10-Q: A SPAC II Extends Deadline, Faces Going Concern Doubt

A SPAC II Acquisition Corp. reports a net loss for Q2 2025, extends its business combination deadline to August 2027, and undergoes significant board and management changes amid substantial shareholder redemptions.

Summary

• The company, a blank check company (SPAC), reported a net loss of $17,335 for the three months ended June 30, 2025, compared to a net income of $138,280 for the same period in 2024.
• For the six months ended June 30, 2025, the company had a net loss of $78,078, a decrease from a net income of $280,625 in the prior year period.
• Shareholders approved an extension of the business combination deadline to August 5, 2027, and also approved allowing the company to target entities with principal business operations in China (including Hong Kong and Macau).
• In connection with the July 30, 2025, Extraordinary General Meeting, 344,384 Class A ordinary shares were redeemed for approximately $4,078,485, reducing the Trust Account balance to approximately $516,277.
• The Sponsor's ownership increased to approximately 93.6% of the company's 5,343,594 outstanding ordinary shares immediately after the July 2025 redemptions.
• The company was delisted from the Nasdaq Global Market on September 24, 2024, due to non-compliance with minimum shareholder requirements and its securities are now quoted on Over-the-Counter (OTC) markets.
• As of June 30, 2025, the company had a working capital deficit of $452,710 and cash of $147,832.
• The Sponsor has provided multiple promissory notes for working capital: up to $160,000 (December 2024), up to $152,000 (July 2025), and up to $500,000 (October 2025).
• The company dismissed Marcum Asia CPAs LLP as its independent registered public accountants and engaged FundCertify CPA Professional Corporation, effective August 5, 2025.

Sentiment

Score: 2

Explanation: The company reported losses, experienced significant shareholder redemptions, was delisted from Nasdaq, and faces substantial doubt about its ability to continue as a going concern. While the business combination deadline was extended, the overall financial health and operational progress are highly concerning.

Positives

• Shareholders approved an extension of the business combination deadline to August 5, 2027, providing an additional two years to identify and complete an acquisition.
• The scope for potential business combinations was broadened to include entities with principal business operations in China (including Hong Kong and Macau), potentially increasing target opportunities.
• The Sponsor continues to provide financial support through non-interest bearing promissory notes, totaling up to $812,000, to cover expenses and working capital needs.

Negatives

• The company reported a net loss of $17,335 for Q2 2025 and $78,078 for the six months ended June 30, 2025, a significant decline from net income in the prior year periods.
• Substantial shareholder redemptions of 344,384 Class A ordinary shares for $4,078,485 drastically reduced the Trust Account balance to approximately $516,277.
• The company was delisted from the Nasdaq Global Market on September 24, 2024, and its securities are now quoted on Over-the-Counter (OTC) markets, potentially impacting liquidity and investor interest.
• A working capital deficit of $452,710 as of June 30, 2025, indicates ongoing financial strain and a need for additional financing.
• The company faces substantial doubt about its ability to continue as a going concern due to the mandatory liquidation if a business combination is not completed by August 5, 2027, and its reliance on non-obligatory sponsor financing.
• The Sponsor's ownership increased to approximately 93.6% of outstanding ordinary shares after redemptions, indicating a high concentration of control.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to the mandatory liquidation if a business combination is not consummated by August 5, 2027, and the need for additional financing without firm commitments.
• There is no assurance that the company's plans to complete a business combination will be successful within the extended period, potentially leading to liquidation.
• The company is dependent on the Sponsor for working capital loans, which are not obligated, posing a risk to its operational funding.
• Global social and political circumstances, including U.S.-China trade tensions and ongoing conflicts, may adversely affect the ability to consummate a business combination or the operations of a target business.
• The ability to raise equity and debt financing may be impacted by increased market volatility or decreased market liquidity, making third-party financing unavailable or on unacceptable terms.
• The delisting from Nasdaq and subsequent quotation on OTC markets may reduce the liquidity and attractiveness of the company's securities.
• If a business combination is not completed within the Combination Period, warrants and rights may expire worthless, resulting in a loss for holders.

Future Outlook

The company expects to continue incurring significant professional and transaction costs in pursuit of a business combination, for which it will require additional financing without current commitments. It has until August 5, 2027, to consummate a business combination, after which it faces mandatory liquidation. Management plans to address going concern uncertainty through completing a business combination and receiving financing under Working Capital Loans from the Sponsor, though the Sponsor is not obligated to make such loans.

