Alpha Modus Holdings, Inc. / Insight Acquisition Corp. — Form 10-K Summary
Entity clarification: The supplied filing is Insight Acquisition Corp.’s Form 10-K, not a filing under the name Alpha Modus Holdings, Inc. Alpha Modus, Corp. is the proposed merger target. The report covers the fiscal year ended December 31, 2023; it does not provide standalone fourth-quarter results.
Business context and reporting period
Insight was a Nasdaq-listed special purpose acquisition company (SPAC) with no operating business or operating revenue, formed to complete a business combination. Its principal activity was seeking a target. The filing was signed May 14, 2024 and describes the proposed Alpha Modus transaction and developments through that date.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Operating revenue | None | None |
| Net income (loss) | $(651,138) | $11.9 million |
| General and administrative expenses | $2.42 million | $1.31 million |
| Trust investment gain | $3.12 million | $3.33 million |
| Operating cash flow | $(2.91) million | $(827,207) |
The swing from 2022 profit to 2023 loss largely reflects warrant-liability fair-value changes: a $538,200 loss in 2023 versus a $10.71 million gain in 2022. These are valuation items, not operating performance. No operating margins are meaningful because the SPAC had no revenue.
At year-end, assets were $12.35 million, including $10.66 million in the trust account and $314,482 in restricted cash; the balance sheet shows no unrestricted cash. Current liabilities were $5.26 million, total liabilities $12.49 million, and working capital deficit approximately $3.57 million. Other material obligations included $6.6 million of deferred underwriting commissions and $2.35 million of excise tax payable. Class A shares subject to possible redemption were recorded at $10.85 million; stockholders’ deficit was $10.99 million. The company reported no outstanding traditional working-capital loans, but recorded $320,755 due to an investor, net of debt discount, and related-party balances.
Material changes and proposed transaction
- Public-share redemptions in March and September 2023 substantially reduced trust assets. The filing reports approximately $10.7 million remaining at year-end, compared with $244.3 million of trust investments at December 31, 2022.
- The Avila Energy business-combination agreement was terminated in August 2023. Avila agreed to reimburse up to $300,000 of expenses, but management considered the receivable uncollectible and fully valued it.
- In October 2023, Insight agreed to merge with Alpha Modus, Corp., which would become a wholly owned subsidiary. The stated merger consideration is up to 11 million common shares valued at $110 million, subject to the agreement’s terms. Alpha Modus stockholders may also earn up to 2.2 million shares based on post-closing share-price milestones or a change of control. The sponsor would place 750,000 shares into a similar earnout arrangement.
- The agreement also provides for repayment of certain Polar and Janbella loans, each capped at $1 million, with shares issued based on amounts paid. The S-4 registration statement was filed December 28, 2023. The filing expected closing by June 7, 2024, subject to approvals and other conditions; it does not establish that the transaction closed.
Outlook, risks, contingencies and unusual items
- Going concern: Management and the auditor cited substantial doubt about Insight’s ability to continue as a going concern, given inadequate operating liquidity and the approaching June 7, 2024 business-combination deadline. Management said additional financing was needed and was not assured. If no transaction closed by the deadline, the company would be required to wind up and redeem public shares, subject to creditor claims and applicable law; warrants could expire worthless.
- Trust-account control failure: The filing describes approximately $1.05 million withdrawn from the trust for tax purposes but used for company expenses, contrary to the trust agreement. The sponsor returned the amount in March 2024 and paid an additional $36,285 to compensate for foregone interest. The filing also describes transfers totaling $891,000 from the company’s operating account to the sponsor, later returned. The auditor highlighted the trust withdrawals, and prior interim financial statements were restated.
- Management changes: Following the fund-transfer issues, Jeffrey Gary was removed as CEO and CFO and resigned as a director on April 21, 2024. Michael Singer became CEO and Glenn Worman became CFO. The board imposed dual-approval controls for trust withdrawals, tax payments and transfers with the sponsor; $132,500 of deferred compensation owed to Mr. Gary was forfeited.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing material weaknesses, untimely filings, trust-fund activity and restatements. Remediation was underway; the auditor did not provide an internal-control effectiveness opinion.
- Taxes and other exposures: A $2.35 million excise-tax liability was recorded in connection with redemptions. The Alpha Modus agreement allocates responsibility for this liability in specified circumstances, but the company could bear it in others. Trust funds may also face creditor claims, and sponsor indemnification is not assured.
- Other risks include the transaction’s approval and financing conditions, potential further dilution, dependence on a single target, conflicts of interest, exchange-listing requirements and the possibility of liquidation. The filing reports no material litigation pending.
Investor facts to verify
- Confirm the correct issuer and security: this is Insight Acquisition Corp.’s filing; Alpha Modus, Corp. is the proposed target.
- Check subsequent filings for the Alpha Modus transaction’s closing or termination, final consideration, redemptions, financing and actual post-combination capitalization.
- Reconcile the filing’s trust-withdrawal disclosures: the auditor refers to $2.703 million withdrawn for taxes and $1.049 million not remitted to authorities, while other passages cite approximately $2.497 million in withdrawals and different tax-payment totals.
- Verify the status and settlement of the $2.35 million excise-tax liability, deferred underwriting fees, related-party balances and any amounts due from the sponsor or shareholders.
- Review the restated interim statements, remediation progress and any later assessment of internal controls, liquidity and going-concern status.