10-Q: Alpha Modus Faces Going Concern Amidst Mounting Losses

Alpha Modus Holdings, Inc. reported a significant increase in net losses and a substantial working capital deficit, raising going concern doubts for the AI software provider.

Summary

• Alpha Modus Holdings, Inc. (AMOD) reported a net loss of $3,095,143 for the six months ended June 30, 2025, a substantial increase from $409,733 for the same period in 2024.
• The company's cash balance decreased significantly to $118,214 as of June 30, 2025, from $735,814 at December 31, 2024.
• Operating expenses surged to $2,508,011 for the six months ended June 30, 2025, compared to $311,464 in the prior year, primarily due to increased professional fees, insurance, payroll, and investor relations.
• A working capital deficit of $9,381,880 was reported as of June 30, 2025.
• Management expressed substantial doubt about the company's ability to continue as a going concern, citing recurring losses and no current revenue stream.
• The company requires a minimum of an additional $2,500,000 in funding to maintain its growth plan.
• Alpha Modus is actively pursuing patent monetization and has filed several patent infringement lawsuits, some of which have settled.
• Significant stock issuances occurred, including 26,079,868 shares of Class A common stock to Alessi family trusts in exchange for Series C Preferred Stock, and 1,250,000 shares to Streeterville Capital, LLC as a financing incentive.
• The Streeterville Capital, LLC convertible note, with an original principal of $2,890,000, was fully satisfied by July 23, 2025, through conversions and a cash payment.
• A new convertible promissory note for $2,142,857 was issued to The Alessi 2023 Irrevocable Trust, providing $1,500,000 in cash funding.

Sentiment

Score: 2

Explanation: The sentiment is very negative due to significant and increasing net losses, a critically low cash balance, a substantial working capital deficit, and an explicit 'going concern' warning from management. While there are strategic alliances and patent activities, the severe financial distress overshadows any potential positives.

Positives

• The company successfully settled patent infringement lawsuits against The Kroger Company and Wakefern Food Corporation/Shelf Nine LLC.
• A new license agreement with CashX was established on July 21, 2025, granting Alpha Modus exclusive, perpetual, and irrevocable rights to use CashX's mobile and kiosk applications for selling related products in the U.S., with an initial investment commitment of up to $2,000,000.
• The Streeterville Capital, LLC convertible note, which had complex terms and required significant conversions, was fully satisfied by July 23, 2025.
• Secured $1,500,000 in cash funding through a new convertible promissory note from The Alessi 2023 Irrevocable Trust on July 10, 2025.

Negatives

• Net loss for the six months ended June 30, 2025, increased significantly to $3,095,143 from $409,733 in the prior year.
• Cash balance declined sharply to $118,214 as of June 30, 2025, from $735,814 at December 31, 2024.
• Operating expenses for the six months ended June 30, 2025, rose to $2,508,011 from $311,464, indicating increased cash burn without corresponding revenue.
• The company reported a substantial working capital deficit of $9,381,880 as of June 30, 2025.
• Management identified substantial doubt about the company's ability to continue as a going concern due to recurring losses and lack of revenue.
• Disclosure controls and procedures were deemed not effective as of June 30, 2025.
• Significant dilution occurred with the issuance of 26,079,868 shares of Class A common stock from Series C Preferred Stock conversion and 1,250,000 shares as a financing incentive to Streeterville Capital, LLC.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and lack of revenue.
• The company's cash balance of $118,214 as of June 30, 2025, is insufficient to cover expected significant expenses, requiring additional funding of at least $2,500,000.
• Any share redemption or repurchase after December 31, 2022, may be subject to a new U.S. federal 1% excise tax under the Inflation Reduction Act of 2022, with potential interest and penalties for unpaid amounts.
• The effectiveness of disclosure controls and procedures was not confirmed as of June 30, 2025, indicating potential weaknesses in financial reporting.
• The company is involved in ongoing patent infringement lawsuits (e.g., against Brookshire Grocery Co., Walgreen Co., Optisigns, Inc.) which could result in adverse outcomes.
• Reliance on related party financing and transactions, including notes from Janbella Group, LLC and The Alessi 2023 Irrevocable Trust, poses potential conflicts of interest and dependency risks.
• The company's business model, focused on patent development and commercialization, has not yet generated revenue, creating uncertainty regarding future profitability.
• Significant dilution of common stock has occurred and may continue with future capital raises or conversions of preferred stock and convertible notes.

