Business context and reporting period
The supplied filing is Insight Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2023—not a filing under the requested company name, ALPHA MODUS HOLDINGS, INC. Insight was a shell company formed to pursue a business combination and had not begun operating or generating operating revenue.
After quarter-end, on April 3, 2023, Insight entered into a business combination agreement to acquire Avila Energy Corporation in a transaction involving Insight’s redomicile to Alberta. The filing does not establish that the transaction was completed.
Financial results and position
- Revenue: No operating revenue. The company’s income came primarily from trust-account investments and other non-operating items.
- Net income: $895,469 for Q1 2023, versus $3.38 million in Q1 2022. Basic and diluted income per share was $0.04 versus $0.11.
- Expenses and unusual items: Operating loss was $631,326. Other income, net, was $1.94 million, including $1.88 million of trust investment gains and a $273,110 gain on forgiveness of deferred underwriting fees; these were partly offset by $175,950 of derivative-liability fair-value expense and $39,104 of forward-purchase-liability fair-value expense. Income tax expense was $416,252.
- Cash flow: Net cash used in operating activities was $289,693. Investing activities provided $216.99 million, largely reflecting trust withdrawals for redemptions; financing activities used $215.52 million, largely reflecting redemptions. Ending cash was $50,931 and restricted cash was $1.30 million, or $1.35 million combined.
- Assets and liquidity: Total assets were $30.77 million, including $29.21 million in the trust account. Current liabilities were $1.66 million. Management reported a working-capital surplus of approximately $59,000 and described approximately $1.3 million in its operating bank account.
- Debt and obligations: No working-capital loans were outstanding. Deferred underwriting commissions were $6.6 million at quarter-end, payable only if a business combination is completed. Total liabilities were $8.65 million.
- Equity and redemptions: Public shareholders redeemed 21,151,393 shares, approximately 88.1% of outstanding Class A shares, in connection with the extension. At March 31, 2,848,607 public shares remained classified as redeemable, with a carrying value of $29.47 million.
Margins are not meaningful because the company reported no operating revenue. The statements report Q1 net income of $895,469, while MD&A states approximately $935,000; the filing text does not reconcile this difference.
Changes versus the prior comparable period
- Net income fell to $895,469 from $3.38 million. The prior-year result included a $3.90 million gain from the change in fair value of derivative liabilities; Q1 2023 instead recorded a $175,950 loss on that item.
- Q1 2023 included $1.88 million of trust investment gains, compared with a $57,679 trust investment loss in Q1 2022.
- General and administrative expense rose to $506,326 from $413,077; Q1 2023 also included $75,000 of related-party general and administrative expense.
- Trust assets fell from $244.31 million at December 31, 2022 to $29.21 million at March 31, 2023, primarily following the substantial shareholder redemptions.
- Deferred underwriting commissions decreased from $12.0 million to $6.6 million after an underwriter waived $5.4 million of fees; the filing describes both a gain and an adjustment to redeemable shares related to the waiver.
Outlook, risks, and controls
The company had until June 7, 2023 to complete a business combination, with board-authorized monthly extensions possible through September 7, 2023. It stated its intention to complete a transaction by September 7. Failure to do so would require liquidation and redemption of public shares. Management concluded that the limited liquidity and potential mandatory liquidation raised substantial doubt about the company’s ability to continue as a going concern.
Management identified risks including inability to complete the Avila transaction or obtain financing, potential dilution or debt burdens from a transaction, uncertainty related to COVID-19 and geopolitical events, and a possible 1% federal excise tax on certain post-2022 stock repurchases. The filing states the tax exposure and its effect on available transaction cash were uncertain. The forward share purchase agreement with Avila-related counterparties and Meteora entities was recorded as a $125,473 liability; purchases under the agreement were described as intended but not obligatory for the sellers.
Disclosure controls and internal control over financial reporting were deemed ineffective at March 31, 2023. The company reported two significant deficiencies resulting in a material weakness and linked them to its late annual report filing. Management said it intended to remediate through a timelier reporting schedule and additional reviews. No legal proceedings were reported.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Insight Acquisition Corp., not ALPHA MODUS HOLDINGS, INC.
- Check the status and terms of the proposed Avila combination, including required approvals, financing, redemptions, and closing conditions.
- Verify the business-combination deadline and any extensions, and assess the liquidation outcome if no transaction closes.
- Reconcile reported Q1 net income: $895,469 in the financial statements versus approximately $935,000 in MD&A.
- Review the underwriter-fee waiver accounting and the remaining $6.6 million deferred commission obligation.
- Assess the company’s going-concern warning, low working-capital surplus, and plans to remediate the material weakness in controls.