UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
INSIGHT ACQUISITION CORPCORP..
(Exact name of registrant as specified in its charter)
Delaware | 001-40775 | 86-3386030 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) |
333 East 91st Street New York, NY | 10128 | |
(Address Of Principal Executive Offices) | (Zip Code) |
(917)374-2922
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant | The | |||
Class A Common Stock, $0.0001 par value | INAQ | The | ||
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
As of August
INSIGHT ACQUISITION CORP.
Form 10-Q
For the Quarter Ended
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
CONDENSED BALANCE SHEETS
June 30, 2022 | December 31, 2021 | |||||||
(unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | 126,504 | $ | 877,937 | ||||
Prepaid expenses | 571,385 | 876,317 | ||||||
Total current assets | 697,889 | 1,754,254 | ||||||
Other Assets | 83,334 | — | ||||||
Investments held in Trust Account | 241,316,750 | 241,187,929 | ||||||
Total Assets | $ | 242,097,973 | $ | 242,942,183 | ||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 94,639 | $ | 34,332 | ||||
Accrued expenses | 72,436 | 155,963 | ||||||
Accrued expenses - related party | 10,000 | 10,000 | ||||||
Franchise tax payable | 41,181 | 140,274 | ||||||
Total current liabilities | 218,256 | 340,569 | ||||||
Deferred underwriting commissions in connection with the Initial Public Offering | 12,000,000 | 12,000,000 | ||||||
Derivative liabilities | 3,860,520 | 10,796,190 | ||||||
Total Liabilities | 16,078,776 | 23,136,759 | ||||||
Commitments and Contingencies | 0 | 0 | ||||||
Class A common stock subject to possible redemption, $0.0001 par value; 24,000,000 shares at $10.05 per share at June 30, 2022 and December 31, 2021, respectively | 241,200,000 | 241,200,000 | ||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding at June 30, 2022 and December 31, 2021, respectively | — | — | ||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 0 non-redeemable shares issued or outstanding at March 31, 2022 and December 31, 2021, respectively | — | — | ||||||
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,900,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 690 | 690 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (15,181,493 | ) | (21,395,266 | ) | ||||
Total stockholders’ deficit | (15,180,803 | ) | (21,394,576 | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 242,097,973 | $ | 242,942,183 | ||||
June 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | 144,592 | $ | 171,583 | ||||
Restricted cash | 557,519 | — | ||||||
Prepaid expenses | 85,001 | 367,219 | ||||||
Total current assets | 787,112 | 538,802 | ||||||
Investments held in Trust Account | 29,841,332 | 244,314,622 | ||||||
Total Assets | $ | 30,628,444 | $ | 244,853,424 | ||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 91,055 | $ | 128,835 | ||||
Accrued expenses | 549,269 | 68,216 | ||||||
Accrued expenses—related party | 235,000 | 85,000 | ||||||
Income tax payable | 620,034 | 467,991 | ||||||
Excise tax payable | 2,156,214 | |||||||
Franchise tax payable | 100,000 | 149,041 | ||||||
Total current liabilities | 3,751,572 | 899,083 | ||||||
Deferred tax liability | — | 156,593 | ||||||
Forward purchase agreement liability | 8,035 | — | ||||||
Deferred underwriting commissions in connection with the Initial Public Offering | 6,600,000 | 12,000,000 | ||||||
Derivative liabilities | 681,050 | 84,890 | ||||||
Total Liabilities | 11,040,657 | 13,140,566 | ||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, $0.0001 par value; 2,848,607 and 24,000,000 redeemable shares at $10.44 and $10.15 per share redemption value at June 30, 2023 and December 31, 2022, respectively | 29,728,906 | 243,597,590 | ||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at June 30, 2023 and December 31, 2022 | — | — | ||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 5,100,000 and 0 non-redeemable shares issued and outstanding at June 30, 2023 and December 31, 2022 (excluding 2,848,607 and 24,000,000 shares subject to possible redemption), respectively | 510 | — | ||||||
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 900,000 and 6,000,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 90 | 600 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (10,141,719 | ) | (11,885,332 | ) | ||||
Total stockholders’ deficit | (10,141,119 | ) | (11,884,732 | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 30,628,444 | $ | 244,853,424 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
INSIGHT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended June 30, 2022 | For the six months ended June 30, 2022 | For the period from April 20, 2021 (inception) through June 30, 2021 | ||||||||||
General and administrative expenses | $ | 339,509 | $ | 752,586 | $ | 879 | ||||||
Franchise tax expenses | 49,315 | 98,132 | 38,954 | |||||||||
Loss from operations | (388,824 | ) | (850,718 | ) | (39,833 | ) | ||||||
Other income: | ||||||||||||
Change in fair value of derivative warrant liabilities | (3,036,600 | ) | (6,935,670 | ) | — | |||||||
Net gain on investments held in Trust Account | (186,500 | ) | (128,821 | ) | — | |||||||