Future Outlook

The company intends to continue its intellectual property licensing and enforcement efforts throughout 2025. It plans to deploy services under the GZ6G license by the end of 2024, expand event venue service offerings in late 2025, and expand service offerings in additional industries in 2024. The strategic alliance with CashX is focused on a national deployment of kiosks and a mobile application for underbanked populations, with initial investment milestones tied to commercial release and certification of applications/kiosks. The company expects to remain an emerging growth company at least through the end of the 2026 fiscal year and continue to take advantage of extended transition periods for accounting standards. Management expects to incur significant expenses and needs to raise a minimum of an additional $2,500,000 to maintain its growth plan.

Management Comments

• Management 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.
• Management determined that Alpha Modus constitutes a business and that the substance of the Business Combination transaction is a recapitalization of Alpha Modus, often referred to as a reverse recapitalization.
• Management believes that the company will need to raise a minimum of an additional $2,500,000 to maintain its plan of growth.
• Management intends to remediate the identified material weakness in disclosure controls by implementing a more timely reporting schedule and incorporating additional reviews of the financial statement support for future quarters.

Industry Context

Alpha Modus operates in the rapidly evolving retail technology sector, focusing on AI-driven solutions for enhanced customer experience and operational efficiency. The market dynamics indicate significant growth in U.S. retail media advertising spend (projected to surpass $97 billion by 2028) and digitally influenced retail sales ($3.8 trillion expected in 2027). The increasing deployment of AI-powered signage, kiosks, and in-store targeting (53% of retailers) and the growth of financial service kiosks for the underbanked (16% CAGR) suggest a receptive market for Alpha Modus's patented technologies. The company's ecosystem approach, combining IP, service infrastructure, and strategic partnerships, aims to capitalize on these trends, particularly in areas like real-time inventory, customized ads, theft prevention, and smart planograms. However, the company's current lack of revenue generation contrasts sharply with the substantial market opportunities, indicating a significant gap between its technological potential and commercial execution.

Comparison to Industry Standards

• The company's lack of revenue generation and significant net losses are well below industry standards for a commercialized technology company, especially given the projected growth in the retail AI and media advertising sectors.
• The substantial working capital deficit and reliance on debt and equity financing for operations are indicative of a pre-revenue or early-stage company, rather than a mature player in a high-growth industry.
• While the company holds patents and has strategic alliances (e.g., with CashX for underbanked services, VSBLTY for retail data/AI), specific comparable project results or market penetration metrics are not provided to assess performance against industry leaders like IBM Watson (which recognized Alpha Modus as a thought leader) or other established retail tech providers.
• The company's valuation of its Series C Preferred Stock and warrant liabilities using Black-Scholes and Monte Carlo models is standard practice, but the significant fluctuations in these liabilities contribute to the reported losses, which is a common characteristic of companies with complex capital structures and derivative instruments.

Corporate Governance

Legal Proceedings

• Alpha Modus filed a patent infringement lawsuit against The Kroger Company on January 16, 2024, which has since been settled.
• Alpha Modus filed a patent infringement lawsuit against Brookshire Grocery Co. on November 12, 2024, which is in its initial pleading stage.
• Alpha Modus filed a patent infringement lawsuit against Wakefern Food Corporation and Shelf Nine LLC on December 17, 2024, which has since been settled.
• Alpha Modus filed a patent infringement lawsuit against Walgreen Co. on February 3, 2025, which is in its initial pleading stage.
• Alpha Modus filed a patent infringement lawsuit against Optisigns, Inc. on April 15, 2025, which is in its initial pleading stage.
• The company entered into a Patent Monetization Agreement on April 28, 2025, to provide litigation funding to Alpha Modus Ventures, LLC for a patent litigation suit against Broadcom Inc.

