ALPHA MODUS HOLDINGS, INC. quarterly report, Q1 FY2022

Business context and reporting period

The supplied filing is Insight Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2022, not a filing identified in its text as Alpha Modus Holdings, Inc. Insight was a blank-check company seeking a business combination and had not commenced operations. It reported no operating revenue; its activity consisted of formation, its September 2021 IPO and the search for a target.

Key financial metrics

MetricMarch 31, 2022 quarter / period-end
RevenueNone reported; the company said it would not generate operating revenue before a business combination.
Net income$3.38 million, or $0.11 per Class A and Class B share. This was primarily driven by a $3.90 million noncash gain from the decrease in fair value of warrant liabilities.
Operating expenses$413,077 general and administrative expense and $48,817 franchise tax expense.
Trust investment result$57,679 loss on investments held in the Trust Account.
Cash flow$223,529 net cash used in operating activities; $85,000 used in financing activities; cash declined $308,529 to $569,408.
Assets and liquidityTotal assets were $242.51 million, including $241.13 million in the Trust Account. Management reported working capital of approximately $952,000.
Liabilities and debtTotal liabilities were $19.32 million, including $12.00 million of deferred underwriting commissions and $6.90 million of derivative liabilities. No working-capital loans were outstanding.
Equity / redemption sharesStockholders’ deficit was $18.02 million. All 24 million Class A shares were classified as temporary equity, subject to possible redemption, at $241.20 million.

Margins are not meaningful for this pre-combination shell company. The filing does not provide a prior-year-quarter income statement or cash-flow comparison, so quarter-over-quarter or year-over-year operating trends cannot be assessed from the supplied text.

Material changes and unusual items

  • Compared with December 31, 2021, cash declined from $877,937 to $569,408; total assets declined from $242.94 million to $242.51 million; and total liabilities declined from $23.14 million to $19.32 million.
  • Warrant liabilities fell from $10.80 million to $6.90 million, producing the quarter’s $3.90 million noncash fair-value gain and most of reported net income.
  • Trust Account investments decreased from $241.19 million to $241.13 million, with the filing reporting a $57,679 investment loss.
  • The company disclosed a material weakness in internal control over financial reporting involving accounting for complex financial instruments, and said the weakness had resulted in a restatement of its September 7, 2021 balance sheet. Disclosure controls were deemed ineffective as of March 31, 2022; remediation work was ongoing.

Outlook, risks and contingencies

  • The company had until March 7, 2023—18 months after its IPO—to complete a business combination. Failure to do so would require redemption of public shares and liquidation. Management said this uncertainty raised substantial doubt about the company’s ability to continue as a going concern, while intending to complete a combination by the deadline.
  • The $12.00 million deferred underwriting commission was payable only if a business combination was completed. The company also had related-party service arrangements and may seek, but was not assured of receiving, sponsor working-capital loans.
  • Management said the effects of COVID-19 and Russia’s invasion of Ukraine and related sanctions on its target search and financial position were uncertain and not then determinable. The filing also cited proposed SEC SPAC rules as a potential source of added cost, delay or difficulty in completing a transaction.
  • The filing reported no legal proceedings, defaults on senior securities, off-balance-sheet arrangements or subsequent events requiring adjustment or disclosure.

Important facts for investors to verify

  • Confirm the registrant’s identity and whether this Insight Acquisition Corp. filing is the intended filing for Alpha Modus Holdings, Inc.
  • Review the restatement details and the scope, remediation plan and status of the material weakness in financial reporting controls.
  • Assess available cash outside the Trust Account, expected transaction costs and any need or ability to obtain additional financing before the March 7, 2023 deadline.
  • Evaluate the proposed business combination, redemption exposure, deferred underwriting fee and potential dilution from founder shares and warrants; no target or transaction is identified in the supplied filing text.