ALPHA MODUS HOLDINGS, INC. quarterly report, Q2 FY2023

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Business context and reporting period

Entity discrepancy: The supplied filing is Insight Acquisition Corp.’s Form 10-Q, not a filing under the name Alpha Modus Holdings, Inc. It covers the quarter and six months ended June 30, 2023; the financial statements are unaudited. Insight was a shell company formed to pursue a business combination and had not begun operating activities or generating operating revenue.

Financial results and position

  • Revenue: None reported; the company expected operating revenue only after a business combination.
  • Profit: Net loss was $383,459 for Q2 2023, versus net income of $2.83 million in Q2 2022. Six-month net income was $512,010 in 2023, versus $6.21 million in 2022. Results were materially affected by warrant fair-value changes and Trust Account investment gains.
  • Expenses and margins: No operating margin is meaningful because there was no revenue. Operating loss was $541,246 for Q2 and $1.17 million for the first six months of 2023.
  • Cash flow: Operating cash outflow was $936,122 for the first six months. Cash and restricted cash totaled $702,111 at June 30, including $557,519 restricted for taxes.
  • Liquidity and assets: Cash was $144,592; current assets were $787,112; Trust Account investments were $29.84 million; and total assets were $30.63 million. Current liabilities were $3.75 million, implying a working-capital deficit of approximately $2.96 million.
  • Liabilities and equity: Total liabilities were $11.04 million, including $6.6 million of deferred underwriting commissions, $2.16 million of excise tax payable, and $681,050 of derivative liabilities. Stockholders’ deficit was $10.14 million. The filing reports no Working Capital Loan balance at June 30.

Material changes versus prior comparable periods

  • After an extension vote, holders redeemed 21,151,393 public shares—about 88.1% of the outstanding Class A shares—for approximately $215.62 million. At June 30, 2,848,607 redeemable shares remained.
  • Trust Account investments fell from $244.31 million at December 31, 2022, to $29.84 million at June 30, 2023, principally reflecting redemptions and tax withdrawals. The redemption value per remaining public share was $10.44, compared with $10.15 at year-end.
  • Six-month income fell from $6.21 million to $512,010. In particular, the prior-year period included a $6.94 million gain from changes in derivative fair value; the 2023 period recorded a $596,160 loss.
  • An underwriter waived $5.4 million of deferred fees; $6.6 million remained outstanding at quarter-end, versus $12.0 million at year-end.

Outlook, risks and unusual items

  • Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing limited operating liquidity and the risk of mandatory liquidation if no business combination closes by the extended deadline. The filing describes a deadline of June 7, 2024, subject to required monthly extension deposits.
  • The Avila business combination agreement was terminated on August 10, 2023. Avila agreed to reimburse up to $300,000 of expenses under specified payment conditions.
  • After quarter-end, Insight entered a business combination agreement with Alpha Modus, Corp. on October 13, 2023. The proposed merger remained subject to completion and related conditions; it was not a completed transaction in this reporting period.
  • The company recorded a $2.16 million excise-tax liability on 2023 redemptions. Responsibility for payment may depend on transaction outcomes, and the company stated Trust Account funds would not be used to pay it.
  • Disclosure controls and internal control over financial reporting were deemed ineffective due to late filings, which management identified as a material weakness. Management said it intended to improve reporting timeliness and review procedures.
  • No numeric operating guidance was provided. The filing identifies business-combination execution, financing, dilution, liquidation, market conditions, and potential effects of COVID-19 and geopolitical events as risks.

Important facts for investors to verify

  1. Confirm the correct issuer and filing: this report is for Insight Acquisition Corp., despite the request naming Alpha Modus Holdings, Inc.
  2. Reconcile reported results: the financial statements show Q2 net loss of $383,459 and six-month net income of $512,010, while MD&A gives different approximate figures (about $258,000 loss and $637,000 income).
  3. Reconcile liquidity disclosures: the balance sheet implies a working-capital deficit of about $2.96 million; other narrative disclosures give different amounts.
  4. Check the status, terms, approvals, financing, redemptions, and closing conditions of the October 2023 Alpha Modus transaction, as well as the extended combination deadline.
  5. Verify available cash outside the Trust Account, extension and sponsor financing terms, deferred underwriting obligations, and who ultimately bears the excise-tax liability.