Alpha Modus Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2024

References to the “Company,” “Insight Acquisition Corp.,” “Insight,” “our,” “us” or “we” refer to Insight Acquisition Corp.. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

Some of the statements contained in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following risks, uncertainties (some of which are beyond our control) or other factors:

• we have no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective;
• our ability to select an appropriate target business or businesses;
• our ability to complete a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”);
• our expectations around the performance of a prospective target business or businesses;
• our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial Business Combination;
• our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial Business Combination;
• our potential ability to obtain additional financing to complete our initial Business Combination;
• our pool of prospective target businesses;
• our ability to consummate an initial Business Combination due to the uncertainty resulting from the recent COVID-19 pandemic;
• the ability of our officers and directors to generate a number of potential Business Combination opportunities;
• our public securities’ potential liquidity and trading;
• the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
• the trust account not being subject to claims of third parties;
• our financial performance following our initial public offering (“IPO”); and
• the other risks and uncertainties discussed herein, in our filings with the SEC and in our final prospectus relating to our IPO, filed with the SEC on September 2, 2021.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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 derivative warrant liabilities, respectively. Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) of 7,500,000 and 1,200,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), to the Sponsor and Cantor Fitzgerald & Co. and Odeon Group, LLC, respectively, for an aggregate of 8,700,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, generating proceeds of $8.7 million.

Upon the closing of the IPO and the Private Placement, $241.2 million ($10.05 per Unit) of the net proceeds of the sale of the Units in the IPO and of the Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

If the Company is unable to complete a Business Combination by December 7, 2023 (the “Combination Period”), which may be extended by our board of directors in their sole discretion on a monthly basis, by depositing $20,000 per month into the Trust Account, up to and including to June 7, 2024, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of such interest may be used to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

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.

Initial Proposed Business Combination

On April 3, 2023, the Company, Avila Amalco Sub Inc., an Alberta corporation (“Amalco Sub”) and Avila Energy Corporation, an Alberta corporation (“Avila”), entered into a business combination agreement (the “Avila BCA”) pursuant to which the Company will acquire Avila for consideration of shares of the Company following its redomicile into the Province of Alberta. The terms of the Avila BCA, which contained customary representations and warranties, covenants, closing conditions and other terms relating to the mergers and the other transactions contemplated thereby, are summarized below. The Company’s entry into the Avila BCA was previously disclosed in the Company’s Current Report on Form 8-K, which was filed on April 4, 2023, and is incorporated herein by reference.

On August 10, 2023, the Company and Avila entered into a Letter Agreement providing for the mutual termination of the Avila BCA. The Letter Agreement provides for the mutual release of claims against the other party and also provides that Avila will pay to SPAC $300,000 in partial reimbursement of expenses incurred by SPAC in connection with the Avila BCA (the “Avila Payment”). The Avila Payment is due and payable as follows: 1) up to $300,000 immediately upon Avila’s receipt of net proceeds from any financing, public or private, in excess of U.S. $3,000,000, -or- (2) (i) $50,000 by December 1, 2023, (ii) $100,000 by February 1, 2024 and (iii) $150,000 by April 1, 2024. The termination of the Avila BCA was previously disclosed in the Company’s Current Report on Form 8-K, which was filed on August 11, 2023, and is incorporated herein by reference.

As previously disclosed, on March 29, 2023, the Company entered into a forward share purchase agreement (the “Forward Share Purchase Agreement”) with Avila, Meteora Special Opportunity Fund I, LP, Meteora Capital Partners, LP and Meteora Select Trading Opportunities Master, LP (collectively, “Seller”) for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”). The Forward Share Purchase Agreement was terminated as a result of the termination of the Avila BCA on August 10, 2023, as described above.

On August 30, 2023, the Company, Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an investor, entered into an agreement (the Subscription Agreement”) in which Polar has agreed to fund the Sponsor up to $1,000,000, pursuant to written draw down requests (a “Capital Call”), and the Sponsor will in turn loan such funds to the Company, to cover the Company’s working capital expenses (each a “Sponsor Loan”). In September 2023, Polar funded Sponsor $150,000 under the Subscription Agreement and the Sponsor loaned the Company $150,000 from Polar. All subsequent Capital Calls are subject to the mutual consent of the Company, Sponsor and Polar. All Capital Calls funded by Polar shall not accrue interest and are repayable by the Sponsor at the closing of the Company’s initial business combination. At the option of Polar, all Capital Calls funded by Polar may be repaid by the Company through the issuance of 1 share of Class A Common Stock for each $10 of the outstanding Capital Calls funded by Polar. Sponsor is also responsible to reimburse Polar for its reasonable attorney’s fees incurred in connection with the Subscription Agreement up to $5,000. In the event, a business combination does not occur and the Company’s liquidates, then all Capital Calls funded by Polar out of cash held in the Sponsor’s bank accounts and/or the Company’s bank accounts, excluding the Company’s Trust Account. The Sponsor Loans shall not accrue interest and shall be repaid by the Company at the closing of the business combination.

In consideration of the funds received, the Company will issue, at the closing of its business combination, to Polar one (1) shares of the company’s Class A Common Stock for each dollar Polar funds through the Capital Calls (“Subscription Shares”). The Subscription Shares shall not be subject to any transfer restrictions or any other lock-up provisions, earn outs, or other contingencies. The Subscription Shares (i) to the extent feasible and in compliance with all applicable laws and regulations shall be registered as part of any registration statement issuing shares before or in connect ion with the Business Combination Closing or (ii) if no such registration statement is filed in connection with the Business Combination Closing, shall promptly be registered pursuant to the first registration statement filed by the Company or the surviving entity following the Business Combination Closing, which shall be filed no later than 30 days after the Business Combination Closing and declared effective no later than 90 days after the Business Combination Closing. The Sponsor shall not sell, transfer, or otherwise dispose of any securities owned by the Sponsor until the Subscription Shares have been transferred to the Investor and the registration statement has been made effective.

