10-Q: Alpha Modus Faces Severe Liquidity Crisis Amid Soaring Losses
Sentiment:
Quarterly Report
Alpha Modus Holdings, Inc. reported a significant increase in net loss and a substantial working capital deficit, raising substantial doubt about its ability to continue as a going concern.
Delay expectedThe company was not required to begin making monthly payments under the Streeterville Capital, LLC Note until May 16, 2025, following an amendment on January 27, 2025, which was a delay from the original March 16, 2025, start date.The company had the right on up to three occasions to extend the monthly payment start date for one month under the Streeterville Capital, LLC Note, with the outstanding balance increasing by one percent for each extension, indicating potential for payment delays.
Capital raiseThe company explicitly states, "We expect to seek to obtain additional funding through increased revenues and future financings."A minimum of an additional $2,500,000 is needed to maintain the company's plan of growth.The company has no current arrangements or understandings for bank loans, lines of credit, or other funding sources, indicating a need for future capital raises.The SPA with Streeterville Capital, LLC granted the investor the right to fund up to an additional $5,000,000 and the exclusive right to enter into an equity line of credit or similar financing arrangement for at least $20,000,000.The Loeb & Loeb, LLP Convertible Note requires the company to use at least 50% of proceeds from any capital raise exceeding $1,000,000 to pay down the note.The new license agreement with CashX obligates Alpha Modus to use its best efforts to secure general operating capital until it is cash flow positive and spend a minimum of $500,000 up to a maximum of $2,000,000 over 24 months, with the remaining investment considered satisfied upon the effectiveness of a registration statement covering an offering of Alpha Modus common stock in an amount not less than $2,000,000.A convertible promissory note for $400,000 cash was entered into on October 16, 2025, with warrants issued, representing a recent capital infusion.
Worse than expectedNet loss for the nine months ended September 30, 2025, increased over 900% to $7,354,742 compared to $725,479 in the prior year, indicating a significant deterioration in financial performance.Operating expenses surged to $3,725,869 from $597,595, reflecting a substantial increase in costs without corresponding revenue.Cash on hand decreased dramatically to $75,705 from $735,814, highlighting a severe liquidity crunch.The company reported a working capital deficit of $10,406,476, which is a critical indicator of short-term financial distress.The recognition of $1,276,447 in interest expense for default penalties on related-party notes signifies financial instability and inability to meet obligations on time.The disclosure of 'substantial doubt about our ability to continue as a going concern' explicitly states a worse-than-expected financial condition.
Summary
- Alpha Modus Holdings, Inc. (AMOD) reported a net loss of $7,354,742 for the nine months ended September 30, 2025, a substantial increase from $725,479 for the same period in 2024.
- The company had no revenue for both the three and nine months ended September 30, 2025 and 2024.
- Operating expenses surged to $3,725,869 for the nine months ended September 30, 2025, up from $597,595 in the prior year.
- Cash on hand decreased significantly to $75,705 as of September 30, 2025, from $735,814 at December 31, 2024.
- A working capital deficit of $10,406,476 was reported as of September 30, 2025.
- The company recognized $1,276,447 in interest expense for default penalties and interest on renegotiated notes with related party Janbella Group, LLC.
- Alpha Modus is evaluating options for a $2,348,302 U.S. federal excise tax payable, which is subject to 10% annual interest and a 5% monthly underpayment penalty from November 1, 2024.
- Disclosure controls and procedures were deemed not effective as of September 30, 2025.
- The company completed a business combination on December 13, 2024, with Alpha Modus, Corp. becoming a wholly-owned subsidiary.
- Alpha Modus is focused on commercializing its patent portfolio, including recent patent infringement lawsuits and licensing agreements with GZ6G Technologies Corp. and CashXAI Inc.
Sentiment
Score: 1
Explanation: The company faces severe financial distress with no revenue, rapidly escalating losses, a critical liquidity shortage, and substantial doubt about its ability to continue as a going concern. Ineffective internal controls and heavy reliance on related-party financing further exacerbate the negative outlook.
Positives
- The company received $108,096 in patent infringement income for the nine months ended September 30, 2025, including a settled lawsuit with The Kroger Company.