Total other income | (3,223,100 | ) | (7,064,491 | ) | — | |||||||
Net income (loss) | $ | 2,834,276 | $ | 6,213,773 | $ | (39,833) | ||||||
Weighted average shares outstanding of Class A common stock, basic and diluted | 24,000,000 | 24,000,000 | — | |||||||||
Basic and diluted net income per common share, Class A common stock | $ | 0.09 | $ | 0.21 | $ | — | ||||||
Weighted average shares outstanding of Class B common stock, basic and diluted | 6,000,000 | 6,000,000 | 6,000,000 | |||||||||
Basic and diluted net income (loss) per common share, Class B common stock | $ | 0.09 | $ | 0.21 | $ | (0.01) | ||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
General and administrative expenses | $ | 416,246 | $ | 339,509 | $ | 922,572 | $ | 752,586 | ||||||||
General and administrative expenses - related party | 75,000 | — | 150,000 | — | ||||||||||||
Franchise tax expenses | 50,000 | 49,315 | 100,000 | 98,132 | ||||||||||||
Loss from operations | (541,246 | ) | (388,824 | ) | (1,172,572 | ) | (850,718 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Change in fair value of derivative liabilities | (420,210 | ) | 3,036,600 | (596,160 | ) | 6,935,670 | ||||||||||
Change in fair value of Forward Purchase Agreement Liability | 117,438 | — | 78,334 | — | ||||||||||||
Gain on investments held in Trust Account | 629,757 | 186,500 | 2,514,748 | 128,821 | ||||||||||||
Gain on forgiveness of deferred underwriting fee payable | — | — | 273,110 | — | ||||||||||||
Total other income, net | 326,985 | 3,223,100 | 2,270,032 | 7,064,491 | ||||||||||||
(Loss) income before income tax expense | (214,261 | ) | 2,834,276 | 1,097,460 | 6,213,773 | |||||||||||
Income tax expense | (169,198 | ) | — | (585,450 | ) | — | ||||||||||
Net (loss) income | $ | (383,459 | ) | $ | 2,834,276 | $ | 512,010 | $ | 6,213,773 | |||||||
Weighted average shares outstanding of Class A Redeemable common stock, basic and diluted | 2,848,607 | 24,000,000 | 10,327,553 | 24,000,000 | ||||||||||||
Basic and diluted net (loss) income per common share, Class A Redeemable common stock | $ | (0.04 | ) | $ | 0.09 | $ | 0.03 | $ | 0.21 | |||||||
Weighted average shares outstanding of Class A Non-Redeemable common stock, basic and diluted | 5,100,000 | — | 2,848,856 | — | ||||||||||||
Basic and diluted net (loss) income per common share, Class A Non-Redeemable common stock | $ | (0.04 | ) | $ | — | $ | 0.03 | $ | — | |||||||
Weighted average shares outstanding of Class B common stock, basic and diluted | 900,000 | 6,000,000 | 3,166,667 | 6,000,000 | ||||||||||||
Basic and diluted net (loss) income per common share, Class B common stock | $ | (0.04 | ) | $ | 0.09 | $ | 0.03 | $ | 0.21 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
INSIGHT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 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 | — | $ | — | 6,000,000 | $ | 600 | $ | — | $ | (11,885,332 | ) | $ | (11,884,732 | ) | ||||||||||||||
Accretion of Class A common stock subject to redemption value | — | — | — | — | — | 3,628,151 | 3,628,151 | |||||||||||||||||||||
Contributions from Sponsor | — | — | — | — | 100,000 | — | 100,000 | |||||||||||||||||||||
Initial Value of Forward Purchase Agreement | — | — | — | — | (86,369 | ) | — | (86,369 | ) | |||||||||||||||||||
Class B common stock converted to Class A common stock on a one for one basis | 5,100,000 | 510 | (5,100,000 | ) | (510 | ) | — | — | — | |||||||||||||||||||
Net income | — | — | — | — | — | 895,469 | 895,469 | |||||||||||||||||||||
Balance – March 31, 2023 (unaudited) | 5,100,000 | 510 | 900,000 | 90 | 13,631 | (7,361,712 | ) | (7,347,481 | ) | |||||||||||||||||||
Accretion of Class A common stock subject to redemption value | — | — | — | — | (13,631 | ) | (240,334 | ) | (253,965 | ) | ||||||||||||||||||
Excise tax payable | — | — | — | — | — | (2,156,214 | ) | (2,156,214 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (383,459 | ) | (383,459 | ) | |||||||||||||||||||
Balance – June 30, 2023 (unaudited) | 5,100,000 | $ | 510 | 900,000 | $ | 90 | $ | — | $ | (10,141,719 | ) | $ | (10,141,119 | ) |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
Common Stock | Total | |||||||||||||||||||||||||||
Class A | Class B | Additional Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2021 | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (21,395,266 | ) | $ | (21,394,576 | ) | ||||||||||||||
Net income | — | — | — | — | — | 3,379,497 | 3,379,497 | |||||||||||||||||||||
Balance - March 31, 2022 (unaudited) | — | — | 6,900,000 | 690 | — | (18,015,769 | ) | (18,015,079 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 2,834,276 | 2,834,276 | |||||||||||||||||||||
Balance - June 30, 2022 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | — | $ | (15,181,493 | ) | $ | (15,180,803 | ) | ||||||||||||||
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance – December 31, 2021 | — | $ | — | 6,000,000 | $ | 600 | $ | — | $ | (21,395,176 | ) | $ | (21,394,576 | ) | ||||||||||||||
Net income | — | — | — | — | — | 3,379,497 | 3,379,497 | |||||||||||||||||||||
Balance – March 31, 2022 (unaudited) | — | — | 6,000,000 | 600 | — | (18,015,679 | ) | (18,015,079 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 2,834,276 | 2,834,276 | |||||||||||||||||||||
