File Pursuant to Rule
424(b)(3)
Registration No. 333-284810
PROSPECTUS
ALPHA
MODUS HOLDINGS, INC.
5,189,638
Shares of Common Stock
2,325,004 Warrants to Purchase Shares of Common Stock
2,325,004 Shares of Common Stock Underlying Warrants
This
prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling
Securityholders”) of up to 5,189,638 shares of Alpha Modus Holdings, Inc. (“Alpha Modus” or the “Company”)
Class A common stock, par value $0.0001 per share (“common stock”), 2,325,004 warrants to purchase shares of common
stock, and 2,325,004 shares of common stock that are issuable upon the exercise of the warrants, consisting of:
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up
to 1,550,000 shares of common stock (the “Consideration Shares”) that were issued as consideration in the Business
Combination (as defined below); the Consideration Shares were acquired by the Selling Securityholders based on a value of $9.50 per
share of common stock at closing of the Business Combination; however, these shares were issued in exchange for shares of Alpha Modus,
Corp. that were acquired by its officer, William Alessi (and his various family trusts) through private placements and equity award
grants at prices that equate to purchase prices of less than $9.50 per share of common stock, and, in some cases, including equity
securities purchased in connection with or following the original founding of Alpha Modus, Corp., purchase prices of approximately
$0.0001 per share of common stock; |
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up
to 750,000 shares of common stock (the “Convertible Note Shares”) that could be issued upon conversion of the
Secured Convertible Promissory Note that was issued to Streeterville Capital, LLC (the “Investor”) on or about
December 16, 2024, in connection with the Business Combination; |
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up
to 517,512 shares of common stock (the “Sponsor Shares”) that were originally issued in a private placement to
the Company’s original sponsor in 2021 in connection with the Company’s initial public offering on September 8, 2021
(the “INAQ IPO”), which were acquired by the sponsor at a purchase price equivalent to approximately $0.004 per
share of common stock and transferred to the sponsor’s stakeholders in January 2025 for no additional consideration; |
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up
to 1,012,510 shares of common stock (the “Anchor Shares”) that were issued in a private placement to the
Company’s original sponsor in 2021 in connection with the INAQ IPO, which were acquired by the sponsor at a purchase price
equivalent to approximately $0.004 per share of common stock and transferred to anchor investors in the INAQ IPO in 2021 for no additional
consideration; |
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up
to 1,359,616 shares of common stock (the “Additional Business Combination Shares”) that were issued at closing
of the Business Combination as contractually required by the Business Combination Agreement, which were issued in satisfaction of
other obligations of the Company, the value of which did not equate to the value of our common stock at closing of the Business Combination; |
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up
to 2,325,004 warrants (“Private Placement Warrants”) that were originally issued in a private placement at the
time of the INAQ IPO. The Private Placement Warrants were acquired at a purchase price of $1.00 per Private Placement Warrant; and |
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up
to 2,325,004 shares of common stock (the “Private Warrant Shares”) issuable upon the exercise of the Private Placement
Warrants; the Private Placement Warrants each entitle the holder thereof to purchase one share of our common stock for $11.50 per
share. |
We
are registering the offer and sale of these securities to satisfy certain registration rights we have granted. The Selling Securityholders
may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing
market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of our common stock or warrants,
except with respect to amounts received by us upon the exercise of the warrants. Because the exercise price of the Private Placement
Warrants substantially exceeds the current trading price of our common stock, it is unlikely that holders of our warrants will be able
to exercise such warrants in the near future, if at all. As a result, we are unlikely to receive any proceeds from the exercise of our
warrants in the near future, if at all. We will bear all costs, expenses and fees in connection with the registration of these securities,
including with regard to compliance with state securities or “blue sky” laws. The Selling Securityholders will bear all commissions
and discounts, if any, attributable to their sale of shares of our common stock or warrants. See section entitled “Plan of Distribution”
beginning on page 59 of this prospectus.
Due
to the significant number of shares of our common stock that were redeemed in connection with the Business Combination, the number of
shares of common stock that the Selling Securityholders can sell into the public markets pursuant to this prospectus may exceed our public
float. As a result, the resale of shares of our common stock pursuant to this prospectus could have a significant negative impact on
the trading price of our common stock. This impact may be heightened by the fact that, as described above, certain of the Selling Securityholders
acquired shares of our common stock at prices that are well below the current trading price of our common stock. The 7,514,642
shares that may be resold and/or issued into the public markets pursuant to this prospectus represent approximately 60.2% of the
shares of our common stock outstanding as of January 30, 2025 (after giving effect to the issuance of the Convertible Note Shares and
Private Warrant Shares).
Our
common stock and public warrants are listed on the Nasdaq Global Market under the symbols “AMOD” and “AMODW,”
respectively. As of February 7, 2025, the closing price of our common stock and warrants was $2.37 and $0.0703, respectively.
We
are an “emerging growth company” under applicable federal securities laws and will be subject to reduced public company reporting
requirements.
INVESTING
IN OUR SECURITIES INVOLVES RISKS THAT ARE DESCRIBED IN THE “RISK FACTORS” SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued
under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is February 14, 2025.
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is
different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not
assume that the information contained in this prospectus is accurate as of any date other than that date.
For
investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform
yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
INTRODUCTORY
NOTE AND FREQUENTLY USED TERMS
On
December 13, 2024 (the “Closing” and such date the “Closing Date”), the Company, which was then
named Insight Acquisition Corp., a Delaware corporation (“IAC”), Alpha Modus, Corp., a Florida corporation (“Legacy
Alpha Modus”), and IAC Merger Sub Inc., a Florida corporation and newly formed wholly-owned subsidiary of IAC (“Merger
Sub”), consummated the Business Combination pursuant to the terms of the Business Combination Agreement.
On
the Closing Date, (i) IAC changed its name to “Alpha Modus Holdings, Inc.” (“Alpha Modus” or the “Company”),
(ii) Merger Sub merged with and into Legacy Alpha Modus (the “Merger”), with Legacy Alpha Modus surviving the Merger
as the wholly-owned subsidiary of the Company, (iii) the Company issued 5,295,000 shares of common stock and 7,500,000 shares of the
Company’s Series C Preferred Stock to Legacy Alpha Modus’s shareholders as Merger consideration in the Business Combination,
(iv) the Company issued 1,817,308 shares of common stock to various parties as required by the Business Combination Agreement, and (v)
the parties to the Business Combination Agreement consummated the other transactions contemplated thereby.
Unless
the context otherwise requires, references in this prospectus to “Alpha Modus,” the “Company,” “us,”
“we,” “our” and any related terms prior to the closing of the Business Combination are intended to mean Insight
Acquisition Corp., a Delaware corporation, and after the closing of the Business Combination, Alpha Modus Holdings, Inc. and its consolidated
subsidiaries.
“Amended
and Restated Charter” means the second amended and restated certificate of incorporation of Alpha Modus, in effect as of the
date of this prospectus.
“Business
Combination” means the Merger and the other transactions contemplated by the Business Combination Agreement.
“Business
Combination Agreement” means the Business Combination Agreement, dated October 13, 2023, as amended by the First Amendment
to the Business Combination Agreement, dated as of June 21, 2024, by and among IAC, Merger Sub and Legacy Alpha Modus.
“Alpha
Modus” means Alpha Modus Holdings, Inc., a Delaware corporation.
“Alpha
Modus Board” means the board of directors of Alpha Modus.
“Closing”
means the closing of the Business Combination.
“common
stock” means the common stock, par value $0.0001 per share, of Alpha Modus Holdings, Inc.
“DGCL”
means the General Corporation Law of the State of Delaware, as amended.
“Earnout
Shares” means the up to 2,200,000 shares of common stock that may be issued to Legacy Alpha Modus securityholders if certain
share prices of common stock are achieved and other conditions are satisfied.
“Founder
Shares” means IAC common stock initially purchased and provided.
“IAC”
means Insight Acquisition Corp., a Delaware corporation, which was renamed “Alpha Modus Holdings, Inc.” in connection with
the Closing.
“IAC
Board” means the board of directors of IAC prior to the Business Combination.
“IAC
Charter” means IAC’s amended and restated certificate of incorporation as filed with the Secretary of State of the State
of Delaware on December 13, 2024.
“IAC
Class A common stock” means the Class A common stock, par value $0.0001, of IAC.
“IAC
Class B common stock” means the Class B common stock, par value $0.0001, of IAC.
“IAC
IPO” means IAC’s initial public offering that was consummated by IAC on September 8, 2021.
“Legacy
Alpha Modus” means Alpha Modus, Corp., a Florida corporation, and includes the surviving corporation after the Merger. References
herein to Alpha Modus will include its subsidiaries, including Legacy Alpha Modus, to the extent reasonably applicable
“Legacy
Alpha Modus Board” means the board of directors of Legacy Alpha Modus.
“Legacy
Alpha Modus Series C Preferred Stock” means shares of Series C Redeemable Convertible Preferred Stock, par value $0.0001 per
share, of Alpha Modus of Legacy Alpha Modus.
“Merger”
means the merger of Merger Sub with and into Legacy Alpha Modus, with Legacy Alpha Modus continuing as the surviving corporation and
as a wholly-owned subsidiary of Alpha Modus, in accordance with the terms of the Business Combination Agreement.
“Merger
Sub” means IAC Merger Sub Inc., a Florida corporation.
“Private
Placement” means the private placement consummated simultaneously with the IAC IPO in which IAC issued to the Sponsor the Private
Placement Warrants.
“Private
Placement Warrants” means 8,700,000 warrants to purchase shares of IAC Class A common stock issued to the Sponsor and the IAC
IPO underwriters in the Private Placement (including the additional warrants purchased after the IAC IPO in connection with the overallotment
securities issued by IAC’s underwriters). Each Private Placement Warrant entitles the holder thereof to purchase one share of IAC
Class A common stock for $11.50 per share. “Public Shares” means IAC Class A common stock underlying the Units sold
in the IAC IPO, including any overallotment securities acquired by IAC’s underwriters.
“Public
Warrants” means warrants underlying the Units issued in the IAC IPO. Each Public Warrant entitles the holder thereof to purchase
one share of IAC Class A common stock for $11.50 per share.
“Sponsor”
means Insight Acquisition Sponsor LLC, a Delaware limited liability company, which is an affiliate of Michael Singer, IAC’s Executive
Chairman and Chief Executive Officer prior to the Closing.
“Trust
Account” means the trust account of IAC, which holds the net proceeds of the IAC IPO, including from overallotment securities
sold by IAC’s underwriters, and the sale of the Private Placement Warrants, together with interest earned thereon, less amounts
released to pay franchise and income tax obligations and up to $100,000 for dissolution expenses, and amounts paid pursuant to redemptions.
“Units”
means Units issued in the IAC IPO, including any overallotment securities acquired by IAC’s underwriters, consisting of one share
of IAC Class A common stock and one-half of one Public Warrant.
“Warrants”
means any of the Private Placement Warrants and the Public Warrants.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this prospectus may constitute “forward-looking statements” within the meaning of the “safe
harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. In addition, any statements that refer
to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking
statements. Forward-looking statements may be identified by the use of words such as “estimate,” “plan,” “project,”
“forecast,” “intend,” “will,” “expect,” “anticipate,” “believe,”
“seek,” “target,” “designed to” or other similar expressions that predict or indicate future events
or trends or that are not statements of historical matters. We caution readers of this prospectus that these forward-looking statements
are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, that could cause
the actual results to differ materially from the expected results. These forward-looking statements include, but are not limited to,
statements regarding estimates and forecasts of financial and performance metrics, projections of market opportunity and market share,
potential benefits and the commercial attractiveness to our customers of our products and services, the potential success of our marketing
and expansion strategies, the potential for us to achieve design awards and potential benefits of the Business Combination (including
with respect to shareholder value). These statements are based on various assumptions, whether or not identified in this prospectus,
and on the current expectations of our management and are not predictions of actual performance. These forward-looking statements are
provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee,
an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible
to predict and will differ from assumptions. These forward-looking statements are subject to a number of risks and uncertainties, including:
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Alpha
Modus’ inability to achieve or sustain profitability; |
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viability of Alpha Modus’ intellectual property; |
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changes
in applicable laws or regulations; |
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the
possibility that Alpha Modus’ business or the combined company may be adversely affected by other economic business, changing
technology, evolving industry standards, and/or competitive factors; |
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the
ability of Alpha Modus to obtain, maintain, and protect its intellectual property, and other risks related to enforcement of Alpha
Modus’ intellectual property rights; |
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failure
to realize the anticipated benefits of the proposed business combination; |
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risks
related to future market adoption of Alpha Modus’ technology; |
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risks
related to Alpha Modus’ marketing and growth strategies; |
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the
effects of competition on Alpha Modus’ future business; |
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the
ability of Alpha Modus to meet the continued listing standards of The Nasdaq Stock Market; |
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Alpha
Modus’ ability to raise funding on reasonable terms as necessary to develop its products in the timeframe contemplated by its
business plan; |
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Alpha
Modus’ ability to execute its business plans and strategy; |
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the
outcome of any legal proceedings that may be instituted against us related to the Business Combination; and |
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other
risks and uncertainties described in this prospectus, including those under the section entitled “Risk Factors.” |
If
any of these risks materialize or any of our assumptions prove incorrect, actual results could differ materially from the results implied
by these forward-looking statements. There may be additional risks that we presently do not know or that we currently believe are immaterial
that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements
reflect our expectations, plans or forecasts of future events and views as of the date of this prospectus. We anticipate that subsequent
events and developments will cause our assessments to change. However, while we may elect to update these forward-looking statements
at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied
upon as representing our assessment as of any date subsequent to the date of this prospectus. Accordingly, undue reliance should not
be placed upon the forward-looking statements. Actual results, performance or achievements may, and are likely to, differ materially,
and potentially adversely, from any projections and forward-looking statements and the assumptions on which those forward-looking statements
were based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned
not to place undue reliance on forward-looking statements as a predictor of future performance as projected financial information and
other information are based on estimates and assumptions that are inherently subject to various significant risks, uncertainties and
other factors, many of which are beyond our control.
SUMMARY
OF THE PROSPECTUS
This
summary highlights selected information from this prospectus and does not contain all of the information that is important to you in
making an investment decision. This summary is qualified in its entirety by the more detailed information included in this prospectus.
Before making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the
information under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” “Unaudited Pro Forma Condensed Combined Financial Information and Other Data” and the financial statements
included elsewhere in this prospectus.
The
Company
Alpha
Modus offers technology as a service. Its core technologies have been deployed on IBM’s Bluemix platform and earned a Beacon Award
by IBM 2016 for Best New Application on IBM Cloud from an Entrepreneur. Alpha Modus has been recognized by IBM Watson as a thought leader
in technology. As technological innovation is at the core of the company, Alpha Modus has developed comprehensive end-to-end patented
solutions for retailers and consumer brands to bring innovation to consumers and enhance their experience at the point of sale.
On
January 11, 2024, Alpha Modus entered into a license agreement with GZ6G Technologies Corp. (“GZ6G”), which gives GZ6G the
right to use Alpha Modus’ patented intellectual property, and pertains to GZ6G’s promotional, advertising, and operational
functions, including co-development arrangements with Alpha Modus for AI-driven advertising solutions for stadiums and event management.
Alpha Modus intends to deploy services under the license by the end of 2024, expand event venue service offerings in late 2025, and expand
service offerings in additional industries in 2024.
On
January 16, 2024, Alpha Modus initiated a patent infringement action against The Kroger Company alleging patent infringement of several
Alpha Modus patents encompassing retail marketing and advertising data-driven technologies to enhance consumer’s in-store experience
at the point of decision. On November 12, 2024, Alpha Modus initiated a patent infringement lawsuit against Brookshire Grocery Co. alleging
infringement of several Alpha Modus patents pertaining to its ‘571 patent portfolio, ‘825 patent portfolio, ‘672 patent
portfolio, ‘890 patent portfolio and ‘880 patent portfolio, which encompass retail marketing and advertising data-driven
technologies to enhance consumers’ in-store experience at the point of decision. On December 17, 2024, Alpha Modus filed a similar
patent infringement lawsuit against Wakefern Food Corporation and Shelf Nine LLC, and on February 3, 2025, Alpha Modus filed a patent
infringement lawsuit against Walgreen Co.
On
April 10, 2024, Alpha Modus entered into a license agreement with Xalles Holdings Inc. and its subsidiary, CashXAI Inc. (“CashX”),
which gives CashX the exclusive right to use all of Alpha Modus’s patented intellectual property in connection with CashX’s
promotional, advertising, and operational functions, including co-development arrangements with Alpha Modus, within the Exclusive Industry.
The “Exclusive Industry” means the industry relating to self-service kiosks located in retail food, drug and convenience
stores for the purpose of serving Unbanked and Underbanked consumers, by offering banking, phone and insurance solutions to the consumer.
An “Unbanked” consumer means a person that does not have a checking or savings account with an FDIC-insured institution,
and an “Underbanked” consumer means a person that has or had a checking or savings account with an FDIC-insured institution,
but regularly uses non-traditional banks such as Venmo or the Cash App, or lenders such as a check cashing company or payday lender.
Alpha Modus intends to deploy services under the license by the end of 2024.
Although
Alpha Modus’ audited financial statements for the years ended December 31, 2023 and 2022, were prepared under the assumption that
it would continue operations as a going concern, the report of its independent registered public accounting firm that accompanies its
financial statements for the years ended December 31, 2023 and 2022, contains a going concern qualification in which such firm expressed
substantial doubt about Alpha Modus’ ability to continue as a going concern, based on its financial statements and results at that
time, including its lack of current revenues, recurring losses from operations and net capital deficiency.
The
mailing address of Alpha Modus’ principal executive office is 20311 Chartwell Center Dr., #1469, Cornelius, North Carolina, 28031,
and its telephone number is (704) 252-5050.
For
more information about Alpha Modus, see the sections entitled “Information About Alpha Modus” and “Alpha
Modus’ Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Emerging
Growth Company
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not “emerging growth companies” including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result,
there may be a less active trading market for our securities and the prices of our securities may be more volatile.
We
will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) ending December 31, 2026, (b) in
which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which
means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s
second fiscal quarter; and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year
period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Smaller
Reporting Company
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held
by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed
fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.
Risk
Factors Summary
You
should consider all the information contained in this prospectus before making a decision to invest in our common stock or warrants.
In particular, you should consider the risk factors described under “Risk Factors” beginning on page 7. Such risks
include, but are not limited to, the following risks:
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Due
to the significant number of shares of our common stock that were redeemed in connection with the Business Combination, the number
of shares of common stock that the Selling Securityholders can sell into the public markets pursuant to this prospectus may exceed
our public float. As a result, the resale of shares of our common stock pursuant to this prospectus could have a significant negative
impact on the trading price of our common stock. |
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Alpha
Modus had net losses and negative cash flows from operating activities in the past, and it may not achieve or sustain profitability. |
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If
Alpha Modus is unable to continue as a going concern, its securities will have little or no value. |
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The
artificial intelligence (AI) technology market in which Alpha Modus participates is competitive. |
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If
Alpha Modus fails to adapt to changes in the AI industry, its business may be harmed. |
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Alpha
Modus may fail to protect its intellectual property rights and proprietary information. |
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Alpha
Modus will likely become subject to intellectual property disputes. |
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Alpha
Modus’ patent portfolio is subject to evolving legislation, regulations, and rules associated with patent law in the United
States and other jurisdictions, which may adversely affect its business. |
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Patent
litigation is inherently risky, and the USPTO, or other relevant patent offices, may either invalidate Alpha Modus’ patents
or materially narrow the scope of their claims. |
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Alpha
Modus may experience delays in successful enforcement and licensing of its patent portfolio. |
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Because
Alpha Modus’ patents are expected to expire in 2034-2037, its continued operations beyond those dates will depend on its ability
to obtain additional patents with later expiration dates. |
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Alpha
Modus’ lack of patent enforcement and licensing experience could adversely affect its operations. |
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Alpha
Modus will incur increased costs as a result of operating as a public company. |
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Alpha
Modus’ management team has limited experience managing a Nasdaq-listed public company. |
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Modus is a “controlled company” under Nasdaq’s listing rules and can rely on exemptions from certain corporate
governance requirements. |
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Alpha
Modus may issue additional shares of common or preferred stock, which would dilute the interests of stockholders and likely present
other risks. |
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We
may amend the terms of our public warrants in a manner that may be adverse to holders of public warrants without the approval of
all holders. |
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Alpha
Modus may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to holders, thereby making Public
Warrants worthless. |
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Alpha
Modus may be subject to the excise tax included in the Inflation Reduction Act of 2022 in connection with redemptions of our common
stock after December 31, 2022. |
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We
do not expect that we will pay dividends in the foreseeable future. |
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If
Alpha Modus fails to develop or maintain an effective system of internal control over financial reporting, it may not be able to
accurately report its financial results or prevent financial fraud. |
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Alpha
Modus’ outstanding Series C Preferred Stock, and the future issuances of other debt securities and equity securities, may adversely
affect the Company, including the market price of the Company’s common stock, and be dilutive to existing stockholders. |
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There
can be no assurance that Alpha Modus will continue to be listed on the Nasdaq in the future. |
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The
market price of Alpha Modus’s common stock may decline. |
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Alpha
Modus’s failure to meet the continued listing requirements of Nasdaq could result in a delisting of its securities. |
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Alpha
Modus is as an “emerging growth company” as well as a smaller reporting company within the meaning of the Securities
Act, and if the Company takes advantage of certain exemptions from disclosure requirements available to emerging growth companies
or smaller reporting companies, this could make the Company’s securities less attractive to investors and may make it more
difficult to compare the Company’s performance with other public companies. |
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The
future exercise of registration rights may adversely affect the market price of our common stock. |
THE
OFFERING
| Issuer |
Alpha
Modus Holdings, Inc. |
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| Securities
offered by the Selling Securityholders |
We
are registering the resale by the Selling Securityholders named in this prospectus, or their permitted transferees, of an aggregate
of 5,189,638 shares of common stock, 2,325,004 warrants to purchase shares of common stock, and 2,325,004 shares of common
stock issuable upon exercise of warrants, which includes up to: |
| |
|
● |
1,550,000
Consideration Shares; |
| |
|
● |
750,000
Convertible Note Shares; |
| |
|
● |
517,512
Sponsor Shares; |
| |
|
● |
1,012,510
Anchor Shares; |
| |
|
● |
1,359,616
Additional Business Combination Shares; |
| |
|
● |
2,325,004
Private Placement Warrants; and |
| |
|
● |
2,325,004
shares of common stock issuable upon exercise of the registered Private Placement Warrants. |
| |
|
|
| Use
of proceeds |
We
will not receive any of the proceeds from the sale of the common stock or warrants by the Selling Securityholders. See “Use
of Proceeds” for additional information. |
| |
|
|
| Common
stock issued and outstanding immediately after this offering |
On
a pro forma basis before and after giving effect to issuance of the Convertible Note Shares and exercise of the registered Private
Placement Warrants. |
| |
|
● |
12,476,780
shares of common stock prior to the issuance
of any Convertible Note Shares or any shares upon exercise of the registered Private Placement Warrants; and |
| |
|
● |
15,530,256
shares of common stock assuming the issuance of all 750,000 of the Convertible Note Shares and 2,325,0004 shares of common stock
upon the exercise of the registered Private Placement Warrants. |
| |
|
|
| Use
of proceeds |
We
will receive up to an aggregate of approximately $26,737,546 from the exercise of the registered Private Placement Warrants, assuming
the exercise in full of all of the registered Private Placement Warrants for cash. We expect to use the net proceeds, if any, from
the exercise of the warrants for working capital and general corporate purposes. Because the exercise price of the Private Placement
Warrants substantially exceeds the current trading price of our common stock, we are unlikely to receive any proceeds from the exercise
of our warrants in the near future, if at all. See “Use of Proceeds” for additional information. |
| Lock-Up
Restrictions |
Certain
of our stockholders are subject to lock-up agreements that restrict, subject to certain exceptions, transfer of shares of our common
stock and other securities exercisable, exchangeable or convertible into shares of common stock. We are only registering for resale
a number of shares by the holders that are not subject to those lock-up restrictions. See “Certain Relationships and Related
Person Transactions — Business Combination Related Agreements — Confidentiality and Lock-Up Agreement” and “Certain
Relationships and Related Person Transactions — Business Combination Related Agreements — Sponsor Lock-Up Agreement.” |
| |
|
| Nasdaq
ticker symbols |
Our
common stock and Public Warrants are currently listed on Nasdaq under the symbol “AMOD” and “AMODW,” respectively. |
| |
|
| Risk
factors |
Any
investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the
information set forth under “Risk Factors” and elsewhere in this prospectus. |
| |
|
| |
The
resale of shares of our common stock pursuant to this prospectus could have a significant negative impact on the trading price of
our common stock. This impact may be heighted by the fact that certain of the Selling Securityholders purchased, or are able to purchase,
shares of our common stock at prices that are well below the current trading price of our common stock. |
Unless
we specifically state otherwise or the context otherwise requires, the information above is as of the Closing Date, does not give effect
to issuances of our common stock, warrants or options to purchase shares of our common stock, or the exercise of warrants or options
after such date, and excludes:
| |
●
|
2,200,000
Earnout Shares; |
| |
|
|
| |
●
|
5,174,996
shares of common stock issuable upon exercise of the Private Placement Warrants that are not being registered for resale; and |
| |
|
|
| |
●
|
12,000,000
shares of common stock issuable upon exercise of the Public Warrants. |
RISK
FACTORS
Investment
in our securities involves risk. You should carefully consider the following risk factors in addition to the other information included
in this prospectus, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statement.”
Please see the section entitled “Where You Can Find More Information” in this prospectus. These risk factors are not exhaustive,
and investors are encouraged to perform their own investigation with respect to our business, financial condition and prospects. We may
face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair
our business or financial condition. The following discussion should be read in conjunction with “Unaudited Pro Forma Condensed
Combined Financial Information and Other Data,” the financial statements and notes to the financial statements included herein.
Due
to the significant number of shares of our common stock that were redeemed in connection with the Business Combination, the number of
shares of common stock that the Selling Securityholders can sell into the public markets pursuant to this prospectus may exceed our public
float. As a result, the resale of shares of our common stock pursuant to this prospectus could have a significant negative impact on
the trading price of our common stock.
Due
to the significant number of shares of our common stock that were redeemed in connection with the Business Combination, the number of
shares of common stock that the Selling Securityholders can sell into the public markets pursuant to this prospectus may exceed our public
float. As a result, the resale of shares of our common stock pursuant to this prospectus could have a significant negative impact on
the trading price of our common stock. This impact may be heightened by the fact that, as described in the table below, certain of the
Selling Securityholders purchased, or are able to purchase, shares of our common stock at prices that are well below the current trading
price of our common stock. The 7,514,642 shares that may be resold and/or issued into the public markets pursuant to this prospectus
represent approximately 60.2% of the shares of our common stock outstanding as of February 7, 2025 (after giving effect
to the issuance of the Convertible Note Shares and Private Warrant Shares).
| Security |
|
Purchase
price |
|
%
of shares/warrants
outstanding |
|
Potential
profit per share |
Consideration
Shares
(1,550,000 shares) |
|
Acquired
by Alpha Modus’s officer, William Alessi (and his various family trusts) through private placements and equity award grants
at prices that equate to purchase prices of less than $9.50 per share of common stock, and, in some cases, including equity securities
purchased in connection with or following the founding of Legacy Alpha Modus, purchase prices of approximately $0.0001 per share
of common stock |
|
Approximately
21% |
|
Up
to $2.37 per share |
Convertible
Note Shares
(750,000 shares) |
|
To
be issued upon conversion of the Secured Convertible Promissory Note held by the Investor, at a conversion price no less than $4.00
per share |
|
Approximately
9% (after giving effect to the issuance of the Convertible Note Shares) |
|
N/A
(Conversion floor price of $4.00 is less than current trading price) |
Sponsor
Shares
(517,512 shares) |
|
Approximately
$0.004 per share of common stock |
|
Approximately
7% |
|
Up
to $2.37 per share |
Anchor
Shares
(1,012,510 shares) |
|
Approximately
$0.004 per share of common stock |
|
Approximately
13% |
|
Up
to $2.37 per share |
| Additional
Business Combination Shares (1,359,616 shares) |
|
N/A
(issued in satisfaction of other obligations of Alpha Modus) |
|
Approximately
18% |
|
Up
to $2.37 per share |
Private
Placement Warrants
(2,325,004 warrants) |
|
$1.00
per Private Placement Warrant |
|
Approximately
11% |
|
N/A |
Calculations
based on (i) 12,476,780 shares of common stock and 20,700,000 warrants outstanding, in each case as of February 7, 2025,
and (ii) sales of shares of common stock at a price of $2.37 per share and sales of warrants at a price of $0.0703 per
warrant, which reflect the closing prices of the common stock and warrants as of February 7, 2025. Unless otherwise noted,
assumes no issuance of Convertible Note Shares, Earnout Shares, Private Warrant Shares or Public Warrant Shares.
The
Selling Securityholders will determine the timing, pricing and rate at which they sell such shares into the public market. Although the
current trading price or our common stock is significantly below $10.00 per share, which was the sales price for units in the INAQ IPO,
as well as the $9.50/share trading price of our common stock as of the closing of the Business Combination, as shown in the table above,
certain of the Selling Securityholders have an incentive to sell because they acquired shares and/or warrants at prices below the initial
public offering price and/or below the recent trading prices of our securities. Sales by such investors may cause the trading prices
of our securities to experience a further decline.
Risks
Related to Alpha Modus’ Business and Industry
Alpha
Modus had net losses and negative cash flows from operating activities in the past, and it may not achieve or sustain profitability.
Alpha
Modus had a net loss of $501,295 and net cash used in operating activities of $515,181 in 2023, and a net loss of $27,403 and net cash
used in operating activities of $27,403 in 2022. Alpha Modus cannot assure you that it will be able to generate net profit or positive
cash flows from operating activities in the future. Its future revenue growth and profitability will depend on a variety of factors,
many of which are beyond its control. These factors include effectiveness of its monetization strategy, its ability to control costs
and expenses and to manage its growth effectively, market competition, and the macroeconomic and regulatory environment. Alpha Modus
may fail to develop and improve its operational, financial and managerial controls, enhance its financial reporting systems and procedures,
recruit, train and retain skilled professional personnel, or maintain customer satisfaction to effectively support and manage its future
growth. If Alpha Modus invests substantial time and resources to expand its patent family but fails to manage the growth of its business
and capitalize on its growth opportunities effectively, it may not be able to achieve profitability, and its business, financial condition,
results of operations and prospects would be materially and adversely affected.
If
Alpha Modus is unable to continue as a going concern, its securities will have little or no value.
Although
Alpha Modus’ audited financial statements for the years ended December 31, 2023 and 2022, were prepared under the assumption that
it would continue our operations as a going concern, the report of its independent registered public accounting firm that accompanies
its financial statements for the years ended December 31, 2023 and 2022, contains a going concern qualification in which such firm expressed
substantial doubt about Alpha Modus’ ability to continue as a going concern, based on its financial statements and results at that
time, including its lack of current revenues, recurring losses from operations and net capital deficiency.
Alpha
Modus expects to continue to incur significant expenses and operating losses in 2025. Alpha Modus’ prior losses and expected future
losses have had, and will continue to have, an adverse effect on its financial condition. In addition, continued operations and Alpha
Modus’ ability to continue as a going concern may be dependent on its ability to obtain additional financing in the near future
and thereafter, and there are no assurances that such financing will be available to it at all or will be available in sufficient amounts
or on reasonable terms. Alpha Modus’ financial statements do not include any adjustments that may result from the outcome of this
uncertainty. If Alpha Modus is unable to generate sufficient additional funds in the future through operations, financings or from other
sources or transactions, it will exhaust its resources and will be unable to continue operations. If it cannot continue as a going concern,
its shareholders would likely lose most or all of their investment in it.
The
artificial intelligence (AI) technology market in which Alpha Modus participates is competitive, and if it does not compete effectively,
its business, operating results and financial condition could be harmed.
The
AI market is competitive and rapidly evolving. The principal competitive factors in Alpha Modus’ market include research and development
capabilities, industry know-how, continuous capital investment, product portfolio, among others. Many of Alpha Modus’ competitors
have substantial competitive advantages, including larger scale, longer operating history, greater brand recognition, more established
relationships with customers, suppliers and partners, and greater financial, research and development, marketing and other resources.
As a result, Alpha Modus’ competitors may be able to respond more quickly and effectively than Alpha Modus can to new or changing
opportunities, technologies, standards or customer requirements. In addition, some competitors may offer products, solutions and services
that address one or more number of functions with greater depth, application, or functionality greater than Alpha Modus’ solutions
and technologies. Alpha Modus’ existing and potential competitors may develop and market new products, solutions and services with
functionality comparable to it. If Alpha Modus is unable to compete successfully against its current or potential competitors, its business,
financial condition, and results of operations may be materially and adversely impacted.
If
Alpha Modus fails to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations,
and changing customer needs, requirements or preferences, its business may be materially and adversely affected.
The
AI industry market is subject to rapid technological changes, evolving industry standards, regulations and customer needs, requirements
and preferences. The success of Alpha Modus’ business will depend, in part, on its ability to adapt and respond to these changes
on an effective and timely basis. If it fails to improve its technologies in a way that satisfies potential users or customers of intellectual
property that keep pace with rapid technological and industry changes, its business, operating results and financial condition could
be adversely affected. If new technologies emerge that are able to deliver competitive products, solutions and services at lower prices,
more efficiently, more conveniently or more securely, such technologies could adversely impact Alpha Modus’ ability to compete
effectively.
Issues
arising in connection with the use of AI in the market generally may result in reputational harm or liability to Alpha Modus.
As
with many disruptive innovations, AI presents risks and challenges that could affect its adoption, and therefore Alpha Modus’ business.
AI algorithms may be flawed. Datasets may be insufficient or contain biased information. Inappropriate or controversial data practices
could impair the acceptance of AI solutions. These deficiencies could undermine the decisions, predictions, or analysis AI applications
produce, subjecting the providers of AI technologies generally, including Alpha Modus, to competitive harm, legal liability, and brand
or reputational harm. Some AI scenarios present ethical or data privacy issues. If Alpha Modus enables or offers AI solutions that are
controversial because of their impact on human rights, privacy, employment, or other social issues, it may experience brand or reputational
harm.
Risks
Related to Alpha Modus’ Intellectual Property
Alpha
Modus may fail to obtain, maintain, and protect its intellectual property rights and proprietary information or prevent third parties
from any unauthorized use of its technologies.
Alpha
Modus’ trade secrets, trademarks, patents, and other intellectual property rights are critical to its success. Alpha Modus expects
to rely on confidentiality agreements and non-compete agreements with third parties to protect its intellectual properties. However,
events beyond its control may pose threats to its intellectual property rights and the integrity of its technologies and brand. Effective
protection of Alpha Modus’ intellectual property rights is expensive and challenging. While Alpha Modus has taken measures to protect
its intellectual property rights by filing patent applications, pursuing patent prosecution, and obtaining patents in the United States,
such efforts are inadequate to guard against and prohibit potential infringement and misappropriation. In addition, Alpha Modus’
intellectual property rights may be declared invalid or unenforceable by the courts. Furthermore, Alpha Modus cannot assure you that
any of its pending patent or other intellectual property rights applications will ultimately proceed to registration or will result in
registration with adequate scope for its business. Some of Alpha Modus’ applications or registrations may be successfully challenged
or invalidated by others. If Alpha Modus’ intellectual property rights applications are not successful, it may have to use different
intellectual property rights for its affected technologies, or seek to enter into arrangements with any third parties who may have prior
registrations, applications or rights, which might not be available on commercially reasonable terms, if at all. If Alpha Modus fails
to protect or enforce its intellectual property rights, its competitors may use its technologies without authorization. As a result,
future customers and partners could then devalue Alpha Modus’ technologies, and Alpha Modus’ ability to compete effectively
may be impaired, which could have a material adverse effect on its business, financial condition and results of operations.
Alpha
Modus will likely become subject to intellectual property disputes, which are typically costly and may subject us to significant liability
and increased costs of business.
Alpha
Modus competes in markets where there are a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and
proprietary rights, as well as disputes regarding infringement of these rights. Alpha Modus intends to enforce its patent rights by bringing
legal claims against other parties, and its competitors and other third parties may, whether rightly or falsely, bring legal claims against
it for infringing on their intellectual property rights. The intellectual property laws in the United States, which cover the validity,
enforceability and scope of protection of intellectual property rights, are evolving, and litigation is a popular means to resolve commercial
disputes. Any intellectual property lawsuits against Alpha Modus, whether successful or not, may harm our brand and reputation.
Prosecuting
and defending intellectual property claims is costly and can impose a significant burden on our management and resources. Any intellectual
property litigation to which Alpha Modus becomes a party may require it to do one or more of the following:
| |
●
|
cease
selling, licensing, or using products or features that incorporate the intellectual property rights that Alpha Modus allegedly infringes,
misappropriates, or violates; |
| |
|
|
| |
●
|
make
substantial payments for legal fees, settlement payments, or other costs or damages, including indemnification of third parties; |
| |
|
|
| |
●
|
obtain
a license or enter into a royalty agreement, either of which may not be available on reasonable terms or at all, in order to obtain
the right to sell or use the relevant intellectual property; or |
| |
|
|
| |
●
|
redesign
the allegedly infringing products or services to avoid infringement, misappropriation, or violation, which could be costly, time-consuming,
or impossible. |
Further,
there is no guarantee that Alpha Modus can obtain favorable judgment in its legal cases, in which case it may need to pay damages or
be forced to cease using certain intellectual property that is critical to our technology or service offerings. Any resulting liabilities
or expenses or required changes to technologies may have a material adverse effect on Alpha Modus’ business, results of operations,
and prospects.
Alpha
Modus’ intellectual property business is reliant on the strength of is patent portfolios and is subject to evolving legislation,
regulations, and rules associated with patent law, which may adversely affect its business.
The
success of Alpha Modus’ intellectual property business is heavily dependent on obtaining and enforcing patents. Patent acquisition
and enforcement is costly, time-consuming, and inherently uncertain. Obtaining and enforcing patents across various industries, including
the artificial intelligence industry, involves a high degree of technological and legal complexity. Alpha Modus’ patent rights
may be affected by developments or uncertainty in U.S. or foreign patent statutes, patent case law, U.S. Patent and Trademark Office
(“USPTO”) rules and regulations and the rules and regulations of foreign patent offices. In addition, the United States
may, at any time, enact changes to U.S. patent law and regulations, including by legislation, by regulatory rulemaking, or by judicial
precedent, that adversely affect the scope of patent protection available and weaken the rights of patent owners to obtain patents, enforce
against patent infringement and obtain injunctions and/or damages. For example, over the past several years, the Court of Appeals for
the Federal Circuit and the Supreme Court issued various opinions, and the USPTO modified its guidance for practitioners on multiple
occasions, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners
in certain situations. Other countries may likewise enact changes to their patent laws in ways that adversely diminish the scope of patent
protection and weaken the rights of patent owners to obtain patents, enforce against patent infringement, and obtain injunctions and/or
damages. In addition to increasing uncertainty with regard to Alpha Modus’ ability to obtain patents in the future, this combination
of events has created uncertainty with respect to the value of patents, once obtained. Alpha Modus cannot predict the breadth of claims
that may be allowed or enforced in its patents or in third-party patents, and whether Congress or other foreign legislative bodies may
pass patent reform legislation that is unfavorable to it, which may, in turn, affect the value of its patent assets.
Further,
the United States and other governments may, at any time, enact changes to law and regulation that create new avenues for challenging
the validity of issued patents. For example, the Leahy-Smith America Invents Act (described in more detail in the following risk factor)
created new administrative post-grant proceedings, including post-grant review, inter-partes review, and derivation proceedings that
allow third parties to challenge the validity of issued patents. This applies to all of Alpha Modus’ patents. Because of a lower
evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent
claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though
the same evidence would be insufficient to invalidate the claim if first presented in a district court action. In addition to increasing
uncertainty with regard to Alpha Modus’ ability to obtain patents in the future, this combination of events has created uncertainty
with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO,
the laws and regulations governing patents could change in unpredictable ways that could weaken Alpha Modus’ ability to obtain
new patents or to enforce its existing patents and patents that it might obtain in the future.
Additionally,
new rules regarding the burden of proof in patent enforcement actions could significantly increase the cost of Alpha Modus’ enforcement
actions, and new standards or limitations on liability for patent infringement could negatively impact Alpha Modus’ revenue derived
from such enforcement actions. In addition, recent federal court decisions have lowered the threshold for obtaining attorneys’
fees in patent infringement cases and increased the level of deference given to a district court’s fee-shifting determination.
These decisions may make it easier for district courts to shift a prevailing party’s attorneys’ fees to a non-prevailing
party if the district court believes that the case was weak or conducted in an abusive manner. As a result, defendants in patent infringement
actions brought by non-practicing entities may elect not to settle because these decisions make it much easier for defendants to get
attorneys’ fees.
Finally,
it is difficult to predict the outcome of patent enforcement litigation at the trial level and outcomes can be unfavorable. It can be
difficult to understand complex patented technologies, and as a result, this may lead to a higher rate of unfavorable litigation outcomes.
Moreover, in the event of a favorable outcome, there is often a higher rate of successful appeals in patent enforcement litigation than
more standard business litigation. Such appeals are expensive and time consuming, resulting in increased costs and a potential for delayed
or foregone revenue opportunities in the event of modification or reversal of favorable outcomes. Although Alpha Modus plans to diligently
pursue enforcement litigation, it cannot predict with reliability the decisions that may made by juries and trial courts.
Changes
to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing Alpha Modus’
ability to protect its product or its current or future product candidates.
Alpha
Modus’ success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents is costly,
time consuming and inherently uncertain. Patent reform legislation in the United States and other countries, including the Leahy-Smith
America Invents Act (the “Leahy-Smith Act”), contributes to those uncertainties and costs. The Leahy-Smith Act includes
a number of significant changes to U.S. patent law. These include provisions that have affected the way patent applications are prosecuted
and have redefined prior art and provided more efficient and cost-effective avenues for competitors to challenge the validity of patents.
In addition, the Leahy-Smith Act has transformed the U.S. patent system into a first-to-file system in which, assuming that other requirements
of patentability are met, the first inventor to file a patent application will be entitled to the patent regardless of whether a third
party was first to invent the claimed invention. A third party that has filed a patent application in the USPTO after March 2013 but
before Alpha Modus could therefore be awarded a patent covering an invention of Alpha Modus even if Alpha Modus had made the invention
before it was made by such third party. This requires Alpha Modus or its licensees to be cognizant of the time from invention to filing
of a patent application. Furthermore, Alpha Modus’ ability to obtain and maintain valid and enforceable patents depends on whether
the differences between its technology and the prior art allow its technology to be patentable over the prior art. Since patent applications
in the United States and most other countries are confidential for a period of time after filing or until issuance, Alpha Modus cannot
be certain that it was the first to either (i) file any patent application related to its product or product candidates, or (ii) invent
any of the inventions claimed in its patents or patent applications. Even where Alpha Modus has a valid and enforceable patent, Alpha
Modus or its licensees may not be able to exclude others from practicing the claimed invention where the other party can show that they
used the invention in commerce before our filing date or the other party benefits from a compulsory license.
Among
some of the other changes introduced by the Leahy-Smith Act are changes that (i) affect the way patent applications are prosecuted, (ii)
redefine prior art, and (iii) provide more efficient and cost-effective avenues for competitors to challenge the validity of patents.
These include changes that limit where a patentee may file a patent infringement suit and provide new opportunities for third parties
to challenge issued patents in the USPTO. Alpha Modus or its licensees may be subject to the risk of third-party prior art submissions
on pending applications or become a party to opposition, derivation, reexamination, inter partes review, post-grant review or
interference proceedings challenging our patents. There is a lower standard of evidence necessary to invalidate a patent claim in a USPTO
proceeding relative to the standard in U.S. district or federal court. This could lead third parties to challenge and successfully invalidate
Alpha Modus or its licensees’ patents that would not otherwise be invalidated if challenged through the court system. Accordingly,
a third party may attempt to use the USPTO procedures to invalidate Alpha Modus or its licensees’ patent claims that would not
have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and
its implementation increase the uncertainties and costs surrounding the prosecution of Alpha Modus or its future licensees’ patent
applications and the enforcement or defense of Alpha Modus’ issued patents, all of which could have a material adverse effect on
our business, financial condition, results of operations and prospects.
Additionally,
the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in
certain circumstances or weakening the rights of patent owners in certain situations. In addition, there have been recent proposals for
additional changes to the patent laws of the United States and other countries that, if adopted, could impact Alpha Modus or its licensees’
ability to obtain or maintain patent protection for Alpha Modus or its out-licensed proprietary technology or Alpha Modus’ or its
licensees’ ability to enforce Alpha Modus or its out-licensed proprietary technology, respectively. Depending on future actions
by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing
patents could change in unpredictable ways that would weaken Alpha Modus’ ability to obtain new patents; enforce or shorten the
term of Alpha Modus or its licensees’ existing patents and patents that might be obtained in the future; shorten the term that
has been lengthened by patent term adjustment of existing patents or patents that Alpha Modus might obtain in the future; or challenge
the validity or enforceability of Alpha Modus patents that may be asserted against Alpha Modus by competitors or other third parties.
Any of these outcomes could have a material adverse effect on Alpha Modus’ business. For example, with respect to patent term adjustment,
the Federal Circuit’s recent holding in In re Cellect, LLC, 81 F.4th 1216 (Fed. Cir. 2023), that obviousness-type
double patent analysis for a patent that has received patent term adjustment must be based on the expiration date of the patent after
the patent term adjustment has been added, may negatively impact the term of Alpha Modus’ patents.
Finally,
Europe’s new Unitary Patent system and Unified Patent Court (the “UPC”) may present uncertainties for Alpha
Modus’ ability to protect and enforce patent rights against competitors in Europe. In 2012, the European Patent Package (the “EU
Patent Package”), regulations were passed with the goal of providing a single pan-European Unitary Patent system and a new
UPC for litigation involving European patents. Implementation of the EU Patent Package occurred in June 2023. Under the UPC, all European
patents, including those issued prior to ratification of the European Patent Package, will by default automatically fall under the jurisdiction
of the UPC. The UPC will provide Alpha Modus’ competitors with a new forum to centrally revoke European patents and allow for the
possibility of a competitor to obtain pan-European injunctions. It will be several years before Alpha Modus will understand the scope
of patent rights that will be recognized and the strength of patent remedies that will be provided by the UPC. Under the EU Patent Package,
Alpha Modus will have the right to opt patents out of the UPC over the first seven years of the court’s existence, but doing so
may preclude Alpha Modus from realizing the benefits of the new unified court.
Patent
litigation is inherently risky because courts may find Alpha Modus’ patents invalid, not infringed, or unenforceable, and the USPTO,
or other relevant patent office, may either invalidate Alpha Modus’ patents or materially narrow the scope of their claims during
the course of a reexamination, opposition or other such proceeding.
Patent
litigation is inherently risky and may result in the invalidation of Alpha Modus’ patents, even if it is the plaintiff in an underlying
action. It is difficult to predict the outcome of patent enforcement litigation at any level. Although Alpha Modus intends to diligently
pursue enforcement litigation, it cannot predict with significant reliability the decisions made by juries and trial courts. At the trial
level, it is often difficult for juries and trial judges to understand complex, patented technologies, and as a result, there is a higher
rate of successful appeals in patent enforcement litigation than more standard business litigation.
The
defendant to any case Alpha Modus brings may file as many appeals as allowed by right, including to District Court, the Federal Circuit
and the Supreme Court. Such appeals are expensive and time-consuming, and the outcomes of such appeals are sometimes unpredictable, resulting
in increased costs and reduced or delayed revenue which could have a material adverse effect on Alpha Modus’ results of operations
and financial condition. These appeals may also result in the invalidation of Alpha Modus’ patents, which may have an adverse impact
on Alpha Modus’ operations and financial performance.
The
enforcement of Alpha Modus’ intellectual property rights depends in part upon its ability to retain the best legal counsel in order
to achieve favorable outcomes from litigation, and Alpha Modus’ desired legal counsel may become conflicted out of such representation.
The
success of Alpha Modus’ intellectual property enforcement efforts will depend in part upon its ability to retain the best legal
counsel to coordinate its patent infringement litigation matters. As Alpha Modus’ intellectual property business evolves, Alpha
Modus expects that it will become more difficult to find the best legal counsel to handle all of its patent enforcement matters due in
part to potential conflicts of interest. This is because, from time to time, the counterparties to litigation matters have previously
engaged world class law firms that are specialized in connection with the industries of the patents at issue in such matters. These previous
engagements may have, or may in the future, result in these firms being conflicted out of representing us.
In
addition, counterparties in Alpha Modus’ patent litigation matters may devote a substantial amount of resources to avoid or limit
a finding that they are liable for infringing on Alpha Modus’ patents or, in the event liability is found, to avoid or limit the
amount of associated damages. There is a risk these counterparties may file inter-partes reviews, reexaminations or other proceedings
with the USPTO or other government agencies in the United States or abroad in an attempt to invalidate, narrow the scope or render unenforceable
the patents Alpha Modus owns or controls. If this were to occur, it may have a significant negative impact on Alpha Modus’ intellectual
property.
The
inability to retain the best legal counsel to represent Alpha Modus in infringement actions may result in unfavorable or adverse outcomes,
which may result in losses, exhaustion of financial resources or other adverse effects which could encumber Alpha Modus’ ability
to effectively operate its business or execute its business strategy. Alpha Modus cannot provide any assurance that any prospective patent
prosecution or litigation matters will result in a favorable outcome.
Alpha
Modus may experience delays in successful prosecution, enforcement, and licensing of its patent portfolio.
The
value of Alpha Modus’ patent portfolios is dependent upon the issuance of patents in a timely manner. More patent applications
are filed each year. Alpha Modus believes this increase in patent applications has resulted in longer delays in obtaining approval of
pending patent applications. If the USPTO experiences reductions in funding, it could have an adverse impact on the cost of processing
pending patent applications and the value of those pending patent applications, negatively impacting the value of Alpha Modus’
patent applications. Further, reductions in funding from Congress could result in higher patent application filing and maintenance fees
charged by the USPTO, causing an increase in Alpha Modus’ expenses. Application delays could cause delays in recognizing revenue
from these patents and could cause Alpha Modus to miss opportunities to license patents before other competing technologies are developed
or introduced into the market.
After
prosecuting Alpha Modus’ patents, Alpha Modus’ intellectual property business can incur significant general and administrative
and legal expenses prior to entering into license agreements and generating license revenues. Alpha Modus plans to spend considerable
resources educating prospective licensees on the benefits of a license arrangement with it. As such, Alpha Modus may incur significant
losses in any particular period before any associated revenue stream begins.
Alpha
Modus believes that it will frequently be engaged in litigation to enforce its patents, protect its trade secrets, or determine the validity
and scope of the proprietary rights of others. Enforcement proceedings are typically protracted and complex. The costs are typically
substantial, and the outcomes are unpredictable. Enforcement actions divert managerial, technical, legal and financial resources from
business operations, and there are no assurances that such enforcement actions will result in favorable results for Alpha Modus.
Patent
litigation schedules in general, and in particular trial dates, are subject to routine adjustment, and in most cases delay, as courts
adjust their calendars or respond to requests from one or more parties. Trial dates often are rescheduled by the court for various reasons
that are often unrelated to the underlying patent assets and typically for reasons that are beyond our control. As a result, to the extent
such events are an indicator of possible future revenue opportunities for Alpha Modus, or other outcome determinative events, they may
and often do change which can result in delay of the expected scheduled event. Any such delay could be significant and could affect the
corresponding future revenue opportunities, thus adversely impacting Alpha Modus’ business, results of operations and financial
condition.
Further,
federal courts are becoming more crowded, and as a result, patent enforcement litigation is taking longer. Alpha Modus’ anticipated
patent enforcement actions are expected to be almost exclusively prosecuted in federal court. Federal trial courts that hear patent enforcement
actions also hear criminal cases. Criminal cases tend to take priority over patent enforcement actions. As a result, it is difficult
to predict the length of time it will take to complete an enforcement action. Moreover, Alpha Modus believes there is a trend in increasing
numbers of civil lawsuits and criminal proceedings before federal judges, and, as a result, it believes that the risk of delays in patent
enforcement actions will have a greater negative effect on Alpha Modus’ business in the future unless this trend changes.
Because
Alpha Modus’ patents are expected to expire in 2034-2037, its continued operations beyond those dates will depend on its ability
to obtain additional patents with later expiration dates.
Alpha
Modus’ current patents are expected to expire in 2034-2037. If Alpha Modus does not obtain patents or other intellectual property
with expiration dates that extend beyond those years, its operations would be adversely affected.
Alpha
Modus’ lack of patent enforcement and licensing experience could adversely affect its operations.
Alpha
Modus has limited patent enforcement experience and cannot provide any assurance that it will be able to effectively manage patent enforcement
efforts. Patent enforcement litigation is complex and needs to be closely and carefully managed. Because Alpha Modus does not have experience
in managing patent enforcement efforts, it may not do so effectively, and its enforcement efforts could be harmed as a result. Similarly,
Alpha Modus has limited experience managing intellectual property licensing programs, and this lack of experience could impair its ability
to execute its business plans.
Alpha
Modus may not be able to protect its intellectual property rights throughout the world.
Filing,
prosecuting, and defending patents in all countries throughout the world would be prohibitively expensive, and intellectual property
rights in some countries outside the United States could be less extensive than those in the United States. Alpha Modus may not choose,
or be able, to obtain patent protection outside the United States. In addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as federal and state laws in the United States, even in jurisdictions where Alpha Modus does pursue
patent protection. Consequently, Alpha Modus may not be able to prevent third parties from practicing its intellectual property in all
countries outside the United States, even in jurisdictions where it does pursue patent protection.
Competitors
may use Alpha Modus’ technologies in jurisdictions where it has not pursued and obtained patent protection and, further, may export
otherwise infringing products to territories where Alpha Modus has patent protection, but enforcement is not as strong as that in the
United States. These products may compete with Alpha Modus’ technologies. Alpha Modus’ patents or other intellectual property
rights may not be effective or sufficient to prevent them from competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets,
and other intellectual property protection, particularly those relating to technology products, which could make it difficult for Alpha
Modus to stop infringement of its intellectual property. Proceedings to enforce patent rights in foreign jurisdictions could result in
substantial costs and divert Alpha Modus’ efforts and attention from other aspects of its business, could put its patents at risk
of being invalidated or interpreted narrowly and patent applications at risk of not issuing, and could provoke third parties to assert
claims against it. Alpha Modus may not prevail in any lawsuits that it initiates, and the damages or other remedies awarded, if any,
may not be commercially meaningful. Accordingly, Alpha Modus’ efforts to enforce intellectual property rights around the world
may be inadequate to obtain a significant commercial advantage from its intellectual property.
Many
countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition,
many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent
owner may have limited remedies, which could materially diminish the value of such patent. If Alpha Modus is forced to grant a license
to third parties with respect to any of its patents, its competitive position may be impaired, and its business, financial condition,
results of operations, and prospects may be adversely affected.
Risks
Related to Being a Public Company
Alpha
Modus will incur increased costs as a result of operating as a public company, and its management will devote substantial time to compliance
with its public company responsibilities and corporate governance practices.
Alpha
Modus will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may
increase even more after Alpha Modus is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a
public company, Alpha Modus will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank
Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq, and other applicable securities rules and regulations, which
impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls
and changes in corporate governance practices. Alpha Modus’ management and other personnel will need to devote a substantial amount
of time to these public company requirements. Moreover, Alpha Modus expects these rules and regulations to substantially increase its
legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs will increase Alpha
Modus’ net loss. Alpha Modus may need to hire additional legal, accounting and financial staff with appropriate public company
experience and technical accounting knowledge and maintain an internal audit function.
In
addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for
public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations,
and standards are subject to varying interpretations and may evolve over time as new guidance is provided by regulatory and governing
bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to
disclosure and governance practices. Alpha Modus intends to invest resources to comply with evolving laws, regulations, and standards,
and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention
from revenue-generating activities to compliance activities. If Alpha Modus’s efforts to comply with new laws, regulations, and
standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice,
regulatory authorities may initiate legal proceedings against Alpha Modus and its business may be adversely affected.
The
rules and regulations applicable to public companies make it more expensive for Alpha Modus to obtain and maintain director and officer
liability insurance, and Alpha Modus may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
These factors could also make it more difficult for Alpha Modus to attract and retain qualified members of its board of directors, particularly
to serve on Alpha Modus’s audit committee and compensation committee, and qualified executive officers.
Alpha
Modus cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of
these requirements could also make it more difficult for Alpha Modus to attract and retain qualified persons to serve on its board of
directors, its board committees or as executive officers.
Alpha
Modus’ management team has limited experience managing a Nasdaq-listed public company.
Alpha
Modus’ management team has limited experience managing a Nasdaq-listed public company, interacting with public company investors
and complying with the increasingly complex laws pertaining to exchange-listed public companies. Alpha Modus’ management team may
not successfully or efficiently manage their new roles and responsibilities. Alpha Modus’ transition to being a public company
subjects it to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny
of securities analysts and investors. These new obligations and constituents will require significant attention from Alpha Modus’
senior management and could divert their attention away from the day-to-day management of Alpha Modus’ business, which could adversely
affect Alpha Modus’ business, financial condition, and operating results.
If
we were deemed to be an investment company for purposes of the Investment Company Act of 1940, as amended (the “Investment Company
Act”), we may be required to liquidate the Company.
There
is currently uncertainty concerning the applicability of the Investment Company Act to a special purpose acquisition company (“SPAC”),
and we, as a former SPAC, may in the future be subject to a claim that we have been operating as an unregistered investment company.
If we are deemed to be an investment company for purposes of the Investment Company Act, we may be required to liquidate. If we are required
to liquidate, our investors would not be able to realize the benefits of owning stock in a successor operating business, including the
potential appreciation in the value of our stock and warrants following such a transaction, and our warrants would expire worthless.
Upon
closing our initial IPO in September 2021, the net proceeds of the IPO and of a private offering of warrants were placed in a trust account
located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invested only in direct U.S.
government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the
trust account as described below. The longer that the funds in the trust account were held in short-term U.S. government securities or
in money market funds invested exclusively in such securities, the greater the risk that we may be considered an unregistered investment
company, in which case we would be required to register as an investment company with the SEC.
Alpha
Modus is a “controlled company” within the meaning of the listing rules of Nasdaq and, as a result, can rely on exemptions
from certain corporate governance requirements that provide protection to shareholders of other companies.
Alpha
Modus’ CEO, William Alessi, will be deemed to beneficially own or control in excess of 34.9% of Alpha Modus’s common stock
and 100% of Alpha Modus’s preferred stock. As a result, Alpha Modus would be deemed to be a “controlled company” as
defined under the listing rules of Nasdaq. Under Nasdaq listing rules, controlled companies are companies of which more than 50% of the
voting power for the election of directors is held by an individual, a group, or another company. For as long as Alpha Modus remains
a controlled company, Alpha Modus will be permitted to elect to rely on certain exemptions from Nasdaq’s corporate governance rules,
including the following:
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exemption from the rule that its compensation committee be composed entirely of independent directors; |
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an
exemption from the rule that its director nominees must be selected or recommended solely by independent directors or a nominating
committee composed solely of independent directors; |
Although
Alpha Modus does not currently intend for Alpha Modus to rely on the “controlled company” exemptions to Nasdaq’s corporate
governance rules, Alpha Modus could elect to rely on these exemptions in the future. If it elected to rely on those “controlled
company” exemptions, a majority of the members of Alpha Modus’s board of directors might not be independent directors, its
nominating and corporate governance and compensation committees might not consist entirely of independent directors, and you would not
have the same protection afforded to shareholders of companies that are subject to all of Nasdaq’s corporate governance rules.
Alpha
Modus may issue additional shares of common or preferred stock, which would dilute the interests of stockholders and likely present other
risks.
Alpha
Modus may issue additional shares of common or preferred stock for financing or other reasons. The issuance of additional shares of common
or preferred stock:
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subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded to holders of
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could
cause a change in control if a substantial number of common stock is issued, which may affect, among other things, Alpha Modus’s
ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of Alpha Modus’s
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adversely affect prevailing market prices for Alpha Modus’s common stock and/or warrants. |
We
may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of
at least a majority of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the
exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could
be decreased, all without your approval.
Our
warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant
agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure
any ambiguity or correct any defective provision, but requires the approval by the holders of at least a majority of the then outstanding
public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we
may amend the terms of the public warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding
public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least
a majority of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things,
increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number
of shares of our Class A common stock purchasable upon exercise of a warrant.
Alpha
Modus may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your
Public Warrants worthless.
Alpha
Modus will have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration,
at a price of $0.01 per warrant, provided that the last reported sales price of Alpha Modus common stock equals or exceeds $18.00 per
share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date Alpha Modus gives notice
of redemption. If and when the Public Warrants become redeemable by Alpha Modus, Alpha Modus may exercise its redemption right even if
it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the
outstanding Public Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it
may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise
wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants
are called for redemption, is likely to be substantially less than the market value of your Public Warrants. As of February 7,
2025, the sales price of the Class A common stock did not exceed the threshold that would allow Alpha Modus to redeem the Public
Warrants. None of the Private Warrants will be redeemable by the Company so long as they are held by their initial purchasers or their
permitted transferees.
We
may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in connection with redemptions of our Common Stock after
December 31, 2022.
On
August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, imposes a 1% excise
tax on any publicly traded domestic corporation that repurchases its stock after December 31, 2022 (the “Excise Tax”).
The Excise Tax is imposed on the fair market value of the repurchased stock, with certain exceptions. Because we are a Delaware corporation
and because our securities trade on Nasdaq, we are a “covered corporation” within the meaning of the Inflation Reduction
Act. While not free from doubt, absent any further guidance from the U.S. Department of the Treasury (the “Treasury”), who
has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the Excise Tax,
the Excise Tax may apply to any redemptions of our IAC Class A common stock after December 31, 2022, including redemptions in connection
with the Business Combination, unless an exemption is available. Generally, issuances of securities by us in connection with our initial
Business Combination transaction (including any PIPE transaction at the time of our initial Business Combination), as well as any other
issuances of securities not in connection with our initial Business Combination, would be expected to reduce the amount of the Excise
Tax in connection with redemptions occurring in the same calendar year. In addition, the Excise Tax would be payable by us, and not by
the redeeming holder. Further, based on recently issued interim guidance from the IRS and Treasury, subject to certain exceptions, the
Excise Tax should not apply in the event of IAC’s liquidation. As of June 30, 2024, IAC had an Excise Tax payable of $2,402,516.
We
do not expect that we will pay dividends in the foreseeable future.
We
expect that we will retain most, if not all, of our available funds and any future earnings to fund our operations and the development
and growth of our business. As a result, we do not expect that we will pay any cash dividends on our common stock in the foreseeable
future.
The
Company’s board of directors will have complete discretion as to whether to distribute dividends. Even if the board of directors
decides to declare and pay dividends, the timing, amount, and form of such dividends, if any, will depend on the future results of operations
and cash flow, capital requirements and surplus, the amount of distributions, if any, received by the Company from its subsidiaries,
the Company’s financial condition, contractual restrictions, and other factors deemed relevant by the board of directors. There
is no guarantee that the shares of Company common stock will appreciate in value or that the trading price of the shares will not decline.
Holders of the Company common stock should not rely on an investment in shares of common stock as a source for any future dividend income.
The
existence of indemnification rights to the Company’s directors, officers, and employees may result in substantial expenditures
by the Combined Company and may discourage lawsuits against its directors, officers, and employees.
The
Amended and Restated Charter contains indemnification provisions obligating the Company to provide indemnification for its directors,
officers, and employees in certain circumstances. Such indemnification obligations could result in the Company incurring substantial
expenditures to cover the cost of settlement or damage awards against its directors, executive officers, and employees, which it may
be unable to recoup. These provisions and resultant costs may also discourage the Company from bringing a lawsuit against its directors
and executive officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by its
stockholders against its directors and officers even though such actions, if successful, might otherwise benefit the Company and its
stockholders.
If
the Company fails to develop or maintain an effective system of internal control over financial reporting, it may not be able to accurately
report its financial results or prevent financial fraud. As a result, current and potential stockholders could lose confidence in its
financial reporting.
The
Company is subject to the risk that its independent registered public accounting firm could communicate to its board of directors that
it has deficiencies in its internal control structure that they consider to be “significant deficiencies.” A “significant
deficiency” is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is more than a remote likelihood that a material misstatement of the entity’s financial statements will not be prevented
or detected by the entity’s internal controls.
Effective
internal control is necessary to provide reliable financial reports and effectively prevent fraud. If the Company cannot provide reliable
financial reports or prevent fraud, it could be subject to regulatory action or other litigation and its operating results could be harmed.
The
Company’s intended business, operations, and accounting are expected to be substantially more complex than they have been to date.
It may be time consuming, difficult, and costly for the Company to develop and implement the internal control and reporting procedures
required by the Exchange Act. the Company may need to hire additional financial reporting, internal control, and other finance personnel
in order to develop and implement appropriate internal control and reporting procedures. If the Company is unable to comply with the
internal control over financial reporting requirements of the Exchange Act, then it may not be able to obtain the required independent
accountant certifications, which may preclude it from keeping its filings current with the SEC.
Further,
a material weakness in the effectiveness of internal control over financial reporting could result in an increased chance of fraud and
the loss of customers, reduce the Company’s ability to obtain financing, and require additional expenditures to comply with these
requirements, each of which could have a material adverse effect on its business, results of operations, and financial condition.
If
the Company is unable to implement and maintain effective internal control over financial reporting, including as applicable standards
governing internal control are modified, supplemented, or amended from time to time, the Company may not be able to ensure that it can
conclude on an ongoing basis that it has effective internal control over financial reporting. Failure to achieve and maintain effective
internal control over financial reporting could cause the Company to face regulatory action and cause investors to lose confidence in
its reported financial information, either of which could adversely affect the value of the Company common stock.
Risks
Related to Ownership of Alpha Modus’s Shares
The
Amended and Restated Charter requires, to the fullest extent permitted by law, that derivative actions brought in the Company’s
name, as applicable, against their respective directors, officers, other employees or stockholders for breach of fiduciary duty and other
similar actions may be brought only in the Court of Chancery in the State of Delaware, which may have the effect of discouraging lawsuits
against the Company’s directors, officers, other employees or stockholders, as applicable.
The
Amended and Restated Charter requires, to the fullest extent permitted by law, that derivative actions brought in Alpha Modus’s
name, as applicable, against their respective directors, officers, other employees or stockholders for breach of fiduciary duty and other
similar actions may be brought only in the Court of Chancery in the State of Delaware or, if the Court of Chancery does not have subject
matter jurisdiction, in the federal district court of the State of Delaware. This exclusive forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with Alpha Modus, or any of their respective directors,
officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although their respective stockholders
will not be deemed to have waived their compliance with federal securities laws and the rules and regulations thereunder. However, there
is no assurance that a court would enforce the choice of forum provision contained in the Amended and Restated Charter. If a court were
to find such provision to be inapplicable or unenforceable in an action, Alpha Modus may incur additional costs associated with resolving
such action in other jurisdictions, which could harm their business, operating results and financial condition.
The
Amended and Restated Charter provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable
law. The Amended and Restated Charter also provides that to the fullest extent permitted by applicable law, the federal district courts
of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities
Act.
The
exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim
for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over
all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result,
federal courts will have exclusive jurisdiction over suits brought to enforce any duty or liability created by the Exchange Act or any
other claim for which the federal courts have exclusive jurisdiction. Section 22 of the Securities Act creates concurrent jurisdiction
for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such claims. As noted above, the Amended and Restated
Charter provides that the federal district courts of the United States will be, to the fullest extent permitted by applicable law, the
exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. Due to the concurrent jurisdiction
for federal and state courts created by Section 22 of the Securities Act over all suits brought to enforce any duty or liability created
by the Securities Act or the rules and regulations thereunder, there is uncertainty as to whether a court would enforce the exclusive
form provision. Investors also cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Anti-takeover
provisions contained in the Amended and Restated Charter and the Company’s Bylaws, as well as provisions of Delaware law, could
impair a takeover attempt.
The
Amended and Restated Charter and the Company’s Bylaws contain provisions that could have the effect of delaying or preventing changes
in control or changes in our management without the consent of our board of directors. These provisions include:
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cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
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exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors
or the resignation, death, or removal of a director with or without cause by stockholders, which prevents stockholders from being
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ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other
terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly
dilute the ownership of a hostile acquirer; |
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prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting
of our stockholders; |
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requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our
stockholders to force consideration of a proposal or to take action, including the removal of directors; |
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limiting
the liability of, and providing indemnification to, our directors and officers; |
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the procedures for the conduct and scheduling of stockholder meetings; |
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providing
for a staggered board, in which the members of the board of directors are divided into three classes to serve for a period of three
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granting
the ability to remove directors with cause by the affirmative vote of 66 2∕3% in voting power of the outstanding shares of
Alpha Modus common stock entitled to vote thereon; |
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requiring
the affirmative vote of at least 66 2∕3% of the voting power of the outstanding shares of capital stock of Alpha Modus entitled
to vote generally in the election of directors, voting together as a single class, to amend the Proposed Bylaws or certain sections
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advance
notice procedures that stockholders must comply with in order to nominate candidates to Alpha Modus Board or to propose matters to
be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation
of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Alpha Modus. |
These
provisions, alone or together, could delay hostile takeovers and changes in control of Alpha Modus or changes in Alpha Modus Board and
Alpha Modus’s management.