- A gain of $1,052,494 was recognized from the change in fair value of earnout shares liability for the nine months ended September 30, 2025.
- Strategic alliances were formed with GZ6G Technologies Corp. for AI-driven advertising solutions and with CashXAI Inc. (CashX) for exclusive use of patented IP in self-service kiosks for unbanked/underbanked consumers.
- A new license agreement with CashX grants Alpha Modus an exclusive, perpetual, and irrevocable license to use CashX's mobile and kiosk applications and prepaid card to sell related products in the United States.
Negatives
- Net loss for the nine months ended September 30, 2025, increased over 900% to $7,354,742 from $725,479 in the prior year.
- The company generated no revenue for the reported periods.
- Cash balance significantly declined to $75,705 from $735,814 at year-end 2024.
- A substantial working capital deficit of $10,406,476 indicates severe short-term liquidity issues.
- Operating expenses increased dramatically to $3,725,869 for the nine months ended September 30, 2025, from $597,595 in the prior year.
- Interest expense soared to $3,523,515 for the nine months ended September 30, 2025, largely due to default penalties and interest on related-party notes.
- A loss of $598,324 was incurred on the settlement of debt, and a loss of $667,630 from the change in fair value of warrant liabilities.
- The company faces a $2,348,302 excise tax payable, subject to significant interest and penalties, with options for this obligation still being evaluated.
- Substantial doubt exists 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 ineffective as of September 30, 2025, indicating internal control weaknesses.
Risks
- Substantial doubt about the company's ability to continue as a going concern due to recurring losses, no revenue stream, and insufficient cash ($75,705 as of September 30, 2025).
- Inability to generate sufficient cash from operating activities or raise additional funds could lead to delays, reductions, or curtailment of operations.
- The 1% U.S. federal excise tax on stock repurchases under the Inflation Reduction Act of 2022, amounting to $2,348,302, could be subject to additional interest (10% per annum) and penalties (5% per month up to 25%) if not paid from November 1, 2024.
- The company's disclosure controls and procedures were not effective as of September 30, 2025, indicating potential risks in financial reporting and internal controls.
- Reliance on future financings, with no assurance as to the availability or terms of such capital, poses a significant risk to operations.
- The company's business model, focused on patent development and commercialization, carries inherent risks related to market acceptance, competition, and successful enforcement of intellectual property.
- The exercise of warrants and conversion of convertible notes could lead to significant dilution for existing shareholders.
- The company is involved in ongoing patent infringement lawsuits, the outcomes of which are uncertain and could materially affect liquidity and financial condition.
- The company's strategic alliances and licensing agreements require significant investment and best efforts to secure operating capital, with no guarantee of positive results or revenue generation.
Future Outlook
The company expects to continue incurring losses due to the absence of a revenue stream. It anticipates significant expenses as a public company, including general overhead, legal, and accounting fees. Alpha Modus aims to obtain additional funding through increased revenues and future financings, with a minimum of $2,500,000 needed to support its growth plan. The company intends to continue its intellectual property licensing and enforcement efforts throughout 2025 and plans national deployment of kiosks and a mobile application for underbanked populations, with additional offerings anticipated.
Management Comments
- "We have incurred recurring losses since inception and expect to continue to incur losses since the Company does not have any revenue stream."
- "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."
- "Management intends to remediate the identified material weakness [in internal 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 artificial intelligence software as a service (SaaS) sector, specifically targeting the retail industry with smart technology and patent monetization. Its focus on AI applications for real-time inventory, customized ads, customer assistance, and smart planograms aligns with broader industry trends towards digital transformation and enhanced customer experience in retail. The strategic alliance with CashXAI Inc. positions the company in the growing market of financial service kiosks for the underbanked, which is projected to grow at approximately 16% CAGR (2025-2030). The company's patent portfolio is intended to create defensible market positions in these areas, leveraging the estimated $62.35 billion U.S. retail media advertising spend in 2025 and the $3.8 trillion in digitally influenced U.S. retail sales expected in 2027.