Balance – June 30, 2022 (unaudited) | — | $ | — | 6,000,000 | $ | 600 | $ | — | $ | (15,181,403 | ) | $ | (15,180,803 | ) |
Common Stock | Total | |||||||||||||||||||||||||||
Class A | Class B | Additional Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - April 20, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B common stock to Sponsor | — | — | 6,900,000 | 690 | 24,310 | — | 25,000 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (39,833 | ) | (39,833 | ) | |||||||||||||||||||
Balance - June 30, 2021 (unaudited) | — | $ | — | 6,900,000 | $ | 690 | $ | 24,310 | $ | (39,833 | ) | $ | (14,833 | ) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
INSIGHT ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2022 | For the period from April 20, 2021 (inception) through June 30, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | 6,213,773 | $ | (39,833 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Change in fair value of derivative warrant liabilities | (6,935,670 | ) | — | |||||
Net gain on investments held in Trust Account | (128,821 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 221,598 | — | ||||||
Accounts payable | 60,307 | 879 | ||||||
Accrued expenses - related party | 1,473 | — | ||||||
Franchise tax payable | (99,093 | ) | 38,954 | |||||
Net cash used in operating activities | (666,433 | ) | — | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from note payable to related party | — | 25,000 | ||||||
Offering costs paid | (85,000 | ) | — | |||||
Net cash (used in) provided by financing activities | (85,000 | ) | 25,000 | |||||
Net change in cash | (751,433 | ) | 25,000 | |||||
Cash - beginning of the period | 877,937 | — | ||||||
Cash - end of the period | $ | 126,504 | $ | 25,000 | ||||
Supplemental disclosure of noncash financing activities: | ||||||||
Offering costs paid by the Sponsor in exchange for issuance of Class B common stock | $ | — | $ | 25,000 | ||||
Offering costs included in accounts payable | $ | — | $ | 60,020 | ||||
Offering costs included in accrued expenses | $ | — | $ | 255,875 | ||||
Offering costs paid by Sponsor under promissory note | $ | — | $ | 25,000 |
For the Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 512,010 | $ | 6,213,773 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Change in fair value of derivative liabilities | 596,160 | (6,935,670 | ) | |||||
Gain on investments held in Trust Account | (2,514,748 | ) | (128,821 | ) | ||||
Gain on forgiveness of deferred underwriting fee payable | (273,110 | ) | — | |||||
Change in fair value of forward purchase agreement | (78,334 | ) | — | |||||
Deferred tax benefit | (156,593 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 282,218 | 221,598 | ||||||
Accounts payable | (37,780 | ) | 60,307 | |||||
Accrued expenses – related party | 481,053 | 1,473 | ||||||
Due to related party | 150,000 | — | ||||||
Income tax payable | 152,043 | — | ||||||
Franchise tax payable | (49,041 | ) | (99,093 | ) | ||||
Net cash used in operating activities | (936,122 | ) | (666,433 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Cash withdrawn from Trust Account to pay franchise and income taxes | 1,446,650 | — | ||||||
Cash withdrawn from Trust Account in connection with redemption | 215,621,388 | — | ||||||
Cash deposited in Trust Account | (80,000 | ) | — | |||||
Net cash provided by investing activities | 216,988,038 | — | ||||||
Cash Flows from Financing Activities: | ||||||||
Contributions from Sponsor | 100,000 | — | ||||||
Offering costs paid | — | (85,000 | ) | |||||
Redemption of common stock | (215,621,388 | ) | — | |||||
Net cash used in financing activities | (215,521,388 | ) | (85,000 | ) | ||||
Net change in cash and restricted cash | 530,528 | (751,433 | ) | |||||
Cash and restricted cash – beginning of the period | 171,583 | 877,937 | ||||||
Total cash and restricted cash– end of the period | $ | 702,111 | $ | 126,504 | ||||
Cash | $ | 144,592 | $ | 126,504 | ||||
Restricted Cash | $ | 557,519 | $ | — | ||||
Supplemental disclosure of noncash activities: | ||||||||
Forgiveness of deferred underwriting fee payable | $ | (5,126,890 | ) | $ | — | |||
Value of excise tax liability | $ | 2,156,214 | $ | — | ||||
Initial value of forward purchase agreement liability | $ | 83,369 | $ | — |
The accompanying notes are an integral part of these unaudited condensed financial statements.
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Note 1 -– Description of Organization and Business Operations
Insight Acquisition Corp. (the “Company”) was incorporated in Delaware on April 20, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of June 30, 2022,2023, the Company had not commenced any operations. All activity for the period from April 20, 2021 (inception) through June 30, 20222023 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
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 24,000,000 units (the “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 waswere for deferred underwriting commissions (see Note 5) and offering costs allocated to derivate warrant liabilities, respectively.
