UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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the quarterly period ended
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As
of November 14, 2023,
INSIGHT ACQUISITION CORP.
Form 10-Q
For the Quarter Ended September 30, 2023
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
INSIGHT ACQUISITION CORP.
CONDENSED BALANCE SHEETS
September 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Restricted cash | ||||||||
Prepaid expenses | ||||||||
Due from related party | ||||||||
Total current assets | ||||||||
Investments held in Trust Account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Due to related party | ||||||||
Due to investor | ||||||||
Income tax payable | ||||||||
Excise tax payable | ||||||||
Franchise tax payable | ||||||||
Total current liabilities | ||||||||
Deferred tax liability | ||||||||
Deferred underwriting commissions in connection with the Initial Public Offering | ||||||||
Derivative liabilities | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, $ | ||||||||
Stockholders’ Deficit: | ||||||||
Class A common stock, $ | ||||||||
Class B common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ deficit | ( | ) | ( | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
INSIGHT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
General and administrative expenses | $ | $ | $ | $ | ||||||||||||
General and administrative expenses - related party | ||||||||||||||||
Franchise tax expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income (expense): | ||||||||||||||||
Change in fair value of derivative liabilities | ( | ) | ||||||||||||||
Change in fair value of Forward Purchase Agreement Liability | ||||||||||||||||
Gain on investments held in Trust Account | ||||||||||||||||
Gain on forgiveness of deferred underwriting fee payable | ||||||||||||||||
Total other income, net | ||||||||||||||||
(Loss) income before income tax expense | ( | ) | ||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net (loss) income | $ | ( | ) | $ | $ | $ | ||||||||||
$ | ( | ) | $ | $ | $ | |||||||||||
$ | ( | ) | $ | $ | $ | |||||||||||
$ | ( | ) | $ | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
INSIGHT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
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 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Accretion of Class A common stock subject to redemption value | — | — | ||||||||||||||||||||||||||
Contributions from Sponsor | — | — | ||||||||||||||||||||||||||
Initial Value of Forward Purchase Agreement | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Class B common stock converted to Class A common stock on a one for one basis | ( | ) | ( | ) | ||||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – March 31, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Accretion of Class A common stock subject to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Excise tax payable | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance – June 30, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Accretion of Class A common stock subject to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Excise tax payable | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance – September 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance – December 31, 2021 | — | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – March 31, 2022 (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – June 30, 2022 (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
Accretion of Class A common stock subject to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – September 30, 2022 (unaudited) | — | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
INSIGHT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Change in fair value of derivative liabilities | ( | ) | ||||||
Gain on investments held in Trust Account | ( | ) | ( | ) | ||||
Gain on forgiveness of deferred underwriting fee payable | ( | ) | ||||||
Change in fair value of forward purchase agreement | ( | ) | ||||||
Deferred tax benefit | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ||||||||
Accounts payable | ( | ) | ||||||
Accrued expenses | ||||||||
Accrued expenses – related party | ( | ) | ||||||
Due to related party | ||||||||
Due from related party | ( | ) | ||||||
Income tax payable | ||||||||
Franchise tax payable | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash withdrawn from Trust Account to pay franchise and income taxes | ||||||||
Cash withdrawn from Trust Account in connection with redemption | ||||||||
Cash deposited in Trust Account | ( | ) | ||||||
Net cash provided by investing activities | ||||||||
Cash Flows from Financing Activities: | ||||||||
Contributions from Sponsor | ||||||||
Due to related party | — | |||||||
Offering costs paid | ( | ) | ||||||
Redemption of common stock | ( | ) | ||||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Net change in cash and restricted cash | ( | ) | ||||||
Cash and restricted cash – beginning of the period | ||||||||
Total cash and restricted cash – end of the period | $ | $ | ||||||
Cash | $ | — | $ | |||||
Restricted Cash | $ | $ | ||||||
Supplemental disclosure of noncash activities: | ||||||||
Forgiveness of deferred underwriting fee payable | $ | $ | ||||||
Value of excise tax liability | $ | $ | ||||||
Increase in Due to Investor | $ | $ | — |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Note 1 - Description of Organization and Business Operations
Insight Acquisition Corp. (the “Company”)
was incorporated in Delaware on
As of September 30, 2023, the Company had not commenced any operations. All activity for the period from April 20, 2021 (inception) through September 30, 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
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon the closing of the Initial Public Offering
and the Private Placement, $
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
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 $
5
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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
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
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
If the Company is unable to complete a Business
Combination by December 7, 2023 (the “Combination Period”), or up to June 7, 2024 provided the Company extends the Combination
Period to the fullest extent, as further as noted below, 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 $
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 $
6
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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
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
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, 2022, 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 Form10-K for the fiscal year ended December 31, 2022 (the “Form10-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 Form10-Kand 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. 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 Stock Market (“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 $
On August 17, 2023, the Company issued an unsecured
promissory note in the aggregate principal amount of $
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 $
7
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
On September 7, 2023, October 7, 2023 and November
7, 2023 the Company deposited $
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.