As
a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents some stockholders
holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders
of substantially all of Alpha Modus common stock. Any provision of Amended and Restated Charter, the Proposed Bylaws or Delaware law
that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium
for their shares of Alpha Modus common stock and could also affect the price that some investors are willing to pay for Alpha Modus common
stock. For more information, see the section of this proxy statement/prospectus captioned “Description of Securities of IAC
— Certain Anti-Takeover Provisions of Delaware Law and the IAC Charter and Bylaws.”
Claims
for indemnification by Alpha Modus’s directors and officers may reduce Alpha Modus’s available funds to satisfy successful
third-party claims against Alpha Modus and may reduce the amount of money available to Alpha Modus.
The
Company’s Bylaws provide that Alpha Modus will indemnify its directors and officers, in each case to the fullest extent permitted
by Delaware law. In addition, as permitted by Section 145 of the DGCL, the Bylaws and indemnification agreements that the Company has
entered into with its directors and officers provide that:
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Alpha
Modus will indemnify its directors and officers for serving Alpha Modus in those capacities or for serving other business enterprises
at its request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person
if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests
of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was
unlawful; |
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Alpha
Modus may, in its discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable
law; |
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Alpha
Modus will be required to advance expenses, as incurred, to its directors and officers in connection with defending a proceeding,
except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is
not entitled to indemnification; |
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Alpha
Modus will not be obligated pursuant to its Proposed Bylaws to indemnify a person with respect to proceedings initiated by that person
against Alpha Modus or its other indemnitees, except with respect to proceedings authorized by its board of directors or brought
to enforce a right to indemnification; and |
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the
rights conferred in the Proposed Bylaws are not exclusive, and Alpha Modus is authorized to enter into indemnification agreements
with its directors, officers, employees and agents and to obtain insurance to indemnify such persons. |
If
securities or industry analysts do not publish or cease publishing research or reports about Alpha Modus, its business, or its market,
or if they change their recommendations regarding Alpha Modus’s securities adversely, the price and trading volume of Alpha Modus’s
securities could decline.
The
trading market for Alpha Modus’s securities will be influenced by the research and reports that industry or securities analysts
may publish about Alpha Modus, its business, market or competitors. Securities and industry analysts do not currently, to the knowledge
of management, and may never, publish research on Alpha Modus. If no securities or industry analysts commence coverage of Alpha Modus,
Alpha Modus’s share price and trading volume would likely be negatively impacted. If any of the analysts who may cover Alpha Modus
change their recommendation regarding Alpha Modus common stock adversely, or provide more favorable relative recommendations about Alpha
Modus’s competitors, the price of shares of Alpha Modus common stock would likely decline. If any analyst who may cover Alpha Modus
were to cease coverage of Alpha Modus or fail to regularly publish reports on it, Alpha Modus could lose visibility in the financial
markets, which in turn could cause its share price or trading volume to decline.
The
Company’s Series C Preferred Stock, and the future issuances of other debt securities and equity securities, may adversely affect
us, including the market price of the Company’s common stock and be dilutive to existing stockholders.
We
issued 7,500,000 shares of Series C Preferred Stock in the Business Combination. The Series C Preferred Stock will generally be convertible
at any time 18 months following the Closing of the Business Combination and may convert in some circumstances into more than 7,500,000
shares of common stock. Conversion of the Series C Preferred Stock into common Stock will be dilutive to existing stockholders and may
reduce the market price of common stock. For example, if there has never been a Trigger Event (as defined below), shares of Series C
Preferred Stock, which have a deemed face value of $10.00 per share (the “Face Value”) will convert into shares of common
stock at the lesser of the Face Value or the average of the 5 lowest closing prices of common stock during the 10 trading days preceding
conversion. However, following a following any Trigger Event, such conversion shall be at the lesser of the Face Value or 50.0% of the
average of the lowest closing prices during the 10 trading days preceding conversion. “Trigger Event” generally means (i)
the Company’s failure to deliver conversion shares when required; (ii) violation of or failure to timely perform any covenant in
the designation of the rights of the Series C Preferred Stock; (iii) suspension from trading or delisting from the Company’s principal
trading exchange or market; (iv) notification of an intention not to comply with a conversion notice; (v) bankruptcy, insolvency, reorganization,
liquidation or similar proceedings; (vi) the appointment of a custodian, receiver or similar official for the Company; (vii) judgments
in excess of $500,000 which are not stayed or satisfied within 30 days of entry; (viii) failure to comply with reporting requirements
of Securities Exchange Act; (ix) any regulatory, administrative or enforcement proceeding is initiated against IAC; or (x) any material
provision of the designation of the rights of the Series C Preferred Stock ceases to be valid or is contested. As a result, regardless
of whether a Trigger Event occurs, if the trading price of the Company’s common stock is less than $10.00/share at the time of
conversion, the Series C Preferred Stock will generally convert into more than 7,500,000 shares, and if the trading price is substantially
lower than $10.00/share or a Trigger Event occurs, into substantially more than 7,500,000 shares.
Additionally,
shares of Series C Preferred Stock will rank senior to the Company’s common stock with respect to rights upon liquidation, winding
up or dissolution. The Series C Preferred Stock has a liquidation preference of $10.00 per share or an aggregate liquidation preference
of $75,000,000 over holders of common stock. This preference, and conversion rights associated with the Series C Preferred Stock, may
adversely affect us and reduce returns for holders, or the market price, of the Company’s common stock.
Additionally,
in the future, we may incur debt or issue other equity ranking senior to the Company’s common stock, like the Series C Preferred
Stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other
instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that
we issue in the future may have rights, preferences and privileges more favorable than those of the Company’s common stock. Because
our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict
or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital-raising efforts
may reduce the market price of the Company’s common stock and be dilutive to existing stockholders.
There
can be no assurance that the Company’s common stock will continue to be so listed, or that we will be able to comply with the continued
listing standards of Nasdaq.
There
can be no assurance that the Company’s common stock will continue to be listed on the Nasdaq, or that we will be able to comply
with Nasdaq’s continued listing standards. If Nasdaq delists Alpha Modus’s shares from trading on its exchange for failure
to meet Nasdaq’s listing standards, Alpha Modus and its stockholders could face significant material adverse consequences including,
but not limited to:
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a
limited availability of market quotations for Alpha Modus’s securities; |
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reduced
liquidity for Alpha Modus’s securities; |
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a
determination that Alpha Modus common stock is a “penny stock” which will require brokers trading in Alpha Modus common
stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market
for Alpha Modus common stock; |
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limited amount of analyst coverage; and |
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decreased ability to issue additional securities or obtain additional financing in the future. |
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the
sale of certain securities, which are referred to as “covered securities.” Because Alpha Modus common stock and Public Warrants
are listed on Nasdaq, they are covered securities. Although the states are preempted from regulating the sale of our securities, the
federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent
activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state,
other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies,
certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers,
to hinder the sale of securities of blank check companies in their states. Further, if Alpha Modus was no longer listed on Nasdaq, Alpha
Modus’s securities would not be covered securities and Alpha Modus would be subject to regulation in each state in which Alpha
Modus offers its securities.
An
active market for Alpha Modus’s securities may not develop, which would adversely affect the liquidity and price of Alpha Modus’s
securities.
The
price of Alpha Modus’s securities may vary significantly due to factors specific to Alpha Modus as well as to general market or
economic conditions. Furthermore, an active trading market for Alpha Modus’s securities may never develop or, if developed, it
may not be sustained. Holders of Alpha Modus’s securities may be unable to sell their securities unless a market can be established
and sustained.
The
market price of the Company’s common stock may decline.
Fluctuations
in the price of the Company’s securities could contribute to the loss of all or part of your investment. Prior to the Business
Combination, there has not been an active public market for the Company’s common stock. If an active market for Alpha Modus’s
securities develops and continues, the trading price of Alpha Modus’s securities in the future could be volatile and subject to
wide fluctuations in response to various factors, some of which are beyond Alpha Modus’s control. Any of the factors listed below
could have a material adverse effect on your investment in Alpha Modus’s securities and Alpha Modus’s securities may trade
at prices significantly below the price you paid for them. In such circumstances, the trading price of Alpha Modus’s securities
may not recover and may experience a further decline.
The
market price of Alpha Modus common stock may decline for a number of other reasons including if:
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investors
react negatively to the prospects of Alpha Modus’s business operations, results, and prospects; |
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actual
or anticipated fluctuations in Alpha Modus’s quarterly financial results or the quarterly financial results of companies perceived
to be similar to it; |
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in the market’s expectations about Alpha Modus’s operating results; |
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success
of competitors; |
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changes
in financial estimates and recommendations by securities analysts concerning Alpha Modus or the AI industry in general; |
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operating
and share price performance of other companies that investors deem comparable to Alpha Modus; |
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Alpha
Modus’s ability to market new and enhanced products and technologies on a timely basis; |
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changes
in laws and regulations affecting Alpha Modus’s business; |
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Modus’s ability to meet compliance requirements; |
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commencement
of, or involvement in, litigation involving Alpha Modus; |
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in Alpha Modus’s capital structure, such as future issuances of securities or the incurrence of additional debt; |
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the
volume of Alpha Modus’s shares of common stock available for public sale; or |
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major change in Alpha Modus’s Board or management. |
Future
sales, or the perception of future sales, by Alpha Modus or its stockholders in the public market could cause the market price for Alpha
Modus common stock to decline.
The
sale of shares of Alpha Modus common stock in the public market, or the perception that such sales could occur, could harm the prevailing
market price of shares of Alpha Modus common stock. These sales, or the possibility that these sales may occur, also might make it more
difficult for Alpha Modus to sell equity securities in the future at a time and at a price that it deems appropriate.
All
shares currently held by public stockholders and all of the shares issued in the Business Combination to existing Alpha Modus stockholders
are freely tradable without registration under the Securities Act, and without restriction by persons other than Alpha Modus’s
“affiliates” (as defined under Rule 144 of the Securities Act, “Rule 144”), including Alpha Modus’s
directors, executive officers and other affiliates.
Certain
existing Alpha Modus stockholders, who collectively own 4,342,308 shares of Alpha Modus common stock following the Business Combination
and 7,500,000 shares of Alpha Modus Series C Preferred Stock (all of which shares are deemed to be owned by William Alessi, the CEO of
Alpha Modus, as Mr. Alessi or his spouse have voting and dispositive power with respect to those shares), have agreed pursuant to a lock-up
agreement not to dispose of (or hedge) more than 2,484,616 shares Alpha Modus common stock or securities convertible into or exchangeable
for shares of Alpha Modus common stock during the period from the date of the Closing continuing through the earliest of: (i) the date
that is one year from the Closing Date, (ii) the last trading day when the last reported sale price of Alpha Modus common stock equals
or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for 20 trading
days within any 30-trading day period at least one year after the Closing Date, or (iii) such date on which Alpha Modus completes a liquidation,
merger, stock exchange, reorganization or other similar transaction that results in all of the Alpha Modus stockholders having the right
to exchange their shares of Alpha Modus common stock for cash, securities or other property. Because 2,484,616 shares of Alpha Modus
common stock held by those stockholders are not subject to those lock-up restrictions (and are being registered for resale), those stockholders
may sell those shares, which could cause the market price of Alpha Modus common stock to decline.
In
the future, Alpha Modus may also issue its securities in connection with investments or acquisitions. The amount of shares of Alpha Modus
common stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares
of Alpha Modus common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional
dilution to Alpha Modus stockholders.
Alpha
Modus’s failure to meet the continued listing requirements of Nasdaq could result in a delisting of its Securities.
On
January 6, 2025, Alpha Modus received a written notice from the Listing Qualifications Department of Nasdaq indicating that the Company
no longer met the minimum market value of publicly held shares (“MVPHS”) of $15,000,000 required by Nasdaq’s
listing rules. Under the rules, the Company has 180 calendar days, or until July 7, 2025, to regain compliance. If the Company’s
MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days during this period, Nasdaq will provide the Company
with written confirmation of compliance, and the matter will be closed. There is no guarantee, however, that the Company’s MVPHS
will increase sufficiently and for a long enough period of time for the Company to regain compliance with the rules.
If
Alpha Modus fails to regain compliance with the MVPHS rule, or fails to satisfy other continued listing requirements of Nasdaq, such
as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist the Company’s
securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell
or purchase the securities when you wish to do so. In the event of a delisting, Alpha Modus can provide no assurance that any action
taken by it to restore compliance with listing requirements would allow its securities to become listed again, stabilize the market price
or improve the liquidity of its securities, prevent its securities from dropping below the Nasdaq minimum bid price requirement or prevent
future non-compliance with Nasdaq’s listing requirements. Additionally, if Alpha Modus’s securities are not listed on, or
become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for
equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we
were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can
be established or sustained.
Alpha
Modus qualifies as an “emerging growth company” as well as a smaller reporting company within the meaning of the Securities
Act, and if Alpha Modus takes advantage of certain exemptions from disclosure requirements available to emerging growth companies or
smaller reporting companies, this could make Alpha Modus’s securities less attractive to investors and may make it more difficult
to compare Alpha Modus’s performance with other public companies.
Alpha
Modus qualifies as an “emerging growth company” within the meaning of Section 2(a)(19) of the Securities Act, as modified
by the JOBS Act. As such, Alpha Modus may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies for as long as Alpha Modus continues to be an emerging growth company,
including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, (ii) reduced disclosure obligations regarding executive compensation in Alpha Modus’s periodic reports and proxy statements
and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of
any golden parachute payments not previously approved. As a result, Alpha Modus’s stockholders may not have access to certain information
they may deem important. Alpha Modus will remain an emerging growth company until the earliest of (i) the last day of the fiscal year
in which the market value of Alpha Modus common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s
second fiscal quarter, (ii) the last day of the fiscal year in which Alpha Modus has total annual gross revenue of $1.07 billion or more
during such fiscal year (as indexed for inflation), (iii) the date on which Alpha Modus has issued more than $1 billion in non-convertible
debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first
sale of common stock in the IAC IPO. Investors may find Alpha Modus’s securities less attractive because Alpha Modus will rely
on these exemptions. Alpha Modus cannot predict whether investors will find its securities less attractive because it will rely on these
exemptions. If some investors find Alpha Modus’s securities less attractive as a result of its reliance on these exemptions, the
trading prices of Alpha Modus’s securities may be lower than they otherwise would be, there may be a less active trading market
for its securities and the trading prices of its securities may be more volatile.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such
extended transition period, which means that when a standard is issued or revised and it has different application dates for public or
private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new
or revised standard. This may make comparison of Alpha Modus’s financial statements with another public company which is neither
an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.
Additionally,
Alpha Modus will qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting
companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited
financial statements. Alpha Modus will remain a smaller reporting company until the last day of the fiscal year in which (i) the market
value of Alpha Modus common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter,
or (ii) its annual revenues exceeded $100 million during such completed fiscal year and the market value of Alpha Modus common stock
held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter. To the extent Alpha Modus takes
advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies
difficult or impossible.
The
unaudited pro forma financial information included herein may not be indicative of what Alpha Modus’s actual financial position
or results of operations would have been.
The
unaudited pro forma financial information included herein is presented for illustrative purposes only and is not necessarily indicative
of what Alpha Modus’s actual financial position or results of operations would have been had the Business Combination been completed
on the dates indicated.
Compliance
obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial
financial and management resources, and increase the time and costs of completing an initial business combination.
Section
404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls. Only in the event we are deemed
to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to
comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.
Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public
accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company
makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies
because a target business with which we seek to complete our initial business combination may not be in compliance with the provisions
of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to
achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
We
have identified material weakness in our internal control over financial reporting. This material weakness could continue to adversely
affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose
any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We
previously identified two significant deficiencies that resulted in immaterial revisions to our previously reported financial statements
contained in our Annual Report on Form 10-K for the year ended December 31, 2021, and the quarterly unaudited financial statements contained
in its Form 10-Qs for the quarterly periods ended March 31, 2022, June 30, 2022 and September 30, 2022. The deficiencies related to a
missed adjustment for shares that were forfeited on October 16, 2021, and a calculation error in the supporting documents for the Company’s
income tax footnote. These two identified significant deficiencies resulted in our inability to timely file its Annual Report on Form
10-K, and, thus, resulted in a material weakness in our internal control over financial reporting.
Additionally,
between March 2, 2023 and December 5, 2023, the Company withdrew an aggregate amount of $2,497,248.57 from the Company’s IPO trust
account pursuant to seven separate written withdrawal requests to Continental Stock Transfer and Trust (“Continental”), the
trustee for the trust account for the payment of taxes. While the Company paid an aggregate amount of $1,447,889.17 for tax payments,
the remaining amount of $1,049,359.40, that was withdrawn from the trust account for tax purposes, was used to pay other business expenses
of the Company. On March 15, 2024, the Sponsor deposited $1,049,359.40 into the trust account, and on March 26, 2024, the Sponsor deposited
an additional amount $36,285.07 into the trust account to reimburse the trust account for interest that would have earned on the $1,049,359.40
that was erroneously withdrawn from the trust account. This resulted in a material weakness in our internal control over financial reporting.
Subsequent to the end of the March 31 fiscal quarter, the funds were returned by the Sponsor to the trust account. Furthermore, during
the year ended December 31, 2023, funds were transferred from the trust account to the Company’s operating bank account and then
to the Sponsor, which is not in accordance with the trust agreement. During the year ended December 31, 2023, we did not have controls
in place to prevent or detect such transfer of funds. This resulted in a material weakness. Subsequent to the period end, the funds were
returned by the Sponsor to the Company’s operating bank account.
We
have concluded that our internal control over financial reporting was ineffective as of December 31, 2022, and as of December 31, 2023,
because material weaknesses existed in our internal control over financial reporting. We have taken a number of measures to remediate
the material weaknesses described therein; however, if we are unable to remediate our material weaknesses in a timely manner or we identify
additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may
incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject
to sanctions or investigations by the stock exchange on which our Class A common stock is listed, the SEC or other regulatory authorities.
Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3 or, which may impair
our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition. In either
case, the existence of material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect
our business and our reputation or investor perceptions of us, which could have a negative effect on the trading price of our stock.
In addition, we will incur additional costs to remediate material weaknesses in our internal control over financial reporting.
We
can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses in our internal
control over financial reporting or that any additional material weaknesses or restatements of financial results will not arise in the
future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.
In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may
not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
The
future exercise of registration rights may adversely affect the market price of our common stock.
Certain
of our stockholders will continue to have registration rights for restricted securities in the future. We are obligated to register certain
securities, including shares of common stock held by the Sponsor or its assignees and shares of Alpha Modus common stock received by
certain significant Alpha Modus stockholders as part of the Business Combination. We are obligated to (i) file a resale “shelf”
registration statement to register such securities (and any shares of Alpha Modus common stock into which they may be exercised following
the consummation of the Business Combination) after filing an amendment to this proxy statement/prospectus following the receipt of the
first round of SEC comments, and (ii) use reasonable best efforts to cause such registration statement to be declared effective by the
SEC as soon as reasonably practicable. Sales of a substantial number of shares of Alpha Modus common stock pursuant to the resale registration
statement in the public market could occur at any time the registration statement remains effective. In addition, certain registration
rights holders can request underwritten offerings to sell their securities. These sales, or the perception in the market that the holders
of a large number of shares intend to sell shares, could reduce the market price of Alpha Modus common stock.
In
connection with the Amended Registration Rights Agreement executed simultaneously with the Business Combination Agreement, approximately
4,500,000 shares of Alpha Modus common stock, held by the Sponsor and the Anchor Investors, as defined herein, approximately 4,340,000
shares of Alpha Modus common stock deemed to be beneficially owned by William Alessi, and up to 8,700,000 shares of Alpha Modus common
stock underlying the Private Placement Warrants held by Sponsor and the underwriter are entitled to registration rights. This amount
of shares subject to registration rights does not include any earnout shares which the Sponsor may receive following the closing of the
Business Combination Agreement. In the event the Sponsor does receive any earnout shares, the Sponsor will have registration rights with
respect to such earnout shares.
USE
OF PROCEEDS
All
of the common stock and the Private Warrants offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling
Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.
We
will receive up to an aggregate of approximately $26.7 million from the exercise of the Private Placement Warrants being registered,
assuming the exercise in full of all of those Private Placement Warrants for cash. We expect to use the net proceeds, if any, from the
exercise of those Private Placement Warrants for working capital and general corporate purposes. Because the exercise price of the Private
Placement Warrants substantially exceeds the current trading price of our common stock, it is unlikely that holders of our warrants will
be able to exercise such warrants in the near future, if at all. As a result, we are unlikely to receive any proceeds from the exercise
of our warrants in the near future, if at all. We will have broad discretion over the use of proceeds from the exercise of the Private
Placement Warrants. There is no assurance that the holders of the Private Placement Warrants will elect to exercise any or all of such
Private Placement Warrants, and there may be no economic incentive for such holders to exercise unless and until the trading price of
our common stock exceeds $11.50 per share. To the extent that the Private Placement Warrants are exercised on a “cashless basis,”
the amount of cash we would receive from the exercise of the Private Placement Warrants will decrease.
In
considering our capital requirements and sources of liquidity, we have not relied on the receipt of proceeds from the exercise of the
Private Placement Warrants. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations
— Liquidity and Capital Resources” for more information.
MARKET
PRICE AND DIVIDEND INFORMATION
Market
Information
Our
common stock and Public Warrants are currently listed on Nasdaq under the symbol “AMOD” and “AMODW,” respectively.
As of February 7, 2025, the closing price of our common stock and warrants was $2.37 and $0.0703, respectively.
As of February 7, 2025, there were 112 holders of record of our common stock.
Dividend
Policy
We
currently intend to retain all available funds and any future earnings to fund the growth and development of our business. We have never
declared or paid any cash dividends on our capital stock. We do not intend to pay cash dividends to our stockholders in the foreseeable
future. Investors should not purchase our common stock with the expectation of receiving cash dividends.
Any
future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition,
operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION AND OTHER DATA
Defined
terms included below shall have the same meaning as terms defined and included elsewhere in this prospectus. Unless the context otherwise
requires, references in this prospectus to “Legacy Alpha Modus” and “Alpha Modus” prior to the closing of the
Business Combination are intended to mean Alpha Modus, Corp., a Florida corporation, “IAC” refers to Insight Acquisition
Corp. (the Company) prior to the Closing, and “New IAC” refers to Alpha Modus Holdings, Inc. (the Company) following the
Closing. References in this prospectus to “Alpha Modus,” the “Company,” the “Post-Combination Company”
and the “combined company” after the closing of the Business Combination are intended to mean Alpha Modus Holdings, Inc.
and its consolidated subsidiaries.
Introduction
The
following unaudited pro forma condensed combined financial information presents the combination of financial information of IAC and Alpha
Modus, adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined
financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786
“Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction
(“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that
have occurred or are reasonably expected to occur (“Management’s Adjustments”). IAC has elected not to present Management’s
Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
The
following unaudited pro forma condensed combined balance sheet as of September 30, 2024, assumes that the Business Combination occurred
on September 30, 2024. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2024,
and for the year ended December 31, 2023, assume that the Business Combination occurred on January 1, 2023.
The
unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily
reflect what the Post-Combination Company’s financial condition or results of operations would have been had the Business Combination
occurred on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting
the future financial condition and results of operations of the Post-Combination Company. The actual financial position and results of
operations of the Post-Combination Company may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The
historical financial information of IAC was derived from the unaudited financial statements of IAC as of and for the nine months ended
September 30, 2024, and the audited financial statements of IAC for the year ended December 31, 2023, which are incorporated by reference.
The historical financial information of Alpha Modus was derived from the unaudited financial statements of Alpha Modus as of and for
the nine months ended September 30, 2024, and the audited financial statements of Alpha Modus for the year ended December 31, 2023, which
are incorporated by reference. This information should be read together with IAC’s and Alpha Modus’ unaudited and audited
financial statements, and related notes, the sections titled “IAC Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and “Alpha Modus’ Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and other financial information incorporated by reference.
Description
of the Business Combination
Effective
as of October 13, 2023, IAC, Merger Sub, and Alpha Modus, entered into a Business Combination Agreement pursuant to which Merger Sub
would merge with and into Alpha Modus with Alpha Modus as the surviving corporation and becoming a wholly-owned subsidiary of IAC, and
the Business Combination Agreement was amended on June 21, 2024. The Business Combination was closed on December 13, 2024.
Each
share of Alpha Modus common stock (other than the Dissenting Shares and the Cancelled Shares (as such terms are defined in the Business
Combination Agreement)) was converted into (i) the right to receive Earnout Shares (which may be zero), and (ii) one share of New IAC
common stock. Each share of Alpha Modus Series C preferred stock (other than the Dissenting Shares and the Cancelled Shares (as such
terms are defined in the Business Combination Agreement)) was converted into (i) the right to receive Earnout Shares (which may be zero),
and (ii) one share of New IAC Series C Preferred Stock. Alpha Modus had no outstanding options, warrants or other convertible securities
outstanding, so no IAC warrants, options or stock were issued to any Alpha Modus convertible security holders in the Merger.
IAC
common stock and warrants issued and outstanding immediately prior to the consummation of the Merger continue to be outstanding after
the closing of the Merger, except that all shares of IAC Class B Common Stock outstanding as of the Closing were converted into the same
number of shares of IAC Class A Common Stock as of the Closing (on a 1-for-1 basis). Although the IAC Charter provides for an anti-dilutive
adjustment to the IAC Class B-to-IAC Class A common stock conversion ratio (to a ratio greater than 1-for-1) if the number of shares
of IAC Class A common stock issued or deemed issued in connection with the Business Combination is in excess of the number of shares
of IAC Class A common stock originally issued in the IAC IPO, that anti-dilutive adjustment was not triggered at the Closing since less
than 24,000,000 shares of IAC Class A common stock (the number of shares of IAC Class A common stock issued in the IAC IPO) were issued
in connection with the Business Combination.
The
stockholders of Alpha Modus may be issued up to 2,200,000 additional Earnout Shares. The Alpha Modus Earnout Shares will be earned and
issued in one-third (1/3) increments (of approximately 733,333 shares) if, for any twenty (20) Trading Days within any thirty (30)-consecutive
Trading Day period beginning at least 180 days after the Closing Date and on or prior to the 5-year anniversary of the Closing Date,
the VWAP of the Common Shares equals or exceeds $13.00 per share, $15.00 per share and $18.00 per share (as equitably adjusted for stock
splits, stock dividends, combinations, recapitalizations and the like after the Closing), respectively, with all remaining Alpha Modus
Earnout Shares earned and issued upon a Change of Control of IAC at or prior to the 5-year anniversary of the Closing Date. Earnout Shares
will be issued pro rata to holders of Alpha Modus common stock and Alpha Modus preferred stock, with a holder of a share of Alpha Modus
common stock being treated equally with, and entitled to the same number of Earnout Shares as, a holder of a share of Alpha Modus preferred
stock.
Management
believes that the Earnout Shares is contingent consideration subject to the Financial Accounting Standards Board (“FASB”)
rule ASC 805, Business Combinations. The guidance in ASC 815-40-15 requires a two-step approach first evaluating an instrument’s
contingent exercise provisions and then settlement provisions to determine the classification of such instrument. The guidance as required
under step 2 of ASC 815-40-15 is often referred to as the “fixed-for-fixed” rule and states that an instrument meets such
criteria if the strike price and the notional of the instrument are fixed. In addition, if there is a change of control, all of the Earnout
Shares will be issued regardless of the stock price. As a result, it appears the change of control provision does impact the settlement
amount and the number of Earnout Shares issuable varies based on whether there is a change in control, which is not an input into a fixed-for-fixed
valuation model. Therefore, the change in control provision appears to represent a settlement provision that precludes indexation to
a company’s stock under step 2 of ASC 815-40-15-7. As such, management determined that they should be classified as liability.
At
the Closing, the Sponsor deposited 750,000 Common Shares into escrow. The Sponsor Earnout Shares will be released to the Sponsor according
to the same milestones and timelines applicable to the Alpha Modus Earnout Shares described above as such management determined that
they should be classified as liability.
At
the Closing, (i) the combined company repaid $1,000,000 to Polar and issued 150,000 shares to Polar, (ii) the combined company issued
to Janbella 1,392,308 Common Shares, (iii) the combined company issued to Michael Singer 125,000 Common Shares, (iv) the combined company
issued to Cantor 210,000 Common Shares, and (v) the combined company issued to Odeon 90,000 Common Shares.
Other
Related Events in connection with the Business Combination
On
October 23, 2024, IAC entered into a securities purchase agreement (the “SPA”) with Streeterville Capital, LLC (the “Streeterville”),
pursuant to which, upon the consummation of the Business Combination, IAC sold, and Streeterville purchased, a secured convertible promissory
note in the original principal amount of $2,890,000 (the “SPA Note”) for a net purchase price of $2,600,000 (after deducting
an original issue discount of $260,000, and payment of $30,000 for the Streeterville’s legal, accounting, due diligence, asset
monitoring, and other transaction expenses).
The
SPA Note will mature 18 months following the date the purchase price is delivered to IAC (the “Purchase Price Date”), will
accrue interest of 10% per annum, will be prepayable (after providing five trading days’ notice) at a 20% premium to the then-outstanding
balance of the SPA Note, and will be convertible into Class A common stock of IAC as described below. Within 30 days of the Purchase
Price Date, IAC will be obligated to file a registration statement on Form S-1 with the SEC registering a number of shares of Common
Stock issuable upon conversion of the SPA Note in an amount no less than two times the number of shares of Common Stock necessary to
convert the outstanding balance under the SPA Note in full as of the date IAC files the registration statement. If the registration statement
is not declared effective by the SEC within 120 days of the Purchase Price Date, the outstanding balance under the SPA Note will automatically
increase by one percent and will continue increasing by one percent every 30 days thereafter until the registration statement is declared
effective or Streeterville is able to sell shares of Common Stock issuable upon conversion of the SPA Note pursuant to Rule 144 under
the Securities Act of 1933, as amended. If by the date that 50% of the shares registered under the registration statement have been issued
to Streeterville (such date, the “Trigger Date”) the SPA Note has not yet been repaid in full, IAC will be obligated to file
an additional registration statement registering additional shares of Common Stock issuable upon conversion of the SPA Note within 30
days of the Trigger Date. If that additional registration statement is not declared effective by the SEC within 120 days of the Trigger
Date, the outstanding balance under the SPA Note will automatically increase by one percent and will continue increasing by one percent
every 30 days thereafter until the additional registration statement is declared effective.
On
December 12, 2024, IAC amended the SPA to provide for revised terms in the SPA Note to be issued under the SPA (the “Amended SPA”).
Specifically, the revised terms of the SPA Note provide (i) that the floor price on the Conversion Price is now $4.00, (ii) if the closing
bid price of IAC’s common stock is less than the floor price for ten consecutive trading days, IAC shall be obligated to commence
repayment of the SPA Note on 90 days following delivery of the Purchase Price Date, and (iii) Streeterville shall not foreclose on IAC’s
assets for twelve months following the Purchase Price Date.
Management
is still evaluating the accounting for such SPA Note.
On
December 17, New IAC entered into a waiver agreement (“Waiver Agreement”), effective as of the Closing, with the Sponsor,
pursuant to which, the parties determined to waive and release entirely any amounts owed under the related party transactions.
The
following table summarizes the number of shares of New IAC Common Stock outstanding following the consummation of the Business Combination(1):
| Equity
Capitalization Summary | |
Shares | | |
% | |
| Alpha
Modus Stockholders(2) | |
| 6,687,308 | | |
| 53.7 | % |
| William
Alessi and Affiliates(3) | |
| 4,342,308 | | |
| 34.9 | % |
| Other
Alpha Modus Stockholders | |
| 2,345,000 | | |
| 18.8 | % |
| IAC
Public Stockholders | |
| 92,944 | | |
| 0.7 | % |
| Sponsor(4) | |
| 4,199,990 | | |
| 33.7 | % |
| Anchor
Investors(5) | |
| 1,050,010 | | |
| 8.4 | % |
| Underwriters(6) | |
| 300,000 | | |
| 2.4 | % |
| Michael
Singer(7) | |
| 125,000 | | |
| 1.1 | % |
| Total
common stock | |
| 12,455,252 | | |
| 100.0 | % |
(1)
This table does not include the 12,000,000 shares underlying IAC Public Warrants, the 8,700,000 shares underlying IAC Private Placement
Warrants, or the 2,200,000 Earnout Shares that may be issued to the stockholders of Alpha Modus upon meeting certain milestones. Additionally,
the table does not include any shares of common stock that may be issued upon conversion of the Series C Preferred Stock issued at Closing
of the Business Combination, as the shares of Series C Preferred Stock issued at Closing are generally not convertible into IAC Class
A common stock until 18 months following Closing. Each share of IAC Class B common stock outstanding prior to Closing the Business Combination
were converted into IAC Class A common stock in accordance with the IAC Charter on a 1-for-1 basis. Although the IAC Charter provides
for an anti-dilutive adjustment to the IAC Class B-to-IAC Class A common stock conversion ratio (to a ratio greater than 1-for-1) if
the number of shares of IAC Class A common stock issued or deemed issued in connection with the Business Combination is in excess of
the number of shares of IAC Class A common stock originally issued in the IAC IPO, that anti-dilutive adjustment was not triggered at
the Closing since less than 24,000,000 shares of IAC Class A common stock (the number of shares of IAC Class A common stock issued in
the IAC IPO) were issued in connection with the Business Combination.
(2)
Includes 1,392,308 shares of IAC Class A common stock issued by IAC to Janbella at Closing and 5,295,000 shares of IAC Class A common
stock issued by IAC to Alpha Modus’ stockholders in the Business Combination as Merger Consideration. Prior to Closing, Janbella
owned 1,400,000 shares of Alpha Modus common stock, and Polar owned 150,000 shares of Alpha Modus common stock, such that the 5,295,000
shares of IAC Class A common stock issued to Alpha Modus’ stockholders as Merger Consideration includes 1,400,000 shares of IAC
Class A common stock issued to Janbella as Merger Consideration, and 150,000 shares of IAC Class A common stock issued to Polar as Merger
Consideration. Janbella Group, LLC is controlled by William Alessi, the current CEO and principal stockholder of Alpha Modus, who is
also the combined company’s CEO and principal stockholder.
(3)
Includes 2,792,308 shares of IAC Class A common stock held by Janbella following Closing, as well as 1,550,000 shares of IAC Class A
common stock held by the following other affiliates of Mr. Alessi following Closing: (i) 139,784 shares held in the name of The Alessi
2023 Irrevocable Trust, (ii) 200,000 shares held in the name of The WRA 2023 Irrevocable Trust, (iii) 200,000 shares held in the name
of The Janet Alessi 2023 Irrevocable Trust, (iv) 200,000 shares held in the name of The Isabella Alessi 2023 Irrevocable Trust, (v) 200,000
shares held in the name of The Kim Alessi Richter Irrevocable Trust, and (vi) 610,216 shares of Alpha Modus common stock held in the
name of the Alessi Revocable Trust. William Alessi’s spouse, Sonia Alessi, is the trustee of each of the preceding trusts, and
Mr. Alessi is deemed to be the beneficial owner of shares held in the name of each of the trusts.
(4)
The shares held by Sponsor at Closing reflect the forfeiture and cancellation of 750,000 shares by the Sponsor at Closing, but include
750,000 shares that will be transferred to escrow upon the Closing (which will still be deemed to be beneficially owned by the Sponsor
since it will retain voting power with respect to the shares transferred to escrow), which will be released to the Sponsor according
to the same milestones and timelines applicable to the Alpha Modus Earnout Shares described above.
(5)
The Anchor Investors are not affiliated with the Sponsor.
(6)
Includes 210,000 shares of IAC Class A common stock issued by IAC to Cantor at Closing, and 90,000 shares of IAC Class A common stock
issued by IAC to Odeon at Closing.
(7)
Includes 125,000 shares of IAC Class A common stock issued by IAC to Mr. Singer at Closing, but does not include shares of IAC Class
A common stock deemed to be owned by Mr. Singer as a result of his voting and dispositive power over the Sponsor (as such shares are
included in the Sponsor’s ownership in the table).
Accounting
Treatment
The
Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, although
IAC acquired all of the outstanding equity interests of Alpha Modus in the Business Combination, IAC was treated as the “acquired”
company and Alpha Modus was treated as the accounting acquirer for financial statement reporting purposes. Accordingly, the Business
Combination was treated as the equivalent of Alpha Modus issuing stock for the net assets of IAC, accompanied by a recapitalization.
The net assets of IAC were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business
Combination were those of Alpha Modus.
Alpha
Modus was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| ● |
The
Alpha Modus’ stockholders have the greatest voting interest in the Post-Combination Company; |
| |
|
| ● |
The
Alpha Modus’ stockholders have the ability to control decisions regarding election and removal of directors and officers of the
Post-Combination Company; |
| |
|
| ● |
Alpha
Modus comprises the ongoing operations of the Post-Combination Company; and |
| |
|
| ● |
Alpha
Modus’ existing senior management is the senior management of the Post-Combination Company. |
The
following unaudited pro forma condensed combined balance sheet as of September 30, 2024, and the unaudited pro forma condensed combined
statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, are based on the unaudited
and audited historical financial statements of IAC and Alpha Modus. The unaudited pro forma adjustments are based on information currently
available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual
results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial
information and include immaterial rounding differences.
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2024
(in thousands, except share and per share data)
| | |
(1)
Alpha
Modus
(Historical) | | |
(2)
IAC
(Historical) | | |
Transaction
Accounting
Adjustments | |
|
Pro
Forma
Combined | |
| Assets: | |
| | | |
| | | |
| | |
|
| | |
| Current
assets: | |
| | | |
| | | |
| | |
|
| | |
| Cash | |
$ | 66 | | |
$ | 12 | | |
$ | (12 | ) |
(B) |
$ | 620 | |
| | |
| | | |
| | | |
| 1,161 | |
(D) |
| | |
| | |
| | | |
| | | |
| (2,207 | ) |
(F) |
| | |
| | |
| | | |
| | | |
| (1,000 | ) |
(G) |
| | |
| | |
| | | |
| | | |
| 2,600 | |
(O) |
| | |
| Prepaid
expenses | |
| — | | |
| 84 | | |
| 142 | |
(F) |
| 226 | |
| Due
from related party | |
| — | | |
| 145 | | |
| (145 | ) |
(P) |
| — | |
| Due
from Sponsor | |
| — | | |
| 140 | | |
| (140 | ) |
(P) |
| — | |
| Total
current assets | |
| 66 | | |
| 381 | | |
| 399 | |
|
| 846 | |
| Investments
held in Trust Account | |
| — | | |
| 5,941 | | |
| (4,810 | ) |
(A) |
| — | |
| | |
| | | |
| | | |
| 12 | |
(B) |
| | |
| | |
| | | |
| | | |
| 18 | |
(C) |
| | |
| | |
| | | |
| | | |
| (1,161 | ) |
(D) |
| | |
| Total
Assets | |
$ | 66 | | |
$ | 6,322 | | |
$ | (5,542 | ) |
|
$ | 846 | |
| | |
| | | |
| | | |
| | |
|
| | |
| Liabilities,
Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | |
| | | |
| | | |
| | |
|
| | |
| Current
liabilities: | |
| | | |
| | | |
| | |
|
| | |
| Accounts
payable | |
$ | 61 | | |
$ | 459 | | |
$ | (266 | ) |
(F) |
$ | 254 | |
| Accrued
expenses | |
| — | | |
| 884 | | |
| (791 | ) |
(F) |
| 93 | |
| Accrued
liabilities to related party | |
| 74 | | |
| — | | |
| — | |
|
| 74 | |
| Accrued
interest payable to related party | |
| 65 | | |
| — | | |
| (65 | ) |
(G) |
| — | |
| Payable
to related party, net of discount | |
| 1,476 | | |
| — | | |
| (1,476 | ) |
(G) |
| — | |
| Loan
payable | |
| — | | |
| 108 | | |
| (108 | ) |
(G) |
| — | |
| Due
to related party | |
| — | | |
| 777 | | |
| (777 | ) |
(P) |
| — | |
| Due
to investor, net of debt discount | |
| — | | |
| 975 | | |
| (975 | ) |
(G) |
| — | |
| Vendor
promissory note | |
| — | | |
| — | | |
| 325 | |
(F) |
| 325 | |
| Income
tax payable | |
| — | | |
| 49 | | |
| — | |
|
| 49 | |
| Excise
tax payable | |
| — | | |
| 2,403 | | |
| — | |
|
| 2,403 | |
| Total
current liabilities | |
| 1,676 | | |
| 5,655 | | |
| (4,133 | ) |
|
| 3,198 | |
| Convertible
note – related party | |
| — | | |
| 35 | | |
| — | |
|
| 35 | |
| Deferred
underwriting commissions in connection with the Initial Public Offering | |
| — | | |
| 6,600 | | |
| (6,600 | ) |
(E) |
| — | |
| Earnout
Shares liability | |
| — | | |
| — | | |
| 19,861 | |
(M) |
| 19,861 | |
| Sponsor
Earnout Shares liability | |
| — | | |
| — | | |
| 6,771 | |
(N) |
| 6,771 | |
| SPA
Note | |
| — | | |
| — | | |
| 2,600 | |
(O) |
| 2,600 | |
| Deferred
tax liability | |
| — | | |
| 5 | | |
| — | |
|
| 5 | |
| Derivative
liabilities | |
| — | | |
| 1,035 | | |
| — | |
|
| 1,035 | |
| Total
Liabilities | |
| 1,676 | | |
| 13,330 | | |
| 18,499 | |
|
| 33,505 | |
| IAC
Class A common stock subject to possible redemption, $0.0001 par value, 519,080 shares at redemption value | |
| — | | |
| 5,850 | | |
| (4,810 | ) |
(A) |
| — | |
| | |
| | | |
| | | |
| 12 | |
(B) |
| | |
| | |
| | | |
| | | |
| 18 | |
(C) |
| | |
| | |
| | | |
| | | |
| (1,070 | ) |
(J) |
| | |
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2024
(in thousands, except share and per share data) — (Continued)
| | |
(1)
Alpha
Modus
(Historical) | | |
(2)
IAC
(Historical) | | |
Transaction
Accounting
Adjustments | |
|
Pro
Forma
Combined | |
| Stockholders’
Deficit | |
| | | |
| | | |
| | |
|
| | |
| IAC
preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | | |
| — | |
|
| — | |
| IAC
Series C preferred stock | |
| — | | |
| — | | |
| 1 | |
(G) |
| 1 | |
| IAC
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 5,100,000 non-redeemable shares issued and outstanding | |
| — | | |
| 1 | | |
| — | |
(E) |
| 2 | |
| | |
| | | |
| | | |
| 1 | |
(G) |
| | |
| | |
| | | |
| | | |
| — | |
(H) |
| | |
| | |
| | | |
| | | |
| — | |
(J) |
| | |
| | |
| | | |
| | | |
| — | |
(K) |
| | |
| | |
| | | |
| | | |
| — | |
(L) |
| | |
| IAC
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 900,000 shares issued and outstanding | |
| — | | |
| — | | |
| — | |
(K) |
| — | |
| Alpha
Modus series A preferred stock, $0.0001 par value; 5,100,000 shares authorized; none issued and outstanding | |
| — | | |
| — | | |
| — | |
|
| — | |
| Alpha
Modus series B preferred stock, $0.0001 par value; 10 shares authorized; none issued and outstanding | |
| — | | |
| — | | |
| — | |
|
| — | |
| Alpha
Modus common stock, $0.0001 par value; 490,000,000 shares authorized; 13,645,000 shares issued and outstanding | |
| 1 | | |
| — | | |
| (1 | ) |
(G) |
| — | |
| Additional
paid-in capital | |
| 2,763 | | |
| 1,350 | | |
| (12 | ) |
(B) |
| — | |
| | |
| | | |
| | | |
| 6,395 | |
(E) |
| | |
| | |
| | | |
| | | |
| (535 | ) |
(F) |
| | |
| | |
| | | |
| | | |
| 1,623 | |
(G) |
| | |
| | |
| | | |
| | | |
| 10,772 | |
(H) |
| | |
| | |
| | | |
| | | |
| (25,574 | ) |
(I) |
| | |
| | |
| | | |
| | | |
| 1,070 | |
(J) |
| | |
| | |
| | | |
| | | |
| — | |
(L) |
| | |
| | |
| | | |
| | | |
| (19,861 | ) |
(M) |
| | |
| | |
| | | |
| | | |
| (6,771 | ) |
(N) |
| | |
| | |
| | | |
| | | |
| 492 | |
(P) |
| | |
| | |
| | | |
| | | |
| 28,288 | |
(Q) |
| | |
| Accumulated
deficit | |
| (4,374 | ) | |
| (14,209 | ) | |
| 205 | |
(E) |
| (32,662 | ) |
| | |
| | | |
| | | |
| (798 | ) |
(F) |
| | |
| | |
| | | |
| | | |
| (10,772 | ) |
(H) |
| | |
| | |
| | | |
| | | |
| 25,574 | |
(I) |
| | |
| | |
| | | |
| | | |
| (28,288 | ) |
(Q) |
| | |
| Total
stockholders’ deficit | |
| (1,610 | ) | |
| (12,858 | ) | |
| (18,191 | ) |
|
| (32,659 | ) |
| Total
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | |
$ | 66 | | |
$ | 6,322 | | |
$ | (5,542 | ) |
|
$ | 846 | |
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
(in thousands, except share and per share data)
| | |
(1)
Alpha
Modus
(Historical) | | |
(2)
IAC
(Historical) | | |
Transaction
Accounting
Adjustments | |
|
Pro
Forma
Combined | |
| Revenue | |
$ | — | | |
$ | — | | |
$ | — | |
|
$ | — | |
| Operating
expenses | |
| | | |
| | | |
| | |
|
| | |
| General
and administrative expenses | |
| 286 | | |
| 902 | | |
| — | |
|
| 1,188 | |
| Franchise
tax expenses | |
| — | | |
| 77 | | |
| — | |
|
| 77 | |
| Professional
fees | |
| 312 | | |
| — | | |
| — | |
|
| 312 | |
| Total
operating expenses | |
| 598 | | |
| 979 | | |
| — | |
|
| 1,577 | |
| | |
| | | |
| | | |
| | |
|
| | |
| Loss
from operations | |
| (598 | ) | |
| (979 | ) | |
| — | |
|
| (1,577 | ) |
| | |
| | | |
| | | |
| | |
|
| | |
| Other
income (expense): | |
| | | |
| | | |
| | |
|
| | |
| Change
in fair value of derivative liabilities | |
| — | | |
| (412 | ) | |
| — | |
|
| (412 | ) |
| Stock
compensation expense | |
| — | | |
| (1,109 | ) | |
| — | |
|
| (1,109 | ) |
| Gain
on investments held in Trust Account | |
| — | | |
| 357 | | |
| (357 | ) |
(AA) |
| — | |
| Interest
expense | |
| (128 | ) | |
| (456 | ) | |
| 584 | |
(DD) |
| (242 | ) |
| | |
| | | |
| | | |
| (242 | ) |
(HH) |
| | |
| Total
other expense, net | |
| (128 | ) | |
| (1,620 | ) | |
| (15 | ) |
|
| (1,763 | ) |
| Loss
before income tax expense | |
| (726 | ) | |
| (2,599 | ) | |
| (15 | ) |
|
| (3,340 | ) |
| Income
tax expense | |
| — | | |
| (59 | ) | |
| — | |
|
| (59 | ) |
| Net
loss | |
$ | (726 | ) | |
$ | (2,658 | ) | |
$ | (15 | ) |
|
$ | (3,399 | ) |
| Loss
per share – basic and fully diluted | |
$ | (0.06 | ) | |
| | | |
| | |
|
| | |
| Basic
and diluted net loss per common share, Class A Redeemable common stock | |
| | | |
$ | (0.39 | ) | |
| | |
|
| | |
| Basic
and diluted net loss per common share, Class A Non-Redeemable common stock | |
| | | |
$ | (0.39 | ) | |
| | |
|
| | |
| Basic
and diluted net loss per common share, Class B common stock | |
| | | |
$ | (0.39 | ) | |
| | |
|
| | |
| Weighted
average number of common shares outstanding, basic and diluted | |
| | | |
| | | |
| | |
|
| 12,455,252 | |
| Net
loss per common share, basic and diluted | |
| | | |
| | | |
| | |
|
$ | (0.27 | ) |
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
(in thousands, except share and per share data)
| | |
(1)
Alpha
Modus
(Historical) | | |
(2)
IAC
(Historical) | | |
Transaction
Accounting
Adjustments | |
|
Pro
Forma
Combined | |
| Revenue | |
$ | — | | |
$ | — | | |
$ | — | |
|
$ | — | |
| Operating
expenses | |
| | | |
| | | |
| | |
|
| | |
| General
and administrative expenses | |
| 43 | | |
| 2,419 | | |
| 889 | |
(CC) |
| 14,123 | |
| | |
| | | |
| | | |
| 10,772 | |
(FF) |
| | |
| General
and administrative expenses – related party | |
| — | | |
| 300 | | |
| (300 | ) |
(BB) |
| — | |
| Franchise
tax expenses | |
| — | | |
| 143 | | |
| — | |
|
| 143 | |
| Professional
fees | |
| 349 | | |
| — | | |
| — | |
|
| 349 | |
| Total
operating expenses | |
| 392 | | |
| 2,862 | | |
| 11,361 | |
|
| 14,615 | |
| | |
| | | |
| | | |
| | |
|
| | |
| Loss
from operations | |
| (392 | ) | |
| (2,862 | ) | |
| (11,361 | ) |
|
| (14,615 | ) |
| | |
| | | |
| | | |
| | |
|
| | |
| Other
income (expense): | |
| | | |
| | | |
| | |
|
| | |
| Change
in fair value of derivative liabilities | |
| — | | |
| (538 | ) | |
| — | |
|
| (538 | ) |
| Change
in fair value of Forward Purchase Agreement Liability | |
| — | | |
| 86 | | |
| — | |
|
| 86 | |
| Gain
on investments held in Trust Account | |
| — | | |
| 3,118 | | |
| (3,118 | ) |
(AA) |
| — | |
| Gain
on forgiveness of deferred underwriting fee payable | |
| — | | |
| 273 | | |
| 205 | |
(EE) |
| 478 | |
| Gain
on settlement of vendor payable | |
| — | | |
| — | | |
| 91 | |
(GG) |
| 91 | |
| Interest
expense | |
| (109 | ) | |
| (112 | ) | |
| 221 | |
(DD) |
| (482 | ) |
| | |
| | | |
| | | |
| (482 | ) |
(HH) |
| | |
| Total
other (expense) income, net | |
| (109 | ) | |
| 2,827 | | |
| (3,083 | ) |
|
| (365 | ) |
| Loss
before income tax expense | |
| (501 | ) | |
| (35 | ) | |
| (14,444 | ) |
|
| (14,980 | ) |
| Income
tax expense | |
| — | | |
| (615 | ) | |
| — | |
|
| (615 | ) |
| Net
loss | |
$ | (501 | ) | |
$ | (650 | ) | |
$ | (14,444 | ) |
|
$ | (15,595 | ) |
| Loss
per share – basic and fully diluted | |
$ | (0.10 | ) | |
| | | |
| | |
|
| | |
| Basic
and diluted net loss per common share, Class A Redeemable common stock | |
| | | |
$ | (0.05 | ) | |
| | |
|
| | |
| Basic
and diluted net loss per common share, Class A Non-Redeemable common stock | |
| | | |
$ | (0.05 | ) | |
| | |
|
| | |
| Basic
and diluted net loss per common share, Class B common stock | |
| | | |
$ | (0.05 | ) | |
| | |
|
| | |
| Weighted
average number of common shares outstanding, basic and diluted | |
| | | |
| | | |
| | |
|
| 12,455,252 | |
| Net
loss per common share, basic and diluted | |
| | | |
| | | |
| | |
|
$ | (1.25 | ) |
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1.
Basis of Presentation
The
Business Combination was accounted for as a reverse recapitalization in accordance with GAAP as Alpha Modus was determined to be the
accounting acquirer, primarily due to the fact that Alpha Modus’ stockholders continue to control the Post-Combination Company.
Under this method of accounting, although IAC acquired all of the outstanding equity interests of Alpha Modus in the Business Combination,
IAC was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated
as the equivalent of Alpha Modus issuing stock for the net assets of IAC, accompanied by a recapitalization. The net assets of IAC were
stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those
of Alpha Modus.
The
unaudited pro forma condensed combined balance sheet as of September 30, 2024, assumes that the Business Combination and related transactions
occurred on September 30, 2024. The unaudited pro forma condensed combined statements of operations for the nine months ended September
30, 2024, and for the year ended December 31, 2023, presents pro forma effect to the Business Combination as if it had been completed
on January 1, 2023.
The
unaudited pro forma condensed combined balance sheet as of September 30, 2024, has been prepared using, and should be read in conjunction
with, the following:
●
IAC’s unaudited balance sheet as of September 30, 2024 and the related notes for the nine months ended September 30, 2024, incorporated
by reference; and
●
Alpha Modus’ unaudited consolidated balance sheet as of September 30, 2024 and the related notes for the nine months ended September
30, 2024, incorporated by reference.
The
unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024, has been prepared using,
and should be read in conjunction with, the following:
●
IAC’s unaudited statement of operations for the nine months ended September 30, 2024, and the related notes, incorporated by reference;
and
●
Alpha Modus’ unaudited consolidated statement of operations for the nine months ended September 30, 2024, and the related notes,
incorporated by reference.
The
unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, has been prepared using, and should
be read in conjunction with, the following:
●
IAC’s audited statement of operations for the year ended December 31, 2023, and the related notes, incorporated by reference; and
●
Alpha Modus’ audited consolidated statement of operations for the year ended December 31, 2023, and the related notes, incorporated
by reference.
As
the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts
recorded may differ materially from the information presented.
The
unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies,
tax savings or cost savings that may be associated with the Business Combination.
The
pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and
certain assumptions and methodologies that IAC believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments,
which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore,
it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material.
IAC believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business
Combination based on information available to management at this time and that the pro forma adjustments give appropriate effect to those
assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The
unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and
financial position of the Post-Combination Company would have been had the Business Combination taken place on the dates indicated, nor
are they indicative of the future consolidated results of operations or financial position of the Post-Combination Company. They should
be read in conjunction with the historical financial statements and notes thereto of IAC and Alpha Modus.
2.
Accounting Policies
Upon
consummation of the Business Combination, management of the Post-Combination Company performed a comprehensive review of the two entities’
accounting policies. As a result of the review, management of the Post-Combination Company did not identify differences between the accounting
policies of the two entities which have a material impact on the financial statements of the Post-Combination Company. Based on its analysis,
management of the Post-Combination Company did not identify any differences that would have a material impact on the unaudited pro forma
condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume
any differences in accounting policies.
3.
Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The
unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and
has been prepared for informational purposes only.
The
following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation
S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses”
to depict the Transaction Accounting Adjustments and present the Management’s Adjustments. IAC has elected not to present Management’s
Adjustments and is only presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to include
all necessary Transaction Accounting Adjustments pursuant to Article 11 of Regulation S-X, including those that are not expected to have
a continuing impact.
The
audited historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give
pro forma effect to Transaction Accounting Adjustments that reflect the accounting for the transaction under GAAP. Alpha Modus and IAC
have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate
activities between the companies.
The
pro forma combined statement of operations does not reflect a provision for income taxes or any amounts that would have resulted had
the Post-Combination Company filed consolidated income tax returns during the periods presented. The pro forma condensed combined balance
sheet does not reflect the deferred taxes of the Post-Combination Company as a result of the Business Combination. Since it is likely
that the Post-Combination Company will record a valuation allowance against the total U.S. and state deferred tax assets given the net
operating losses as the recoverability of the tax assets is uncertain, the tax provision is zero.
Transaction
Accounting Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The
Transaction Accounting Adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2024 are
as follows:
(A)
Reflects (i) the redemption of 426,135 IAC Class A ordinary shares for aggregate redemption payments of $4.8 million at a redemption
price of approximately $11.29 per share on December 3, 2024, and (2) the redemption of 1 IAC Class A common stock at a redemption price
of approximately $12.49 per share on December 13, 2024.
(B)
Reflects the deposit of $0.01 million to the Trust Account in connection with the Extension and the accretion of $0.01 million to the
IAC Class A Common Stock subject to possible redemption.
(C)
Reflects the interest income earned in the Trust Account subsequent to September 30, 2024.
(D)
Reflects the transfer of investments held in the Trust Account to cash.
(E)
Reflects the settlement of the deferred underwriting commissions by issuance of a total of 300,000 shares of IAC Class A Common Stock
to the Underwriters upon the Closing of the Business Combination.
(F)
Represents transaction costs incurred by IAC and Alpha Modus of approximately $2.0 million and $0.6 million, respectively. These costs
are accounted for a reduction in the combined cash account with a corresponding reduction in additional paid-in capital or accumulated
deficit consistent with the treatment described in SEC Staff Accounting Bulletin Topic 5.A. These transaction costs will not recur in
the Post-Combination Company’s income beyond 12 months after the transaction.
For
the IAC transaction costs, $1.0 million has been accrued as of the pro forma balance sheet date. $0.1 million are recorded as prepayment
for D&O insurance policy. The remaining amount of $0.9 million is reflected as an adjustment to accumulated losses. Additionally,
IAC issued a vendor promissory note in the principal amount of $0.3 million and paid cash of $0.4 million to settle the $0.8 million
balance owed to such vendor as of the pro forma balance sheet date. A settlement gain of $0.1 million was recorded as of the pro forma
balance sheet date. The IAC estimated transaction costs exclude the deferred underwriting commissions included in (E) above.
For
the Alpha Modus transaction costs, $0.1 million has been accrued as of the pro forma balance sheet date. The remaining amount of $0.5
million is included as an adjustment to additional paid-in capital.
(G)
Represents the issuance of 5,295,000 shares of IAC Class A Common Stock and 7,500,000 IAC Series C preferred stock and the payment of
$1.0 million to the existing Alpha Modus’ stockholders and debt holders.
(H)
Represents the issuance of 1,392,308 shares of IAC Class A Common Stock to Janbella and 125,000 shares of IAC Class A Common Stock to
Michael Singer upon the Closing of the Business Combination.
(I)
Reflects the elimination of IAC’s historical accumulated deficit after recording the settlement of deferred underwriting commissions
by stock as described in Adjustment (E) above, the transaction costs as described in (F) above, and the issuance of stock as described
in Adjustment (H) above.
(J)
Reflects reclassification of 92,944 shares of IAC Class A common stock subject to possible redemption to permanent equity.
(K)
Reflects the conversion of 900,000 shares of IAC Class B Common Stock into the same number of IAC Class A Common Stock at the Business
Combination.
(L)
Reflects the forfeiture and cancellation of 750,000 shares of IAC Common Stock by the Sponsor at the Business Combination.
(M)
Reflects the obligation to issue Earnout Shares to Alpha Modus stockholders upon meeting milestones. The Earnout Shares were valued with
a Monte Carlo Model simulation. The Monte Carlo Model simulation included 100,000 iterations and simulated the stock price and the change
of control probabilities (at 3 and 4 years). The fair value was the discounted cash flow from the sale of the securities at the time
the restrictions terminated.
(N)
Reflects the obligation to issue Sponsor Earnout Shares to Sponsor upon meeting milestones. The Earnout Shares were valued with a Monte
Carlo Model simulation. The Monte Carlo Model simulation included 100,000 iterations and simulated the stock price and the change of
control probabilities (at 3 and 4 years). The fair value was the discounted cash flow from the sale of the securities at the time the
restrictions terminated.
(O)
Reflects the cash proceeds received in accordance with the SPA executed on October 23, 2024 and the amended SPA executed on December
12, 2024.
(P)
Reflects the waiver of any amounts owed under the related party transactions pursuant to the Waiver Agreement effective as of the Closing.
(Q)
Reflects the reclassification under equity to avoid negative additional paid-in capital.
Transaction
Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
The
Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statements of operations for the nine months
ended September 30, 2024 and the year ended December 31, 2023 are as follows:
(AA)
Represents an adjustment to eliminate interest earned on investments held in the Trust Account after giving effect to the Business Combination
as if it had occurred on January 1, 2023.
(BB)
Represents an adjustment to eliminate administrative service fees that will be ceased paying at the Business Combination.
(CC)
Represents an adjustment to eliminate the effect of the pro forma balance sheet adjustment presented in (F) above in the aggregate amount
of $0.9 million for the direct, incremental costs of the Business Combination incurred by IAC, assuming those adjustments were made as
of the beginning of the fiscal year presented. As these costs are directly related to the Business Combination, they are not expected
to recur in the income of the Post-Combination Company beyond 12 months after the Business Combination.
(DD)
Represents an adjustment to eliminate interest expense after giving effect to the conversion of debt at the Business Combination as if
it had occurred on January 1, 2023.
(EE)
Reflects the settlement of the deferred underwriting commissions by issuance of a total of 300,000 shares of IAC Class A Common Stock
to the Underwriters upon the Closing of the Business Combination.
(FF)
Represents the issuance of 1,392,308 shares of IAC Class A Common Stock to Janbella and 125,000 shares of IAC Class A Common Stock to
Michael Singer upon the Closing of the Business Combination.
On
June 21, 2024, IAC, Alpha Modus and Merger Sub entered into an amendment to the Alpha Modus BCA (the “BCA Amendment”). The
BCA Amendment requires the combined company to issue 1,392,308 shares to Janbella and 125,000 shares to Michael Singer upon the Closing
of the Business Combination. The difference between the fair value of the shares and the book value of the related party payables due
to Michael Singer has been recorded as additional compensation expense under ASC 718. The management evaluated the shares issuable to
Janbella under ASC 815 and concluded that the shares are indexed to the stock as a change in control or merger of the issuer as contemplated
by the BCA Amendment agreement is representative of an exercise contingency that does not preclude equity classification in accordance
with ASC 815-40-15-7A. Furthermore, management determined that the shares issuable to Janbella meet the additional equity classification
considerations listed within ASC 815-40-25-10. As a result of the conclusions listed above, the Company has concluded that it will recognize
and measure the issuance of shares at fair value as of the acquisition date.
(GG)
Reflects the settlement of vendor payable by issuance of a convertible promissory note upon the Closing of the Business Combination.
(HH)
Reflects the interest expense accrued on the SPA Note as if the Business Combination had closed on January 1, 2023.
4.
Net Loss per Share
Represents
the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in
connection with the Business Combination, assuming the shares were outstanding since January 1, 2023. As the Business Combination and
related transactions are being reflected as if they had occurred at the beginning of January 1, 2023, the calculation of weighted average
shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have
been outstanding for the entire periods presented.
The
unaudited pro forma condensed combined financial information has been prepared with the actual redemptions by IAC Public Stockholders
of shares of IAC Class A common stock for the nine months ended September 30, 2024 and for the year ended December 31, 2023:
| (in
thousands, except share and per share data) | |
Nine
Months Ended September
30, 2024 | | |
Year
Ended December
31, 2023 | |
| Net
loss | |
$ | (3,399 | ) | |
$ | (15,595 | ) |
| Weighted
average shares outstanding of common stock(1) | |
| 12,455,252 | | |
| 12,455,252 | |
| Net
loss per common share, basic and diluted | |
$ | (0.27 | ) | |
$ | (1.25 | ) |
(1)
For the purposes of calculating diluted earnings per share, all outstanding 12,000,000 shares of IAC Public Warrants and 8,700,000 shares
of IAC Private Placement Warrants should have been assumed to have been exercised, and all 7,500,000 shares of IAC Series C Preferred
Stock should have assumed to have been converted. However, since this results in anti-dilution, the effect of such exercise/conversion
was not included in calculation of diluted loss per share.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF RESULTS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References
in this section to “we,” “our,” “us,” and “Alpha Modus” generally refer to Alpha Modus,
Corp. prior to the Business Combination and to Alpha Modus Holdings, Inc. and its consolidated subsidiaries after giving effect to the
Business Combination. References to “Legacy Alpha Modus” generally refer to Alpha Modus, Corp., and references to the “Company”
generally refer to Alpha Modus Holdings, Inc. The following discussion and analysis of our results of operations and financial condition
should be read in conjunction with the sections entitled “Business,” “Unaudited Pro Forma Condensed Combined Financial
Information and Other Data,” and our financial statements and related notes and other information included elsewhere in this prospectus.
This discussion contains forward-looking statements based upon our current expectations, estimates and projections that involve risks
and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements due to, among other
considerations, the matters discussed under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Overview
The
Company was a blank check company as “Insight Acquisition Corp.” On December 13, 2024, the Company completed a business combination
with Alpha Modus, Corp., a Florida corporation. At closing of the business combination, the Company’s name was changed to “Alpha
Modus Holdings, Inc.,” and the Company’s operations are now those of Alpha Modus.
Alpha
Modus offers technology as a service. Its core technologies have been deployed on IBM’s Bluemix platform and earned a Beacon Award
by IBM 2016 for Best New Application on IBM Cloud from an Entrepreneur. Alpha Modus has been recognized by IBM Watson as a thought leader
in technology. As technological innovation is at the core of the company, Alpha Modus has developed comprehensive end-to-end patented
solutions for retailers and consumer brands to bring innovation to consumers and enhance their experience at the point of sale.
On
January 11, 2024, Alpha Modus entered into a license agreement with GZ6G Technologies Corp. (“GZ6G”), which gives
GZ6G the right to use Alpha Modus’ patented intellectual property, and pertains to GZ6G’s promotional, advertising, and operational
functions, including co-development arrangements with Alpha Modus for AI-driven advertising solutions for stadiums and event management.
Alpha Modus intends to deploy services under the license by the end of 2024, expand event venue service offerings in late 2025, and expand
service offerings in additional industries in 2024.
On
January 16, 2024, Alpha Modus initiated a patent infringement action against The Kroger Company alleging patent infringement of several
Alpha Modus patents encompassing retail marketing and advertising data-driven technologies to enhance consumer’s in-store experience
at the point of decision. On November 12, 2024, Alpha Modus initiated a patent infringement lawsuit against Brookshire Grocery Co. alleging
infringement of several Alpha Modus patents pertaining to its ‘571 patent portfolio, ‘825 patent portfolio, ‘672 patent
portfolio, ‘890 patent portfolio and ‘880 patent portfolio, which encompass retail marketing and advertising data-driven
technologies to enhance consumers’ in-store experience at the point of decision. On December 17, 2024, Alpha Modus filed a similar
patent infringement lawsuit against Wakefern Food Corporation and Shelf Nine LLC, and on February 3, 2025, Alpha Modus filed a patent
infringement lawsuit against Walgreen Co.
On
April 10, 2024, Alpha Modus entered into a license agreement with Xalles Holdings Inc. and its subsidiary, CashXAI Inc. (“CashX”),
which gives CashX the exclusive right to use all of Alpha Modus’ patented intellectual property in connection with CashX’s
promotional, advertising, and operational functions, including co-development arrangements with Alpha Modus, within the Exclusive Industry.
The “Exclusive Industry” means the industry relating to self-service kiosks located in retail food, drug and convenience
stores for the purpose of serving Unbanked and Underbanked consumers, by offering banking, phone and insurance solutions to the consumer.
An “Unbanked” consumer means a person that does not have a checking or savings account with an FDIC-insured institution,
and an “Underbanked” consumer means a person that has or had a checking or savings account with an FDIC-insured institution,
but regularly uses non-traditional banks such as Venmo or the Cash App, or lenders such as a check cashing company or payday lender.
Alpha Modus intends to deploy services under the license by the end of 2024.
Alpha
Modus intends to continue its intellectual property licensing and enforcement efforts throughout 2025. No assurances can be given that
any of these plans will come to fruition or that, if implemented, they will necessarily yield positive results.
Business
Combination Agreements
The
Company was originally incorporated in Delaware on April 20, 2021, as a special purpose acquisition company under the name “Insight
Acquisition Corp.” (“INAQ”).
On
October 13, 2023, the Company and Alpha Modus, Corp. entered into the Business Combination Agreement, which was subsequently amended
on June 21, 2024. Pursuant to the Business Combination Agreement, as amended, Alpha Modus, Corp., and the Company agreed that (i) each
share of Alpha Modus, Corp. common stock (other than those properly exercising any applicable appraisal rights under applicable law)
would be converted into (A) one share of Company common stock, and (B) the contingent right to receive a pro rata portion of the Earnout
Shares (as defined below) (which may be zero); and (iii) each share of Alpha Modus, Corp. preferred stock (other than those properly
exercising any applicable appraisal rights under applicable law) would be converted into (A) one share of Company Series C Preferred
Stock, and (B) the contingent right to receive a pro rata portion of the Earnout Shares (as defined below) (which may be zero) (collectively
the “Merger Consideration”).
