8-K: Alpha Modus Secures $900K in Convertible Debt & Warrants

Alpha Modus Holdings, Inc. announced two private placement financing agreements totaling $900,000, including convertible notes and warrants, with a family trust of its CEO and another family trust.

Summary

• Alpha Modus Holdings, Inc. (the Company) entered into two material definitive agreements for financing, securing a total of $900,000 in new capital.
• The Company issued a promissory note (the Alessi Note) to The Alessi 2023 Irrevocable Trust, a family trust of CEO William Alessi, with an original principal amount of $714,285.71.
• The Alessi Note was issued in consideration of $500,000 in funding received by the Company on or about September 15, 2025, implying an original issue discount of $214,285.71.
• The Alessi Note accrues interest at 8% per annum and matures on September 15, 2026, convertible into Class A common stock at $5.00 per share.
• The Company also entered into a securities purchase agreement with the Nancy Helen Wallace and Gerard Haase-Dubosc Family Trust (the Haase-Dubosc Trust) for a total purchase price of $400,000.
• This agreement included a convertible promissory note (the Haase-Dubosc Note) with an original principal amount of $400,000 and warrants to purchase 363,636 shares of Class A common stock.
• The Haase-Dubosc Note accrues interest at 7% per annum, matures on October 15, 2026, and is convertible into Class A common stock at 80% of the 5-day volume-weighted average price on the first trading day following issuance, convertible after six months.
• The Haase-Dubosc Warrants are exercisable at $1.10 per share during the period commencing October 16, 2025, and ending on October 15, 2030.
• Both financing agreements contain provisions for events of default, including cross-default clauses and a mandatory default amount of 200% of outstanding principal plus accrued interest and late fees for the Alessi Note.
• The Company is required to seek shareholder approval for the issuance of shares exceeding the Nasdaq Listing Rule 5635(d) Exchange Cap (initially 7,972,000 shares) within 120 days of October 16, 2025, and every three months thereafter until obtained.
• The Company will use its commercially reasonable best efforts to register for resale the shares of Common Stock issuable upon conversion of the Haase-Dubosc Note and exercise of the Warrants within 90 days of October 16, 2025.

Sentiment

Score: 4

Explanation: While the Company successfully secured capital, the terms of the financing, including a significant original issue discount, high interest rates, and a punitive default clause, suggest a challenging financial position and expensive capital. The potential for substantial dilution and the need for shareholder approval for share issuance also weigh on the sentiment, indicating a less favorable outcome than typically desired for a healthy company.

Positives

• Secured $900,000 in new capital, providing necessary liquidity for operations.
• The convertible notes offer flexibility for the Company to potentially convert debt to equity, reducing cash outflow for principal repayment.
• The warrants provide additional capital upon exercise, assuming the stock price is above the exercise price.

Negatives

• The Alessi Note has a significant original issue discount of $214,285.71, meaning the Company received only $500,000 for a $714,285.71 principal obligation.
• High interest rates of 8% and 7% per annum on the convertible notes represent a substantial cost of capital.
• The mandatory default amount for the Alessi Note is 200% of the outstanding principal plus accrued interest and late fees, which is a severe penalty in case of default.
• The need for shareholder approval for share issuance exceeding the Nasdaq Exchange Cap introduces uncertainty and potential delays for full conversion/exercise of the securities.
• Potential for significant dilution to existing shareholders upon conversion of the notes and exercise of the warrants.

Risks

• Failure to obtain shareholder approval for issuing shares beyond the Nasdaq Exchange Cap could limit the Company's ability to fully convert the notes and warrants, potentially leading to further financial obligations or renegotiations.
• The high interest rates and original issue discount increase the Company's debt burden and cost of capital.
• The 200% mandatory default amount on the Alessi Note poses a substantial financial risk if the Company experiences an Event of Default.
• Significant dilution of existing shareholder value if the convertible notes and warrants are fully converted/exercised.
• The securities are not registered under the Securities Act of 1933, limiting their liquidity for holders unless an exemption or subsequent registration is available.
• Cross-default provisions mean a default under one agreement could trigger defaults across other material agreements, accelerating obligations.

Future Outlook

The Company plans to seek shareholder approval for the issuance of shares exceeding the Nasdaq Exchange Cap within 120 days of October 16, 2025, and will continue seeking approval every three months thereafter until obtained. Additionally, the Company will use its commercially reasonable best efforts to register for resale the shares of Common Stock issuable upon conversion of the Haase-Dubosc Note and exercise of the Warrants within 90 days of October 16, 2025.

Industry Context

This filing details specific financing transactions for Alpha Modus Holdings, Inc. and does not provide broader industry context or trends. The terms of the financing, particularly the high interest rates and original issue discount, suggest the Company may be facing challenges in securing capital on more favorable market terms, which could be indicative of its specific financial position rather than general industry conditions.

Corporate Governance

Related Party Transactions

• The Company issued a promissory note with an original principal amount of $714,285.71 to The Alessi 2023 Irrevocable Trust, which is a family trust of the Company's CEO, William Alessi. This constitutes a related-party transaction.

Stakeholder Impact

• **Shareholders:** Face potential significant dilution from the conversion of notes and exercise of warrants. The high cost of capital and punitive default terms could negatively impact shareholder value. The need for shareholder approval for share issuance introduces uncertainty.
• **Creditors (Note Holders):** Benefit from high interest rates (8% and 7%), a significant original issue discount on one note, and a punitive 200% mandatory default amount, providing strong downside protection and attractive returns.
• **Company (Management):** Secures necessary capital for operations but under terms that reflect a high cost of financing and potential future dilution, indicating a need to manage financial health carefully.

Next Steps

• The Company must seek shareholder approval for the issuance of shares exceeding the Nasdaq Exchange Cap within 120 days of October 16, 2025, and every three months thereafter until approval is obtained.
• The Company will use commercially reasonable best efforts to register for resale the shares of Common Stock issuable upon conversion of the Haase-Dubosc Note and exercise of the Warrants within 90 days of October 16, 2025.
• The Haase-Dubosc Note will become convertible six months after its issuance date (April 16, 2026).

Key Dates

Recommendation

The Company successfully secured capital, which is crucial for its ongoing operations and avoids immediate liquidity concerns. However, the terms of this financing are notably expensive, including a significant original issue discount, high interest rates, and a punitive 200% default penalty. The potential for substantial dilution to existing shareholders upon conversion of the notes and exercise of the warrants, coupled with the requirement for shareholder approval for exceeding the Nasdaq Exchange Cap, introduces considerable uncertainty and risk. While the capital infusion provides a lifeline, the unfavorable terms suggest underlying financial challenges. Therefore, a 'hold' recommendation is appropriate for existing investors, acknowledging the immediate liquidity benefit but advising caution due to the high cost of capital and potential future dilution. New investors should approach with extreme caution, considering the expensive financing terms and associated risks.

Keywords

Convertible Note, Warrants, Private Placement, Capital Raise, Debt Financing, Equity Dilution, SEC Filing, Corporate Finance, Nasdaq Compliance, Related Party Transaction