ALPHA MODUS HOLDINGS, INC. annual report, FY2022

Business context and reporting period

Entity mismatch: The request names Alpha Modus Holdings, Inc., but the supplied filing is Insight Acquisition Corp.’s Form 10-K for the fiscal year ended December 31, 2022, signed April 18, 2023. Insight was a blank-check company seeking a business combination; it had no operating business or revenue. The 2022 results are compared with the period from inception on April 20, 2021 through December 31, 2021, not a full prior year.

Financial performance and position

The $11.91 million 2022 profit was primarily non-operating: a $10.71 million gain from the decline in warrant liabilities and a $3.33 million gain on trust investments, partly offset by operating costs and $0.62 million of income tax expense. The filing reports no operating margin or business-level cash generation; conventional margin measures are not meaningful for this pre-combination SPAC. No working-capital loan borrowings were outstanding at year-end. The $12.0 million deferred underwriting commission was recorded as a liability at December 31, 2022.

Material changes and subsequent events

• Net income increased from $0.99 million in the 2021 inception period to $11.91 million in 2022, mainly due to the larger warrant-liability fair-value gain and trust investment gain; this is not a like-for-like full-year comparison.
• At a March 6, 2023 extension vote, holders redeemed 21,151,393 Class A shares, approximately 88.1% of IPO shares. The filing reports approximately $28.74 million remaining in trust and 2,848,607 Class A shares outstanding immediately after those redemptions.
• The business-combination deadline was extended to May 7, 2023, with board discretion for monthly extensions through September 7, 2023. The board authorized an $80,000 trust deposit for the May extension.
• On April 3, 2023, Insight signed a business-combination agreement to acquire Avila Energy Corporation through a proposed Alberta continuance and merger. Avila holders are to receive 12,528,000 shares at closing, with up to 7,000,000 additional earnout shares subject to a $15 share-price condition. Closing remained subject to approvals and other conditions, and was expected by September 7, 2023.
• The filing describes a forward share purchase arrangement involving potential purchases of redeeming shareholders’ shares and post-closing payments and share issuance mechanics. It may affect cash available, dilution, trading supply and the apparent redemption level.
• In connection with the Avila transaction, an IPO underwriter agreed to forfeit $5.4 million of deferred fees, leaving $3.0 million payable to that representative at closing. The filing also reports $12.0 million of deferred underwriting commissions at year-end; confirm the treatment of the other underwriters’ fees and reconcile the amounts.
• Following the redemptions, the NYSE notified the company that listed-securities market value was below $40 million and identified May 3, 2023 as a potential suspension and delisting date if the threshold remained unmet. The company had applied to transfer listings to Nasdaq; approval and completion are not established in this filing. Public warrants had already been delisted from the NYSE effective January 25, 2023.

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 mandatory liquidation requirement if it failed to complete a business combination by the applicable deadline. The trust account was reserved primarily for a transaction or shareholder redemptions and was not ordinary operating liquidity. There is no assurance that additional financing would be available.

Key risks include failure to close the Avila transaction before the deadline; high redemptions and limited remaining trust cash; possible dilution, transaction costs and financing needs; exchange-listing uncertainty; claims against trust assets and uncertainty over sponsor indemnification; conflicts of interest and sponsor incentives; and potential excise tax on post-2022 share repurchases. Warrants may expire worthless if no combination closes, and warrant trading and exercise are subject to listing and registration conditions.

Financial statements received an unqualified audit opinion, but the auditor highlighted the going-concern uncertainty. Management concluded that disclosure controls and internal control over financial reporting were ineffective at year-end due to a material weakness. The filing describes two significant deficiencies: a missed adjustment for 900,000 forfeited founder shares and an income-tax-footnote calculation error. Prior-period financial statements were revised; management said the revisions did not affect total assets, total stockholders’ deficit, operations or cash flows.

Investor verification priorities

1. Confirm the issuer identity and obtain the correct Alpha Modus filing if that was the intended company.
2. Review current status and final terms of the Avila transaction, including shareholder and regulatory approvals, closing conditions, cash proceeds and any later amendments or termination.
3. Reconcile trust cash after redemptions, extensions, transaction expenses, excise-tax exposure, forward-purchase payments and deferred underwriting fees; verify the $12.0 million year-end balance against the later $5.4 million waiver and $3.0 million representative fee.
4. Verify the Nasdaq transfer, current listing status, warrant trading venue and any associated registration or exercise restrictions.
5. Assess the remediation of the material weakness and confirm that subsequent filings and financial statements address the identified accounting and reporting deficiencies.
6. Review the forward share purchase agreement’s actual share purchases, fees, settlement terms and potential dilution, and compare actual redemptions with the transaction’s minimum-cash requirements.