In the event the Sponsor of the Company default in their obligations under the Subscription Agreement (a “Default”), then the Sponsor shall be required to transfer to Polar 0.1 share of Class A Common Stock or Class B Common Stock for each $1 that Polar has funded under the Capital Calls as of the date of such Default and shall be required repeat such issuance for each month the such Default continues.

The foregoing description of the Subscription Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the actual Subscription Agreement, a copy of which is attached to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 as Exhibit 10.10, which was filed on October 25, 2023, and incorporated herein by reference.

On October 29, 2024, the Company held a Special Meeting of stockholders. At the Special Meeting, the Company’s stockholders approved the Business Combination Agreement, dated as of October 13, 2023, as amended by the First Amendment to the Business Combination Agreement, dated as of June 21, 2024, by and among the Company, IAC Merger Sub Inc. (“Merger Sub”), and Alpha Modus, Corp. (“Alpha Modus”), and approve the transactions contemplated thereby, including the merger of Merger Sub with and into Alpha Modus, with Alpha Modus continuing as the surviving corporation and as a wholly-owned subsidiary of the Company (the “Business Combination”), approved the Company’s amended and restated certificate of incorporation, as amended (the “IAC Charter”), in connection with the closing of the Business Combination, by adopting the second amended and restated certificate of incorporation (the “Amended and Restated Charter”), which includes the authorization to issue and designation of 7,500,000 new shares of preferred stock as Series C Redeemable Convertible Preferred Stock”, and the stockholders also approved the issuance of shares of the Company’s common stock pursuant to the Business Combination Agreement, as well as the issuance of shares of the Company’s common stock issuable upon conversion of the Company’s Series C Redeemable Convertible Preferred Stock issuable pursuant to the Business Combination Agreement for purposes of complying with the applicable listing rules of the Nasdaq Stock Market. In connection with the stockholders’ vote at the Special Meeting, 426,135 shares were tendered for redemption.

Recent Developments

Effective as of October 13, 2023, the Company, IAC Merger Sub Inc., a Florida corporation (“Merger Sub”) and Alpha Modus, Corp., a Florida corporation (“Alpha Modus”), entered into a business combination agreement and plan of merger (the “Alpha Modus BCA”) pursuant to which Merger Sub will merge with and into Alpha Modus with Alpha Modus as the surviving corporation and becoming a wholly owned subsidiary of the Company. The Board of Directors of the Company (the “Board”) has unanimously approved and declared advisable the Alpha Modus BCA, the Merger and the other transactions contemplated thereby (the “Proposed Transactions”). A copy of the Alpha Modus BCA is filed as Exhibit 2.1 in the current report on Form 8-K dated October 17, 2023. In connection with entering into the Alpha Modus BCA, in October 2023, the Company formed IAC Merger Sub Inc, a Florida corporation.

On December 28, 2023, the Company filed with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 (the “Registration Statement”) in connection with the proposed business combination with Alpha Modus, Corp. based in Metro-Charlotte, NC (the “Business Combination”).

During the preparation of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Board learned that between March 2, 2023 and December 5, 2023, the Company withdrew an aggregate amount of $2,497,248.57 from the Trust Account pursuant to seven separate written withdrawal requests to Continental Stock Transfer and Trust (“Continental”), the trustee for the Trust Account for the payment of taxes. Jeff Gary, consistent with his position as the Company’s Chief Financial Officer, signed and delivered each of the seven separate written withdrawal requests to Continental. Between March 10, 2023 and December 11, 2023 the Company paid an aggregate amount of $1,447,889.17 of which $1,130,000, in four payments, was paid for estimated income tax payments for 2022 and 2023 and $317,889.17, in three payments, was paid for Delaware franchise taxes. Mr. Gary, acting in his capacity as CFO, made each of the seven payments for estimated taxes and Delaware franchise taxes. The Board learned further that between March 2, 2023 and December 31, 2023, Mr. Gary used the remaining $1,049,359.40, that was withdrawn from the Trust Account for tax purposes to pay other business expenses of the Company. Each of the transactions described above was recorded on the books of the Company and no money was used for anything other than tax payments or appropriate Company business related expenses. The $1,049,359.40 that was withdrawn from the Trust Account for tax purposes to pay business expenses of the Company was fully paid back to the Trust Account by the Sponsor on March 15, 2024 and on March 26, 2024, and the Sponsor wired an additional $36,285.07 in to the Trust Account to reimburse the Trust Account for interest that would have accrued on the funds that were erroneously withdrawn from the Trust Account. As a result, there has been no financial loss to shareholders or the Trust Account. The Sponsor’s reimbursement of the Trust Account in the amount of $1,085,644.32 is memorialized in a Capital Contribution Agreement, dated May 9, 2024 between the Company and Insight Acquisition Sponsor, LLC, which is attached hereto as Exhibit 10.20.