Simultaneously with the closing of the Initial Public Offering, 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. (“Cantor”) and Odeon Capital Group, LLC (“Odeon”), 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 (see Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, $241.2 million ($10.05 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering 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
The Company’scompany’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 80% of the net assets held in the Trust Account (as defined below) (net of amounts disbursed to management for working capital purposes and excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
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
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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 20% or more of the Public Shares, without the prior consent of the Company.
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 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’ rights or
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 100% of its Public Shares if the Company has not consummated an initial Business Combination within the Combination Period or (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if the Company fails to complete the initial Business Combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period).
If the Company is unable to complete a Business Combination within 18 months from the closing of the Initial Public Offering, or Marchby November 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
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 $5,000,001 (the “Redemption Limitation”) in order to allow the Company to redeem public shares irrespective of whether such redemption would exceed the Redemption Limitation (the “Second Charter Amendment Proposal”), (iii) a proposal to amend the Charter to provide for the right of a holder of Class B common stock of the Company, par value $0.0001 per share (“Class B Common Stock”) to convert such shares into shares of Class A common stock of the Company, par value $0.0001 per share (“Class A Common Stock”) on a one-for-one basis prior to the closing of a business combination at the election of the holder (the “Third Charter Amendment Proposal” and together with the First Charter Amendment Proposal and the Second Charter Amendment Proposal, the “Charter Amendment Proposals”) and (iv) a proposal to direct the chairman of the Special Meeting to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve each of the Charter Amendment Proposals. In connection with the Extension, the holders of 21,151,393 Class A common shares, representing approximately 88.1% of the Company’s issued and outstanding Class A common shares, elected to redeem their shares. Following such redemptions, approximately $28,744,831 remained in the trust account and 2,848,607 shares of Class A Common Stock remained issued and outstanding.
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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 May 7, 2023 and authorized management to deposit $80,000 into the Trust Account for such extension. Accordingly, management deposited $80,000 into the Trust Account and the date by which the Company has to consummate a business combination has been extended to May 7, 2023. On May 2, 2023, the board of directors of the Company approved an additional one-month extension to June 7, 2023 and deposited an additional $80,000 into the Trust Account.
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 2,376,000 shares of the Company Class A Common Stock purchased in the Company’s initial public offering (“IPO Shares”) in the Forward Purchase Transaction, up to a maximum of 2,500,000 shares of Class A Common Stock (including any Recycled Shares).
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 $300,000 in partial reimbursement of expenses incurred by the Company 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.
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.
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 $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, 1,847,662 shares were tendered for redemption.
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
On September 7, 2023, the Company deposited $20,000 into the Trust Account to extend the Business Combination Period from September 7, 2023 to October 7, 2023. In October 2023 the Company deposited $20,000 into the Trust Account to extend the Business Combination Period from October 7, 2023 to November 7, 2023.
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.
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 $10.05. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i) $10.05 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.05 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Risks and Uncertainties
Management continues to evaluate the impact of the
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 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.
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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, 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.
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
Liquidity and going concern
As of June 30, 2022,2023, the Company had approximately $127,000$144,600 in its operating bank account available to pay operating expenses and working capital deficit of approximately $563,000.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering 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 (as defined in Note 4)3), and the loan from the Sponsor of approximately $163,000 under the Note (as defined in Note 4). The Company repaid $157,000 of 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 Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering 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, provide the Company Working Capital Loans (see Note 4). As of June 30, 20222023 and December 31, 2021,2022, there were 0no amounts outstanding under any Working Capital Loans.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’sFASB Accounting Standards Update (“ASU”)
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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
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 Form
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 0no cash equivalents as of June 30, 20222023 and December 31, 2021.
Restricted Cash
The Company has approximately $557,500 of restricted cash to be used to pay for taxes as of June 30, 2023. There was no restricted cash balance as of December 31, 2022.
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 $250,000. AsAny loss incurred or a lack of June 30, 2022access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and December 31, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
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 185
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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 warrantderivative 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
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 a Black-Scholes modelthe public market quoted prices at each measurement date.date starting at June 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
The Company granted the underwriters a
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 and the value as of June 30, 2023 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.
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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
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 June 30, 20222023 and December 31, 2021.