Comparison to Industry Standards
- The company's complete lack of revenue stands in stark contrast to established players in the AI retail technology space, such as NVIDIA (mentioned in the filing for AI-powered signage deployment) or other SaaS providers, which typically demonstrate revenue growth and market penetration.
- The significant net losses and negative cash flow from operations are far below industry benchmarks for sustainable technology companies, which often prioritize profitability or at least positive operational cash flow after initial growth phases.
- The reliance on patent infringement income and related-party financing, rather than product sales or licensing revenue from commercial operations, suggests a business model that is not yet aligned with typical industry revenue generation strategies.
- The reported ineffective disclosure controls and procedures are a governance concern, contrasting with the robust internal control environments expected of publicly traded technology companies.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Series C Preferred Stock Conversion | On June 30, 2025, 3,200,000 shares of Series C Preferred Stock held by CEO William Alessi's family trusts were converted into 26,079,868 shares of Class A common stock, moving $30,638,517 from mezzanine equity to shareholders' equity. This conversion was part of an exchange agreement where the trusts agreed to a lock-up until June 13, 2026. | 2025-06-30 | This significantly increased the outstanding common stock, leading to dilution, but reduced the mezzanine equity liability. The lock-up provides some stability for the newly issued common shares. |
| Disclosure Controls and Procedures | Disclosure controls and procedures were evaluated and concluded to be not effective as of September 30, 2025. | 2025-09-30 | Indicates a material weakness in internal controls over financial reporting, posing risks to the accuracy and reliability of financial disclosures. Management plans remediation. |
Legal Proceedings
- Patent infringement lawsuit against The Kroger Company (case no. 2:2024cv00022) filed on January 16, 2024, has since been settled.
- Patent infringement lawsuit against Brookshire Grocery Co. (case no. 2:2024cv00919) filed on November 12, 2024, is in its initial pleading stage.
- Patent infringement lawsuit against Wakefern Food Corporation and Shelf Nine LLC (case no. 2:2024cv01056) filed on December 17, 2024, has since been settled.
- Patent infringement lawsuit against Walgreen Co. (case no. 2:2025cv00120) filed on February 3, 2025, is in its initial pleading stage.
- Patent infringement lawsuit against Optisigns, Inc. (case no. 4:2025cv01727) filed on April 15, 2025, is in its initial pleading stage.
Related Party Transactions
- Janbella Group, LLC (controlled by CEO William Alessi) is a significant lender to the company, with multiple secured promissory notes. On August 18, 2025, notes in default were renegotiated, extending maturity to February 1, 2026, setting an 8.00% interest rate, and becoming convertible at $1.10. Default penalties and interest of $1,276,447 were recognized as interest expense, increasing the adjusted balance to $2,747,038.
- Jeffrey J. Gary (a related party) was issued an unsecured convertible promissory note for $35,000 on July 25, 2024, for transfers made in April and May 2024.
- The Alessi 2023 Irrevocable Trust (a family trust of CEO William Alessi) provided $1,500,000 in funding on July 10, 2025, resulting in a $2,142,857 promissory note (8.00% interest, convertible at $5.00/share) issued on July 15, 2025.
- The Alessi 2023 Irrevocable Trust also provided $500,000 in funding on September 16, 2025, resulting in a $714,286 promissory note (8.00% interest, convertible at $5.00/share) issued on September 16, 2025.
- On December 13, 2024, 1,392,308 shares of Class A common stock were issued to JanBella as a forbearance fee, valued at $13,226,926.
- Four family trusts of CEO William Alessi exchanged 3,200,000 shares of Series C Preferred Stock for 26,079,868 shares of Class A common stock on May 27, 2025, with a lock-up until June 13, 2026.
- The Patent Monetization Agreement and Option Agreement, both dated April 28, 2025, involve Alpha Modus Ventures, LLC (AMV), which is controlled by CEO William Alessi, and AMV's owners (Janbella Group, LLC and Chris Chumas). The Option Agreement gives the company the right to acquire AMV, involving a $300,000 payment to Janbella Group, LLC and issuance of common stock valued at $35,000,000 to AMV's owners, subject to shareholder approval.