The
stockholders of Alpha Modus, Corp. may be issued up to 2,200,000 additional shares of Company common stock (the “Earnout Shares”).
The Earnout Shares will be earned and issued in one-third (1/3) increments (of approximately 733,333 shares) if, for any twenty (20)
trading days within any thirty (30)-consecutive trading day period beginning at least 180 days after the Closing and on or prior to the
5-year anniversary of the Closing, the VWAP of the Company’s common stock equals or exceeds $13.00 per share, $15.00 per share
and $18.00 per share (as equitably adjusted for stock splits, stock dividends, combinations, recapitalizations and the like after the
Closing), respectively, with all remaining Earnout Shares earned and issued upon certain changes of control of IAC at or prior to the
5-year anniversary of the Closing.
Additionally,
at the Closing, the Company’s sponsor, Insight Acquisition Sponsor LLC (the “Sponsor”) was required to deposit
750,000 shares of Company common stock into escrow (the “Sponsor Earnout Shares”), and the Sponsor Earnout Shares
will be released to the Sponsor according to the same milestones and timelines applicable to the Earnout Shares described above. Additionally,
the Company and the Sponsor agreed that the Sponsor will forfeit and cancel 750,000 shares of Company common stock at Closing. Finally,
at the Closing, (i) the Company will to use its best efforts to pay off the Company’s loan(s) from Polar Multi-Strategy Master
Fund (“Polar”) (expected to be approximately $975,000 at Closing), (ii) the Company will use its best efforts to pay
Alpha Modus, Corp.’s loans from Janbella Group, LLC (“Janbella”) (expected to be approximately $1,400,000 at
Closing), (iii) the Company will issue to Janbella 1,392,308 shares of Company common stock, (iv) the Company will issue to Michael Singer
125,000 shares of Company common stock, (v) the Company will issue to Cantor Fitzgerald & Co. (“Cantor”) 210,000
shares of Company common stock, and (vi) the Company will issue to Odeon Capital Group, LLC (“Odeon”) 90,000 shares
of Company common stock.
Cantor,
the representative of the underwriters in the Company’s original IPO in September 2021, was entitled to a deferred underwriting
commission upon the closing of the Business Combination of $6,600,000, which amount was not subject to change based on redemption levels.
On June 20, 2024, Cantor and Odeon entered into fee modification agreements with the Company pursuant to which (i) Cantor would be issued
210,000 shares of Company common stock and Odeon would be issued 90,000 shares of Company common stock at the closing of the Business
Combination, and (ii) Cantor and Odeon would waive the right to any further underwriting commissions or other payments by the Company
under its Underwriting Agreement with them, subject to the other terms of those fee modification agreements.
On
October 29, 2024, Company stockholders approved the Business Combination and other transactions and proposal presented within the proxy
statement/prospectus in connection with Business Combination transactions.
Financing
in Connection with Business Combination
On
October 23, 2024, Alpha Modus Holdings, Inc. (the “Company”) entered into a securities purchase agreement (the “SPA”)
with Streeterville Capital, LLC (the “Investor”), pursuant to which the Company would sell, and the Investor would
purchase, a secured convertible promissory note in the original principal amount of $2,890,000 (the “Note”) for a
net purchase price of $2,600,000 (after deducting an original issue discount of $260,000, and payment of $30,000 for the Investor’s
legal, accounting, due diligence, asset monitoring, and other transaction expenses).
The
SPA includes customary representations, warranties and covenants by the Company and customary closing conditions. The SPA grants the
Investor (i) the right to fund up to an additional $5,000,000 to the Company, with the Company’s consent, through the date that
is six months following repayment of the Note in full (the “Reinvestment Right”), and (ii) the exclusive right, on
customary market terms, to enter into an equity line of credit or other similar financing arrangement with the Company for at least $20,000,000,
through the date that is one year following the Purchase Price Date (defined below). Pursuant the SPA, Alpha Modus, Corp. is required
to guarantee all of the Company’s obligations under the Note and related transaction documents pursuant to a guaranty agreement
(the “Guaranty”), and the Note will also be secured by security agreements (the “Security Agreements”)
by and between the Investor and both the Company and Alpha Modus, Corp., granting the Investor first priority security interests in all
assets of the Company, as well as all assets of Alpha Modus, Corp., including all of Alpha Modus’ intellectual property (and including
Alpha Modus’ patent portfolio) pursuant to a separate intellectual property security agreement (the “IP Security Agreement”).
Additionally, the Company and Alpha Modus (collectively the “Borrowers”), and William Alessi, his entity, Janbella
Group, LLC, and the trusts deemed to be beneficially owned by Mr. Alessi (each a “Capital Party” and collectively
the “Capital Parties”), are required to execute at closing a subordination and voting agreement (the “Subordination
Agreement”) pursuant to which (i) all of the Borrowers’ indebtedness and obligations to each Capital Party will be subordinated
to Investor, (ii) all security interests of any Capital Party will be subordinate to Investor’s security interests, (iii) the Borrowers
will not make any payments to any Capital Party, (iv) none of the Capital Parties will accelerate any subordinated debt or equity, (v)
and no Capital Party will convert or exchange their preferred stock of the Company into Common Stock, until such time as the Investor
has been fully paid and all financing agreements between the Investor and the Borrowers are terminated.
The
Note will mature 18 months following the date the purchase price is delivered to the Company (the “Purchase Price Date”),
will accrue interest of 10% per annum, will be prepayable (after providing five trading days’ notice) at a 20% premium to the then-outstanding
balance of the Note, and will be convertible into Class A common stock (“Common Stock”) of the Company as described
below. Within 30 days of the Purchase Price Date, the Company will be obligated to file a registration statement on Form S-1 with the
SEC registering a number of shares of Common Stock issuable upon conversion of the Note. If the registration statement is not declared
effective by the SEC within 120 days of the Purchase Price Date, the outstanding balance under the Note will automatically increase by
one percent and will continue increasing by one percent every 30 days thereafter until the registration statement is declared effective
or the Investor is able to sell shares of Common Stock issuable upon conversion of the Note pursuant to Rule 144 under the Securities
Act of 1933, as amended. If by the date that 50% of the shares registered under the registration statement have been issued to Investor
(such date, the “Trigger Date”) the Note has not yet been repaid in full, the Company will be obligated to file an
additional registration statement registering additional shares of Common Stock issuable upon conversion of the Note within 30 days of
the Trigger Date. If that additional registration statement is not declared effective by the SEC within 120 days of the Trigger Date,
the outstanding balance under the Note will automatically increase by one percent and will continue increasing by one percent every 30
days thereafter until the additional registration statement is declared effective.
The
Note will be convertible at the election of the Investor into shares of Common Stock at any time following the earlier of the effective
date of the registration statement described above or one year following the Purchase Price Date, at a conversion price equal to 90%
multiplied by the lowest daily volume-weighted average price during the five trading days preceding conversion, and provided that (i)
the Investor may not convert the Note into shares of Common Stock to the extent that such conversion would result in the Investor’s
beneficial ownership of Common Stock being in excess of 4.99% (or 9.99% if the Company’s market capitalization is less than $10
million), and provided that (ii) the Note is not convertible into a total cumulative number of shares of Common Stock in excess of the
number of shares of Common Stock permitted by Nasdaq Listing Rule 5635 (the “Exchange Cap”). Pursuant to the terms
of the Note, the Company will, within 120 days of the Purchase Price Date, seek shareholder approval of the Note and the issuance of
shares of Common Stock, issuable upon conversion of the Note and pursuant to the Reinvestment Right, in excess of the Exchange Cap (the
“Shareholder Approvals”). If such shareholder approval is not obtained within 120 days, the Company will continue
to seek shareholder approval every three months thereafter until shareholder approval is obtained. Pursuant to the Subordination Agreement,
each Capital Party is required to vote all of their shares of Company stock in favor of the Shareholder Approvals. Under the SPA, the
Company is required to initially reserve 7,500,000 shares of its Common Stock for issuance to the Investor under the Note, and the Company
is required to add additional shares to the reserve in increments of 100,000 shares when requested by the Investor if at the time of
the request the number of shares being held in reserve is less than three times the number of shares of Common Stock equal to the outstanding
balance under the Note divided by the applicable conversion price at that time.
On
December 12, 2024, the Company amended the SPA (the “Amended SPA”) to revise the terms of the Note. Pursuant to the
Amended SPA, the Note is not convertible below a floor price of $4.00/share, but if the closing bid price of the Company’s common
stock is less than the floor price for ten consecutive trading days, the Company is required to begin making monthly payments under the
Note on the date that is 90 days following the original funding date.
On
or about December 13, 2024, the Company issued the Note to the Investor, the Note was funded on or about December 16, 2024, and since
that time, the closing bid price of the Company’s common stock has been less than the $4.00 floor price for more than ten consecutive
trading days, which, under the terms of the Amended SPA, would have required the Company to begin making monthly payments under the Note,
with those monthly payments commencing on March 16, 2025, and with those monthly payments being equal to 120% multiplied by the outstanding
balance divided by the lesser of 6 or the number of months remaining until the Note’s maturity date.
On
January 27, 2025, the Company and the Investor entered into an amendment to the Note providing that (i) the Company is not required to
begin making monthly payments under the Note until May 16, 2025, (ii) the monthly payments will equal $485,000.00 plus all accrued but
unpaid interest, multiplied by 120%, and (iii) the Company will pay to the Investor 50% of all proceeds received by the Company from
any equity line of credit or similar arrangement within one trading day of receipt by the Company.
Business
Combination Closing
On
December 13, 2024, the parties to the Business Combination Agreement consummated the Business Combination, and in connection with closing
issued the Note to the Investor, and entered into the Guaranty, Security Agreements, IP Security Agreement, and Subordination Agreement.
Immediately upon the consummation of the Business Combination, Alpha Modus, Corp. became a wholly owned subsidiary of the Company, the
Company changed its name to “Alpha Modus Holdings, Inc.,” and the Company is now listed on Nasdaq under the symbol “AMOD”.
The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, INAQ is treated as the acquired
company for financial statement reporting purposes. See “Unaudited Pro Forma Condensed Combined Financial Information and Other
Data.” Legacy Alpha Modus’s financial statements for previous periods will be disclosed in the Company’s future
periodic reports filed with the SEC.
In
connection with the Business Combination, approximately 426,136 shares of common stock were redeemed, which represented a significant
portion of the publicly traded shares outstanding immediately prior to the Business Combination and resulted in only approximately $1.16
million of cash from the INAQ trust account becoming available to Alpha Modus in connection with the closing of the Business Combination.
In the Business Combination, the Company issued 5,295,000 shares of common stock and 7,500,000 shares of Series C Preferred Stock to
Legacy Alpha Modus’s shareholders as merger consideration in the Business Combination, and the Company issued 1,817,308 shares
of common stock to various parties as required by the Business Combination Agreement. Immediately following the Business Combination,
including the redemption of shares described above, there were 12,455,252 shares of the Company’s common stock (all Class A common
stock) issued and outstanding, and 7,500,000 shares of the Company’s Series C Preferred Stock issued and outstanding.
The
7,514,642 shares that may be resold and/or issued into the public markets pursuant to this prospectus represent approximately
60.2% of the shares of our common stock outstanding as of February 7, 2025 (after giving effect to the issuance of the
Convertible Note Shares and Private Warrant Shares). The Selling Securityholders will determine the timing, pricing and rate at which
they sell such shares into the public market, and such sales could have a significant negative impact on the trading price of our common
stock. Although the current trading price of our common stock is significantly below $10.00 per share, which was the sales price for
units in the Insight Acquisition Corp. initial public offering, certain of the Selling Securityholders have an incentive to sell because
they purchased shares and/or warrants at prices below the initial public offering price and/or below the current trading price of our
securities. Sales by such investors may prevent the trading price of our securities from exceeding the initial public offering price
and may cause the trading prices of our securities to experience a further decline.
As
a result of becoming a publicly traded company, we will need to hire additional personnel and implement procedures and processes to address
public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for,
among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting
and legal and administrative resources, including increased audit and legal fees.
Off-balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to investors.
Results
of Operations
For
the three months ended September 30, 2024, compared to the three months ended September 30, 2023
Revenue
Alpha
Modus had no revenue during the three months ended September 30, 2024 and 2023.
Operating
Expenses
Alpha
Modus had operating expenses of $286,131 for the three months ended September 30, 2024, compared to $5,900 for the three months ended
September 30, 2023. The increase was primarily due to the reclassification of expenses for a related party of $208,433 during the three
months ended September 30, 2023. These expenses were charged directly against additional paid-in capital instead of an expense to Alpha
Modus.
Other
Income/Expenses
Alpha
Modus had total other expense of $29,615 for the three months ended September 30, 2024, $29,618 of which was interest expense, as compared
to total other expense of $22,089 and interest expense of $22,090 during the three months ended September 30, 2023.
Net
Loss
Alpha
Modus had a net loss of $315,746 for the three months ended September 30, 2024, compared to $27,989 of net loss for the three months
ended September 30, 2023. The increase in net loss during the three months ended September 30, 2024, as compared to the three months
ended September 30, 2023, was primarily due to the reclassification of expenses for a related party of $208,433 during the three months
ended September 30, 2023, described above.
For
the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023
Revenue
Alpha
Modus had no revenue during the nine months ended September 30, 2024 and 2023.
Operating
Expenses
Alpha
Modus had operating expenses of $597,595 for the nine months ended September 30, 2024, compared to $177,519 for the nine months ended
September 30, 2023. The increase was primarily due to the reclassification of expenses for a related party of $208,433 during the nine
months ended September 30, 2023. These expenses were charged directly against additional paid-in capital instead of an expense to Alpha
Modus. Professional fees also increased by $164,979 during the nine months ended September 30, 2024.
Other
Income/Expenses
Alpha
Modus had total other expense of $127,884 for the nine months ended September 30, 2024, $127,892 of which was interest expense, as compared
to total other expense of $57,470 and interest expense of $57,474 during the nine months ended September 30, 2023.
Net
Loss
Alpha
Modus had a net loss of $725,479 for the nine months ended September 30, 2024, compared to $234,989 of net loss for the nine months ended
September 30, 2023. The increase in net loss during the nine months ended September 30, 2024, as compared to the nine months ended September
30, 2023, was primarily due to the reclassification of expenses for a related party of $208,433 and professional fees as described above.
Liquidity
and Capital Resources
As
of September 30, 2024, Alpha Modus had cash of $66,011. We do not have sufficient resources to effectuate our business. We expect to
incur significant expenses during the next twelve months of operations, including as a result of becoming a public company. We estimate
that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees. To maintain our plan
of growth, we believe we will need to raise a minimum of an additional $2,500,000. These factors, along with the lack of current Company
revenues, raise substantial doubts about Alpha Modus’s ability to continue as a going concern.
Operations
used cash of $541,826 for the nine months ended September 30, 2024, compared to $304,620 for the nine months ended September 30, 2023.
We
had net cash provided by financing activities for the nine months ended September 30, 2024, of $501,028, compared to $397,042 for the
same period in 2023.
We
will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into
a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have
no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we
have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact
on our ability to remain a viable company.
Emerging
Growth Company Status
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth
companies, and any such election to not take advantage of the extended transition period is irrevocable.
IAC
is an “emerging growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the
benefits of the extended transition period for new or revised financial accounting standards. Following the consummation of the Business
Combination, Alpha Modus expects to remain an emerging growth company at least through the end of the 2023 fiscal year and to continue
to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting
standards to the extent permitted by such standards. This may make it difficult or impossible to compare Alpha Modus’ financial
results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company
that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting
standards used.
Subject
to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not
required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required
of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement
that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose
certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of
the Chief Executive Officer’s compensation to median employee compensation.
We
will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the
fifth anniversary of the IAC IPO, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07
billion, (iii) the date on we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0
million of outstanding common equity held by non-affiliates, or (iv) the date on which we have issued more than $1.0 billion in non-convertible
debt securities during the previous three years.
BUSINESS
Alpha
Modus engages in creating, developing and licensing data-driven technologies to enhance consumers’ in-store digital experience
at the point of decision. The company was founded in 2014 and is headquartered in Cornelius, North Carolina.
Since
its launch, Alpha Modus has defined and kept to its corporate mission by solving pain-points using actionable insights found in previously
unstructured data and through the use of artificial intelligence which turns previously unstructured data, into valuable actionable insights.
Alpha Modus began serving several clients in the financial markets and real estate industry. It was through these efforts that Alpha
Modus gained acceptance for its thought-leading technology in data analytics as an IBM partner by leveraging the use of IBM Blue Mix
cloud services platform powered by Watson. In 2016, following rigorous engagement and working alongside partner IBM, Alpha Modus was
presented with a Beacon Award for “Best New Application on IBM Cloud” and anointed with the title “IBM’s
born on the cloud, start-up of the century.” This award came as a result of Alpha Modus developing an algorithmic trading concept
to better predict New York Stock Exchange market activity into the close of trading.
In
2017, Alpha Modus was introduced to Michael Garel, Founder and CEO of eyeQ. eyeQ was also an IBM partner and a recipient of an IBM Beacon
award in 2015. eyeQ was an Austin, Texas-based startup with a focus on serving the retail sector with hardware devices which accompanied
a SaaS revenue model. With the original intent of Alpha Modus leveraging eyeQ’s technology, which gathered consumer and brand metadata,
for the purpose of predicting retail sales data, Alpha Modus acquired eyeQ’s assets and pending patent applications in 2018. After
the acquisition, Alpha Modus took over management of the eyeQ patent portfolio, including the pending patent applications. This led to
the ‘571 patent issuance in August of 2019. During this time, Alpha Modus attempted to license the ‘571 patent to previous
eyeQ customers and prospective customers in the eyeQ sales pipeline. However, the technology covered under the ‘571 patent was
not yet embraced by most retailers. Additionally, other previous customers and prospective customers in the eyeQ sales pipeline were
beginning to launch their own internal initiatives for data-driven point-of-sale technologies. Faced with difficulty in licensing the
single ‘571 patent while trying to re-engaging eyeQ’s previous clientele, Alpha Modus chose to pause immediate sales and
licensing efforts and focus solely on continued innovation of the technology covered by the ‘571 patent, which evolved into additional
patents and services that are in a better position to compete for licensing and services revenue in the foreseeable future.
As
technological innovation is at the core of the company, Alpha Modus has developed comprehensive end-to-end patented solutions for retailers
and consumer brands to bring innovation to consumers and enhance their experience at the point of sale. Some examples that the ‘571
patent family could potentially include use in the following:
| |
● |
targeted
marketing campaigns; |
| |
|
|
| |
● |
actionable
insights on consumer product packaging; |
| |
|
|
| |
● |
inventory
control; |
| |
|
|
| |
● |
smart
planograms; |
| |
|
|
| |
● |
in-store
heatmapping of consumer traffic; |
| |
|
|
| |
● |
consumer
behavior; and |
| |
|
|
| |
● |
staffing
needs based on foot traffic in a retail location. |
The
primary focus of Alpha Modus’ technology is to analyze consumer behavior and their interactions with retail products in real-time
with the objective to provide brands and retailers the ability to achieve the following:
Enhance
the Consumer’s In-Store Experience
| |
● |
Engage
consumers with interactive output displays throughout brick-and-mortar retail stores to capture critical decision-making at the point
of sale. |
| |
|
|
| |
● |
Cater
to specific and immediate needs of the consumer. |
| |
|
|
| |
● |
Capture
MAC address tracking data, user eye tracking, object identification of goods throughout the store. |
Manage
Inventory and Create Smart Planograms
| |
● |
Assess
the consumers product engagement and product tracking in real time. |
| |
|
|
| |
● |
Aid
in inventory management and product placement throughout a store by creating smart planograms. |
Monetize
Digital Insights
| |
● |
Curate
tailored in-store marketing solutions. |
| |
|
|
| |
● |
Drive
sales via engaging customers with digital experiences at the point of sale. |
Acquisition
of eyeQ
The
company eyeQ was founded in 2013 and was an operating entity until December 2018, when it was acquired by Alpha Modus. At the time of
acquisition, US Patent No. 10,360,571 (“the ‘571 patent”) was still a pending application. Post-acquisition, the inventors
of the inventions claimed in the ‘571 patent family were engaged by Alpha Modus as advisors. Currently, Michael Garel, the eyeQ
founder and a co-inventor of the inventions, is the only one of the inventors of the inventions claimed in the ‘571 patent family
that continues to be an Alpha Modus advisor. Chris Chumas, Alpha Modus’ Chief Strategy Officer and a former IBM client executive,
currently manages the Alpha Modus research and patent development efforts. Since acquiring eyeQ and the ‘571 application, Alpha
Modus was awarded the first patent in the ‘571 patent family in July 2019. Since August of 2019, several continuation patents have
been issued in the ‘571 patent family.
The
‘571 Patent Family and the uses thereof
The
‘571 patent family is based on US Patent No. 10,360,571, which issued on July 23, 2019. The ‘571 patent claims priority to
a provisional patent application filed on July 19, 2013.
The
‘571 patent family currently consists of the following issued patents/patent applications:
| Country |
|
Application
Number |
|
Filing
Date |
|
Publication
Number |
|
Publication
Date |
|
Patent
Number |
|
Issue
Date |
|
Status |
|
Title |
| US |
|
14/335429 |
|
18-Jul-2014 |
|
2015-0025936 |
|
22-Jan-2015 |
|
10360571 |
|
23-Jul-2019 |
|
Granted |
|
METHOD
FOR MONITORING AND ANALYZING BEHAVIOR AND USES THEREOF |
| US |
|
16/509343 |
|
11-Jul-2019 |
|
2019-0333081 |
|
31-Oct-2019 |
|
10853825 |
|
01-Dec-2020 |
|
Granted |
|
METHOD
FOR MONITORING AND ANALYZING BEHAVIOR AND USES THEREOF |
| US |
|
16/837577 |
|
01-Apr-2020 |
|
2020-0226621 |
|
16-Jul-2020 |
|
11049120 |
|
29-Jun-2021 |
|
Granted |
|
METHOD
AND SYSTEM FOR GENERATING A LAYOUT FOR PLACEMENT OF PRODUCTS IN A RETAIL STORE |
| US |
|
16/837645 |
|
01-Apr-2020 |
|
2020-0226622 |
|
16-Jul-2020 |
|
11301880 |
|
12-Apr-2022 |
|
Granted |
|
METHOD
AND SYSTEM FOR INVENTORY MANAGEMENT IN A RETAIL STORE |
| US |
|
16/837711 |
|
01-Apr-2020 |
|
2020-0226623 |
|
16-Jul-2020 |
|
11042890 |
|
22-Jun-2021 |
|
Granted |
|
METHOD
AND SYSTEM FOR CUSTOMER ASSISTANCE IN A RETAIL STORE |
| US |
|
16/985001 |
|
04-Aug-2020 |
|
2020-0364730 |
|
19-Nov-2020 |
|
10977672 |
|
13-Apr-2021 |
|
Granted |
|
(TRACK
1) METHOD AND SYSTEM FOR REAL-TIME INVENTORY MANAGEMENT, MARKETING, AND ADVERTISING IN A RETAIL STORE |
| US |
|
17/590605 |
|
01-Feb-2022 |
|
2022-0156764 |
|
19-May-2022 |
|
12039550 |
|
16-Jul-2024 |
|
Granted |
|
METHOD
FOR ENHANCING CUSTOMER SHOPPING EXPERIENCE IN A RETAIL STORE |
| US |
|
18/100377 |
|
23-Jan-2023 |
|
2023-0162211 |
|
25-May-2023 |
|
12026731 |
|
2-Jul-2024 |
|
Granted |
|
METHOD
FOR PERSONALIZED MARKETING AND ADVERTISING OF RETAIL PRODUCTS |
| US |
|
18/519550 |
|
27-Nov-2023 |
|
2024-0095760 |
|
25-May-2023 |
|
12175484 |
|
24-Dec-2024 |
|
Granted |
|
METHODS
FOR PERSONALIZED MARKETING AND ADVERTISING |
The
patents cover various inventions related to user interactions in physical locations, and based on such interactions, the displaying as
ads of items or information that would potentially be relevant to the user. For example, cameras monitor customers and can understand
their purchasing interests and provide offers or recommendations to a customer of similar products including coupons, sales, etc.
The
‘571 patent relates to a method for monitoring and analyzing consumer behavior in real-time, particularly within retail environments.
It utilizes various information monitoring devices to collect data about consumers, enhancing their shopping experience through targeted
and personalized digital interactions.
The
inventors of the ‘571 patent identified a critical need in the retail industry, especially brick-and-mortar stores, to adapt to
the evolving shopping habits influenced by online retail and social media. The patent addresses the challenge of providing an enriched
in-store experience that rivals online shopping, thus countering trends like showrooming.
The
‘571 patent describes and claims a specific method that involves using information monitoring devices, like video image devices,
to gather data about shoppers. This data includes demographic characteristics (such as gender and age), sentiment, and tracking details
(like movement and eye tracking). The patent details the process of analyzing this data in real-time and providing various responses,
such as targeted marketing, personal engagement, or offering coupons, to enhance the shopping experience.
The
‘825 patent is directed to a method of using devices to gather information about the shopper including demographic (gender and/or
age) and tracking (tracking movement by the shopper or eye tracking what the shopper is looking at), and analyzing and utilizing this
information to provide real time assistance to the shopper by selecting the proper sales associate to interact with the shopper.
The
‘880 patent is directed to a method of using devices to gather information about shopper’s interactions with a product and
object information of the products interacted with by the shopper and analyzing and utilizing this information and responding for inventory
management.
The
‘120 patent is directed to a method of using devices to gather information about the shopper including demographic (gender and/or
age) and tracking (tracking movement by the shopper or eye tracking what the shopper is looking at) and analyzing and utilizing this
information to provide real time assistance to the shopper by selecting the proper sales associate to interact with the shopper.
The
‘890 patent relates to an improved method for enhancing customer assistance in retail stores through the use of advanced information
monitoring systems. The inventors of the ‘890 patent recognized the need for brick-and-mortar retailers to adapt to the changing
consumer behavior influenced by digital technology.
The
patent offers a solution by integrating technology to analyze customer interactions with products in real-time, providing targeted assistance
and enhancing the shopping experience. The ‘890 patent provides several advancements over previous methods, such as real-time analysis
of customer interactions with products, including sentiment and object identification information, and utilizing this data to manage
inventory and offer personalized responses.
The
‘672 patent introduces a novel system for real-time inventory management, marketing, and advertising within a retail store setting.
The ‘672 patent addresses the emerging challenges in the retail sector, particularly for brick-and-mortar stores, in the context
of the increasing prevalence of online shopping and the phenomenon of showrooming. The patent provides innovative solutions to enhance
in-store customer experiences and counter the competitive pressures from online retail.
The
inventors of the ‘672 patent recognized that there existed a significant gap in the brick-and-mortar retail sector’s ability
to provide real-time, personalized experiences to customers, a feature commonly leveraged by online retailers. The patent offers a method
and system that bridges this gap by utilizing technology to analyze consumer behavior and dynamically adjust marketing and inventory
strategies.
The
‘550 patent is directed to a method of leveraging a customer’s metadata to enhance the customer experience and drive in-store
foot-traffic.
The
‘731 patent is directed to a method of leveraging a customer’s metadata to enhance the customer experience and generate personalized
advertising for a particular customer.
The
‘484 patent is directed to a method that leverage artificial intelligence to deliver real-time, tailored marketing and advertising
experiences at the point of decision-making.
The
‘571 patent received a patent term extension of 1,042 days and does not expire until May 25, 2037. The other patents in the family
expire on July 18, 2034. Therefore, there is significant patent life remaining in the ‘571 patent family. Beginning well before
the current expiration of our entire patent family, Alpha Modus intends to continue evolving with the industry and developing new concepts
that support increasing revenue streams. Alpha Modus intends to expand the use of our patent family as a lever to develop a sales team
to drive potential partnerships authorized under the ‘571 patent family.
Alpha Modus filed
two additional patent applications during 2024: (i) patent application no. 18/651410 titled “Methods and Systems for Shopping in
a Retail Store,” and (ii) patent application no. 18/905975 titled “Methods and Systems for Providing Customer Assistance
in a Retail Store.”
Alpha
Modus believes the ‘571 patent and several family members are being infringed by many major retailers, service providers and consumer
brands, and that the adoption of the ‘571 patent (and family) technology is occurring at an exponential pace in the retail marketplace.
Market
Analysis
Alpha
Modus believes it is at the center of major shifts in technology, consumer preferences and industry trends that are catalyzing the adoption
of Alpha Modus’ patented solutions across its target retail markets.
Retail
media is on track to be a $45 billion industry this year (2023), up 20% from the prior year, according to Insider Intelligence. The market
researcher expects that growth to accelerate in the coming years and reach about $106 billion in 2027. See https://www.insiderintelligence.com/content/in-store-retail-media-2023.
It is estimated that US digital-influenced retail sales will top $3.8 trillion in 2027. See https://www.forrester.com/blogs/us-digital-influenced-retail-sales-will-top-3-8-trillion-in-2027/.
Approach
and Value Proposition
Upon
its first notification of allowance for the ‘571 patent in July of 2019, Alpha Modus decided to focus 100% of its resources on
the expansion of the technology described in the ‘571 patent. The services covered by the ‘571 patent were just beginning
to be adopted by retailers. Alpha Modus’ strategy was to build out the technology, resulting in a robust patent portfolio that
would serve its stakeholders better, as early thought leaders in the retail digital marketing space. Alpha Modus intends to monetize
its patent portfolio through licensing over the course of the next twelve months.
Alpha
Modus has engaged Dickinson Wright PLLC to lead licensing and enforcement efforts.
Services
and Revenue Model
Alpha
Modus is currently a non-revenue producing company which focuses on licensing its services to retailers. Alpha Modus’ core asset
is the ‘571 patent family, which was developed before the presence of services and/or offerings covered by the ‘571 patent
family were in demand in the retail marketplace. Over the past two years, there have been significant developments in the retail sector,
specifically with regard to digital in-store marketing and inventory management. As a result, Alpha Modus has focused recent efforts
on preparing its intellectual property for licensing to third parties, identifying potential licensee targets, and identifying third
parties which it believes have infringed on Alpha’s intellectual property.
On
January 11, 2024, Alpha Modus entered into an intellectual property license agreement with GZ6G Technologies Corp. (“GZ6G”).
The license agreement gives GZ6G the right to use Alpha Modus’ patented intellectual property, and pertains to GZ6G’s promotional,
advertising, and operational functions, including co-development arrangements with Alpha Modus for AI-driven advertising solutions for
stadiums and event management. The license agreement provides that GZ6G and Alpha Modus will share equally all revenues derived from
co-developed service offerings, and that Alpha Modus will be paid continuing license fees in the amount of 10% of GZ6G’s gross
revenues derived from sales of products utilizing or enhanced to use Alpha Modus’ licensed intellectual property. Alpha Modus intends
to deploy services under the license by the end of 2024, expand event venue service offerings in late 2025, and expand service offerings
in additional industries in 2024.
On
April 10, 2024, Alpha Modus entered into a license agreement with Xalles Holdings Inc. and its subsidiary, CashXAI Inc. (“CashX”),
which gives CashX the exclusive right to use all of Alpha Modus’s patented intellectual property in connection with CashX’s
promotional, advertising, and operational functions, including co-development arrangements with Alpha Modus, within the Exclusive Industry.
The “Exclusive Industry” means the industry relating to self-service kiosks located in retail food, drug and convenience
stores for the purpose of serving Unbanked and Underbanked consumers, by offering banking, phone and insurance solutions to the consumer.
An “Unbanked” consumer means a person that does not have a checking or savings account with an FDIC-insured institution,
and an “Underbanked” consumer means a person that has or had a checking or savings account with an FDIC-insured institution,
but regularly uses non-traditional banks such as Venmo or the Cash App, or lenders such as a check cashing company or payday lender.
Alpha Modus intends to deploy services under the license by the end of 2024.
On
January 16, 2024, Alpha Modus initiated a patent infringement action against The Kroger Company alleging patent infringement of several
Alpha Modus patents pertaining to the Company’s ‘571 patent portfolio encompassing retail marketing and advertising data-driven
technologies to enhance consumer’s in-store experience at the point of decision. On November 12, 2024, Alpha Modus initiated a
patent infringement lawsuit against Brookshire Grocery Co. alleging infringement of several Alpha Modus patents pertaining to its ‘571
patent portfolio, ‘825 patent portfolio, ‘672 patent portfolio, ‘890 patent portfolio and ‘880 patent portfolio,
which encompass retail marketing and advertising data-driven technologies to enhance consumers’ in-store experience at the point
of decision. On December 17, 2024, Alpha Modus filed a similar patent infringement lawsuit against Wakefern Food Corporation and Shelf
Nine LLC, and on February 3, 2025, Alpha Modus filed a patent infringement lawsuit against Walgreen Co.
Alpha
Modus intends to expand enforcement of its patent rights throughout 2024, and expects that those expanded patent enforcement efforts
will led by its patent counsel, Dickinson Wright PLLC. Alpha Modus also has plans to develop an internal sales and marketing staff for
licensing or sales upon closing of the pending transaction with Insight Acquisition Corp, Inc.
Competition
The
retail advertising markets in which Alpha Modus competes are rapidly evolving as retailers increasingly adopt in-store digital marketing
and inventory management technologies. Alpha Modus has invested, and intends to invest, significant resources in ongoing research and
development programs because it believes its ability to generate licensing revenues and grow market position depends, in part, on innovative
technologies that offer a unique value proposition for Alpha Modus licensees and differentiation from competitors’ efforts. Alpha
Modus believes the ‘571 patent family covers a wide range of use cases in its domain and will serve as a cornerstone for gaining
market share.
Based
upon internal market research, Alpha Modus believes that there are numerous companies practicing the ‘571 patents, and that in
order to practice the technology claimed by the ‘571 patent, these companies will have no alternative but to become licensees of
the ‘571 patent family.
Business
Operations Advantage
With
a licensing-centric business model, Alpha Modus anticipates that it will be able to operate with a small operations team of no more than
6-10 professionals, which will allow Alpha Modus to not burn significant cash resources and instead focus on results-driven R&D efforts.
R&D efforts will be led by Alpha Modus’ CEO and Founder, William Alessi, and Chief Sales Officer, Chris Chumas. William Alessi
and Chris Chumas will lead licensing efforts through infringement enforcement supported by a small internal sales force team. Alpha Modus
has a core focus on isolating infringement targets and enforcing action to secure licensing. The range of enforcement suits is vast and
wide, but there is no guarantee that Alpha Modus will be successful in its efforts.
Research
and Development
The
majority of Alpha Modus R&D activities occur virtually. The company’s R&D team also partners with its legal team with the
goal of developing further complimenting technologies to the company’s expanding ‘571 patent family.
Alpha
Modus’ R&D team consists of technical operators and professionals with experience from a wide variety of leading advertising,
marketing, legal, technology, business and brand organizations. This team of specialists continues to monitor the retail industry and
expand the landscape of the ‘571 patent family through new patent applications, and work with litigation counsel to blueprint enforcement
and licensing of infringement.
Near-Term
and Long-Term Vision
Alpha
Modus intends to begin generating licensing revenue in 2024 with a steady growth rate in parallel to the current projected industry growth
rate cited by Insider Intelligence. Alpha Modus believes that the ‘571 patent family could soon become an acquisition target for
larger competitors practicing the ‘571 patent family.
Legal
Proceedings
From
time to time, the Company may be involved in litigation relating to claims arising out of commercial operations in the normal course
of business. As of the Closing Date, there were no pending or threatened lawsuits that could reasonably be expected to have a material
effect on the Company’s results of operations except as set forth below.
On
January 16, 2024, Alpha Modus filed a patent infringement lawsuit against The Kroger Company alleging patent infringement of several
Alpha Modus patents pertaining to the Company’s ‘571 patent portfolio encompassing retail marketing and advertising data-driven
technologies to enhance consumer’s in-store experience at the point of decision. The complaint was filed in the United States District
Court for the Eastern District of Texas (case no. 2:2024cv00022), and the case is currently in discovery.
On
November 12, 2024, Alpha Modus filed a patent infringement lawsuit against Brookshire Grocery Co. alleging infringement of several Alpha
Modus patents pertaining to its ‘571 patent portfolio, ‘825 patent portfolio, ‘672 patent portfolio, ‘890 patent
portfolio and ‘880 patent portfolio, which encompass retail marketing and advertising data-driven technologies to enhance consumers’
in-store experience at the point of decision. The complaint was filed in the United States District Court for the Eastern District of
Texas (case no. 2:2024cv00919), and the case is in its initial pleading stage.
On
December 17, 2024, Alpha Modus filed a patent infringement lawsuit against Wakefern Food Corporation and Shelf Nine LLC alleging infringement
of several Alpha Modus patents pertaining to its ‘571 patent portfolio, ‘825 patent portfolio, ‘672 patent portfolio,
‘890 patent portfolio and ‘880 patent portfolio, which encompass retail marketing and advertising data-driven technologies
to enhance consumers’ in-store experience at the point of decision. The complaint was filed in the United States District Court
for the Eastern District of Texas (case no. 2:2024cv01056), and the case is in its initial pleading stage.
On
February 3, 2025, Alpha Modus filed a patent infringement lawsuit against Walgreen Co. alleging infringement of several Alpha Modus patents
pertaining to its ‘571 patent portfolio, ‘825 patent portfolio, ‘672 patent portfolio, ‘890 patent portfolio
and ‘880 patent portfolio, which encompass retail marketing and advertising data-driven technologies to enhance consumers’
in-store experience at the point of decision. The complaint was filed in the United States District Court for the Eastern District of
Texas (case no. 2:2025cv00120), and the case is in its initial pleading stage.
Facilities
Alpha
Modus’ headquarters is a virtual facility with an address in Cornelius, North Carolina. Having a virtual headquarters has allowed
Alpha Modus to operate with minimal overhead that was not needed to support its current staff. Operations, research and development functions
are currently conducted virtually, and Alpha Modus believes its current virtual facility is adequate and suitable for its current needs.
Alpha Modus’ plans to expand licensing the ‘571 family of patents through a small internal sales team will require Alpha
Modus to secure a suitable alternative space to accommodate its operations.
Corporate
Information
Alpha
Modus’ principal executive offices are located at 20311 Chartwell Center Drive, #1469, Cornelius, North Carolina, 28031. Alpha
Modus’ website address is www.AlphaModus.com. Information contained on or accessible through Alpha Modus’ website
is not a part of this prospectus, and the inclusion of Alpha Modus’ website address in this proxy statement/prospectus is an inactive
textual reference only.
MANAGEMENT
The
business and affairs of the Company are managed by or under the direction of the Board of Directors (“Board”) of the
Company. The Company’s Amended and Restated Charter provides for a staggered, or classified, Board of Directors consisting of three
classes of directors, each serving a staggered three-year term and with one class being elected at each year’s annual meeting of
stockholders, as follows:
| |
● |
Class
A, which consists of Scott Wattenberg, whose term will expire at the first annual meeting of stockholders to be held after the consummation
of the Business Combination; |
| |
● |
Class
B, which consists of William Ullman and Michael Garel, whose terms will expire at the second annual meeting of stockholders to be held
after the consummation of the Business Combination; and |
| |
|
|
| |
● |
Class
C, which consists of William Alessi and Gregory Richter, whose terms will expire at the third annual meeting of stockholders to be
held after the consummation of the Business Combination. |
At
each annual meeting of stockholders, directors for a particular class will be elected for a three-year term at the annual meeting of
stockholders in the year in which the term for that class expires. Each director’s term is subject to the election and qualification
of his or her successor, or his or her earlier death, disqualification, resignation or removal. Subject to any rights applicable to any
then outstanding preferred stock, any vacancies on the Company Board may be filled only by the affirmative vote of a majority of the
directors then in office. Any increase or decrease in the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. This classification of the Company Board may have the effect
of delaying or preventing changes in the Company’s control or management. The Company’s directors may be removed for cause
by the affirmative vote of the holders of at least two-thirds of the Company’s voting securities.
The
following table sets forth the name, age and position of each of the directors and executive officers of the Company:
| Name |
|
Age |
|
Position |
| Executive
Officers |
|
|
|
|
| William
Alessi |
|
52 |
|
Chief
Executive Officer, Director |
| Rodney
Sperry |
|
56 |
|
Chief
Financial Officer |
| Chris
Chumas |
|
38 |
|
Chief
Sales Officer |
| Thomas
Gallagher |
|
64 |
|
Chief
Revenue Officer |
| Non-Employee
Directors |
|
|
|
|
| William
Ullman |
|
61 |
|
Director(1),(2),(3) |
| Greg
Richter |
|
60 |
|
Director |
| Michael
Garel |
|
46 |
|
Director(1),(2),(3) |
| Scott
Wattenberg |
|
53 |
|
Director(1),(2),(3) |
(1)
Member of the Company audit committee.
(2)
Member of the Company compensation committee.
(3)
Member of the Company nominating and corporate governance committee.
Executive
Officers
William
Alessi was appointed to serve as the Chief Executive Officer of the Company and as a member of the Company Board upon consummation of
the Business Combination on December 13, 2024. He is the founder, and has served as the CEO, of Alpha Modus, Corp. since August 2014,
and as the Managing Director of Hybrid Titan Management, LLC, from September 2000 to November 2021. Mr. Alessi served on the board of
directors of Accredited Solutions, Inc. (formerly known as Good Hemp, Inc.) from February 2018 to May 2022, and as its President and
Chief Executive Officer until December 2021. We believe that Mr. Alessi’s many years of executive leadership experience, as well
as his longstanding personal connection to Alpha Modus and its intellectual property, qualify him to serve on the Company Board.
Rodney
Sperry was appointed to serve as the Chief Financial Officer of the Company upon consummation of the Business Combination on December
13, 2024. He has been serving as CFO of Accredited Solutions, Inc. since June 2021. He has 14 years of experience in public accounting
at leading accounting services and consulting firms in Utah. His industry background includes audits for both private and publicly traded
companies across several industries including manufacturing, distribution, mining, energy, and not-for-profit organizations. He has served
as outside controller for several public companies over the last thirteen years and has been responsible for their SEC filings and compliance.
Mr. Sperry was a licensed CPA in the state of Utah from February 2001 through September 2014 and has operated his own financial consultancy
practice for the past thirteen years. He obtained his bachelor’s degree in accounting from Westminster College and his Master of
Business Administration from Utah State University.
Chris
Chumas was appointed the Chief Sales Officer of the Company upon consummation of the Business Combination on December 13, 2024. He has
been the Chief Strategy Officer of Alpha Modus, Corp. since June 2018. Mr. Chumas served as an IBM sales executive from 2008-2017. He
worked with Erwin, Inc. as an Enterprise Solution Strategist from 2017-2022 and served as a director of Accredited Solutions, Inc. from
July 2019 to May 2022. Mr. Chumas currently works as an Enterprise Sales Leader at WorkFusion, an intelligent automation solutions company,
where he has worked since June 2022.
Thomas
Gallagher was appointed the Chief Revenue Officer of the Company on January 2, 2025. He is a seasoned technology executive who brings
substantial sales and go-to-market leadership experience to Alpha Modus. Throughout his career, Mr. Gallagher has demonstrated an ability
to build high performing teams and grow top line revenue. He has held senior executive roles with companies like Zones as Senior Vice
President of the Services and Solutions (March 2023-January 2025), DXC as VP Sales for all North and South American Industries (August
2021-January 2023), and Capgemini NA as Chief Sales Officer of Cloud Infrastructure Services (March 2018-August 2021). Mr. Gallagher
has also held senior sales roles with IBM, HP/EDS and AT&T. His extensive cross industry and growth mentality are key for Alpha Modus’
next phase of business acceleration. Mr. Gallagher is a graduate of the United States Naval Academy, with a degree in Systems Engineering,
and he served five years in the Marine Corps as a Captain.
Non-Employee
Directors
Greg
Richter is the Chief Executive Officer and a Partner of Medalist Partners, an alternative investment management firm focused on credit
opportunities, and will be appointed to the Company Board upon consummation of the Business Combination. Prior to co-forming Medalist
in May 2018, and its predecessor firm Candlewood Investment Group in 2010, Mr. Richter worked at Credit Suisse as a portfolio manager
heading their structured credit effort. Previously, Mr. Richter was the Global Head of Credit Suisse’s Specialty Finance Group
and a member of Credit Suisse’s Fixed Income Operating Committee, where he was responsible for the combined Global Asset Finance
Capital Markets and the Specialty Finance Banking Groups. The Global Asset Finance Capital Markets division was responsible for loan
origination and securitization activity in the U.S., Europe, Australia and Emerging and structured and originated a wide array of securitized
products. Prior to this, in addition to running Credit Suisse’s ABS/CDO trading/syndicate effort, Mr. Richter also headed the Asset
Backed Securities Home Equity (ABSHE) shelf which bought and packaged mortgage loans. Prior to joining Credit Suisse, Mr. Richter spent
15 years at Prudential Securities in New York where, most recently, he was Managing Director and served as the head of Trading and Syndicate
for all structured products. Mr. Richter holds a B.A. in Economics from Colgate University. We believe Mr. Richter’s experience
in the financial industry make him qualified to serve on the Company Board.
Michael
Garel, who will be appointed to the Company Board upon consummation of the Business Combination, is the Senior Director of Innovation
at Omnicell, a pharmacy technology company, where he has worked since September 2021. From July 2018 through September 2021, Mr. Garel
was the Director of Data Strategy at Accruent, a healthcare technology company. Mr. Garel founded eyeQ in 2013, and eyeQ was acquired
by Alpha Modus in 2018, and has been an advisor to Alpha Modus since 2018. Previously, Mr. Garel was a mechanical engineer at Dell from
1999 to 2008, an a Product and Development Manager from May 2008 through March 2013. Mr. Garrel received his Bachelor of Science from
Carnegie Mellon University, and his Master of Business Administration from the Texas McCombs School of Business at the University of
Texas. We believe Mr. Garrel’s technology expertise qualifies him to serve on the Company Board.
William
Ullman, one of our directors since September 2021, is the Chief Executive Officer of Water Street Advisors LLC, a registered investment
advisor. Mr. Ullman has been a board member of Van Eck Associates Corp., a New York based investment firm, since 2010. He also currently
serves as a special advisor to FinTech Collective Fund II, LP, a venture capital fund, and is a member of the board of directors of the
Capital Returns Fund, since 2010. From 2016 to 2018, Mr. Ullman served as Chief Commercial Officer of Orchard Platform and Chief Executive
Officer of its broker-dealer subsidiary (Orchard Platform Markets LLC) prior to its sale to Kabbage in 2018. From 2006 to 2016, he was
the founder of Right Wall Capital Management LLC, a firm focused on investing in the financial services sector, including financial technology
companies. From 2001 to 2006, Mr. Ullman was a Senior Managing Director of the Global Clearing Services Department at Bear Stearns &
Co., Inc. Prior to that Mr. Ullman was an investment banker in the Financial Institutions Groups of Bear Stearns (1997 — 2001)
and Merrill Lynch (1989 — 1997). Mr. Ullman earned an A.B. in History from Princeton University in 1985 and an M.B.A. from the
Anderson School at UCLA in 1989. We believe Mr. Ullman’s substantial experience as an investment banker covering financial institutions,
an operating executive, an investment manager, an advisor to financial technology start-ups and a board member make him well qualified
to serve on our board of directors.
Scott
Wattenberg has served as the Chief Financial Officer at SPATCO Energy Solutions since April 2023 and will be appointed to the Company
Board upon consummation of the Business Combination. Mr. Wattenberg has extensive experience in financial leadership roles. Prior to
his current position, he served as the Chief Financial Officer at BestCo from July 2014 to April 2023. Scott also served as the CFO at
Prym Consumer USA from 2011 to 2014. Mr. Wattenberg served as CFO — COO at Genesis Today, Inc., from 2010-2011, CFO — COO
of Microstaq from 2007-2010, and Senior Finance Director/CFO for New Business Ventures at Walmart from 2006-2007. Previously, Mr. Wattenberg
served as CFO of Philips Display Solutions from 2003-2006. He is currently an Advisory Board Member at Greenstream International and
Green Revolution Cooling. Mr. Wattenberg obtained his MBA in 2005 from The University of Chicago Booth School of Business. We believe
Mr. Wattenberg’s established expertise in financial management make him a valuable addition to the Company Board.
Board
of Directors Leadership Structure
The
Company’s Bylaws do not require separating the roles of Chair of the Board and Chief Executive Officer. The Company Board believes
that combining these roles will help to promote unified leadership and direction for both the Company Board and management, and has therefore
appointed Mr. Alessi as President, Chief Executive Officer and Chair of the Company Board upon consummation of the Business Combination
on December 13, 2024.
Board
Composition
The
Company Board is comprised of five directors.
Director
Independence
The
Company Board has determined that Michael Garel, Scott Wattenberg, and William Ullman qualify as independent directors on the Company
Board, as defined under the listing rules of Nasdaq, and the Company Board will consist of a majority of “independent directors,”
as defined under the rules of the SEC and Nasdaq relating to director independence requirements. In addition, the Company will be subject
to the rules of the SEC and Nasdaq relating to the membership, qualifications and operations of the audit committee, as discussed below.
Role
of the Company Board in Risk Oversight/Risk Committee
One
of the key functions of the Company Board is oversight of the Company’s risk management process. The Company Board does have a
standing risk management committee, but instead administers this oversight function directly through the Company Board as a whole, as
well as through various standing committees of the Company Board that address risks inherent in their respective areas of oversight.
For example, the Company audit committee is responsible for overseeing the management of risks associated with the Company’s financial
reporting, accounting, and auditing matters; the Company’s compensation committee oversees the management of risks associated with
our compensation policies and programs.
Board
Committees
The
Company Board has established an audit committee, a compensation committee and a nominating and corporate governance committee. The Company
Board has adopted a charter for each of these committees, which complies with the applicable requirements of current Nasdaq rules. The
Company intends to comply with future requirements to the extent they will be applicable to the Company. Copies of the charters for each
committee are available on the investor relations portion of the Company’s website.
Audit
Committee
The
Company’s audit committee consists of Scott Wattenberg, Michael Garel, and William Ullman. The Company Board has determined that
each of the members of the audit committee satisfies the independence requirements of Nasdaq and Rule 10A-3 under the Exchange Act. Each
member of the audit committee can read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements.
In arriving at this determination, the Company Board examined each audit committee member’s scope of experience and the nature
of their prior and/or current employment.
Scott
Wattenberg serves as the Chair of the audit committee. The Company Board has determined that Mr. Wattenberg qualifies as an audit committee
financial expert within the meaning of the rules and regulations of the SEC and meets the financial sophistication requirements of Nasdaq
listing rules. In making this determination, the Company Board considered Mr. Wattenberg’s formal education and previous experience
in financial roles and as Chief Financial Officer for several companies. Both Company’s independent registered public accounting
firm and management periodically will meet privately with the Company’s audit committee.
The
functions of the audit committee include, among other things:
| |
● |
evaluating
the performance, independence and qualifications of the Company’s independent auditors and determining whether to retain the
Company’s existing independent auditors or engage new independent auditors; |
| |
|
|
| |
● |
monitoring
the integrity of the Company’s financial statements and the Company’s compliance with legal and regulatory requirements
as they relate to financial statements or accounting matters; |
| |
|
|
| |
● |
reviewing
the integrity, adequacy and effectiveness of the Company’s internal control policies and procedures; |
| |
|
|
| |
● |
preparing
the audit committee report required by the SEC to be included in the Company’s annual proxy statement; |
| |
|
|
| |
● |
discussing
the scope and results of the audit with the Company’s independent auditors, and reviewing with management and the Company’s
independent auditors the Company’s interim and year-end operating results; |
| |
|
|
| |
● |
establishing
and overseeing procedures for employees to submit concerns anonymously about questionable accounting or auditing matters; |
| |
|
|
| |
● |
reviewing
the Company’s guidelines and policies on risk assessment and risk management; |
| |
|
|
| |
● |
reviewing
and approving related party transactions; |
| |
|
|
| |
● |
obtaining
and reviewing a report by the Company’s independent auditors at least annually, that describes the Company’s independent
auditors internal quality control procedures, any material issues raised by review under such procedures, and any steps taken to deal
with such issues when required by applicable law; and |
| |
|
|
| |
● |
approving
(or, as permitted, pre-approving) all audit and non-audit services to be performed by the Company’s independent auditors. |
The
composition and function of the audit committee comply with all applicable requirements of the Sarbanes-Oxley Act, SEC rules and regulations
and Nasdaq listing rules. The Company will comply with future requirements to the extent they become applicable to the Company.
Compensation
Committee
The
Company’s compensation committee consists of Michael Garel, Scott Wattenberg, and William Ullman. Michael Garel serves as the Chair
of the compensation committee. The Company’s Board has determined that each of the members of the compensation committee is a non-employee
director, as defined in Rule 16b-3 promulgated under the Exchange Act, and satisfies the independence requirements of Nasdaq.
The
functions of the compensation committee include, among other things:
| |
● |
approving
the retention of compensation consultants and outside service providers and advisors; |
| |
|
|
| |
● |
reviewing
and approving, or recommending that the Company Board approve, the compensation of Company’s executive officers, including annual
base salary, annual incentive bonuses, specific performance goals relevant to their compensation, equity compensation, employment; |
| |
|
|
| |
● |
reviewing
and recommending to the Company Board the compensation of the Company’s directors; |
| |
|
|
| |
● |
administering
and determining any award grants under the Company’s equity and non-equity incentive plans; |
| |
|
|
| |
● |
reviewing
and evaluating succession plans for the executive officers; |
| |
|
|
| |
● |
preparing
the compensation committee report required by the SEC to be included in the Company’s annual proxy statement; and |
| |
|
|
| |
● |
periodically
reviewing the Company’s practices and policies of employee compensation as they relate to risk management and risk-taking incentives. |
The
composition and function of its compensation committee comply with all applicable requirements of the Sarbanes-Oxley Act, SEC rules and
regulations and Nasdaq listing rules. The Company will comply with future requirements to the extent they become applicable to the Company.
Nominating
and Corporate Governance Committee
The
Company’s nominating and corporate governance committee consists of William Ullman, Scott Wattenberg, and Michael Garel. William
Ullman serves as the Chair of the nominating and corporate governance committee. The Company Board has determined that each of the members
of the Company’s nominating and corporate governance committee satisfies the independence requirements of Nasdaq.
The
functions of the nominating and corporate governance committee include, among other things:
| |
● |
identifying,
evaluating, and recommending individuals qualified to become members of the Company Board and its committees; |
| |
|
|
| |
● |
evaluating
the performance of the Company Board and of individual directors; |
| |
|
|
| |
● |
reviewing
the Company’s environmental and social responsibility policies and practices; |
| |
|
|
| |
● |
developing
and recommending corporate governance guidelines to the Company Board; and |
| |
|
|
| |
● |
overseeing
an annual evaluation of the Company Board’s and management. |
The
composition and function of the nominating and corporate governance committee comply with all applicable requirements of the Sarbanes-Oxley
Act, SEC rules and regulations and Nasdaq listing rules. The Company will comply with future requirements to the extent they become applicable
to the Company.
Compensation
Committee Interlocks and Insider Participation
None
of the intended members of the Company’s compensation committee has ever been an executive officer or employee of the Company.
None of the Company’s executive officers currently serve, or has served during the last completed fiscal year, on the compensation
committee or board of directors of any other entity that has one or more executive officers that will serve as a member of the Company
Board or compensation committee.
Limitation
on Liability and Indemnification of Directors and Officers
The
Amended and Restated Charter of the Company eliminates the Company’s directors’ liability for monetary damages to the fullest
extent permitted by applicable law. The DGCL provides that directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability:
| |
● |
for
any transaction from which the director derives an improper personal benefit; |
| |
|
|
| |
● |
for
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| |
|
|
| |
● |
for
any unlawful payment of dividends or redemption of shares; or |
| |
|
|
| |
● |
for
any breach of a director’s duty of loyalty to the corporation or its stockholders. |
If
the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability
of the Company’s directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
The
Amended and Restated Charter requires the Company to indemnify and advance expenses to, to the fullest extent permitted by applicable
law, its directors, officers and agents. The Company plans to maintain a directors’ and officers’ insurance policy pursuant
to which the Company’s directors and officers are insured against liability for actions taken in their capacities as directors
and officers. Finally, the Amended and Restated Charter prohibits any retroactive changes to the rights or protections or increasing
the liability of any director in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability
or indemnification.
In
addition, the Company has entered into separate indemnification agreements with the Company’s directors and officers. These agreements,
among other things, require the Company to indemnify its directors and officers for certain expenses, including attorneys’ fees,
judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as
one of the Company’s directors or officers or any other company or enterprise to which the person provides services at the Company’s
request.
We
believe these provisions in the Amended and Restated Charter are necessary to attract and retain qualified persons as directors and officers
of the Company.
Code
of Conduct and Ethics for Employees, Executive Officers and Directors
The
Company Board has adopted a Code of Conduct and Ethics (the “Code of Ethics”) applicable to all of the Company’s
employees, executive officers and directors. The Code of Ethics is available on the Company’s website at https://alphamodus.com/.
Information contained on or accessible through the Company’s website is not a part of this prospectus, and the inclusion of the
Company’s website address in this prospectus is an inactive textual reference only. The nominating and corporate governance committee
of the Company Board will be responsible for overseeing the Code of Ethics and must approve any waivers of the Code of Ethics for employees,
executive officers and directors. The Company expects that any amendments to the Code of Ethics, or any waivers of its requirements,
will be disclosed on its website.
EXECUTIVE
COMPENSATION
This
section describes the material components of the executive compensation program for certain of Alpha Modus’ executive officers
(the “Target NEOs”) and directors. This discussion may contain forward-looking statements that are based on Alpha
Modus’ current plans, considerations, expectations and determinations regarding future compensation programs.
Alpha
Modus intends to develop a compensation program that is designed to align executives’ compensation with Alpha Modus’ business
objectives and the creation of stockholder value, while helping Alpha Modus to continue to attract, motivate and retain individuals who
contribute to the long-term success of the company. Alpha Modus anticipates that compensation for its executive officers will have three
primary components: base salary, an annual cash incentive bonus opportunity, and long-term equity-based incentive compensation.
Decisions
on the design and implementation of the executive compensation program will be made by the compensation committee. The executive compensation
program actually adopted will depend on the judgment of the members of the compensation committee.
Summary
Compensation Table — Fiscal 2024 and 2023
| Name
and Principal Position | |
Year | | |
Salary
($) | | |
Bonus
($)(1) | | |
Stock
Awards
($) | | |
Option
Awards
($)(2) | | |
Non-Equity
Incentive Plan
Compensation
($) | | |
Non-Qualified
Deferred
Compensation
Earnings
($) | | |
All
Other
Compensation
($) | | |
Total
($) | |
| William
Alessi | |
2024 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Chief
Executive Officer | |
2023 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Chris
Chumas | |
2024 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Chief
Sales Officer (Chief Strategic Officer of Alpha Modus, Corp.) | |
2023 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Rodney
Sperry | |
2024 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Chief
Financial Officer | |
2023 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Thomas
Gallagher | |
2024 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Chief
Revenue Officer | |
2023 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
No
Alpha Modus executive officer named above had any unexercised options, stock that had not vested or equity incentive plan awards outstanding
as of December 31, 2024 and 2023.
Equity
Incentive Plans
Long-Term
Incentive Plans. Alpha Modus does not provide its officers or employees with pension, stock appreciation rights, long-term incentive
or other plans, nor does it provide non-qualified deferred compensation to its officers or employees, and therefore, the Summary Compensation
Table above does not include columns for nonequity incentive plan compensation and nonqualified deferred compensation earnings since
there were none.
Employee
Pension, Profit Sharing or other Retirement Plans. Alpha Modus does not have a defined benefit, pension plan, profit sharing or other
retirement plan, although it may adopt one or more of such plans in the future.
Executive
Employment Agreements
Effective
as of closing of the Business Combination on December 13, 2024, we entered into an employment agreement with William Alessi to serve
as our Chief Executive Officer. The agreement does not have a specified term. The agreement provides that Mr. Alessi will receive an
initial annual base salary of $500,000 and is eligible for an annual performance-based cash bonus of up to 110% of Mr. Alessi’s
base salary as determined by the Board, as well as annual grants of long-term incentive awards under and subject to the terms of the
Company’s equity or other long-term incentive plans in effect from time to time, with the target value of such awards equaling
130% of Mr. Alessi’s base salary. The Company will have the right in its sole discretion to defer payment of cash compensation
to Mr. Alessi until the Company shall have raised an aggregate of $10,000,000 in funding. If Mr. Alessi’s employment with the Company
is terminated by the Company without “cause” (as defined in the agreement), he will receive severance of 12 months of current
base salary, payable in a lump sum within 60 days. However, Mr. Alessi will receive severance, payable in a lump sum within 60 days,
in an amount equal to the highest base salary during the prior 3 years, plus his average annual bonus, if termination of his employment
occurs (i) without “cause” following a change in control of the Company, (ii) after Mr. Alessi has resigned as a result of
a material diminution in his authority, duties, or responsibilities, a material reduction in base salary or other compensation benefits,
relocation of more than 50 miles from Mr. Alessi’s then-current place of employment being required by the Board, or material breach
by the Company of the employment agreement, or (iii) after Mr. Alessi has resigned in connection with a change in control of the Company
as a result of the Company’s failure to obtain the assumption of the employment agreement following the change in control. Mr.
Alessi’s right to receive these severance benefits is subject to his providing a release of claims to the Company and his continued
compliance with confidentiality, non-solicitation and other covenants in favor of the Company.
Effective
as of closing of the Business Combination on December 13, 2024, we entered into an employment agreement with Rodney Sperry to serve as
our Chief Financial Officer. The agreement does not have a specified term. The agreement provides that Mr. Sperry will receive an initial
annual base salary of $48,000 and is eligible for an annual performance-based cash bonus of up to 110% of Mr. Sperry’s base salary
as determined by the Board, as well as annual grants of long-term incentive awards under and subject to the terms of the Company’s
equity or other long-term incentive plans in effect from time to time, with the target value of such awards equaling 130% of Mr. Sperry’s
base salary. The Company will have the right in its sole discretion to defer payment of cash compensation to Mr. Sperry until the Company
shall have raised an aggregate of $10,000,000 in funding. If Mr. Sperry’s employment with the Company is terminated by the Company
without “cause” (as defined in the agreement), he will receive severance of 12 months of current base salary, payable in
a lump sum within 60 days. However, Mr. Sperry will receive severance, payable in a lump sum within 60 days, in an amount equal to the
highest base salary during the prior 3 years, plus his average annual bonus, if termination of his employment occurs (i) without “cause”
following a change in control of the Company, (ii) after Mr. Sperry has resigned as a result of a material diminution in his authority,
duties, or responsibilities, a material reduction in base salary or other compensation benefits, relocation of more than 50 miles from
Mr. Sperry’s then-current place of employment being required by the Board, or material breach by the Company of the employment
agreement, or (iii) after Mr. Sperry has resigned in connection with a change in control of the Company as a result of the Company’s
failure to obtain the assumption of the employment agreement following the change in control. Mr. Sperry’s right to receive these
severance benefits is subject to his providing a release of claims to the Company and his continued compliance with confidentiality,
non-solicitation and other covenants in favor of the Company.
Effective
as of closing of the Business Combination on December 13, 2024, we entered into an employment agreement with Chris Chumas to serve as
our Chief Sales Officer. The agreement does not have a specified term. The agreement provides that Mr. Chumas will receive an initial
annual base salary of $250,000 and is eligible for an annual performance-based cash bonus of up to 110% of Mr. Chumas’s base salary
as determined by the Board, as well as annual grants of long-term incentive awards under and subject to the terms of the Company’s
equity or other long-term incentive plans in effect from time to time, with the target value of such awards equaling 130% of Mr. Chumas’s
base salary. The Company will have the right in its sole discretion to defer payment of cash compensation to Mr. Chumas until the Company
shall have raised an aggregate of $10,000,000 in funding. If Mr. Chumas’s employment with the Company is terminated by the Company
without “cause” (as defined in the agreement), he will receive severance of 12 months of current base salary, payable in
a lump sum within 60 days. However, Mr. Chumas will receive severance, payable in a lump sum within 60 days, in an amount equal to the
highest base salary during the prior 3 years, plus his average annual bonus, if termination of his employment occurs (i) without “cause”
following a change in control of the Company, (ii) after Mr. Chumas has resigned as a result of a material diminution in his authority,
duties, or responsibilities, a material reduction in base salary or other compensation benefits, relocation of more than 50 miles from
Mr. Chumas’s then-current place of employment being required by the Board, or material breach by the Company of the employment
agreement, or (iii) after Mr. Chumas has resigned in connection with a change in control of the Company as a result of the Company’s
failure to obtain the assumption of the employment agreement following the change in control. Mr. Chumas’s right to receive these
severance benefits is subject to his providing a release of claims to the Company and his continued compliance with confidentiality,
non-solicitation and other covenants in favor of the Company.
We
entered into an employment agreement with Mr. Gallagher effective as of January 2, 2025. The agreement, which has an initial one-year
term, provides that Mr. Gallagher will receive an initial annual base salary of $175,000, as well as $250,000 in Company common stock
per year (vesting and issued on a quarterly basis), valued at the average closing price of the Company’s common stock for the 10
trading days prior to an ending the last trading day of each quarter. Mr. Gallagher is also eligible for an annual performance-based
cash and/or stock award bonus based on performance and the Company’s ability to achieve EBITDA and financial goals as determined
by the Company, as well as annual grants of long-term incentive awards under and subject to the terms of the Company’s equity or
other long-term incentive plans in effect from time to time. If Mr. Gallagher’s employment with the Company is terminated by the
Company without “cause” (as defined in the agreement) prior to the expiration of the initial one-year term, he will receive
severance consisting of one month of current base salary, payable in a lump sum within 60 days. However, Mr. Gallagher will receive severance,
payable in a lump sum within 60 days, in an amount equal to the highest base salary during the prior three years, plus his average annual
bonus, if termination of his employment occurs (i) without “cause” following a change in control of the Company, (ii) after
Mr. Gallagher has resigned as a result of a material diminution in his authority, duties, or responsibilities, a material reduction in
base salary or other compensation benefits, relocation of more than 50 miles from Mr. Gallagher’s then-current place of employment
being required by the Board, or material breach by the Company of the employment agreement, or (iii) after Mr. Gallagher has resigned
in connection with a change in control of the Company as a result of the Company’s failure to obtain the assumption of the employment
agreement following the change in control. Mr. Gallagher’s right to receive these severance benefits is subject to his providing
a release of claims to the Company and his continued compliance with confidentiality, non-solicitation and other covenants in favor of
the Company.
Defined
Contribution Plans
As
part of its overall compensation program, Alpha Modus provides all full-time employees, including each of the Target NEOs, with the opportunity
to participate in a defined contribution 401(k) plan. The plan is intended to qualify under Section 401 of the Internal Revenue Code
so that employee contributions and income earned on such contributions are not taxable to employees until withdrawn. Employees may elect
to defer a percentage of their eligible compensation (not to exceed the statutorily prescribed annual limit) in the form of elective
deferral contributions to the plan. The 401(k) plan also has a “catch-up contribution” feature for employees aged 50 or older
(including those who qualify as “highly compensated” employees) who can defer amounts over the statutory limit that applies
to all other employees. The Company does not currently make any matching or other contributions to participants’ accounts under
the 401(k) plan.
Director
Compensation
On
January 2, 2025, the Company entered into director agreements with its non-employee members of the Board of Directors, Gregory Richter,
Michael Garel, Scott Wattenberg, and William Ullman, to be considered effective as of closing of the Company’s business combination
with Alpha Modus, Corp. (December 13, 2024), and pursuant to which the Company generally agreed to indemnify each of the non-employee
directors to the broadest extent permitted by law and agreed to pay each non-employee director (i) $100,000 in common stock per annum,
payable quarterly on the first day of each fiscal quarter and valued based on the closing price of the Company’s common stock on
December 13, 2024, and (ii) $25,000 in cash per annum, payable in quarterly installments. The Company intends to continue evaluating
the compensation to be provided to its non-employee directors.
None
of the Company’s directors were compensated as directors during 2024 or 2023.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
INAQ
Related Person Transactions
Founder
Shares
On
May 5, 2021, our Sponsor paid $25,000 to cover certain of our offering costs in exchange for 6,181,250 Founder Shares, or approximately
$0.004 per share. On July 29, 2021, we effected a 1:1.1162791 stock split of our Class B common stock, resulting in our Sponsor holding
an aggregate of 6,900,000 Founder Shares. On October 16, 2021, as a result of the underwriters’ over-allotment option expiring
unexercised, our Sponsor surrendered 900,000 shares of our Class B common stock for no consideration, resulting in 6,000,000 Founder
Shares that have since been outstanding. The number of Founder Shares outstanding was determined based on the expectation that the total
size of our IPO would be a maximum of 27,600,000 units if the underwriters’ over-allotment option was exercised in full, and therefore
that such Founder Shares would represent 20% of the outstanding shares after our IPO.