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 $169,000 and $0 was recognized for the three months ended June 30, 2023 and 2022, respectively, and amounts of approximately $585,000 and $0 were recognized for the six months ended June 30, 2023 and 2022, respectively. There were 0no unrecognized tax benefits as of June 30, 20222023 and December 31, 2021.2022. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. NaNNo amounts were accrued for the payment of interest and penalties as of June 30, 20222023 and December 31, 2021.2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company ishas been subject to income tax examinations by major taxing authorities since
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
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Net (Loss) Income (Loss) 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 (loss) per common share is calculated by dividing the net (loss) income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net (loss) income (loss) 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 20,700,000 shares of Class A common stock in the calculation of diluted (loss) income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net (loss) income (loss) per share is the same as basic net (loss) income (loss) per share for the three and six months ended June 30, 2023 and 2022. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The following tables present a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income (loss) per share for each class of common stock:
For the Three Months Ended June 30, 2022 | For the Six Months Ended June 30, 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income per common share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 2,267,421 | $ | 566,855 | $ | 4,971,018 | $ | 1,242,755 | ||||||||
Denominator: | ||||||||||||||||
Basic and diluted weighted average common shares outstanding | 24,000,000 | 6,000,000 | 24,000,000 | 6,000,000 | ||||||||||||
Basic and diluted net income per common share | $ | 0.09 | $ | 0.09 | $ | 0.21 | $ | 0.21 | ||||||||
For the period from April 20, 2021 (inception) through June 30, 2021 | ||||||||
Class A | Class B | |||||||
Basic and diluted net loss per common share: | ||||||||
Numerator: | ||||||||
Allocation of net loss | $ | — | $ | (39,833 | ) | |||
Denominator: | ||||||||
Basic and diluted weighted average common shares outstanding | — | 6,000,000 | ||||||
Basic and diluted net loss per common share | $ | — | $ | (0.01 | ) |
For the Three Months Ended June 30, | ||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Class A redeemable | Class B | Class A non- redeemable | Class A redeemable | Class B | ||||||||||||||||
Basic and diluted net (loss) income per common share: | ||||||||||||||||||||
Numerator: | ||||||||||||||||||||
Allocation of net (loss) income | $ | (129,446 | ) | $ | (39,002 | ) | $ | (221,011 | ) | $ | 2,267,421 | $ | 566,855 | |||||||
Denominator: | ||||||||||||||||||||
Basic and diluted weighted average common shares outstanding | 2,848,607 | 900,000 | 5,100,000 | 24,000,000 | 6,000,000 | |||||||||||||||
Basic and diluted net (loss) income per common share | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | 0.09 | $ | 0.09 |
For the Six Months Ended June 30, | ||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||
Class A redeemable | Class B | Class A non- redeemable | Class A redeemable | Class B | ||||||||||||||||
Basic and diluted net income per common share: | ||||||||||||||||||||
Numerator: | ||||||||||||||||||||
Allocation of net income | $ | 323,775 | $ | 98,879 | $ | 89,356 | $ | 4,971,018 | $ | 1,242,755 | ||||||||||
Denominator: | ||||||||||||||||||||
Basic and diluted weighted average common shares outstanding | 10,327,553 | 3,166,667 | 2,861,667 | 24,000,000 | 6,000,000 | |||||||||||||||
Basic and diluted net income per common share | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.21 | $ | 0.21 |
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 24,000,000 Units, 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 waswere for deferred underwriting commissions and offering costs allocated to
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Of the 24,000,000 Units sold in the Initial Public Offering, 23,760,000 Units were purchased by certain qualified institutional buyers or institutional accredited investors which are not affiliated with any member of the Company management (the “Anchor Investors”). In connection with the sale of Units to the Anchor Investors, the Sponsor transferred an aggregate of 1,350,000 of the Company’s Class B common stock held by the Sponsor (the “Founder Shares”) to the Anchor Investors at a price of approximately $0.004 per Founder Share. The Company determined that the excess of the fair value of the Founder Shares acquired by the Anchor Investors over the price paid by such Anchor Investors should be recognized as an offering cost in accordance with SEC Staff Accounting Bulletin Topic 5A. The Company estimated the fair value of the Founder Shares sold to the Anchor Investors to be $2.37 per share or an aggregate of approximately $3.2 million, based on third-party transactions in the Sponsor’s equity interests. Accordingly, the offering cost is 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 allocated to the Public Warrants are expensed as incurred. Offering costs allocated to the Public Shares are charged against the carrying value of Class A common stock upon the completion of the Initial Public Offering.
The Company granted the underwriters a
Note 4 - Related Party Transactions
Founder Shares
On May 5, 2021, the Sponsor paid for certain offering costs totaling $25,000 on behalf of the Company in exchange for issuance of 6,181,250
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 $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
Contributed Capital
During the quarter ended March 31, 2023, the Sponsor contributed $100,000 to the Company for no consideration.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 7,500,000 and 1,200,000 Private Placement Warrants to the Sponsor and Cantor and Odeon, 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.
Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor and the underwriters was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. Except as set forth below, the Private Placement Warrants will be
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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 $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was
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 $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of June 30, 20222023 and December 31, 2021,2022, the Company had no borrowings under the Working Capital Loans.
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 $10,000 per month for office space, secretarial and administrative services provided to or incurred by members of the Company’s management team until the earlier of the Company’s consummation of a Business Combination and the Company’s liquidation. For the three and six months ended June 30, 2022,2023, the Company incurred approximately
The board of directors has also approved payments of up to $15,000 per month, through the earlier of the consummation of the Company’s initial business combinationBusiness Combination or its liquidation, to members of the Company’s management team for services rendered to the Company. In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 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 $0.20 per unit, or $4.8 million in the aggregate, paid upon the closing of the Initial Public Offering. 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. If the underwriters’ over-allotment option was fully exercised, $0.70 per over-allotment unit, or up to an additional approximately $2.5 million, or approximately $14.5 million in the aggregate, would have been deposited in the Trust Account as deferred underwriting commissions. On October 16, 2021, the over-allotment option expired unexercised. 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 October 16, 2021, the over-allotment option expired unexercised.
