been illiquid, making it difficult for investors to sell shares.
• The company has not paid cash dividends in the past and does not expect to in the foreseeable future.
• Operations are subject to federal, state, and local laws and regulations, with non-compliance potentially leading to sanctions, fines, and reputational harm.
• The company may be unable to comply with reporting and other requirements under federal securities laws, and its internal controls over financial reporting are not effective.
• As a smaller reporting company, reduced disclosure requirements may make its securities less attractive to investors.

Future Outlook

The company anticipates launching its AdaptAI platform by December 31, 2026, contingent on securing sufficient funding. Future plans include expanding AdaptAI's capabilities to support automated content creation and end-to-end generative content workflows. Revenues are expected to be primarily derived from athlete representation fees, sponsorships, and AdaptAI platform-enabled brand integrations. The company is actively seeking additional acquisitions, as evidenced by a letter of intent to acquire Levelution Sports, and will need to raise additional capital to fund operations and meet obligations for the foreseeable future.

Management Comments

• 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.
• We anticipate launching AdaptAI by December 31, 2026, subject to the Company securing sufficient funding.
• 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.
• Management believes that AdaptAI will be completed for the Companys internal use by December 31, 2026.
• 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.
• 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.

Industry Context

Adapti, Inc. is undergoing a significant transformation, pivoting from the health and beauty sector to the dynamic sports management and marketing industry. This move positions the company to compete in the athlete representation market, which relies heavily on established agent-athlete relationships and securing brand sponsorships. Concurrently, its development of AdaptAI places it in the rapidly evolving AI-driven influencer marketing and content creation space, aiming to leverage technology for optimized brand-influencer alignment. The company's strategy, including the Ballengee Group acquisition and the letter of intent for Levelution Sports, suggests a focus on consolidation and expansion within the athlete representation sector, including tapping into the growing Name, Image, Likeness (NIL) market for collegiate athletes.

Management Changes

Corporate Governance

Legal Proceedings

• No pending, threatened, or actual legal proceedings, except for routine litigation.

Related Party Transactions

• Acquisition of The Ballengee Group, LLC from BSG Holdings, LLC and JBAH Holdings, LLC (now majority shareholders).
• Participating promissory notes totaling $7,500,000 issued to BSG Holdings, LLC and JBAH Holdings, LLC as part of the Ballengee acquisition.
• Earnout consideration of up to $20,000,000 payable in common stock to former Ballengee owners (BSG Holdings, LLC and JBAH Holdings, LLC).
• Operating lease with Bacchus Capital Trading, LLC (related party under common management), later assigned to White Claw Crude (WCC). Lease payments of $25,000/month, payable in shares to Waskom Enterprises, LLC (owned by James Ballengee).
• Convertible note payable to Campbell Trust (Jeff Campbell, Executive Chairman) for $100,000, with maturity extended to September 24, 2026.
• Convertible note payable to Stuff International (Adam Nicosia, CEO) for $100,000, with maturity extended to October 30, 2026.
• Convertible note payable to Campbell Trust (Jeff Campbell) for $150,000.
• Subordinated convertible promissory notes issued on August 14, 2025, to Marilu Brassington (interim CFO) for $184,800, Jeff Campbell (Executive Chairman) for $492,800, and Adam Nicosia (CEO) for $1,478,400.
• Note payable from Ballengee to Campbell Trust (Jeff Campbell) for $250,000.
• Note payable from Stuff International (Adam Nicosia) for $223,246.
• Note payable to Market Group International (Robert Van Boreum, ex-CEO) for $284,797, settled for 29,666 common shares at a 20% discount.
• Operating loans from Jorgan Development, LLC (owned by James H. Ballengee, manager of Ballengee) totaling $448,341.
• Advance from Edgeware Energy (owned by James H. Ballengee) for $135,000.
• New revolving line of credit for up to $2,000,000 entered into by 2278 Monitor, LLC (controlled by James Ballengee), with a cross-collateralization agreement impacting Ballengee's new $3,000,000 revolving loan.
• Accrued but unpaid salaries to CEO Adam Nicosia ($150,000) and interim CFO Marilu Brassington ($95,000).
• Issuance of 10,000 shares of Common Stock to Stuff International (Adam Nicosia) for extending a convertible note maturity.
• Issuance of 10,000 shares of Common Stock to The Campbell Trust (Jeff Campbell) for extending a convertible note maturity.
• Issuance of 34,469 shares to Waskom Enterprises, LLC (owned by James Ballengee) for rent payments.

Stakeholder Impact

• Shareholders face significant dilution risk from future stock issuances for earnouts and capital raises. The concentration of ownership by former Ballengee principals (over 80%) limits the influence of other shareholders, and the market for common stock has historically been illiquid with no expected dividends.
• Employees, particularly agents and managers, are critical to the business, and there is a risk of losing key personnel. The unpaid accrued salaries for the CEO and interim CFO could impact management retention and morale.
• Clients (athletes and influencers) may benefit from enhanced marketing and sponsorship opportunities through the AdaptAI platform, but are exposed to risks of negative publicity affecting their relationships and the company's ability to attract and retain high-demand talent.
• Creditors are exposed to substantial debt obligations, including convertible notes and a new secured revolving line of credit. The pledging of Ballengee's assets as collateral and a cross-collateralization agreement with a related party's loan increase default risk.
• Management faces increased workload due to the strategic shift and integration, potential conflicts of interest due to part-time roles and other business interests, and financial risk from unpaid accrued salaries.

Next Steps

• Integrate the operations of the Ballengee Group with Adapti.
• Continue the development of the AdaptAI technology platform, with an anticipated launch by December 31, 2026.
• Secure sufficient funding to complete AdaptAI development and support ongoing operations.
• Expand AdaptAI's capabilities to include automated content creation and generative content workflows.
• Complete the acquisition of Levelution Sports, subject to due diligence and definitive documents.
• Identify and pursue additional potential acquisitions that align with the company's business plan.
• Address the substantial doubt about the company's ability to continue as a going concern by raising additional capital.
• Improve disclosure controls and procedures and internal control over financial reporting.
• Satisfy accrued but unpaid salaries owed to the CEO and interim CFO.
• Begin making interest payments on the new $3,000,000 revolving line of credit commencing in December 2025.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial net loss, accumulated deficit, and a going concern warning from both management and auditors. Disclosure controls are ineffective, and key management personnel have significant unpaid salaries, raising serious operational and governance concerns. While the acquisition of Ballengee Group and the development of AdaptAI offer potential, the execution risk is extremely high, compounded by significant dilution potential from future capital raises and earnout obligations. The company's ability to secure necessary funding and achieve profitability is highly uncertain, making it a high-risk investment with a strong likelihood of further value erosion.

Keywords

Sports Management, Athlete Representation, AI Platform, Influencer Marketing, SEC Filing, 10-Q, Adapti, Ballengee Group, AdaptAI, Financial Results, Acquisition, Going Concern, Convertible Notes, Dilution, Corporate Governance, Risk Factors