On
March 22, 2023, 5,100,000 shares of Class B common stock were exchanged for an equal number of shares of Class A common stock. Such shares
are not entitled to redemption rights.
Contributed
Capital
On
March 7, 2023, the Sponsor contributed $100,000 to the Company for no consideration.
Private
Placement Warrants
The
Sponsor and the underwriters of our IPO have purchased an aggregate of 8,700,000 private placement warrants, at a price of $1.00 per
warrant, or $8,700,000 in the aggregate, in a private placement that closed simultaneously with the closing of our IPO. Of those 8,700,000
private placement warrants, our Sponsor agreed to purchase 7,500,000 private placement warrants and Cantor and Odeon agreed to purchase
1,200,000 private placement warrants in the aggregate. Each private placement warrant entitles the holder to purchase one share of Class
A common stock at $11.50 per share. The private placement warrants (including the Class A common stock issuable upon exercise of the
private placement warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the
completion of our initial business combination.
Services
Agreement
On
September 1, 2021, we entered into an agreement with the Sponsor, pursuant to which we agreed to pay the Sponsor a total of $10,000 per
month for office space, secretarial and administrative services provided to or incurred by members of our management team until the earlier
of the consummation of a Business Combination and the Company’s liquidation. For the three and six months ended June 30, 2024,
we incurred approximately $30,000 and $60,000, respectively, under the services agreement in the statements of operations. For the three
and six months ended June 30, 2023, we incurred approximately $30,000 and $60,000, respectively, under the services agreement in the
condensed statements of operations. As of June 30, 2024 and December 31, 2023, $220,000 and $160,000, respectively, was included in accrued
expenses — related party on the unaudited condensed consolidated balance sheets.
The
Board has also approved payments of up to $15,000 per month, through the earlier of the consummation of our initial Business Combination
or our liquidation, to members of our management team for services rendered to us. In addition, the Sponsor, executive officers and directors,
or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our
behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee
reviews on a quarterly basis all payments that were made to the Sponsor, executive officers or directors, or the Company’s or their
affiliates. On April 21, 2024, all deferred compensation owed to Mr. Gary by the Company to date, in the aggregate amount of $132,500,
shall be forfeited, and henceforth shall cease to accrue $7,500 per month in service fees currently recorded in due to related party
on the balance sheets. For the three and six months ended June 30, 2024, we incurred approximately $24,500 and $69,500, respectively,
under the services agreement of which $132,500 was offset due to the forfeiture of Mr. Gary’s deferred compensation. For the three
and six months ended June 30, 2023, we incurred approximately $45,000 and $90,000, respectively, under the services agreement in the
condensed statements of operations. As of June 30, 2024 and December 31, 2023, $159,500 and $225,000, respectively, was included in due
to related party on the unaudited condensed consolidated balance sheets.
On
June 21, 2024, IAC, the Sponsor, Mr. Singer and Alpha Modus entered into a Fee Waiver Agreement (the “Singer Fee Waiver Agreement”)
providing that Mr. Singer would be issued 125,000 shares of IAC common stock (the “Singer Shares”) at closing of the
Business Combination, and the Sponsor and Mr. Singer waived, effective upon the issuance of the Singer Shares at closing of the Business
Combination, the right to any amounts owed to them for services provided to IAC pursuant to the Sponsor and management payment agreement
described above.
Except
pursuant to the Singer Fee Waiver Agreement described above, no compensation of any kind, including finder’s and consulting fees,
will be paid by the Company to our Sponsor, executive officers and directors, or any of their respective affiliates, for services rendered
prior to or in connection with the completion of the Business Combination.
Related
Party Loans
On
April 30, 2021, the Sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to our IPO pursuant to a promissory
note. This loan was non-interest bearing and payable upon the completion of our IPO. We borrowed approximately $163,000 under the promissory
note. On September 7, 2021, we repaid $157,000 of the promissory note balance and repaid the remaining balance of approximately $6,000
in full on September 13, 2021. Subsequent to the repayment, the facility was no longer available to us.
Convertible
Promissory Note – Related Party
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. As of September 30, 2024 there was no amount drawn from the promissory note and on November
6, 2023 the Company and the Sponsor entered into a written agreement to rescind and nullify the promissory note.
On
July 25, 2024, the Company issued an unsecured promissory note in the aggregate principal amount of $35,000 (the “Note”)
to a related party, the Note being entered into in consideration of two transfers made by Jeffrey J. Gary to the Maker on April 18, 2024
for $25,000 and on May 22, 2024 for $10,000. The Note does not bear interest and matures upon the closing of an initial business combination
by the Company. The principal balance may be repaid at any time. The principal balance shall be payable by the Company either: (i) in
cash, or (ii) at the Payee’s election in writing, by issuance of Maker’s private placement warrants (the “Private Warrants”),
at a price of $1.00 per Private Warrant. Each Private Warrant entitles the holder to purchase one share of Class A common stock at $11.50
per share. As of September 30, 2024, there was $35,000 outstanding under this Note included on the condensed consolidated balance sheet.
Due
to Related Party
As
of September 30, 2024, the Sponsor advanced a total of $485,000 to the Company of which $450,000 was deposited to the Trust to extend
the Business Combination Period from April 7, 2023 to September 7, 2023 based on the Amended and Restated Certificate of Incorporation
as amended on March 6, 2023 allowing the Company to consummate an initial business combination from March 7, 2023 to September 7, 2023,
provided that the Company deposits the lesser of $80,000 and $0.04 for each outstanding share of common stock sold in the Company’s
initial public offering into the Trust Account, as defined in the Charter for each one-month extension and $20,000 was deposited to the
Trust to extend the Business Combination period from September 7, 2023 to October 7, 2023 based on the Amended and Restated Certificate
of Incorporation as amended on September 6, 2023 allowing the Company to consummate an initial business combination from September 7,
2023 to June 7, 2024, provided that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold
in the Company’s initial public offering into the Trust Account, as defined in the Charter for each one-month extension. As of
September 30, 2024 and December 31, 2023, $450,000 and $420,000 were included in due to related party on the condensed consolidated balance
sheets, respectively.
Due
from Related Party
On
July 20, 2023 and August 7, 2023, a total of $891,000 was transferred to the Sponsor from the operating bank account, of which a total
of $616,000 was paid back on October 10, 2023, October 11, 2023 and December 13, 2023. Additionally, during the year ended December 31,
2023, the Sponsor paid operating expenses on behalf of the Company with a total value of $80,000, which has been netted against the amount
owed. During the nine months ended September 30, 2024, a total of $49,972 was paid back. As of September 30, 2024 and December 31, 2023,
there were amounts of $145,028 and $195,000 outstanding from the Sponsor, respectively.
Due
from Sponsor
Between
March 2, 2023 and December 5, 2023, the Company withdrew an aggregate amount of $2,497,248 from the Trust Account pursuant to seven separate
written withdrawal requests to Continental Stock Transfer and Trust (“Continental”), the trustee for the Trust Account for
the payment of taxes. While the Company paid an aggregate amount of $1,447,889 for tax payments, the remaining amount of $1,049,359,
that was withdrawn from the Trust Account for tax purposes, was used to pay other business expenses of the Company. On March 15, 2024,
the Sponsor deposited $1,049,359 into the Trust Account, and on March 26, 2024, the Sponsor deposited an additional amount $36,285 into
the Trust Account to reimburse the Trust Account for interest that would have earned on the $1,049,359 that was erroneously withdrawn
from the Trust Account of which $24,656 was accrued as of December 31, 2023. From March 11, 2024 through March 14, 2024, the Sponsor
transferred an aggregate of $1,090,000 to fund amounts transferred to the Trust Account. As of September 30, 2024 and December 31, 2023,
there were amounts of $140,139 and $1,074,015 outstanding from the Sponsor, respectively.
Polar-Sponsor
Funding
On
August 30, 2023, the Company, Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an investor, entered into an
agreement (the “Polar Subscription Agreement”) in which Polar has agreed to fund the Sponsor up to $1,000,000, pursuant
to written draw down requests (a “Capital Call”), and the Sponsor will in turn loan such funds to the Company, to
cover the Company’s working capital expenses (each a “Sponsor Loan”). In September 2023, Polar funded Sponsor
$150,000 under the Polar Subscription Agreement, and the Sponsor loaned the Company $150,000 from Polar. All subsequent Capital Calls
are subject to the mutual consent of the Company, Sponsor and Polar. All Capital Calls funded by Polar shall not accrue interest and
are repayable by the Sponsor at the closing of the Company’s initial business combination. At the option of Polar, all Capital
Calls funded by Polar may be repaid by the Company through the issuance of 1 share of Class A Common Stock for each $10 of the outstanding
Capital Calls funded by Polar. Sponsor is also responsible to reimburse Polar for its reasonable attorney’s fees incurred in connection
with the Polar Subscription Agreement up to $5,000. In the event a business combination does not occur and the Company’s liquidates,
then all Capital Calls funded by Polar will be repaid up to the amount of cash held in the Sponsor’s bank accounts and/or the Company’s
bank accounts, excluding the Company’s Trust Account. The Sponsor Loans shall not accrue interest and shall be repaid by the Company
at the closing of the business combination.
In
consideration of the funds received, the Company agreed to issue, at the closing of its business combination, to Polar one (1) shares
of the company’s Class A Common Stock for each dollar Polar funds through the Capital Calls (“Polar Subscription Shares”).
The Polar Subscription Shares shall not be subject to any transfer restrictions or any other lock-up provisions, earn outs, or other
contingencies. The Polar Subscription Shares (i) to the extent feasible and in compliance with all applicable laws and regulations shall
be registered as part of any registration statement issuing shares before or in connection with the Business Combination Closing, or
(ii) if no such registration statement is filed in connection with the Business Combination Closing, shall promptly be registered pursuant
to the first registration statement filed by the Company or the surviving entity following the Business Combination Closing, which shall
be filed no later than 30 days after the Business Combination Closing and declared effective no later than 90 days after the Business
Combination Closing. The Sponsor shall not sell, transfer, or otherwise dispose of any securities owned by the Sponsor until the Polar
Subscription Shares have been transferred to the Investor and the registration statement has been made effective.
In
the event the Sponsor of the Company defaults in their obligations under the Polar Subscription Agreement (a “Sponsor Default”),
then the Sponsor shall be required to transfer to Polar 0.1 shares of Class A Common Stock or Class B Common Stock for each $1 that Polar
has funded under the Capital Calls as of the date of such Default and shall be required to repeat such issuance for each month such Sponsor
Default continues.
On
May 15, 2024, the Company, Sponsor and Polar entered into Amendment No. 1 to the Subscription Agreement (the “Amendment”)
pursuant to which Polar’s aggregate advance under the Subscription Agreement was reduced from $1,000,000 to $975,000 and in the
event the Company consummates the business combination with Alpha Modus Corp., then the Company will not be obligated to issue to Polar
one (1) share of the Company’s Class A Common Stock for each dollar Polar advances to the Company under the Subscription Agreement
at the closing of the business combination. However, if the Company consummates a business combination with an entity other than Alpha
Modus, Corp., then the Company is obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar
Polar advances to the Company under the Subscription Agreement at the closing of the business combination with an entity other than Alpha
Modus, Corp. (the “Subscription Shares”). The Subscription Shares shall be subject to no transfer restrictions or any other
lock-up provisions, earn outs, or other contingencies. The Subscription Shares (i) to the extent feasible and in compliance with all
applicable laws and regulations shall be registered as part of any registration statement issuing shares before or in connection with
the closing of the business combination or (ii) if no such registration statement is filed in connection with the closing of the business
combination, shall promptly be registered pursuant to the first registration statement filed by the Company or the surviving entity following
the closing of the business combination, which shall be filed no later than 30 days after the closing of the business combination and
declared effective no later than 90 days after the closing of the business combination. Sponsor shall not sell, transfer or otherwise
dispose of any securities owned by the Sponsor until the Subscription Shares have been transferred to the Investor and the registration
statement has been made effective.
For
the nine months ended September 30, 2024, Polar funded Sponsor an additional $375,000 under the Subscription Agreement, and the Sponsor
loaned the Company $150,000 from Polar.
On
December 12, 2024, Polar, which had previously been issued 1,000,000 shares of Alpha Modus, Corp. common stock, agreed to forfeit 850,000
of its shares of Alpha Modus, Corp. common stock (such that at closing of the Business Combination, Polar would only be issued 150,000
shares of Company common stock).
Alpha
Modus Related Person Transactions
In
2021, William Alessi (“Alessi”), an officer and director of Alpha Modus, Corp., loaned Alpha Modus, Corp. $89,929 and received
a payment of $4,000, for a net of $85,929. The loan is informal, unsecured, due on demand and bears 10% interest. The accrued interest
as of December 31, 2023 was $3,612. The accrued interest as of September 30, 2024 was $5,436. In 2023, Alpha Modus, Corp. made payments
of $61,958 towards the balance of the loan. On April 17, 2024, Alpha Modus, Corp. paid the remaining balance of $23,972. As of September
30, 2024 and December 31, 2023, the balance was $0 and $23,972, respectively.
On
January 17, 2023, Alpha Modus, Corp. and Janbella Group, LLC (“Janbella”), which is controlled by Alessi, entered into a
secured convertible promissory note for $412,500. The note included the $75,000 balance as of December 31, 2022, an additional $300,000,
and an OID of $37,500. The note matures on January 17, 2024. The OID of $37,500 was recorded as a debt discount and was being amortized
over the life of the original note ending on January 17, 2024. On August 31, 2023, Alpha Modus, Corp. and Janbella entered into an Amended
and Restated 12% Senior Secured Promissory Note for $453,750. This note was a modification of the $412,500 note dated January 17, 2023.
The Company treated this as a modification of debt. All assets of Alpha Modus, Corp. are collateral for the note. In the event of a Qualified
Offering prior to the maturity date, at the option of Janbella, for every dollar received in a Qualified Offering, Janbella would receive
$0.50, until the outstanding principal and interest are paid. Janbella is managed by Alessi. The note is convertible at a conversion
price of $1.00. In the event of a merger or consolidation, the payment due to Janbella is 200% of the principal. During the year ended
December 31, 2023, Alpha Modus, Corp. amortized $35,753 of this discount. As of December 31, 2023, there is a remaining balance of $1,747
left of the OID. During the nine months ended September 30, 2024, Alpha Modus, Corp. amortized the remaining balance of $1,747 of this
discount. There was a one-time interest charge of 10%, or $41,250, which was recorded as original interest discount and is being amortized
over the life of the original note ending on January 17, 2024. During the year ended December 31, 2023, Alpha Modus, Corp. amortized
$39,329 of this discount. As of December 31, 2023, there was a balance remaining of $1,921. During the nine months ended September 30,
2024, Alpha Modus, Corp. amortized the remaining balance of $1,921 of this discount. On March 29, 2024, Alpha Modus, Corp. extended this
note to June 7, 2024 and issued 1,400,000 shares of common stock to the JanBella. The stock was valued at $0.025 per share for a total
value of $35,000. The Company recorded the charge of $35,000 as a debt discount and amortized $35,000 as debt discount interest expense
during the nine months ended September 30, 2024. As of September 30, 2024 and December 31, 2023, the balance was $453,750 and $453,750,
with accrued interest $18,452 and $59,895, respectively.
On
August 31, 2023, Alpha Modus, Corp. and Janbella entered into an 0% Senior Secured Promissory Note for $300,000. The note matures on
August 31, 2024. There is no interest. An imputed interest discount was calculated for this note of $27,272, which was recorded directly
to the accumulated deficit balance. This discount is being amortized over the life of the original note ending on August 31, 2024. During
the year ended December 31, 2023, Alpha Modus, Corp. amortized $9,116 of this discount. As of December 31, 2023, the balance of this
discount was $18,157. During the nine months ended September 30, 2024, Alpha Modus, Corp. amortized $18,157 of this discount. As of September
30, 2024, the balance of this discount was $0. All assets of Alpha Modus, Corp. are collateral for the note. As of September 30, 2024
and December 31, 2023, the balance on this note was $300,000.
On
November 6, 2023, Alpha Modus, Corp. and Janbella entered into an 0% Senior Secured Promissory Note for $221,941. The note matures on
August 31, 2024. There is no interest. An imputed interest discount was calculated for this note of $16,804, which was recorded directly
to the accumulated deficit balance. This discount is being amortized over the life of the original note ending on August 31, 2024. During
the year ended December 31, 2023, Alpha Modus, Corp. amortized $3,091 of this discount. As of December 31, 2023, the balance of this
discount was $13,713. During the nine months ended September 30, 2024, Alpha Modus, Corp. amortized $13,713 of this discount. As of September
30, 2024, the balance of this discount was $0. All assets of Alpha Modus, Corp. are collateral for the note. As of September 30, 2024
and December 31, 2023, the balance on this note was $221,941.
On
February 28, 2024, Alpha Modus, Corp. and Janbella entered into a verbal agreement for a $100,000 0% Senior Secured Promissory Note.
On May 17, 2024, Alpha Modus, Corp. and Janbella formalized the February 28, 2024 verbal agreement by entering into an 0% Senior Secured
Promissory Note for $400,000 and JanBella funded an additional $300,000. The note matures on August 31, 2024. There is no interest. An
imputed interest discount was calculated for this note of $14,087, which was recorded directly to the accumulated deficit balance. This
discount is being amortized over the life of the original note ending on August 31, 2024. During the nine months ended September 30,
2024, Alpha Modus, Corp. amortized $14,087 of this discount. As of September 30, 2024, the balance of this discount was $0. All assets
of Alpha Modus, Corp. are collateral for the note. On September 24, 2024, Alpha Modus, Corp. and Janbella entered into a verbal agreement
for an additional $100,000 0% Senior Secured Promissory Note. As of September 30, 2024 and December 31, 2023, the balance on this note
was $500,000 and $0, respectively.
During
the fiscal year ending December 31, 2023, Alpha Modus, Corp. agreed to reimburse Mr. Alessi $208,433 for the cancellation of 90,165,908
shares and the potential acquisition of Alpha Modus Corp. by Insight Acquisition Corp. Payments of $120,083 had been made during 2023,
leaving a balance due to Mr. Alessi of $88,350 as of December 31, 2023. During the nine months ended September 30, 2024, Alpha Modus,
Corp. made payments of $14,226, leaving a balance due of $74,124.
On
or about April 26, 2024, Polar, which had previously entered into the Subscription Agreement with the Company, entered into a subscription
agreement to purchase 1,000,000 shares of Alpha Modus, Corp. common stock from Alpha Modus, Corp. for $25,000, which was accepted by
Alpha Modus, Corp. on May 16, 2024. On December 12, 2024, Polar, which had been issued 1,000,000 shares of Alpha Modus, Corp. common
stock under the May 16, 2024 subscription agreement with Alpha Modus, Corp. described above, agreed to forfeit 850,000 of the 1,000,000
shares of Alpha Modus, Corp. common stock (such that at closing of the Business Combination, Polar would only be issued 150,000 shares
of Company common stock).
On
March 29, 2024, Alpha Modus, Corp. and Janbella entered into an extension agreement (the “Extension Agreement”) pursuant
to which (i) Janbella agreed to extend the maturity date under the August 2023 Amended Note, which is currently in default, to June 7,
2024, (ii) Janbella agreed to waive the prior default for failure to pay the August 2023 Amended Note at the original maturity date,
(iii) Janbella agreed to fund an additional $200,000 to Alpha Modus, Corp. prior to Closing the Business Combination (the “Additional
Funding”), (iv) Alpha Modus, Corp. agreed to issue Janbella secured promissory notes for $100,000 in funding provided by Janbella
to Alpha Modus, Corp. on or about February 28, 2024, and $100,000 in funding provided by Janbella to Alpha Modus, Corp. on or about April
18, 2024, (v) Alpha Modus, Corp. agreed to issue Janbella a secured promissory note for the Additional Funding upon receipt of the Additional
Funding, and (vi) Alpha Modus, Corp. agreed to issue Janbella 1,400,000 shares of Alpha Modus, Corp. common stock as consideration for
Janbella’s agreements in the Extension Agreement. Effective as March 29, 2024, those shares were issued to Janbella.
Business
Combination Related Agreements
On
October 13, 2023, the Company and Alpha Modus, Corp. entered into the Business Combination Agreement, which was subsequently amended
on June 21, 2024. Pursuant to the Business Combination Agreement, as amended, Alpha Modus, Corp., and the Company agreed that (i) each
share of Alpha Modus, Corp. common stock (other than those properly exercising any applicable appraisal rights under applicable law)
would be converted into (A) one share of Company common stock, and (B) the contingent right to receive a pro rata portion of the Earnout
Shares (as defined below) (which may be zero); and (iii) each share of Alpha Modus, Corp. preferred stock (other than those properly
exercising any applicable appraisal rights under applicable law) would be converted into (A) one share of Company Series C Preferred
Stock, and (B) the contingent right to receive a pro rata portion of the Earnout Shares (as defined below) (which may be zero) (collectively
the “Merger Consideration”).
The
stockholders of Alpha Modus, Corp. may be issued up to 2,200,000 additional shares of Company common stock (the “Earnout Shares”).
The Earnout Shares will be earned and issued in one-third (1/3) increments (of approximately 733,333 shares) if, for any twenty (20)
trading days within any thirty (30)-consecutive trading day period beginning at least 180 days after the Closing and on or prior to the
5-year anniversary of the Closing, the VWAP of the Company’s common stock equals or exceeds $13.00 per share, $15.00 per share
and $18.00 per share (as equitably adjusted for stock splits, stock dividends, combinations, recapitalizations and the like after the
Closing), respectively, with all remaining Earnout Shares earned and issued upon certain changes of control of IAC at or prior to the
5-year anniversary of the Closing.
Additionally,
at the Closing, the Company’s sponsor, Insight Acquisition Sponsor LLC (the “Sponsor”) was required to deposit
750,000 shares of Company common stock into escrow (the “Sponsor Earnout Shares”), and the Sponsor Earnout Shares
will be released to the Sponsor according to the same milestones and timelines applicable to the Earnout Shares described above. Additionally,
the Company and the Sponsor agreed that the Sponsor will forfeit and cancel 750,000 shares of Company common stock at Closing. Finally,
at the Closing, (i) the Company will to use its best efforts to pay off the Company’s loan(s) from Polar Multi-Strategy Master
Fund (“Polar”) (expected to be approximately $975,000 at Closing), (ii) the Company will use its best efforts to pay
Alpha Modus, Corp.’s loans from Janbella Group, LLC (“Janbella”) (expected to be approximately $1,400,000 at
Closing), (iii) the Company will issue to Janbella 1,392,308 shares of Company common stock, (iv) the Company will issue to Michael Singer
125,000 shares of Company common stock, (v) the Company will issue to Cantor Fitzgerald & Co. (“Cantor”) 210,000
shares of Company common stock, and (vi) the Company will issue to Odeon Capital Group, LLC (“Odeon”) 90,000 shares
of Company common stock.
In
connection with the Business Combination Agreements, the Company, Alpha Modus, Corp., and certain other parties entered into related
agreements described below.
Stockholder
Support Agreements
The
Company, and the majority stockholders of Alpha Modus, Corp., the family trusts of Mr. Alessi, entered into a Stockholder Support Agreement
(the “Stockholder Support Agreement”) on or about October 13, 2023. Pursuant to the Stockholder Support Agreement,
the Alpha Modus, Corp. majority stockholders agreed to, among other things, vote their shares of Alpha Modus, Corp. in favor of the adoption
and approval of the Business Combination Agreement and related transactions.
Amended
Registration Rights Agreement
The
Company, the Sponsor and certain other Company shareholders parties thereto (collectively, the “Initial Holders”),
Alpha Modus, and certain Alpha Modus stockholders entered an Amended and Restated Registration Rights Agreement (the “Amended
Registration Rights Agreement”) on or about October 13, 2023. Pursuant to the Amended Registration Rights Agreement, the Initial
Holders will be provided the right to demand registrations, piggy-back registrations and shelf registrations with respect to Registrable
Securities (as defined in the Amended Registration Rights Agreement). The Amended Registration Rights Agreement would supersede the registration
rights agreements between IAC and certain of the Initial Holders.
Confidentiality
and Lock-Up Agreement
Certain
Alpha Modus stockholders (the majority stockholders of Alpha Modus, Corp.) entered into a Confidentiality and Lock-up Agreement with
the Company (the “Confidentiality and Lock-Up Agreement”) on or about October 13, 2023. Pursuant to the Confidentiality
and Lock-Up Agreement, each Alpha Modus stockholder party thereto agreed to a lock-up of its Company securities during a period (the
“Lock-Up Period”) from Closing of the Business Combination through the earlier of (i) the date that is 12 months after
Closing, or (ii) the date that the volume-weighted average price of the Company’s common stock as reported by Bloomberg exceeds
$12.50 per share for any 20 trading days within any consecutive 30-trading day period, except for an aggregate number of shars of Company
common stock equal to (X) 1,650,000 shares, plus (Y) the number of shares of Company common stock issued to Janbella pursuant to Section
7.21 of the Business Combination Agreement, minus (Z) 557,692 shares, which aggregate number of shares is not subject to lock-up restrictions
may be sold by the Alpha Modus stockholder parties during the Lock-Up Period. As 1,392,308 shares of Company common stock were issued
to Janbella pursuant to Section 7.21 of the Business Combination Agreement, an aggregate of 2,484,616 shares of Company held by the majority
stockholders are not subject to lock-up restrictions, and are therefore being registered for resale.
Sponsor
Lock-Up Agreement
The
Company, the Sponsor, and Alpha Modus, Corp. entered into an Lock-Up Agreement (the “Sponsor Lock-Up Agreement”) on
or about October 13, 2023, pursuant to which, among other things, the Sponsor agreed to a lock-up of its Company securities during the
defined lock-up period, except for a number of shares equal to 15% of the Company’s common stock owned by the Sponsor as of Closing,
which number of shares may be sold by the Sponsor during the lock-up period without lock-up restriction. As the Sponsor owned 3,449,990
shares as of Closing (that were not Sponsor Earnout Shares), 15% of such number of shares, or approximately 517,512 shares, are therefore
being registered for resale by the Sponsor’s assignees.
IAC
Stockholder Support Agreement
The
Company, the Sponsor, and Alpha Modus, Corp. entered into a Stockholder Support Agreement (the “IAC Stockholder Support Agreement”)
on or about October 13, 2023, pursuant to which the Sponsor agreed, among other things, to vote their shares of Company common stock
in favor of the adoption an approval of the Business Combination Agreement and related transactions.
DESCRIPTION
OF SECURITIES
The
following summary of the material terms of the Company’s securities is not intended to be a complete summary of the rights and
preferences of such securities. We urge you to read the DGCL and the Amended and Restated Charter in its entirety for a complete description
of the rights and preferences of the Company’s securities.
Pursuant
to the Amended and Restated Charter, our authorized capital stock consists of 200,000,000 shares of Class A common stock, $0.0001 par
value, 20,000,000 shares of IAC Class B common stock, $0.0001 par value, and 8,500,000 shares of preferred stock, $0.0001 par value,
7,500,000 shares of which have been designated as Series C Redeemable Convertible Preferred Stock, and 1,000,000 shares of which will
remain undesignated preferred stock. The following description summarizes the material terms of the capital stock of the Company. Because
it is only a summary, it may not contain all the information that is important to you.
Common
Stock
At
the closing of the Business Combination, all outstanding shares of Class B common stock were converted into Class A common stock in accordance
with the Amended and Restated Charter on a 1-for-1 basis, and all outstanding shares of common stock were Class A common stock, par value
$0.0001 per share, which shares are referred to herein as “common stock.”
Immediately
after the Closing of the Business Combination, the Company had a total of 12,455,252 shares of common stock issued and outstanding. As
of February 7, 2025, the Company had a total of 12,476,780 shares of common stock issued and outstanding.
Common
stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless specified in
the Amended and Restated Charter or the Company’s Bylaws, or as required by applicable provisions of the DGCL or applicable stock
exchange rules, the affirmative vote of a majority of our shares of common stock that are voted is required to approve any such matter
voted on by our stockholders.
Preferred
Stock
The
Amended and Restated Charter authorizes the issuance of 8,500,000 shares of preferred stock, 7,500,000 shares of which have been designated
as Series C Redeemable Convertible Preferred Stock (“Series C Preferred Stock”), and 1,000,000 shares of which will
be undesignated.
The
Series C Preferred Stock has the following rights:
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(i) |
Ranking.
The Series C Preferred Stock will rank senior to the IAC common stock and other classes of IAC preferred stock with respect to rights
upon liquidation, winding up or dissolution. |
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(ii) |
Voting.
Each share of Series C Preferred Stock shall entitle the holder to one vote on all matters submitted to the vote of IAC’s shareholders; |
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(iii) |
Dividends.
The Series C Preferred Stock shall be treated pari passu with the IAC common stock except that the dividends per share payable on the
Series C Preferred Stock shall equal the dividend per share declared on each share of IAC common stock multiplied by $10.00 (the “Face
Value”) and divided by the applicable Conversion Price (as defined below). “Conversion Price” means a
price per share equal to the lesser of either the Face Value, or (a) if no Trigger Event (as defined below) has occurred, 100% of the
average of the 5 lowest closing bid prices of the IAC common stock during the 10 days preceding the conversion notice date (the “Measurement
Period”), not to exceed 100% of the lowest sales price on the last day of the Measurement Period, or (b) following any Trigger
Event, 50.0% of the average of the lowest closing bid prices of the common stock during the Measurement Period, not to exceed 50.0%
of the lowest sales price on the last day of such Measurement Period. “Trigger Event” generally means (a) a failure
of a holder of Series C Preferred Stock to receive conversion shares when required; (b) IAC’s violation of or failure to timely
perform any covenant in the designation of the Series C Preferred Stock or any agreement between IAC and the Series C Preferred Stockholder
that is either (x) related to the payment of cash or delivery of conversion shares, or (y) curable, has not occurred before, and is
not cured within 5 trading days of notice; (c) IAC’s suspension from trading or delisting from its principal trading exchange
or market; (d) notification of an intention for IAC or its transfer agent not to comply with a conversion notice; (e) IAC’s bankruptcy,
insolvency, reorganization, liquidation or similar proceedings; (f) the appointment of a custodian, receiver or similar official for
IAC; (g) the entry of judgments against IAC in excess of $500,000 which are not stayed or satisfied within 30 days of entry; (h) IAC’s
failure to comply with reporting requirements of Securities Exchange Act; (i) the initiation of any regulatory, administrative or enforcement
proceeding against IAC; or (j) any material provision of the designation of the Series C Preferred Stock ceases to be valid or is contested. |
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(iv) |
Liquidation.
Upon any liquidation, dissolution or winding up of IAC, holders of Series C Preferred Stock shall be paid the Face Value per share,
plus any accrued but unpaid dividends (the “Liquidation Value”). |
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(v) |
Redemption.
IAC shall be obligated to pay holders the Liquidation Value to redeem the Series C Preferred Stock upon the occurrence of a Deemed
Liquidation Event (as defined below) or Trigger Event (as defined below). “Deemed Liquidation Event” generally means
(a) a merger or consolidation where IAC or a subsidiary is a party to the merger and IAC issues shares of stock (except for domicile
mergers and mergers not constituting a change of control); (b) IAC issues convertible or equity securities that senior to the Series
C Preferred Stock in any respect; (c) a holder does not receive conversion shares upon conversion of the Series C Preferred Stock within
5 trading days due to the occurrence of an event that is solely within the control of IAC; (d) trading of the common stock is halted
or suspended for 10 or more consecutive trading days due to the occurrence of an event that is solely within the control of IAC; or
(e) a sale or other disposition of substantially all the assets of IAC that is not approved by the holders of the Series C Preferred
Stock. |
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(vi) |
Conversion.
Shares of Series C Preferred Stock are not convertible until 18 months following Closing of the Business Combination so long as a Trigger
Event has not occurred. Beginning 18 months following Closing of the Business Combination, or following the occurrence of a Trigger
Event, shares of Series C Preferred Stock are convertible at election of the holder at the then-applicable Conversion Price. |
The
Amended and Restated Charter provides that shares of preferred stock may be issued from time to time in one or more series. Our board
of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional
or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series of preferred
stock. Our board of directors will be able to, without stockholder approval, issue preferred stock with voting and other rights that
could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The
ability of our board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring
or preventing a change of control of us or the removal of existing management. We have 7,500,000 shares of Series C Preferred Stock,
and other preferred stock, outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock
other than the 7,500,000 shares of Series C Preferred Stock, we cannot assure you that we will not do so in the future.
Warrants
Public
Warrants
Each
Public Warrant entitles the registered holder to purchase one share of Company common stock at a price of $11.50 per share, subject to
adjustment as discussed below, at any time commencing 30 days after the Closing. The Public Warrants will expire five years after the
Closing of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We
will not be obligated to deliver any shares of Company common stock pursuant to the exercise of a Public Warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Company common
stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations
described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Company
common stock upon exercise of a warrant unless the Company common stock issuable upon such warrant exercise has been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that
the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such warrant
will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required
to net cash settle any warrant.
We
are not registering the shares of Company common stock issuable upon exercise of the Public Warrants at this time. However, we have agreed
that as soon as practicable, but in no event later than 15 business days after the Closing of the Business Combination, we will use our
best efforts to file with the SEC a registration statement covering the shares of Company common stock issuable upon exercise of the
warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Company
common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the
shares of Company common stock issuable upon exercise of the warrants is not effective by the 60th business day after the
Closing of the Business Combination, warrantholders may, until such time as there is an effective registration statement and during any
period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement
covering the Company common stock issuable upon exercise of the warrants is not effective within a specified period following the Closing
of the Business Combination, warrantholders may, until such time as there is an effective registration statement and during any period
when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption
provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption,
is not available, holders will not be able to exercise their warrants on a cashless basis.
Once
the Public Warrants become exercisable, we may call the warrants for redemption:
| |
● |
in
whole and not in part; |
| |
|
|
| |
● |
at
a price of $0.01 per warrant; |
| |
|
|
| |
● |
upon
not less than 30 days’ prior written notice of redemption to each warrantholder; and |
| |
|
|
| |
● |
if,
and only if, the reported last sale price of the Company common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three
business days before we send the notice of redemption to the warrantholders. |
As
of September 18, 2024, the sales price of the IAC Class A Common Stock did not exceed the threshold that would allow the Company to redeem
the Public Warrants.
If
and when the Public Warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock
upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable
to effect such registration or qualification.
We
have established the last of the redemption criteria discussed above to prevent a redemption call unless there is at the time of the
call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption
of the Public Warrants, each warrantholder will be entitled to exercise its warrant prior to the scheduled redemption date. However,
the price of the Company common stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
If
we call the Public Warrants for redemption as described above, our management will have the option to require any holder that wishes
to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants
on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that
are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Company common stock issuable
upon the exercise of our warrants. If our management takes advantage of this option, all holders of Public Warrants would pay the exercise
price by surrendering their warrants for that number of shares of Company common stock equal to the quotient obtained by dividing (x)
the product of the number of shares of Company common stock underlying the warrants, multiplied by the difference between the exercise
price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the Company common stock for the 10 trading days ending on the third trading day prior
to the date on which the notice of redemption is sent to the holders of warrants. If our management takes advantage of this option, the
notice of redemption will contain the information necessary to calculate the number of shares of Company common stock to be received
upon exercise of the Public Warrants, including the “fair market value” in such case. Requiring a cashless exercise in this
manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this
feature is an attractive option to us if we do not need the cash from the exercise of the warrants after the Closing. If we call our
Public Warrants for redemption and our management does not take advantage of this option, Sponsor and its permitted transferees would
still be entitled to exercise their Private Placement Warrants for cash or on a cashless basis using the same formula described above
that other warrantholders would have been required to use had all warrantholders been required to exercise their warrants on a cashless
basis, as described in more detail below.
A
holder of a Public Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have
the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s
affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as
a holder may specify) of the shares of Company common stock outstanding immediately after giving effect to such exercise.
If
the number of outstanding shares of Company common stock is increased by a stock dividend payable in shares of Company common stock,
or by a split-up of shares of Company common stock or other similar event, then, on the effective date of such stock dividend, split-up
or similar event, the number of shares of Company common stock issuable on exercise of each Public Warrant will be increased in proportion
to such increase in the outstanding shares of Company common stock. A rights offering to holders of Company common stock entitling holders
to purchase shares of Company common stock at a price less than the fair market value will be deemed a stock dividend of a number of
shares of Company common stock equal to the product of (i) the number of shares of Company common stock actually sold in such rights
offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Company
common stock) and (ii) one (1) minus the quotient of (x) the price per share of Company common stock paid in such rights offering divided
by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Company
common stock, in determining the price payable for Company common stock, there will be taken into account any consideration received
for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted
average price of Company common stock as reported during the ten (10) trading day period ending on the trading day prior to the first
date on which the shares of Company common stock trade on the applicable exchange or in the applicable market, regular way, without the
right to receive such rights.
In
addition, if we, at any time while the Public Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash,
securities or other assets to the holders of Company common stock on account of such shares of Company common stock (or other shares
of our capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends,
(c) to satisfy the redemption rights of the holders of Company common stock in connection with the Closing of the Business Combination,
(d) to satisfy the redemption rights of the holders of Company common stock in connection with a stockholder vote to amend and restate
the IAC Charter (i) for an extension, or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial
business combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our initial
business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event,
by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Company common stock in respect
of such event.
If
the number of outstanding shares of our Company common stock is decreased by a consolidation, combination, reverse stock split or reclassification
of shares of Company common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock
split, reclassification or similar event, the number of shares of Company common stock issuable on exercise of each Public Warrant will
be decreased in proportion to such decrease in outstanding shares of Company common stock.
Whenever
the number of shares of Company common stock purchasable upon the exercise of the Public Warrants is adjusted, as described above, the
warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction
(x) the numerator of which will be the number of shares of Company common stock purchasable upon the exercise of the warrants immediately
prior to such adjustment, and (y) the denominator of which will be the number of shares of Company common stock so purchasable immediately
thereafter.
In
case of any reclassification or reorganization of the outstanding shares of Company common stock (other than those described above or
that solely affects the par value of such shares of Company common stock), or in the case of any merger or consolidation of us with or
into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in
any reclassification or reorganization of our outstanding shares of Company common stock), or in the case of any sale or conveyance to
another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with
which we are dissolved, the holders of the Public Warrants will thereafter have the right to purchase and receive, upon the basis and
upon the terms and conditions specified in the warrants and in lieu of the shares of our Company common stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities
or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following
any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately
prior to such event. If less than 70% of the consideration receivable by the holders of Company common stock in such a transaction is
payable in the form of Company common stock in the successor entity that is listed for trading on a national securities exchange or is
quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if
the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction,
the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the
warrant agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the warrants
when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise
do not receive the full potential value of the warrants in order to determine and realize the option value component of the warrant.
This formula is to compensate the warrantholder for the loss of the option value portion of the warrant due to the requirement that the
warrantholder exercise the warrant within 30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair
market value where no quoted market price for an instrument is available.
The
Public Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant
agent, and IAC. You should review a copy of the warrant agreement, which has been publicly filed with the SEC and which you can find
in the list of exhibits to this registration statement, for a complete description of the terms and conditions applicable to the warrants.
The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity
or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Public Warrants
to make any change that adversely affects the interests of the registered holders of Public Warrants.
The
Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full
payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number
of warrants being exercised. The warrantholders do not have the rights or privileges of holders of Company common stock and any voting
rights until they exercise their warrants and receive shares of Company common stock. After the issuance of shares of Company common
stock upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be
voted on by stockholders.
No
fractional shares will be issued upon exercise of the Public Warrants. If, upon exercise of the warrants, a holder would be entitled
to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Company common
stock to be issued to the warrantholder.
Private
Warrants
The
private placement warrants (including the Class A common stock issuable upon exercise of the private placement warrants) will not be
transferable, assignable or salable until 30 days after the completion of our initial business combination (except, among other limited
exceptions as described under “Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants,”
to our officers and directors and other persons or entities affiliated with the initial purchasers of the private placement warrants)
and they will not be redeemable by us so long as they are held by the initial stockholders or their permitted transferees. The initial
purchasers, or their permitted transferees, have the option to exercise the private placement warrants on a cashless basis. Except as
described in this section, the private placement warrants have terms and provisions that are identical to those of the warrants being
sold as part of the units in this offering. If the private placement warrants are held by holders other than the initial purchasers or
their permitted transferees, the private placement warrants will be redeemable by us for cash and exercisable by the holders on the same
basis as the warrants included in the units being sold in this offering.
If
holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering
his, her or its warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product
of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “fair market value”
of our Class A common stock (defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market
value” will mean the average closing price of the Class A common stock for the 10 trading days ending on the third trading day
prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants
will be exercisable on a cashless basis so long as they are held by the initial purchasers or their permitted transferees is because
it is not known at this time whether they will be affiliated with us following a business combination. If they remain affiliated with
us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that prohibit
insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted
to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly,
unlike public stockholders who could exercise their warrants and sell the shares of Class A common stock received upon such exercise
freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such
securities. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate.
Our
initial stockholders and the underwriters have agreed not to transfer, assign or sell any of the private placement warrants (including
the Class A common stock issuable upon exercise of any of these warrants) until the date that is 30 days after the date we complete our
initial business combination, except that, among other limited exceptions, transfers can be made to our officers and directors and other
persons or entities affiliated with the sponsor or the underwriters.
In
addition, for as long as the private placement warrants are held by Cantor or Odeon or their respective designees or affiliates, they
will be subject to the lock-up and registration rights limitations imposed by FINRA Rule 5110 and may not be exercised after five years
from the commencement of sales of this offering.
Dividends
We
have not paid any cash dividends on our common stock to date. The payment of cash dividends in the future will be dependent upon our
revenues and earnings, if any, capital requirements and general financial conditions. The payment of any cash dividends is within the
discretion of our board of directors at such time. Further, if we incur any indebtedness, our ability to declare dividends may be limited
by restrictive covenants we may agree to in connection therewith.
Our
Transfer Agent and Warrant Agent
The
transfer agent for our common stock and warrant agent for our warrants is Continental Stock Transfer & Trust Company. We have agreed
to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of
its stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for
its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified
person or entity.
Certain
Anti-Takeover Provisions of Delaware Law and the Amended and Restated Charter and Bylaws
We
are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations,
under certain circumstances, from engaging in a “business combination” with:
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● |
a
stockholder who owns 15% or more of the Company’s outstanding voting stock (otherwise known as an “interested stockholder”); |
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|
|
| |
● |
an
affiliate of an interested stockholder; or |
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|
|
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● |
an
associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder. |
A
“business combination” includes a merger or sale of the Company’s assets with a market value of 10% or more of its
aggregate market value of all of its assets or of all of its outstanding stock. However, the above provisions of Section 203 do not apply
if:
| |
● |
the
Company Board approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the
transaction; |
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|
|
| |
● |
after
the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least
85% of the Company’s voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of
common stock; or |
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|
|
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● |
on
or subsequent to the date of the transaction, the initial business combination is approved by the Company Board and authorized at a
meeting of the Company’s stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding
voting stock not owned by the interested stockholder. |
Under
certain circumstances, Section 203 of the DGCL will make it more difficult for a person who would be an “interested stockholder”
to effect various business combinations with the Company for a three-year period. This provision may encourage companies interested in
acquiring the Company to negotiate in advance with the Company Board because the stockholder approval requirement would be avoided if
the Company Board approves either the business combination or the transaction which results in the stockholder becoming an interested
stockholder. Section 203 of the DGCL also may have the effect of preventing changes in the Company Board and may make it more difficult
to accomplish transactions which stockholders may otherwise deem to be in their best interests.
The
Amended and Restated Charter provided that the Company Board is classified into three classes of directors. As a result, in most circumstances,
a person can gain control of the Company Board only by successfully engaging in a proxy contest at two or more annual meetings.
Authorized
but Unissued Shares
The
Company’s authorized but unissued common stock and preferred stock are available for future issuances without stockholder approval
(including a specified future issuance) and could be utilized for a variety of corporate purposes, including future offerings to raise
additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and
preferred stock could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger or otherwise.
Exclusive
forum for certain lawsuits
The
Amended and Restated Charter requires, to the fullest extent permitted by law, that derivative actions brought in the Company’s
name, actions against any current or former directors, officers, employees or stockholders of the Company for breach of fiduciary duty
and other similar actions may be brought only in the Court of Chancery in the State of Delaware or if such court does not have subject
matter jurisdiction, the federal district court of the State of Delaware. The Amended and Restated Charter also requires, to the fullest
extent permitted by applicable law, the federal district courts of the United States to be the exclusive forum for the resolution of
any complaint asserting a cause of action under the Securities Act. Although we believe these provisions benefit us by providing increased
consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that these provisions
are unenforceable, and to the extent they are enforceable, the provisions may have the effect of discouraging lawsuits against the Company’s
directors and officers, although the Company stockholders will not be deemed to have waived the Company’s compliance with federal
securities laws and the rules and regulations thereunder.
Special
meeting of stockholders
The
Bylaws provide that special meetings of our stockholders may be called only by a resolution adopted by the Company Board.
Advance
notice requirements for stockholder proposals and director nominations
The
Bylaws provide that stockholders seeking to bring business before the Company’s annual meeting of stockholders, or to nominate
candidates for election as directors at Company’s annual meeting of stockholders, must provide timely notice of their intent in
writing. To be timely, a stockholder’s notice will need to be received by the company secretary at the Company’s principal
executive offices not later than the close of business on the 90th day nor earlier than the opening of business on the 120th
day prior to the anniversary date of the immediately preceding annual meeting of stockholders. Pursuant to Rule 14A-8 of the Exchange
Act, proposals seeking inclusion in the Company’s annual proxy statement must comply with the notice periods contained therein.
The Bylaws also specify certain requirements as to the form and content of a stockholders’ meeting. These provisions may preclude
the Company’s stockholders from bringing matters before the Company’s annual meeting of stockholders or from making nominations
for directors at the Company’s annual meeting of stockholders.
Action
by written consent
Any
action required or permitted to be taken at any annual and special meeting of stockholders may be taken only upon the vote of stockholders
at an annual or special meeting duly noticed and called in accordance of the DGCL and may not be taken by written consent of the stockholders
without a meeting.
Classified
Board of Directors
The
Company Board is divided into three classes, Class A, Class B and Class C, with members of each class serving staggered three-year terms.
As a result, in most circumstances, a person can gain control of the Company Board only by successfully engaging in a proxy contest at
two or more annual meetings. The Amended and Restated Charter and the Company’s Bylaws provide that the authorized number of directors
may be changed only by resolution of the board of directors. Subject to the terms of any preferred stock, any or all of the directors
may be removed from office at any time, but only for cause and only by the affirmative vote of holders of at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of all then outstanding shares of Company capital stock entitled to vote generally in the election
of directors, voting together as a single class. Any vacancy on the Company Board, including a vacancy resulting from an enlargement
of the Company Board, may be filled only by vote of a majority of the Company’s directors then in office.
Listing
of Securities
Our
common stock and Public Warrants are currently listed on the Nasdaq Global Market under the symbol “AMOD” and “AMODW,”
respectively.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information known to the Company regarding the beneficial ownership of the Company’s common stock as
of January 30, 2025, by:
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each
person who is known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company’s common
stock; |
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|
|
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● |
each
of the Company’s named executive officers and directors; and |
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|
|
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● |
all
of the Company’s executive officers and directors as a group. |
Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security
if he, she or it possesses sole or shared voting or investment power over that security, which includes the power to dispose of or to
direct the disposition of the security or has the right to acquire such powers within 60 days. In computing the number of shares of the
Company’s common stock beneficially owned by a person or entity and the percentage ownership, the Company deemed outstanding shares
of its common stock subject to options and warrants held by that person or entity that are currently exercisable or exercisable within
60 days of January 30, 2025. The Company did not deem these shares outstanding, however, for the purpose of computing the percentage
ownership of any other person or entity.
Unless
otherwise noted, the address of each beneficial owner is c/o Alpha Modus Holdings, Inc., 20311 Chartwell Center Dr., #1469, Cornelius,
North Carolina, 28031.
The
beneficial ownership of the Company’s stock is based on 12,476,780 shares of the Company’s common stock, and 7,500,000
shares of Series C Preferred Stock, issued and outstanding as of January 30, 2025.
Name
and Address
of Beneficial
Owner | |
Number
of
Shares of
Class A
Common Stock | | |
% |
| |
Number
of
Shares of
Series C
Preferred
Stock | | |
% | |
| Directors
and Executive Officers | |
| | | |
| |
| |
| | | |
| | |
| William
Alessi | |
| 4,342,308 | (1) | |
| 34.8 |
% | |
| 7,500,000 | (2) | |
| 100.0 | % |
| Rodney
Sperry | |
| - | | |
| - |
| |
| - | | |
| - | |
| Chris
Chumas | |
| 81,000 | (3) | |
| 0.6 |
% | |
| - | | |
| - | |
| Michael
Garel | |
| 23,032 | | |
| 0.2 |
% | |
| - | | |
| - | |
| Thomas
Gallagher | |
| - | | |
| |
- | |
| - | | |
| - | |
| Gregory
Richter | |
| 38,632 | (4) | |
| 0.3 |
% | |
| - | | |
| - | |
| Scott
Wattenberg | |
| 2,632 | | |
| 0.02 |
% | |
| - | | |
| - | |
| William
Ullman | |
| 655,212 | (5) | |
| 5.25 |
% | |
| - | | |
| - | |
| All
Directors and Executive Officers as a Group | |
| 5,142,816 | | |
| 39.9 |
% | |
| 7,500,000 | | |
| 100.0 | % |
| | |
| | | |
| |
| |
| | | |
| | |
| Other
Five Percent Holders | |
| | | |
| |
| |
| | | |
| | |
| Alex
Haase (6) | |
| 1,092,308 | | |
| 8.8 |
% | |
| - | | |
| - | |
| Cantor
Fitzgerald & Co. (7) | |
| 1,050,000 | (8) | |
| 7.8 |
% | |
| - | | |
| - | |
| Odeon
Capital Group, LLC (9) | |
| 450,000 | (10) | |
| 3.5 |
% | |
| - | | |
| - | |
| Insight
Acquisition Sponsor LLC (11) | |
| 750,000 | (12) | |
| 5.0 |
% | |
| - | | |
| - | |
| Michael
Singer (13) | |
| 875,000 | (14) | |
| 7.0 |
% | |
| - | | |
| - | |
| |
(1) |
Includes
(i) 139,784 shares of Class A common stock held in the name of The Alessi 2023 Irrevocable Trust, (ii) 200,000 shares of Class A
common stock held in the name of The WRA 2023 Irrevocable Trust, (iii) 200,000 shares of Class A common stock held in the name of
The Janet Alessi 2023 Irrevocable Trust, (iv) 200,000 shares of Class A common stock held in the name of The Isabella Alessi 2023
Irrevocable Trust, (v) 200,000 shares of Class A common stock held in the name of The Kim Alessi Richter Irrevocable Trust, (vi)
610,216 shares of Class A common stock held in the name of the Alessi Revocable Trust, and (vii) 2,792,308 shares of Class A common
stock held in the name of Janbella Group, LLC. William Alessi’s spouse, Sonia Alessi, is the trustee of each of the preceding
trusts, and Mr. Alessi is deemed to be the beneficial owner of shares held in the name of each of the trusts. Mr. Alessi has voting
and investment discretion with respect to shares held by Janbella Group, LLC, and is deemed to be the beneficial owner of shares
held in the name of Janbella Group, LLC. |
| |
|
|
| |
(2) |
Includes
(i) 4,300,000 shares of Series C Preferred Stock held in the name of The Alessi 2023 Irrevocable Trust, (ii) 800,000 shares of Alpha
Modus Series C Preferred Stock held in the name of The WRA 2023 Irrevocable Trust, (iii) 800,000 shares of Alpha Modus Series C Preferred
Stock held in the name of The Janet Alessi 2023 Irrevocable Trust, (iv) 800,000 shares of Alpha Modus Series C Preferred Stock held
in the name of The Isabella Alessi 2023 Irrevocable Trust, and (v) 800,000 shares of Alpha Modus Series C Preferred Stock held in
the name of The Kim Alessi Richter Irrevocable Trust. |
| |
|
|
| |
(3) |
Includes
(i) 75,000 shares of Class A common stock held in the name of Chris Chumas, and (ii) 6,000 shares of Class A common stock held in
the name of Mr. Chumas’s spouse, Amanda Chumas. |
| |
|
|
| |
(4) |
Includes
(i) 22,632 shares of Class A common stock held in the name of Gregory Richter, and (ii) 16,000 shares of Class A common stock
held in the name of Mr. Richter’s spouse, Kim Alessi Richter. |
| |
|
|
| |
(5) |
Includes (i) 74,177 shares of Class A common stock held
in the name of William Ullman, (ii) 159,983 shares of Class A common stock held in the name of Water Street Opportunities I LLC,
and (iii) 421,052 shares of common stock issuable under the private placement warrants held by Water Street Opportunities I LLC,
which are deemed to be beneficially owned by Water Street Opportunities I LLC since the warrants are exercisable within 60 days of
the date of the Closing. Mr. Ullman has voting and investment discretion with respect to securities held by Water Street Opportunities
I LLC, and is deemed to be the beneficial owner of securities held in the name of Water Street Opportunities I LLC. |
| |
|
|
| |
(6) |
The
address of Alex Haase is 17408 Lynx Den Ct., Cornelius, NC 28036. |
| |
|
|
| |
(7) |
Cantor Fitzgerald & Co. (“Cantor”) is the record owner of the securities. The business address
of Cantor is 110 East 59th Street, New York, NY, 10022. Cantor Fitzgerald Securities (“CFS”) controls the managing
general partner of Cantor. Cantor Fitzgerald, L.P. (“CFLP”) indirectly controls each of CFS and Cantor. CFLP is controlled
by CF Group Management, Inc. (“CFGM”), its managing general partner. Mr. Howard Lutnick is the Chairman and Chief Executive
Officer of CFGM and also the trustee of CFGM’s sole stockholder and therefore controls CFGM. As such, each of CFS, CFLP, CFGM and
Mr. Lutnick may be deemed to have beneficial ownership of the securities directly held by Cantor. Each such entity or person disclaims
any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or
indirectly. |
| |
|
|
| |
(8) |
Consists
of (i) 210,000 shares of Class A common stock issued to Cantor at Closing of the Business Combination, and (ii) 840,000 shares of
Class A common stock issuable under the private placement warrants held by Cantor, which are deemed to be beneficially owned by Cantor
since the warrants are exercisable within 60 days of the date of the Closing. |
| |
|
|
| |
(9) |
The
address of Odeon Capital Group, LLC (“Odeon”) is 750 Lexington Ave., 27th Floor, New York, NY 10022. |
| |
|
|
| |
(10) |
Consists
of (i) 90,000 shares of New IAC common stock issued to Odeon at Closing of the Business Combination, and (ii) 360,000 shares of common
stock issuable under the private placement warrants held by Odeon, which are deemed to be beneficially owned by Odeon since
the warrants are exercisable within 60 days of the date of the Closing. |
| |
|
|
| |
(11) |
The
address of the Sponsor is 333 East 91st Street, New York, NY 10128. |
| |
|
|
| |
(12) |
Includes
750,000 shares of Class A common stock (the Sponsor Earnout Shares) that are held in the name of the Sponsor but subject
to escrow conditions prior to release to the Sponsor (which shares are deemed to be beneficially owned by the Sponsor since the Sponsor
has voting power with respect to the shares while in escrow). Michael Singer, the former Executive Chairman and CEO of the Company,
and Jeffrey Gary, the Company’s former CEO and CFO, are the managing members of the Sponsor, and share voting and investment
discretion with respect to the common stock held of record by the Sponsor, and Mr. Singer and Mr. Gary are therefore each deemed
to be beneficial owners of securities held in the name of the Sponsor. |
| |
|
|
| |
(13) |
The
address of Michael Singer is 333 East 91st Street, New York, NY 10128. |
| |
|
|
| |
(14) |
Includes
(i) 125,000 shares of Class A common stock issued to Michael Singer at Closing of the Business Combination, and (ii) 750,000
shares of Class A common stock held in the name of the Sponsor after the Closing (see note 12 above). |
SELLING
SECURITYHOLDERS
We
are registering the offer and sale of these securities to satisfy certain registration rights we have granted to the Selling Securityholders.
The Selling Securityholders may offer and sell, from time to time, any or all of the shares of common stock or Private Placement Warrants
being offered for resale by this prospectus, which consists of up to:
| |
● |
1,550,000
Consideration Shares; |
| |
|
|
| |
● |
750,000
Convertible Note Shares; |
| |
|
|
| |
● |
517,512
Sponsor Shares; |
| |
|
|
| |
● |
1,012,510
Anchor Shares; |
| |
|
|
| |
● |
1,359,616
Additional Business Combination Shares; |
| |
|
|
| |
● |
2,325,004
Private Placement Warrants; and |
| |
|
|
| |
● |
2,325,004
Private Warrant Shares issuable upon exercise of the Private Placement Warrants. |
The
Selling Securityholders may from time to time offer and sell any or all of the shares of common stock or Private Placement Warrants set
forth below pursuant to this prospectus. In this prospectus, the term “Selling Securityholders” includes (i) the entities
identified in the table below (as such table may be amended from time to time by means of an amendment to the registration statement
of which this prospectus forms a part or by a supplement to this prospectus) and (ii) any donees, pledgees, transferees or other successors-in-interest
that acquire any of the securities covered by this prospectus after the date of this prospectus from the named Selling Securityholders
as a gift, pledge, partnership distribution or other non-sale related transfer.
The
following tables provide, as of the date of this prospectus, information regarding the beneficial ownership of our common stock and Private
Placement Warrants of each Selling Securityholder, the number of shares of common stock and number of Private Placement Warrants that
may be sold by each Selling Securityholder under this prospectus and that each Selling Securityholder will beneficially own after this
offering. The immediately following table also sets forth the percentage of common stock beneficially owned by a Selling Securityholder
after giving effect to the sale by the Selling Securityholder of all Offered Securities, based on 12,476,780 shares of common
stock outstanding on January 30, 2025.
For
purposes of the table below, the Company has assumed that (i) no holders of Public Warrants exercise any of the outstanding Warrants,
(ii) after termination of this offering, none of the shares of common stock covered by this prospectus will be beneficially owned by
the Selling Securityholders and (iii) the Selling Securityholders will not acquire beneficial ownership of any additional securities
during the offering. In addition, we assume that the Selling Securityholders have not sold, transferred or otherwise disposed of, our
securities in transactions exempt from the registration requirements of the Securities Act. Many of the shares of common stock beneficially
owned by certain of the Selling Securityholders are subject to the lock-up agreements. See “Certain Relationships and Related
Person Transactions — Business Combination Related Agreements.”
We
cannot advise you as to whether the Selling Securityholders will in fact sell any or all of such common stock or warrants. In addition,
the Selling Securityholders may sell, transfer or otherwise dispose of, at any time and from time to time, common stock and warrants
in transactions exempt from the registration requirements of the Securities Act after the date of this prospectus.
Certain
of the Selling Securityholders have an incentive to sell because they purchased shares and/or warrants at prices below the initial public
offering price and/or below the recent trading prices of our securities. Sales by such investors may prevent the trading price of our
securities from exceeding the initial public offering price and may cause the trading prices of our securities to experience a further
decline. Since others of our public stockholders purchased shares or warrants at prices above, and the exercise price of our warrants
exceeds, the recent trading prices for shares of our common stock or warrants, other of our securityholders may not experience a positive
rate of return if they were to sell at the same prices.
Selling
Securityholder information for each additional Selling Securityholder, if any, will be set forth in a prospectus supplement to the extent
required prior to the time of any offer or sale of such Selling Securityholder’s securities pursuant to this prospectus. Any prospectus
supplement may add, update, substitute, or change the information contained in this prospectus, including the identity of each Selling
Securityholder and the number of shares of common stock or Private Placement Warrants registered on its behalf.
Please
see the section entitled “Plan of Distribution” for further information regarding the Selling Securityholders’
method of distributing these shares of common stock and Private Placement Warrants.
Unless
otherwise noted below, the address for each Selling Securityholder is c/o Alpha Modus Holdings, Inc., 20311 Chartwell Center Dr., #1469,
Cornelius, NC 28031.
| | |
Securities Beneficially Owned Prior to the Offering | | |
Securities Being Offered in the Offering | | |
Securities Beneficially Owned After the Offered Securities are Sold | |
| Name | |
Shares of Common Stock | | |
Warrants | | |
Shares of Common Stock | | |
Warrants | | |
Shares of Common Stock | | |
% | | |
Warrants | | |
% | |
| CPC Sponsor Opportunities
I, LP + (1) | |
| 832,963 | | |
| 483,960 | | |
| 52,351 | | |
| 72,594 | | |
| 708,018 | | |
| 4.6 | % | |
| 411,366 | | |
| 2.0 | % |
| CPC SPONSOR OPPORTUNITIES
I (Parellel), LP + (2) | |
| 695,409 | | |
| 404,040 | | |
| 43,706 | | |
| 60,606 | | |
| 591,097 | | |
| 3.8 | % | |
| 343,434 | | |
| 1.7 | % |
| Shorefield Global Limited
+ (3) | |
| 362,510 | | |
| 222,000 | | |
| 21,077 | | |
| 33,300 | | |
| 308,133 | | |
| 2.0 | % | |
| 188,700 | | |
| 0.9 | % |
| ACM Alameda Special Purpose
Investment Fund II LP + (4) | |
| 480,556 | | |
| 283,436 | | |
| 29,568 | | |
| 42,516 | | |
| 408,472 | | |
| 2.6 | % | |
| 240,920 | | |
| 1.2 | % |
| ACM ASOF VII (Cayman) Holdco
LP + (5) | |
| 376,732 | | |
| 222,200 | | |
| 23,180 | | |
| 33,330 | | |
| 320,222 | | |
| 2.1 | % | |
| 188,870 | | |
| 0.9 | % |
| Atalaya Special Purpose Investment
Fund II LP + (6) | |
| 273,000 | | |
| 161,030 | | |
| 16,796 | | |
| 24,155 | | |
| 232,049 | | |
| 1.5 | % | |
| 136,875 | | |
| 0.7 | % |
| Greenhaven Road Special Opportunities
Fund LP + (7) | |
| 527,688 | | |
| 300,000 | | |
| 34,154 | | |
| 45,000 | | |
| 448,534 | | |
| 2.9 | % | |
| 255,000 | | |
| 1.2 | % |
| FT SOF XIV (SPAC) Holdings,
LLC + (8) | |
| 290,525 | | |
| 171,354 | | |
| 17,876 | | |
| 25,704 | | |
| 246,945 | | |
| 1.6 | % | |
| 145,650 | | |
| 0.7 | % |
| FT SOF XIII (SPAC) Holdings,
LLC + (9) | |
| 48,568 | | |
| 28,646 | | |
| 2,989 | | |
| 4,297 | | |
| 41,282 | | |
| 0.3 | % | |
| 24,349 | | |
| 0.1 | % |
| Utah Diversified Holdings,
Inc. + (10) | |
| 445,635 | | |
| 223,333 | | |
| 33,346 | | |
| 33,500 | | |
| 378,789 | | |
| 2.4 | % | |
| 189,833 | | |
| 0.9 | % |
| Moonshots IAC Partners LLC
+ (11) | |
| 60,204 | | |
| 51,666 | | |
| 1,281 | | |
| 7,750 | | |
| 51,173 | | |
| 0.3 | % | |
| 43,916 | | |
| 0.2 | % |
| William A. Ullman +
(12) | |
| 121,545 | | |
| 50,000 | | |
| 10,732 | | |
| 7,500 | | |
| 103,313 | | |
| 0.7 | % | |
| 42,500 | | |
| 0.2 | % |
| Michael Singer + (13) | |
| 2,800,231 | | |
| 2,169,975 | | |
| 94,539 | | |
| 325,497 | | |
| 2,380,195 | | |
| 15.3 | % | |
| 1,844,478 | | |
| 8.9 | % |
| Jeff Gary + (14) | |
| 1,427,675 | | |
| 1,090,475 | | |
| 50,580 | | |
| 163,572 | | |
| 1,213,523 | | |
| 7.8 | % | |
| 926,903 | | |
| 4.5 | % |
| Marie Gary + (15) | |
| 1,146,164 | | |
| 1,079,500 | | |
| 10,000 | | |
| 161,925 | | |
| 974,239 | | |
| 6.3 | % | |
| 917,575 | | |
| 4.4 | % |
| David S. Brosgol +
(16) | |
| 165,464 | | |
| 83,333 | | |
| 12,320 | | |
| 12,500 | | |
| 140,644 | | |
| 0.9 | % | |
| 70,833 | | |
| 0.3 | % |
| Victor Pascucci III +
(17) | |
| 113,002 | | |
| 52,000 | | |
| 9,151 | | |
| 7,800 | | |
| 96,051 | | |
| 0.6 | % | |
| 44,200 | | |
| 0.2 | % |
| Benjamin Securities Inc. +
(18) | |
| 3,000 | | |
| — | | |
| 450 | | |
| — | | |
| 2,550 | | |
| 0.02 | % | |
| — | | |
| — | |
| Stephen F. Shea +
(19) | |
| 1,060 | | |
| — | | |
| 159 | | |
| — | | |
| 901 | | |
| 0.01 | % | |
| — | | |
| — | |
| Polar Multi-Strategy Fund + (20) | |
| 25,723 | | |
| — | | |
| 3,859 | | |
| — | | |
| 21,864 | | |
| 0.1 | % | |
| — | | |
| — | |
| Chelsea Saffran +
(21) | |
| 5,000 | | |
| 2,000 | | |
| 450 | | |
| 300 | | |
| 4,250 | | |
| 0.03 | % | |
| 1,700 | | |
| 0.0 | % |
| Water Street Opportunities
I LLC + (22) | |
| 581,035 | | |
| 421,052 | | |
| 23,998 | | |
| 63,158 | | |
| 493,879 | | |
| 3.2 | % | |
| 357,894 | | |
| 1.7 | % |
| ECEG Partners LLC +
(23) | |
| 89,409 | | |
| — | | |
| 13,412 | | |
| — | | |
| 75,997 | | |
| 0.5 | % | |
| — | | |
| — | |
| Timber Family LLC +
(24) | |
| 17,882 | | |
| — | | |
| 2,683 | | |
| — | | |
| 15,199 | | |
| 0.1 | % | |
| — | | |
| — | |
| James Davidowitz +
(25) | |
| 8,941 | | |
| — | | |
| 1,342 | | |
| — | | |
| 7,599 | | |
| 0.05 | % | |
| — | | |
| — | |
| John Davidowitz +
(26) | |
| 6,259 | | |
| — | | |
| 939 | | |
| — | | |
| 5,320 | | |
| 0.03 | % | |
| — | | |
| — | |
| Mitchell Spector +
(27) | |
| 13,411 | | |
| — | | |
| 2,012 | | |
| — | | |
| 11,399 | | |
| 0.1 | % | |
| — | | |
| — | |
| Bruce Cameron + (28) | |
| 8,941 | | |
| — | | |
| 1,342 | | |
| — | | |
| 7,599 | | |
| 0.05 | % | |
| — | | |
| — | |
| Zac Prince + (29) | |
| 5,364 | | |
| — | | |
| 805 | | |
| — | | |
| 4,559 | | |
| 0.03 | % | |
| — | | |
| — | |
| Ian Rosen + (30) | |
| 7,152 | | |
| — | | |
| 1,073 | | |
| — | | |
| 6,079 | | |
| 0.04 | % | |
| — | | |
| — | |
| Robert Densen + (31) | |
| 4,471 | | |
| — | | |
| 671 | | |
| — | | |
| 3,800 | | |
| 0.02 | % | |
| — | | |
| — | |
| Jean Chatzky + (32) | |
| 4,471 | | |
| — | | |
| 671 | | |
| — | | |
| 3,800 | | |
| 0.02 | % | |
| — | | |
| — | |
| POLAR MULTI-STRATEGY MASTER
FUND ++ (33) | |
| 112,500 | | |
| — | | |
| 112,500 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| PEAK6 CAPITAL MANAGEMENT LLC
++ (34) | |
| 112,500 | | |
| — | | |
| 112,500 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| WOLVERINE FLAGSHIP FUND TRADING
LIMITED ++ (34) | |
| 56,250 | | |
| — | | |
| 56,250 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| METEORA CAPITAL PARTNERS,
LP ++ (35) | |
| 75,000 | | |
| — | | |
| 56,250 | | |
| — | | |
| 18,750 | | |
| 0.1 | % | |
| — | | |
| — | |
| LMR MASTER FUND LIMITED ++
(36) | |
| 56,250 | | |
| — | | |
| 56,250 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| LMR CCSA MASTER FUND LIMITED
++ (36) | |
| 56,250 | | |
| — | | |
| 56,250 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| HIGHBRIDGE TACTICAL CREDIT
MASTER FUND, L.P. ++ (37) | |
| 101,919 | | |
| — | | |
| 101,919 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| HIGHBRIDGE TACTICAL CREDIT
INSTITUTIONAL FUND LTD ++ (37) | |
| 10,581 | | |
| — | | |
| 10,581 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR CONSTELLATION MASTER
FUND, LTD ++ (38) | |
| 18,275 | | |
| — | | |
| 18,275 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR CONSTELLATION FUND
II, LTD ++ (38) | |
| 5,864 | | |
| — | | |
| 5,864 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR SC FUND LTD ++
(38) | |
| 4,806 | | |
| — | | |
| 4,806 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR STRUCTURED CREDIT
FUND, LP ++ (38) | |
| 6,656 | | |
| — | | |
| 6,656 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR XING HE MASTER FUND
LTD ++ (38) | |
| 7,184 | | |
| — | | |
| 7,184 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| PURPOSE ALTERNATIVE CREDIT
FUND LTD ++ (38) | |
| 3,275 | | |
| — | | |
| 3,275 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| PURPOSE ALTERNATIVE CREDIT
FUND-T LLC ++ (38) | |
| 1,163 | | |
| — | | |
| 1,163 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR LAKE CREDIT FUND LLC ++ (38) | |
| 5,598 | | |
| — | | |
| 5,598 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR CAPITAL MASTER FUND
LTD ++ (38) | |
| 2,024 | | |
| — | | |
| 2,024 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MAGNETAR DISCOVERY MASTER
FUND LTD ++ (38) | |
| 1,413 | | |
| — | | |
| 1,413 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| KEPOS ALPHA MASTER FUND L.P.