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 $5.4 million of its $8.4 million deferred underwriting commissions payable upon completion of an initial Business Combination. As a result, the Company recognized $273,110 of gain on forgiveness of underwriting fee payable and $5,126,890 toward Class A redeemable shares in relation to the forgiveness of the deferred underwriter fee allocated to the underwriter in the accompanying consolidated financial statements. 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 June 30, 2023 and December 31, 2022, $6,600,000 and $12,000,000 were outstanding under deferred underwriting fee payable, respectively.
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 2,376,000 shares of SPAC Class A Common Stock purchased in the SPAC’s initial public offering (“IPO Shares”) in the Forward Purchase Transaction, up to a maximum of 2,500,000 shares of Class A Common Stock (including any Recycled Shares). The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023, as described below.
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Business Combination Agreement
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 $300,000 in partial reimbursement of expenses incurred by the Company 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.
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.
Note 6 - Class A Shares of Common Stock Subject to Possible Redemption
The Company’s Class A common stock feature
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
The shares of Class A common stock issued in the Initial Public Offering were recognized in Class A common stock subject to possible redemption as follows:
Gross proceeds from Initial Public Offering | $ | 240,000,000 | ||
Less: | ||||
Fair value of Public Warrants at issuance | (7,582,627 | ) | ||
Offering costs allocated to Class A common stock subject to possible redemption | (20,050,096 | ) | ||
Plus: | ||||
Accretion on Class A common stock subject to possible redemption amount | 31,230,313 | |||
Class A common stock subject to possible redemption at December 31, 2022 | 243,597,590 | |||
Less: | ||||
Redemptions | (215,621,388 | ) | ||
Accretion of carrying value to redemption value | (3,374,186 | ) | ||
Plus: | ||||
Waiver of underwriting fee allocated to Class A Common Stock | 5,126,890 | |||
Class A common stock subject to possible redemption at June 30, 2023 | $ | 29,728,906 |
Gross proceeds from Initial Public Offering | $ | 240,000,000 | ||
Less: | ||||
Fair value of Public Warrants at issuance | (7,582,627 | ) | ||
Offering costs allocated to Class A common stock subject to possible redemption | (20,050,096 | ) | ||
Plus: | ||||
Accretion on Class A common stock subject to possible redemption amount | 28,832,723 | |||
Class A common stock subject to possible redemption | $ | 241,200,000 | ||
Note 7 - Stockholders’ Deficit
Preferred Stock -
Class
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Class B Common Stock -
Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class B common stock will have the right to elect all of the Company’s directors prior to the consummation of the initial Business Combination. On any other matter submitted to a vote of the Company’s 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
Note 8 - Warrants
As of June 30, 20222023 and December 31, 2021,2022, the Company has 12,000,000 and 8,700,000 Public Warrants and Private Placement Warrants, respectively, outstanding.
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
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Initial Stockholders or their affiliates, without taking into account any Founder Shares held by the Initial Stockholders or such affiliates, as applicable, prior to such issuance), (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
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
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
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 20222023 and December 31, 20212022 and indicatesindicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
June 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 | $ | 29,841,332 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative liabilities-public warrants | $ | — | $ | 394,800 | $ | — | ||||||
Derivative liabilities-private warrants | $ | — | $ | 286,250 | $ | — | ||||||
Forward Purchase Agreement liability | $ | — | $ | — | $ | 8,035 |
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
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 | $ | 241,316,750 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative liabilities—public warrants | $ | 2,158,800 | $ | — | $ | — | ||||||
Derivative liabilities—private warrants | $ | — | $ | — | $ | 1,701,720 |
December 31, 2021
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 | $ | 241,187,929 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative liabilities—public warrants | $ | 6,240,000 | $ | — | $ | — | ||||||
Derivative liabilities—private warrants | $ | — | $ | — | $ | 4,556,190 |
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 | $ | 244,314,622 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative liabilities-public warrants | $ | — | $ | 49,200 | $ | — | ||||||
Derivative liabilities-private warrants | $ | — | $ | 35,690 | $ | — |
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 June 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 six months ended June 30, 2022.