Stakeholder Impact
- **Shareholders**: Significant dilution has occurred due to the issuance of 26,079,868 common shares from Series C Preferred Stock conversion and other share issuances for financing and services. The substantial net losses and going concern warning pose a high risk to shareholder value. Future capital raises will likely lead to further dilution.
- **Creditors**: The company's high debt levels, recurring losses, and working capital deficit increase credit risk. Renegotiation of related-party notes due to default indicates challenges in meeting debt obligations.
- **Employees**: The company's precarious financial position and going concern warning could impact job security and future compensation, although stock-based compensation has been issued to key personnel.
- **Customers/Partners**: The company's focus on patent commercialization and strategic alliances (e.g., with CashXAI, VSBLTY) suggests potential for future service offerings, but the lack of revenue and financial instability could hinder successful deployment and long-term support for these initiatives.
- **Regulatory Authorities**: The disclosure of ineffective disclosure controls and procedures will likely draw scrutiny from the SEC, requiring significant remediation efforts.
Next Steps
- Management intends to remediate identified material weaknesses in disclosure controls by implementing a more timely reporting schedule and additional financial statement reviews.
- The company expects to seek additional funding through increased revenues and future financings, with a minimum of $2,500,000 required for growth.
- Alpha Modus intends to continue its intellectual property licensing and enforcement efforts throughout 2025.
- The company is targeting a national deployment of kiosks and a mobile application to support underbanked populations through its strategic alliance with CashXAI Inc.
- The company will continue to seek shareholder approval every three months for the issuance of shares in excess of the Exchange Cap related to the Streeterville Capital, LLC financing, if not obtained within 120 days of the Purchase Price Date.
Key Dates
| Date | Description |
|---|---|
| 2014-07-11 | Alpha Modus Corp. incorporated in Florida. |
| 2019-07-23 | US Patent No. 10,360,571 (the '571 Patent) awarded to Alpha Modus. |
| 2019-08-01 | Alpha Modus began focusing on research and development to expand claims of the '571 Patent. |
| 2020-01-01 | Alpha Modus abandoned its software and deemed it not technologically feasible. |
| 2021-04-20 | Insight Acquisition Corp. (INAQ) incorporated in Delaware as a SPAC. |
| 2022-08-16 | Inflation Reduction Act of 2022 (IR Act) signed into federal law, introducing a 1% excise tax on stock repurchases. |
| 2023-01-17 | Company and Janbella Group, LLC entered into a secured convertible promissory note for $412,500. |
| 2023-08-31 | Company and Janbella Group, LLC entered into an Amended and Restated 12% Senior Secured Promissory Note for $453,750 (modification of Jan 17, 2023 note). |
| 2023-08-31 | Company and Janbella Group, LLC entered into a 0% Senior Secured Promissory Note for $300,000. |
| 2023-10-13 | Company and Alpha Modus, Corp. entered into the Business Combination Agreement. |
| 2023-11-06 | Company and Janbella Group, LLC entered into a 0% Senior Secured Promissory Note for $221,941. |
| 2024-01-01 | Commercialization efforts of the '571 Patent family began. |
| 2024-01-11 | Alpha Modus entered into a license agreement with GZ6G Technologies Corp. |
| 2024-01-16 | Alpha Modus initiated a patent infringement action against The Kroger Company (since settled). |
| 2024-02-28 | Company and Janbella Group, LLC entered into a verbal agreement for a $100,000 0% Senior Secured Promissory Note. |
| 2024-03-29 | Company extended Janbella Group, LLC note to June 7, 2024, and issued 1,400,000 common shares. |
| 2024-04-10 | Alpha Modus entered into a license agreement with Xalles Holdings Inc. and CashXAI Inc. |
| 2024-04-11 | Company entered into an agreement to retain Maxim Group LLC for capital market advisory and investment banking services. |
| 2024-04-18 | Jeffrey J. Gary made a $25,000 transfer to the Maker, part of a $35,000 unsecured convertible promissory note. |
