Filing summary
Registrant identity: The supplied filing is Insight Acquisition Corp.’s Form 10-Q, not a filing by Alpha Modus Holdings, Inc. It covers the quarter ended September 30, 2022; filed November 14, 2022.
Business context and reporting period
Insight was a blank-check company formed to pursue a business combination and had not begun operating activities as of September 30, 2022. It reported no operating revenue; reported income primarily reflects changes in warrant fair value and investment gains in its trust account. The IPO raised $240.0 million in September 2021, and $241.2 million was initially deposited in the trust account.
Key financial metrics
| Metric | Three months ended September 30, 2022 | Nine months ended September 30, 2022 |
|---|---|---|
| Revenue | None reported | None reported |
| Net income | $2.39 million | $8.60 million |
| Net income per share, Class A and B | $0.08 | $0.29 |
| Net cash used in operating activities | $(0.75) million for the nine-month period |
- Q3 2022 income included a $1.79 million gain from lower warrant liabilities and a $1.17 million trust-investment gain, offset in part by $278,000 of general and administrative expense, $49,863 of franchise tax expense, and $241,792 of income tax expense. These gains are not evidence of operating revenue.
- At September 30, cash outside the trust was $253,554; prepaid expenses were $515,969; and trust investments were $242.28 million. Working capital was approximately $199,000, excluding accrued franchise tax.
- Total liabilities were $14.64 million, including $12.0 million of deferred underwriting commissions payable only if a business combination is completed, and $2.07 million of warrant-related derivative liabilities. No working capital loans were outstanding.
- Redeemable Class A shares were carried as temporary equity at $241.85 million. The filing reports a $13.44 million stockholders’ deficit.
- Cash flow for the nine months included $205,853 withdrawn from the trust and $85,000 of offering costs paid. No operating margin measure is meaningful for this pre-combination company.
Changes versus the prior comparable period
Q3 2022 net income of $2.39 million compares with a $1.95 million net loss in Q3 2021. The change chiefly reflects a $1.79 million warrant-liability fair-value gain in 2022 versus a $1.13 million loss in 2021, along with higher trust-investment gains. Nine-month 2022 net income of $8.60 million compares with a $1.99 million loss for the period from inception through September 30, 2021; the prior period is not a full comparable nine-month period. The trust balance increased from $241.19 million at December 31, 2021 to $242.28 million at September 30, 2022, while outside cash fell from $877,937 to $253,554.
Outlook, risks, and unusual items
- Management intended to complete a business combination by March 7, 2023, the end of the 18-month combination period. The company warned that failure to complete one by then would require redemption of public shares and liquidation.
- Management concluded that limited liquidity outside the trust and the possible mandatory liquidation raised substantial doubt about the company’s ability to continue as a going concern. No liquidation adjustments were made to the financial statements.
- The filing provides no operating forecast or numerical guidance. A sponsor or affiliates may provide working capital loans, but are not obligated to do so.
- Potential risks include difficulty finding or completing a target transaction, competition among SPACs, COVID-19 effects, geopolitical impacts from Russia’s war in Ukraine and related sanctions, and possible dilution or debt burdens from transaction financing.
- A new 1% federal excise tax on certain share repurchases beginning in 2023 could apply to redemptions, potentially reducing cash available for a transaction; application and mechanics were uncertain.
- The company reported no legal proceedings or material subsequent events. Disclosure controls were deemed effective; a previously identified material weakness related to accounting for redeemable shares was reported as remediated as of June 30, 2022.
Important facts for investors to verify
- Confirm the filing is for Insight Acquisition Corp., not Alpha Modus Holdings, Inc., before attributing these results.
- Verify the status and terms of any proposed business combination, any extension, and the March 7, 2023 deadline described in this period’s filing.
- Assess cash available outside the trust separately from trust assets, which were reserved for a transaction or redemptions.
- Review the going-concern warning, redemption and liquidation provisions, and the potential effect of the excise tax on transaction cash.
- Reconcile share counts: the balance sheet and notes report 6.9 million Class B shares at September 30, while the cover reports 6.0 million outstanding as of November 14, 2022.