On July 20, 2023 Mr. Gary effected the transfer of $480,000 from the Company’s operating account to the Sponsor and on August 7, 2023, Mr. Gary effected the transfer of an additional $411,000 from the Company’s operating account to the Sponsor. The Board learned on or about November 14, 2023, that Mr. Gary had transferred funds from the Company’s operating account to the Sponsor. Mr. Gary informed the Board that the money was being used by the Sponsor to pay Company expenses. The Board directed Mr. Gary to have the Sponsor return all such funds to the Company. The Sponsor transferred $891,000 to the Company between October 10, 2023 and November 2, 2023.

As a result of the above conduct by Mr. Gary, the Board adopted resolutions taking the following actions:

1. On April 21, 2024, Mr. Gary was removed as the Company’s Chief Executive Officer and Chief Financial Officer of the Company.

2. On April 21, 2024, Mr. Gary was appointed as an Assistant Finance Manager of the Company and shall report to the new Chief Financial Officer of the Company.

3. On April 21, 2024, Michael Singer, the Executive Chairman of the Company, was appointed to the position of Chief Executive Officer of the Company.

4. On April 21, 2024, Mr. Gary resigned as a director of the Company and the Board has accepted Mr. Gary’s resignation.

5. Mr. Gary shall be removed from all Company bank accounts, including the Trust Account and Mr. Gary’s authority to withdraw funds from the Company bank accounts, including the Trust Account has been terminated.

6. On April 21, 2024, the Board engaged Glenn Worman as the Company’s Chief Financial Officer, and that Mr. Worman will approve and sign the Company’s 2023 Annual Report on Form 10-K.

Mr. Worman’s background is as follows:

Glenn Worman, 65 years old, has been a Partner in the New York office of SeatonHill Partners, LP since November 2022. Mr. Worman is an accomplished and diverse financial services executive with a history of providing strong, effective leadership and developing and executing strategy across a spectrum of businesses. With nearly four decades of experience, he is adept at organizational analysis and implementing change, ensuring proper controls and sources of liquidity are in place, and advising executive management on business direction. Mr. Worman’s prior experience in senior finance and chief operating officer positions in corporate finance, fixed income and equity capital markets, wealth management, investment management, strategic analysis, interdealer brokerage, and compliance underscore his ability to handle industry segment and public company chief financial officer requirements. Between 2015 and 2022, Mr. Worman served as the CFO and President of National Holdings Corporation. From 2011 to 2015, he served as the Chief Financial Officer for the Americas for ICAP, plc. Prior to ICAP, plc Mr. Worman held senior positions at, among other companies, Duetsche Bank, Morgan Stanley, and Merrill Lynch. Mr. Worman earned a BS degree from Ramapo College of New Jersey and an MBA from Fairleigh Dickinson University.

7. Mr. Gary agreed to reimburse the Company for all fees and expenses incurred by the Company in connection with the Company’s engagement of Mr. Worman as the new Chief Financial Officer of the Company.

8. Going forward all withdrawals from the Trust Account, payments of taxes and all fund transfers between the Company and the Sponsor will require the approval of both the Chief Executive Officer and Chief Financial Officer.

9. All deferred compensation owed to Mr. Gary by the Company to date, in the aggregate amount of $132,500 shall be forfeited by Mr. Gary, and that henceforth Mr. Gary shall cease to accrue $7,500 per month in service fees.

10. Mr. Gary shall not be the Company’s designee to be a member of the board of directors of the post-transaction company in the Company’s planned business combination with Alpha Modus Corp.

The removal of Mr. Gary as Chief Executive Officer and Chief Financial Officer, the appointment of Mr. Gary as an Assistant Finance Manager of the Company, Mr. Gary’s resignation as a director of the Company, the appointment of Michael Singer as the Chief Executive Officer of the Company and the appointment of Glenn Worman as the Chief Financial Officer of the Company was previously disclosed by the Company in a Current Report on Form 8-K filed with the SEC on April 24, 2024 and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

On May 9, 2024, the Company and the Sponsor entered into a capital contribution agreement, which memorialized that the $1,085,644.32 deposited by the Sponsor in the Company’s trust account in March 2024, were to be considered a capital contribution to the Company. A copy of the Capital Contribution Agreement, effective as of May 9, 2024, between the Company and the Sponsor is attached hereto as Exhibit 10.12.

On May 15, 2024, the Company, Sponsor and Polar entered into Amendment No. 1 to the Subscription Agreement (the “Polar Amendment”) pursuant to which Polar’s aggregate advance under the Subscription Agreement was reduced from $1,000,000 to $975,000 and in the event the Company consummates the business combination with Alpha Modus Corp., then the Company will not be obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar Polar advances to the Company under at Subscription Agreement at the closing of the business combination. However, if the Company consummates a business combination with an entity other than Alpha Modus, Corp., then the Company is obligated to issue to Polar one (1) share of the Company’s Class A Common Stock for each dollar Polar advances to the Company under at Subscription Agreement at the closing of the business combination with an entity other than Alpha Modus, Corp. (the “Subscription Shares”). The Subscription Shares shall be subject to no 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 connection with the closing of the business combination or (ii) if no such registration statement is filed in connection with the closing of the business combination, shall promptly be registered pursuant to the first registration statement filed by the Company or the surviving entity following the closing of the business combination, which shall be filed no later than 30 days after the closing of the business combination and declared effective no later than 90 days after the closing of the business combination. 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.

The foregoing description of the Polar Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the actual Polar Amendment, a copy of which is attached hereto as Exhibit 10.13.