| 2024-05-14 | Company entered into an agreement with Pickwick Capital Partners, LLC, issuing 195,000 common shares as a success fee. |
| 2024-05-16 | Company entered into a subscription agreement with Polar Multi-Strategy Master Fund to purchase 1,000,000 common shares for $25,000. |
| 2024-05-17 | Company and Janbella Group, LLC formalized the Feb 28, 2024 verbal agreement into a $400,000 0% Senior Secured Promissory Note, with an additional $300,000 funded. |
| 2024-05-22 | Jeffrey J. Gary made a $10,000 transfer to the Maker, part of a $35,000 unsecured convertible promissory note. |
| 2024-06-20 | Cantor and Odeon entered into fee modification agreements with the Company. |
| 2024-06-21 | Business Combination Agreement amended. |
| 2024-07-25 | Company issued an unsecured convertible promissory note for $35,000 to Jeffrey J. Gary. |
| 2024-10-23 | Company entered into a securities purchase agreement (SPA) with Streeterville Capital, LLC for a secured convertible promissory note of $2,890,000. |
| 2024-10-29 | Company stockholders approved the Business Combination. |
| 2024-10-31 | Filing and payment deadline for 2023 excise tax liability. |
| 2024-11-01 | Excise tax not paid in full will be subject to additional interest and penalties from this date. |
| 2024-11-12 | Alpha Modus initiated a patent infringement lawsuit against Brookshire Grocery Co. |
| 2024-12-12 | Company and Polar entered into a forfeiture agreement, surrendering 850,000 common shares. |
| 2024-12-12 | Company amended the SPA with Streeterville Capital, LLC (Amended SPA). |
| 2024-12-13 | Business Combination consummated; Alpha Modus, Corp. became a wholly-owned subsidiary of Alpha Modus Holdings, Inc. |
| 2024-12-13 | Company issued a Convertible Promissory Note for $325,000 to Loeb & Loeb, LLP for services. |
| 2024-12-13 | Company issued 1,392,308 shares of Class A common stock to JanBella as a forbearance fee. |
| 2024-12-16 | Streeterville Capital, LLC note funded. |
| 2024-12-16 | Company entered into a financing arrangement for an insurance policy for $663,582. |
| 2024-12-17 | Alpha Modus filed a patent infringement lawsuit against Wakefern Food Corporation and Shelf Nine LLC (since settled). |
| 2024-12-24 | Company and Janbella Group, LLC entered into a verbal agreement for an additional $100,000 0% Senior Secured Promissory Note. |
| 2025-01-05 | Company issued 2,632 shares of Class A common stock to each of four non-employee directors for quarterly issuance. |
| 2025-01-05 | Company issued 11,000 shares of Class A common stock to two individuals for services rendered as a bonus. |
| 2025-01-27 | Company and Streeterville Capital, LLC entered into an amendment to the Note, delaying monthly payments until May 16, 2025. |
| 2025-02-03 | Alpha Modus filed a patent infringement lawsuit against Walgreen Co. |
| 2025-03-10 | CEO William Alessi's family entities entered into Rule 10b5-1 trading plans. |
| 2025-03-14 | Company and Janbella Group, LLC entered into a verbal agreement for an additional $400,000 0% Senior Secured Promissory Note. |
| 2025-04-15 | Alpha Modus filed a patent infringement lawsuit against Optisigns, Inc. |
| 2025-04-28 | Company and Streeterville Capital, LLC entered into a second amendment to the Note (Second Amendment). |
| 2025-04-28 | Company entered into a Patent Monetization Agreement with Alpha Modus Ventures, LLC (AMV). |
| 2025-04-28 | Company entered into an Option Agreement with AMV's owners (Janbella Group, LLC and Chris Chumas). |
| 2025-04-30 | Company issued 1,250,000 shares of Class A common stock to Streeterville Capital, LLC as a financing incentive. |
| 2025-04-30 | Company issued 15,690 shares of Class A common stock to each of four non-employee directors for quarterly issuance. |
| 2025-04-30 | Company issued 39,266 shares of Class A common stock to Chief Revenue Officer, Thomas Gallagher. |
| 2025-04-30 | Alessi Revocable Trust and other family trusts terminated their 10b5 plans. |
| 2025-05-01 | Company issued a convertible promissory note for $500,000 to a lender. |
| 2025-05-23 | Registration statement for Streeterville Capital, LLC shares declared effective by the SEC. |