++ (39) | |
| 42,338 | | |
| — | | |
| 42,338 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| KEPOS SPECIAL OPPORTUNITIES
MASTER FUND L.P. ++ (39) | |
| 13,913 | | |
| — | | |
| 13,913 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| AG OFCON, LTD & AG OFCON,
LLC ++ (40) | |
| 56,250 | | |
| — | | |
| 56,250 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MMCAP INTERNATIONAL INC. SPC
++ (41) | |
| 56,250 | | |
| — | | |
| 56,250 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| CAAS CAPITAL MASTER FUND LP
++ (42) | |
| 112,500 | | |
| — | | |
| 112,500 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| BLACKWELL PARTNERS LLC- SERIES
A ++ (43) | |
| 33,188 | | |
| — | | |
| 33,188 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| STAR V PARTNERS LLC ++
(43) | |
| 12,938 | | |
| — | | |
| 12,938 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| MASO CAPITAL INVESTMENTS LIMITED
++ (43) | |
| 10,125 | | |
| — | | |
| 10,125 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| METEORA SPECIAL OPPORTUNITY
FUND I LP ++ (44) | |
| 75,000 | | |
| — | | |
| 56,250 | | |
| — | | |
| 18,750 | | |
| 0.1 | % | |
| — | | |
| — | |
| Michael Singer (45) | |
| 125,000 | | |
| — | | |
| 125,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Cantor Fitzgerald & Co.
(46) | |
| 1,050,000 | | |
| 840,000 | | |
| 210,000 | | |
| 840,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
| Odeon Capital Group, LLC (47) | |
| 450,000 | | |
| 360,000 | | |
| 90,000 | | |
| 360,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
| Streeterville Capital, LLC
(48) | |
| 750,000 | | |
| — | | |
| 750,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| THE ALESSI 2023 IRREVOCABLE
TRUST +++ (49) | |
| 139,784 | | |
| — | | |
| 139,784 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| THE ALESSI REVOCABLE TRUST
+++ (49) | |
| 610,216 | | |
| — | | |
| 610,216 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| THE ISABELLA ALESSI 2023 IRREVOCABLE
TRUST +++ (49) | |
| 200,000 | | |
| — | | |
| 200,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| THE JANET ALESSI 2023 IRREVOCABLE
TRUST +++ (49) | |
| 200,000 | | |
| — | | |
| 200,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| THE KIM ALESSI RICHTER 2023
IRREVOCABLE TRUST +++ (49) | |
| 200,000 | | |
| — | | |
| 200,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| THE WRA 2023 IRREVOCABLE TRUST
+++ (49) | |
| 200,000 | | |
| — | | |
| 200,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Janbella Group, LLC ++++
(49) | |
| 1,392,308 | | |
| — | | |
| 934,616 | | |
| — | | |
| 457,692 | | |
| 2.9 | % | |
| — | | |
| — | |
| + |
Assignee
of Sponsor’s securities; assignee’s securities are subject to a contractual lock-up for 12 months following the Closing
Date as described under “Certain Relationships and Related Person Transactions — Related Agreements — Sponsor
Lock-Up Agreement.” 85% of assignee’s shares are subject to lock-up restrictions on sale, and 15% of such shares
are not subject to lock-up and are being registered for resale. Interests shown consist of assigned Sponsor Shares, Private
Placement Warrants assigned by the Sponsor to the securityholder, and Private Warrant Shares. |
| ++ |
Interests
shown consist of Anchor Shares. |
| +++ |
Interests
shown consist of Consideration Shares that are subject to a contractual lock-up for 12 months following the Closing Date as described
under “Certain Relationships and Related Person Transactions — Related Agreements — Confidentiality and Lock-Up
Agreement.” |
| ++++ |
Interests
shown consist of Additional Business Combination Shares that are subject to a contractual lock-up for 12 months following the Closing
Date as described under “Certain Relationships and Related Person Transactions — Related Agreements — Confidentiality
and Lock-Up Agreement.” |
| (1)
|
Interests
shown consist of 349,003 Sponsor Shares, 483,960 Private Placement Warrants, and 483,960 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 200 East 94th Street, #2109, New York, NY, 10128. |
| (2) |
Interests
shown consist of 291,369 Sponsor Shares, 404,040 Private Placement Warrants, and 404,040 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 200 East 94th Street, #2109, New York, NY, 10128. |
| (3)
|
Interests
shown consist of 140,510 Sponsor Shares, 222,000 Private Placement Warrants, and 222,000 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is Vistra Corporate Services Centre, Wickhams Cay II, 22/F
Lyndhurst Tower, 1 Lyndhurst Terrace Central, Road Town, Tortola, VG1110, British Virgin Islands. |
| (4)
|
Interests
shown consist of 197,120 Sponsor Shares, 283,436 Private Placement Warrants, and 283,436 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is One Rockefeller Plaza, 32nd Floor, New York, NY, 10120. |
| (5)
|
Interests
shown consist of 154,532 Sponsor Shares, 222,200 Private Placement Warrants, and 222,200 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is One Rockefeller Plaza, 32nd Floor, New York, NY, 10120. |
| (6)
|
Interests
shown consist of 111,970 Sponsor Shares, 161,030 Private Placement Warrants, and 161,030 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is One Rockefeller Plaza, 32nd Floor, New York, NY, 10120. |
| (7) |
Interests
shown consist of 227,688 Sponsor Shares, 300,000 Private Placement Warrants, and 300,000 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 8 Sound Shore Drive, Suite 190, Greenwich, CT, 06830. |
| (8) |
Interests
shown consist of 119,171 Sponsor Shares, 171,354 Private Placement Warrants, and 171,354 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 500 Fifth Avenue, 9th Floor, New York, NY, 10110. |
| (9) |
Interests
shown consist of 19,922 Sponsor Shares, 28,646 Private Placement Warrants, and 28,646 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 500 Fifth Avenue, 9th Floor, New York, NY, 10110. |
| (10)
|
Interests
shown consist of 222,302 Sponsor Shares, 223,333 Private Placement Warrants, and 223,333 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 365 5th Avenue #201, Naples, FL, 34102. |
| (11)
|
Interests
shown consist of 8,538 Sponsor Shares, 51,666 Private Placement Warrants, and 51,666 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 12989 Thistlethorn Drive, Herndon, VA, 20171. |
| (12)
|
Interests
shown consist of 71,545 Sponsor Shares, 50,000 Private Placement Warrants, and 50,000 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 200 Water Street, Apt 4B, Brooklyn, NY, 11201. |
| (13)
|
Interests
shown consist of 630,256 Sponsor Shares, 2,169,975 Private Placement Warrants, and 2,169,975 Private Warrant Shares issuable upon
exercise of the Private Placement Warrants. The securityholder’s address is 112 Two Holes of Water Road, East Hampton, NY,
11937. |
| (14) |
Interests
shown consist of 337,200 Sponsor Shares, 1,090,475 Private Placement Warrants, and 1,090,475 Private Warrant Shares issuable upon
exercise of the Private Placement Warrants. The securityholder’s address is 149 Puesta Del Sol, Osprey, FL, 34229. |
| (15) |
Interests
shown consist of 66,664 Sponsor Shares, 1,079,500 Private Placement Warrants, and 1,079,500 Private Warrant Shares issuable upon
exercise of the Private Placement Warrants. The securityholder’s address is P.O. Box 431, Princeton, NJ, 08540. |
| (16) |
Interests
shown consist of 82,131 Sponsor Shares, 83,333 Private Placement Warrants, and 83,333 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 10 Franklin Road, Scarsdale, NY, 10583. |
| (17) |
Interests
shown consist of 61,002 Sponsor Shares, 52,000 Private Placement Warrants, and 52,000 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 330 Oxford Road 43, Kenilworth, IL, 60043. |
| (18) |
Interests
shown consist of 3,000 Sponsor Shares. The securityholder’s address is 3 West Garden Street Suite 407, Pensacola, FL, 32502. |
| (19)
|
Interests
shown consist of 1,060 Sponsor Shares. The securityholder’s address is 137 Camino Posada, Walnut Creek, CA, 94595. |
| (20)
|
Interests
shown consist of 25,723 Sponsor Shares. The securityholder’s address is 16 York St., Suite 2900, Toronto, ON, M5J 0E6, Canada. |
| (21)
|
Interests
shown consist of 3,000 Sponsor Shares, 2,000 Private Placement Warrants, and 2,000 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 43 Upsala Path, West Milford, NJ, 07480. |
| (22)
|
Interests
shown consist of 159,983 Sponsor Shares, 421,052 Private Placement Warrants, and 421,052 Private Warrant Shares issuable upon exercise
of the Private Placement Warrants. The securityholder’s address is 200 Water Street #4B, Brooklyn, NY, 11201. William Ullman,
one of the Company’s directors, has voting and investment discretion with respect to securities held by Water Street Opportunities
I LLC, and is deemed to be the beneficial owner of securities held in the name of Water Street Opportunities I LLC. |
| (23)
|
Interests
shown consist of 89,409 Sponsor Shares. The securityholder’s address is 754 Lake Avenue, Greenwich, CT, 06870. |
| (24)
|
Interests
shown consist of 17,882 Sponsor Shares. The securityholder’s address is 9 Timber Trail, Rye, NY, 10580. |
| (25)
|
Interests
shown consist of 8,941 Sponsor Shares. The securityholder’s address is 3 Stearns Ridge, Irvington, NY, 10533. |
| (26)
|
Interests
shown consist of 6,259 Sponsor Shares. The securityholder’s address is 230 College Street, Burlington, VT, 05401. |
| (27)
|
Interests
shown consist of 13,411 Sponsor Shares. The securityholder’s address is 13 Kolbert Drive, Scarsdale, NY, 10583. |
| (28)
|
Interests
shown consist of 8,941 Sponsor Shares. The securityholder’s address is 306 Colleton Avenue SE, Aiken, SC, 29801. |
| (29)
|
Interests
shown consist of 5,364 Sponsor Shares. The securityholder’s address is 231 Old Route 209, Hurley, NY, 12443. |
| (30)
|
Interests
shown consist of 7,152 Sponsor Shares. The securityholder’s address is 5 Chambry Court, Freehold, NJ, 07728. |
| (31)
|
Interests
shown consist of 4,471 Sponsor Shares. The securityholder’s address is 100 Wilson Road, Apt 18, Springfield, NJ, 07081. |
| (32) |
Interests
shown consist of 4,471 Sponsor Shares. The securityholder’s address is 237 South 18th Street, Philadelphia, PA, 19103. |
| (33)
|
The
securityholder’s address is 16 York St., Suite 2900, Toronto, ON, M5J 0E6, Canada. |
| (34)
|
The
securityholder’s address is 141 W Jackson Blvd, Ste 340, Chicago, IL, 60604. |
| (35)
|
Interests
shown consist of 56,250 Anchor Shares, and 18,750 Sponsor Shares assigned by the Sponsor to the securityholder. The
securityholder’s address is 250 W 55th St, Fl 30A, New York, NY, 10019. |
| (36)
|
The
securityholder’s address is 9th Fl., Devonshire House, 1 Mayfair Place, London W1J 8AJ, United Kingdom. |
| (37)
|
The
securityholder’s address is 277 Park Ave, Fl 23, New York, NY, 10172. |
| (38)
|
The
securityholder’s address is 1603 Orrington Ave, Fl 13, Evanston, IL, 60201. |
| (39)
|
The
securityholder’s address is 11 Times Sq, Fl 35, New York, NY, 10036. |
| (40)
|
The
securityholder’s address is 245 Park Ave, New York, NY, 10167. |
| (41)
|
The
securityholder’s address is 94 Solaris Ave, Camana Bay, PO Box 1348, Grand Cayman, KY1-1108, Cayman Islands. |
| (42)
|
The
securityholder’s address is 800 3rd Ave, Fl 26, New York, NY 10022. |
| (43)
|
The
securityholder’s address is 8/F Printing House, 6 Duddell Street, Hong Kong. |
| (44)
|
Interests shown consist of 56,250 Anchor Shares, and
18,750 Sponsor Shares assigned by the Sponsor to the securityholder. The
securityholder’s address is 1200 N Federal Hwy, #200, Boca Raton, FL, 33432. |
| (45)
|
Interests
shown consist of 125,000 Additional Business Combination Shares. The securityholder’s address is 112 Two Holes of Water Road,
East Hampton, NY, 11937. |
| (46)
|
Interests
shown consist of 210,000 Additional Business Combination Shares, 840,000 Private Placement Warrants, and 840,000 Private Warrant
Shares issuable upon exercise of the Private Placement Warrants. Cantor Fitzgerald & Co. (“Cantor”) is the
record owner of the securities. The business address of Cantor is 110 East 59th Street, New York, NY, 10022. Cantor Fitzgerald Securities
(“CFS”) controls the managing general partner of Cantor. Cantor Fitzgerald, L.P. (“CFLP”) indirectly
controls each of CFS and Cantor. CFLP is controlled by CF Group Management, Inc. (“CFGM”), its managing general
partner. Mr. Howard Lutnick is the Chairman and Chief Executive Officer of CFGM and also the trustee of CFGM’s sole stockholder
and therefore controls CFGM. As such, each of CFS, CFLP, CFGM and Mr. Lutnick may be deemed to have beneficial ownership of the securities
directly held by Cantor. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent
of any pecuniary interest they may have therein, directly or indirectly. |
| (47)
|
Interests
shown consist of 90,000 Additional Business Combination Shares, 360,000 Private Placement Warrants, and 360,000 Private Warrant Shares
issuable upon exercise of the Private Placement Warrants. The securityholder’s address is 750 Lexington Ave, Fl 27, New York,
NY, 10022. |
| (48)
|
Interests
shown consist of Convertible Note Shares issuable upon conversion of the Note. The securityholder’s address is 303 East Wacker
Drive, Suite 1040, Chicago, IL, 60601. The Company believes that John M. Fife has voting and investment discretion with respect to
securities held by Streeterville Capital, LLC, and is deemed to be the beneficial owner of securities held in the name of Streeterville
Capital, LLC. |
| (49) |
Deemed
to be beneficially owned by the Company’s CEO, William Alessi. William Alessi’s spouse, Sonia Alessi, is the trustee
of each of the various Alessi family trusts, and Mr. Alessi is deemed to be the beneficial owner of shares held in the name of each
of the trusts. Mr. Alessi has voting and investment discretion with respect to shares held by Janbella Group, LLC, and is deemed
to be the beneficial owner of shares held in the name of Janbella Group, LLC. |
U.S.
FEDERAL INCOME TAX CONSIDERATIONS
The
following is a discussion of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of shares
of common stock. This discussion is limited to certain U.S. federal income tax considerations to beneficial owners of the common stock
who are initial purchasers of such common stock pursuant to this offering and hold the common stock as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This
summary is based upon U.S. federal income tax laws as of the date of this prospectus, which is subject to change or differing interpretations,
possibly with retroactive effect. This discussion is a summary only and does not describe all of the tax consequences that may be relevant
to you in light of your particular circumstances, including but not limited to the alternative minimum tax, the Medicare tax on certain
net investment income and the different consequences that may apply if you are subject to special rules that apply to certain types of
investors, including but not limited to:
| ● | financial
institutions or financial services entities; |
| | | |
| ● | broker-dealers; |
| | | |
| ● | governments
or agencies or instrumentalities thereof; |
| | | |
| ● | regulated
investment companies; |
| | | |
| ● | real
estate investment trusts; |
| | | |
| ● | expatriates
or former long-term residents of the United States; |
| | | |
| ● | persons
that actually or constructively own five percent or more (by vote or value) of our shares; |
| | | |
| ● | persons
subject to the “applicable financial statement” accounting rules under Section
451(b) of the Code; |
| | | |
| ● | persons
that acquired our common stock pursuant to an exercise of employee share options, in connection
with employee share incentive plans or otherwise as compensation; |
| | | |
| ● | insurance
companies; |
| | | |
| ● | dealers
or traders subject to a mark-to-market method of accounting with respect to our common stock; |
| | | |
| ● | persons
holding our common stock as part of a “straddle,” constructive sale, hedge, conversion
or other integrated or similar transaction; |
| | | |
| ● | U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar; |
| | | |
| ● | partnerships
(or entities or arrangements classified as partnerships or other pass-through entities for
U.S. federal income tax purposes) and any beneficial owners of such partnerships; |
| | | |
| ● | tax-exempt
entities; |
| | | |
| ● | controlled
foreign corporations; and |
| | | |
| ● | passive
foreign investment companies. |
If
a partnership (including an entity or arrangement treated as a partnership or other pass-thru entity for U.S. federal income tax purposes)
holds our common stock, the tax treatment of a partner, member or other beneficial owner in such partnership will generally depend upon
the status of the partner, member or other beneficial owner, the activities of the partnership and certain determinations made at the
partner, member or other beneficial owner level. If you are a partner, member or other beneficial owner of a partnership holding our
common stock, you are urged to consult your tax advisor regarding the tax consequences of the acquisition, ownership and disposition
of our common stock.
This
discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations
as of the date hereof, which are subject to change, possibly on a retroactive basis, and changes to any of which subsequent to the date
of this prospectus may affect the tax consequences described herein. This discussion does not address any aspect of state, local or non-U.S.
taxation, or any U.S. federal taxes other than income taxes (such as gift and estate taxes).
We
have not sought, and do not expect to seek, a ruling from the U.S. Internal Revenue Service (the “IRS”) as to any
U.S. federal income tax consequence described herein. The IRS may disagree with the discussion herein, and its determination may be upheld
by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will
not adversely affect the accuracy of the statements in this discussion. You are urged to consult your tax advisor with respect to the
application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state,
local or foreign jurisdiction.
THIS
DISCUSSION IS ONLY A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE ACQUISITION, OWNERSHIP AND DISPOSITION
OF OUR COMMON STOCK. EACH PROSPECTIVE INVESTOR IN OUR COMMON STOCK IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY U.S. FEDERAL NON-INCOME, STATE, LOCAL, AND NON-U.S. TAX LAWS.
U.S.
Holders
This
section applies to you if you are a “U.S. Holder.” A U.S. Holder is a beneficial owner of our common stock who or that is,
for U.S. federal income tax purposes:
| ● | an
individual who is a citizen or resident of the United States; |
| | | |
| ● | a
corporation (or other entity taxable as a corporation) organized in or under the laws of
the United States, any state thereof or the District of Columbia; |
| | | |
| ● | an
estate the income of which is includible in gross income for U.S. federal income tax purposes
regardless of its source; or |
| | | |
| ● | a
trust, if (i) a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons (as defined in the
Code) have authority to control all substantial decisions of the trust or (ii) it has a valid
election in effect under Treasury Regulations to be treated as a United States person. |
Taxation
of Distributions. If we pay distributions in cash or other property (other than certain distributions of our stock or rights to acquire
our stock) to U.S. Holders of shares of our common stock, such distributions generally will constitute dividends for U.S. federal income
tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against
and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated
as gain realized on the sale or other disposition of our common stock and will be treated as described under “U.S. Holders —
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock” below.
Dividends
we pay to a U.S. Holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding
period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment
interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. Holder
may constitute “qualified dividend income” that will be subject to tax at the maximum tax rate accorded to long-term capital
gains. If the holding period requirements are not satisfied, then a corporation may not be able to qualify for the dividends received
deduction and would have taxable income equal to the entire dividend amount, and non-corporate U.S. Holders may be subject to tax on
such dividend at regular ordinary income tax rates instead of the preferential rate that applies to qualified dividend income.
Gain
or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Our Common Stock. Upon a sale or other taxable disposition of our
common stock, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized
and the U.S. Holder’s adjusted tax basis in the common stock. Any such capital gain or loss generally will be long-term capital
gain or loss if the U.S. Holder’s holding period for the common stock so disposed of exceeds one year. Long-term capital gains
recognized by non-corporate U.S. Holders may be eligible to be taxed at reduced rates. The deductibility of capital losses is subject
to limitations.
Generally,
the amount of gain or loss recognized by a U.S. Holder is an amount equal to the difference between (i) the sum of the amount of cash
and the fair market value of any property received in such disposition and (ii) the U.S. Holder’s adjusted tax basis in its common
stock exchanged. A U.S. Holder’s adjusted tax basis in its common stock generally will equal the U.S. Holder’s acquisition
cost less any prior distributions treated as a return of capital.
Information
Reporting and Backup Withholding. In general, information reporting requirements may apply to dividends paid to a U.S. Holder and
to the proceeds of the sale or other disposition of our common stock, unless the U.S. Holder is an exempt recipient. Backup withholding
may apply to such payments if the U.S. Holder fails to provide a taxpayer identification number, a certification of exempt status or
has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against a U.S.
Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided the required information is timely
furnished to the IRS.
Non-U.S.
Holders
This
section applies to you if you are a “Non-U.S. Holder.” As used herein, the term “Non-U.S. Holder” means a beneficial
owner of our common stock who or that is for U.S. federal income tax purposes:
| |
●
|
a
non-resident alien individual (other than certain former citizens and residents of the United States subject to U.S. tax as expatriates); |
| |
|
|
| |
●
|
a
foreign corporation; or |
| |
|
|
| |
●
|
an
estate or trust that is not a U.S. Holder; |
but
generally does not include an individual who is present in the United States for 183 days or more in the taxable year of the disposition
of our common stock. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences
of the acquisition, ownership or sale or other disposition of our common stock.
Taxation
of Distributions. In general, any distributions we make to a Non-U.S. Holder of shares of our common stock, to the extent paid out
of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends
for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. Holder’s conduct
of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate
of 30%, unless such Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides
proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). Any distribution not constituting
a dividend will be treated first as reducing (but not below zero) the Non-U.S. Holder’s adjusted tax basis in its shares of our
common stock and, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain realized from the sale
or other disposition of the common stock, which will be treated as described under “Non-U.S. Holders — Gain on Sale, Taxable
Exchange or Other Taxable Disposition of Our Common Stock” below. In addition, if we determine that we are likely to be classified
as a “United States real property holding corporation” (see “Non-U.S. Holders — Gain on Sale, Taxable Exchange
or Other Taxable Disposition of Our Common Stock” below), we generally will withhold 15% of any distribution that exceeds our
current and accumulated earnings and profits.
The
withholding tax generally does not apply to dividends paid to a Non-U.S. Holder who provides a Form W-8ECI, certifying that the dividends
are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States. Instead, the effectively
connected dividends will be subject to regular U.S. federal income tax as if the Non-U.S. Holder were a U.S. resident, subject to an
applicable income tax treaty providing otherwise. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject
to an additional “branch profits tax” imposed at a rate of 30% (or a lower applicable treaty rate).
Gain
on Sale, Taxable Exchange or Other Taxable Disposition of Our Common Stock. A Non-U.S. Holder generally will not be subject to U.S.
federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our common
stock unless:
●
the gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States (and, under
certain income tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the Non-U.S. Holder);
or we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time
during the shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. Holder held our common stock,
and, in the case where shares of our common stock are regularly traded on an established securities market, the Non-U.S. Holder has owned,
directly or constructively, more than 5% of our common stock at any time within the shorter of the five-year period preceding the disposition
or such Non-U.S. Holder’s holding period for the shares of our common stock. There can be no assurance that our common stock will
be treated as regularly traded on an established securities market for this purpose.
Unless
an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable
U.S. federal income tax rates as if the Non-U.S. Holder were a U.S. resident. Any gains described in the first bullet point above of
a Non-U.S. Holder that is a foreign corporation may also be subject to an additional “branch profits tax” imposed at a 30%
rate (or lower treaty rate).
If
the second bullet point above applies to a Non-U.S. Holder, gain recognized by such holder on the sale, exchange or other disposition
of our common stock will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of our common
stock from such holder may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such disposition.
We will be classified as a United States real property holding corporation if the fair market value of our “United States real
property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our
other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. We do not expect to be
a United States real property holding corporation immediately after the Business Combination is completed.
Information
Reporting and Backup Withholding. Information returns will be filed with the IRS in connection with payments of dividends and may
be filed with respect to the proceeds from a sale or other disposition of shares of common stock. A Non-U.S. Holder may have to comply
with certification procedures to establish that it is not a United States person in order to avoid information reporting and backup withholding
requirements. The certification procedures required to claim a reduced rate of withholding under a treaty generally will satisfy the
certification requirements necessary to avoid the backup withholding as well. Backup withholding is not an additional tax. The amount
of any backup withholding from a payment to a Non-U.S. Holder will be allowed as a credit against such holder’s U.S. federal income
tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA
Withholding Taxes. Provisions commonly referred to as “FATCA” impose withholding of 30% on payments of dividends on our
common stock to “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment
vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating
to ownership by United States persons of interests in or accounts with those entities) have been satisfied by, or an exemption applies
to, the payee (typically certified as to by the delivery of a properly completed IRS Form W-8BEN-E). Foreign financial institutions located
in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under
certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such withholding taxes, and a Non-U.S. Holder might
be required to file a U.S. federal income tax return to claim such refunds or credits. Thirty percent withholding under FATCA was scheduled
to apply to payments of gross proceeds from the sale or other disposition of property that produces U.S.-source interest or dividends
beginning on January 1, 2019, but on December 13, 2018, the IRS released proposed regulations that, if finalized in their proposed form,
would eliminate the obligation to withhold on gross proceeds. Such proposed regulations also delayed withholding on certain other payments
received from other foreign financial institutions that are allocable, as provided for under final Treasury regulations, to payments
of U.S.-source dividends, and other fixed or determinable annual or periodic income. Although these proposed Treasury regulations are
not final, taxpayers generally may rely on them until final Treasury regulations are issued. Prospective investors should consult their
tax advisors regarding the effects of FATCA on their investment in our common stock.
PLAN
OF DISTRIBUTION
Each
Selling Securityholder and any of their pledgees, assignees, transferees and successors-in-interest may, from time to time, sell any
or all of their securities covered hereby on the principal trading market for such securities or any other stock exchange, market or
trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling
Securityholder may use any one or more of the following methods when selling securities:
| ● | ordinary
brokerage transactions and transactions in which the broker-dealer solicits subscribers; |
| | | |
| ● | block
trades in which the broker-dealer will attempt to sell the securities as agent but may position
and resell a portion of the block as principal to facilitate the transaction; |
| | | |
| ● | purchases
by a broker-dealer as principal and resale by the broker-dealer for its account; |
| | | |
| ● | an
exchange distribution in accordance with the rules of the applicable exchange; |
| | | |
| ● | privately
negotiated transactions; |
| | | |
| ● | settlement
of short sales; |
| | | |
| |
● |
in
transactions through broker-dealers that agree with the Selling Securityholders to sell a specified number of such securities at a
stipulated price per security; |
| |
|
|
| ● | in
“at the market” offerings, as defined in Rule 415 under the Securities Act, at
negotiated prices, at prices prevailing at the time of sale or at prices related to such
prevailing market prices, including sales made directly on a national securities exchange
or sales made through a market maker other than on an exchange or other similar offerings
through sales agents; |
| | | |
| ● | through
the writing or settlement of options or other hedging transactions, whether through an options
exchange or otherwise; |
| | | |
| ● | through
a combination of any such methods of sale; or |
| ● | any
other method permitted pursuant to applicable law. |
The
Selling Securityholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Securityholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Securityholders (or, if any broker-dealer acts as agent for the Subscriber of securities, from the Subscriber)
in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in
excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or
markdown in compliance with FINRA IM-2440.
In
connection with the sale of the securities or interests therein, the Selling Securityholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the
positions they assume. The Selling Securityholders may also sell securities short and deliver these securities to close out their short
positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Securityholders may
also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities
such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Securityholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each Selling Securityholder has informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the securities.
The
Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company
has agreed to indemnify the Selling Securityholders against certain losses, claims, damages and liabilities, including liabilities under
the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i) all of the securities have been sold pursuant to this prospectus or
Rule 144 under the Securities Act or any other rule of similar effect, or (ii) they may be sold pursuant to Rule 144 without volume or
manner-of-sale restrictions, as determined by the Company. The resale securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may
not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Additionally,
certain Legacy Alpha Modus stockholders (entities and family trusts of William Alessi) entered into Confidentiality and Lock-up Agreements,
whereby all shares of common stock issuable upon conversion of 7,500,000 shares of Series C Preferred Stock, as well as 1,857,692 shares
of common stock, are locked-up following Closing, subject to (i) early release upon certain corporate transactions and (ii) certain limited
permitted transfers where the recipient takes the shares subject to the restrictions in the Confidentiality and Lock-Up Agreement, but
2,484,616 shares of common stock held by those stockholders is not subject to the lock-up restrictions. For more information, see “Certain
Relationships and Related Person Transactions — Business Combination Related Agreements — Confidentiality and Lock-Up Agreement.”
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock or Public Warrants for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In addition, the Selling Securityholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases
and sales of the common stock or Public Warrants by the Selling Securityholders or any other person. We will make copies of this prospectus
available to the Selling Securityholders and have informed them of the need to deliver a copy of this prospectus to each Subscriber at
or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
LEGAL
MATTERS
Certain
legal matters relating to the validity of the common stock to be issued hereunder will be passed upon for the Company by Brunson
Chandler & Jones, PLLC, of Salt Lake City, Utah.
EXPERTS
The
audited financial statements of IAC as of and for the years ended December 31, 2023 and 2022, included in this proxy statement/prospectus
have been so included in reliance on a report of WithumSmith+Brown, PC, an independent registered public accounting firm, as set forth
in their report thereon (which includes explanatory paragraphs relating to tax withdrawals from the trust account, the correction of
certain misstatements related to the audited financial statements, and IAC’s ability to continue as a going concern) appearing
elsewhere in this proxy statement/prospectus, and are included in reliance on such report given upon such firm as experts in auditing
and accounting.
The
audited financial statements of Alpha Modus, Corp. as of and for the years ended December 31, 2023 and 2022, have been included herein
in reliance upon the report of Turner, Stone & Company, L.L.P., an independent registered public accounting firm, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and auditing.
Changes
in Registrant’s Certifying Accountant
On
December 18, 2024, the Company informed WithumSmith+Brown, PC (“Withum”), the Company’s independent registered
public accounting firm prior to the Transactions, of its dismissal as the Company’s independent registered public accounting firm.
The Company’s Audit Committee participated in and approved the determination to dismiss Withum. The report of Withum on IAC’s
financial statements as of and for the fiscal years ended December 31, 2023 and 2022, did not contain an adverse opinion or a disclaimer
of opinion, and were not qualified or modified as to uncertainties, audit scope or accounting principles.
During
the fiscal years ended December 31, 2023 and 2022, and the subsequent period through December 18, 2024, there were no disagreements with
Withum on any matter of accounting principles or practices, financial statement disclosures or audited scope or procedures, which disagreements
if not resolved to Withum’s satisfaction would have caused Withum to make reference to the subject matter of the disagreement in
connection with its report. During the fiscal years ended December 31, 2023 and 2022, and the subsequent period through December 18,
2024, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act, other than the material
weaknesses in internal controls identified by IAC’s management, in consultation with its advisors, related to the Company’s
inability to timely file periodic reports, the manner in which an amount due to shareholders was accounted for, the over withdrawal of
trust funds, the incorrect transfer of funds to the Sponsor’s account, and restatement of prior period financial statements, as
described in Item 9A. Controls and Procedures in IAC’s Annual Report on Form 10-K for the period ended December 31, 2023,
filed with the SEC on May 14, 2024, and Item 4. Controls and Procedures of the Company’s subsequent Quarterly Reports on
Form 10-Q. The Company has authorized Withum to respond fully to the inquiries of the successor accountant.
The
Company provided Withum with a copy of the foregoing disclosures prior to the filing of this prospectus and requested that Marcum furnish
a letter addressed to the SEC, which is filed as Exhibit 16.1, stating whether it agrees with such disclosures, and, if not, stating
the respects in which is does not agree.
On
December 18, 2024, the Audit Committee approved the engagement of MaloneBailey, LLP (“MaloneBailey”) as the Company’s
independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ending December
31, 2024. MaloneBailey served as the independent registered public accounting firm of Legacy Alpha Modus prior to the Transactions. During
the fiscal years ended December 31, 2023 and 2022, and prior to December 18, 2024, IAC did not consult with MaloneBailey with respect
to (i) the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that
might be rendered on IAC’s financial statements, and neither a written report nor oral advice was provided to IAC that MaloneBailey
concluded was an important factor considered by IAC in reaching a decision as to any accounting, auditing or financial reporting issue,
or (ii) any other matter that was the subject of a disagreement or a reportable event (each as specified above).
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed a registration statement on Form S-1, including exhibits, under the Securities Act of 1933, as amended, with respect to the
securities offered by this prospectus. This prospectus does not contain all of the information included in the registration statement.
For further information pertaining to us and our securities, you should refer to the registration statement and exhibits.
In
addition, we file annual, quarterly and current reports, prospectus and other information with the SEC. Our SEC filings are available
to the public on a website maintained by the SEC located at www.sec.gov. We also maintain a website at https://alphamodus.com/.
Through our website, we make available, free of charge, annual, quarterly and current reports, prospectus and other information as soon
as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained on, or that may
be accessed through, our website is not part of, and is not incorporated into, this prospectus.
INDEX
TO FINANCIAL STATEMENTS
INSIGHT
ACQUISITION CORP.
Index
to Unaudited Interim Condensed Consolidated Financial Statements as of and
for the Three and Nine Months Ended September 30, 2024 and 2023
Index
to Audited Financial Statements December 31, 2023 and 2022
ALPHA
MODUS, CORP.
Index
to the Unaudited Interim Condensed Financial Statements as of September 30, 2024 and
December 31, 2023, and for the three and nine months ended September 30, 2024 and 2023
Index
to Audited Financial Statements December 31, 2023 and 2022
INSIGHT
ACQUISITION CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
| | |
September
30,
2024 | | |
December
31,
2023 | |
| | |
(Unaudited) | | |
| |
| Assets: | |
| | | |
| | |
| Current
assets: | |
| | | |
| | |
| Cash | |
$ | 11,810 | | |
$ | — | |
| Restricted
cash | |
| — | | |
| 314,482 | |
| Prepaid
expenses | |
| 83,642 | | |
| 105,568 | |
| Due
from sponsor | |
| 140,139 | | |
| 1,074,015 | |
| Due
from related party | |
| 145,028 | | |
| 195,000 | |
| Total
current assets | |
| 380,619 | | |
| 1,689,065 | |
| | |
| | | |
| | |
| Investments
held in the Trust Account | |
| 5,940,746 | | |
| 10,664,690 | |
| Total
Assets | |
$ | 6,321,365 | | |
$ | 12,353,755 | |
| Liabilities,
Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | |
| | | |
| | |
| Current
liabilities: | |
| | | |
| | |
| Accounts
payable | |
$ | 459,201 | | |
$ | 89,311 | |
| Accrued
expenses | |
| 883,998 | | |
| 968,309 | |
| Due
to related party | |
| 777,000 | | |
| 805,000 | |
| Due
to investor, net of debt discount | |
| 975,000 | | |
| 320,755 | |
| Due
to Shareholders | |
| — | | |
| 628,758 | |
| Loan
payable | |
| 108,466 | | |
| — | |
| Income
tax payable | |
| 48,649 | | |
| 100,036 | |
| Excise
tax payable | |
| 2,402,516 | | |
| 2,348,302 | |
| Franchise
tax payable | |
| — | | |
| - | |
| Total
current liabilities | |
| 5,654,830 | | |
| 5,260,471 | |
| | |
| | | |
| | |
| Convertible
note – related party | |
| 35,000 | | |
| — | |
| Deferred
tax liability | |
| 5,161 | | |
| 9,935 | |
| Deferred
underwriting commissions in connection with the Initial Public Offering | |
| 6,600,000 | | |
| 6,600,000 | |
| Derivative
liabilities | |
| 1,035,000 | | |
| 623,090 | |
| Total
Liabilities | |
| 13,329,991 | | |
| 12,493,496 | |
| | |
| | | |
| | |
| Commitments
and Contingencies | |
| - | | |
| - | |
| Class
A common stock subject to possible redemption, $0.0001 par value; 519,080 and 1,000,945 redeemable shares at approximately $11.27
and $10.84 per share redemption value at September 30, 2024 and December 31, 2023, respectively | |
| 5,850,330 | | |
| 10,847,403 | |
| | |
| | | |
| | |
| Stockholders’
Deficit: | |
| | | |
| | |
| Preferred
stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at September 30, 2024 and December 31, 2023 | |
| — | | |
| — | |
| Class
A common stock, $0.0001 par value; 200,000,000 shares authorized; 5,100,000 and 5,100,000 non-redeemable shares issued and outstanding
at September 30, 2024 and December 31, 2023 (excluding 519,080 and 1,000,945 shares subject to possible redemption), respectively | |
| 510 | | |
| 510 | |
| Class
B common stock, $0.0001 par value; 20,000,000 shares authorized; 900,000 shares issued and outstanding at September 30, 2024 and
December 31, 2023 | |
| 90 | | |
| 90 | |
| Common
stock, value | |
| 90 | | |
| 90 | |
| Additional
paid-in capital | |
| 1,349,771 | | |
| 509,211 | |
| Accumulated
deficit | |
| (14,209,327 | ) | |
| (11,496,955 | ) |
| Total
stockholders’ deficit | |
| (12,858,956 | ) | |
| (10,987,144 | ) |
| Total
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | |
$ | 6,321,365 | | |
$ | 12,353,755 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
INSIGHT
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| | |
For
the Three Months Ended
September
30, | | |
For
the Nine Months Ended
September
30, | |
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| | |
| | |
| | |
| | |
| |
| General
and administrative expenses | |
$ | 52,630 | | |
$ | 525,375 | | |
$ | 902,076 | | |
$ | 1,597,947 | |
| Franchise
tax expenses | |
| 20,500 | | |
| 50,000 | | |
| 76,700 | | |
| 150,000 | |
| Loss
from operations | |
| (73,130 | ) | |
| (575,375 | ) | |
| (978,776 | ) | |
| (1,747,947 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other
(expense) income: | |
| | | |
| | | |
| | | |
| | |
| Change
in fair value of derivative liabilities | |
| (227,700 | ) | |
| 7,245 | | |
| (411,910 | ) | |
| (588,915 | ) |
| Change
in fair value of Forward Purchase Agreement Liability | |
| — | | |
| 8,035 | | |
| — | | |
| 86,369 | |
| Stock
Compensation Expense | |
| — | | |
| — | | |
| (1,109,250 | ) | |
| — | |
| Interest
expense – debt discount | |
| — | | |
| — | | |
| (456,449 | ) | |
| — | |
| Gain
on investments held in Trust Account | |
| 76,525 | | |
| 384,239 | | |
| 357,115 | | |
| 2,898,987 | |
| Gain
on forgiveness of deferred underwriting fee payable | |
| — | | |
| — | | |
| — | | |
| 273,110 | |
| Total
other (expense) income | |
| (151,175 | ) | |
| 399,519 | | |
| (1,620,494 | ) | |
| 2,669,551 | |
| | |
| | | |
| | | |
| | | |
| | |
| (Loss)
Income before income tax expense | |
| (224,305 | ) | |
| (175,856 | ) | |
| (2,599,270 | ) | |
| 921,604 | |
| Income
tax expense | |
| (11,766 | ) | |
| (51,725 | ) | |
| (58,888 | ) | |
| (637,175 | ) |
| Net
(loss) income | |
$ | (236,071 | ) | |
$ | (227,581 | ) | |
$ | (2,658,158 | ) | |
$ | 284,429 | |
| Weighted
average shares outstanding of Class A Redeemable common stock, basic and diluted | |
| 519,080 | | |
| 2,366,608 | | |
| 795,185 | | |
| 7,637,976 | |
| Basic
and diluted net (loss) income per common share, Class A Redeemable common stock | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.39 | ) | |
$ | 0.02 | |
| Weighted
average shares outstanding of Class A Non-Redeemable common stock, basic and diluted | |
| 5,100,000 | | |
| 5,100,000 | | |
| 5,100,000 | | |
| 3,605,495 | |
| Basic
and diluted net (loss) income per common share, Class A Non-Redeemable common stock | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.39 | ) | |
$ | 0.02 | |
| Weighted
average shares outstanding of Class B common stock, basic and diluted | |
| 900,000 | | |
| 900,000 | | |
| 900,000 | | |
| 2,400,000 | |
| Basic
and diluted net (loss) income per common share, Class B common stock | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.39 | ) | |
$ | 0.02 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
INSIGHT
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| | |
Common
Stock | | |
Additional | | |
| | |
Total | |
| | |
Class
A | | |
Class
B | | |
Paid-In | | |
Accumulated | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| Balance
– December 31, 2023 | |
| 5,100,000 | | |
$ | 510 | | |
| 900,000 | | |
$ | 90 | | |
$ | 509,211 | | |
$ | (11,496,955 | ) | |
$ | (10,987,144 | ) |
| Accretion
of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (168,352 | ) | |
| — | | |
| (168,352 | ) |
| Allocated
fair value of Subscription Shares in connection with Subscription Agreement | |
| — | | |
| — | | |
| — | | |
| — | | |
| 177,204 | | |
| — | | |
| 177,204 | |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (633,846 | ) | |
| (633,846 | ) |
| Balance
– March 31, 2024 (unaudited) | |
| 5,100,000 | | |
| 510 | | |
| 900,000 | | |
| 90 | | |
| 518,063 | | |
| (12,130,801 | ) | |
| (11,612,138 | ) |
| Accretion
of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (202,137 | ) | |
| — | | |
| (202,137 | ) |
| Excise
tax payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (54,214 | ) | |
| (54,214 | ) |
| Fair
value of shares issued in connection with Sponsor and CEO fee waiver agreements | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,436,250 | | |
| — | | |
| 1,436,250 | |
| Fees
waived in connection with the Sponsor and CEO fee waiver agreements | |
| — | | |
| — | | |
| — | | |
| — | | |
| (327,000 | ) | |
| — | | |
| (327,000 | ) |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,788,241 | ) | |
| (1,788,241 | ) |
| Balance
– June 30, 2024 (unaudited) | |
| 5,100,000 | | |
| 510 | | |
| 900,000 | | |
| 90 | | |
| 1,425,176 | | |
| (13,973,256 | ) | |
| (12,547,480 | ) |
| Accretion
of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (75,405 | ) | |
| — | | |
| (75,405 | ) |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (236,071 | ) | |
| (236,071 | ) |
| Balance
– September 30, 2024 (unaudited) | |
| 5,100,000 | | |
$ | 510 | | |
| 900,000 | | |
$ | 90 | | |
$ | 1,349,771 | | |
$ | (14,209,327 | ) | |
$ | (12,858,956 | ) |
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| | |
Common
Stock | | |
Additional | | |
| | |
Total | |
| | |
Class
A | | |
Class
B | | |
Paid-In | | |
Accumulated | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| Balance
– December 31, 2022 | |
| — | | |
$ | — | | |
| 6,000,000 | | |
$ | 600 | | |
$ | — | | |
$ | (11,885,332 | ) | |
$ | (11,884,732 | ) |
| Accretion
of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,628,151 | | |
| 3,628,151 | |
| Contributions
from Sponsor | |
| — | | |
| — | | |
| — | | |
| — | | |
| 100,000 | | |
| — | | |
| 100,000 | |
| Initial
Value of Forward Purchase Agreement | |
| — | | |
| — | | |
| — | | |
| — | | |
| (86,369 | ) | |
| — | | |
| (86,369 | ) |
| Class
B common stock converted to Class A common stock on a one for one basis | |
| 5,100,000 | | |
| 510 | | |
| (5,100,000 | ) | |
| (510 | ) | |
| — | | |
| — | | |
| — | |
| Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 895,469 | | |
| 895,469 | |
| Balance
– March 31, 2023 (unaudited) | |
| 5,100,000 | | |
| 510 | | |
| 900,000 | | |
| 90 | | |
| 13,631 | | |
| (7,361,712 | ) | |
| (7,347,481 | ) |
| Accretion
of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| (13,631 | ) | |
| (240,334 | ) | |
| (253,965 | ) |
| Excise
tax payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,156,214 | ) | |
| (2,156,214 | ) |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (383,459 | ) | |
| (383,459 | ) |
| Balance
– June 30, 2023 (unaudited) | |
| 5,100,000 | | |
| 510 | | |
| 900,000 | | |
| 90 | | |
| — | | |
| (10,141,719 | ) | |
| (10,141,119 | ) |
| Balance | |
| 5,100,000 | | |
| 510 | | |
| 900,000 | | |
| 90 | | |
| — | | |
| (10,141,719 | ) | |
| (10,141,119 | ) |
| Accretion
of Class A common stock subject to redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (701,466 | ) | |
| (701,466 | ) |
| Excise
tax payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (192,088 | ) | |
| (192,088 | ) |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (227,581 | ) | |
| (227,581 | ) |
| Balance
– September 30, 2023 (unaudited) | |
| 5,100,000 | | |
$ | 510 | | |
| 900,000 | | |
$ | 90 | | |
$ | — | | |
$ | (11,262,854 | ) | |
$ | (11,262,254 | ) |
| Balance
| |
| 5,100,000 | | |
$ | 510 | | |
| 900,000 | | |
$ | 90 | | |
$ | — | | |
$ | (11,262,854 | ) | |
$ | (11,262,254 | ) |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
INSIGHT
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | |
2024 | | |
2023 | |
| | |
For
the Nine Months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| Cash
Flows from Operating Activities: | |
| | | |
| | |
| Net
(loss) income | |
$ | (2,658,158 | ) | |
$ | 284,429 | |
| Adjustments
to reconcile net (loss) income to net cash used in operating activities: | |
| | | |
| | |
| Change
in value of derivative liabilities | |
| 411,910 | | |
| 588,915 | |
| Interest
expense - debt discount | |
| 456,449 | | |
| — | |
| Interest
earned on investments held in Trust Account | |
| (357,115 | ) | |
| (2,898,986 | ) |
| Gain
on forgiveness of deferred underwriting fee payable | |
| — | | |
| (273,110 | ) |
| Change
in fair value of forward purchase agreement | |
| — | | |
| (86,369 | ) |
| Gain
on investments held in Trust Account | |
| - | | |
| - | |
| Stock
compensation expense | |
| 1,109,250 | | |
| — | |
| Deferred
tax benefit | |
| (4,774 | ) | |
| (156,593 | ) |
| Changes
in operating assets and liabilities: | |
| | | |
| | |
| Prepaid
expenses | |
| 21,926 | | |
| 281,046 | |
| Accounts
payable | |
| 369,890 | | |
| (77,780 | ) |
| Accrued
expenses | |
| (84,311 | ) | |
| 449,786 | |
| Accrued
expenses – related party | |
| — | | |
| - | |
| Due
to related party | |
| (58,000 | ) | |
| 225,000 | |
| Due
from related party | |
| 49,972 | | |
| (891,000 | ) |
| Due
from sponsor | |
| (225,000 | ) | |
| — | |
| Due
to investor | |
| 25,000 | | |
| — | |
| Income
tax payable | |
| (51,387 | ) | |
| 203,768 | |
| Franchise
tax payable | |
| — | | |
| 8,159 | |
| Net
cash used in operating activities | |
| (994,348 | ) | |
| (2,342,735 | ) |
| | |
| | | |
| | |
| Cash
Flows from Investing Activities: | |
| | | |
| | |
| Cash
withdrawn from Trust Account to pay franchise and income taxes | |
| 236,505 | | |
| 2,457,248 | |
| Cash
withdrawn from Trust Account in connection with redemption | |
| 6,071,725 | | |
| 234,830,236 | |
| Cash
deposited in Trust Account | |
| (1,227,171 | ) | |
| (500,000 | ) |
| Net
cash provided by investing activities | |
| 5,081,059 | | |
| 236,787,484 | |
| | |
| | | |
| | |
| Cash
Flows from Financing Activities: | |
| | | |
| | |
| Contributions
from Sponsor | |
| — | | |
| 100,000 | |
| Due
to related party | |
| — | | |
| 420,000 | |
| Due
to investors | |
| - | | |
| — | |
| Offering
costs paid | |
| — | | |
| - | |
| Proceeds
from related party | |
| 30,000 | | |
| — | |
| Proceeds
pursuant to subscription agreement | |
| 350,000 | | |
| — | |
| Capital
contribution from Sponsor | |
| 1,158,876 | | |
| — | |
| Proceeds
from loan payable | |
| 108,466 | | |
| — | |
| Proceeds
from convertible promissory note - related party | |
| 35,000 | | |
| — | |
| Due
to shareholders | |
| (650,402 | ) | |
| — | |
| Redemption
of common stock | |
| (5,421,323 | ) | |
| (234,830,236 | ) |
| Net
cash used in financing activities | |
| (4,389,383 | ) | |
| (234,310,236 | ) |
| | |
| | | |
| | |
| Net
change in cash and restricted cash | |
| (302,672 | ) | |
| 134,513 | |
| Cash
and restricted cash – beginning of the period | |
| 314,482 | | |
| 171,583 | |
| Total
cash and restricted cash– end of the period | |
$ | 11,810 | | |
$ | 306,096 | |
| | |
| | | |
| | |
| Cash
and restricted cash – beginning of the period | |
$ | 11,810 | | |
$ | — | |
| Restricted
cash | |
| — | | |
| 306,096 | |
| Total
cash and restricted cash– end of the period | |
$ | 11,810 | | |
$ | 306,096 | |
| | |
| | | |
| | |
| Supplemental
Cash Flow Information: | |
| | | |
| | |
| Cash
paid for franchise and income taxes | |
$ | 236,505 | | |
| $$1,447,889 | |
| | |
| | | |
| | |
| Supplemental
disclosure of noncash activities: | |
| | | |
| | |
| Forgiveness
of deferred underwriting fee payable | |
$ | — | | |
$ | 5,126,890 | |
| Fair
Value of subscription shares | |
$ | 177,204 | | |
$ | — | |
| Value
of excise tax liability | |
$ | 54,214 | | |
$ | 2,348,302 | |
| Increase
in Due to Investor | |
$ | — | | |
$ | 150,000 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Note
1 - Description of Organization and Business Operations
Insight
Acquisition Corp. (the “Company”) was incorporated in Delaware on April 20, 2021. The Company was formed for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company
is subject to all of the risks associated with emerging growth companies.
The
Company has one subsidiary, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”), a direct wholly owned subsidiary of
the Company incorporated on October 10, 2023. As of September 30, 2024 the subsidiary had no activity.
As
of September 30, 2024, the Company had not commenced any operations. All activity for the period from April 20, 2021 (inception) through
September 30, 2024 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”)
described below and subsequent to the Initial Public Offering, the search for a business combination. The Company will not generate any
operating revenues until after the completion of its initial Business Combination, at the earliest. On October 29, 2024, the Company
held a Special Meeting of stockholders. At the Special Meeting, the Company’s stockholders approved the Business Combination Agreement,
dated as of October 13, 2023, as amended by the First Amendment to the Business Combination Agreement, dated as of June 21, 2024. The
Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
Company’s sponsor is Insight Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration
statement for the Company’s Initial Public Offering was declared effective on September 1, 2021. On September 7, 2021, the Company
consummated its Initial Public Offering of 24,000,000 units (the “Units” and, with respect to the Class A common stock included
in the Units being offered, the “Public Shares”), generating gross proceeds of $240.0 million, and incurring offering costs
of approximately $17.5 million, of which approximately $12.0 million and approximately $668,000 were for deferred underwriting commissions
(see Note 5) and offering costs allocated to derivate warrant liabilities, respectively.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 7,500,000
and 1,200,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”),
to the Sponsor and Cantor Fitzgerald & Co. (“Cantor”) and Odeon Capital Group, LLC (“Odeon”), respectively,
for an aggregate of 8,700,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, generating proceeds of $8.7
million (see Note 4).
Upon
the closing of the Initial Public Offering and the Private Placement, $241.2 million ($10.05 per Unit) of the net proceeds of the sale
of the Units in the Initial Public Offering and of the Private Placement Warrants in the Private Placement were placed in a trust account
(“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and
invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having
a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company
Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of (i) the completion
of a Business Combination and (ii) the distribution of the Trust Account.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the deferred underwriting
commissions and taxes payable on the interest earned on the Trust Account) at the time of the agreement to enter into the initial Business
Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more
of the voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
The
Company will provide the holders of the Company’s outstanding Public Shares (the “Public Stockholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholders
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek
stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, in its sole discretion. The Public
Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially
at $10.05 per Public Share plus pro rata interest earned in Trust Account). The per-share amount to be distributed to Public Stockholders
who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters
(as discussed in Note 5). These Public Shares were recorded at a redemption value and classified as temporary equity in accordance with
the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing
Liabilities from Equity.” The Company will proceed with a Business Combination if the holders of 65% of the shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally,
each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval in connection with a Business Combination, the Initial Stockholders (as defined below) agreed
to vote their Founder Shares (as defined below in Note 3) and any Public Shares purchased during or after the Initial Public Offering,
and the Anchor Investors (as defined below in Note 3) agreed to vote any Founder Shares held by them in favor of a Business Combination.
In addition, the Initial Stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares
in connection with the completion of a Business Combination. The Company’s Certificate of Incorporation provides that a Public
Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as
a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
is restricted from redeeming an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The
Company’s Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any
other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), is restricted from redeeming an aggregate of 20% or more of the Public
Shares, without the prior consent of the Company.
The
Sponsor and the Company’s officers and any other holders of the Founder Shares immediately prior to the Initial Public Offering
(the “Initial Stockholders”) agreed not to propose an amendment to the Certificate of Incorporation to modify the substance
or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete a Business Combination
within the Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’ rights
or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment.
The
Anchor Investors are not entitled to (i) redemption rights with respect to any Founder Shares held by them in connection with the completion
of the initial Business Combination, (ii) redemption rights with respect to any Founder Shares held by them in connection with a stockholder
vote to amend the Certificate of Incorporation in a manner that would affect the substance or timing of the Company’s obligation
to redeem 100% of its Public Shares if the Company has not consummated an initial Business Combination within the Combination Period
or (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails
to complete the initial Business Combination within the Combination Period (although they will be entitled to liquidating distributions
from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination
within the Combination Period).
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
If
the Company is unable to complete a Business Combination by June 7, 2024, which may be extended only by the vote of the stockholders
to approve an amendment to the amended and restated certificate of incorporation (the “Combination Period”) the Company will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up
to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will
completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders
and the board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
On
March 6, 2023 the Company held a special meeting (the “Special Meeting”) of stockholders. At the Special Meeting, the Company’s
stockholders were asked to vote on the following items: (i) a proposal to amend the Charter to extend the date by which the Company has
to consummate a business combination for an additional one month, from March 7, 2023 to April 7, 2023 and thereafter, at the discretion
of the board of directors of the Company and without a vote of the stockholders, up to five (5) times for an additional one month each
time, for a total of up to five additional months to September 7, 2023 (the “First Charter Amendment Proposal”), (ii) a proposal
to amend the Company’s Charter to eliminate from the Charter the limitation that the Company may not redeem public shares to the
extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1)
of the Exchange Act) of less than $5,000,001 (the “Redemption Limitation”) in order to allow the Company to redeem public
shares irrespective of whether such redemption would exceed the Redemption Limitation (the “Second Charter Amendment Proposal”),
(iii) a proposal to amend the Charter to provide for the right of a holder of Class B common stock of the Company, par value $0.0001
per share (“Class B Common Stock”) to convert such shares into shares of Class A common stock of the Company, par value $0.0001
per share (“Class A Common Stock”) on a one-for-one basis prior to the closing of a business combination at the election
of the holder (the “Third Charter Amendment Proposal” and together with the First Charter Amendment Proposal and the Second
Charter Amendment Proposal, the “Charter Amendment Proposals”) and (iv) a proposal to direct the chairman of the Special
Meeting to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if,
based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve each of the Charter Amendment
Proposals. In connection with the Extension, the holders of 21,151,393 Class A common shares, representing approximately 88.1% of the
Company’s issued and outstanding Class A common shares, elected to redeem their shares. Following such redemptions, approximately
$28,744,831 remained in the trust account and 2,848,607 shares of Class A Common Stock remained issued and outstanding.
On
March 28, 2023, the board of directors of the Company approved a one-month extension of the date by which the Company has to consummate
a business combination to May 7, 2023 and authorized management to deposit $80,000 into the Trust Account for such extension. Accordingly,
management deposited $80,000 into the Trust Account and the date by which the Company has to consummate a business combination has been
extended to May 7, 2023. On May 2, 2023, the board of directors of the Company approved an additional one-month extension to June 7,
2023 and deposited an additional $80,000 into the Trust Account.
On
March 29, 2023, the Company entered into a forward share purchase agreement (the “Forward Share Purchase Agreement”) with
Avila, Meteora Special Opportunity Fund I, LP, Meteora Capital Partners, LP and Meteora Select Trading Opportunities Master, LP (collectively,
“Seller”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). Pursuant to the
terms of the Forward Purchase Agreement, Seller intends but is not obligated to purchase the Company’s Class A Common Stock from
holders (other than the Company or its affiliates) who have elected to redeem such shares in connection with the Proposed Transactions.
Purchases by Seller will be made through brokers in the open market after the redemption deadline in connection with the Proposed Transactions
at a price no higher than the redemption price to be paid by the Company in connection with the Proposed Transactions (the “Initial
Price”). The Shares purchased by the Seller, other than the Share Consideration Shares are referred to herein as the “Recycled
Shares.” The Seller also may sell 2,376,000 shares of the Company Class A Common Stock purchased in the Company’s initial
public offering (“IPO Shares”) in the Forward Purchase Transaction, up to a maximum of 2,500,000 shares of Class A Common
Stock (including any Recycled Shares).
On
April 3, 2023, the Company entered into a Business Combination Agreement (“Avila BCA”) with Avila Energy Corporation, an
Alberta corporation (“Avila”), pursuant to which the Company will acquire Avila for consideration of shares of the Company
following its redomicile into the Province of Alberta. The business combination agreement and related executed agreements included supporting
agreements and a forward share purchase agreement are more fully described and filed with the Company’s Current Report on Form
8-K filed with the SEC on April 4, 2023.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
On
April 18, 2023, the Company received a notification from the New York Stock Exchange (“NYSE”) that it was in violation of
NYSE requirements as it had failed to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Form
10-K”) and that if the Form 10-K is not filed with the SEC by 2:30 p.m. Eastern Time on April 21, 2023, the NYSE would post the
Company to the NYSE’s late filers list on the Profile, Data and News pages with respect to each of the Company’s securities
(the “LF Designation”). Effective April 19, 2023, the Company filed the Form 10-K and that same day the Company received
additional correspondence from the NYSE acknowledging that the filing had been made and cancelling its prior correspondence and stating
that the LF Designation would not be posted on the Profile, Data and News pages with respect to each of the Company’s securities.
On
April 27, 2023, the Company issued a press release reporting that the Company will transfer the listing of its securities to The Nasdaq
Stock Market (“Nasdaq”). In the press release, the Company stated that its securities will commence trading on Nasdaq upon
the market open on Tuesday, May 2, 2023. The Company’s Class A common stock will continue trading under the ticker symbol “INAQ”
on the Nasdaq Global Market and the Company’s units and warrants will continue trading under the ticker symbols “INAQU”
and “INAQW,” respectively, on the Nasdaq Capital Market.
On
May 24, 2023, the Company received a notification from the Nasdaq that it was not in compliance with Nasdaq Listing Rule 5250I(1) as
it had failed to timely file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form 10-Q”). Under
the Nasdaq Listing Rules, the Company now has 60 calendar days to submit a plan to regain compliance and if the plan is accepted, Nasdaq
may grant an exception of up to 180 calendar days from the Form 10-Q’s due date, or until November 20, 2023, to regain compliance.
The Company subsequently filed the Form 10-Q for the quarter ended March 31, 2023 on June 2, 2023, regaining compliance.
On
August 10, 2023, the Company and Avila entered into a Letter Agreement providing for the mutual termination of the Avila BCA. The Letter
Agreement provides for the mutual release of claims against the other party and also provides that Avila will pay to the Company $300,000
in partial reimbursement of expenses incurred by the Company in connection with the Avila BCA (the “Avila Payment”). The
Avila Payment is due and payable as follows: 1) up to $300,000 immediately upon Avila’s receipt of net proceeds from any financing,
public or private, in excess of U.S. $3,000,000, -or- (2) (i) $50,000 by December 1, 2023, (ii) $100,000 by February 1, 2024 and (iii)
$150,000 by April 1, 2024.
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. On November 6, 2023, the Company and the Sponsor entered into a written agreement (the
“Rescission Agreement”) to rescind and nullify that certain promissory note in the principal amount of $480,000 and executed
on August 17, 2023 (the “Note”) pursuant to which the Company agreed to pay the Sponsor the principal amount of $480,000
subject to the terms and conditions of the Note. Upon execution and delivery of the Rescission Agreement, the Note, in its entirety,
is hereby irrevocably rescinded, abrogated, cancelled and rendered null and void ab initio and of no force or effect whatsoever, and
the positions among the Company and the Sponsor shall be restored to what would have existed had they not entered into the Note.
As
approved by its stockholders at the annual meeting of stockholders held on September 6, 2023 (the “Annual Meeting”), the
Company filed a Second Amendment (the “Second Amendment”) to its Amended and Restated Certificate of Incorporation (the “Charter”)
with the Delaware Secretary of State on September 6, 2023 to modify the terms and extend Combination Period by which the Company has
to consummate an initial business combination (the “Business Combination”) from September 7, 2023 to June 7, 2024, provided
that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account, as defined in the Charter for each one-month extension. In connection with the stockholder’s
vote at the Annual Meeting, 1,847,662 shares were tendered for redemption in exchange for a total redemption payment of $19,208,848.
On
September 7, 2023, October 7, 2023, November 7, 2023, December 15, 2023, January 5, 2024, February 2, 2024, February 7, 2024, March 20,
2024 and May 6, 2024, the Company deposited $20,000 into the Trust Account on each date, to extend the Business Combination Period from
September 7, 2023 to June 7, 2024. On June 6, 2024, July 31, 2024, August 21, 2024, September 11, 2024, October 7, 2024, and November
15, 2024, the Company deposited $10,382 or $0.02 for each outstanding share of common stock sold in the Company’s initial public
offering into the Trust Account on each date to extend the Business Combination Period from June 7, 2024 to November 7, 2024. The Company
will deposit an additional amount of $10,382 or $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account on or before the closing date of the Business Combination to extend the Business Combination Period
to December 7, 2024.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Effective
as of October 13, 2023, the Company, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”) and Alpha Modus, Corp., a
Florida corporation (“Alpha Modus”), entered into a business combination agreement and plan of merger (the “AM BCA”)
pursuant to which Merger Sub will merge with and into Alpha Modus with Alpha Modus as the surviving corporation and becoming a wholly
owned subsidiary of the Company. The Board of Directors of the Company (the “Board”) has unanimously approved and declared
advisable the AM BCA, the Merger and the other transactions contemplated thereby (the “Proposed Transactions”). A copy of
the AM BCA is filed as Exhibit 2.1 in the Current Report on Form 8-K, dated October 17, 2023. In connection with entering into the AM
BCA, in October 2023, the Company formed IAC Merger Sub Inc., a Florida corporation.
On
December 28, 2023, the Company filed with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on
Form S-4 (the “Registration Statement”) in connection with the proposed business combination with Alpha Modus, Corp. based
in Metro-Charlotte, NC (the “Business Combination”).
On
April 21, 2024, Jeff Gary, in connection with his departure as an officer and director of the Company, waived and forfeited any monies
he was owed under the Sponsor Payment Agreement and/or Management Payment Agreement. On June 21, 2024, the Company, Sponsor and Michael
Singer entered into a fee waiver agreement (the “Waiver Agreement”) pursuant to which the Sponsor and Michael Signer agreed
that in exchange for Michael Singer’s receipt of 125,000 shares of the Company’s Class A common stock to be delivered at
the closing of the proposed business combination between the Company and Alpha Modus Corp., the Sponsor and Michael Singer agreed to
waive all amounts due to them now and in the future under the Sponsor Payment Agreement and Management Payment Agreement on the terms
and conditions set forth in the Waiver Agreement.
On
June 5, 2024, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting the Company’s
stockholders approved the filing of a Third Amendment (the “Third Amendment”) to its Amended and Restated Certificate of
Incorporation (the “Charter”) with the Delaware Secretary of State to modify the terms and extend time by which the Company
has to consummate an initial business combination (the “Business Combination”) from June 7, 2024 to December 7, 2024, provided
that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account, as defined in the Charter for each one-month extension. In connection with the stockholder’s
vote at the Special Meeting and the planned filing of the Third Amendment, 481,865 shares of the Company’s Class A Common Stock,
$0.0001 par value per share, were tendered for redemption.
On
September 27, 2024, the Company received the Notice from the Nasdaq Stock Market LLC (“Nasdaq”), stating that the Company
did not comply with Nasdaq Interpretive Material IM-5101-2, and that its securities are now subject to delisting. The Company’s
registration statement filed in connection with the Company’s IPO became effective on September 1, 2021. Pursuant to IM-5101-2,
the Company, a special purpose acquisition company, must complete one or more business combinations within 36 months of the effectiveness
of its IPO registration statement. Since the Company failed to complete its initial business combination by September 1, 2024, the Company
did not comply with IM5101-2, and its securities are now subject to delisting. Unless the Company requests an appeal of this determination
by October 4, 2024, trading of the Company’s securities will be suspended at the opening of business on October 8, 2024, and a
Form 25-NSE will be filed with the Securities and Exchange Commission (the “SEC”), which will remove the Company’s
securities from listing and registration on The Nasdaq Stock Market. The Company appealed the determination contained in the Notice and
a hearing on the appeal was scheduled for November 14, 2024 (the “Hearing”). The Hearing was held on November 14, 2024 and
the Company requested an extension until December 31, 2024 to complete the Business Combination. The Company is waiting for the decision
on its appeal.
The
Initial Stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares
if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders acquire Public
Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect
to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed
to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not
complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds
held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be
only $10.05. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the
extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered
or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality
or other similar agreement or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account
to below the lesser of (i) $10.05 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date
of the liquidation of the Trust Account, if less than $10.05 per Public Share due to reductions in the value of the trust assets, less
taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and
all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under
the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor
will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Risks
and Uncertainties
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further,
the impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited condensed
consolidated financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows
is also not determinable as of the date of these unaudited condensed consolidated financial statements.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax.
Any
share redemption or other share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension
vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection
with a Business Combination, extension vote or otherwise will depend on a number of factors, including (i) the fair market value of the
redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination,
(iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise
issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the
content of regulations and other guidance from the Treasury.
During
the second quarter of 2024, the Internal Revenue Service issued final regulations with respect to the timing and payment of the excise
tax. These regulations provided that the filing and payment deadline for any liability incurred during the period from January 1, 2023
to December 31, 2023 would be October 31, 2024. The Company is currently evaluating its options with respect to this obligation. Any
amount of such excise tax not paid in full, will be subject to additional interest and penalties which are currently estimated at 10%
interest per annum and a 5% underpayment penalty per month or portion of a month up to 25% of the total liability for any amount that
is unpaid from November 1, 2024 until paid in full.
The
Company held a meeting on March 6, 2023 where the stockholders voted to approve a proposal to amend the Company’s amended and restated
certificate of incorporation to extend the Combination Period, from March 7, 2023, monthly for up to six additional months at the election
of the Company, ultimately until as late as September 7, 2023 (the “Extension”, and such extension date the “Extended
Date”). In connection with the March 6, 2023 meeting, 21,151,393 shares of the Company’s common stock were redeemed with
a total redemption payment of $215,621,387.