On June 20, 2024, IAC entered into a Settlement Agreement (the “Odeon Settlement Agreement”) with Odeon Capital Group LLC (“Odeon”) providing that (i) Odeon will be issued 90,000 shares of IAC common stock at the closing of the Business Combination, and (ii) Odeon will waive the right to any further underwriting commission or other payment by IAC under the Underwriting Agreement. IAC also entered into a Fee Modification Agreement (the “Cantor Fee Modification Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) on June 20, 2024, providing that (i) Cantor will be issued 210,000 shares of IAC common stock at the closing of the Business Combination, (ii) Cantor will waive the right to any further underwriting commission or other payment by IAC under the Underwriting Agreement, (iii) IAC will use its best efforts to file a registration statement with the SEC registering Cantor’s shares within 45 days of closing and cause such registration statement to be declared effective by the SEC no later than 180 days after closing, (iv) IAC will generally be liable to Cantor for liquidated damages of $4,000,000 if IAC has not complied with its resale registration obligations such that Cantor is unable to freely trade its shares within 9 months of closing.

The foregoing description of Odeon Settlement Agreement, and Cantor Fee Modification Agreement do not purport to be complete and are qualified in their entirety by the terms and conditions of each of the actual agreements, copies of which are attached hereto as Exhibit 1.2 and Exhibit 1.3, respectively, and incorporated by reference.

On June 21, 2024, IAC, Alpha Modus and Merger Sub entered into an amendment to the AM BCA (the “BCA Amendment”). The BCA Amendment (i) provides that each share of Alpha Modus’ 6,145,000 shares common stock outstanding prior to the business combination will be exchanged for the right to receive 1 share of IAC Class A common stock, and a contingent right to receive a pro rata portion of the 2,200,000 earnout shares; (ii) provides that each share of Alpha Modus’ 7,500,000 shares Series C Redeemable Convertible Preferred Stock outstanding prior to the business combination will be exchanged for the right to receive 1 share of IAC Series C Preferred Stock (having substantially the same rights as the Alpha Modus Series C Redeemable Convertible Preferred Stock), and a contingent right to receive a pro rata portion of the 2,200,000 earnout shares; (iii) eliminates the closing condition that the combined company is obligated to pay off Polar’s indebtedness (up to a maximum of $1,000,000) and Janbella Group, LLC’s (“Janbella”) indebtedness (up to a maximum of $1,000,000) at closing of the business combination; (iv) eliminates the combined company’s obligation to issue each of Polar and Janbella at closing a number of shares of common stock equal to the amount of indebtedness paid off divided by $1.00; (v) requires the combined company to issue the following shares of common stock at closing: (a) 1,392,308 shares to Janbella, (b) 210,000 shares to Cantor Fitzgerald & Co., (c) 90,000 shares to Odeon Group, LLC, and (d) 125,000 shares to Michael Singer (the “Singer Shares”); and (vi) extends the “Outside Date” (the date by which the business combination must occur, after which either the Company or Alpha Modus may terminate the AM BCA by providing written notice to the other) to September 9, 2024, from June 7, 2024.

The foregoing description of the BCA Amendment does not purport to be complete and are qualified in its entirety by the terms and conditions of the actual BCA Amendment, a copy of which are attached hereto as Exhibit 2.3, and incorporated by reference.

On that June 21, 2024, IAC, the Sponsor, Mr. Singer and Alpha Modus entered into a Fee Waiver Agreement (the “Singer Fee Waiver Agreement”) providing that Mr. Singer would be issued the Singer Shares at closing of the Business Combination, and the Sponsor and Mr. Singer waived, effective upon the issuance of the Singer Shares at closing of the Business Combination, the right to any amounts owed to them for services provided to IAC pursuant to (i) the September 1, 2021, Sponsor payment agreement pursuant to which IAC 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 IAC’s Management Team until the earlier of IAC’s consummation of a business combination and IAC’s liquidation, and (ii) IAC’s prior agreement to pay members of IAC’s Management Team, including Mr. Singer, up to $15,000 per month, through the earlier of IAC’s consummation of a business combination and IAC’s liquidation, for services rendered by them to IAC.

The foregoing description of the Singer Fee Waiver Agreement does not purport to be complete and are qualified in its entirety by the terms and conditions of the actual Singer Fee Waiver Agreement, a copy of which are attached hereto as Exhibit 10.14, and incorporated by reference.

On September 27, 2024, the Company received the Notice from the Nasdaq Stock Market LLC (“Nasdaq”), stating that the Company did not comply with Nasdaq Interpretive Material IM-5101-2, and that its securities are now subject to delisting. The Company’s registration statement filed in connection with the Company’s IPO became effective on September 1, 2021. Pursuant to IM-5101-2, the Company, a special purpose acquisition company, must complete one or more business combinations within 36 months of the effectiveness of its IPO registration statement. Since the Company failed to complete its initial business combination by September 1, 2024, the Company did not comply with IM5101-2, and its securities are now subject to delisting. Unless the Company requests an appeal of this determination by October 4, 2024, trading of the Company’s securities will be suspended at the opening of business on October 8, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the “SEC”), which will remove the Company’s securities from listing and registration on The Nasdaq Stock Market. The Company appealed the determination contained in the Notice and a hearing on the appeal was scheduled for November 14, 2024 (the “Hearing”). The Hearing was held on November 14, 2024 and the Company requested an extension until December 31, 2024 to complete the Business Combination. The Company is waiting for the decision on its appeal.

Liquidity and Going Concern

As of September 30, 2024, we had $11,810 in our operating bank account for operating expenses and working capital deficit of $5,274,211.