Level 1 assets include investments in money market funds and 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. Thedate until September 30, 2022 when the public market quoted price was used. For the three and six months ended June 30, 2023, the Company recognized a loss to the statements of operations resulting from a increase in the fair value of over-allotment option was estimated using a Black-Scholes model.liabilities of approximately $420,000 and $596,000, respectively, presented as change in fair value of derivative warrant liabilities on the accompanying statements of operations. For the three and six months ended June 30, 2022, the Company recognized a gain/(loss)gain to the condensed statements of operations resulting from a
The estimatedinitial fair value and the value as of June 30, 2023 of the Private Placement Warrants,Forward Purchase Agreement liability issued was estimated using a Put Option Pricing model, which that were analyzed and incorporated into the Public Warrants prior to being separately listedmodel included the put price, the risk-free rate, the variable term, the settlement features, the likelihood of completing a business combination and traded, and over-allotment option, was determined using Level 3 inputs. Inherent in a Monte Carlo simulation and Black-Scholesthe early termination provisions. The model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatilityunderlying economic factors that influenced which of its warrantsthese 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 implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. Significant increases (decreases) in the expected volatility in isolation could result in a significantly higher (lower)management projections. The fair value measurement.was adjusted for the market implied likelihood of completing a business combination. The risk-free interest rate is based on the U.S. Treasurykey inputs are summarized below:
Valuation Date | Common Stock Price | Probability of completing BC | Maximum Term yrs | Risk Free Rate | Implied Volatility | |||||||||||||||
3/29/2023 | $ | 10.35 | 14.00 | % | 3.74 | 3.74 | % | 2.90 | % | |||||||||||
3/31/2023 | $ | 10.22 | 14.00 | % | 3.73 | 3.68 | % | 3.50 | % | |||||||||||
6/30/2023 | $ | 10.43 | 14.00 | % | 3.48 | 3.74 | % | 2.30 | % |
Description | Carrying Value at March 29, 2023 | Change in Fair Value | Carrying Value at June 30, 2023 | |||||||||
Liabilities: | ||||||||||||
Forward Purchase Agreement | $ | 86,369 | $ | 78,334 | $ | 8,035 |
INSIGHT ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2022 | December 31, 2021 | |||||||
Exercise price | $ | 11.50 | $ | 11.50 | ||||
Stock price | $ | 9.82 | $ | 9.77 | ||||
Volatility | 2.0 | % | 10.0 | % | ||||
Risk-free rate | 3.02 | % | 1.31 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % |
JUNE 30, 2022 is summarized as follows:2023
Derivative liabilities at December 31, 2021 | $ | 4,556,190 | ||
Change in fair value of derivative warrant liabilities | (1,619,070 | ) | ||
Derivative liabilities at March 31, 2022 | $ | 2,937,120 | ||
Change in fair value of derivative warrant liabilities | (1,235,400 | ) | ||
Derivative liabilities at June 30, 2022 | $ | 1,701,720 | ||
Note 10 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date the condensed financial statements were issued. Based upon this review, other than noted below and as described above, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
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 $300,000 in partial reimbursement of expenses incurred by the Company 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.
On August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $180,000 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 and to fund working capital expenses. 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.
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.
On September 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 “Second Extension Amendment”) the Company’s amended and restated certificate of incorporation, as amended (the “Charter”), to extend the date by which the Company has to consummate a business combination (the “Extension”) for up to nine (9) additional one (1) month extensions or from September 7, 2023 up to June 7, 2024 (the “Extended Termination Date”) in exchange for the Company depositing 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. Adoption of the Charter Amendment Proposal required approval by the affirmative vote of at least a majority of the Company’s outstanding shares of common stock, (ii) a proposal to elect one (1) director, David Brosgol, to serve until 2026 annual meeting and until his successor has been duly elected and qualified or until his earlier resignation, removal or death. Adoption of the Directors Proposal required approval by the affirmative vote of at least a majority of the Company’s outstanding shares of common stock, and (iii) a proposal to ratify the appointment of WithumSmith+Brown PC, as the independent registered public accounting firm for the year ending December 31, 2023. Adoption of the Auditor Proposal required approval by the affirmative vote of at least a majority of the Company’s outstanding shares of common stock. In connection with the stockholders’ vote at the Annual Meeting, 1,847,662 shares were tendered for redemption in exchange for a total redemption payment of $19,208,848. On September 7, 2023, the Company deposited $20,000 in the Trust Account to extend the Business Combination Period from September 7, 2023 to October 7, 2023. In October 2023, the Company deposited $20,000 in the Trust Account to extend the Business Combination Period from October 7, 2023 to November 7, 2023. Additionally, on September 6, 2023, the Company recorded an additional $192,088 of excise tax liability.
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.
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..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
The forward-looking statements contained in this Quarterly Report on Form
● | 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.
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.
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
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 within 18 months from the closing of the IPO, or Marchby June 7, 2023 (the “Combination Period”), the Companywhich may be extended by our board of directors in their sole discretion on a monthly basis up to and including to September 7, 2023, and further extended 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
We intend to effectuate our initial Business Combination using cash from the proceeds of our IPO and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, equity and debt.
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. |
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 (as further explained below). The terms of the Avila BCA, which contains customary representations and warranties, covenants, closing conditions and other terms relating to the mergers and the other transactions contemplated thereby, are insufficientsummarized 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.
Recent Developments
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 repay our debt obligations;
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 our obligationsthe 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 repayfund the indebtedness even if we makeSponsor 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 principal and interest payments when due if we breach certain covenants that requireCapital Calls funded by Polar may be repaid by the maintenanceCompany through the issuance of certain financial ratios or reserves without a waiver or renegotiation1 share of that covenant;
In consideration of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on ourreceived, the Company will issue, at the closing of its business combination, to Polar one (1) shares of the company’s Class A common stock if declared, expenses, capital expenditures, acquisitions andCommon 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 general corporate purposes;
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 adverse changestransfer 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 general economic, industryits entirety by the terms and competitive conditions of the actual agreement, a copy of which is attached hereto as Exhibit 10.10 and adverse changesincorporated herein by reference.