The
Company held its annual meeting on September 6, 2023 where the stockholders voted to approve a proposal to amend the Company’s
amended and restated certificate of incorporation to extend the Combination Period, from September 7, 2023 to June 7, 2024, provided
that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account, as defined in the Charter for each one-month extension. In connection with the stockholder’s
vote at the Annual Meeting, 1,847,662 shares were tendered for redemption in exchange for a total redemption payment of $19,208,848.
The
Company held a special meeting on June 5, 2024 where the stockholders voted to approve a proposal to amend the Company’s amended
and restated certificate of incorporation to extend the Combination Period, from June 7, 2024 to December 7, 2024, provided that the
Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold in the Company’s initial public
offering into the Trust Account, as defined in the Charter for each one-month extension. In connection with the stockholder’s vote
at the Special Meeting, 481,865 shares were tendered for redemption in exchange for a total redemption payment of $5,421,323.
As
a result, the Company booked a liability of $2,348,302 for the excise tax based on 1% of shares redeemed during the year ended December
31, 2023 and $54,214 for the excise tax based on 1% of shares redeemed during the nine months ended September 30, 2024. For interim periods,
an entity is not required to estimate future stock repurchases and stock issuances to measure its excise tax obligation. Rather, an entity
can generally record the obligation on an as-incurred basis. In other words, the excise tax obligation recognized at the end of a quarterly
financial reporting period is calculated as if the end of the quarterly period was the end of the annual period for which the excise
tax obligation is payable.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Pursuant
to the AM BCA, (i) in the event the business combination contemplated by the AM BCA occurs, then the surviving company shall pay the
Company’s excise tax liability; (ii) if Alpha Modus does not obtain its shareholders approval of the business combination, or Alpha
Modus breaches the AM BCA, then Alpha Modus will be responsible to pay the Company’s excise tax liability; and (iii) if an Alpha
Modus material adverse effect occurs and the business combination does not close, or if Alpha Modus fails to close the business combination
for any reason other than a material breach by the Company, then Alpha Modus will be responsible to pay the Company’s excise tax
liability. In all other circumstances the Company will be responsible to pay the Company’s excise tax liability. The Company will
not use any of the funds held in the Trust Account and any additional amounts deposited into the Trust Account, as well as any interest
earned thereon, to pay for the Company’s excise tax liability. In addition, because the excise tax would be payable by the Company
and not by the redeeming holders, the mechanics of any required payment of the excise tax by the Company have not been determined. The
foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability
to complete a Business Combination.
In
October 2023, the Israel-Hamas war commenced. As a result of the war, instability in the Middle East and various other regions of the
world may occur and effect the world economy. Various nations, including the United States, as a reaction to the Israel-Hamas war have
begun taking actions that may further affect the world economy. Such effects on the world economy are not determinable as of the date
of these unaudited condensed consolidated financial statements. The specific impact on the Company’s financial condition, results
of operations and cash flows is also not determinable as of the date of these unaudited condensed consolidated financial statements.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has
opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards
used.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Liquidity
and Going Concern
As
of September 30, 2024, the Company had $11,810 in its operating bank account available to pay operating expenses and working capital
deficit of $5,274,211.
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000
from the Sponsor to cover for certain offering costs on behalf of the Company in exchange for issuance of the Founder Shares (as defined
in Note 3), and the loan from the Sponsor of approximately $163,000 under the Note (as defined in Note 4). The Company repaid $157,000
of Note balance on September 7, 2021 and repaid the remaining balance of approximately $6,000 in full on September 13, 2021, at which
time the Note was terminated. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see
Note 4). As of September 30, 2024 and December 31, 2023, there were no amounts outstanding under any Working Capital Loans.
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. On November 6, 2023, the Company and the Sponsor entered into a written agreement (the
“Rescission Agreement”) to rescind and nullify that certain promissory note in the principal amount of $480,000 and executed
on August 17, 2023 (the “Note”) pursuant to which the Company agreed to pay the Sponsor the principal amount of $480,000
subject to the terms and conditions of the Note. Upon execution and delivery of the Rescission Agreement, the Note, in its entirety,
is hereby irrevocably rescinded, abrogated, cancelled and rendered null and void ab initio and of no force or effect whatsoever, and
the positions among the Company and the Sponsor shall be restored to what would have existed had they not entered into the Note.
On
August 30, 2023, the Company, Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an investor, entered into an agreement
(the “Subscription Agreement”) in which Polar has agreed to fund the Sponsor up to $1,000,000, pursuant to written draw down
requests (a “Capital Call”), and the Sponsor will in turn loan such funds to the Company, to cover the Company’s working
capital expenses (each a “Sponsor Loan”). On May 15, 2024, the Company, Sponsor and Polar entered into Amendment No. 1 to
the Subscription Agreement (the Amendment”) pursuant to which Polar’s aggregate advance under the Subscription Agreement
was reduced from $1,000,000 to $975,000 (see Note 6). For the nine months ended September 30, 2024, Polar funded Sponsor additional $375,000
under the Subscription Agreement and the Sponsor loaned the Company $375,000 from Polar. For the year ended December 31, 2023, Polar
funded Sponsor $600,000 under the Subscription Agreement and the Sponsor loaned the Company $600,000 from Polar. As of September 30,
2024 and December 31, 2023, there were outstanding amounts of $975,000 and $600,000 due to Polar, respectively.
On
July 25, 2024, the Company issued an unsecured promissory note in the aggregate principal amount of $35,000 (the “Note”)
to a related party, the Note being entered into in consideration of two transfers made by Jeffrey J. Gary to the Maker on April 18, 2024
for $25,000 and on May 22, 2024 for $10,000. The Note does not bear interest and matures upon the closing of an initial business combination
by the Company. The principal balance may be repaid at any time. The principal balance shall be payable by the Company either: (i) in
cash, or (ii) at the Payee’s election in writing, by issuance of Maker’s private placement warrants (the “Private Warrants”),
at a price of $1.00 per Private Warrant. Each Private Warrant entitles the holder to purchase one share of Class A common stock at $11.50
per share. As of September 30, 2024, there was $35,000 outstanding amount under this Note included on the condensed consolidated balance
sheets.
In
connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until
December 7, 2024 (extended monthly through extension payments), to consummate a Business Combination. It is uncertain that the Company
will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will
be a mandatory liquidation and subsequent dissolution of the Company. The Company will need to raise additional capital through loans
or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors
and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional
financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide
any assurance that new financing will be available to it on commercially acceptable terms, if at all. Management has determined that
the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises
substantial doubt about the Company’s ability to continue as a going concern. Management intends to complete a Business Combination
by close of business on December 7, 2024. No adjustments have been made to the carrying amounts of assets or liabilities should the Company
be required to liquidate after December 7, 2024.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Note
2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to
Form 10-Q and Article 8 of Regulation S-X and pursuant to the rules and regulations of the SEC. Accordingly, certain disclosures included
in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim
financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments,
which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.
Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected
through December 31, 2024 or any future period.
The
accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements
and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on May 14, 2024.
Principles
of Consolidation
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.
All significant intercompany balances and transactions have been eliminated in consolidation.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had no cash equivalents as of September 30, 2024 and December 31, 2023.
Restricted
Cash
The
Company has $0 and $314,482 of restricted cash to be used to pay for taxes as of September 30, 2024 and December 31, 2023, respectively.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access
to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
Use
of Estimates
The
preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the unaudited condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. One of the more significant accounting estimates included in these
unaudited condensed consolidated financial statements is the determination of the fair value of the warrant liabilities. It is at least
reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the
unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Investments
Held in the Trust Account
The
Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held
in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. Trading securities
and investments in money market funds are presented on the condensed consolidated balance sheets at fair value at the end of each reporting
period. Gains and losses resulting from the change in fair value of these securities are included in gain on investments held in Trust
Account in the accompanying condensed consolidated statements of operations. The estimated fair values of investments held in the Trust
Account are determined using available market information.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Financial
Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair
Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the condensed consolidated balance
sheets, except for the derivative liabilities (see Note 9).
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
| |
● |
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| |
|
|
| |
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and |
| |
|
|
| |
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants and the forward purchase agreement, to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives
and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be
recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The
warrants issued in the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized
as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair
value and adjusts the carrying value of the instruments to fair value at each reporting period for so long as they are outstanding. The
initial fair value of the Public Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants
have been estimated using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been
estimated using the public market quoted prices at each measurement date starting at September 30, 2022. The fair value of Public Warrants
has subsequently been measured based on the listed market price of such warrants. Derivative warrant liabilities are classified as non-current
liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
The
Company granted the underwriters a 45-day option to purchase up to 3,600,000 additional Units solely to cover over-allotments, if any.
The Company estimated the fair value of the over-allotment option using a Black-Scholes model. On October 16, 2021, the over-allotment
option expired unexercised.
The
Forward Purchase Agreement entered into on March 29, 2023 included elements that require liability classification under ASC 480. Accordingly,
the Company recognizes the Forward Purchase Agreement as a liability at fair value and adjusts the carrying value of the instruments
to fair value at each reporting period for so long as it is outstanding. The initial fair value of the Forward Purchase Agreement liability
issued was estimated using a Put Option Pricing model, which analyzed and incorporated into the model the put price, the risk-free rate,
the variable term, the settlement features, the likelihood of completing a business combination and the early termination provisions.
The model estimates the underlying economic factors that influenced which of these events would occur, when they were likely to occur,
and the specific terms that would be in effect at the time (i.e., stock price, exercise price, etc.). Probabilities were assigned to
each variable such as the timing and pricing of events over the term of the instruments based on management projections. The fair value
was adjusted for the market implied likelihood of completing a business combination. The Forward Share Purchase Agreement was terminated
as a result of the termination of the Avila BCA on August 10, 2023. As a result, there was no value assigned to the Forward Share Purchase
Agreement. The Company has written off the liability and recognized the change in value of the Forward Share Purchase Agreement in the
unaudited condensed consolidated statement of operations during the nine months ended September 30, 2023.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Capital
Call Loan
The
Company previously analyzed the Subscription Agreement under ASC 470 “Debt”, ASC 480 “Distinguishing Liabilities from
Equity” and ASC 815, “Derivatives and Hedging”, and previously concluded that, (i) the Subscription Shares (as defined
in Note 5) issuable under the Subscription Agreement are not required to be accounted for as a liability under ASC 480, (ii) bifurcation
of a single derivative that comprises all of the fair value of the Subscription Share feature(s) (i.e., derivative instrument(s)) is
not necessary under ASC 815-15-25-7 through 25-10 and (iii) under ASC 470-20-25-2 the Subscription Shares are deemed to be representative
of a freestanding financial instrument issued in a bundled transaction with the Capital Call Loan. The Subscription Shares to be issued
as part of the bundled transaction were previously classified and accounted for as equity. As a result, proceeds from the sale of a debt
instrument with stock purchase Subscription Shares were allocated to the two elements based on the relative fair values of the debt instrument
without the Subscription Shares and of the Subscription Shares themselves at time of issuance. The portion of the proceeds allocated
to the Subscription Shares was accounted for as paid-in capital. The remainder of the proceeds was allocated to the debt instrument portion
of the transaction. This resulted in a debt discount, which shall be accounted for as interest and amortized as interest expense over
the life of the loan. Based on the previous accounting for Subscription Agreement, the Company recognized at draw dates an aggregate
of $800,000 as capital call loan recorded as a due to investor under condensed consolidated balance sheets, $568,503 was recorded as
additional paid-in capital and $568,503 was recognized as debt discount – due to investor which was amortized as interest expense
in the profit and loss over the life of the loan.
On
May 15, 2024, the Company, Sponsor and Polar entered into the Amendment pursuant to which Polar’s aggregate advance under the Subscription
Agreement was reduced from $1,000,000 to $975,000 and in the event the Company consummates the business combination with Alpha Modus
Corp., then the Company will not be obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar
Polar advances to the Company under at Subscription Agreement at the closing of the business combination. However, if the Company consummates
a business combination with an entity other than Alpha Modus, Corp., then the Company is obligated to issue to Polar one (1) share of
the Company’s Class A Common Stock for each dollar Polar advances to the Company under at Subscription Agreement at the closing
of the business combination with an entity other than Alpha Modus, Corp. After the amendment.
The
Company analyzed the amended Subscription Agreement under ASC 470 “Debt”, ASC 480 “Distinguishing Liabilities from
Equity”, ASC 815, “Derivatives and Hedging” and ASC 825 “Financial Instrument” and concluded that, (i)
the Subscription Shares issuable under the Subscription Agreement are now required to be accounted for as a liability under ASC 480,
(ii) bifurcation of a single derivative that comprises all of the fair value of the Subscription Share feature(s) (i.e., derivative instrument(s))
is not necessary under ASC 815-15-25-7 through 25-10 and (iii) under ASC 470-20-25-2 the Subscription Shares are deemed to be representative
of a freestanding financial instrument issued in a bundled transaction with the Capital Call Loan. The Subscription Shares to be issued
as part of the bundled transaction shall be classified and accounted for as liability. The Subscription Shares are required to be classified
and accounted for at fair value under ASC 480-10. The Company has not elected to classify and account for the Capital Call(s) at fair
value under the fair value option under ASC 825. As a result, proceeds from the sale of a debt instrument with stock purchase Subscription
Shares were allocated to the two elements based on the relative fair values of the debt instrument without the Subscription Shares and
of the Subscription Shares themselves at time of issuance. The portion of the proceeds so allocated to the Subscription Shares was accounted
for as subscription share liability. The remainder of the proceeds was allocated to the debt instrument portion of the transaction. This
resulted in a debt discount, which shall be accounted for as interest on capital call date. In accordance with ASC 480-10, the Subscription
Shares were initially required to be classified as liability classified instruments; therefore, the Subscription Shares are required
to be measured at fair value at each reporting period with changes in fair value recorded within earnings. As a result of the amendment,
the Company recognized the fair value of the subscription share liability on the amendment date amounting to $0. As of September 30,
2024, the Company drew an additional $175,000 as a capital call loan and recorded it as a due to investor on the condensed consolidated
balance sheet, and $0 was allocated as fair value of the bundled subscription share.
As
of September 30, 2024, the Company received $975,000 under the Subscription Agreement and recorded the amount as due to investor. No
value was allocated to subscription share liability on the accompanying condensed consolidated balance sheet. As of December 31, 2023,
the Company received $600,000 under the Subscription Agreement and recorded the amount as a due to investor, net of debt discount of
$279,245, on the accompanying condensed consolidated balance sheet.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly
related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant
liabilities were expensed as incurred and presented as non-operating expenses in the condensed consolidated statements of operations.
Offering costs associated with issuance of the Class A common stock were charged against the carrying value of the Class A common stock
subject to possible redemption upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions
as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation
of current liabilities.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. Deferred tax assets were offset by a full valuation allowance as of September 30, 2024 and December 31, 2023. Deferred
tax liabilities were $5,161 and $9,935 as of September 30, 2024 and December 31, 2023, respectively.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. Tax expense of approximately $12,000 and $52,000 was recognized for the three
months ended September 30, 2024 and 2023, respectively, and amounts of approximately $59,000 and $637,000 were recognized for the nine
months ended September 30, 2024 and 2023, respectively. There were no unrecognized tax benefits as of September 30, 2024 and December
31, 2023. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts
were accrued for the payment of interest and penalties as of September 30, 2024 and December 31, 2023. The Company is currently not aware
of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has
been subject to income tax examinations by major taxing authorities since inception.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing
Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments
and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’
equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, 519,080 and 1,000,945 shares of Class A common stock subject
to possible redemption as of September 30, 2024 and December 31, 2023, respectively, are presented at redemption value as temporary equity,
outside of the stockholders’ deficit section of the Company’s condensed consolidated balance sheets.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject
to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting
period as if it were also the redemption date for the security. Immediately upon the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to
the extent available) and accumulated deficit.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Net
(Loss) Income Per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. The presentation assumes a business combination as the most likely outcome. Net (loss) income per
common share is calculated by dividing the net (loss) income by the weighted average shares of common stock outstanding for the respective
period.
The
calculation of diluted net (loss) income does not consider the effect of the warrants underlying the Units sold in the Initial Public
Offering and the private placement warrants to purchase an aggregate of 20,700,000 shares of Class A common stock in the calculation
of diluted (loss) income per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive
under the treasury stock method. As a result, diluted net (loss) income per share is the same as basic net (loss) income per share for
the three and nine months ended September 30, 2024 and 2023. Accretion associated with the redeemable Class A common stock is excluded
from earnings per share as the redemption value approximates fair value.
The
following tables present a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share
for each class of common stock:
Schedule of Basic and Diluted Net (Loss) Income Per Share
| | |
For
the Three Months Ended September 30, | |
| | |
2024 | | |
2023 | |
| | |
Class
A
redeemable | | |
Class
A
non-redeemable | | |
Class
B | | |
Class
A
redeemable | | |
Class
A
non-redeemable | | |
Class
B | |
| Basic
and diluted net loss per common share: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Numerator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allocation
of net loss | |
$ | (18,797 | ) | |
$ | (184,683 | ) | |
$ | (32,591 | ) | |
$ | (64,374 | ) | |
$ | (138,726 | ) | |
$ | (24,481 | ) |
| Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted weighted average common shares outstanding | |
| 519,080 | | |
| 5,100,000 | | |
| 900,000 | | |
| 2,366,608 | | |
| 5,100,000 | | |
| 900,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted net loss per common share | |
$ | (0.04 | ) | |
$ | (0.04 | ) | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.03 | ) |
| | |
For
the Nine Months Ended September 30, | |
| | |
2024 | | |
2023 | |
| | |
Class
A
redeemable | | |
Class
A
non-redeemable | | |
Class
B | | |
Class
A
redeemable | | |
Class
A
non-redeemable | | |
Class
B | |
| Basic
and diluted net (loss) income per common share: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Numerator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allocation
of net (loss) income | |
$ | (311,063 | ) | |
$ | (1,995,031 | ) | |
$ | (352,064 | ) | |
$ | 159,231 | | |
$ | 75,165 | | |
$ | 50,033 | |
| Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted weighted average common shares outstanding | |
| 795,185 | | |
| 5,100,000 | | |
| 900,000 | | |
| 7,637,976 | | |
| 3,605,495 | | |
| 2,400,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted net (loss) income per common share | |
$ | (0.39 | ) | |
$ | (0.39 | ) | |
$ | (0.39 | ) | |
$ | 0.02 | | |
$ | 0.02 | | |
$ | 0.02 | |
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect
on the accompanying unaudited condensed consolidated financial statements.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Note
3 - Initial Public Offering
On
September 7, 2021, the Company consummated its Initial Public Offering of 24,000,000 Units, generating gross proceeds of $240.0 million,
and incurring offering costs of approximately $17.5 million, of which approximately $12.0 million and approximately $668,000 were for
deferred underwriting commissions and offering costs allocated to derivative warrant liabilities, respectively. Each Unit consists of
one share of Class A common stock, and one-half of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant
entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 6).
Of
the 24,000,000 Units sold in the Initial Public Offering, 23,760,000 Units were purchased by certain qualified institutional buyers or
institutional accredited investors which are not affiliated with any member of the Company management (the “Anchor Investors”).
In connection with the sale of Units to the Anchor Investors, the Sponsor transferred an aggregate of 1,350,000 of the Company’s
Class B common stock held by the Sponsor (the “Founder Shares”) to the Anchor Investors at a price of approximately $0.004
per Founder Share. The Company determined that the excess of the fair value of the Founder Shares acquired by the Anchor Investors over
the price paid by such Anchor Investors should be recognized as an offering cost in accordance with SEC Staff Accounting Bulletin Topic
5A. The Company estimated the fair value of the Founder Shares sold to the Anchor Investors to be $2.37 per share or an aggregate of
approximately $3.2 million, based on third-party transactions in the Sponsor’s equity interests. Accordingly, the offering cost
is allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared
to total proceeds received. Offering costs allocated to the Public Warrants are expensed as incurred. Offering costs allocated to the
Public Shares are charged against the carrying value of Class A common stock upon the completion of the Initial Public Offering.
The
Company granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase
up to 3,600,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts
and commissions. On October 16, 2021, the over-allotment option expired unexercised.
Note
4 - Related Party Transactions
Founder
Shares
On
May 5, 2021, the Sponsor paid for certain offering costs totaling $25,000 on behalf of the Company in exchange for issuance of 6,181,250
shares of the Company’s Founder Shares, par value $0.0001 per share. On July 29, 2021, the Company effected a 1:1.1162791 stock
split of Class B common stock, resulting in an aggregate of 6,900,000 shares of Class B common stock outstanding. In connection with
the sale of Units to the Anchor Investors, the Sponsor transferred 1,350,000 Founder Shares to the Anchor Investors, as described in
Note 3, above. The Sponsor agreed to forfeit up to 900,000 Founder Shares to the extent that the over-allotment option is not exercised
in full by the underwriters, so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after
the Initial Public Offering. On October 16, 2021, the over-allotment option expired unexercised. As such, 900,000 shares of Class B common
stock were forfeited.
On
March 22, 2023, 5,100,000 shares of Class B common stock were exchanged for an equal number of shares of Class A common stock. Such shares
are not entitled to redemption rights.
The
Initial Stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier
to occur of: (i) one year after the completion of the initial Business Combination and (ii) the date following the completion of the
initial Business Combination on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction
that results in all of the stockholders having the right to exchange their common stock for cash, securities or other property. Notwithstanding
the foregoing, if the closing price of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after the initial Business Combination, the Founder Shares will be released from the lockup.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Contributed
Capital
On
March 7, 2023, the Sponsor contributed $100,000 to the Company for no consideration.
Private
Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 7,500,000 and 1,200,000 Private Placement
Warrants to the Sponsor and Cantor and Odeon, respectively, for an aggregate of 8,700,000 Private Placement Warrants, at a price of $1.00
per Private Placement Warrant, generating proceeds of $8.7 million.
Each
Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the
proceeds from the sale of the Private Placement Warrants to the Sponsor and the underwriters was added to the proceeds from the Initial
Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the
Private Placement Warrants will expire worthless. Except as set forth below, the Private Placement Warrants will be non-redeemable for
cash and exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters or their permitted transferees.
The
Sponsor, the underwriters and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign
or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related
Party Loans
On
April 30, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public
Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of
the Initial Public Offering. The Company borrowed approximately $163,000 under the Note. On September 7, 2021, the Company repaid $157,000
of Note balance and repaid the remaining balance of approximately $6,000 in full on September 13, 2021. Subsequent to the repayment,
the facility was no longer available to the Company.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside
the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lender’s discretion,
up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price
of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of September 30,
2024 and December 31, 2023, the Company had no borrowings under the Working Capital Loans.
Services
Agreement
On
September 1, 2021, the Company entered into an agreement with the Sponsor, pursuant to which the Company agreed to pay the Sponsor a
total of $10,000 per month for office space, secretarial and administrative services provided to or incurred by members of the Company’s
management team until the earlier of the Company’s consummation of a Business Combination and the Company’s liquidation.
On June 21, 2024, the Company entered into a fee waiver agreement with the Sponsor and a member of the management team whereas 125,000
shares of the post Business Combination entity shall be issued in full satisfaction of all compensation through March 31, 2024 and in
the future. For the three and nine months ended September 30, 2024, the Company incurred approximately $0 and $30,000, respectively.
For the three and nine months ended September 30, 2023, the Company incurred approximately $30,000 and $90,000, respectively, under the
services agreement in the condensed consolidated statements of operations. As of September 30, 2024 and December 31, 2023, $190,000 and
$160,000 were included in due to related party on the condensed consolidated balance sheets, respectively.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
The
board of directors has also approved payments of up to $15,000 per month, through the earlier of the consummation of the Company’s
initial Business Combination or its liquidation, to members of the Company’s management team for services rendered to the Company.
In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing
due diligence on suitable business combinations. The Company’s audit committee will review on a quarterly basis all payments that
were made to the Sponsor, executive officers or directors, or the Company’s or their affiliates. On April 21, 2024, all deferred
compensation owed to Mr. Gary by the Company to date, in the aggregate amount of $132,500, shall be forfeited and henceforth shall cease
to accrue $7,500 per month in service fees currently recorded in due to related party on the condensed consolidated balance sheets. On
June 21, 2024, the Company entered into a fee waiver agreement with the Sponsor and a member of the management team whereas 125,000 shares
of the post Business Combination entity shall be issued in full satisfaction of all compensation through March 31, 2024 and in the future.
For the three and nine months ended September 30, 2024, the Company incurred approximately $0 and $24,500, respectively, under the services
agreement. For the three and nine months ended September 30, 2023, the Company incurred approximately $45,000 and $135,000, respectively,
under the services agreement. As of September 30, 2024 and December 31, 2023, $137,000 and $225,000 were included in due to related party
on the condensed consolidated balance sheets, respectively.
The
agreement will be accounted for under ASC 718 and the Company recorded a stock compensation expense for the fair value of the shares
to be issued in excess of the fair value of the liability recorded as of September 30, 2024. The Company estimated the aggregate fair
value of the 125,000 shares of the post Business Combination attributable to the member of the management team in full satisfaction of
all compensation and administrative fees through March 31, 2024 and in the future to be $1,436,250 or $11.49 per share. The fair value
of the post Business Combination shares was based on the publicly traded share price of the Company as of the date of the agreement.
Convertible
Promissory Note – Related Party
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. As of September 30, 2024 there was no amount drawn from the promissory note and on November
6, 2023 the Company and the Sponsor entered into a written agreement to rescind and nullify the promissory note.
On
July 25, 2024, the Company issued an unsecured promissory note in the aggregate principal amount of $35,000 (the “Note”)
to a related party, the Note being entered into in consideration of two transfers made by Jeffrey J. Gary to the Maker on April 18, 2024
for $25,000 and on May 22, 2024 for $10,000. The Note does not bear interest and matures upon the closing of an initial business combination
by the Company. The principal balance may be repaid at any time. The principal balance shall be payable by the Company either: (i) in
cash, or (ii) at the Payee’s election in writing, by issuance of Maker’s private placement warrants (the “Private Warrants”),
at a price of $1.00 per Private Warrant. Each Private Warrant entitles the holder to purchase one share of Class A common stock at $11.50
per share. As of September 30, 2024, there was $35,000 outstanding under this Note included on the condensed consolidated balance sheet.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Due
to Related Party
As
of September 30, 2024, the Sponsor advanced a total of $485,000 to the Company of which $450,000 was deposited to the Trust to extend
the Business Combination Period from April 7, 2023 to September 7, 2023 based on the Amended and Restated Certificate of Incorporation
as amended on March 6, 2023 allowing the Company to consummate an initial business combination from March 7, 2023 to September 7, 2023,
provided that the Company deposits the lesser of $80,000 and $0.04 for each outstanding share of common stock sold in the Company’s
initial public offering into the Trust Account, as defined in the Charter for each one-month extension and $20,000 was deposited to the
Trust to extend the Business Combination period from September 7, 2023 to October 7, 2023 based on the Amended and Restated Certificate
of Incorporation as amended on September 6, 2023 allowing the Company to consummate an initial business combination from September 7,
2023 to June 7, 2024, provided that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold
in the Company’s initial public offering into the Trust Account, as defined in the Charter for each one-month extension. As of
September 30, 2024 and December 31, 2023, $450,000 and $420,000 were included in due to related party on the condensed consolidated balance
sheets, respectively.
Due
from Related Party
On
July 20, 2023 and August 7, 2023, a total of $891,000 was transferred to the Sponsor from the operating bank account, of which a total
of $616,000 was paid back on October 10, 2023, October 11, 2023 and December 13, 2023. Additionally, during the year ended December 31,
2023 the Sponsor paid operating expenses on behalf of the Company with a total value of $80,000 which has been netted against the amount
owed. During the nine months ended September 30, 2024, a total of $49,972 was paid back.
As
of September 30, 2024 and December 31, 2023, there were amounts of $145,028 and $195,000 outstanding from the Sponsor, respectively.
Due
from Sponsor
Between
March 2, 2023 and December 5, 2023, the Company withdrew an aggregate amount of $2,497,248 from the Trust Account pursuant to seven separate
written withdrawal requests to Continental Stock Transfer and Trust (“Continental”), the trustee for the Trust Account for
the payment of taxes. While the Company paid an aggregate amount of $1,447,889 for tax payments, the remaining amount of $1,049,359,
that was withdrawn from the Trust Account for tax purposes, was used to pay other business expenses of the Company. On March 15, 2024,
the Sponsor deposited $1,049,359 into the Trust Account, and on March 26, 2024, the Sponsor deposited an additional amount $36,285 into
the Trust Account to reimburse the Trust Account for interest that would have earned on the $1,049,359 that was erroneously withdrawn
from the Trust Account of which $24,656 was accrued as of December 31, 2023. From March 11, 2024 through March 14, 2024, the Sponsor
transferred an aggregate of $1,090,000 to fund amounts transferred to the Trust Account.
For
the nine months ended September 30, 2024, Polar funded Sponsor an additional $375,000 under the Subscription Agreement and the Sponsor
loaned the Company $150,000 from Polar.
As
of September 30, 2024 and December 31, 2023, there were amounts of $140,139 and $1,074,015 outstanding from the Sponsor, respectively.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Note
5 - Commitments and Contingencies
Registration
Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any
shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working
Capital Loans and upon conversion of the Founder Shares), were entitled to registration rights pursuant to a registration and stockholder
rights agreement signed prior to the consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback”
registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.8 million in the aggregate, paid upon the closing of
the Initial Public Offering. An additional fee of $0.50 per unit, or $12.0 million in the aggregate will be payable to the underwriters
for deferred underwriting commissions. If the underwriters’ over-allotment option was fully exercised, $0.70 per over-allotment
unit, or up to an additional approximately $2.5 million, or approximately $14.5 million in the aggregate, would have been deposited in
the Trust Account as deferred underwriting commissions. On October 16, 2021, the over-allotment option expired unexercised. The deferred
fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
On
March 28, 2023, the Company received a waiver from one of the underwriters of its Initial Public Offering pursuant to which such underwriter
waived all rights to $5.4 million of its $8.4 million deferred underwriting commissions payable upon completion of an initial Business
Combination. As a result, the Company recognized $273,110 of gain on forgiveness of underwriting fee payable and $5,126,890 toward Class
A redeemable shares in relation to the forgiveness of the deferred underwriter fee allocated to the underwriter in the accompanying unaudited
condensed consolidated financial statements. In connection with this waiver, the underwriter also agreed that the remainder of the deferred
underwriting fee of $3.0 million will be payable upon the consummation of the business combination. As of September 30, 2024 and December
31, 2023, $6,600,000 was outstanding under deferred underwriting fee payable.
Also
in March 2023, the Company entered into an agreement with Odeon Capital Group, LLC (“Odeon”), the other IPO Underwriter,
pursuant to which Odeon agreed to irrevocably forfeit $2.6 million of the deferred underwriting discount of $3.6 million that Odeon was
previously entitled to receive at the closing of the Business Combination. Such remaining $1.0 million of deferred underwriting discount
was to be payable in cash to Odeon at the closing of the Business Combination.
On
June 20, 2024, the Company entered into agreements with its underwriters, pursuant to which its underwriters agreed to accept a total
of 300,000 shares at the closing of the Business Combination in full satisfaction of the remaining $6.6 million of deferred underwriting
discount that was payable in cash to the underwriters at the closing of the Business Combination. The Company’s agreements with
its underwriters are subject to certain conditions which result in the Company recording the impact of the agreements at the closing
of the Business Combination.
Forward
Share Purchase Agreement
On
March 29, 2023, the Company entered into a forward share purchase agreement (the “Forward Share Purchase Agreement”) with
Avila, Meteora Special Opportunity Fund I, LP, Meteora Capital Partners, LP and Meteora Select Trading Opportunities Master, LP (collectively,
“Seller”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). Pursuant to the
terms of the Forward Purchase Agreement, Seller intends but is not obligated to purchase shares of SPAC Class A Common Stock from holders
(other than SPAC or its affiliates) who have elected to redeem such shares in connection with the Proposed Transactions. Purchases by
Seller will be made through brokers in the open market after the redemption deadline in connection with the Proposed Transactions at
a price no higher than the redemption price to be paid by SPAC in connection with the Proposed Transactions (the “Initial Price”).
The Shares purchased by the Seller, other than the Share Consideration Shares are referred to herein as the “Recycled Shares.”
The Seller also may sell 2,376,000 shares of SPAC Class A Common Stock purchased in the SPAC’s initial public offering (“IPO
Shares”) in the Forward Purchase Transaction, up to a maximum of 2,500,000 shares of Class A Common Stock (including any Recycled
Shares). The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023, as described
below.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Business
Combination Agreements
On
April 3, 2023, the Company entered into a Business Combination Agreement with Avila Energy Corporation, an Alberta corporation (“Avila”),
pursuant to which the Company will acquire Avila for consideration of shares of the Company following its redomicile into the Province
of Alberta. The business combination agreement and related executed agreements included supporting agreements and a forward share purchase
agreement are more fully described and filed with the Company’s Current Report on Form 8-K filed with the SEC on April 4, 2023.
On
August 10, 2023, the Company and Avila entered into a Letter Agreement providing for the mutual termination of the Avila BCA. The Letter
Agreement provides for the mutual release of claims against the other party and also provides that Avila will pay to the Company $300,000
in partial reimbursement of expenses incurred by the Company in connection with the Avila BCA (the “Avila Payment”). The
Avila Payment is due and payable as follows: 1) up to $300,000 immediately upon Avila’s receipt of net proceeds from any financing,
public or private, in excess of U.S. $3,000,000, -or- (2) (i) $50,000 by December 1, 2023, (ii) $100,000 by February 1, 2024 and (iii)
$150,000 by April 1, 2024. Management does not believe that Avila has the funds to pay the reimbursement of expenses in connection with
the Avila BCA and believes it to be uncollectible. The Company has fully allowed for the receivable from Avila for the reimbursement
of expenses in connection with the Avila BCA as of September 30, 2024.
Effective
as of October 13, 2023, the Company, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”) and Alpha Modus, Corp., a
Florida corporation (“Alpha Modus”), entered into a business combination agreement and plan of merger (the “AM BCA”)
pursuant to which Merger Sub will merge with and into Alpha Modus with Alpha Modus as the surviving corporation and becoming a wholly
owned subsidiary of the Company. The Board of Directors of the Company (the “Board”) has unanimously approved and declared
advisable the AM BCA, the Merger and the other transactions contemplated thereby (the “Proposed Transactions”). A copy of
the AM BCA is filed as Exhibit 2.1 in the Current Report on Form 8-K dated October 17, 2023. In connection with entering into the AM
BCA, in October 2023, the Company formed IAC Merger Sub Inc, a Florida corporation.
On
June 21, 2024, the Company, Alpha Modus and Merger Sub entered into an amendment to the AM BCA (the “BCA Amendment”). The
BCA Amendment (i) provides that each share of Alpha Modus’ 6,145,000 shares common stock outstanding prior to the business combination
will be exchanged for the right to receive 1 share of IAC Class A common stock, and a contingent right to receive a pro rata portion
of the 2,200,000 earnout shares; (ii) provides that each share of Alpha Modus’ 7,500,000 shares Series C Redeemable Convertible
Preferred Stock outstanding prior to the business combination will be exchanged for the right to receive 1 share of IAC Series C Preferred
Stock (having substantially the same rights as the Alpha Modus Series C Redeemable Convertible Preferred Stock), and a contingent right
to receive a pro rata portion of the 2,200,000 earnout shares; (iii) eliminates the closing condition that the combined company is obligated
to pay off the indebtedness of Polar Multi-Strategy Master Fund (“Polar”), up to a maximum of $1,000,000, and the indebtedness
of Janbella Group, LLC’s (“Janbella”), up to a maximum of $1,000,000, at closing of the business combination; (iv)
eliminates the combined company’s obligation to issue each of Polar and Janbella at closing a number of shares of common stock
equal to the amount of indebtedness paid off divided by $1.00; (v) requires the combined company to issue the following shares of common
stock at closing: (a) 1,392,308 shares to Janbella, (b) 210,000 shares to Cantor Fitzgerald & Co., (c) 90,000 shares to Odeon Group,
LLC, and (d) 125,000 shares to Michael Singer; and (vi) extends the “Outside Date” (the date by which the business combination
must occur, after which either the Company or Alpha Modus may terminate the AM BCA by providing written notice to the other) to September
9, 2024, from June 7, 2024.
On
October 29, 2024, the Company held a Special Meeting of stockholders. At the Special Meeting, the Company’s stockholders approved
the Business Combination Agreement, dated as of October 13, 2023, as amended by the First Amendment to the Business Combination Agreement,
dated as of June 21, 2024, by and among the Company, IAC Merger Sub Inc. (“Merger Sub”), and Alpha Modus, Corp. (“Alpha
Modus”), and approve the transactions contemplated thereby, including the merger of Merger Sub with and into Alpha Modus, with
Alpha Modus continuing as the surviving corporation and as a wholly-owned subsidiary of the Company (the “Business Combination”),
approved the Company’s amended and restated certificate of incorporation, as amended (the “IAC Charter”), in connection
with the closing of the Business Combination, by adopting the second amended and restated certificate of incorporation (the “Amended
and Restated Charter”), which includes the authorization to issue and designation of 7,500,000 new shares of preferred stock as
Series C Redeemable Convertible Preferred Stock”, and the stockholders also approved the issuance of shares of the Company’s
common stock pursuant to the Business Combination Agreement, as well as the issuance of shares of the Company’s common stock issuable
upon conversion of the Company’s Series C Redeemable Convertible Preferred Stock issuable pursuant to the Business Combination
Agreement for purposes of complying with the applicable listing rules of the Nasdaq Stock Market. In connection with the stockholders’
vote at the Special Meeting, 426,135 shares were tendered for redemption.
Subscription
Agreement
On
August 30, 2023, the Company, Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an investor, entered into an agreement
(the “Subscription Agreement”) in which Polar has agreed to fund the Sponsor up to $1,000,000, pursuant to written draw down
requests (a “Capital Call”), and the Sponsor will in turn loan such funds to the Company, to cover the Company’s working
capital expenses (each a “Sponsor Loan”). For the nine months ended September 30, 2024, Polar funded Sponsor additional $375,000
under the Subscription Agreement and the Sponsor loaned the Company $375,000 from Polar. For the year ended December 31, 2023, Polar
funded Sponsor $600,000 under the Subscription Agreement and the Sponsor loaned the Company $600,000 from Polar. All subsequent Capital
Calls are subject to the mutual consent of the Company, Sponsor and Polar. All Capital Calls funded by Polar shall not accrue interest
and are repayable by the Sponsor at the closing of the Company’s initial business combination. At the option of Polar, all Capital
Calls funded by Polar may be repaid by the Company through the issuance of one share of Class A Common Stock for each $10 of the outstanding
Capital Calls funded by Polar. Sponsor is also responsible to reimburse Polar for its reasonable attorney’s fees incurred in connection
with the Subscription Agreement up to $5,000. In the event, a business combination does not occur and the Company liquidates, then all
Capital Calls funded by Polar out of cash held in the Sponsor’s bank accounts and/or the Company’s bank accounts, excluding
the Company’s Trust Account. The Sponsor Loans shall not accrue interest and shall be repaid by the Company at the closing of the
business combination.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
In
consideration of the funds received, the Company will issue, at the closing of its business combination, to Polar one (1) shares of the
company’s Class A Common Stock for each dollar Polar funds through the Capital Calls (“Subscription Shares”). The Subscription
Shares shall not be subject to any transfer restrictions or any other lock-up provisions, earn outs, or other contingencies. The Subscription
Shares (i) to the extent feasible and in compliance with all applicable laws and regulations shall be registered as part of any registration
statement issuing shares before or in connection with the Business Combination Closing or (ii) if no such registration statement is filed
in connection with the Business Combination Closing, shall promptly be registered pursuant to the first registration statement filed
by the Company or the surviving entity following the Business Combination Closing, which shall be filed no later than 30 days after the
Business Combination Closing and declared effective no later than 90 days after the Business Combination Closing. The Sponsor shall not
sell, transfer, or otherwise dispose of any securities owned by the Sponsor until the Subscription Shares have been transferred to the
Investor and the registration statement has been made effective.
In
the event the Sponsor of the Company defaults in its obligations under the Subscription Agreement (a “Default”), then the
Sponsor shall be required to transfer to Polar 0.1 share of Class A Common Stock or Class B Common Stock for each $1 that Polar has funded
under the Capital Calls as of the date of such Default and shall be required repeat such issuance for each month the such Default continues.
On
May 15, 2024, the Company, Sponsor and Polar entered into Amendment No. 1 to the Subscription Agreement (the Amendment”) pursuant
to which Polar’s aggregate advance under the Subscription Agreement was reduced from $1,000,000 to $975,000 and in the event the
Company consummates the business combination with Alpha Modus Corp., then the Company will not be obligated to issue to Polar one (1)
share of the Company’s Class A Common Stock for each dollar Polar advances to the Company under at Subscription Agreement at the
closing of the business combination. However, if the Company consummates a business combination with an entity other than Alpha Modus,
Corp., then the Company is obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar Polar
advances to the Company under at Subscription Agreement at the closing of the business combination with an entity other than Alpha Modus,
Corp. (the “Subscription Shares”). The Subscription Shares shall be subject to no transfer restrictions or any other lock-up
provisions, earn outs, or other contingencies. The Subscription Shares (i) to the extent feasible and in compliance with all applicable
laws and regulations shall be registered as part of any registration statement issuing shares before or in connection with the closing
of the business combination or (ii) if no such registration statement is filed in connection with the closing of the business combination,
shall promptly be registered pursuant to the first registration statement filed by the Company or the surviving entity following the
closing of the business combination, which shall be filed no later than 30 days after the closing of the business combination and declared
effective no later than 90 days after the closing of the business combination. Sponsor shall not sell, transfer or otherwise dispose
of any securities owned by the Sponsor until the Subscription Shares have been transferred to the Investor and the registration statement
has been made effective.
Note
6 - Class A Shares of Common Stock Subject to Possible Redemption
The
Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue 200,000,000 shares of Class A common stock with a
par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. In connection
with the Extensions on March 6, 2023, September 6, 2023 and June 5, 2024, the holders of 21,151,393, 1,847,662 and 481,865 Class A common
shares, representing approximately 88.1%, 65% and 48%, respectively, of the Company’s issued and outstanding Class A common shares,
elected to redeem their shares. Following such redemptions, approximately $5,840,000 will remain in the trust account and 1,000,945 shares
of Class A Common Stock subject to possible redemption will remain issued and outstanding. As of September 30, 2024 and December 31,
2023, there were 519,080 and 1,000,945 shares of Class A common stock subject to possible redemption outstanding at $11.27 and $10.84
redemption value, respectively, all of which were subject to possible redemption.
The
shares of Class A common stock issued in the Initial Public Offering were recognized in Class A common stock subject to possible redemption
as follows:
Schedule of Class A Common Stock Subject to Possible Redemption
| Class
A common stock subject to possible redemption at December 31, 2022 | |
$ | 243,597,590 | |
| Less: | |
| | |
| Redemptions | |
| (234,830,236 | ) |
| Due
to shareholder | |
| (628,758 | ) |
| Accretion of carrying
value to redemption value | |
| (2,418,083 | ) |
| Plus: | |
| | |
| Waiver
of underwriting fee allocated to Class A Common Stock | |
| 5,126,890 | |
| Class
A common stock subject to possible redemption at December 31, 2023 | |
| 10,847,403 | |
| Less: | |
| | |
| Redemptions | |
| (5,421,323 | ) |
| Due
to shareholder | |
| (21,644 | ) |
| Plus: | |
| | |
| Accretion
of Class A common stock subject to possible redemption amount | |
| 445,894 | |
| Class
A common stock subject to possible redemption at September 30, 2024 | |
$ | 5,850,330 | |
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
Note
7 - Stockholders’ Deficit
Preferred
Stock -The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations,
voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of September
30, 2024 and December 31, 2023, there were no preferred shares issued or outstanding.
Class
A Common Stock -The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per
share. As of September 30, 2024 and December 31, 2023, there were 5,619,080 and 6,100,945 shares of Class A common stock issued and outstanding,
respectively. All shares of Class A common stock subject to possible redemption have been classified as temporary equity (see Note 6).
On March 22, 2023, 5,100,000 shares of Class B common stock were exchanged for an equal number of shares of Class A common stock. Such
shares are not entitled to redemption rights.
Class
B Common Stock - The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per
share. As of September 30, 2024 and December 31, 2023, there were 900,000 shares of Class B common stock issued and outstanding.
Common
stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class B
common stock and holders of Class A common stock will vote together as a single class, except as required by applicable law or stock
exchange rule.
The
Class B common stock will automatically convert into shares of Class A common stock concurrently with or immediately following the consummation
of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations,
recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common
stock or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of shares
of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of
the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares
of Class A common stock by Public Stockholders), including the total number of shares of Class A common stock issued, or deemed issued
or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection
with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked
securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the
initial Business Combination and any private placement warrants issued to the Sponsor, officers or directors upon conversion of Working
Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Note
8 - Warrants
As
of September 30, 2024 and December 31, 2023, the Company has 12,000,000 and 8,700,000 Public Warrants and Private Placement Warrants,
respectively, outstanding.
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination;
provided that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock
issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders
to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act).
The Company agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business
Combination, the Company will use its best efforts to file with the SEC and have an effective registration statement covering the shares
of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class
A common stock until the warrants expire or are redeemed. If a registration statement covering the Class A common stock issuable upon
exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrant holders
may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain
an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise
of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under
Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants
to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so
elect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect,
it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
The
warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock
or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue
price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to
be determined in good faith by the board of directors and, in the case of any such issuance to the Initial Stockholders or their affiliates,
without taking into account any Founder Shares held by the Initial Stockholders or such affiliates, as applicable, prior to such issuance)
(the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity
proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the
initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of Class A common stock during the
20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price
described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of
the Market Value and the Newly Issued Price.
The
Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A
common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until the completion
of a Business Combination, subject to certain limited exceptions. Additionally, except as set forth below, the Private Placement Warrants
will be non-redeemable so long as they are held by the Sponsor, the underwriters or their permitted transferees. If the Private Placement
Warrants are held by someone other than the Sponsor, the underwriters or their permitted transferees, the Private Placement Warrants
will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption
of warrants. Once the warrants become exercisable, the Company may redeem the outstanding warrants for cash (except as
described herein with respect to the Private Placement Warrants):
| |
● |
in
whole and not in part; |
| |
|
|
| |
● |
at
a price of $0.01 per warrant; |
| |
|
|
| |
● |
upon
a minimum of 30 days’ prior written notice of redemption; and |
| |
|
|
| |
● |
if,
and only if, the closing price of Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within
a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to
the warrant holders. |
Note
9 - Fair Value Measurements
The
following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis as of September 30, 2024 and December 31, 2023 and indicate the fair value hierarchy of the valuation techniques that the Company
utilized to determine such fair value:
September
30, 2024
Schedule
of Assets and Liabilities Measured at Fair Value on a Recurring Basis
| Description | |
Quoted
Prices in
Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
| Assets: | |
| | | |
| | | |
| | |
| Investments
held in Trust Account—Money Market Funds | |
$ | 5,940,746 | | |
$ | — | | |
$ | — | |
| Liabilities: | |
| | | |
| | | |
| | |
| Derivative
liabilities-public warrants | |
$ | — | | |
$ | 600,000 | | |
$ | — | |
| Derivative
liabilities-private warrants | |
$ | — | | |
$ | 435,000 | | |
$ | — | |
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
December
31, 2023
| Description | |
Quoted
Prices in
Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
| Assets: | |
| | | |
| | | |
| | |
| Investments
held in Trust Account—U.S. Treasury Securities | |
$ | 10,664,690 | | |
$ | — | | |
$ | — | |
| Liabilities: | |
| | | |
| | | |
| | |
| Derivative
liabilities-public warrants | |
$ | — | | |
$ | 361,200 | | |
$ | — | |
| Derivative
liabilities-private warrants | |
$ | — | | |
$ | 261,890 | | |
$ | — | |
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred
from a Level 3 measurement to a Level 1 fair value measurement on October 1, 2021 because the Public Warrants were separately listed
and traded in an active market. The estimated fair value of the Public Warrants transferred from a Level 1 measurement to a Level 2 fair
value measurement in September 2022, due to the limited trading activity of the Public Warrants at September 30, 2022 through December
31, 2023. The Private Placement Warrants were transferred from a Level 3 measurement to a Level 2 measurement in September 2022, as the
Public and Private Placement Warrants are viewed as economically equivalent. There were no transfers to/from Levels 1, 2, and 3 during
the nine months ended September 30, 2024.
Level
1 assets include investments in U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields and quoted
market prices from dealers or brokers.
Note
10 - Subsequent Events
The
Company evaluated subsequent events and transactions that occurred up to the date the unaudited condensed consolidated financial statements
were issued. Based upon this review, other than as described below, the Company, did not identify any subsequent events that would have
required adjustment or disclosure in the condensed consolidated financial statements.
On
October 7, 2024, the Company deposited $10,382 or $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account to extend the Business Combination Period from September 7, 2024 to October 7, 2024. On November
15, 2024, the Company deposited $10,382 or $0.02 for each outstanding share of common stock sold in the Company’s initial public
offering into the Trust Account to extend the Business Combination Period from October 7, 2024 to November 7, 2024. The Company will
deposit an additional amount of $10,382 or $0.02 for each outstanding share of common stock sold in the Company’s initial public
offering into the Trust Account on or before the closing date of the Business Combination to extend the Business Combination Period to
December 7, 2024.
On
October 14, 2024, the Company held its Special Meeting for the purpose of approving the proposals set forth in the Company’s definitive
proxy statement filed with the U.S. Securities and Exchange Commission on September 18, 2024 (the “Proxy Statement”). The
only matter presented at the Special Meeting was to adjourn the Special Meeting to Tuesday, October 29, 2024 at 11:00 a.m. The Chairman
proposed to adjourn the Special Meeting to Tuesday, October 29, 2024 at 11:00 a.m. and 5,512,500 shares of common stock of the Company
were voted in favor of the adjournment, and that such number constituted a majority of the issued and outstanding shares of common stock
present in person or represented by proxy and entitled to vote and voted at the Special Meeting. Accordingly, the Special Meeting was
adjourned to Tuesday, October 29, 2024 at 11:00 a.m.
In
connection with the adjournment of the Special Meeting, the Company also extended the deadline for stockholders of the Company to exercise
their redemption rights to Friday, October 25, 2024 at 5:00 p.m. Accordingly, all stockholders have until October 25, 2024 at 5:00 p.m.
to redeem their shares and any stockholder who has previously tendered its shares for redemption and now decides that it does not want
to redeem its shares may withdraw such redemption request.
On
October 23, 2024, the Company entered into a securities purchase agreement (the “SPA”) with Streeterville Capital,
LLC (the “Investor”), an entity controlled by John M. Fife, pursuant to which the Company will sell, and the Investor
will purchase, a secured convertible promissory note in the original principal amount of $2,890,000 (the “Note”) for
a net purchase price of $2,600,000 (after deducting an original issue discount of $260,000, and payment of $30,000 for the Investor’s
legal, accounting, due diligence, asset monitoring, and other transaction expenses), which is anticipated to close on the date that the
Company closes its business combination (the “Business Combination”) with Alpha Modus, Corp. (“Alpha Modus”).
INSIGHT
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2024
The
SPA includes customary representations, warranties and covenants by the Company and customary closing conditions. The SPA grants the
Investor (i) the right to fund up to an additional $5,000,000 to the Company, with the Company’s consent, through the date that
is six months following repayment of the Note in full (the “Reinvestment Right”), and (ii) the exclusive right, on
customary market terms, to enter into an equity line of credit or other similar financing arrangement with the Company for at least $20,000,000,
through the date that is one year following the Purchase Price Date (defined below). Pursuant the SPA, Alpha Modus is required to guarantee
all of the Company’s obligations under the Note and related transaction documents pursuant to a guaranty agreement (the “Guaranty”),
and the Note will also be secured by security agreements (the “Security Agreements”) by and between the Investor and
both the Company and Alpha Modus, granting the Investor first priority security interests in all assets of the Company, as well as all
assets of Alpha Modus, including all of Alpha Modus’ intellectual property (and including Alpha Modus’ patent portfolio)
pursuant to a separate intellectual property security agreement (the “IP Security Agreement”). Additionally, the Company
and Alpha Modus (collectively the “Borrowers”), and William Alessi, his entity, Janbella Group, LLC, and the trusts
deemed to be beneficially owned by Mr. Alessi (each a “Capital Party” and collectively the “Capital Parties”),
are required to execute at closing a subordination and voting agreement (the “Subordination Agreement”) pursuant to
which (i) all of the Borrowers’ indebtedness and obligations to each Capital Party will be subordinated to Investor, (ii) all security
interests of any Capital Party will be subordinate to Investor’s security interests, (iii) the Borrowers will not make any payments
to any Capital Party, (iv) none of the Capital Parties will accelerate any subordinated debt or equity, (v) and no Capital Party will
convert or exchange their preferred stock of the Company into Common Stock, until such time as the Investor has been fully paid and all
financing agreements between the Investor and the Borrowers are terminated.
The
Note will mature 18 months following the date the purchase price is delivered to the Company (the “Purchase Price Date”),
will accrue interest of 10% per annum, will be prepayable (after providing five trading days’ notice) at a 20% premium to the then-outstanding
balance of the Note, and will be convertible into Class A common stock (“Common Stock”) of the Company as described
below. Within 30 days of the Purchase Price Date, the Company will be obligated to file a registration statement on Form S-1 with the
Securities and Exchange Commission (the “SEC”) registering a number of shares of Common Stock issuable upon conversion
of the Note in an amount no less than two times the number of shares of Common Stock necessary to convert the outstanding balance under
the Note in full as of the date the Company files the registration statement. If the registration statement is not declared effective
by the SEC within 120 days of the Purchase Price Date, the outstanding balance under the Note will automatically increase by one percent
and will continue increasing by one percent every 30 days thereafter until the registration statement is declared effective or the Investor
is able to sell shares of Common Stock issuable upon conversion of the Note pursuant to Rule 144 under the Securities Act of 1933, as
amended. If by the date that 50% of the shares registered under the registration statement have been issued to Investor (such date, the
“Trigger Date”) the Note has not yet been repaid in full, the Company will be obligated to file an additional registration
statement registering additional shares of Common Stock issuable upon conversion of the Note within 30 days of the Trigger Date. If that
additional registration statement is not declared effective by the SEC within 120 days of the Trigger Date, the outstanding balance under
the Note will automatically increase by one percent and will continue increasing by one percent every 30 days thereafter until the additional
registration statement is declared effective.
The
Note will be convertible at the election of the Investor into shares of Common Stock at any time following the earlier of the effective
date of the registration statement described above or one year following the Purchase Price Date, at a conversion price equal to 90%
multiplied by the lowest daily volume-weighted average price during the five trading days preceding conversion, and provided that (i)
the Investor may not convert the Note into shares of Common Stock to the extent that such conversion would result in the Investor’s
beneficial ownership of Common Stock being in excess of 4.99% (or 9.99% if the Company’s market capitalization is less than $10
million), and provided that (ii) the Note is not convertible into a total cumulative number of shares of Common Stock in excess of the
number of shares of Common Stock permitted by Nasdaq Listing Rule 5635 (the “Exchange Cap”). Pursuant to the terms
of the Note, the Company will, within 120 days of the Purchase Price Date, seek shareholder approval of the Note and the issuance of
shares of Common Stock, issuable upon conversion of the Note and pursuant to the Reinvestment Right, in excess of the Exchange Cap (the
“Shareholder Approvals”). If such shareholder approval is not obtained within 120 days, the Company will continue
to seek shareholder approval every three months thereafter until shareholder approval is obtained. Pursuant to the Subordination Agreement,
each Capital Party is required to vote all of their shares of Company stock in favor of the Shareholder Approvals. Under the SPA, the
Company is required to initially reserve 7,500,000 shares of its Common Stock for issuance to the Investor under the Note, and the Company
is required to add additional shares to the reserve in increments of 100,000 shares when requested by the Investor if at the time of
the request the number of shares being held in reserve is less than three times the number of shares of Common Stock equal to the outstanding
balance under the Note divided by the applicable conversion price at that time.
On
October 29, 2024, the Company held a Special Meeting of stockholders. At the Special Meeting, the Company’s stockholders approved
the Business Combination Agreement, dated as of October 13, 2023, as amended by the First Amendment to the Business Combination Agreement,
dated as of June 21, 2024, by and among the Company, IAC Merger Sub Inc. (“Merger Sub”), and Alpha Modus, Corp. (“Alpha
Modus”), and approve the transactions contemplated thereby, including the merger of Merger Sub with and into Alpha Modus, with
Alpha Modus continuing as the surviving corporation and as a wholly-owned subsidiary of the Company (the “Business Combination”),
approved the Company’s amended and restated certificate of incorporation, as amended (the “IAC Charter”), in connection
with the closing of the Business Combination, by adopting the second amended and restated certificate of incorporation (the “Amended
and Restated Charter”), which includes the authorization to issue and designation of 7,500,000 new shares of preferred stock as
Series C Redeemable Convertible Preferred Stock”, and the stockholders also approved the issuance of shares of the Company’s
common stock pursuant to the Business Combination Agreement, as well as the issuance of shares of the Company’s common stock issuable
upon conversion of the Company’s Series C Redeemable Convertible Preferred Stock issuable pursuant to the Business Combination
Agreement for purposes of complying with the applicable listing rules of the Nasdaq Stock Market. In connection with the stockholders’
vote at the Special Meeting, 426,135 shares were tendered for redemption.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and the Board of Directors of Insight Acquisition Corp.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Insight Acquisition Corp. and subsidiary (the “Company”) as
of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows
for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31,
2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.
Emphasis
of Matter — Franchise and Income Tax Withdrawals from Trust Account
As
discussed in Note 12 to the financial statements, the Company withdrew $2,703,102 from the Trust Account to pay liabilities related to
the federal income and Delaware franchise taxes. Through December 31, 2023, the Company remitted $1,653,743 to the respective tax authorities,
which resulted in remaining excess funds withdrawn from the Trust Account but not remitted to the government authorities of $1,049,359.
Management has determined that this use of the Withdrawn Trust Funds was not in accordance with the Trust Agreement. The disclosure of
this was omitted from the Company’s quarterly reports on Form 10-Q for the quarters ended June 30, 2023 and September 30, 2023.
The amounts deemed to have been used for operating expenses were $4,448 as of June 30, 2023 and $1,411,063 as of September 30, 2023.
Emphasis
of the Matter — Restatement of Unaudited Interim Financial Statements
As
discussed in Note 2 to the financial statements, the unaudited interim financial statements as of and for the three and nine months ended
September 30, 2023 have been restated to correct certain misstatements.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and
complete a business combination by June 7, 2024 (as approved by the Annual Meeting described in Note 1), then the Company will cease
all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution
raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these
matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
| /s/
WithumSmith+Brown, PC |
|
We
have served as the Company’s auditor since 2021.
New
York, New York
May
14, 2024
PCAOB
ID Number 100
INSIGHT
ACQUISITION CORP.
CONSOLIDATED
BALANCE SHEETS
| | |
2023 | | |
2022 | |
| | |
December
31, | |
| | |
2023 | | |
2022 | |
| Assets: | |
| | | |
| | |
| Current
assets: | |
| | | |
| | |
| Cash | |
$ | — | | |
$ | 171,583 | |
| Restricted
cash | |
| 314,482 | | |
| — | |
| Prepaid
expenses | |
| 105,568 | | |
| 367,219 | |
| Due
from Sponsor | |
| 1,074,015 | | |
| — | |
| Due
from related party | |
| 195,000 | | |
| — | |
| Total
current assets | |
| 1,689,065 | | |
| 538,802 | |
| Investments
held in the Trust Account | |
| 10,664,690 | | |
| 244,314,622 | |
| Total
Assets | |
$ | 12,353,755 | | |
$ | 244,853,424 | |
| | |
| | | |
| | |
| Liabilities,
Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | |
| | | |
| | |
| Current
liabilities: | |
| | | |
| | |
| Accounts
payable | |
$ | 89,311 | | |
$ | 128,835 | |
| Accrued
expenses | |
| 968,309 | | |
| 68,216 | |
| Due
to related party | |
| 805,000 | | |
| 85,000 | |
| Due
to investor, net of debt discount | |
| 320,755 | | |
| — | |
| Due
to Shareholders | |
| 628,758 | | |
| — | |
| Income
tax payable | |
| 100,036 | | |
| 467,991 | |
| Excise
tax payable | |
| 2,348,302 | | |
| — | |
| Franchise
tax payable | |
| — | | |
| 149,041 | |
| Total
current liabilities | |
| 5,260,471 | | |
| 899,083 | |
| Deferred
tax liability | |
| 9,935 | | |
| 156,593 | |
| Deferred
underwriting commissions in connection with the Initial Public Offering | |
| 6,600,000 | | |
| 12,000,000 | |
| Derivative
liabilities | |
| 623,090 | | |
| 84,890 | |
| Total
Liabilities | |
| 12,493,496 | | |
| 13,140,566 | |
| Commitments
and Contingencies | |
| | | |
| | |
| Class
A common stock subject to possible redemption, $0.0001 par value; 1,000,945 and 24,000,000 redeemable shares at approximately $10.84
and $10.15 per share redemption value at December 31, 2023 and 2022, respectively | |
| 10,847,403 | | |
| 243,597,590 | |
| | |
| | | |
| | |
| Stockholders’
Deficit: | |
| | | |
| | |
| Preferred
stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at December 31, 2023 and 2022 | |
| — | | |
| — | |
| Class
A common stock, $0.0001 par value; 200,000,000 shares authorized; 5,100,000 and 0 non-redeemable shares issued and outstanding at
December 31, 2023 and 2022 (excluding 1,000,945 and 24,000,000 shares subject to possible redemption), respectively | |
| 510 | | |
| — | |
| Class
B common stock, $0.0001 par value; 20,000,000 shares authorized; 900,000 and 6,000,000 shares issued and outstanding at December
31, 2023 and 2022, respectively | |
| 90 | | |
| 600 | |
| Common
stock, value | |
| 90 | | |
| 600 | |
| Additional
paid-in capital | |
| 509,211 | | |
| — | |
| Accumulated
deficit | |
| (11,496,955 | ) | |
| (11,885,332 | ) |
| Total
stockholders’ deficit | |
| (10,987,144 | ) | |
| (11,884,732 | ) |
Total
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’
Deficit | |
$ | 12,353,755 | | |
$ | 244,853,424 | |
The
accompanying notes are an integral part of the consolidated financial statements.
INSIGHT
ACQUISITION CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS
| | |
2023 | | |
2022 | |
| | |
For
the Year Ended December
31, | |
| | |
2023 | | |
2022 | |
| General
and administrative expenses | |
$ | 2,419,328 | | |
$ | 1,305,836 | |
| General
and administrative expenses – related party | |
| 300,000 | | |
| — | |
| General
and administrative expenses | |
| 300,000 | | |
| — | |
| Franchise
tax expenses | |
| 143,200 | | |
| 205,992 | |
| Loss
from operations | |
| (2,862,528 | ) | |
| (1,511,828 | ) |
| | |
| | | |
| | |
| Other
income (expense): | |
| | | |
| | |
| Change
in fair value of derivative liabilities | |
| (538,200 | ) | |
| 10,711,300 | |
| Change
in initial value of Forward Purchase Agreement Liability | |
| 86,369 | | |
| — | |
| Interest
expense – debt discount | |
| (112,054 | ) | |
| — | |
| Gain
on investments held in Trust Account | |
| 3,117,552 | | |
| 3,332,546 | |
| Gain
on forgiveness of deferred underwriting fee payable | |
| 273,110 | | |
| — | |
| Total
other income, net | |
| 2,826,777 | | |
| 14,043,846 | |
| | |
| | | |
| | |
| (Loss)
Income before income tax expense | |
| (35,751 | ) | |
| 12,532,018 | |
| Income
tax expense | |
| (615,387 | ) | |
| (624,584 | ) |
| Net
(loss) income | |
$ | (651,138 | ) | |
$ | 11,907,434 | |
| | |
| | | |
| | |
| Weighted
average shares outstanding of Class A Redeemable common stock, basic and diluted | |
| 5,965,080 | | |
| 24,000,000 | |
Basic
and diluted net (loss) income per common share, Class A Redeemable
common stock | |
$ | (0.05 | ) | |
$ | 0.40 | |
| | |
| | | |
| | |
Weighted
average shares outstanding of Class A Non-Redeemable common
stock, basic and diluted | |
| 3,982,192 | | |
| — | |
Basic
and diluted net (loss) income per common share, Class A Non-Redeemable
common stock | |
$ | (0.05 | ) | |
$ | — | |
| | |
| | | |
| | |
Weighted
average shares outstanding of Class B common stock, basic and
diluted | |
| 2,017,808 | | |
| 6,000,000 | |
Basic
and diluted net (loss) income per common share, Class B common
stock | |
$ | (0.05 | ) | |
$ | 0.40 | |
The
accompanying notes are an integral part of the consolidated financial statements.
INSIGHT
ACQUISITION CORP.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| | |
Common
Stock | | |
Additional | | |
| | |
Total | |
| | |
Class
A | | |
Class
B | | |
Paid-In | | |
Accumulated | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| Balance
– December 31, 2021 | |
| — | | |
$ | — | | |
| 6,000,000 | | |
$ | 600 | | |
$ | — | | |
$ | (21,395,176 | ) | |
$ | (21,394,576 | ) |
| Accretion
of Class A common stock subject to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,397,590 | ) | |
| (2,397,590 | ) |
| Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 11,907,434 | | |
| 11,907,434 | |
| Balance
– December 31, 2022 | |
| — | | |
| — | | |
| 6,000,000 | | |
| 600 | | |
| — | | |
| (11,885,332 | ) | |
| (11,884,732 | ) |
| Balance | |
| — | | |
| — | | |
| 6,000,000 | | |
| 600 | | |
| — | | |
| (11,885,332 | ) | |
| (11,884,732 | ) |
| Accretion
of Class A common stock subject to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (969,734 | ) | |
| 3,387,817 | | |
| 2,418,083 | |
| Contributions
from Sponsor | |
| — | | |
| — | | |
| — | | |
| — | | |
| 100,000 | | |
| — | | |
| 100,000 | |
| Initial
Value of Forward Purchase Agreement | |
| — | | |
| — | | |
| — | | |
| — | | |
| (86,369 | ) | |
| — | | |
| (86,369 | ) |
| Class
B common stock converted to Class A common stock on a one for one basis | |
| 5,100,000 | | |
| 510 | | |
| (5,100,000 | ) | |
| (510 | ) | |
| — | | |
| — | | |
| — | |
| Fair
value of Subscription Shares in connection with Subscription Agreement | |
| — | | |
| — | | |
| — | | |
| — | | |
| 391,299 | | |
| — | | |
| 391,299 | |
| Contribution
receivable from the Sponsor | |
| | | |
| | | |
| | | |
| | | |
| 1,074,015 | | |
| | | |
| 1,074,015 | |
| Excise
tax | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,348,302 | ) | |
| (2,348,302 | ) |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (651,138 | ) | |
| (651,138 | ) |
| Net
Income (loss) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (651,138 | ) | |
| (651,138 | ) |
| Balance
– December 31, 2023 | |
| 5,100,000 | | |
$ | 510 | | |
| 900,000 | | |
$ | 90 | | |
$ | 509,211 | | |
$ | (11,496,955 | ) | |
$ | (10,987,144 | ) |
| Balance | |
| 5,100,000 | | |
$ | 510 | | |
| 900,000 | | |
$ | 90 | | |
$ | 509,211 | | |
$ | (11,496,955 | ) | |
$ | (10,987,144 | ) |
The
accompanying notes are an integral part of the consolidated financial statement.