Our liquidity needs prior to the consummation of the IPO were satisfied through the payment of $25,000 from the Sponsor to cover for certain offering costs on behalf of the Company in exchange for issuance of the Founder Shares, and the loan from the Sponsor of approximately $163,000 under the Note. We repaid $157,000 of the Note balance on September 7, 2021 and repaid the remaining balance of approximately $6,000 in full on September 13, 2021, at which time the Note was terminated. Subsequent to the consummation of the IPO, our liquidity has been satisfied through the net proceeds from the consummation of the IPO and the Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). As of September 30, 2024 and December 31, 2023, there were no amounts outstanding under any Working Capital Loans.

On August 17, 2023, the Company issued an unsecured promissory note in the aggregate principal amount of $480,000 (the “Note”) to the Sponsor, in exchange for the Sponsor advancing $480,000 to the Company to fund six one-month extensions of the amount of time the Company has to complete its initial business combination, from March 7, 2023 to September 7, 2023. The Note does not bear interest and matures upon the closing of an initial business combination by the Company. In addition, at the option of the holder, the Note may be paid by the Company through the issuance of private placement warrants of the Company at a price of $1.00 per unit. The loan will be forgiven, except to the extent of any funds held outside of the Company’s trust account, by the Sponsor, if Company is unable to consummate an initial business combination. On November 6, 2023, the Company and the Sponsor entered into a written agreement (the “Rescission Agreement”) to rescind and nullify that certain promissory note in the principal amount of $480,000 and executed on August 17, 2023 (the “Note”) pursuant to which the Company agreed to pay the Sponsor the principal amount of $480,000 subject to the terms and conditions of the Note. Upon execution and delivery of the Rescission Agreement, the Note, in its entirety, is hereby irrevocably rescinded, abrogated, cancelled and rendered null and void ab initio and of no force or effect whatsoever, and the positions among the Company and the Sponsor shall be restored to what would have existed had they not entered into the Note.

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”). On May 15, 2024, the Company, Sponsor and Polar entered into Amendment No. 1 to the Subscription Agreement (the “Polar Amendment”) pursuant to which Polar’s aggregate advance under the Subscription Agreement was reduced from $1,000,000 to $975,000 (see Note 6). For the nine months ended September 30, 2024, Polar funded Sponsor additional $375,000 under the Subscription Agreement and the Sponsor loaned the Company $375,000 from Polar. For the year ended December 31, 2023, Polar funded Sponsor $600,000 under the Subscription Agreement and the Sponsor loaned the Company $600,000 from Polar. As of September 30, 2024 and December 31, 2023 there were $975,000 and $600,000 outstanding due to Polar, respectively.

On July 25, 2024, the Company issued an unsecured promissory note in the aggregate principal amount of $35,000 (the “Note”) to a related party, the Note being entered into in consideration of two transfers made by Jeffrey J. Gary to the Maker on April 18, 2024 for $25,000 and on May 22, 2024 for $10,000. The Note does not bear interest and matures upon the closing of an initial business combination by the Company. The principal balance may be prepaid at any time. The principal balance shall be payable by the Company either: (i) in cash, or (ii) at the Payee’s election in writing, by issuance of Maker’s private placement warrants (the “Private Warrants”), at a price of $1.00 per Private Warrant. Each Private Warrant entitles the holder to purchase one share of Class A common stock at $11.50 per share. As of September 30, 2024, there was $35,000 outstanding amount under this Note included on the unaudited condensed consolidated balance sheets.

In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company had until December 7, 2024 (extended monthly through extension payments), to consummate a Business Combination (the “Combination Period”). It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. We have determined that the insufficient liquidity as well as the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. We intend to complete a Business Combination by close of business on December 7, 2024. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 7, 2024.

Risks and Uncertainties

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 unaudited condensed consolidated financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed consolidated 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.

The Company held its annual meeting on September 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 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 in exchange for a total redemption payment of $19,208,848.

The Company held a special meeting on June 5, 2024 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 June 7, 2024 to December 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 Special Meeting, 481,865 shares were tendered for redemption in exchange for a total redemption payment of $5,421,323.

As a result, the Company booked a liability of $2,402,516 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.

During the second quarter of 2024, the Internal Revenue Service (the “IRS”) issued final regulations with respect to the timing and payment of the excise tax. Pursuant to those regulations, the Company would need to file a return and remit payment for any liability incurred during the period from January 1, 2023 to December 31, 2023 on or before October 31, 2024.

The Company is currently evaluating its options with respect to payment of this obligation. If the Company is unable to pay its obligation in full, it will be subject to additional interest and penalties which are currently estimated at 10% interest per annum and a 5% underpayment penalty per month or portion of a month up to 25% of the total liability for any amount that is unpaid from November 1, 2024 until paid in full.

In October 2023, the Israel-Hamas war commenced. As a result of the war, instability in the Middle East and various other regions of the world may occur and effect the world economy. Various nations, including the United States, as a reaction to the Israel-Hamas war have begun taking actions that may further affect the world economy. Such effects on the world economy are not determinable as of the date of these unaudited condensed consolidated financial statements. The specific impact on the Company’s financial condition, results of operations and cash flows is also not determinable as of the date of these unaudited condensed consolidated financial statements.

Results of Operations

Our entire activity since inception up to September 30, 2024 was in preparation for our formation, the IPO and search for a business combination target. We will not generate any operating revenues until the closing and completion of our initial Business Combination.