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 government regulation; and
Liquidity and Going Concern
As of June 30, 2022,2023, we had approximately $127,000$144,600 in our operating bank account for operating expenses, and working capital deficit of approximately $563,000.$2,839,000.
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 June 30, 20222023 and December 31, 2021,2022, there were no amounts outstanding under any Working Capital Loans.
In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)
Risks and Uncertainties
Management continues to evaluate the impact of the
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 June 30, 20222023 was in preparation for our formation, he IPO and the IPO.search for a business combination target. We will not be generatinggenerate any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended June 30, 2023, we had net loss of approximately $258,000, which consisted of approximately $420,000 of loss on change in the fair value of derivative liabilities, approximately $416,000 in general and administrative costs, approximately $75,000 in general and administrative costs – related party, approximately $50,000 franchise tax expenses and approximately $44,000 of income tax expense, partially offset by approximately $630,000 investments held in Trust Account and approximately $117,000 of gain on change in the fair value of forward purchase agreement liability.
For the three months ended June 30, 2022, we had net income of approximately $2.8 million, which consisted of approximately $3.0 million of gain change in the fair value of derivative warrant liabilities and approximately $187,000 of unrealized gains on investments held in Trust Account, of approximately $187,000 partially offset by approximately $340,000 in general and administrative costs and approximately $49,000 franchise tax expenses.
For the six months ended June 30, 2023, we had net income of approximately $637,000, which consisted of approximately $2.5 million of gain on investments held in Trust Account, approximately $273,000 in other income, and approximately $78,000 of gain on change in the fair value of the forward purchase agreement liability, partially offset by approximately $596,000 of loss on change in the fair value of derivative liabilities, approximately $923,000 in general and administrative costs, approximately $150,000 in general and administrative costs – related party, approximately $100,000 franchise tax expenses and approximately $460,000 income tax expense.
For the six months ended June 30, 2022, we had net income of approximately $6.2 million, which consisted of $6.9 million gain on change in the fair value of derivative warrant liabilities and approximately $129,000 of unrealized gains on investments held in Trust Account, of approximately $129,000 partially offset by approximately $753,000 in general and administrative costs and approximately $98,000 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. If the underwriters’ over-allotment option was fully exercised, $0.70 per over-allotment unit, or up to an additional approximately $2.5 million, or approximately $14.5 million in the aggregate, would have been deposited in the Trust Account as deferred underwriting commissions. On October 16, 2021, the over-allotment option expired unexercised. 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 June 30, 2023 and December 31, 2022, $6,600,000 and $12,000,000 were outstanding under deferred underwriting fee payable, respectively.
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 six months ended June 30, 2023, we incurred approximately $30,000 and $60,000, respectively, under the services agreement in the condensed statements of operations. For the three and six months ended June 30, 2022, we incurred approximately $30,000 and $60,000, respectively, under the services agreement in the condensed statements of operations. As of June 30, 20222023 and December 31, 2021, $10,000,2022, $100,000 and $40,000, respectively, was included in Due to Related Partyaccrued 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
Critical Accounting Estimates
The preparation of ourcondensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires usmanagement to make estimates and judgmentsassumptions that affect the reported amounts of assets liabilities, revenues and expenses and theliabilities, disclosure of contingent assets and liabilities in ourat the date of the financial statements. On an ongoing basis, we evaluate our estimatesstatements, and judgments, including those related to fair valuethe reported amounts of financial instrumentsincome and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable underexpenses during the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.period reported. Actual results maycould materially differ from these estimates under different assumptions or conditions.those estimates. The Company has not identified the following as itsany critical accounting policies:estimates.
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
As of June 30, 2023 and December 31, 2022, we did not have any
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
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
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule
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 June 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 Form 10-Q as well as the current June 30, 2023 Form 10-Q, which resulted in a material weakness.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in our reports filed or submitted under the Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in Company reports filed or submitted under the Exchange Act 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 Rules
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 the design and operation of our disclosure controls and procedures as of June 30, 2022 (the “Evaluation Date”). Based upon their evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures (as defined in Rules
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
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
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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. |
(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). |
Incorporated by reference to the Form S-1 of Insight Acquisition Corp. filed with the Securities and ExchangeCommission on August 11, 2021 (Registration Number333-258727). | |
(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). |
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: October 25, 2023 | INSIGHT ACQUISITION CORP. | ||||||
By: | /s/ Jeff Gary | ||||||
Name: | Jeff Gary | ||||||
Title: | |||||||
Chief Executive Officer and Chief Financial Officer | |||||||
Dated: October 25, 2023 | INSIGHT ACQUISITION CORP. | ||||||
By: | /s/ Michael Singer | ||||||
Name: | Michael Singer | ||||||
Title: | Executive Chairman (Principal Executive Officer) |
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