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 $
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, the results of its operations and search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 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 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
8
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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,
As a result, the Company booked a liability of
$
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.
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 condensed 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.
9
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Liquidity and Going Concern
As of September 30, 2023, the Company had approximately
$
The Company’s liquidity needs prior to the
consummation of the Initial Public Offering were satisfied through the payment of $
On August 17, 2023, the Company issued an unsecured
promissory note in the aggregate principal amount of $
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. 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.
10
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed 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 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, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or any future period.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form10-K filed by the Company with the SEC on April 19, 2023.
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
cash equivalents as of September 30, 2023 and December 31, 2022.
Restricted Cash
The Company has approximately $
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 $
Use of Estimates
The preparation of condensed 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 condensed 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 condensed 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 condensed 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
11
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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 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
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.
12
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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 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, 2023 and December 31, 2022. The deferred tax liability as of September 30, 2023
and December 31, 2022 was $
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 $
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,
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.
13
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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
For the Three Months Ended September 30, | ||||||||||||||||||||
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 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||
Denominator: | ||||||||||||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ |
For the Nine Months Ended September 30, | ||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Class A redeemable | Class A non- redeemable | Class B | Class A redeemable | Class B | ||||||||||||||||
Basic and diluted net income per common share: | ||||||||||||||||||||
Numerator: | ||||||||||||||||||||
Allocation of net income | $ | $ | $ | $ | $ | |||||||||||||||
Denominator: | ||||||||||||||||||||
$ | $ | $ | $ | $ |
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 condensed financial statements.
Note 3 - Initial Public Offering
On September 7, 2021, the Company consummated
its Initial Public Offering of
14
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Of the
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
Note 4 - Related Party Transactions
Founder Shares
On May 5, 2021, the Sponsor paid for certain
offering costs totaling $
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 $
Contributed Capital
During the quarter ended March 31, 2023, the Sponsor
contributed $
Private Placement Warrants
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the Private Placement of
Each Private Placement Warrant is exercisable
for one whole share of Class A common stock at a price of $
15
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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 $
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 $
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 $
16
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The board of directors has also approved payments
of up to $
Promissory Note – Related Party
On August 17, 2023, the Company issued an unsecured
promissory note in the aggregate principal amount of $
Due to related party
As of September 30, 2023, the Sponsor advanced
a total of $
Due from related party
As of September 30, 2023 and December 31,
2022, $
17
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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 $
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 $
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
18
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
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 $
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.
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 $
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”),
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
19
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Gross proceeds from Initial Public Offering | $ | |||
Less: | ||||
Fair value of Public Warrants at issuance | ( | ) | ||
Offering costs allocated to Class A common stock subject to possible redemption | ( | ) | ||
Plus: | ||||
Accretion on Class A common stock subject to possible redemption amount | ||||
Class A common stock subject to possible redemption at December 31, 2022 | ||||
Less: | ||||
Redemptions | ( | ) | ||
Accretion of carrying value to redemption value | ( | ) | ||
Plus: | ||||
Waiver of underwriting fee allocated to Class A Common Stock | ||||
Class A common stock subject to possible redemption at September 30, 2023 | $ |
Note 7 - Stockholders’ Deficit
Preferred Stock -The Company is
authorized to issue
Class A Common Stock -The Company
is authorized to issue
20
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Class B Common Stock - The
Company is authorized to issue
Common stockholders of record are entitled to
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,
Note 8 - Warrants
As of September 30, 2023 and December 31,
2022, the Company has
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.