For the three months ended September 30, 2024, we had net loss of approximately $236,000, which consisted of approximately $228,000 of loss on change in the fair value of derivative liabilities, approximately $105,000 in general and administrative costs, approximately $21,000 franchise tax expenses and approximately $12,000 income tax expense, partially offset by approximately $53,000 in general and administrative costs – related party, net of forfeited costs, and approximately $77,000 of gain on investments held in Trust Account.

For the nine months ended September 30, 2024, we had net loss of approximately $2.7 million, which consisted of approximately $412,000 of loss on change in the fair value of derivative liabilities, approximately $960,000 in general and administrative costs, approximately $77,000 franchise tax expenses, approximately $456,000 interest expense – debt discount, $1,109,000 stock compensation expense, and approximately $59,000 income tax expense, partially offset by net of forfeited costs and approximately $357,000 of gain on investments held in Trust Account and approximately $58,000 in general and administrative costs – related party.

For the three months ended September 30, 2023, we had net loss of approximately $228,000, which consisted approximately $575,000 in general and administrative costs, approximately $75,000 in general and administrative costs – related party, approximately $50,000 franchise tax expenses and approximately $52,000 of income tax expense, partially offset by approximately $384,000 investments held in Trust Account, approximately $8,000 of gain on change in the fair value of forward purchase agreement liability and approximately $7,000 of gain on change in the fair value of derivative liabilities.

For the nine months ended September 30, 2023, we had net income of approximately $284,000, which consisted of approximately $2.9 million of gain on investments held in Trust Account, approximately $273,000 in other income, and approximately $86,000 of gain on change in the fair value of the forward purchase agreement liability, partially offset by approximately $589,000 of loss on change in the fair value of derivative liabilities, approximately $1.7 million in general and administrative costs, approximately $225,000 in general and administrative costs – related party, approximately $150,000 franchise tax expenses and approximately $637,000 income tax expense.

Contractual Obligations

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares), are entitled to registration rights pursuant to a registration and stockholder rights agreement signed prior to the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.8 million in the aggregate, paid upon the closing of the IPO. An additional fee of $0.50 per unit, or $12.0 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. On April 3, 2023, the Company received a waiver from one of the underwriters of its Initial Public Offering pursuant to which such underwriter waived all rights to $5.4 million of its $8.4 million deferred underwriting commissions payable upon completion of an initial Business Combination. In connection with this waiver, the underwriter also agreed that the remainder of the deferred underwriting fee of $3.0 million will be payable upon the consummation of the business combination. As of September 30, 2024 and December 31, 2023, $6,600,000 were outstanding under deferred underwriting fee payable.

On June 20, 2024, the Company entered an agreement with Cantor, pursuant to which Cantor agreed to accept 210,000 shares at the closing of the Business Combination in full satisfaction of the remaining $3.0 million of deferred underwriting discount that was payable in cash to Cantor at the closing of the Business Combination (the “Cantor Fee Modification Agreement”).

Also in March 2023, the Company entered into an agreement with Odeon Capital Group, LLC (“Odeon”), the other IPO Underwriter, pursuant to which Odeon agreed to irrevocably forfeit $2.6 million of the deferred underwriting discount of $3.6 million that Odeon was previously entitled to receive at the closing of the Business Combination. Such remaining $1.0 million of deferred underwriting discount was to be payable in cash to Odeon at the closing of the Business Combination.

On June 20, 2024, the Company entered an agreement with Odeon, pursuant to which Odeon agreed to accept 90,000 shares at the closing of the Business Combination in full satisfaction of the remaining $1.0 million of deferred underwriting discount that was payable in cash to Cantor at the closing of the Business Combination (the “Odeon Settlement Agreement”).

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. On June 21, 2024, the Company entered into a fee waiver agreement with the Sponsor and a member of the management team whereas 125,000 shares of the post Business Combination entity shall be issued in full satisfaction of all compensation through March 31, 2024 and in the future. For the three and nine months ended September 30, 2024, we incurred approximately $30,000 and $90,000, respectively, under the services agreement of which $60,000 was offset due to the fee waiver agreement in the statements of operations. For the three and nine months ended September 30, 2023, we incurred approximately $30,000 and $90,000, respectively, under the services agreement in the condensed statements of operations. As of September 30, 2024 and December 31, 2023, $190,000 and $160,000, respectively, was included in accrued expenses—related party on the unaudited condensed consolidated balance sheets.

The Board has also approved payments of up to $15,000 per month, through the earlier of the consummation of our initial Business Combination or our liquidation, to members of our management team for services rendered to us. In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to the Sponsor, executive officers or directors, or the Company’s or their affiliates. On April 21, 2024, all deferred compensation owed to Mr. Gary by the Company to date, in the aggregate amount of $132,500, shall be forfeited, and henceforth shall cease to accrue $7,500 per month in service fees currently recorded in due to related party on the balance sheets. On June 21, 2024, the Company entered into a fee waiver agreement with the Sponsor and a member of the management team whereas 125,000 shares of the post Business Combination entity shall be issued in full satisfaction of all compensation through March 31, 2024 and in the future. For the three and nine months ended September 30, 2024, we incurred approximately $22,500 and $90,000, respectively, under the services agreement of which $133,000 was offset due to the forfeiture of Mr. Gary’s deferred compensation and $45,000 was offset due to the fee waiver agreement. For the three and nine months ended September 30, 2023, we incurred approximately $45,000 and $135,000, respectively, under the services agreement in the condensed statements of operations. As of September 30, 2024 and December 31, 2023, $137,000 and $225,000, respectively, was included in due to related party on the unaudited condensed consolidated balance sheets.