INSIGHT
ACQUISITION CORP.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| | |
2023 | | |
2022 | |
| | |
For
the Year Ended December
31, | |
| | |
2023 | | |
2022 | |
| Cash
Flows from Operating Activities: | |
| | | |
| | |
| Net
(loss) income | |
$ | (651,138 | ) | |
$ | 11,907,434 | |
| | |
| | | |
| | |
| Adjustments
to reconcile net (loss) income to net cash used in operating activities: | |
| | | |
| | |
| Change
in initial value of derivative liabilities | |
| 538,200 | | |
| (10,711,300 | ) |
| Interest
expense – debt discount | |
| 112,054 | | |
| — | |
| Gain
on investments held in Trust Account | |
| (3,117,552 | ) | |
| (3,332,546 | ) |
| Gain
on forgiveness of deferred underwriting fee payable | |
| (273,110 | ) | |
| — | |
| Change
in fair value of forward purchase agreement | |
| (86,369 | ) | |
| — | |
| Deferred
tax (benefit) expense | |
| (146,658 | ) | |
| 156,593 | |
| | |
| | | |
| | |
| Changes
in operating assets and liabilities: | |
| | | |
| | |
| Prepaid
expenses | |
| 261,651 | | |
| 509,098 | |
| Accounts
payable | |
| (39,524 | ) | |
| 94,503 | |
| Accrued
expenses | |
| 900,093 | | |
| — | |
| Accrued
expenses – related party | |
| — | | |
| 72,253 | |
| Due
to related party | |
| 300,000 | | |
| — | |
| Income
tax payable | |
| (367,955 | ) | |
| 467,991 | |
| Franchise
tax payable | |
| (149,041 | ) | |
| 8,767 | |
| Due
from related party | |
| (195,000 | ) | |
| — | |
| Net
cash used in operating activities | |
| (2,914,349 | ) | |
| (827,207 | ) |
| | |
| | | |
| | |
| Cash
Flows from Investing Activities: | |
| | | |
| | |
| Cash
withdrawn from Trust Account to pay franchise and income taxes | |
| 2,497,248 | | |
| 205,853 | |
| Cash
withdrawn from Trust Account in connection with redemption | |
| 234,830,236 | | |
| — | |
| Cash
deposited in Trust Account | |
| (560,000 | ) | |
| — | |
| Net
cash provided by investing activities | |
| 236,767,484 | | |
| 205,853 | |
| | |
| | | |
| | |
| Cash
Flows from Financing Activities: | |
| | | |
| | |
| Contributions
from Sponsor | |
| 100,000 | | |
| — | |
| Due
to related party | |
| 420,000 | | |
| — | |
| Due
to investors | |
| 600,000 | | |
| — | |
| Offering
costs paid | |
| — | | |
| (85,000 | ) |
| Redemption
of Class A common stock | |
| (234,830,236 | ) | |
| — | |
| Net
cash used in financing activities | |
| (233,710,236 | ) | |
| (85,000 | ) |
| | |
| | | |
| | |
| Net
change in cash and restricted cash | |
| 142,899 | | |
| (706,354 | ) |
| Cash
and restricted cash – beginning of the year | |
| 171,583 | | |
| 877,937 | |
| Cash
and restricted cash – end of the year | |
$ | 314,482 | | |
$ | 171,583 | |
| Cash | |
$ | — | | |
$ | 171,583 | |
| Restricted
Cash | |
$ | 314,482 | | |
$ | — | |
| | |
| | | |
| | |
| Supplemental
disclosure of noncash activities: | |
| | | |
| | |
| Forgiveness
of deferred underwriting fee payable | |
$ | 5,126,890 | | |
$ | — | |
| Value of excise tax
liability | |
$ | 2,348,302 | | |
$ | — | |
| Capital
contribution from Sponsor | |
$ | 1,074,015 | | |
| — | |
The
accompanying notes are an integral part of the consolidated financial statements.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations
Insight
Acquisition Corp. (the “Company”) was incorporated in Delaware on April 20, 2021. The Company was formed for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company
is subject to all of the risks associated with emerging growth companies.
The
Company has one subsidiary, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”), a direct wholly owned subsidiary of
the Company incorporated in on October 10, 2023. As of December 31, 2023 the subsidiary had no activity.
As
of December 31, 2023, the Company had not commenced any operations. All activity for the period from April 20, 2021 (inception) through
December 31, 2023 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”)
described below and subsequent to the Initial Public Offering, the search for a business combination. The Company will not generate any
operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating
income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
Company’s sponsor is Insight Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration
statement for the Company’s Initial Public Offering was declared effective on September 1, 2021. On September 7, 2021, the Company
consummated its Initial Public Offering of 24,000,000 units (the “Units” and, with respect to the Class A common stock included
in the Units being offered, the “Public Shares”), generating gross proceeds of $240.0 million, and incurring offering costs
of approximately $17.5 million, of which approximately $12.0 million and approximately $668,000 were for deferred underwriting commissions
(see Note 5) and offering costs allocated to derivate warrant liabilities, respectively.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 7,500,000
and 1,200,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”),
to the Sponsor and Cantor Fitzgerald & Co. (“Cantor”) and Odeon Capital Group, LLC (“Odeon”), respectively,
for an aggregate of 8,700,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, generating proceeds of $8.7
million (see Note 4).
Upon
the closing of the Initial Public Offering and the Private Placement, $241.2 million ($10.05 per Unit) of the net proceeds of the sale
of the Units in the Initial Public Offering and of the Private Placement Warrants in the Private Placement were placed in a trust account
(“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and
invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having
a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company
Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of (i) the completion
of a Business Combination and (ii) the distribution of the Trust Account.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the deferred underwriting
commissions and taxes payable on the interest earned on the Trust Account) at the time of the agreement to enter into the initial Business
Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more
of the voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
The
Company will provide the holders of the Company’s outstanding Public Shares (the “Public Stockholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholders
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek
stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, in its sole discretion. The Public
Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially
at $10.05 per Public Share plus pro rata interest earned in Trust Account). The per-share amount to be distributed to Public Stockholders
who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters
(as discussed in Note 5). These Public Shares were recorded at a redemption value and classified as temporary equity in accordance with
the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing
Liabilities from Equity.” The Company will proceed with a Business Combination if the holders of 65% of the shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally,
each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval in connection with a Business Combination, the Initial Stockholders (as defined below) agreed
to vote their Founder Shares (as defined below in Note 3) and any Public Shares purchased during or after the Initial Public Offering,
and the Anchor Investors (as defined below in Note 3) agreed to vote any Founder Shares held by them in favor of a Business Combination.
In addition, the Initial Stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares
in connection with the completion of a Business Combination. The Company’s Certificate of Incorporation provides that a Public
Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as
a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
is restricted from redeeming an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The
Company’s Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any
other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), is restricted from redeeming an aggregate of 20% or more of the Public
Shares, without the prior consent of the Company.
The
Sponsor and the Company’s officers and any other holders of the Founder Shares immediately prior to the Initial Public Offering
(the “Initial Stockholders”) agreed not to propose an amendment to the Certificate of Incorporation to modify the substance
or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete a Business Combination
within the Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’ rights
or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment.
The
Anchor Investors are not entitled to (i) redemption rights with respect to any Founder Shares held by them in connection with the completion
of the initial Business Combination, (ii) redemption rights with respect to any Founder Shares held by them in connection with a stockholder
vote to amend the Certificate of Incorporation in a manner that would affect the substance or timing of the Company’s obligation
to redeem 100% of its Public Shares if the Company has not consummated an initial Business Combination within the Combination Period
or (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails
to complete the initial Business Combination within the Combination Period (although they will be entitled to liquidating distributions
from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination
within the Combination Period).
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
If
the Company is unable to complete a Business Combination by June 7, 2024, which may be extended only by the vote of our stockholders
to approve an amendment to our amended and restated certificate of incorporation (the “Combination Period”) the Company will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up
to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will
completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders
and the board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
On
March 6, 2023 the Company held a special meeting (the “Special Meeting”) of stockholders. At the Special Meeting, the Company’s
stockholders were asked to vote on the following items: (i) a proposal to amend the Charter to extend the date by which the Company has
to consummate a business combination for an additional one month, from March 7, 2023 to April 7, 2023 and thereafter, at the discretion
of the board of directors of the Company and without a vote of the stockholders, up to five (5) times for an additional one month each
time, for a total of up to five additional months to September 7, 2023 (the “First Charter Amendment Proposal”), (ii) a proposal
to amend the Company’s Charter to eliminate from the Charter the limitation that the Company may not redeem public shares to the
extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1)
of the Exchange Act) of less than $5,000,001 (the “Redemption Limitation”) in order to allow the Company to redeem public
shares irrespective of whether such redemption would exceed the Redemption Limitation (the “Second Charter Amendment Proposal”),
(iii) a proposal to amend the Charter to provide for the right of a holder of Class B common stock of the Company, par value $0.0001
per share (“Class B Common Stock”) to convert such shares into shares of Class A common stock of the Company, par value $0.0001
per share (“Class A Common Stock”) on a one-for-one basis prior to the closing of a business combination at the election
of the holder (the “Third Charter Amendment Proposal” and together with the First Charter Amendment Proposal and the Second
Charter Amendment Proposal, the “Charter Amendment Proposals”) and (iv) a proposal to direct the chairman of the Special
Meeting to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if,
based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve each of the Charter Amendment
Proposals. In connection with the Extension, the holders of 21,151,393 Class A common shares, representing approximately 88.1% of the
Company’s issued and outstanding Class A common shares, elected to redeem their shares. Following such redemptions, approximately
$28,744,831 remained in the trust account and 2,848,607 shares of Class A Common Stock remained issued and outstanding.
On
March 28, 2023, the board of directors of the Company approved a one-month extension of the date by which the Company has to consummate
a business combination to May 7, 2023 and authorized management to deposit $80,000 into the Trust Account for such extension. Accordingly,
management deposited $80,000 into the Trust Account and the date by which the Company has to consummate a business combination has been
extended to May 7, 2023. On May 2, 2023, the board of directors of the Company approved an additional one-month extension to June 7,
2023 and deposited an additional $80,000 into the Trust Account.
On
March 29, 2023, the Company entered into a forward share purchase agreement (the “Forward Share Purchase Agreement”) with
Avila, Meteora Special Opportunity Fund I, LP, Meteora Capital Partners, LP and Meteora Select Trading Opportunities Master, LP (collectively,
“Seller”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). Pursuant to the
terms of the Forward Purchase Agreement, Seller intends but is not obligated to purchase the Company’s Class A Common Stock from
holders (other than the Company or its affiliates) who have elected to redeem such shares in connection with the Proposed Transactions.
Purchases by Seller will be made through brokers in the open market after the redemption deadline in connection with the Proposed Transactions
at a price no higher than the redemption price to be paid by the Company in connection with the Proposed Transactions (the “Initial
Price”). The Shares purchased by the Seller, other than the Share Consideration Shares are referred to herein as the “Recycled
Shares.” The Seller also may sell 2,376,000 shares of the Company Class A Common Stock purchased in the Company’s initial
public offering (“IPO Shares”) in the Forward Purchase Transaction, up to a maximum of 2,500,000 shares of Class A Common
Stock (including any Recycled Shares).
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
On
April 3, 2023, the Company entered into a Business Combination Agreement (“Avila BCA”) with Avila Energy Corporation, an
Alberta corporation (“Avila”), pursuant to which the Company will acquire Avila for consideration of shares of the Company
following its redomicile into the Province of Alberta. The business combination agreement and related executed agreements included supporting
agreements and a forward share purchase agreement are more fully described and filed with the Company’s Current Report on Form
8-K filed with the SEC on April 4, 2023.
On
April 18, 2023, the Company received a notification from the New York Stock Exchange (“NYSE”) that it was in violation of
NYSE requirements as it had failed to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Form
10-K”) and that if the Form 10-K is not filed with the SEC by 2:30 p.m. Eastern Time on April 21, 2023, NYSE post the Company to
the NYSE’s late filers list on the Profile, Data and News pages with respect to each of the Company’s securities (the “LF
Designation”). Effective April 19, 2022, the Company filed the Form 10-K and that same day the Company received additional correspondence
from the NYSE acknowledging that the filing had been made and cancelling its prior correspondence and stating that the LF Designation
would not be posted on the Profile, Data and News pages with respect to each of the Company’s securities.
On
April 27, 2023, the Company issued a press release reporting that the Company will transfer the listing of its securities to The Nasdaq
Stock Market (“Nasdaq”). In the press release, the Company stated that its securities will commence trading on Nasdaq upon
the market open on Tuesday, May 2, 2023. The Company’s Class A common stock will continue trading under the ticker symbol “INAQ”
on the Nasdaq Global Market and the Company’s units and warrants will continue trading under the ticker symbols “INAQU”
and “INAQW,” respectively, on the Nasdaq Capital Market.
On
May 24, 2023, the Company received a notification from the Nasdaq that it was not in compliance with Nasdaq Listing Rule 5250I(1) as
it had failed to timely file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form 10-Q”). Under
the Nasdaq Listing Rules, the Company now has 60 calendar days to submit a plan to regain compliance and if the plan is accepted, Nasdaq
may grant an exception of up to 180 calendar days from the Form 10-Q’s due date, or until November 20, 2023, to regain compliance.
The Company subsequently filed the Form 10-Q for the quarter ended March 31, 2023 on June 2, 2023, regaining compliance.
On
August 10, 2023, the Company and Avila entered into a Letter Agreement providing for the mutual termination of the Avila BCA. The Letter
Agreement provides for the mutual release of claims against the other party and also provides that Avila will pay to the Company $300,000
in partial reimbursement of expenses incurred by the Company in connection with the Avila BCA (the “Avila Payment”). The
Avila Payment is due and payable as follows: 1) up to $300,000 immediately upon Avila’s receipt of net proceeds from any financing,
public or private, in excess of U.S. $3,000,000, -or- (2) (i) $50,000 by December 1, 2023, (ii) $100,000 by February 1, 2024 and (iii)
$150,000 by April 1, 2024.
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. On November 6, 2023, the Company and the Sponsor entered into a written agreement (the
“Rescission Agreement”) to rescind and nullify that certain promissory note in the principal amount of $480,000 and executed
on August 17, 2023 (the “Note”) pursuant to which the Company agreed to pay the Sponsor the principal amount of $480,000
subject to the terms and conditions of the Note. Upon execution and delivery of the Rescission Agreement, the Note, in its entirety,
is hereby irrevocably rescinded, abrogated, cancelled and rendered null and void ab initio and of no force or effect whatsoever, and
the positions among the Company and the Sponsor shall be restored to what would have existed had they not entered into the Note.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
As
approved by its stockholders at the annual meeting of stockholders held on September 6, 2023 (the “Annual Meeting”), the
Company filed a Second Amendment (the “Second Amendment”) to its Amended and Restated Certificate of Incorporation (the “Charter”)
with the Delaware Secretary of State on September 6, 2023 to modify the terms and extend Combination Period by which the Company has
to consummate an initial business combination (the “Business Combination”) from September 7, 2023 to June 7, 2024, provided
that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account, as defined in the Charter for each one-month extension. In connection with the stockholder’s
vote at the Annual Meeting, 1,847,662 shares were tendered for redemption in exchange for a total redemption payment of $19,208,848.
On
September 7, 2023, October 7, 2023, November 7, 2023, December 15, 2023, January 5, 2024, February 2, 2024, February 7, 2024, March 20,
2024 and May 6, 2024 the Company deposited $20,000 into the Trust Account on each date, to extend the Business Combination Period from
September 7, 2023 to June 7, 2024. On June 6, 2024, July 31, 2024 and August 21, 2024, the Company deposited $10,381.60 or $0.02 for
each outstanding share of common stock sold in the Company’s initial public offering into the Trust Account on each date to extend
the Business Combination Period from June 7, 2024 to September 7, 2024.
Effective
as of October 13, 2023, the Company, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”) and Alpha Modus, Corp., a
Florida corporation (“Alpha Modus”), entered into a business combination agreement and plan of merger (the “AM BCA”)
pursuant to which Merger Sub will merge with and into Alpha Modus with Alpha Modus as the surviving corporation and becoming a wholly
owned subsidiary of the Company. The Board of Directors of the Company (the “Board”) has unanimously approved and declared
advisable the AM BCA, the Merger and the other transactions contemplated thereby (the “Proposed Transactions”). A copy of
the AM BCA is filed as Exhibit 2.1 in the Current Report on Form 8-K, dated October 17, 2023. In connection with entering into the AM
BCA, in October 2023, the Company formed IAC Merger Sub Inc., a Florida corporation.
On
December 28, 2023, the Company filed with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on
Form S-4 (the “Registration Statement”) in connection with the proposed business combination with Alpha Modus, Corp. based
in Metro-Charlotte, NC (the “Business Combination”).
The
Initial Stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares
if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders acquire Public
Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect
to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed
to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not
complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds
held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be
only $10.05. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the
extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered
or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality
or other similar agreement or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account
to below the lesser of (i) $10.05 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date
of the liquidation of the Trust Account, if less than $10.05 per Public Share due to reductions in the value of the trust assets, less
taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and
all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under
the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor
will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
Risks
and Uncertainties
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further,
the impact of this action and related sanctions on the world economy is not determinable as of the date of these consolidated financial
statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable
as of the date of these consolidated financial statements.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection
with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would
be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise,
(ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection
with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year
of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury.
The
Company held a meeting on March 6, 2023 where the stockholders voted to approve a proposal to amend the Company’s amended and restated
certificate of incorporation to extend the Combination Period, from March 7, 2023, monthly for up to six additional months at the election
of the Company, ultimately until as late as September 7, 2023 (the “Extension”, and such extension date the “Extended
Date”). In connection with the March 6, 2023 meeting, 21,151,393 shares of the Company’s common stock were redeemed with
a total redemption payment of $215,621,387.
The
Company held its annual meeting on September 6, 2023 where the stockholders voted to approve a proposal to amend the Company’s
amended and restated certificate of incorporation to extend the Combination Period, from September 7, 2023 to June 7, 2024, provided
that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold in the Company’s initial
public offering into the Trust Account, as defined in the Charter for each one-month extension. In connection with the stockholder’s
vote at the Annual Meeting, 1,847,662 shares were tendered for redemption in exchange for a total redemption payment of $19,208,848.
As
a result, the Company booked a liability of $2,348,302 for the excise tax based on 1% of shares redeemed during the reporting period.
For interim periods, an entity is not required to estimate future stock repurchases and stock issuances to measure its excise tax obligation.
Rather, an entity can generally record the obligation on an as-incurred basis. In other words, the excise tax obligation recognized at
the end of a quarterly financial reporting period is calculated as if the end of the quarterly period was the end of the annual period
for which the excise tax obligation is payable.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
Pursuant
to the AM BCA, (i) in the event the business combination contemplated by the AM BCA occurs, then the surviving company shall pay the
Company’s excise tax liability; (ii) if Alpha Modus does not obtain its shareholders approval of the business combination, or Alpha
Modus breaches the AM BCA, then Alpha Modus will be responsible to pay the Company’s excise tax liability; and (iii) if an Alpha
Modus material adverse effect occurs and the business combination does not close, or if Alpha Modus fails to close the business combination
for any reason other than a material breach by the Company, then Alpha Modus will be responsible to pay the Company’s excise tax
liability. In all other circumstances the Company will be responsible to pay the Company’s excise tax liability, except if the
Company liquidates prior to December 31, 2023, in which event there will be no excise tax liability. The Company will not use any of
the funds held in the Trust Account and any additional amounts deposited into the Trust Account, as well as any interest earned thereon,
to pay for the Company’s excise tax liability. In addition, because the excise tax would be payable by the Company and not by the
redeeming holders, the mechanics of any required payment of the excise tax by the Company have not been determined. The foregoing could
cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business
Combination.
In
October 2023, the Israel-Hamas war commenced. As a result of the war, instability in the Middle East and various other regions of the
world may occur and effect the world economy. Various nations, including the United States, as a reaction to the Israel-Hamas war have
begun taking actions that may further affect the world economy. Such effects on the world economy are not determinable as of the date
of these consolidated financial statements. The specific impact on the Company’s financial condition, results of operations and
cash flows is also not determinable as of the date of these consolidated financial statements.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements
with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the
extended transition period difficult or impossible because of the potential differences in accounting standards used.
Liquidity
and Going Concern
As
of December 31, 2023, the Company had approximately $0 in its operating bank account available to pay operating expenses and working
capital deficit of approximately $3,571,000.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
1 — Description of Organization and Business Operations (cont.)
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000
from the Sponsor to cover for certain offering costs on behalf of the Company in exchange for issuance of the Founder Shares (as defined
in Note 4), and the loan from the Sponsor of approximately $163,000 under the Note (as defined in Note 4). The Company repaid $157,000
of Note balance on September 7, 2021 and repaid the remaining balance of approximately $6,000 in full on September 13, 2021, at which
time the Note was terminated. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see
Note 5). As of December 31, 2023 and 2022, there were no amounts outstanding under any Working Capital Loans.
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. On November 6, 2023, the Company and the Sponsor entered into a written agreement (the
“Rescission Agreement”) to rescind and nullify that certain promissory note in the principal amount of $480,000 and executed
on August 17, 2023 (the “Note”) pursuant to which the Company agreed to pay the Sponsor the principal amount of $480,000
subject to the terms and conditions of the Note. Upon execution and delivery of the Rescission Agreement, the Note, in its entirety,
is hereby irrevocably rescinded, abrogated, cancelled and rendered null and void ab initio and of no force or effect whatsoever, and
the positions among the Company and the Sponsor shall be restored to what would have existed had they not entered into the Note.
On
August 30, 2023, the Company, Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an investor, entered into an agreement
(the “Subscription Agreement”) in which Polar has agreed to fund the Sponsor up to $1,000,000, pursuant to written draw down
requests (a “Capital Call”), and the Sponsor will in turn loan such funds to the Company, to cover the Company’s working
capital expenses (each a “Sponsor Loan”). For the year ended December 31, 2023, Polar funded Sponsor $600,000 under the Subscription
Agreement and the Sponsor loaned the Company $600,000 from Polar.
In
connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until
June 7, 2024 (extended monthly through extension payments), to consummate a Business Combination. It is uncertain that the Company will
be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution of the Company. The Company will need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor
may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their
sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all. Management has determined that the liquidity
condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial
doubt about the Company’s ability to continue as a going concern. Management intends to complete a Business Combination by close
of business on June 7, 2024. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required
to liquidate after June 7, 2024.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
2 — Restatement to Prior Period Financial Statements
During
the course of preparing the annual report on Form 10-K for the year ended December 31, 2023, the Company identified an amount due to
shareholders which was identified during the year ended December 31, 2023 and not accounted for during the September 30, 2023 Form 10-Q
review and filing. Since the completion of its IPO on September 7, 2021, and through December 31, 2023, the Company withdrew $2,703,102
from the Trust Account to pay liabilities related to the income and Delaware franchise taxes. Through December 31, 2023, the Company
remitted $1,653,743 to the respective tax authorities, which resulted in remaining excess funds withdrawn from the Trust Account but
not remitted to the government authorities of $1,049,359. Additionally, the Withdrawn Trust Funds were held in the Company’s operating
account that also holds funds deposited by the Sponsor to be used for general operating expenses. Management has determined that this
use of the Withdrawn Trust Funds was not in accordance with the Trust Agreement. See Note 12 for further details.
During
the period in which the over withdrawals occurred, the Company held its annual meeting on September 6, 2023 where the stockholders voted
to approve a proposal to amend the Company’s amended and restated certificate of incorporation to extend the Combination Period,
from September 7, 2023 to June 7, 2024 (as noted in Note 1). In connection with the stockholder’s vote at the annual meeting, there
was a share redemption in exchange for a redemption payment paid to the redeeming shareholders. Upon calculation of the over withdrawals,
the Company determined that $628,758 of the over withdrawn amount is due to those redeemed shareholders and has accounted for this on
the balance sheet as due to shareholders as of December 31, 2023, however, this amount should have been recorded as of September 30,
2023. Additionally, of the $1,049,359 over withdrawal amount noted above, $994,950 was over withdrawn as of September 30, 2023 and should
be accounted of as due from Sponsor. The Company determined these errors were material to the Form 10-Q for the three and nine months
ended September 30, 2023. The below table represent the impact and adjustments to the financial statements:
Schedule
of Adjustments to the Financial Statements
| | |
As previously Reported | | |
Adjustments | | |
As Restated | |
| Unaudited
Condensed Balance sheet as of September 30, 2023 | |
| | | |
| | | |
| | |
| Due
from Sponsor | |
$ | — | | |
$ | 994,950 | | |
$ | 994,950 | |
| Due
to Shareholders | |
$ | — | | |
$ | 628,758 | | |
$ | 628,758 | |
| Total
Current Liabilities | |
$ | 4,626,318 | | |
$ | 628,758 | | |
$ | 5,255,076 | |
| Total
Liabilities | |
$ | 11,900,123 | | |
$ | 628,758 | | |
$ | 12,528,881 | |
| Class
A common stock subject to possible redemption | |
$ | 11,221,524 | | |
$ | (628,758 | ) | |
$ | 10,592,766 | |
| Additional
paid-in capital | |
$ | — | | |
$ | 293,484 | | |
$ | 293,484 | |
| Accumulated
deficit | |
$ | (11,262,854 | ) | |
$ | 701,466 | | |
$ | (10,561,388 | ) |
| Total
stockholders’ deficit | |
$ | (11,262,254 | ) | |
$ | 994,950 | | |
$ | (10,267,304 | ) |
| Total
Liabilities, Class A Common Stock subject to possible redemption | |
$ | 11,859,393 | | |
$ | 994,950 | | |
$ | 12,854,343 | |
Note
3 — Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
3 — Basis of Presentation and Summary of Significant Accounting Policies (cont.)
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had no cash equivalents as of December 31, 2023 and 2022.
Restricted
Cash
The
Company has $314,482 of restricted cash to be used to pay for taxes as of December 31, 2023. There was no restricted cash balance as
of December 31, 2022.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access
to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of income and expenses during the reporting period. Making estimates requires management to exercise
significant judgment. One of the more significant accounting estimates included in these consolidated financial statements is the determination
of the fair value of the warrant liabilities. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
Investments
Held in the Trust Account
The
Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held
in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. Trading securities
and investments in money market funds are presented on the consolidated balance sheets at fair value at the end of each reporting period.
Gains and losses resulting from the change in fair value of these securities are included in income from investments held in Trust Account
in the accompanying consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined
using available market information.
Financial
Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair
Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the consolidated balance sheets,
except for the derivative liabilities (see Note 11).
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
3 — Basis of Presentation and Summary of Significant Accounting Policies (cont.)
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
| |
● |
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| |
|
|
| |
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and |
| |
|
|
| |
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants and the forward purchase agreement, to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives
and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be
recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The
warrants issued in the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized
as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair
value and adjusts the carrying value of the instruments to fair value at each reporting period for so long as they are outstanding. The
initial fair value of the Public Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants
have been estimated using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been
estimated using the public market quoted prices at each measurement date starting at September 30, 2022. The fair value of Public Warrants
has subsequently been measured based on the listed market price of such warrants. Derivative warrant liabilities are classified as non-current
liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
The
Company granted the underwriters a 45-day option to purchase up to 3,600,000 additional Units solely to cover over-allotments, if any.
The Company estimated the fair value of the over-allotment option using a Black-Scholes model. On October 16, 2021, the over-allotment
option expired unexercised.
The
Forward Purchase Agreement entered into on March 29, 2023 included elements that require liability classification under ASC 480. Accordingly,
the Company recognizes the Forward Purchase Agreement as a liability at fair value and adjusts the carrying value of the instruments
to fair value at each reporting period for so long as it is outstanding. The initial fair value of the Forward Purchase Agreement liability
issued was estimated using a Put Option Pricing model, which analyzed and incorporated into the model the put price, the risk-free rate,
the variable term, the settlement features, the likelihood of completing a business combination and the early termination provisions.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
3 — Basis of Presentation and Summary of Significant Accounting Policies (cont.)
The
model estimates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and
the specific terms that would be in effect at the time (i.e., stock price, exercise price, etc.). Probabilities were assigned to each
variable such as the timing and pricing of events over the term of the instruments based on management projections. The fair value was
adjusted for the market implied likelihood of completing a business combination.
Capital
Call Loan
The
Company analyzed the Subscription Agreement under ASC 470 “Debt”, ASC 480 “Distinguishing Liabilities from Equity”
and ASC 815, “Derivatives and Hedging”, and concluded that, (i) the Subscription Shares (as defined in Note 5) issuable under
the Subscription Agreement are not required to be accounted for as a liability under ASC 480 or ASC 815, (ii) bifurcation of a single
derivative that comprises all of the fair value of the Subscription Share feature(s) (i.e., derivative instrument(s)) is not necessary
under ASC 815-15-25-7 through 25-10 and (iii) under ASC 470-20-25-2 the Subscription Shares are deemed to be representative of a freestanding
financial instrument issued in a bundled transaction with the Capital Call Loan. The Subscription Shares to be issued as part of the
bundled transaction are classified and accounted for as equity. As a result, proceeds from the sale of a debt instrument with stock purchase
Subscription Shares shall be allocated to the two elements based on the relative fair values of the debt instrument without the Subscription
Shares and of the Subscription Shares themselves at time of issuance. The portion of the proceeds so allocated to the Subscription Shares
shall be accounted for as paid-in capital. The remainder of the proceeds shall be allocated to the debt instrument portion of the transaction.
This results in a debt discount, which shall be accounted for as interest and amortized as interest expense over the life of the loan.
As of December 31, 2023, the Company received $600,000 under the Subscription Agreement and recorded the amounts as a due to investors,
net of debt discount of $279,245, on the accompanying condensed consolidated balance sheets. As of December 31, 2022 there is no amount
outstanding under the Capital Call Loan.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly
related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant
liabilities were expensed as incurred and presented as non-operating expenses in the consolidated statements of operations. Offering
costs associated with issuance of the Class A common stock were charged against the carrying value of the Class A common stock subject
to possible redemption upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as
non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation
of current liabilities.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. Deferred tax assets were offset by a full valuation allowance as of December 31, 2023 and 2022. Deferred tax
liabilities were $9,935 and $156,593 as of December 31, 2023 and 2022, respectively.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
3 — Basis of Presentation and Summary of Significant Accounting Policies (cont.)
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the consolidated financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely
than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2023 and
2022. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were
accrued for the payment of interest and penalties as of December 31, 2023 and 2022. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position. The Company has been subject
to income tax examinations by major taxing authorities since inception.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing
Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments
and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’
equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, 1,000,945 and 24,000,000 shares of Class A common stock
subject to possible redemption as of December 31, 2023 and 2022, respectively, are presented at redemption value as temporary equity,
outside of the stockholders’ deficit section of the Company’s consolidated balance sheets.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject
to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting
period as if it were also the redemption date for the security. Immediately upon the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to
the extent available) and accumulated deficit.
Net
(Loss) Income Per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. The presentation assumes a business combination as the most likely outcome. Net (loss) income per
common share is calculated by dividing the net (loss) income by the weighted average shares of common stock outstanding for the respective
period.
The
calculation of diluted net (loss) income does not consider the effect of the warrants underlying the Units sold in the Initial Public
Offering and the private placement warrants to purchase an aggregate of 20,700,000 shares of Class A common stock in the calculation
of diluted (loss) income per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive
under the treasury stock method. As a result, diluted net (loss) income per share is the same as basic net (loss) income per share for
the years ended December 31, 2023 and 2022. Accretion associated with the redeemable Class A common stock is excluded from earnings per
share as the redemption value approximates fair value.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
3 — Basis of Presentation and Summary of Significant Accounting Policies (cont.)
The
following tables present a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share
for each class of common stock:
Schedule of Basic and Diluted Net (Loss) Income Per Share
| | |
For
the Year Ended December 31, | |
| | |
2023 | | |
2022 | |
| | |
Class
A redeemable | | |
Class
A
non- redeemable | | |
Class
B | | |
Class
A redeemable | | |
Class
B | |
| Basic
and diluted net (loss) income per common share: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Numerator: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allocation
of net (loss) income | |
$ | (324,619 | ) | |
$ | (216,710 | ) | |
$ | (109,809 | ) | |
$ | 9,525,947 | | |
$ | 2,383,487 | |
| Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted weighted average common shares outstanding | |
| 5,965,080 | | |
| 3,982,192 | | |
| 2,017,808 | | |
| 24,000,000 | | |
| 6,000,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted net (loss) income per common share | |
$ | (0.05 | ) | |
$ | (0.05 | ) | |
$ | (0.05 | ) | |
$ | 0.40 | | |
$ | 0.40 | |
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect
on the accompanying consolidated financial statements.
Note
4 — Initial Public Offering
On
September 7, 2021, the Company consummated its Initial Public Offering of 24,000,000 Units, generating gross proceeds of $240.0 million,
and incurring offering costs of approximately $17.5 million, of which approximately $12.0 million and approximately $668,000 were for
deferred underwriting commissions and offering costs allocated to derivative warrant liabilities, respectively. Each Unit consists of
one share of Class A common stock, and one-half of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant
entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
Of
the 24,000,000 Units sold in the Initial Public Offering, 23,760,000 Units were purchased by certain qualified institutional buyers or
institutional accredited investors which are not affiliated with any member of the Company management (the “Anchor Investors”).
In connection with the sale of Units to the Anchor Investors, the Sponsor transferred an aggregate of 1,350,000 of the Company’s
Class B common stock held by the Sponsor (the “Founder Shares”) to the Anchor Investors at a price of approximately $0.004
per Founder Share. The Company determined that the excess of the fair value of the Founder Shares acquired by the Anchor Investors over
the price paid by such Anchor Investors should be recognized as an offering cost in accordance with SEC Staff Accounting Bulletin Topic
5A. The Company estimated the fair value of the Founder Shares sold to the Anchor Investors to be $2.37 per share or an aggregate of
approximately $3.2 million, based on third-party transactions in the Sponsor’s equity interests. Accordingly, the offering cost
is allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared
to total proceeds received. Offering costs allocated to the Public Warrants are expensed as incurred. Offering costs allocated to the
Public Shares are charged against the carrying value of Class A common stock upon the completion of the Initial Public Offering.
The
Company granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase
up to 3,600,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts
and commissions. On October 16, 2021, the over-allotment option expired unexercised.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
5 — Related Party Transactions
Founder
Shares
On
May 5, 2021, the Sponsor paid for certain offering costs totaling $25,000 on behalf of the Company in exchange for issuance of 6,181,250
shares of the Company’s Founder Shares, par value $0.0001 per share. On July 29, 2021, the Company effected a 1:1.1162791 stock
split of Class B common stock, resulting in an aggregate of 6,900,000 shares of Class B common stock outstanding. In connection with
the sale of Units to the Anchor Investors, the Sponsor transferred 1,350,000 Founder Shares to the Anchor Investors, as described in
Note 3, above. The Sponsor agreed to forfeit up to 900,000 Founder Shares to the extent that the over-allotment option is not exercised
in full by the underwriters, so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after
the Initial Public Offering. On October 16, 2021, the over-allotment option expired unexercised. As such, 900,000 shares of Class B common
stock were forfeited.
On
March 22, 2023, 5,100,000 shares of Class B common stock were exchanged for an equal number of shares of Class A common stock. Such shares
are not entitled to redemption rights.
The
Initial Stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier
to occur of: (i) one year after the completion of the initial Business Combination and (ii) the date following the completion of the
initial Business Combination on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction
that results in all of the stockholders having the right to exchange their common stock for cash, securities or other property. Notwithstanding
the foregoing, if the closing price of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after the initial Business Combination, the Founder Shares will be released from the lockup.
Contributed
Capital
During
the quarter ended March 31, 2023, the Sponsor contributed $100,000 to the Company for no consideration.
Private
Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 7,500,000 and 1,200,000 Private Placement
Warrants to the Sponsor and Cantor and Odeon, respectively, for an aggregate of 8,700,000 Private Placement Warrants, at a price of $1.00
per Private Placement Warrant, generating proceeds of $8.7 million.
Each
Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the
proceeds from the sale of the Private Placement Warrants to the Sponsor and the underwriters was added to the proceeds from the Initial
Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the
Private Placement Warrants will expire worthless. Except as set forth below, the Private Placement Warrants will be non-redeemable for
cash and exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters or their permitted transferees.
The
Sponsor, the underwriters and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign
or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related
Party Loans
On
April 30, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public
Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of
the Initial Public Offering. The Company borrowed approximately $163,000 under the Note. On September 7, 2021, the Company repaid $157,000
of Note balance and repaid the remaining balance of approximately $6,000 in full on September 13, 2021. Subsequent to the repayment,
the facility was no longer available to the Company.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
5 — Related Party Transactions (cont.)
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside
the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lender’s discretion,
up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price
of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of December 31,
2023 and 2022, the Company had no borrowings under the Working Capital Loans.
Services
Agreement
On
September 1, 2021, the Company entered into an agreement with the Sponsor, pursuant to which the Company agreed to pay the Sponsor a
total of $10,000 per month for office space, secretarial and administrative services provided to or incurred by members of the Company’s
management team until the earlier of the Company’s consummation of a Business Combination and the Company’s liquidation.
For the years ended December 31, 2023 and 2022, the Company incurred approximately $120,000, under the services agreement in the consolidated
statements of operations. As of December 31, 2023 and 2022, $160,000 and $40,000 were included in due to related party on the consolidated
balance sheets, respectively.
The
board of directors has also approved payments of up to $15,000 per month, through the earlier of the consummation of the Company’s
initial Business Combination or its liquidation, to members of the Company’s management team for services rendered to the Company.
In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing
due diligence on suitable business combinations. The Company’s audit committee will review on a quarterly basis all payments that
were made to the Sponsor, executive officers or directors, or the Company’s or their affiliates. For the years ended December 31,
2023 and 2022, the Company incurred approximately $180,000 under the services agreement. As of December 31, 2023 and 2022, $225,000 and
$45,000 were included in due to related party on the consolidated balance sheets, respectively.
Promissory
Note — Related Party
On
August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”)
to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time
the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest
and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may
be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will
be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable
to consummate an initial business combination. As of December 31, 2023 there was no amounts drawn from the promissory note and on November
6, 2023 the Company and the Sponsor entered into a written agreement to rescind and nullify the promissory note.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
5 — Related Party Transactions (cont.)
Due
to related party
As
of December 31, 2023, the Sponsor advanced a total of $420,000 to the Company of which $400,000 was deposited to the Trust to extend
the Business Combination Period from April 7, 2023 to September 7, 2023 based on the Amended and Restated Certificate of Incorporation
as amended on March 6, 2023 allowing the Company to consummate an initial business combination from March 7, 2023 to September 7, 2023,
provided that the Company deposits the lesser of $80,000 and $0.04 for each outstanding share of common stock sold in the Company’s
initial public offering into the Trust Account, as defined in the Charter for each one-month extension and $20,000 was deposited to the
Trust to extend the Business Combination period from September 7, 2023 to October 7, 2023 based on the Amended and Restated Certificate
of Incorporation as amended on September 6, 2023 allowing the Company to consummate an initial business combination from September 7,
2023 to June 7, 2024, provided that the Company deposits the lesser of $20,000 and $0.02 for each outstanding share of common stock sold
in the Company’s initial public offering into the Trust Account, as defined in the Charter for each one-month extension. As of
December 31, 2023 and 2022, $420,000 and $0 were included in due to related party on the consolidated balance sheets, respectively.
Due
from related party
On
July 20, 2023 and August 7, 2023, a total of $891,000 was transferred to the Sponsor from the operating bank account, of which a total
of $616,000 was paid back on October 10, 2023, October 11, 2023 and December 13, 2023. Additionally, during the year ended December 31,
2023 the Sponsor paid operating expenses on behalf of the Company with a total value of $80,000 which has been netted against the amount
owed.
As
of December 31, 2023 and 2022, there were $195,000 and $0 amounts outstanding from the Sponsor, respectively.
Note
6 — Commitments and Contingencies
Registration
Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any
shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working
Capital Loans and upon conversion of the Founder Shares), were entitled to registration rights pursuant to a registration and stockholder
rights agreement signed prior to the consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback”
registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.8 million in the aggregate, paid upon the closing of
the Initial Public Offering. An additional fee of $0.50 per unit, or $12.0 million in the aggregate will be payable to the underwriters
for deferred underwriting commissions. If the underwriters’ over-allotment option was fully exercised, $0.70 per over-allotment
unit, or up to an additional approximately $2.5 million, or approximately $14.5 million in the aggregate, would have been deposited in
the Trust Account as deferred underwriting commissions. On October 16, 2021, the over-allotment option expired unexercised. The deferred
fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
6 — Commitments and Contingencies (cont.)
On
March 28, 2023, the Company received a waiver from one of the underwriters of its Initial Public Offering pursuant to which such underwriter
waived all rights to $5.4 million of its $8.4 million deferred underwriting commissions payable upon completion of an initial Business
Combination. As a result, the Company recognized $273,110
of gain on forgiveness of underwriting fee payable and $5,126,890 toward Class A redeemable shares in relation to the forgiveness of
the deferred underwriter fee allocated to the underwriter in the accompanying consolidated financial statements. In connection with this
waiver, the underwriter also agreed that the remainder of the deferred underwriting fee of $3.0 million will be payable upon the consummation
of the business combination. As of December 31, 2023 and 2022, $6,600,000 and $12,000,000 were outstanding under deferred underwriting
fee payable, respectively.
Forward
Share Purchase Agreement
On
March 29, 2023, the Company entered into a forward share purchase agreement (the “Forward Share Purchase Agreement”) with
Avila, Meteora Special Opportunity Fund I, LP, Meteora Capital Partners, LP and Meteora Select Trading Opportunities Master, LP (collectively,
“Seller”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). Pursuant to the
terms of the Forward Purchase Agreement, Seller intends but is not obligated to purchase shares of SPAC Class A Common Stock from holders
(other than SPAC or its affiliates) who have elected to redeem such shares in connection with the Proposed Transactions. Purchases by
Seller will be made through brokers in the open market after the redemption deadline in connection with the Proposed Transactions at
a price no higher than the redemption price to be paid by SPAC in connection with the Proposed Transactions (the “Initial Price”).
The Shares purchased by the Seller, other than the Share Consideration Shares are referred to herein as the “Recycled Shares.”
The Seller also may sell 2,376,000 shares of SPAC Class A Common Stock purchased in the SPAC’s initial public offering (“IPO
Shares”) in the Forward Purchase Transaction, up to a maximum of 2,500,000 shares of Class A Common Stock (including any Recycled
Shares). The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023, as described
below.
Business
Combination Agreements
On
April 3, 2023, the Company entered into a Business Combination Agreement with Avila Energy Corporation, an Alberta corporation (“Avila”),
pursuant to which the Company will acquire Avila for consideration of shares of the Company following its redomicile into the Province
of Alberta. The business combination agreement and related executed agreements included supporting agreements and a forward share purchase
agreement are more fully described and filed with the Company’s Current Report on Form 8-K filed with the SEC on April 4, 2023.
On
August 10, 2023, the Company and Avila entered into a Letter Agreement providing for the mutual termination of the Avila BCA. The Letter
Agreement provides for the mutual release of claims against the other party and also provides that Avila will pay to the Company $300,000
in partial reimbursement of expenses incurred by the Company in connection with the Avila BCA (the “Avila Payment”). The
Avila Payment is due and payable as follows: 1) up to $300,000 immediately upon Avila’s receipt of net proceeds from any financing,
public or private, in excess of U.S. $3,000,000, -or- (2) (i) $50,000 by December 1, 2023, (ii) $100,000 by February 1, 2024 and (iii)
$150,000 by April 1, 2024. Management does not believe that Avila has the funds to pay the reimbursement of expenses in connection with
the Avila BCA and believes it to be uncollectible. The Company has fully valued the receivable from Avila for the reimbursement of expenses
in connection with the Avila BCA as of December 31, 2023.
Effective
as of October 13, 2023, the Company, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”) and Alpha Modus, Corp., a
Florida corporation (“Alpha Modus”), entered into a business combination agreement and plan of merger (the “AM BCA”)
pursuant to which Merger Sub will merge with and into Alpha Modus with Alpha Modus as the surviving corporation and becoming a wholly
owned subsidiary of the Company. The Board of Directors of the Company (the “Board”) has unanimously approved and declared
advisable the AM BCA, the Merger and the other transactions contemplated thereby (the “Proposed Transactions”). A copy of
the AM BCA is filed as Exhibit 2.1 in the Current Report on Form 8-K dated October 17, 2023. In connection with entering into the AM
BCA, in October 2023, the Company formed IAC Merger Sub Inc, a Florida corporation.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
6 — Commitments and Contingencies (cont.)
Subscription
Agreement
On
August 30, 2023, the Company, Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an investor, entered into an agreement
(the “Subscription Agreement”) in which Polar has agreed to fund the Sponsor up to $1,000,000, pursuant to written draw down
requests (a “Capital Call”), and the Sponsor will in turn loan such funds to the Company, to cover the Company’s working
capital expenses (each a “Sponsor Loan”). For the year ended December 31, 2023, Polar funded Sponsor $600,000 under the Subscription
Agreement and the Sponsor loaned the Company $325,000 from Polar. All subsequent Capital Calls are subject to the mutual consent of the
Company, Sponsor and Polar. All Capital Calls funded by Polar shall not accrue interest and are repayable by the Sponsor at the closing
of the Company’s initial business combination. At the option of Polar, all Capital Calls funded by Polar may be repaid by the Company
through the issuance of 1 share of Class A Common Stock for each $10 of the outstanding Capital Calls funded by Polar. Sponsor is also
responsible to reimburse Polar for its reasonable attorney’s fees incurred in connection with the Subscription Agreement up to
$5,000. In the event, a business combination does not occur and the Company’s liquidates, then all Capital Calls funded by Polar
out of cash held in the Sponsor’s bank accounts and/or the Company’s bank accounts, excluding the Company’s Trust Account.
The Sponsor Loans shall not accrue interest and shall be repaid by the Company at the closing of the business combination.
In
consideration of the funds received, the Company will issue, at the closing of its business combination, to Polar one (1) shares of the
company’s Class A Common Stock for each dollar Polar funds through the Capital Calls (“Subscription Shares”). The Subscription
Shares shall not be subject to any transfer restrictions or any other lock-up provisions, earn outs, or other contingencies. The Subscription
Shares (i) to the extent feasible and in compliance with all applicable laws and regulations shall be registered as part of any registration
statement issuing shares before or in connect ion with the Business Combination Closing or (ii) if no such registration statement is
filed in connection with the Business Combination Closing, shall promptly be registered pursuant to the first registration statement
filed by the Company or the surviving entity following the Business Combination Closing, which shall be filed no later than 30 days after
the Business Combination Closing and declared effective no later than 90 days after the Business Combination Closing. The Sponsor shall
not sell, transfer, or otherwise dispose of any securities owned by the Sponsor until the Subscription Shares have been transferred to
the Investor and the registration statement has been made effective.
In
the event the Sponsor of the Company default in their obligations under the Subscription Agreement (a “Default”), then the
Sponsor shall be required to transfer to Polar 0.1 share of Class A Common Stock or Class B Common Stock for each $1 that Polar has funded
under the Capital Calls as of the date of such Default and shall be required repeat such issuance for each month the such Default continues.
Note
7 — Class A Shares of Common Stock Subject to Possible Redemption
The
Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue 200,000,000 shares of Class A common stock with a
par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. In connection
with the Extensions on March 6, 2023 and September 6, 2023, the holders of 21,151,393 and 1,847,662 Class A common shares, representing
approximately 88.1% and 65%, respectively, of the Company’s issued and outstanding Class A common shares, elected to redeem their
shares. Following such redemptions, approximately $10,426,000 will remain in the trust account and 1,000,945 shares of Class A Common
Stock subject to possible redemption will remain issued and outstanding. As of December 31, 2023 and 2022, there were 1,000,945 and 24,000,000
shares of Class A common stock subject to possible redemption outstanding at $10.84 and $10.15 redemption value, respectively, all of
which were subject to possible redemption.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
7 — Class A Shares of Common Stock Subject to Possible Redemption (cont.)
The
shares of Class A common stock issued in the Initial Public Offering were recognized in Class A common stock subject to possible redemption
as follows:
Schedule of Class A Common Stock Subject to Possible Redemption
| Gross
proceeds from Initial Public Offering | |
$ | 240,000,000 | |
| Less: | |
| | |
| Fair
value of Public Warrants at issuance | |
| (7,582,627 | ) |
| Offering
costs allocated to Class A common stock subject to possible redemption | |
| (20,050,096 | ) |
| Plus: | |
| | |
| Accretion
on Class A common stock subject to possible redemption amount | |
| 31,230,313 | |
| | |
| | |
| Class
A common stock subject to possible redemption at December 31, 2022 | |
| 243,597,590 | |
| Less: | |
| | |
| Redemptions | |
| (234,830,236 | ) |
| Due
to shareholder | |
| (628,758 | ) |
| Accretion of carrying
value to redemption value | |
| (2,418,083 | ) |
| Plus: | |
| | |
| Waiver
of underwriting fee allocated to Class A Common Stock | |
| 5,126,890 | |
| Class
A common stock subject to possible redemption at December 31, 2023 | |
$ | 10,847,403 | |
Note
8 — Stockholders’ Deficit
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
As of December 31, 2023 and 2022, there were no preferred shares issued or outstanding.
Class
A Common Stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001
per share. As of December 31, 2023 and 2022, there were 6,100,945 and 24,000,000 shares of Class A common stock, respectively, issued
and outstanding. All shares of Class A common stock subject to possible redemption have been classified as temporary equity (see Note
7). On March 22, 2023, 5,100,000 shares of Class B common stock were exchanged for an equal number of shares of Class A common stock.
Such shares are not entitled to redemption rights.
Class
B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001
per share. As of December 31, 2023 and 2022, there were 900,000 and 6,000,000 shares of Class B common stock issued and outstanding (see
Note 7).
Common
stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class B
common stock and holders of Class A common stock will vote together as a single class, except as required by applicable law or stock
exchange rule.
The
Class B common stock will automatically convert into shares of Class A common stock concurrently with or immediately following the consummation
of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations,
recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common
stock or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of shares
of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of
the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares
of Class A common stock by Public Stockholders), including the total number of shares of Class A common stock issued, or deemed issued
or issuable upon conversion or exercise of any equity-linked securities
or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination,
excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class
A common stock issued, or to be issued, to any seller in the initial Business Combination and any private placement warrants issued to
the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never
occur on a less than one-for-one basis.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
9 — Warrants
As
of December 31, 2023 and 2022, the Company has 12,000,000 and 8,700,000 Public Warrants and Private Placement Warrants, respectively,
outstanding.
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination;
provided that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock
issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders
to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act).
The Company agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business
Combination, the Company will use its best efforts to file with the SEC and have an effective registration statement covering the shares
of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class
A common stock until the warrants expire or are redeemed. If a registration statement covering the Class A common stock issuable upon
exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination,
warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have
failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section
3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s shares of Class A common stock
are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a
“covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public
Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act and, in the event the Company so elect, it will not be required to file or maintain in effect a registration statement, and in the
event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to
the extent an exemption is not available.
The
warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock
or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue
price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to
be determined in good faith by the board of directors and, in the case of any such issuance to the Initial Stockholders or their affiliates,
without taking into account any Founder Shares held by the Initial Stockholders or such affiliates, as applicable, prior to such issuance)
(the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity
proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the
initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of Class A common stock during the
20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price
described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of
the Market Value and the Newly Issued Price.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
9 — Warrants (cont.)
The
Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A
common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until the completion
of a Business Combination, subject to certain limited exceptions. Additionally, except as set forth below, the Private Placement Warrants
will be non-redeemable so long as they are held by the Sponsor, the underwriters or their permitted transferees. If the Private Placement
Warrants are held by someone other than the Sponsor, the underwriters or their permitted transferees, the Private Placement Warrants
will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption
of warrants. Once the warrants become exercisable, the Company may redeem the outstanding warrants for cash (except as described
herein with respect to the Private Placement Warrants):
| |
● |
in
whole and not in part; |
| |
|
|
| |
● |
at
a price of $0.01 per warrant; |
| |
|
|
| |
● |
upon
a minimum of 30 days’ prior written notice of redemption; and |
| |
|
|
| |
● |
if,
and only if, the closing price of Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within
a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to
the warrant holders. |
Note
10 — Income taxes
The
income tax provision consists of the following for the years ended December 31, 2023 and 2022:
Schedule of Income Tax Provision
| | |
December
31, 2023 | | |
December
31, 2022 | |
| Current | |
| | | |
| | |
| Federal | |
$ | 762,045 | | |
$ | 467,991 | |
| State | |
| — | | |
| — | |
| Deferred | |
| | | |
| | |
| Federal | |
| (673,365 | ) | |
| (85,640 | ) |
| State | |
| — | | |
| — | |
| Change
in valuation allowance | |
| 526,707 | | |
| 242,233 | |
| Income
tax provision | |
$ | 615,387 | | |
$ | 624,584 | |
The
Company’s net deferred tax assets (liability) is as follows as of December 31, 2023 and 2022:
Schedule of Deferred Tax Assets (Liability)
| | |
December
31, 2023 | | |
December
31,
2022 | |
| Deferred
tax assets | |
| | | |
| | |
| Net
operating loss carryforward | |
$ | 896,030 | | |
$ | 369,323 | |
| Startup
Costs | |
| — | | |
| — | |
| Total
deferred tax assets | |
| 896,030 | | |
| 369,323 | |
| Valuation
allowance | |
| (896,030 | ) | |
| (369,323 | ) |
| Deferred
tax assets, net of allowance | |
| — | | |
| — | |
| Deferred
tax liabilities | |
| 9,935 | | |
| 156,593 | |
| Unrealized
interest on U.S. Treasuries | |
$ | (9,935 | ) | |
$ | (156,593 | ) |
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which temporary differences
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
10 — Income taxes (cont.)
representing
net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future
taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management
believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established
a full valuation allowance. As of December 31, 2023 and 2022, the valuation allowance was $896,030 and $369,323, respectively. For the
years ended December 31, 2023 and 2022, the change in valuation allowance was $526,707 and $242,233, respectively. As of December 31,
2023, the Company had no U.S. federal net operating loss carryovers and no state net operating loss carryovers available to offset future
taxable income. As of December 31, 2022, the Company had no U.S. federal net operating loss carryovers and no state net operating loss
carryovers available to offset future taxable income.
A
reconciliation of the statutory federal income tax rate (benefit) to the Company’s effective tax rate (benefit) is as follows:
Schedule of Statutory Federal Income Tax Rate (Benefit)
| | |
December
31, 2023 | | |
December
31, 2022 | |
| Statutory
federal income tax rate | |
| 21.0 | % | |
| 21.0 | % |
| Transaction
costs warrants | |
| 0.0 | % | |
| 0.0 | % |
| Change
in fair value of warrants | |
| (316.1 | )% | |
| (17.9 | )% |
| Change
in fair value of Forward Purchase Agreement | |
| (50.7 | )% | |
| 0.0 | % |
| Penalties
& interest | |
| (3.6 | )% | |
| 0.0 | % |
| True
up – Start-up/Organization Costs | |
| (7.1 | )% | |
| 0.0 | % |
| Change
in valuation allowance | |
| (1,466.2 | )% | |
| 1.9 | % |
| Income
tax provision | |
| 1,721.3 | % | |
| 5.0 | % |
There
were no unrecognized tax benefits as of December 31, 2023 and 2022. No amounts were accrued for the payment of interest and penalties
as of December 31, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position. The Company has been subject to income tax examinations by major taxing authorities
since inception. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change
over the next twelve months.
Note
11 — Fair Value Measurements
The
following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis as of December 31, 2023 and 2022 and indicate the fair value hierarchy of the valuation techniques that the Company utilized to
determine such fair value:
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis
December
31, 2023
| Description | |
Quoted Prices
in Active Markets (Level
1) | | |
Significant Other Observable Inputs (Level
2) | | |
Significant Other Unobservable Inputs (Level
3) | |
| Assets: | |
| | | |
| | | |
| | |
| Investments
held in Trust Account – U.S. Treasury Securities | |
$ | 10,664,690 | | |
$ | — | | |
$ | — | |
| Liabilities: | |
| | | |
| | | |
| | |
| Derivative
liabilities – public warrants | |
$ | — | | |
$ | 361,200 | | |
$ | — | |
| Derivative
liabilities – private warrants | |
$ | — | | |
$ | 261,890 | | |
$ | — | |
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
11 — Fair Value Measurements (cont.)
December
31, 2022
| Description | |
Quoted Prices
in Active Markets (Level
1) | | |
Significant Other Observable Inputs (Level
2) | | |
Significant Other Unobservable Inputs (Level
3) | |
| Assets: | |
| | | |
| | | |
| | |
| Investments
held in Trust Account – U.S. Treasury Securities | |
$ | 244,314,622 | | |
$ | — | | |
$ | — | |
| Liabilities: | |
| | | |
| | | |
| | |
| Derivative
liabilities – public warrants | |
$ | — | | |
$ | 49,200 | | |
$ | — | |
| Derivative
liabilities – private warrants | |
$ | — | | |
$ | 35,690 | | |
$ | — | |
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred
from a Level 3 measurement to a Level 1 fair value measurement on October 1, 2021 because the Public Warrants were separately listed
and traded in an active market. The estimated fair value of the Public Warrants transferred from a Level 1 measurement to a Level 2 fair
value measurement in September 2022, due to the limited trading activity of the Public Warrants at September 30, 2022 through December
31, 2023. The Private Placement Warrants were transferred from a Level 3 measurement to a Level 2 measurement in September 2022, as the
Public and Private Placement Warrants are viewed as economically equivalent. There were no transfers to/from Levels 1, 2, and 3 during
the year ended December 31, 2023.
Level
1 assets include investments in U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields and quoted
market prices from dealers or brokers.
The
initial fair value of the Public Warrants issued in connection with the Initial Public Offering and the fair value of the Private Placement
Warrants have been estimated using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants
have been estimated using a Black-Scholes model at each measurement date until September 30, 2022 when the public market quoted price
was used. For the years ended December 31, 2023 and 2022, the Company recognized a loss and gain to the statements of operations resulting
from an increase and decrease in the fair value of liabilities of approximately $0.54 million and $10.7 million, respectively, presented
as change in fair value of derivative warrant liabilities on the accompanying consolidated statements of operations.
The
following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates: June 30,
2022 and March 31, 2022:
Schedule of Fair Value Measurements
| | |
June
30, 2022 | | |
March
31, 2022 | |
| Exercise
price | |
$ | 11.50 | | |
$ | 11.50 | |
| Stock price | |
$ | 9.82 | | |
$ | 9.80 | |
| Volatility | |
| 2.0 | % | |
| 5.0 | % |
| Risk-free
rate | |
| 3.02 | % | |
| 2.42 | % |
| Dividend
yield | |
| 0.0 | % | |
| 0.0 | % |
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
11 — Fair Value Measurements (cont.)
The
initial fair value and the value of the Forward Purchase Agreement liability (previously recorded) issued was estimated using a Put Option
Pricing model, which that were analyzed and incorporated into the model included the put price, the risk-free rate, the variable term,
the settlement features, the likelihood of completing a business combination and the early termination provisions. The model estimates
the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms
that would be in effect at the time (i.e.,
stock price, exercise price, etc.). Probabilities were assigned to each variable such as the timing and pricing of events over the term
of the instruments based on management projections. The fair value was adjusted for the market implied likelihood of completing a business
combination. The key inputs are summarized below:
Schedule
of Fair Value Adjusted Under Business Combination
| Valuation
Date | |
Common Stock Price | | |
Probability
of completing BC | | |
Maximum Term yrs | | |
Risk
Free Rate | | |
Implied Volatility | |
| 3/29/2023 | |
$ | 10.35 | | |
| 14.00 | % | |
| 3.74 | | |
| 3.74 | % | |
| 2.90 | % |
| 3/31/2023 | |
$ | 10.22 | | |
| 14.00 | % | |
| 3.73 | | |
| 3.68 | % | |
| 3.50 | % |
| 6/30/2023 | |
$ | 10.43 | | |
| 14.00 | % | |
| 3.48 | | |
| 3.74 | % | |
| 2.30 | % |
Schedule of Changes in Fair Value
| Description | |
Carrying Value
at March
29, 2023 | | |
Change
in Fair
value | | |
Carrying Value
at December
31, 2023 | |
| Liabilities: | |
| | | |
| | | |
| | |
| Forward
Purchase Agreement | |
$ | 86,369 | | |
$ | (86,369 | ) | |
$ | — | |
The
Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023. As of December 31,
2023 the liability related to the Forward Purchase Agreement was completely derecognized.
Note
12 — Franchise and Income Tax Withdrawal
Since
the completion of its IPO on September 7, 2021, and through December 31, 2023, the Company withdrew $2,703,102 from the Trust Account
to pay liabilities related to the income and Delaware franchise taxes. Through December 31, 2023, the Company remitted $1,653,743 to
the respective tax authorities, which resulted in remaining excess funds withdrawn from the Trust Account but not remitted to the government
authorities of $1,049,359. Additionally, the Withdrawn Trust Funds were held in the Company’s operating account that also holds
funds deposited by the Sponsor to be used for general operating expenses. As a result, the Company mistakenly used $1,415,512 of the
Withdrawn Trust Funds for payment of general operating expenses as of December 31, 2023. The disclosure of this inadvertent mistake was
omitted from the Company’s quarterly reports on Form 10-Q for the quarters ended June 30, 2023 and September 30, 2023. The amounts
deemed to have been used for operating expenses were $4,448 as of June 30, 2023, and $1,411,063 as of September 30, 2023. Management
has determined that this use of the Withdrawn Trust Funds was not in accordance with the Trust Agreement. On March 21, 2024, the Sponsor
deposited, and the Company paid to the Trust Account a total of $1,049,359, which made the Withdrawn Trust Funds whole. The transfer
from the Sponsor replenished the Company’s operating account for the Withdrawn Trust Funds inadvertently used for operating expenses.
On
July 20, 2023, the Company effected the transfer of $480,000 from its operating account to the Sponsor and on August 7, 2023, the Company
effected the transfer of an additional $411,000 from the its operating account to the Sponsor. The Board learned on or about November
14, 2023, that the Company had transferred funds from its operating account to the Sponsor. The Board was informed that the money was
being used by the Sponsor to pay Company expenses. The Board directed the Company to have the Sponsor return all such funds to the Company.
The Sponsor transferred $891,000 to the Company between October 10, 2023 and November 2, 2023.
INSIGHT
ACQUISITION CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2023
Note
12 — Franchise and Income Tax Withdrawal (cont.)
During
the period in which the over withdrawals occurred, the Company held its annual meeting on September 6, 2023 where the stockholders voted
to approve a proposal to amend the Company’s amended and restated certificate of incorporation to extend the Combination Period,
from September 7, 2023 to June 7, 2024 (as noted in note 1). In connection with the stockholder’s vote at the annual meeting, there
was a share redemption in exchange for a redemption payment paid to the redeeming shareholders. Upon calculation of the over withdrawals,
the Company determined that $628,758 of the over withdrawn amount is due to those redeemed shareholders and has accounted for this on
the balance sheet as due to shareholders. Additionally, of the total $1,049,359 repaid above for the over withdrawal amount, $994,950
should have been recorded as of September 30, 2023, at the time of the annual meeting. See Note 2 for details of the three and nine month
period ended September 30, 2023 restatement.
Note
13 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred up to the date the consolidated financial statements were issued.
Based upon this review, other as described below, the Company, did not identify any subsequent events that would have required adjustment
or disclosure in the consolidated financial statements.
On
January 5, 2024, February 2, 2024, February 7, 2024, March 20, 2024 and May 6, 2024 the Company deposited $20,000, on each date, into
the Trust Account to extend the Business Combination Period from January 7, 2024 to June 7, 2024.
For
the period between March 2, 2023 and December 5, 2023, the Company withdrew an approximate amount of $2,497,250 from the Trust Account
pursuant to seven separate written withdrawal requests to Continental Stock Transfer and Trust (“Continental”), the trustee
for the Trust Account for the payment of taxes. Jeff Gary, consistent with his position as the Company’s Chief Financial Officer,
signed and delivered each of the seven separate written withdrawal requests to Continental. Between March 10, 2023 and December 13, 2023
the Company paid an amount of $1,447,900 of which $1,130,000, in four payments, was paid for estimated income tax payments for 2022 and
2023 and $317,900, in three payments, was paid for Delaware franchise taxes. The CFO, made each of the seven payments for estimated taxes
and Delaware franchise taxes. The Board learned further that between March 2, 2023 and December 31, 2023, Mr. Gary used the remaining
approximate $3,049,360 that was withdrawn from the Trust Account for tax purposes, to pay other business expenses of the Company. Each
of the transactions described above was recorded on the books of the Company and no money was used for anything other than tax payments
or appropriate Company business related expenses. The $1,049,360 that was withdrawn from the Trust Account for tax purposes to pay business
expenses of the Company was fully paid back to the Trust Account by the Sponsor on March 15, 2024 and on March 26, 2024, and the Sponsor
wired an additional $36,285.07 in to the Trust Account to reimburse the Trust Account for interest that would have accrued on the funds
that were erroneously withdrawn from the Trust Account. As a result, there has been no financial loss to shareholders or the Trust Account.
As
a result of the above conduct by Mr. Gary, the Board adopted resolutions taking the following actions:
| |
1. |
On
April 21, 2024, Mr. Gary was removed as the Company’s Chief Executive Officer and Chief Financial Officer of the Company. |
| |
|
|
| |
2. |
On
April 21, 2024, Mr. Gary was appointed as an Assistant Finance Manager of the Company and shall report to the new Chief Financial
Officer of the Company. |
| |
|
|
| |
3. |
On
April 21, 2024, Michael Singer, the Executive Chairman of the Company, was appointed to the position of Chief Executive Officer of
the Company. |
| |
|
|
| |
4. |
On
April 21, 2024, Mr. Gary resigned as a director of the Board and the Board has accepted Mr. Gary’s resignation on April 21,
2024. |
| |
|
|
| |
5. |
Mr.
Gary shall be removed from all Company bank accounts, including the Trust Account and Mr. Gary’s authority to withdraw funds
from the Company bank accounts, including the Trust Account has been terminated. |
| |
|
|
| |
6. |
On
April 21, 2024, the Board engaged Glenn Worman as the Company’s Chief Financial Officer, and that Mr. Worman will approve and
sign the Company’s 2023 Annual Report on Form 10-K. |
| |
|
|
| |
7. | Mr.
Gary agreed to reimburse the Company for all fees and expenses incurred by the Company in
connection with the Company’s engagement of Mr. Worman as the new Chief Financial Officer
of the Company. |
| |
| |
| |
8. | Going
forward all withdrawals from the Trust Account, payments of taxes and all fund transfers
between the Company and the Sponsor will require the approval of both the Chief Executive
Officer and Chief Financial Officer. |
| |
| |
| |
9. | All
deferred compensation owed to Mr. Gary by the Company to date, in the aggregate amount of
$132,500, shall be forfeited by Mr. Gary, and that henceforth Mr. Gary shall cease to accrue
$7,500 per month in service fees currently recorded in due to related party on the balance
sheet. |
| |
| |
| |
10. | Mr.
Gary shall not be the Company’s designee to be a member of the board of directors of
the post-transaction company in the Company’s planned business combination with Alpha
Modus Corp. |
In
May 2024, the Company and the Sponsor entered into a capital contribution agreement effective as of May 9, 2023, in which the funds deposited
by the Sponsor were to be considered a capital contribution to the Company.
Alpha
Modus Corp.
Financial
Statements
As
of and for the Three and Nine Months ended September 30, 2024
ALPHA
MODUS CORP.
Balance
Sheets
As
of September 30, 2024 and December 31, 2023
(Unaudited)
| | |
September
30, 2024 | | |
December
31, 2023 | |
| ASSETS | |
| | | |
| | |
| Current
assets | |
| | | |
| | |
| Cash | |
$ | 66,011 | | |
$ | 106,809 | |
| Other
receivables | |
| - | | |
| 15,000 | |
| Total
current assets | |
| 66,011 | | |
| 121,809 | |
| Total
assets | |
$ | 66,011 | | |
$ | 121,809 | |
| | |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
| Current
liabilities | |
| | | |
| | |
| Accounts
payable and accrued liabilities | |
$ | 60,706 | | |
$ | 11,844 | |
| Accrued
liabilities to related party | |
| 74,124 | | |
| 88,350 | |
| Accrued
interest payable to related party | |
| 65,331 | | |
| 22,064 | |
| Payable
to related party, net of discount | |
| 1,475,691 | | |
| 964,125 | |
| Total
current liabilities | |
| 1,675,852 | | |
| 1,086,383 | |
| Total
liabilities | |
| 1,675,852 | | |
| 1,086,383 | |
| | |
| | | |
| | |
| Commitments
and contingencies (see Note 5) | |
| - | | |
| - | |
| | |
| | | |
| | |
| Stockholders’
deficit | |
| | | |
| | |
| Preferred stock,
$0.0001 par value, 10,000,000 shares authorized | |
| | | |
| | |
| Series
A preferred stock, $0.0001 par value, 5,100,000 shares authorized, 0 shares issued and outstanding | |
| - | | |
| - | |
| Series
B preferred stock, $0.0001 par value, 10 shares authorized, 0 shares issued and outstanding | |
| - | | |
| - | |
| Common stock, $0.0001
par value, 490,000,000 shares authorized, 13,645,000 and 11,000,000 shares issued and outstanding as of September 30, 2024 and December
31, 2023, respectively | |
| 1,365 | | |
| 1,100 | |
| Additional
paid-in capital | |
| 2,762,992 | | |
| 2,697,132 | |
| Accumulated
deficit | |
| (4,374,198 | ) | |
| (3,662,806 | ) |
| Total
stockholders’ deficit | |
| (1,609,841 | ) | |
| (964,574 | ) |
| Total
liabilities and stockholders’ deficit | |
$ | 66,011 | | |
$ | 121,809 | |
The
accompanying notes are an integral part of these unaudited financial statements.
ALPHA
MODUS CORP.
