8-K: Alpha Modus Holdings Completes Merger with Insight Acquisition Corp, Secures Financing

Alpha Modus Holdings, Inc. finalized its merger with Insight Acquisition Corp. on December 13, 2024, and secured a $2.6 million convertible note to fund operations and transaction costs.

Summary

• Alpha Modus Holdings, Inc. (formerly Insight Acquisition Corp.) completed its merger with Alpha Modus Corp. on December 13, 2024.
• The merger was executed under a Business Combination Agreement dated October 13, 2023, and amended on June 21, 2024.
• Insight Acquisition Corp. stockholders approved the merger on October 29, 2024.
• Each share of Legacy Alpha Modus common stock was converted into one share of Alpha Modus Holdings Class A common stock and a contingent right to receive Earnout Shares.
• Each share of Legacy Alpha Modus preferred stock was converted into one share of Alpha Modus Holdings Series C Preferred Stock and a contingent right to receive Earnout Shares.
• Up to 2,200,000 contingent shares of Class A common stock (Earnout Shares) are payable to former Alpha Modus stockholders if certain stock price targets are met within five years.
• Insight Acquisition Sponsor LLC deposited 750,000 shares of Class A common stock into escrow, which will be released according to the same milestones as the Earnout Shares.
• The company entered into a securities purchase agreement with Streeterville Capital, LLC for a $2.89 million secured convertible promissory note, with a net purchase price of $2.6 million.
• The note accrues interest at 10% per annum, matures in 18 months, and is convertible into Class A common stock at 90% of the lowest daily VWAP during the five trading days preceding conversion, with a $4.00 per share floor price.
• The company is required to file a registration statement for the shares issuable upon conversion of the note within 30 days of the purchase price date.
• The company also settled outstanding payables with Loeb & Loeb LLP by paying $425,000 in cash and issuing a $325,000 promissory note.
• Holders of 426,136 shares of Insight Acquisition Corp. Class A common stock exercised their right to have their shares redeemed for approximately $11.29 per share, totaling $4.8 million.
• Following the merger and redemptions, there are 12,455,252 shares of Class A common stock and 7,500,000 shares of Series C Preferred Stock outstanding.
• The company's Class A common stock and warrants began trading on the Nasdaq Global Market under the symbols AMOD and AMODW, respectively, on December 16, 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the merger and financing provide a path forward, the company's lack of revenue, significant losses, and going concern issues raise concerns. The sentiment is cautiously optimistic but with significant risks.

Positives

• The merger provides Alpha Modus with access to public markets and additional capital.
• The $2.6 million convertible note provides immediate funding for operations and transaction costs.
• The potential for Earnout Shares provides an incentive for long-term growth and value creation.
• The company has a portfolio of patents related to retail marketing and advertising data-driven technologies.
• The company has entered into licensing agreements with GZ6G Technologies Corp. and Xalles Holdings Inc.

Negatives

• The company has a history of losses and no current revenue.
• The company has a working capital deficit of $1,609,841 as of September 30, 2024.
• The company needs to raise a minimum of $2.5 million to maintain its plan of growth.
• The company's ability to continue as a going concern is in doubt.
• The convertible note includes a provision that if the stock price falls below $4.00 for ten consecutive days, the company is required to commence repayment of the note.

Risks

• The company's inability to achieve or sustain profitability.
• The viability of the company's intellectual property.
• Changes in applicable laws or regulations.
• The possibility that the company's business may be adversely affected by economic factors, changing technology, evolving industry standards, and competitive factors.
• The ability of the company to obtain, maintain, and protect its intellectual property.
• Failure to realize the anticipated benefits of the Business Combination.
• Risks related to future market adoption of the company's technology.
• Risks related to the company's marketing and growth strategies.
• The effects of competition on the company's future business.
• The ability of the company to issue equity or equity-linked securities in the future.
• The company's ability to raise funding on reasonable terms as necessary to develop its products in the timeframe contemplated by its business plan.
• The company's ability to execute its business plans and strategy.
• The outcome of any legal proceedings that may be instituted against the company related to the Business Combination.

Future Outlook

The company intends to deploy services under the license agreements by the end of 2024, expand event venue service offerings in late 2025, and expand service offerings in additional industries in 2024. The company also intends to continue its intellectual property licensing and enforcement efforts throughout 2025.

Management Comments

• The proceeds of the note were used to pay transaction costs associated with the Business Combination and will be used for working capital.

Industry Context

The merger and financing activities are part of a broader trend of special purpose acquisition companies (SPACs) merging with private companies to bring them to the public markets. Alpha Modus's focus on retail marketing and advertising technology aligns with the growing demand for data-driven solutions in the retail sector.

Comparison to Industry Standards

• The company's lack of revenue and significant losses are not uncommon for early-stage technology companies, especially those focused on intellectual property licensing.
• The company's reliance on a convertible note for funding is a common practice for companies seeking to raise capital quickly.
• The company's patent portfolio and licensing agreements are similar to other companies in the technology licensing space.
• The company's focus on retail marketing and advertising technology is comparable to companies like Catalina Marketing and Quotient Technology, though Alpha Modus is at a much earlier stage of development.
• The company's valuation and financial metrics are not directly comparable to established public companies due to its early stage and lack of revenue.

Management Changes

Corporate Governance

Legal Proceedings

• On January 16, 2024, Legacy Alpha Modus filed a patent infringement lawsuit against The Kroger Company.
• On November 12, 2024, Legacy Alpha Modus filed a patent infringement lawsuit against Brookshire Grocery Co.

Related Party Transactions

• The company issued various notes payable to related parties.
• The company entered into a secured convertible promissory note with Janbella Group, LLC, which is controlled by William Alessi.
• The company entered into a waiver agreement with the Sponsor, pursuant to which, the parties determined to waive and release entirely any amounts owed under the related party transactions.

Stakeholder Impact

• Shareholders: Existing Insight Acquisition Corp. shareholders experienced dilution, while former Alpha Modus shareholders received shares in the new public company.
• Employees: The merger may bring changes to the company's structure and operations.
• Customers: The merger may lead to new product offerings and services.
• Suppliers: The merger may impact the company's supply chain and relationships with suppliers.
• Creditors: The company's debt obligations have been restructured as part of the merger and financing.

Next Steps

• The company will deploy services under the license agreements by the end of 2024.
• The company will expand event venue service offerings in late 2025.
• The company will expand service offerings in additional industries in 2024.
• The company will continue its intellectual property licensing and enforcement efforts throughout 2025.
• The company will 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 within 120 days of the Purchase Price Date.

Key Dates

Keywords

merger, acquisition, convertible note, financing, intellectual property, patents, retail technology, advertising technology, Nasdaq, SPAC, business combination, earn out, redemption