Critical Accounting Estimates

The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under 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. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and, accordingly, actual results may differ from these estimates under different assumptions or conditions.

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 unaudited condensed consolidated financial statements.

Off-Balance Sheet Arrangements

As of September 30, 2024 and December 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

JOBS Act

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the executive compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

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 period ended September 30, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2024 due to the Company’s inability to timely file the Annual Report on Form 10-K for the years ended December 31, 2022 and 2023, and the subsequent June 30, 2023 and September 30, 2023 Form 10-Qs, as well as the over withdrawal of the trust funds, incorrect transfer of funds to the Sponsor account, as noted below, and restatement of prior periods, which resulted in material weaknesses.

Between March 2, 2023 and December 5, 2023, the Company withdrew an aggregate amount of $2,497,248 from the Trust Account pursuant to seven separate written withdrawal requests to Continental Stock Transfer and Trust (“Continental”), the trustee for the Trust Account for the payment of taxes. While the Company paid an aggregate amount of $1,447,889 for tax payments, the remaining amount of $1,049,359, that was withdrawn from the Trust Account for tax purposes, was used to pay other business expenses of the Company. On March 15, 2024, the Sponsor deposited $1,049,359 into the Trust Account, and on March 26, 2024, the Sponsor deposited an additional amount $36,285 in to the Trust Account to reimburse the Trust Account for interest that would have earned on the $1,049,359 that was erroneously withdrawn from the Trust Account. This resulted in a material weakness. Subsequent to the period ended, the funds were returned by the Sponsor to the Company’s Trust Account.

Additionally, during the year ended December 31, 2023, funds were transferred from the Trust account to the Company’s operating bank account and then to the Sponsor, which is not in accordance with the trust agreement. During the year ended December 31, 2023 we did not have controls in place to prevent or detect such transfer of funds. This resulted in a material weakness. Subsequent to the period ended, the funds were returned by the Sponsor to the Company’s operating bank account.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Controls Over Financial Reporting

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our unaudited condensed consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our unaudited condensed consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2024. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal controls over financial reporting were not effective as of September 30, 2024 due to the deficiencies noted above.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management intends to remediate the identified material weakness by implementing a more timely reporting schedule and incorporating additional reviews of the financial statement support for future quarters.

Subsequent Event

On October 14, 2024, the Company held its Special Meeting for the purpose of approving the proposals set forth in the Company’s definitive proxy statement filed with the U.S. Securities and Exchange Commission on September 18, 2024 (the “Proxy Statement”). The only matter presented at the Special Meeting was to adjourn the Special Meeting to Tuesday, October 29, 2024 at 11:00 a.m. The Chairman proposed to adjourn the Special Meeting to Tuesday, October 29, 2024 at 11:00 a.m. and 5,512,500 shares of common stock of the Company were voted in favor of the adjournment, and that such number constituted a majority of the issued and outstanding shares of common stock present in person or represented by proxy and entitled to vote and voted at the Special Meeting. Accordingly, the Special Meeting was adjourned to Tuesday, October 29, 2024 at 11:00 a.m.

In connection with the adjournment of the Special Meeting, the Company also extended the deadline for stockholders of the Company to exercise their redemption rights to Friday, October 25, 2024 at 5:00 p.m. Accordingly, all stockholders have until October 25, 2024 at 5:00 p.m. to redeem their shares and any stockholder who has previously tendered its shares for redemption and now decides that it does not want to redeem its shares may withdraw such redemption request.

On October 23, 2024, the Company entered into a securities purchase agreement (the “SPA”) with Streeterville Capital, LLC (the “Investor”), an entity controlled by John M. Fife, pursuant to which the Company will sell, and the Investor will purchase, a secured convertible promissory note in the original principal amount of $2,890,000 (the “Note”) for a net purchase price of $2,600,000 (after deducting an original issue discount of $260,000, and payment of $30,000 for the Investor’s legal, accounting, due diligence, asset monitoring, and other transaction expenses), which is anticipated to close on the date that the Company closes its business combination (the “Business Combination”) with Alpha Modus, Corp. (“Alpha Modus”).

The SPA includes customary representations, warranties and covenants by the Company and customary closing conditions. The SPA grants the Investor (i) the right to fund up to an additional $5,000,000 to the Company, with the Company’s consent, through the date that is six months following repayment of the Note in full (the “Reinvestment Right”), and (ii) the exclusive right, on customary market terms, to enter into an equity line of credit or other similar financing arrangement with the Company for at least $20,000,000, through the date that is one year following the Purchase Price Date (defined below). Pursuant the SPA, Alpha Modus is required to guarantee all of the Company’s obligations under the Note and related transaction documents pursuant to a guaranty agreement (the “Guaranty”), and the Note will also be secured by security agreements (the “Security Agreements”) by and between the Investor and both the Company and Alpha Modus, granting the Investor first priority security interests in all assets of the Company, as well as all assets of Alpha Modus, including all of Alpha Modus’ intellectual property (and including Alpha Modus’ patent portfolio) pursuant to a separate intellectual property security agreement (the “IP Security Agreement”). Additionally, the Company and Alpha Modus (collectively the “Borrowers”), and William Alessi, his entity, Janbella Group, LLC, and the trusts deemed to be beneficially owned by Mr. Alessi (each a “Capital Party” and collectively the “Capital Parties”), are required to execute at closing a subordination and voting agreement (the “Subordination Agreement”) pursuant to which (i) all of the Borrowers’ indebtedness and obligations to each Capital Party will be subordinated to Investor, (ii) all security interests of any Capital Party will be subordinate to Investor’s security interests, (iii) the Borrowers will not make any payments to any Capital Party, (iv) none of the Capital Parties will accelerate any subordinated debt or equity, (v) and no Capital Party will convert or exchange their preferred stock of the Company into Common Stock, until such time as the Investor has been fully paid and all financing agreements between the Investor and the Borrowers are terminated.

