10-Q: Andretti Acquisition II Reports Q2 2025, Faces Going Concern Doubt

Andretti Acquisition Corp. II reported net income of $2.29 million for Q2 2025, driven by Trust Account interest, but faces substantial doubt about its ability to continue as a going concern without a Business Combination.

Summary

• Andretti Acquisition Corp. II is a blank check company incorporated on May 21, 2024, formed to effect a Business Combination.
• The company has not yet selected a specific Business Combination target as of June 30, 2025, and has not commenced any operations.
• Net income for the three months ended June 30, 2025, was $2,289,803, primarily from $2,470,419 in interest earned on marketable securities held in the Trust Account.
• Net income for the six months ended June 30, 2025, was $4,553,206, from $4,926,021 in Trust Account interest.
• General and administrative costs were $180,616 for the three months and $372,815 for the six months ended June 30, 2025.
• As of June 30, 2025, the company had operating cash of $459,437 and a working capital surplus of $538,834.
• Marketable securities held in the Trust Account totaled $239,426,072 as of June 30, 2025, representing $10.41 per Public Share.
• The company faces substantial doubt about its ability to continue as a going concern due to its liquidity condition and dependence on completing a Business Combination.
• The Initial Public Offering (IPO) of 23,000,000 units at $10.00 per unit, including the full exercise of the over-allotment option, generated gross proceeds of $230,000,000 on September 9, 2024.
• Simultaneously, 760,000 private placement units were sold at $10.00 per unit, generating $7,600,000.
• Transaction costs related to the IPO amounted to $15,014,904, including $4,600,000 in cash underwriting fees and $9,775,000 in deferred underwriting fees.
• The company has a Combination Period of 24 months from the IPO closing (September 9, 2024) to complete an initial Business Combination.

Sentiment

Score: 4

Explanation: While the company is generating interest income and the Trust Account value is growing, the significant 'going concern' doubt and the lack of an identified Business Combination target after nearly a year since IPO introduce considerable uncertainty and risk. The positive interest income is offset by the fundamental challenge of its SPAC mandate.

Positives

• Generated net income of $2,289,803 for Q2 2025 and $4,553,206 for the six months ended June 30, 2025, primarily from interest on the Trust Account.
• The Trust Account balance has grown to $239,426,072 as of June 30, 2025, representing $10.41 per Public Share, exceeding the initial $10.00 IPO price.
• Maintained a working capital surplus of $538,834 as of June 30, 2025.
• Successfully completed its Initial Public Offering and private placement, raising significant capital for its Business Combination objective.

Negatives

• The company has not yet identified a specific Business Combination target, increasing uncertainty about its future.
• Management has identified substantial doubt about the company's ability to continue as a going concern due to its current liquidity condition and dependence on completing a Business Combination.
• The company does not generate any operating revenues and incurs significant costs as a public company and for due diligence.
• The Sponsor's ability to satisfy indemnity obligations is not assured, as its only assets are believed to be company securities.
• The company is subject to the Nasdaq 36-Month Requirement to complete its initial Business Combination, failure of which could lead to delisting.

Risks

• Inability to successfully effect a Business Combination within the Combination Period (24 months from September 9, 2024).
• Risk of being deemed an investment company under the Investment Company Act of 1940 if investments are held in the Trust Account for too long.
• Proceeds in the Trust Account could be subject to claims of creditors, potentially having priority over public shareholders.
• The Sponsor may not have sufficient funds to satisfy its indemnity obligations, which could reduce funds in the Trust Account below $10.05 per Public Share.
• Economic uncertainty and volatility in financial markets (downturns, inflation, interest rate fluctuations, geopolitical instability) may adversely affect operations and ability to complete a Business Combination.
• Failure to meet the Nasdaq 36-Month Requirement could lead to suspension of trading and delisting from Nasdaq.
• Dependence on the Sponsor, shareholders, officers, directors, or third parties for additional capital through loans or investments to meet working capital needs.
• Inability to obtain additional financing on commercially acceptable terms, if at all, which could lead to curtailing operations or suspending pursuit of a transaction.

Future Outlook

Management intends to complete an initial Business Combination before the end of the Combination Period. The company will use funds outside the Trust Account to identify and evaluate target businesses, perform due diligence, and structure a Business Combination. There is no assurance that the company will be able to consummate any Business Combination by the end of the Combination Period.

Management Comments

• We intend to effectuate our Business Combination using cash from the proceeds of our Initial Public Offering and the private placement, the proceeds of the sale of our ordinary shares in connection with our initial Business Combination, shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, other securities issuances, or a combination of the foregoing.
• We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure our shareholders that our plans to complete a Business Combination will be successful.
• Our management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.
• Our Certifying Officer concluded that our disclosure controls and procedures were effective as of the end of the quarterly period ended June 30, 2025.