Management Comments

• Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, along with the need to receive additional financing, raise substantial doubt about the Company’s ability to continue as a going concern.
• Management's plans in addressing this uncertainty are through the completion of a business combination and receiving financing under the Working Capital Loans; however, the Sponsor is not obligated to make any such loans.
• Our Certifying Officers concluded that, as of June 30, 2025, our disclosure controls and procedures were effective.

Industry Context

The company's situation reflects broader challenges in the SPAC market, characterized by increased shareholder redemptions and difficulties in identifying and closing suitable business combinations within initial timelines. Its delisting from Nasdaq and subsequent trading on OTC markets align with a trend of SPACs struggling to maintain listing requirements. The strategic decision to expand the target search to include entities in China (including Hong Kong and Macau) suggests an adaptation to market conditions, potentially seeking opportunities in regions perceived as more favorable or less saturated for SPAC mergers.

Comparison to Industry Standards

• The significant shareholder redemptions (over $4 million in July 2025, following $18 million in July 2024 and $190 million in August 2023) are substantially higher than typical SPAC redemption rates in a healthy market, indicating a lack of investor confidence in the company's ability to find a suitable target or the proposed extensions.
• The delisting from Nasdaq and subsequent quotation on OTC markets is a negative deviation from industry standards for publicly traded SPACs, which typically aim for listing on major exchanges to ensure liquidity and visibility.
• The repeated reliance on sponsor loans for working capital, totaling $812,000 in recent notes, suggests a struggle to cover operational expenses from other sources, which is common for SPACs nearing their dissolution deadline but highlights financial strain.
• The extension of the business combination deadline to August 5, 2027, while providing more time, also reflects the prolonged difficulty in identifying and executing a suitable merger, a common challenge for many SPACs in the current market.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently a party to any material litigation or other legal proceedings.
• The company is not aware of any legal proceeding, investigation, or claim that has a more than remote possibility of having a material adverse effect on its business, financial condition, or results of operations.

Related Party Transactions

• The Sponsor agreed to loan the Company up to $160,000 on December 9, 2024, up to $152,000 on July 14, 2025, and up to $500,000 on October 17, 2025, for expenses and working capital purposes. These loans are non-interest bearing and convertible into warrants at the Sponsor's option.
• On December 7, 2023, the Sponsor transferred 4,900,000 Class B ordinary shares to the Company in exchange for 4,900,000 Class A ordinary shares, subject to certain restrictions.
• The Initial Shareholders (including the Sponsor) agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period.

Stakeholder Impact

• Shareholders: Significant redemptions have reduced the Trust Account value per share and increased the Sponsor's ownership concentration. The delisting to OTC markets may reduce liquidity and investor interest. The extension provides more time for a business combination but prolongs uncertainty.
• Sponsor: Continues to provide financial support through loans, increasing its stake and influence. Bears the risk of loans if no business combination is completed.
• Management/Board: Significant turnover in leadership and board members, indicating a strategic shift or response to performance pressures. New management faces the challenge of securing a business combination.
• Underwriters: Entitled to a $7,000,000 deferred underwriting fee only upon completion of a business combination, which remains uncertain.

Next Steps

• Identify and consummate an initial business combination by August 5, 2027.
• Receive additional financing to cover professional and transaction costs.
• FundCertify CPA Professional Corporation to perform independent audit services for the fiscal year ending December 31, 2025, re-audit financial statements for fiscal years ended December 31, 2024 and 2023, and review unaudited interim financial statements for Q1, Q2, and Q3 2025.

Key Dates

Recommendation

The company faces severe challenges, including a net loss, substantial shareholder redemptions that have depleted the Trust Account, and a delisting from Nasdaq to OTC markets. The 'going concern' warning highlights fundamental viability issues. While the business combination deadline was extended and the target scope broadened, the high concentration of sponsor ownership post-redemptions and continued reliance on sponsor loans for basic operations indicate a distressed situation with a very low probability of a successful, value-creating business combination for public shareholders. The risk of warrants and rights expiring worthless is high.

Keywords

SPAC, Business Combination, 10-Q, Quarterly Report, Going Concern, Shareholder Redemption, Nasdaq Delisting, OTC Markets, Promissory Note, Working Capital, China Target, Corporate Governance, Management Change, Trust Account