Related Party Transactions

• Numerous promissory notes and verbal agreements for financing with Janbella Group, LLC, an entity controlled by CEO William Alessi, including a $453,750 note with accrued interest of $101,186, and a $400,000 note as of June 30, 2025.
• Issuance of 1,400,000 shares of common stock to Janbella Group, LLC on March 29, 2024, for a note extension, valued at $35,000.
• Issuance of 1,392,308 shares of Class A common stock to Janbella Group, LLC as a forbearance fee during the business combination, valued at $13,226,926.
• Unsecured convertible promissory note for $35,000 issued to Jeffrey J. Gary, a related party, on July 25, 2024.
• Issuance of 2,632 shares of Class A common stock to each of four non-employee directors on January 5, 2025, for quarterly fees, valued at $28,425.
• Issuance of 15,690 shares of Class A common stock to each of four non-employee directors on April 30, 2025, for quarterly fees, valued at $76,567.
• Issuance of 39,266 shares of Class A common stock to Chief Revenue Officer Thomas Gallagher on April 30, 2025, for his quarterly fee, valued at $47,905.
• Exchange Agreement on May 27, 2025, with four family trusts of CEO William Alessi, converting 3,200,000 shares of Series C Preferred Stock into 26,079,868 shares of Class A common stock.
• Patent Monetization Agreement and Option Agreement entered into on April 28, 2025, with Alpha Modus Ventures, LLC (controlled by CEO William Alessi and Chief Sales Officer Chris Chumas) and its owners.
• Issuance of a convertible promissory note for $2,142,857 to The Alessi 2023 Irrevocable Trust (controlled by Alessi) on July 15, 2025, providing $1,500,000 in cash funding.
• Rule 10b5-1 trading arrangements entered into by entities beneficially owned by CEO William Alessi on March 10, 2025, with some trusts terminating and reinstating their plans later.

Stakeholder Impact

• Shareholders face significant dilution due to the issuance of 26,079,868 shares of Class A common stock from Series C Preferred Stock conversion and other stock issuances for financing and services.
• Existing shareholders are exposed to substantial risk due to the company's 'going concern' warning, recurring losses, and critically low cash reserves, which could lead to further capital raises and dilution or potential insolvency.
• Creditors, particularly those holding convertible notes, face uncertainty regarding repayment given the company's financial distress and reliance on future financing.
• Employees and management may face job insecurity or challenges in executing business plans due to the company's precarious financial position and the need for significant additional capital.
• The company's strategic partners (e.g., GZ6G, CashX, VSBLTY) may experience delays or reduced scope in planned deployments if Alpha Modus fails to secure necessary operating capital.

Next Steps

• Management intends to remediate identified material weaknesses in disclosure controls and procedures by implementing a more timely reporting schedule and additional reviews.
• The company will continue to seek additional funding, with a minimum target of $2,500,000, through increased revenues and future financings.
• Alpha Modus intends to continue its intellectual property licensing and enforcement efforts throughout 2025.
• Deploy services under the GZ6G license by the end of 2024, expand event venue service offerings in late 2025, and expand service offerings in additional industries in 2024.
• Proceed with the CashX strategic alliance, targeting national deployment of kiosks and a mobile application for underbanked populations, with initial investment milestones.
• Hold a stockholder meeting within 60 days of April 28, 2025, to approve issuances to Streeterville Capital, LLC under the Note and a future equity line of credit agreement in excess of the Exchange Cap.
• Seek shareholder approval for the issuance of $10,000,000 of common stock to CashX upon achieving certain revenue or earnings milestones under the new license agreement.
• Employ best efforts to secure general operating capital until the company is cash flow positive and spend a minimum of $500,000 up to a maximum of $2,000,000 over 24 months to use the licensed intellectual property from CashX.

Key Dates

Recommendation

The company is in a highly precarious financial position, explicitly stating 'substantial doubt about our ability to continue as a going concern.' It has no revenue, rapidly increasing operating expenses, and a critically low cash balance of $118,214 against a working capital deficit of over $9 million. The significant net losses, coupled with the need to raise a minimum of $2.5 million, indicate severe liquidity issues. While there are patent activities and strategic alliances, the fundamental financial health is extremely poor, and the risk of insolvency or further massive dilution is very high. A seasoned investor would view this as an unsustainable situation, warranting an immediate exit.

Keywords

Alpha Modus Holdings, AMOD, SEC Filing, 10-Q, Quarterly Report, Financial Results, Net Loss, Going Concern, Artificial Intelligence, AI Software, Patent Monetization, Retail Technology, Convertible Notes, Capital Raise, Liquidity, Working Capital Deficit, Share Dilution, Related Party Transactions, Corporate Governance, Patent Infringement