Statements
of Operations
(Unaudited)
| | |
For
the Three Months Ended | | |
For
the Nine Months Ended | |
| | |
September
30, 2024 | | |
September
30, 2023 | | |
September
30, 2024 | | |
September
30, 2023 | |
| | |
| | |
(Restated) | | |
| | |
(Restated) | |
| Revenue | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating
expenses | |
| | | |
| | | |
| | | |
| | |
| Professional
fees | |
| 124,800 | | |
| 124,336 | | |
| 311,637 | | |
| 146,658 | |
| General
and administrative expenses | |
| 161,331 | | |
| (118,436 | ) | |
| 285,958 | | |
| 30,861 | |
| Total
operating expenses | |
| 286,131 | | |
| 5,900 | | |
| 597,595 | | |
| 177,519 | |
| Operating
loss | |
| (286,131 | ) | |
| (5,900 | ) | |
| (597,595 | ) | |
| (177,519 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other
income (expenses) | |
| | | |
| | | |
| | | |
| | |
| Interest
income | |
| 3 | | |
| 1 | | |
| 8 | | |
| 4 | |
| Interest
expense | |
| (29,618 | ) | |
| (22,090 | ) | |
| (127,892 | ) | |
| (57,474 | ) |
| Total
other income (expense) | |
| (29,615 | ) | |
| (22,089 | ) | |
| (127,884 | ) | |
| (57,470 | ) |
| Net
loss | |
$ | (315,746 | ) | |
$ | (27,989 | ) | |
$ | (725,479 | ) | |
$ | (234,989 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net
loss per common share – basic and diluted | |
$ | (0.02 | ) | |
$ | (0.00 | ) | |
$ | (0.06 | ) | |
$ | (0.08 | ) |
| Weighted
average number of shares of common stock – basic and diluted | |
| 13,645,000 | | |
| 6,453,851 | | |
| 12,575,566 | | |
| 2,946,677 | |
The
accompanying notes are an integral part of these unaudited financial statements.
ALPHA
MODUS CORP.
Statement
of Changes in Stockholders’ Deficit
For
the Nine Months Ended September 30, 2024 and 2023 (Restated)
(Unaudited)
| | |
Preferred
Stock | | |
| | |
Additional | | |
| | |
Total | |
| | |
Series
A | | |
Series
B | | |
Common
Stock | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| Balance,
December 31, 2023 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 11,000,000 | | |
$ | 1,100 | | |
$ | 2,697,132 | | |
$ | (3,662,806 | ) | |
$ | (964,574 | ) |
| Imputed
interest discounts on related party notes | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,824 | | |
| 4,824 | |
| Shares
issued for note extension with related party | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,400,000 | | |
| 140 | | |
| 34,860 | | |
| - | | |
| 35,000 | |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (222,696 | ) | |
| (222,696 | ) |
| Balance, March 31,
2024 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 12,400,000 | | |
| 1,240 | | |
| 2,731,992 | | |
| (3,880,678 | ) | |
| (1,147,446 | ) |
| Imputed
interest discounts on related party notes | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,263 | | |
| 9,263 | |
| Shares
issued for cash and financing incentive | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,000,000 | | |
| 100 | | |
| 24,900 | | |
| - | | |
| 25,000 | |
| Shares
issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| 245,000 | | |
| 25 | | |
| 6,100 | | |
| - | | |
| 6,125 | |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (187,037 | ) | |
| (187,037 | ) |
| Balance, June 30,
2024 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,645,000 | | |
| 1,365 | | |
| 2,762,992 | | |
| (4,058,452 | ) | |
| (1,294,095 | ) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (315,746 | ) | |
| (315,746 | ) |
| Balance,
September 30, 2024 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 13,645,000 | | |
$ | 1,365 | | |
$ | 2,762,992 | | |
$ | (4,374,198 | ) | |
$ | (1,609,841 | ) |
| | |
Preferred
Stock | | |
| | |
Additional | | |
| | |
Total | |
| | |
Series
A | | |
Series
B | | |
Common
Stock | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| Balance,
December 31, 2022 | |
| 5,100,000 | | |
$ | 510 | | |
| 10 | | |
$ | - | | |
| 1,197,208 | | |
$ | 120 | | |
$ | 3,047,035 | | |
$ | (3,205,587 | ) | |
$ | (157,922 | ) |
| Return
of Common shares for cancellation | |
| - | | |
| - | | |
| - | | |
| - | | |
| (36,400 | ) | |
| (4 | ) | |
| (140,996 | ) | |
| - | | |
| (141,000 | ) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (167,856 | ) | |
| (167,856 | ) |
| Balance, March 31,
2023 | |
| 5,100,000 | | |
| 510 | | |
| 10 | | |
| - | | |
| 1,160,808 | | |
| 116 | | |
| 2,906,039 | | |
| (3,373,443 | ) | |
| (466,778 | ) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (39,144 | ) | |
| (39,144 | ) |
| Balance, June 30,
2023 (Restated) | |
| 5,100,000 | | |
| 510 | | |
| 10 | | |
| - | | |
| 1,160,808 | | |
| 116 | | |
| 2,906,039 | | |
| (3,412,587 | ) | |
| (505,922 | ) |
| Conversion
of Series A into common stock | |
| (5,100,000 | ) | |
| (510 | ) | |
| - | | |
| - | | |
| 5,100 | | |
| 1 | | |
| 509 | | |
| - | | |
| - | |
| Conversion
of Series B into common stock | |
| - | | |
| - | | |
| (10 | ) | |
| - | | |
| 100,000,000 | | |
| 10,000 | | |
| (10,000 | ) | |
| - | | |
| - | |
| Return
of Common shares for cancellation | |
| - | | |
| - | | |
| - | | |
| - | | |
| (90,165,908 | ) | |
| (9,017 | ) | |
| (199,416 | ) | |
| - | | |
| (208,433 | ) |
| Imputed
interest discounts on related party notes | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 27,272 | | |
| 27,272 | |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (27,989 | ) | |
| (27,989 | ) |
| Balance,
September 30, 2023 (Restated) | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 11,000,000 | | |
$ | 1,100 | | |
$ | 2,697,132 | | |
$ | (3,413,304 | ) | |
$ | (715,072 | ) |
The
accompanying notes are an integral part of these unaudited financial statements.
ALPHA
MODUS CORP.
Statements
of Cash Flows
(Unaudited)
| | |
For
the Nine Months Ended | |
| | |
September
30, 2024 | | |
September
30, 2023 | |
| Cash
flows from operating activities: | |
| | | |
| (Restated) | |
| Net
loss | |
$ | (725,479 | ) | |
$ | (234,989 | ) |
| Adjustments
to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Amortization
of debt discount | |
| 84,625 | | |
| 57,474 | |
| Stock
issued for services | |
| 6,125 | | |
| - | |
| Change
in assets and liabilities: | |
| | | |
| | |
| Other
receivables | |
| 15,000 | | |
| - | |
| Accounts
payable and accrued expenses | |
| 48,862 | | |
| - | |
| Accrued
liabilities - related party | |
| (14,226 | ) | |
| (127,105 | ) |
| Accrued
interest payable - related party | |
| 43,267 | | |
| - | |
| Net
cash used in operating activities | |
| (541,826 | ) | |
| (304,620 | ) |
| | |
| | | |
| | |
| Cash
flows from investing activities: | |
| | | |
| | |
| Net
cash provided by investing activities | |
| - | | |
| - | |
| | |
| | | |
| | |
| Cash
flows from financing activities: | |
| | | |
| | |
| Proceeds
from note payable | |
| - | | |
| - | |
| Proceeds
from related party loan | |
| 500,000 | | |
| 600,000 | |
| Repayment
of notes payable to related parties | |
| (23,972 | ) | |
| (61,958 | ) |
| Proceeds
from sale of common stock | |
| 25,000 | | |
| - | |
| Repurchase
of common stock to cancel | |
| - | | |
| (141,000 | ) |
| Net
cash provided by financing activities | |
| 501,028 | | |
| 397,042 | |
| Net
change in cash | |
| (40,798 | ) | |
| 92,422 | |
| | |
| | | |
| | |
| Cash
at beginning of period | |
| 106,809 | | |
| 3,006 | |
| Cash
at end of period | |
$ | 66,011 | | |
$ | 95,428 | |
| | |
| | | |
| | |
| Supplemental
disclosures of cash flow information: | |
| | | |
| | |
| Cash
paid for interest | |
$ | - | | |
$ | - | |
| Cash
paid for taxes | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Supplemental
non-cash information | |
| | | |
| | |
| Return
of common shares for cancellation | |
$ | - | | |
$ | 208,433 | |
| Renegotiated
notes payable | |
$ | 453,750 | | |
$ | 75,000 | |
| Common
shares issued for note incentive | |
$ | 35,000 | | |
$ | - | |
| Discounts
on notes payable applied directly against accumulated deficit | |
$ | 14,087 | | |
$ | 27,272 | |
The
accompanying notes are an integral part of these unaudited financial statements.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
September
30, 2024
(Unaudited)
NOTE
1 — NATURE OF OPERATIONS
Company
Background
Alpha
Modus Corp. (the “Company,” “we,” “us,” “our,” or “Alpha Modus”), was incorporated
in the State of Florida on July 11, 2014.
Nature
of Operations
Alpha
Modus was founded as an artificial intelligence software as a service provider. As of January 2020, Alpha Modus abandoned its software
and deemed it not technologically feasible. Since that time, the Company has focused on developing its patents. Alpha Modus was awarded
US Patent No. 10,360,571 (the “571 Patent”) on July 23, 2019. Since August 2019, Alpha Modus has focused on research and
development to expand claims of the 571 Patent. The Company intends to begin commercialization efforts of the 571 Patent family in 2024.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and with Article 8 of Regulation S-X and pursuant
to the rules and regulations of the SEC. Accordingly, certain disclosures included in the annual financial statements have been omitted
from these financial statements as they are not required for interim financial statements. In the opinion of Management, the unaudited
financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the
balances and results for the periods presented. Operating results for the nine months ended September 30, 2024 are not necessarily indicative
of the results that may be expected through December 31, 2024 or any future period.
The
accompanying unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto included
in the Annual Report on Form S-4/A filed by the Company with the SEC on September 13, 2024.
The
Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America
and has a year-end of December 31st.
Management
further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of
internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed
to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded
in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations
and cash flows of the Company for the respective periods being presented.
Business
Segments
The
Company operates in one segment and therefore segment information is not present.
Liquidity
and Going Concern
We
have incurred recurring losses since inception and expect to continue to incur losses since the Company does not have any revenue stream.
On September 30, 2024, we had $66,011 in cash. Our net loss incurred for the nine months ended September 30, 2024 was $725,479. The working
capital deficit was $1,609,841 on September 30, 2024. As a result, there is substantial doubt about our ability to continue as a going
concern. In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may
be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a
material adverse effect on our business, operating results, financial condition and long-term prospects. The Company expects to seek
to obtain additional funding through increased revenues and future financings. There can be no assurance as to the availability or terms
upon which such financing and capital might be available. The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash
is comprised of cash balances. Cash is held at major financial institutions and is subject to credit risk to the extent that those balances
exceed applicable Federal Deposit Insurance Corporation (“FDIC”) insurance amounts of $250,000. From time to time, the Company
has certain cash balances, including restricted cash, that may exceed insured limits. The Company utilizes large banking institutions
that are reputable, therefore mitigating the risks.
Fair
Value of Financial Instruments
The
book values of cash approximate its respective fair values due to the short-term nature of these instruments. The fair value hierarchy
under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable
inputs).
The
hierarchy consists of three levels
| |
● |
Level
one — Quoted market prices in active markets for identical assets or liabilities; |
| |
|
|
| |
● |
Level
two — Inputs other than level one inputs that are either directly or indirectly observable; and |
| |
|
|
| |
● |
Level
three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect
those assumptions that a market participant would use. |
Determining
which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures
each quarter.
Net
Loss Per Share
Net
loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined
by FASB, ASC Topic 260, Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by
dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common
share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents
outstanding. The Company does not have any dilutive shares of common stock as of September 30, 2024 or 2023.
Income
Taxes
The
Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets
and liabilities and loss carryforwards and their respective tax basis.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the periods in which those
temporary differences are expected to be recovered or settled.
The
effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the period of change. A valuation
allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Tax
benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position
taken on an income tax return. The Company has no liability for uncertain tax positions as of September 30, 2024 and December 31, 2023.
Interest and penalties if any, related to unrecognized tax benefits would be recognized as interest expense. The Company does not have
any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during
the nine months ended September 30, 2024 and 2023.
Notes
payable
The
Company issued various notes payable to related parties. These notes payable included original issue discounts and debt issuance costs.
Original
issue discounts. The Company accounts for the original issue discounts in accordance with Accounting Standards Codification (“ASC”)
No. 835-30, Interest and Imputation of Interest, which requires the Company to record the discount as a contra-liability and amortize
it over the term of the underlying note using the interest method.
Debt
issuance costs. The Company accounts for debt issuance costs in accordance with ASC No. 470-20, Debt, which requires the Company
to recognize a contra-liability for costs incurred with the issuance of debt instruments. These contra-liabilities are amortized over
the term of the underlying note payable using the interest method.
Related
Parties
In
accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly
or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related
parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company
and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate
interests. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite
conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall
not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions
unless such representations can be substantiated.
Recent
Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If
not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material
impact on the Company’s financial statements upon adoption.
NOTE
3 — RELATED PARTY TRANSACTIONS
In
2021, William Alessi (“Alessi”), an officer and director of the Company, loaned the Company $89,929 and received a payment
of $4,000, for a net of $85,929. The loan is informal, unsecured, due on demand and bears 10% interest. The accrued interest as of December
31, 2023 was $3,612. The accrued interest as of September 30, 2024 was $5,436. In 2023, the Company made payments of $61,958 towards
the balance of the loan. On April 17, 2024, the Company paid the remaining balance of $23,972. As of September 30, 2024 and December
31, 2023, the balance was $0 and $23,972, respectively.
On
January 17, 2023, the Company and Janbella Group, LLC (“Janbella”), which is controlled by Alessi, entered into a secured
convertible promissory note for $412,500. The note included the $75,000 balance as of December 31, 2022, an additional $300,000, and
an OID of $37,500. The note matures on January 17, 2024. The OID of $37,500 was recorded as a debt discount and was being amortized over
the life of the original note ending on January 17, 2024. On August 31, 2023, the Company and Janbella entered into an Amended and Restated
12% Senior Secured Promissory Note for $453,750. This note was a modification of the $412,500 note dated January 17, 2023. The Company
treated this as a modification of debt. All assets of the Company are collateral for the note. In the event of a Qualified Offering prior
to the maturity date, at the option of Janbella, for every dollar received in a Qualified Offering, Janbella would receive $0.50, until
the outstanding principal and interest are paid. Janbella is managed by Alessi. The note is convertible at a conversion price of $1.00.
In the event of a merger or consolidation, the payment due to Janbella is 200% of the principal. During the year ended December 31, 2023,
the Company amortized $35,753 of this discount. As of December 31, 2023, there is a remaining balance of $1,747 left of the OID. During
the nine months ended September 30, 2024, the Company amortized the remaining balance of $1,747 of this discount. There was a one-time
interest charge of 10%, or $41,250, which was recorded as original interest discount and is being amortized over the life of the original
note ending on January 17, 2024. During the year ended December 31, 2023, the Company amortized $39,329 of this discount. As of December
31, 2023, there was a balance remaining of $1,921. During the nine months ended September 30, 2024, the Company amortized the remaining
balance of $1,921 of this discount. On March 29, 2024, the Company extended this note to June 7, 2024 and issued 1,400,000 shares of
common stock to the JanBella. The stock was valued at $0.025 per share for a total value of $35,000. The Company recorded the charge
of $35,000 as a debt discount and amortized $35,000 as debt discount interest expense during the nine months ended September 30, 2024.
As of September 30, 2024 and December 31, 2023, the balance was $453,750 and $453,750, with accrued interest $18,452 and $59,895, respectively.
On
August 31, 2023, the Company and Janbella entered into an 0% Senior Secured Promissory Note for $300,000. The note matures on August
31, 2024. There is no interest. An imputed interest discount was calculated for this note of $27,272, which was recorded directly to
the accumulated deficit balance. This discount is being amortized over the life of the original note ending on August 31, 2024. During
the year ended December 31, 2023, the Company amortized $9,116 of this discount. As of December 31, 2023, the balance of this discount
was $18,157. During the nine months ended September 30, 2024, the Company amortized $18,157 of this discount. As of September 30, 2024,
the balance of this discount was $0. All assets of the Company are collateral for the note. As of September 30, 2024 and December 31,
2023, the balance on this note was $300,000.
On
November 6, 2023, the Company and Janbella entered into an 0% Senior Secured Promissory Note for $221,941. The note matures on August
31, 2024. There is no interest. An imputed interest discount was calculated for this note of $16,804, which was recorded directly to
the accumulated deficit balance. This discount is being amortized over the life of the original note ending on August 31, 2024. During
the year ended December 31, 2023, the Company amortized $3,091 of this discount. As of December 31, 2023, the balance of this discount
was $13,713. During the nine months ended September 30, 2024, the Company amortized $13,713 of this discount. As of September 30, 2024,
the balance of this discount was $0. All assets of the Company are collateral for the note. As of September 30, 2024 and December 31,
2023, the balance on this note was $221,941.
On
February 28, 2024, the Company and Janbella entered into a verbal agreement for a $100,000 0% Senior Secured Promissory Note. On May
17, 2024, the Company and Janbella formalized the February 28, 2024 verbal agreement by entering into an 0% Senior Secured Promissory
Note for $400,000 and JanBella funded an additional $300,000. The note matures on August 31, 2024. There is no interest. An imputed interest
discount was calculated for this note of $14,087, which was recorded directly to the accumulated deficit balance. This discount is being
amortized over the life of the original note ending on August 31, 2024. During the nine months ended September 30, 2024, the Company
amortized $14,087 of this discount. As of September 30, 2024, the balance of this discount was $0. All assets of the Company are collateral
for the note. On September 24, 2024, the Company and Janbella entered into a verbal agreement for an additional $100,000 0% Senior Secured
Promissory Note. As of September 30, 2024 and December 31, 2023, the balance on this note was $500,000 and $0, respectively.
During
the fiscal year ending December 31, 2023, the Company agreed to reimburse Mr. Alessi $208,433 for the cancellation of 90,165,908 shares
and the potential acquisition of Alpha Modus Corp. by Insight Acquisition Corp. Payments of $120,083 had been made during 2023, leaving
a balance due to Mr. Alessi of $88,350 as of December 31, 2023. During the nine months ended September 30, 2024, the Company made payments
of $14,226, leaving a balance due of $74,124.
NOTE
4 — STOCKHOLDERS’ EQUITY
Preferred
Stock
Alpha
Modus was incorporated on July 11, 2014, under the laws of the state of Florida with 10,000,000 authorized shares of preferred stock
with $0.0001 par value.
Series
A Preferred Stock
On
March 8, 2021, the Board of Directors of the Company amended the Series A preferred stock with a par value of $0.0001 per share. As amended,
each share of the Series A preferred stock is entitled to one vote and each ten shares of Series A preferred stock is convertible into
one share of common stock.
On
April 27, 2021, the Company filed an amended Certificate of Designation (the “Series A Amendment”) regarding the rights associated
with the Company’s shares of Series A preferred stock (the “Series A Preferred Shares”). The Series A Amendment modified
the conversion entitlements associated with the Series A Preferred Shares. The conversion entitlements were increased from one share
of common for ten shares of Series A Preferred Shares to one share of common for 1,000 shares of Series A Preferred Shares. The conversion
change was to the detriment of the shareholder.
As
of September 30, 2024 and December 31, 2023, the Company had 0 shares of Series A preferred stock issued and outstanding.
Series
B Preferred Stock
On
November 26, 2018, the Board of Directors of the Company authorized 10 shares of Series B preferred stock with no par value. Each share
of Series B preferred stock is entitled to ten million votes and is not convertible into shares of common stock.
On
March 8, 2021, the Company filed an amended Certificate of Designation (the “Series B Amendment”) regarding the rights associated
with the Company’s shares of Series B preferred stock (the “Series B Preferred Shares”). The Series B Amendment modified
the conversion entitlements associated with the Series B Preferred Shares. The conversion entitlements were increased from no conversion
into common stock to 10,000,000 shares of common stock for 1 share of Series B Preferred Shares.
The
modification of preferred stock rights that included adding a substantive conversion option required the modification to be treated as
a redemption of the preferred shares and any difference between the fair value of the modified preferred shares and the carrying amount
of the preferred shares be subtracted (or added) to net income (loss) to arrive at income (loss) available to common shareholders in
accordance with ASC 260-10-S99-2. Consequently, the Company has recognized a deemed dividend in determining net income or loss attributable
to common shareholders as reported in the Statement of Operations and utilized in computing earnings or loss per common share. The Company,
at the time of the Series B Amendment, has not yet commercialized the 571 Patent family therefore, the value of the Company was 0. The
Company had not sold any shares of common stock from the date of the Series B Amendment in more than two years. Therefore, the value
of the change in conversion rights at the time of the Series B Amendment was 0.
As
of September 30, 2024 and December 31, 2023, the Company had 0 shares of Series B preferred stock issued and outstanding.
Common
Stock
Alpha
Modus was incorporated on July 11, 2014, under the laws of the state of Florida with 490,000,000 authorized shares of common stock with
$0.0001 par value. The shareholders have one vote per share of common stock.
On
March 29, 2024, the Company issued 1,400,000 shares of common stock to JanBella, a related party, as part of the note extension for the
note that had matured on January 17, 2024. The shares of common stock were valued at $0.025 per share for a total value of $35,000. The
Company recorded the charge of $35,000 as a debt discount and amortized $35,000 as debt discount interest expense during the nine months
ended September 30, 2024.
On
April 11, 2024, the Company entered into an agreement to retain Maxim Group LLC (“Maxim”) to provide capital market advisory
and investment banking services to the Company. The Company shall issue to Maxim (or its designees) an aggregate of 50,000 shares of
common stock, which shall be converted into shares of the surviving publicly traded entity (the “Capital Markets Advisory Fee Stock”).
The Capital Markets Advisory Fee Stock issued to Maxim shall be registered in the Company’s S-4 Registration Statement (in connection
with the De-SPAC Transaction), unrestricted and freely tradeable. In connection with the closing of the De-SPAC Transaction, the Company
shall pay to Maxim a non-refundable advisory fee of $300,000, payable upon the Company or its successor’s first capital raise (including
any self-directed capital raises) after the closing of the De-SPAC Transaction (the “Advisory Fee”). The 50,000 shares of
common stock have been valued at $0.025 per share for a total value of $1,250.
On
May 14, 2024, the Company entered into an agreement with Pickwick Capital Partners, LLC (“Pickwick”). The Company and Pickwick
previously entered into a certain letter agreement dated March 7, 2023, pursuant to which Pickwick would provide the Company corporate
finance and strategic advisory services, and would be compensated for those services (the “Letter Agreement”). During the
term of the Letter Agreement, Pickwick introduced the Company to Insight Acquisition Corp., a special purpose acquisition company (“Insight”),
and the Company and Insight have entered into a business combination agreement (the “Business Combination”), thereby entitling
Pickwick to payment of a success fee under the Letter Agreement. This agreement determined the value of the success fee and method of
payment. In accordance with this agreement, the Company issued 195,000 shares of common stock to Pickwick. These shares were valued at
$0.025 per share for a total value of $4,875.
On
May 16, 2024, the Company entered into a subscription agreement with Polar Multi-Strategy Master Fund (“Polar”), in which
Polar agrees to purchase 1,000,000 shares of common stock for $25,000. These shares have been valued at $0.025 per share for a total
value of $25,000.
As
of September 30, 2024 and December 31, 2023, the Company had 13,645,000 and 11,000,000 shares of common stock issued and outstanding,
respectively.
NOTE
5 — COMMITMENTS AND CONTINGENCIES
The
Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse
outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash
flows.
Certain
conditions may exist as of the date the unaudited financial statements are issued, which may result in a loss to the Company, but which
will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess
such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related
to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s
legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount
of relief sought or expected to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s unaudited financial statements. If the assessment
indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would
be disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee
would be disclosed.
NOTE
6 — RESTATEMENTS
Nine
Months Ended September 30, 2023
The
Company has restated the unaudited financial statements for the nine months ended September 30, 2023 as originally presented.
These
unaudited financial statements have been prepared to:
| |
a) |
Restate
the unaudited financial statements for the nine months ended September 30, 2023 to correct accounting errors; |
| |
b) |
Restate
results for the above noted changes to the unaudited financial statements |
The
restatements are being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision
of ASC 250 requires a company that corrects an error to disclose that its previously issued financial statements have been restated,
a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount
affected for each prior period presented, and the cumulative effect on retained earnings (deficit) in the statement of financial position
as of the beginning of each period presented.
The
table below sets forth the changes to the balance sheet as of September 30, 2023:
| | |
As
Previously Reported | | |
Adjustments | | |
As
Restated | |
| ASSETS | |
$ | 95,423 | | |
$ | 5 | | |
$ | 95,428 | (1) |
| | |
| | | |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | | |
| | |
| Current
liabilities | |
| | | |
| | | |
| | |
| Accrued
liabilities to related party | |
$ | 81,327 | | |
| - | | |
$ | 81,327 | |
| Payable
to related party, net of discount | |
| 713,174 | | |
| 15,999 | | |
| 729,173 | (1)(3) |
| Total
current liabilities | |
| 794,501 | | |
| 15,999 | | |
| 810,500 | |
| Total
liabilities | |
| 794,501 | | |
| 15,999 | | |
| 810,500 | |
| | |
| | | |
| | | |
| | |
| Commitments
and contingencies (see Note 5) | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | |
| Stockholders’
deficit | |
| | | |
| | | |
| | |
| Preferred stock,
$0.0001 par value, 10,000,000 shares authorized | |
| | | |
| | | |
| | |
| Series
A preferred stock, $0.0001 par value, 5,100,000 shares authorized, 0 shares issued and outstanding | |
| - | | |
| - | | |
| - | |
| Series
B preferred stock, $0.0001 par value, 10 shares authorized, 0 shares issued and outstanding | |
| - | | |
| - | | |
| - | |
| Common stock, $0.0001
par value, 490,000,000 shares authorized, 13,645,000 and 11,000,000 shares issued and outstanding as of September 30, 2024 and December
31, 2023, respectively | |
| 1,100 | | |
| - | | |
| 1,100 | |
| Additional
paid-in capital | |
| 3,037,548 | | |
| (340,416 | ) | |
| 2,697,132 | (2) |
| Treasury
stock | |
| (131,983 | ) | |
| 131,983 | | |
| - | (2) |
| Accumulated
deficit | |
| (3,605,743 | ) | |
| 192,439 | | |
| (3,413,304 | )(3)(4) |
| Total
stockholders’ deficit | |
| (699,078 | ) | |
| (15,994 | ) | |
| (715,072 | ) |
| Total
liabilities and stockholders’ deficit | |
$ | 95,423 | | |
$ | 5 | | |
$ | 95,428 | |
| (1) |
Reclassifying
accrued liabilities to accrued liabilities to related parties and general and administrative expenses from penalties and settlement
expense; |
| (2) |
Reclassifying
the repurchase of common shares from shareholders from penalties and settlement expense to equity; |
| (3) |
Reclassifying
interest expense into debt discount and the appropriate amortization expense during the nine months ended September 30, 2023. |
| (4) |
Reclassifying
expense paid by company for related party to equity. |
The
table below sets forth the changes to the statement of operations for the nine months ended September 30, 2023:
| | |
Originally Reported | | |
Restatement Adjustment | | |
As
Restated | |
| Revenue | |
$ | - | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | |
| Operating
expenses | |
| | | |
| | | |
| | |
| Professional
fees | |
| 255,854 | | |
| (109,196 | ) | |
| 146,658 | (4) |
| General
and administrative expenses | |
| 18,051 | | |
| 12,810 | | |
| 30,861 | (1)(3)(4) |
| Total
operating expenses | |
| 273,905 | | |
| (96,386 | ) | |
| 177,519 | |
| Operating
loss | |
| (273,905 | ) | |
| 96,386 | | |
| (177,519 | ) |
| | |
| | | |
| | | |
| | |
| Other
income (expenses) | |
| | | |
| | | |
| | |
| Interest
income | |
| - | | |
| 4 | | |
| 4 | (4) |
| Interest
expense | |
| (41,250 | ) | |
| (16,224 | ) | |
| (57,474 | )(3) |
| Penalties
and settlement | |
| (85,000 | ) | |
| 85,000 | | |
| -(1)(2) | |
| Total
other income (expense) | |
| (126,250 | ) | |
| 68,780 | | |
| (57,470 | ) |
| Net
loss | |
$ | (400,155 | ) | |
$ | 165,166 | | |
$ | (234,989 | ) |
| | |
| | | |
| | | |
| | |
| Net
loss per common share – basic and diluted | |
$ | (0.14 | ) | |
$ | 0.06 | | |
$ | (0.08 | ) |
| Weighted
average number of shares of common stock – basic and diluted | |
| 2,946,405 | | |
| 272 | | |
| 2,946,677 | |
| (1) |
Reclassifying
accrued liabilities to accrued liabilities to related parties and general and administrative expenses from penalties and settlement
expense; |
| (2) |
Reclassifying
the repurchase of common shares from shareholders from penalties and settlement expense to equity; |
| (3) |
Reclassifying
interest expense into debt discount and the appropriate amortization expense during the nine months ended September 30, 2023; |
| (4) |
Reclassifying
expenses that were incorrectly categorized into the proper expenses. |
The
table below sets forth the changes to the statement of stockholders’ deficit for the nine months ended September 30, 2023:
| | |
Common
Shares | |
| | |
As
Previously Reported | | |
Adjustments | | |
As
Restated | |
| Balance,
December 31, 2022 | |
| 1,162,808 | | |
| 34,400 | | |
| 1,197,208 | (1) |
| Return
of common shares for cancellation | |
| - | | |
| (36,400 | ) | |
| (36,400 | )(1) |
| Conversion
of series A into common stock | |
| 5,100 | | |
| - | | |
| 5,100 | |
| Conversion
of series B into common stock | |
| 100,000,000 | | |
| - | | |
| 100,000,000 | |
| Purchase
of treasury stock that was cancelled | |
| (90,167,908 | ) | |
| 2,000 | | |
| (90,165,908 | )(1) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | |
| Balance,
September 30, 2023 | |
| 11,000,000 | | |
| - | | |
| 11,000,000 | |
| | |
Common
Shares | |
| | |
As
Previously Reported | | |
Adjustments | | |
As
Restated | |
| Balance,
December 31, 2022 | |
$ | 116 | | |
$ | 4 | | |
$ | 120 | (1) |
| Return
of common shares for cancellation | |
| - | | |
| (4 | ) | |
| (4 | )(1) |
| Conversion
of series A into common stock | |
| 1 | | |
| - | | |
| 1 | |
| Conversion
of series B into common stock | |
| 10,000 | | |
| - | | |
| 10,000 | |
| Purchase
of treasury stock that was cancelled | |
| (9,017 | ) | |
| - | | |
| (9,017 | ) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | |
| Balance,
September 30, 2023 | |
$ | 1,100 | | |
$ | - | | |
$ | 1,100 | |
| | |
Treasury
Stock | |
| | |
As
Previously Reported | | |
Adjustments | | |
As
Restated | |
| Balance, December
31, 2022 | |
$ | - | | |
$ | - | | |
$ | - | |
| Purchase
of treasury stock | |
| (141,000 | ) | |
| 141,000 | | |
| - | (1) |
| Return
of common stock to treasury | |
| 9,017 | | |
| (9,017 | ) | |
| - | (1) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | |
| Balance,
September 30, 2023 | |
$ | (131,983 | ) | |
| 131,983 | | |
$ | - | |
| | |
Additional
Paid-in Capital | |
| | |
As
Previously Reported | | |
Adjustments | | |
As
Restated | |
| Balance,
December 31, 2022 | |
$ | 3,047,039 | | |
$ | (4 | ) | |
$ | 3,047,035 | (1) |
| Return
of common shares for cancellation | |
| - | | |
| (140,996 | ) | |
| (140,996 | )(1) |
| Conversion
of series A into common stock | |
| 509 | | |
| - | | |
| 509 | |
| Conversion
of series B into common stock | |
| (10,000 | ) | |
| - | | |
| (10,000 | ) |
| Purchase
of treasury stock that was cancelled | |
| - | | |
| (199,416 | ) | |
| (199,416 | )(1)(3) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | |
| Balance,
September 30, 2023 | |
$ | 3,037,548 | | |
| (340,416 | ) | |
$ | 2,697,132 | |
| | |
Accumulated
Deficit | |
| | |
As
Previously Reported | | |
Adjustments | | |
As
Restated | |
| Balance,
December 31, 2022 | |
$ | (3,205,588 | ) | |
$ | 1 | | |
$ | (3,205,587 | )(1) |
| Imputed
interest discount on related party notes | |
| - | | |
| 27,272 | | |
| 27,272 | (2) |
| Net
loss for the period | |
| (400,155 | ) | |
| 165,166 | | |
| (234,989 | ) |
| Balance,
September 30, 2023 | |
$ | (3,605,743 | ) | |
$ | 192,439 | | |
$ | (3,413,304 | ) |
| (1) |
Reclassifying
the repurchase of common shares from shareholders from penalties and settlement expense to equity. |
| (2) |
Reclassifying
interest expense into debt discount and the appropriate amortization expense during the nine months ended September 30, 2023. |
| (3) |
Reclassifying
expense paid by company for related party to equity. |
The
table below sets forth the changes to the statement of cash flows for the nine months ended September 30, 2023:
| | |
Originally Reported | | |
Restatement Adjustment | | |
As
Restated | |
| Cash
flows from operating activities: | |
| | | |
| | | |
| | |
| Net
loss | |
$ | (400,155 | ) | |
$ | 165,166 | | |
$ | (234,989 | ) |
| Adjustments
to reconcile net loss to net cash used in operating activities: | |
| | | |
| | | |
| | |
| Amortization
of debt discount | |
| - | | |
| 57,474 | | |
| 57,474 | (3) |
| Change
in assets and liabilities: | |
| | | |
| | | |
| | |
| Accounts
payable and accrued expenses | |
| 81,327 | | |
| (81,327 | ) | |
| - | (1) |
| Accrued
liabilities - related party | |
| - | | |
| (127,105 | ) | |
| (127,105 | )(1) |
| Net
cash used in operating activities | |
| (318,828 | ) | |
| 14,208 | | |
| (304,620 | ) |
| | |
| | | |
| | | |
| | |
| Cash
flows from investing activities: | |
| | | |
| | | |
| | |
| Net
cash provided by investing activities | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | |
| Cash
flows from financing activities: | |
| | | |
| | | |
| | |
| Proceeds
from related party loan | |
| 651,408 | | |
| (51,408 | ) | |
| 600,000 | (3) |
| Repayment
of notes payable to related parties | |
| (99,163 | ) | |
| 37,205 | | |
| (61,958 | )(3) |
| Repurchase
of common stock to cancel | |
| (141,000 | ) | |
| - | | |
| (141,000 | ) |
| Net
cash provided by financing activities | |
| 411,245 | | |
| (14,203 | ) | |
| 397,042 | |
| Net
change in cash | |
| 92,417 | | |
| 5 | | |
| 92,422 | |
| | |
| | | |
| | | |
| | |
| Cash
at beginning of period | |
| 3,006 | | |
| - | | |
| 3,006 | |
| Cash
at end of period | |
$ | 95,423 | | |
$ | 5 | | |
$ | 95,428 | |
| | |
| | | |
| | | |
| | |
| Supplemental
disclosures of cash flow information: | |
| | | |
| | | |
| | |
| Cash
paid for interest | |
$ | - | | |
$ | - | | |
$ | - | |
| Cash
paid for taxes | |
$ | - | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | |
| Supplemental
non-cash information | |
| | | |
| | | |
| | |
| Renegotiated
notes payable | |
$ | - | | |
$ | 75,000 | | |
$ | 75,000 | (4) |
| Expenses
paid by Company for related party | |
$ | - | | |
$ | 208,433 | | |
$ | 208,433 | (2) |
| Discounts
on notes payable applied directly against accumulated deficit | |
$ | - | | |
$ | 27,272 | | |
$ | 27,272 | (3) |
| (1) |
Reclassifying
accrued liabilities to accrued liabilities to related parties and general and administrative expenses from penalties and settlement
expense; |
| (2) |
Reclassifying
the repurchase of common shares from shareholders from penalties and settlement expense to equity; |
| (3) |
Reclassifying
interest expense into debt discount and the appropriate amortization expense during the nine months ended September 30, 2023. |
| (4) |
Amount
was not disclosed in the original filing. |
NOTE
7 — SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date the unaudited financial statements were issued. The Company has determined that
there are no other such events that warrant disclosure or recognition in the financial statements other than as set forth below.
On
December 13, 2024, the Company, Insight Acquisition Corp., a Delaware corporation (“IAC”), and IAC Merger Sub Inc., a Florida
corporation wholly owned by IAC (“Merger Sub”), completed the business combination agreement and plan of merger (the “BCA”)
pursuant to which Merger Sub will merge with and into the Company with the Company continuing as the surviving corporation in the merger
and becoming a wholly owned subsidiary of IAC. Each share of Company common stock will be converted into (i) the right to receive Earnout
Shares, and (ii) a certain number of shares of IAC Class A Common Stock (“Common Shares”) equal to (x) $110,000,000 divided
by the total number of shares of Company capital stock outstanding on a fully diluted basis as of the date of closing, divided by (y)
$10 (the “Merger Consideration”), with the maximum aggregate Merger Consideration being 11,000,000 Common Shares issuable
to Company common stockholders in the merger. IAC common stock and warrants issued and outstanding immediately prior to the consummation
of the merger will continue to be outstanding after the closing of the merger, except that all shares of IAC Class B Common Stock outstanding
as of the closing will be converted into the same number of shares of IAC Class A Common Stock as of the closing.
Report
of Independent Registered Public Accounting Firm
Board
of Directors and Stockholders
Alpha
Modus Corp.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Alpha Modus Corp. (the “Company”) as of December 31, 2023 and 2022, and the
related statements of operations, changes in stockholders’ deficit, and cash flows for each of the two years in the period ended
December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the
results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting
principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has suffered recurring losses and has stockholders’ deficit that raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/
Turner, Stone & Company, L.L.P
We
have served as the Company’s auditor since 2023.
Dallas,
Texas
May
3, 2024
ALPHA
MODUS CORP.
Balance
Sheets
As
of December 31, 2023 and 2022
| | |
December
31,
2023 | | |
December
31,
2022 | |
| ASSETS | |
| | | |
| | |
| Current
assets | |
| | | |
| | |
| Cash | |
$ | 106,809 | | |
$ | 3,006 | |
| Other
receivable | |
| 15,000 | | |
| — | |
| Total
current assets | |
| 121,809 | | |
| 3,006 | |
| Total
assets | |
$ | 121,809 | | |
$ | 3,006 | |
| | |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
| Current
liabilities | |
| | | |
| | |
| Accounts
payable | |
$ | 11,844 | | |
$ | — | |
| Accrued
liabilities to related party | |
| 88,350 | | |
| — | |
| Accrued
interest payable to related party | |
| 22,064 | | |
| — | |
| Payable
to related party, net of discount | |
| 964,125 | | |
| 160,929 | |
| Total
current liabilities | |
| 1,086,383 | | |
| 160,929 | |
| Total
liabilities | |
| 1,086,383 | | |
| 160,929 | |
| | |
| | | |
| | |
| Commitments
and contingencies (see Note 7) | |
| — | | |
| — | |
| | |
| | | |
| | |
| Stockholders’
deficit | |
| | | |
| | |
| Preferred stock,
$0.0001 par value, 10,000,000 shares authorized | |
| | | |
| | |
| Series
A preferred stock, $0.0001 par value, 5,100,000 shares authorized, 0 and 5,100,000 shares issued and outstanding as of December 31,
2023 and 2022, respectively | |
| — | | |
| 510 | |
| Series
B preferred stock, $0.0001 par value, 10 shares authorized, 0 and 10 shares issued and outstanding as of December 31, 2023 and 2022,
respectively | |
| — | | |
| — | |
| Common
stock, $0.0001 par value, 490,000,000 shares authorized, 11,000,000 and 1,197,208 shares issued and outstanding as of December 31,
2023 and 2022, respectively | |
| 1,100 | | |
| 120 | |
| Additional
paid-in capital | |
| 2,697,132 | | |
| 3,047,035 | |
| Accumulated
deficit | |
| (3,662,806 | ) | |
| (3,205,588 | ) |
| Total
stockholders’ deficit | |
| (964,574 | ) | |
| (157,923 | ) |
| Total
liabilities and stockholders’ deficit | |
$ | 121,809 | | |
$ | 3,006 | |
The
accompanying notes are an integral part of these financial statements.
ALPHA
MODUS CORP.
Statements of Operations
| | |
For
the Years Ended | |
| | |
December
31,
2023 | | |
December
31,
2022 | |
| Revenue | |
$ | — | | |
$ | — | |
| | |
| | | |
| | |
| Operating
expenses | |
| | | |
| | |
| Professional
fees | |
| 349,031 | | |
| 23,792 | |
| General
and administrative expenses | |
| 42,918 | | |
| 3,611 | |
| Total
operating expenses | |
| 391,949 | | |
| 27,403 | |
| Operating
loss | |
| (391,949 | ) | |
| (27,403 | ) |
| | |
| | | |
| | |
| Other
income (expenses) | |
| | | |
| | |
| Interest
income | |
| 7 | | |
| — | |
| Interest
expense | |
| (109,353 | ) | |
| — | |
| Total
other income (expense) | |
| (109,346 | ) | |
| — | |
| Net
loss | |
$ | (501,295 | ) | |
$ | (27,403 | ) |
| | |
| | | |
| | |
| Loss
per share – basic and fully diluted | |
$ | (0.10 | ) | |
$ | (0.02 | ) |
| Weighted
average number of shares of common stock – basic and fully diluted | |
| 4,976,556 | | |
| 1,197,208 | |
The
accompanying notes are an integral part of these financial statements.
ALPHA
MODUS CORP.
Statement
of Changes in Stockholders’ Deficit
For
the Years Ended December 31, 2023 and 2022
| | |
Preferred
Stock | | |
| | |
Additional | | |
| | |
| |
| | |
Series
A | | |
Series
B | | |
Common
Stock | | |
Paid-in | | |
Accumulated | | |
| |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| Balance,
December 31, 2021 | |
| 5,100,000 | | |
$ | 510 | | |
| 10 | | |
$ | — | | |
| 1,197,208 | | |
$ | 120 | | |
$ | 3,047,035 | | |
$ | (3,178,185 | ) | |
$ | (130,520 | ) |
| Net
loss for the year | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (27,403 | ) | |
| (27,403 | ) |
| Balance, December
31, 2022 | |
| 5,100,000 | | |
| 510 | | |
| 10 | | |
| — | | |
| 1,197,208 | | |
| 120 | | |
| 3,047,035 | | |
| (3,205,588 | ) | |
| (157,923 | ) |
| Purchase
of treasury stock that was cancelled | |
| — | | |
| — | | |
| — | | |
| — | | |
| (36,400 | ) | |
| (4 | ) | |
| (140,996 | ) | |
| — | | |
| (141,000 | ) |
| Conversion
of preferred series A to common stock | |
| (5,100,000 | ) | |
| (510 | ) | |
| — | | |
| — | | |
| 5,100 | | |
| 1 | | |
| 509 | | |
| — | | |
| — | |
| Conversion
of preferred series B to common stock | |
| — | | |
| — | | |
| (10 | ) | |
| — | | |
| 100,000,000 | | |
| 10,000 | | |
| (10,000 | ) | |
| — | | |
| — | |
| Return
of Common shares for cancellation | |
| — | | |
| — | | |
| — | | |
| — | | |
| (90,165,908 | ) | |
| (9,017 | ) | |
| (199,416 | ) | |
| — | | |
| (208,433 | ) |
| Imputed
interest discounts on related party notes | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 44,077 | | |
| 44,077 | |
| Net
loss for the year | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (501,295 | ) | |
| (501,295 | ) |
| Balance,
December 31, 2023 | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
| 11,000,000 | | |
$ | 1,100 | | |
$ | 2,697,132 | | |
$ | (3,662,806 | ) | |
$ | (964,574 | ) |
The
accompanying notes are an integral part of these financial statements.
ALPHA
MODUS CORP.
Statements
of Cash Flows
| | |
For
the Years Ended | |
| | |
December
31,
2023 | | |
December
31,
2022 | |
| Cash
flows from operating activities: | |
| | | |
| | |
| Net
loss | |
$ | (501,295 | ) | |
$ | (27,403 | ) |
| Adjustments
to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Amortization
of debt discount | |
| 87,289 | | |
| — | |
| Change
in assets and liabilities: | |
| | | |
| | |
| Other
receivable | |
| (15,000 | ) | |
| — | |
| Accounts
payable and accrued expenses | |
| 11,844 | | |
| — | |
| Accrued
liabilities – related party | |
| (120,083 | ) | |
| — | |
| Accrued
interest payable – related party | |
| 22,064 | | |
| — | |
| Net
cash used in operating activities | |
| (515,181 | ) | |
| (27,403 | ) |
| | |
| | | |
| | |
| Cash
flows from investing activities: | |
| | | |
| | |
| Net
cash provided by investing activities | |
| — | | |
| — | |
| | |
| | | |
| | |
| Cash
flows from financing activities: | |
| | | |
| | |
| Proceeds
from related party loan | |
| 821,941 | | |
| 75,000 | |
| Repayment
of notes payable to related parties | |
| (61,957 | ) | |
| (24,804 | ) |
| Repayment
of note payable | |
| — | | |
| (24,752 | ) |
| Repurchase
of common stock to cancel | |
| (141,000 | ) | |
| — | |
| Net
cash provided by financing activities | |
| 618,984 | | |
| 25,444 | |
| Net
change in cash | |
| 103,803 | | |
| (1,959 | ) |
| | |
| | | |
| | |
| Cash
at beginning of year | |
| 3,006 | | |
| 4,965 | |
| Cash
at end of year | |
$ | 106,809 | | |
$ | 3,006 | |
| | |
| | | |
| | |
| Supplemental
disclosures of cash flow information: | |
| | | |
| | |
| Cash
paid for interest | |
$ | — | | |
$ | — | |
| Cash
paid for taxes | |
$ | — | | |
$ | — | |
| | |
| | | |
| | |
| Supplemental
non-cash information | |
| | | |
| | |
| Conversion
of preferred series A stock into common stock | |
$ | 510 | | |
$ | — | |
| Conversion
of preferred series B stock into common stock | |
$ | 10,000 | | |
$ | — | |
| Common
shares cancelled with reimbursement of expenses | |
$ | 208,433 | | |
$ | — | |
| Renegotiated
notes payable | |
$ | 487,500 | | |
$ | — | |
| Discounts
on notes payable applied directly against accumulated deficit | |
$ | 44,077 | | |
$ | — | |
The
accompanying notes are an integral part of these financial statements.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
1 — NATURE OF OPERATIONS
Company
Background
Alpha
Modus Corp. (the “Company,” “we,” “us,” “our,” or “Alpha Modus”), was incorporated
in the State of Florida on July 11, 2014.
Nature
of Operations
Alpha
Modus was founded as an artificial intelligence software as a service provider. As of January 2020, Alpha Modus abandoned its software
and deemed it not technologically feasible. Since that time, the Company has focused on developing its patents. Alpha Modus was awarded
US Patent No. 10,360,571 (the “571 Patent”) on July 23, 2019. Since August 2019, Alpha Modus has focused on research and
development to expand claims of the 571 Patent. The Company intends to begin commercialization efforts of the 571 Patent family in 2024.
See Note 7.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America
and has a year-end of December 31st.
Management
further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of
internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed
to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded
in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations
and cash flows of the Company for the respective periods being presented.
Business
Segments
The
Company operates in one segment and therefore segment information in not present.
Liquidity
and Going Concern
We
have incurred recurring losses since inception and expect to continue to incur losses since the Company does not have any revenue stream.
On December 31, 2023, we had $106,809 in cash. Our net loss incurred for the year ended December 31, 2023 was $501,295. The working capital
deficit was $964,574 on December 31, 2023. As a result, there is substantial doubt about our ability to continue as a going concern.
In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required
to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse
effect on our business, operating results, financial condition and long-term prospects. The Company expects to seek to obtain additional
funding through increased revenues and future financings. There can be no assurance as to the availability or terms upon which such financing
and capital might be available. The accompanying financial statements have been prepared assuming that the Company will continue as a
going concern.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Cash
Cash
is comprised of cash balances. Cash is held at major financial institutions and is subject to credit risk to the extent that those balances
exceed applicable Federal Deposit Insurance Corporation (“FDIC”) insurance amounts of $250,000. From time to time, the Company
has certain cash balances, including restricted cash, that may exceed insured limits. The Company utilizes large banking institutions
that are reputable, therefore mitigating the risks.
Fair
Value of Financial Instruments
The
book values of cash approximate it’s respective fair values due to the short-term nature of these instruments. The fair value hierarchy
under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable
inputs).
The
hierarchy consists of three levels
| |
● |
Level
one — Quoted market prices in active markets for identical assets or liabilities; |
| |
|
|
| |
● |
Level
two — Inputs other than level one inputs that are either directly or indirectly observable; and |
| |
|
|
| |
● |
Level
three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect
those assumptions that a market participant would use. |
Determining
which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures
each quarter.
Net
Loss Per Share
Net
loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the year as defined by
FASB, ASC Topic 260, Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by dividing
net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations
are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
The Company does not have any dilutive shares of common stock as of December 31, 2023, or 2022.
Income
Taxes
The
Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets
and liabilities and loss carryforwards and their respective tax bases.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those
temporary differences are expected to be recovered or settled.
The
effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation
allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Tax
benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position
taken on an income tax return. The Company has no liability for uncertain tax positions as of December 31, 2023 and 2022. Interest and
penalties in any, related to unrecognized tax benefits would be recognized as interest expense. The Company does not have any accrued
interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during the year
ended December 31, 2023 and 2022.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Notes
payable
The
Company issued various notes payable to related. These notes payable included original issue discounts and debt issuance costs.
Original
issue discounts. The Company accounts for the original issue discounts in accordance with Accounting Standards Codification (“ASC”)
No. 835-30, Interest and Imputation of Interest, which requires the Company to record the discount as a contra-liability and amortize
it over the term of the underlying note using the interest method.
Debt
issuance costs. The Company accounts for debt issuance costs in accordance with ASC No. 470-20, Debt, which requires the Company
to recognize a contra-liability for costs incurred with the issuance of debt instruments. These contra-liabilities are amortized over
the term of the underlying note payable using the interest method.
Related
Parties
In
accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly
or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related
parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company
and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate
interests. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite
conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall
not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions
unless such representations can be substantiated.
Recent
Accounting Pronouncements
Recently
Issued Accounting Standards: Management does not believe that any recently issued, but not yet effective, accounting standards if currently
adopted would have a material effect on the accompanying financial statements, except as noted below.
In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”),
to require disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income
taxes paid. The new requirements should be applied on a prospective basis with an option to apply them retrospectively. ASU 2023-09 will
be effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact
this ASU will have on its consolidated financial statements and related disclosures.
NOTE
3 — REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In
connection with the preparation of its financial statements for the year ended December 31, 2023, the Company identified immaterial errors
related to the outstanding shares of common stock in a prior period. The Company reported 1,162,808 of outstanding shares of common stock
as of December 31, 2022 in its financial statements. The correct number of outstanding shares on December 31, 2022 was 1,197,208. On
January 16, 2023, the Company entered into Rescission Agreements with four shareholders to rescind Purchase Agreements totaling 36,400
shares of common stock for $141,000 in cash. 34,400 of these rescinded shares were incorrectly reported as being cancelled as of December
31, 2022. However, the remaining shares and the cash were not reported in the financial statements until January 16, 2023, when the transactions
took place.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
3 — REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (cont.)
In
accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects
of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the materiality
of this error both quantitatively and qualitatively and determined that it was not material to our previously issued consolidated financial
statements.
The
accompanying financial statements and relevant footnotes to the financial statements in this Annual Report on Form 10-K have been revised
to correct for the immaterial errors discussed above. The tables below provide reconciliations of our previously reported amounts to
revised amounts to correct for these immaterial errors in our financial statements as of and for the year ended December 31, 2022.
Balance
Sheet
| | |
December
31, 2022 | |
| | |
As
Previously
Reported | | |
Adjustment | | |
As
Revised | |
| ASSETS | |
| | | |
| | | |
| | |
| Current
assets | |
| | | |
| | | |
| | |
| Cash | |
$ | 3,006 | | |
| | | |
$ | 3,006 | |
| Total
current assets | |
| 3,006 | | |
| | | |
| 3,006 | |
| Total
assets | |
$ | 3,006 | | |
| | | |
$ | 3,006 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | | |
| | |
| Current
liabilities | |
| | | |
| | | |
| | |
| Payable
to related party, net of discount | |
$ | 160,929 | | |
| | | |
$ | 160,929 | |
| Total
current liabilities | |
| 160,929 | | |
| | | |
| 160,929 | |
| Total
liabilities | |
| 160,929 | | |
| | | |
| 160,929 | |
| | |
| | | |
| | | |
| | |
| Stockholders’
deficit | |
| | | |
| | | |
| | |
| Preferred
stock | |
| | | |
| | | |
| | |
| Series
A preferred stock | |
| 510 | | |
| | | |
| 510 | |
| Series
B preferred stock | |
| — | | |
| | | |
| — | |
| Common
stock | |
| 116 | | |
| 4 | | |
| 120 | |
| Additional
paid-in capital | |
| 3,047,039 | | |
| (4 | ) | |
| 3,047,035 | |
| Accumulated
deficit | |
| (3,205,588 | ) | |
| | | |
| (3,205,588 | ) |
| Total
stockholders’ deficit | |
| (157,923 | ) | |
| | | |
| (157,923 | ) |
| Total
liabilities and stockholders’ deficit | |
$ | 3,006 | | |
| | | |
$ | 3,006 | |
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
3 — REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (cont.)
Statement
of Operations
| | |
For
the Year Ended December 31, 2022 | |
| | |
As
Previously
Reported | | |
Adjustment | | |
As
Revised | |
| Revenue | |
$ | — | | |
| | | |
$ | — | |
| | |
| | | |
| | | |
| | |
| Operating
expenses | |
| | | |
| | | |
| | |
| Professional
fees | |
| 23,792 | | |
| | | |
| 23,792 | |
| General
and administrative expenses | |
| 3,611 | | |
| | | |
| 3,611 | |
| Total
operating expenses | |
| 27,403 | | |
| | | |
| 27,403 | |
| Operating
loss | |
| (27,403 | ) | |
| | | |
| (27,403 | ) |
| | |
| | | |
| | | |
| | |
| Other
income (expenses) | |
| | | |
| | | |
| | |
| Interest
income | |
| — | | |
| | | |
| — | |
| Interest
expense | |
| — | | |
| | | |
| — | |
| Total
other income (expense) | |
| — | | |
| | | |
| — | |
| Net
loss | |
$ | (27,403 | ) | |
| | | |
$ | (27,403 | ) |
| | |
| | | |
| | | |
| | |
| Loss
per share – basic and fully diluted | |
$ | (0.02 | ) | |
| | | |
$ | (0.02 | ) |
| Weighted
average number of shares of common stock – basic and fully diluted | |
| 1,162,808 | | |
| 34,400 | | |
| 1,197,208 | |
Statement
of Stockholders’ Deficit
| | |
For
the Year Ended December 31, 2022 | |
| | |
As
Previously
Reported | | |
Adjustment | | |
As
Revised | |
| Preferred
Series A Shares | |
| 5,100,000 | | |
| | | |
| 5,100,000 | |
| Preferred
Series A Stock Amount | |
$ | 510 | | |
| | | |
$ | 510 | |
| Preferred
Series B Shares | |
| 10 | | |
| | | |
| 10 | |
| Preferred
Series B Stock Amount | |
$ | — | | |
| | | |
$ | — | |
| Common Shares | |
| 1,162,808 | | |
| 34,400 | | |
| 1,197,208 | |
| Common
Stock Amount | |
$ | 116 | | |
| 4 | | |
$ | 120 | |
| Additional
Paid-in Capital | |
$ | 3,047,039 | | |
| (4 | ) | |
$ | 3,047,035 | |
| Accumulated
Deficit | |
$ | (3,205,588 | ) | |
| | | |
$ | (3,205,588 | ) |
| Total
Stockholders’ Deficit | |
$ | (157,923 | ) | |
| | | |
$ | (157,923 | ) |
There
were no revisions made to the Statements of Cash Flows.
NOTE
4 — RELATED PARTY TRANSACTIONS
In
2021, William Alessi (“Alessi”), an officer and director of the Company, loaned the Company $89,929 and received a payment
of $4,000, for a net of $85,929. The loan is informal, unsecured, due on demand and bears 10% interest. The accrued interest for the
fiscal year ended December 31, 2023 was $3,562. In 2023, the Company made payments of $61,957 towards the balance of the loan. As of
December 31, 2023 and 2022, the balance was $23,971 and $85,929, respectively.
Janbella
Group, LLC (“Janbella”), which is controlled by Alessi, has provided loans which are formal, unsecured, due on demand (“Formal
Loans”). In 2022, the Company received a loan of $75,000.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
4 — RELATED PARTY TRANSACTIONS (cont.)
On
January 17, 2023, the Company and Janbella entered into a secured convertible promissory note for $412,500. The note included the $75,000
balance as of December 31, 2022, an additional $300,000, and an OID of $37,500. The note matures on January 17, 2024. The OID of $37,500
was recorded as a debt discount and was being amortized over the life of the original note ending on January 17, 2024. On August 31,
2023, the Company and Janbella entered into an Amended and Restated 12% Senior Secured Promissory Note for $453,750. This note was a
modification of the $412,500 note dated January 17, 2023. The Company treated this as a modification of debt. During the year ended December
31, 2023, the Company amortized $35,753 of this discount. As of December 31, 2023, there is a remaining balance of $1,747 left of the
OID. All assets of the Company are collateral for the note. In the event of a Qualified Offering prior to the maturity date, at the option
of Janbella, for every dollar received in a Qualified Offering, Janbella would receive $0.50, until the outstanding principal and interest
are paid. Janbella is managed by Alessi. The note is convertible at a conversion price of $1.00. In the event of a merger or consolidation,
the payment due to Janbella is 200% of the principal.
On
August 31, 2023, the Company and Janbella entered into an Amended and Restated 12% Senior Secured Promissory Note for $453,750. This
note was a modification of the $412,500 note dated January 17, 2023. There is a one-time interest charge of 10%, or $41,250, which was
recorded as original interest discount and is being amortized over the life of the original note ending on January 17, 2024. During the
year ended December 31, 2023, the Company amortized $39,329 of this discount. As of December 31, 2023, there was a balance remaining
of $1,921. As of December 31, 2023 and 2022, the balance on Formal Loans was $453,750 and $75,000, respectively.
On
August 31, 2023, the Company and Janbella entered into an 0% Senior Secured Promissory Note for $300,000. The note matures on August
31, 2024. There is no interest. An imputed interest discount was calculated for this note of $27,273, which was recorded directly to
the accumulated deficit balance. This discount is being amortized over the life of the original note ending on August 31, 2024. During
the year ended December 31, 2023, the Company amortized $9,116 of this discount. As of December 31, 2023, the balance of this discount
was $18,157. All assets of the Company are collateral for the note. As of December 31, 2023 and 2022, the principal balance on this note
was $300,000 and $0, respectively.
On
November 6, 2023, the Company and Janbella entered into an 0% Senior Secured Promissory Note for $221,941. The note matures on August
31, 2024. There is no interest. An imputed interest discount was calculated for this note of $16,804, which was recorded directly to
the accumulated deficit balance. This discount is being amortized over the life of the original note ending on August 31, 2024. During
the year ended December 31, 2023, the Company amortized $3,091 of this discount. As of December 31, 2023, the balance of this discount
was $13,713. All assets of the Company are collateral for the note. As of December 31, 2023 and 2022, the principal balance on this note
was $221,941 and $0, respectively.
During
the fiscal year ending December 31, 2023, the Company agreed to reimburse Mr. Alessi $208,433 for the cancellation of 90,165,908 shares
and the potential acquisition of Alpha Modus Corp. by Insight Acquisition Corp. Payments of $120,083 had been made by the end of the
fiscal year, leaving a balance due to Mr. Alessi of $88,350 as of December 31, 2023.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
5 — STOCKHOLDERS’ EQUITY
Preferred
Stock
Alpha
Modus was incorporated on July 11, 2014, under the laws of the state of Florida with 10,000,000 authorized shares of preferred stock
with $0.0001 par value.
Series
A Preferred Stock
On
March 8, 2021, the Board of Directors of the Company amended the Series A preferred stock with a par value of $0.0001 per share. As amended,
each share of the Series A preferred stock is entitled to one vote and each ten shares of Series A preferred stock is convertible into
one share of common stock.
On
April 27, 2021, the Company filed an amended Certificate of Designation (the “Series A Amendment”) regarding the rights associated
with the Company’s shares of Series A preferred stock (the “Series A Preferred Shares”). The Series A Amendment modified
the conversion entitlements associated with the Series A Preferred Shares. The conversion entitlements were increased from one share
of common for ten shares of Series A Preferred Shares to one share of common for 1,000 shares of Series A Preferred Shares. The conversion
change was to the detriment of the shareholder.
On
September 8, 2023, the Company elected to convert all shares of Series A Preferred Stock into common stock pursuant to the rights granted
to the Company under its Amended and Restated Articles of Incorporation filed on April, 27, 2021 with the Florida Division of Corporations.
These shares are owned by The Alessi Revocable Trust (4,800,000), a related party, and Dana R. Morey (300,000).
As
of December 31, 2023, and December 31, 2022, the Company had 0 and 5,100,000 shares of Series A preferred stock issued and outstanding,
respectively.
Series
B Preferred Stock
On
November 26, 2018, the Board of Directors of the Company authorized 10 shares of Series B preferred stock with no par value. Each share
of Series B preferred stock is entitled to ten million votes and is not convertible into shares of common stock.
On
March 8, 2021, the Company filed an amended Certificate of Designation (the “Series B Amendment”) regarding the rights associated
with the Company’s shares of Series B preferred stock (the “Series B Preferred Shares”). The Series B Amendment modified
the conversion entitlements associated with the Series B Preferred Shares. The conversion entitlements were increased from no conversion
into common stock to 10,000,000 shares of common stock for one share of Series B Preferred Shares.
The
modification of preferred stock rights that included adding a substantive conversion option required the modification to be treated as
a redemption of the preferred shares and any difference between the fair value of the modified preferred shares and the carrying amount
of the preferred shares be subtracted (or added) to net income to arrive at income available to common shareholders in accordance with
ASC 260-10-S99-2. Consequently, the Company has recognized a deemed dividend in determining net income or loss attributable to common
shareholders as reported in the Statement of Operations and utilized in computing earnings or loss per common share. The Company, at
the time of the Series B Amendment, has not yet commercialized the 571 Patent family therefore, the value of the Company was nil. The
Company had not sold any shares of common stock from the date of the Series B Amendment in more than two years. Therefore, the value
of the change in conversion rights at the time of the Series B Amendment was nil.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
5 — STOCKHOLDERS’ EQUITY (cont.)
On
September 8, 2023, The Alessi 2020 Irrevocable Trust elected to convert 10 shares of Series B Preferred Stock into 100,000,000 shares
of common stock pursuant to the rights granted to the Company under its Amended and Restated Articles of Incorporation filed on March
8, 2021. These shares are owned by The Alessi 2020 Irrevocable Trust, a related party.
As
of December 31, 2023, and December 31, 2022, the Company had 0 and 10 shares of Series B preferred stock issued and outstanding, respectively.
Common
Stock
Alpha
Modus was incorporated on July 11, 2014, under the laws of the state of Florida with 490,000,000 authorized shares of common stock with
$0.0001 par value. The shareholders have one vote per share of common stock.
On
January 16, 2023, the Company entered into Rescission Agreements with four shareholders to rescind Purchase Agreements totaling 36,400
shares of common stock. Each shareholder signed full waivers, so the Company is not liable for any additional settlement costs or resolutions.
As a result, 36,400 shares of common stock were repurchased for $141,000 in cash and were immediately cancelled.
On
September 11, 2023, The Alessi 2020 Irrevocable Trust elected to return 90,165,908 shares of common stock for cancellation in preparation
of the potential acquisition of Alpha Modus Corp. by Insight Acquisition Corp. The Company agreed to reimburse Mr. Alessi $208,433 for
the cancellation of 90,165,908 shares. As a result, 90,165,908 shares of common stock were returned to the Company and cancelled with
the amount of $208,433 recorded directly against equity of the Company.
As
of December 31, 2023, and December 31, 2022, the Company had 11,000,000 and 1,197,208 shares of common stock issued and outstanding,
respectively.
NOTE
6 — INCOME TAXES
As
of December 31, 2023, and 2022, the Company has net operating loss carry forwards of $921,993 and $791,656, respectively, which may be
available to reduce future years’ taxable income through 2043. The Company’s net operating loss carry forwards may be subject
to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section
382 of the Internal Revenue Code.
The
Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying
the United States Federal tax rate of 21% and state tax rate of 5% to loss before taxes for fiscal year 2023 and 2022), as follows:
| | |
December
31, 2023 | | |
December
31, 2022 | |
| Tax
benefit at the statutory rate | |
$ | (105,272 | ) | |
| 21.0 | % | |
$ | (5,755 | ) | |
| 21.0 | % |
| State
income taxes, net of federal income tax benefit | |
| (25,065 | ) | |
| 5.0 | % | |
| (1,370 | ) | |
| 5.0 | % |
| Change
in valuation allowance | |
| 130,337 | | |
| (26.0 | )% | |
| 7,125 | | |
| (26.0 | )% |
| Total | |
$ | — | | |
| | | |
$ | — | | |
| | |
The
tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred
tax assets and liabilities.
ALPHA
MODUS CORP.
Notes
to the Financial Statements
December
31, 2023
NOTE
6 — INCOME TAXES (cont.)
The
tax effect of significant components of the Company’s deferred tax assets and liabilities at December 31, 2023 and 2022, are as
follows:
| | |
December
31,
2023 | | |
December
31,
2022 | |
| Deferred
tax assets: | |
| | | |
| | |
| Net
operating loss carryforward | |
$ | 921,993 | | |
$ | 791,656 | |
| Timing
differences | |
| — | | |
| — | |
| Total
gross deferred tax assets | |
| 921,993 | | |
| 791,656 | |
| Less:
Deferred tax asset valuation allowance | |
| (921,993 | ) | |
| (791,656 | ) |
| Total
net deferred taxes | |
$ | — | | |
$ | — | |
In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
Because
of the historical earnings history of the Company, the net deferred tax assets for 2023 and 2022 were fully offset by a 100% valuation
allowance. The valuation allowance for the remaining net deferred tax assets was $921,993 and $791,656 as of December 31, 2023, and 2022,
respectively.
The
tax years 2020 – 2023 remains to examination by federal agencies and other jurisdictions in which it operates.
NOTE
7 — COMMITMENTS AND CONTINGENCIES
The
Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse
outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash
flows.
Certain
conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only
be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings
that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates
the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or
expected to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates
that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be
disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee
would be disclosed.
NOTE
8 — SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there
are no other such events that warrant disclosure or recognition in the financial statements other than as set forth below.
Effective
as of October 13, 2023, the Company, Insight Acquisition Corp., a Delaware corporation (“IAC”), and IAC Merger Sub Inc.,
a Florida corporation wholly owned by IAC (“Merger Sub”), entered into a business combination agreement and plan of merger
(the “BCA”) pursuant to which Merger Sub will merge with and into the Company with the Company continuing as the surviving
corporation in the merger and becoming a wholly owned subsidiary of IAC. Each share of Company common stock will be converted into (i)
the right to receive Earnout Shares, and (ii) a certain number of shares of IAC Class A Common Stock (“Common Shares”) equal
to (x) $110,000,000 divided by the total number of shares of Company capital stock outstanding on a fully diluted basis as of the date
of closing, divided by (y) $10 (the “Merger Consideration”), with the maximum aggregate Merger Consideration being 11,000,000
Common Shares issuable to Company common stockholders in the merger. IAC common stock and warrants issued and outstanding immediately
prior to the consummation of the merger will continue to be outstanding after the closing of the merger, except that all shares of IAC
Class B Common Stock outstanding as of the closing will be converted into the same number of shares of IAC Class A Common Stock as of
the closing.
In
September 2023, the Company entered into an agreement with a professional services company to provide specific financial services. During
2023, the Company paid this service provider $34,639 in fees. However, the service provider terminated the agreement before completing
the work agreed to. On February 9, 2024, the Company entered into a settlement agreement with this service provider, in which the service
provider agreed to return $15,000 in fees paid by the Company. The Company lowered the expenses recorded for this agreement and created
a receivable balance of $15,000 in its financial statements for the year ended December 31, 2023.
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