The Note will mature 18 months following the date the purchase price is delivered to the Company (the “Purchase Price Date”), will accrue interest of 10% per annum, will be prepayable (after providing five trading days’ notice) at a 20% premium to the then-outstanding balance of the Note, and will be convertible into Class A common stock (“Common Stock”) of the Company as described below. Within 30 days of the Purchase Price Date, the Company will be obligated to file a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) registering a number of shares of Common Stock issuable upon conversion of the Note in an amount no less than two times the number of shares of Common Stock necessary to convert the outstanding balance under the Note in full as of the date the Company files the registration statement. If the registration statement is not declared effective by the SEC within 120 days of the Purchase Price Date, the outstanding balance under the Note will automatically increase by one percent and will continue increasing by one percent every 30 days thereafter until the registration statement is declared effective or the Investor is able to sell shares of Common Stock issuable upon conversion of the Note pursuant to Rule 144 under the Securities Act of 1933, as amended. If by the date that 50% of the shares registered under the registration statement have been issued to Investor (such date, the “Trigger Date”) the Note has not yet been repaid in full, the Company will be obligated to file an additional registration statement registering additional shares of Common Stock issuable upon conversion of the Note within 30 days of the Trigger Date. If that additional registration statement is not declared effective by the SEC within 120 days of the Trigger Date, the outstanding balance under the Note will automatically increase by one percent and will continue increasing by one percent every 30 days thereafter until the additional registration statement is declared effective.

The Note will be convertible at the election of the Investor into shares of Common Stock at any time following the earlier of the effective date of the registration statement described above or one year following the Purchase Price Date, at a conversion price equal to 90% multiplied by the lowest daily volume-weighted average price during the five trading days preceding conversion, and provided that (i) the Investor may not convert the Note into shares of Common Stock to the extent that such conversion would result in the Investor’s beneficial ownership of Common Stock being in excess of 4.99% (or 9.99% if the Company’s market capitalization is less than $10 million), and provided that (ii) the Note is not convertible into a total cumulative number of shares of Common Stock in excess of the number of shares of Common Stock permitted by Nasdaq Listing Rule 5635 (the “Exchange Cap”). Pursuant to the terms of the Note, the Company will, within 120 days of the Purchase Price Date, seek shareholder approval of the Note and the issuance of shares of Common Stock, issuable upon conversion of the Note and pursuant to the Reinvestment Right, in excess of the Exchange Cap (the “Shareholder Approvals”). If such shareholder approval is not obtained within 120 days, the Company will continue to seek shareholder approval every three months thereafter until shareholder approval is obtained. Pursuant to the Subordination Agreement, each Capital Party is required to vote all of their shares of Company stock in favor of the Shareholder Approvals. Under the SPA, the Company is required to initially reserve 7,500,000 shares of its Common Stock for issuance to the Investor under the Note, and the Company is required to add additional shares to the reserve in increments of 100,000 shares when requested by the Investor if at the time of the request the number of shares being held in reserve is less than three times the number of shares of Common Stock equal to the outstanding balance under the Note divided by the applicable conversion price at that time.

The foregoing description of the SPA, as well as the Guaranty, Security Agreements, IP Security Agreement, Subordination Agreement, and Note, do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements, a copy of which (in the case of the SPA), or the form of which (in the case of the Guaranty, Security Agreements, IP Security Agreement, Subordination Agreement and Note) are filed as Exhibit 10.1 (and included as exhibits to it), to Current Report on Form 8-K filed on October 23, 2024.

On October 29, 2024, the Company held a Special Meeting of stockholders. At the Special Meeting, the Company’s stockholders approved the Business Combination Agreement, dated as of October 13, 2023, as amended by the First Amendment to the Business Combination Agreement, dated as of June 21, 2024, by and among the Company, IAC Merger Sub Inc. (“Merger Sub”), and Alpha Modus, Corp. (“Alpha Modus”), and approve the transactions contemplated thereby, including the merger of Merger Sub with and into Alpha Modus, with Alpha Modus continuing as the surviving corporation and as a wholly-owned subsidiary of the Company (the “Business Combination”), approved the Company’s amended and restated certificate of incorporation, as amended (the “IAC Charter”), in connection with the closing of the Business Combination, by adopting the second amended and restated certificate of incorporation (the “Amended and Restated Charter”), which includes the authorization to issue and designation of 7,500,000 new shares of preferred stock as Series C Redeemable Convertible Preferred Stock”, and the stockholders also approved the issuance of shares of the Company’s common stock pursuant to the Business Combination Agreement, as well as the issuance of shares of the Company’s common stock issuable upon conversion of the Company’s Series C Redeemable Convertible Preferred Stock issuable pursuant to the Business Combination Agreement for purposes of complying with the applicable listing rules of the Nasdaq Stock Market. In connection with the stockholders’ vote at the Special Meeting, 426,135 shares were tendered for redemption.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on May 14, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on May 14, 2024, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.