21
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The warrants have an exercise price of $
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.
● | 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
September 30, 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 | $ | $ | $ | |||||||||
Liabilities: | ||||||||||||
Derivative liabilities-public warrants | $ | $ | $ | |||||||||
Derivative liabilities-private warrants | $ | $ | $ |
22
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 | $ | $ | $ | — | ||||||||
Liabilities: | ||||||||||||
Derivative liabilities-public warrants | $ | $ | $ | — | ||||||||
Derivative liabilities-private warrants | $ | $ | $ | — |
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 September 30, 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 three and nine months ended September 30, 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 three and nine months
ended September 30, 2023, the Company recognized a gain and loss to the statements of operations resulting from a decrease and increase
in the fair value of liabilities of approximately $
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.
Valuation Date | Common Stock Price | Probability of completing BC | Maximum Term yrs | Risk Free Rate | Implied Volatility | |||||||||||||||
3/29/2023 | $ | % | % | % | ||||||||||||||||
3/31/2023 | $ | % | % | % | ||||||||||||||||
6/30/2023 | $ | % | % | % |
Description | Carrying Value at March 29, 2023 | Change in Fair value | Carrying Value at September 30, 2023 | |||||||||
Liabilities: | ||||||||||||
Forward Purchase Agreement | $ | $ | ( | ) | $ |
The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023. As of September 30, 2023 the liability related to the Forward Purchase Agreement was completely derecognized.
23
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Note 10 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date the unaudited condensed financial statements were issued. Based upon this review, the Company, other than as described below, did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
On October 10, 2023, October 11, 2023 and November
2, 2023 the Sponsor paid back a total of $
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 $
On November 7, 2023 the Company deposited $
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Insight Acquisition Corp.,” “Insight,” “our,” “us” or “we” refer to Insight Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. 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. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following risks, uncertainties (some of which are beyond our control) or other factors:
● | we have no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective; |
● | our ability to select an appropriate target business or businesses; |
● | our ability to complete a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”); |
● | our expectations around the performance of a prospective target business or businesses; |
● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial Business Combination; |
● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial Business Combination; |
● | our potential ability to obtain additional financing to complete our initial Business Combination; |
● | our pool of prospective target businesses; |
● | our ability to consummate an initial Business Combination due to the uncertainty resulting from the recent COVID-19 pandemic; |
● | the ability of our officers and directors to generate a number of potential Business Combination opportunities; |
● | our public securities’ potential liquidity and trading; |
● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; |
● | the trust account not being subject to claims of third parties; |
● | our financial performance following our initial public offering (“IPO”); and |
● | the other risks and uncertainties discussed herein, in our filings with the SEC and in our final prospectus relating to our IPO, filed with the SEC on September 2, 2021. |
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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Overview
We are a blank check company incorporated in Delaware on April 20, 2021. We were formed for the purpose of effecting a Business Combination that we have not yet identified. Our sponsor is Insight Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
Our registration statement for our IPO was declared effective on September 1, 2021. On September 7, 2021, we consummated an IPO of 24,000,000 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 was for deferred underwriting commissions and offering costs allocated to derivate warrant liabilities, respectively. Simultaneously with the closing of the IPO, 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. and Odeon Group, LLC, 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.
Upon the closing of the IPO and the Private Placement, $241.2 million ($10.05 per Unit) of the net proceeds of the sale of the Units in the IPO 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 as described below.
Our management has broad discretion with respect to the specific application of the net proceeds of the IPO 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.
If the Company is unable to complete a Business Combination by December 7, 2023 (the “Combination Period”), which may be extended by our board of directors in their sole discretion on a monthly basis, by depositing $20,000 per month into the Trust Account, up to and including to June 7, 2024, we 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 such interest may be used 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.