| 2025-05-27 | Company entered into an exchange agreement with four family trusts of CEO William Alessi to convert Series C Preferred Stock to Class A common stock. |
| 2025-05-29 | Streeterville Capital, LLC converted $767,000 of the Note into 613,600 common shares. |
| 2025-06-11 | Streeterville Capital, LLC converted $125,000 of the Note into 100,000 common shares. |
| 2025-06-29 | CEO's family trusts' preferred shares cancelled, and 26,079,868 Class A common shares issued. |
| 2025-07-01 | Company issued 21,113 shares of Class A common stock to each of four non-employee directors for quarterly issuance. |
| 2025-07-10 | Streeterville Capital, LLC converted $162,500 of the Note into 130,000 common shares. |
| 2025-07-10 | Alessi family trusts reinstated their 10b5 plans. |
| 2025-07-10 | Company received $1,500,000 in funding from The Alessi 2023 Irrevocable Trust. |
| 2025-07-11 | Company repaid $400,000 under the verbal agreement with Janbella Group, LLC. |
| 2025-07-15 | Company issued a promissory note for $2,142,857 to The Alessi 2023 Irrevocable Trust. |
| 2025-07-16 | Streeterville Capital, LLC converted $150,000 of the Note into 120,000 common shares. |
| 2025-07-17 | Company issued 52,832 shares of Class A common stock to Chief Revenue Officer, Thomas Gallagher. |
| 2025-07-17 | Company issued 26,000 shares of Class A common stock to two individuals for services. |
| 2025-07-17 | Company issued 138,000 shares of Class A common stock to a noteholder for accrued interest and consulting services. |
| 2025-07-17 | Company paid $500,000 towards the convertible promissory note issued on May 1, 2025. |
| 2025-07-21 | CashX and CashX, LLC entered into a new license agreement with Alpha Modus. |
| 2025-07-23 | Streeterville Capital, LLC converted $2,545,500 of the Note into 2,036,400 common shares, satisfying the note in full. |
| 2025-07-23 | Company paid the remaining $11,312.28 balance to Streeterville Capital, LLC. |
| 2025-07-25 | Company repurchased 1,250,000 Pre-Delivery Shares from Streeterville Capital, LLC for $125. |
| 2025-08-05 | Pre-Delivery Shares returned to the Company by Streeterville Capital, LLC and cancelled. |
| 2025-08-18 | Company renegotiated notes with JanBella, extending maturity to Feb 1, 2026, and setting interest at 8.00%. |
| 2025-09-16 | Company received $500,000 in funding from The Alessi 2023 Irrevocable Trust. |
| 2025-09-16 | Company issued a promissory note for $714,286 to The Alessi 2023 Irrevocable Trust. |
| 2025-10-01 | Chief Sales Officer, Chris Chumas, entered into a Rule 10b5-1 trading plan. |
| 2025-10-16 | Company entered into a convertible promissory note for $400,000 cash with a lender, issuing warrants. |
| 2025-11-14 | Date of filing of the 10-Q report. |
Recommendation
strong sellAlpha Modus Holdings, Inc. presents an extremely high-risk investment profile. The company has no revenue, reported a staggering 900%+ increase in net loss, and possesses a critically low cash balance of $75,705 against a working capital deficit exceeding $10 million. Management explicitly states 'substantial doubt about our ability to continue as a going concern.' The business model relies heavily on patent monetization and future technology deployment, which are highly speculative and have yet to generate meaningful revenue. Furthermore, the company's disclosure controls were deemed ineffective, indicating significant internal control weaknesses. Heavy reliance on related-party financing, coupled with substantial dilution from recent share issuances and a large excise tax liability with penalties, paints a dire financial picture. Given these severe fundamental weaknesses and the explicit going concern warning, a seasoned investor would likely view this stock as a strong sell, anticipating further downside risk and potential insolvency.
Keywords
AI in retail, patent monetization, fintech, underbanked services, kiosk technology, SEC filing, 10-Q, financial reporting, liquidity crisis, going concern, convertible notes, warrants, related party transactions, intellectual property, stock dilution, corporate governance, excise tax
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