Industry Context

As a Special Purpose Acquisition Company (SPAC), Andretti Acquisition Corp. II operates within a highly competitive and time-sensitive market for identifying and acquiring private companies. The current financial environment, marked by potential economic uncertainty, inflation, and fluctuating interest rates, adds complexity to the search for a suitable target. The company's status as a blank check company means its performance is primarily tied to its ability to successfully identify and merge with an operating business, a common challenge for SPACs nearing their combination deadline. The ongoing geopolitical instability could further complicate cross-border transactions or impact target valuations.

Comparison to Industry Standards

• The company's cash held in the Trust Account, at $10.41 per Public Share, is above the initial IPO price of $10.00, which is a positive for public shareholders compared to some SPACs that see their trust value erode.
• The 24-month Combination Period is a standard timeframe for SPACs, but the approaching deadline (September 2026) without an identified target places it in a similar position to other SPACs facing time constraints.
• The deferred underwriting fee of $9,775,000, payable upon Business Combination, is a common SPAC structure, aligning with industry practices for incentivizing successful deal completion.
• The 'going concern' doubt is a significant red flag, indicating a higher risk profile compared to operating companies or SPACs with a definitive merger agreement in place.

Corporate Governance

Related Party Transactions

• Sponsor made a capital contribution of $25,000 for 5,750,000 Class B ordinary shares on May 24, 2024.
• Sponsor and BTIG purchased 760,000 Private Placement Units at $10.00 per unit, generating $7,600,000.
• Sponsor loaned the company up to $400,000 through a promissory note for IPO expenses, which was repaid ($312,130) on September 9, 2024.
• The company pays the Sponsor $2,500 per month for office space, utilities, and administrative support services, incurring $45,000 for Q2 2025 and $90,000 for the six months ended June 30, 2025.
• The company pays its Chief Executive Officer $12,500 per month for services, incurring $45,000 for Q2 2025 and $90,000 for the six months ended June 30, 2025.
• The Sponsor or an affiliate of the Sponsor or certain officers and directors may loan the company funds (Working Capital Loans) to finance transaction costs, with up to $1,500,000 convertible into private placement units.

Stakeholder Impact

• Shareholders (Public): Entitled to redemption at $10.41 per share as of June 30, 2025, if a Business Combination is not completed or approved. Their investment value is protected by the Trust Account, but the lack of a target and going concern doubt create uncertainty regarding the ultimate outcome and potential for growth.
• Shareholders (Sponsor/Class B): Hold significant voting power for director appointments and jurisdiction changes prior to a Business Combination. Their founder shares are subject to forfeiture if the over-allotment option was not exercised (which it was in full). They bear the risk of not completing a Business Combination as their founder shares and private placement shares would not receive liquidating distributions from the Trust Account.
• Creditors: Proceeds in the Trust Account could become subject to claims of creditors, potentially having priority over public shareholders. The Sponsor has agreed to indemnify the company against certain claims that reduce the Trust Account below a threshold, but its ability to satisfy these obligations is not assured.
• Management/Officers: Receive monthly compensation for services and are actively involved in identifying and pursuing a Business Combination. Their compensation and potential for future roles are tied to the successful completion of a transaction.
• Underwriters: Entitled to a deferred underwriting discount of $9,775,000 upon the completion of the initial Business Combination, creating an incentive for deal completion.

Next Steps

• Identify and evaluate target businesses for a Business Combination.
• Perform business due diligence on prospective target businesses.
• Structure, negotiate, and complete a Business Combination.
• Potentially raise additional capital through loans or investments from related parties or third parties to meet working capital needs.
• File a post-effective amendment to the registration statement or a new registration statement covering Class A ordinary shares issuable upon exercise of warrants after a Business Combination.

Key Dates

Recommendation

The company is a SPAC that has not yet identified a Business Combination target, introducing significant uncertainty. While the Trust Account value per share ($10.41) is above the IPO price, providing a floor for public shareholders, the explicit 'going concern' doubt and the approaching deadline for a Business Combination are material risks. An investor holding shares should continue to monitor progress towards a Business Combination, but new investment is not advisable given the high uncertainty and lack of an operating business. A 'hold' recommendation reflects the current protection of the Trust Account but acknowledges the substantial operational and strategic risks.

Keywords

SPAC, blank check company, Business Combination, merger, acquisition, IPO, Trust Account, financial reporting, SEC filing, Andretti Acquisition Corp. II, POLEU, POLE, POLEW, going concern, liquidity, warrants