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The issuance of additional shares in a Business Combination:
● | may significantly dilute the equity interest of investors in our IPO, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock; |
● | may subordinate the rights of holders of Class A common stock if preference shares are issued with rights senior to those afforded our Class A common stock; |
● | could cause a change in control if a substantial number of our Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
● | may adversely affect prevailing market prices for our Class A common stock. |
Similarly, if we issue debt or otherwise incur significant debt, it could result in:
● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
● | our inability to pay dividends on our Class A common stock; |
● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
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Initial Proposed Business Combination
On April 3, 2023, Insight Acquisition Corp., a Delaware corporation (the “Company”), Avila Amalco Sub Inc., an Alberta corporation (“Amalco Sub”) and Avila Energy Corporation, an Alberta corporation (“Avila”), entered into a business combination agreement (the “Avila BCA”) pursuant to which the Company will acquire Avila for consideration of shares of the Company following its redomicile into the Province of Alberta. The terms of the Avila BCA, which contained customary representations and warranties, covenants, closing conditions and other terms relating to the mergers and the other transactions contemplated thereby, are summarized below. The Company’s entry into the Avila BCA was previously disclosed in the Company’s Current Report on Form 8-K, which was filed on April 4, 2023, and is incorporated herein by reference.
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 SPAC $300,000 in partial reimbursement of expenses incurred by SPAC 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. The termination of the Avila BCA was previously disclosed in the Company’s Current Report on Form 8-K, which was filed on August 11, 2023, and is incorporated herein by reference.
As previously disclosed, 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”). The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023, as described above.
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”). In September 2023, Polar funded Sponsor $150,000 under the 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 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.
The foregoing description of the Subscription Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the actual Subscription Agreement, a copy of which is attached to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 as Exhibit 10.10, which was filed on October 25, 2023, and incorporated herein by reference.
Recent Developments – Execution of the Alpha Modus Business Combination Agreement
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 “Alpha Modus 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 Alpha Modus BCA, the Merger and the other transactions contemplated thereby (the “Proposed Transactions”). A copy of the Alpha Modus 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 Alpha Modus BCA, in October 2023, the Company formed IAC Merger Sub Inc, a Florida corporation.
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Liquidity and Going Concern
As of September 30, 2023, we had approximately $0 in our operating bank account for operating expenses and working capital deficit of approximately $3,193,049.
Our liquidity needs prior to the consummation of the IPO 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, and the loan from the Sponsor of approximately $163,000 under the Note. We repaid $157,000 of the 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 IPO, our liquidity has been satisfied through the net proceeds from the consummation of the IPO 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, loan the Company funds as may be required (“Working Capital Loans”). As of September 30, 2023 and December 31, 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. The Note was previously disclosed in the Company’s Current Report on Form 8-K, which was filed on August 17, 2023, and is incorporated herein by reference. On November 6, 2023, the Company 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. The Rescission Agreement was previously disclosed in the Company’s Current Report on Form 8-K, which was filed on November 7, 2023, and is incorporated herein by reference.
In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company had until November 7, 2023 (or up to June 7, 2024 in the event the Company extends such date to the fullest extend), to consummate a Business Combination (the “Combination Period”). It is uncertain that we 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. We have determined that the insufficient liquidity as well as the 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. We intend 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.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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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 are not determinable as of the date of these condensed 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 condensed 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. As a result, the Company booked a liability of $2,156,214 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.
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.
Results of Operations
Our entire activity since inception up to September 30, 2023 was in preparation for our formation, he IPO and search for a business combination target. We will not generate any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended September 30, 2023, we had net loss of approximately $228,000, which consisted approximately $575,000 in general and administrative costs, approximately $75,000 in general and administrative costs – related party, approximately $50,000 franchise tax expenses and approximately $52,000 of income tax expense, partially offset by approximately $384,000 investments held in Trust Account, approximately $8,000 of gain on change in the fair value of forward purchase agreement liability and approximately $7,000 of gain on change in the fair value of derivative liabilities.
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For the three months ended September 30, 2022, we had net income of approximately $2.4 million, which consisted of $1.8 million change in the fair value of derivative warrant liabilities and approximately $1.2 million of unrealized gains on investments held in Trust Account partially offset by approximately $278,000 in general and administrative costs, income tax expense of approximately $242,000 and approximately $50,000 franchise tax expenses.
For the nine months ended September 30, 2023, we had net income of approximately $284,000, which consisted of approximately $2.9 million of gain on investments held in Trust Account, approximately $273,000 in other income, and approximately $86,000 of gain on change in the fair value of the forward purchase agreement liability, partially offset by approximately $589,000 of loss on change in the fair value of derivative liabilities, approximately $1.7 million in general and administrative costs, approximately $225,000 in general and administrative costs – related party, approximately $150,000 franchise tax expenses and approximately $637,000 income tax expense.
For the nine months ended September 30, 2022, we had net income of approximately $8.6 million, which consisted of $8.7 million change in the fair value of derivative warrant liabilities and of approximately $1.3 million unrealized gains on investments held in Trust Account partially offset by approximately $1.0 million in general and administrative costs, income tax expense of approximately $242,000 and approximately $148,000 franchise tax expenses.
Contractual Obligations
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), are entitled to registration rights pursuant to a registration and stockholder rights agreement signed prior to the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. We 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 IPO. 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. 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 April 3, 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. 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, 2023 and December 31, 2022, $6,600,000 and $12,000,000 were outstanding under deferred underwriting fee payable, respectively.
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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 nine months ended September 30, 2023, we incurred approximately $30,000 and $90,000, respectively, under the services agreement in the condensed statements of operations. For the three and nine months ended September 30, 2022, we incurred approximately $30,000 and $90,000, respectively, under the services agreement in the condensed statements of operations. As of September 30, 2023 and December 31, 2022, $130,000 and $40,000, respectively, was included in accrued expenses—related party on the condensed balance sheets.
The board of directors 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. For the three and nine months ended September 30, 2023, we incurred approximately $45,000 and $135,000, respectively, under the services agreement in the condensed statements of operations. For the three and nine months ended September 30, 2022, we incurred approximately $45,000 and $135,000, respectively, under the services agreement in the condensed statements of operations. As of September 30, 2023 and December 31, 2022, $180,000 and $45,000, respectively, was included in due to related party on the condensed balance sheets.
Critical Accounting Estimates
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the period reported. Actual results could materially differ from those estimates. The Company has not identified any critical accounting estimates.
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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 condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, (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 PCAOB 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 executive compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal period ended December 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2023 due to the Company’s inability to timely file the Annual Report on Form 10-K for the year ended December 31, 2022, and the subsequent March 31, 2023 and June 30, 2023 Form 10-Qs, which resulted in a material weakness.
Additionally, during the quarter ended September 30, 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 period ended September 30, 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 quarter ended, the funds were returned by the Sponsor to the Company’s operating bank account.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal controls over financial reporting were not effective as of September 30, 2023 due to the deficiencies noted above.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management intends to remediate the identified material weakness by implementing a more timely reporting schedule and incorporating additional reviews of the financial statement support for future quarters.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on April 19, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 19, 2023, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
The Company held an annual meeting of stockholders on September 6, 2023 (the “Annual Meeting”). At the Annual Meeting the Company’s stockholders approved the filing of a Second Amendment (the “Second 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 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 and the filing of the Second Amendment, 1,847,662 shares of the Company’s Class A Common Stock, $0.0001 par value per share, were tendered for redemption in exchange for a total redemption payment of $19,208,848 from the Trust Account.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are filed or furnished as a part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* | Filed herewith. |
** | Furnished herewith. |
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(1) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on April 4, 2023 (Commission File No. 001-40775). |
(2) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on September 7, 2021 (Commission File No. 001-40775). |
(3) | Incorporated by reference to the Form S-1 of Insight Acquisition Corp. filed with the Securities and Exchange Commission on August 11, 2021 (Registration Number 333-258727). |
(4) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on October 17, 2023 (Commission File No. 001-40775). |
(5) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on September 8, 2023 (Commission File No. 001-40775). |
(6) | Incorporated by reference to the Quarterly Report on Form 10-Q of Insight Acquisition Corp. filed with the Securities and Exchange Commission on October 25, 2023 (Commission File No. 001-40775). |
(7) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on August 11, 2023 (Commission File No. 001-40775). |
(8) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on August 17, 2023 (Commission File No. 001-40775). |
(9) | Incorporated by reference to the Current Report on Form 8-K of Insight Acquisition Corp. filed with the Securities and Exchange Commission on November 7, 2023 (Commission File No. 001-40775). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 14, 2023 | INSIGHT ACQUISITION CORP. | |
By: | /s/ Jeff Gary | |
Name: | Jeff Gary | |
Title: | Chief Executive Officer and Chief Financial Officer | |
Dated: November 14, 2023 | INSIGHT ACQUISITION CORP. | |
By: | /s/ Michael Singer | |
Name: | Michael Singer | |
Title: | Executive Chairman (Principal Executive Officer) |
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