10-Q: Athena II SPAC Faces Going Concern Doubt Amid Delisting

Athena Technology Acquisition Corp. II reports a Q3 2025 net income driven by excise tax reversal, but faces significant liquidity challenges and going concern doubt while pursuing a merger with Ace Green Recycling.

Summary

• Reported a net income of $508,085 for the three months ended September 30, 2025, a significant improvement from a net loss of $(314,920) in the prior year period.
• The net income for Q3 2025 was primarily driven by an $888,340 reversal of prior year interest and penalties on excise tax liability, following new IRS guidance.
• For the nine months ended September 30, 2025, the company recorded a net loss of $(959,779), an improvement from a net loss of $(1,151,865) for the same period in 2024.
• Cash balance increased to $527,152 as of September 30, 2025, from $142,260 at December 31, 2024.
• Investments held in the Trust Account significantly decreased to $293,283 as of September 30, 2025, from $3,666,439 at December 31, 2024, primarily due to substantial redemptions.
• The company has a working capital deficit of $7,689,116 as of September 30, 2025.
• A Business Combination Agreement with Ace Green Recycling, Inc. was entered into on December 4, 2024, with a potential issuance of up to 10,500,000 earnout shares to Ace Green Recycling shareholders and 1,500,000 to the Sponsor.
• The company was delisted from NYSE American on December 30, 2024, due to failure to consummate a business combination within 36 months and now trades on OTC Pink.
• Management has identified a material weakness in internal control over financial reporting related to the misallocation of restricted funds and subsequent financial statement restatements.
• The company's liquidity position and mandatory liquidation date of June 14, 2026, raise substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 2

Explanation: The sentiment is highly negative due to the company's delisting, significant reduction in trust account assets, explicit 'going concern' doubt, and identified material weaknesses in internal controls. While there was a net income in Q3 2025, it was primarily driven by a non-recurring excise tax reversal, not operational performance. The repeated extensions and reliance on related-party funding also indicate underlying struggles.

Positives

• Reported a net income of $508,085 for the three months ended September 30, 2025, compared to a net loss in the prior year.
• Reversed $3,688,337 of excise tax liabilities, including $888,340 in prior year interest and penalties, due to new IRS guidance clarifying that SPACs IPO'd before August 16, 2022, are not subject to excise tax on redemptions.
• Net cash used in operating activities significantly decreased to $(660,423) for the nine months ended September 30, 2025, from $(2,756,485) in the prior year period.
• Secured additional funding through related party promissory notes and subscription agreements totaling $1,800,000 in Working Capital Loans as of September 30, 2025, and a convertible note of $422,182.

Negatives

• The company has a significant working capital deficit of $7,689,116 as of September 30, 2025.
• Investments held in the Trust Account have drastically decreased to $293,283 from $3,666,439 at December 31, 2024, due to substantial redemptions.
• Delisted from NYSE American on December 30, 2024, and now trades on OTC Pink, indicating a loss of major exchange listing status.
• Management concluded that disclosure controls and procedures were not effective as of September 30, 2025, due to a material weakness.
• Previously misallocated $669,440 of restricted funds from the Trust Account for general operating expenses, which was later replenished by a Sponsor loan.
• The company's liquidity position and mandatory liquidation date of June 14, 2026, raise substantial doubt about its ability to continue as a going concern.

Risks

• Inability to successfully complete a Business Combination with Ace Green Recycling or any other target business within the Combination Period (extended to June 14, 2026).
• The company's liquidity position and mandatory liquidation and subsequent dissolution raise substantial doubt about its ability to continue as a going concern.
• Potential for further reductions in the Trust Account balance due to redemptions, impacting funds available for a Business Combination.
• Continued uncertainty and volatility in U.S. and global financial and economic conditions, including tariffs and trade restrictions, could adversely impact the business.
• Disruptions and volatility in financial markets may increase capital costs and limit access to financing sources, hindering the ability to consummate a Business Combination.
• Material weakness in internal control over financial reporting could lead to additional material misstatements not prevented or detected timely.

Future Outlook

The company intends to complete its initial Business Combination with Ace Green Recycling before the mandatory liquidation date of June 14, 2026. However, there is no assurance that the company will be able to consummate any Business Combination by this date. The company expects to continue incurring significant costs in pursuit of its acquisition plans and will likely need to raise additional funds to satisfy further tax liabilities, operational costs, and closing costs prior to the Business Combination closing.

Management Comments

• Management does not believe that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.
• Management has determined that the Company's liquidity position and mandatory liquidation and subsequent dissolution raise substantial doubt about the Company's ability to continue as a going concern.
• Management is committed to the continuous improvement of internal control over financial reporting and will continue to diligently review internal control over financial reporting.

Industry Context

Athena Technology Acquisition Corp. II operates as a Special Purpose Acquisition Company (SPAC) in a challenging market environment. The significant redemptions and subsequent reduction in the Trust Account balance reflect broader investor skepticism and redemption trends seen in the SPAC industry. The delisting from NYSE American to OTC Pink further highlights the difficulties faced by SPACs that fail to complete a business combination within their mandated timeframe. The reversal of excise tax liabilities, while positive for Athena, indicates evolving regulatory clarity for SPACs, which could impact other companies in the sector.

Comparison to Industry Standards

• The significant redemptions of Class A common stock (e.g., 23,176,961 shares in June 2023, 910,258 in March 2024, 977,625 in December 2024, and 285,269 in September 2025) are indicative of a common trend among SPACs where public shareholders opt to redeem their shares rather than participate in the proposed business combination, especially as the deadline approaches or if the target company is perceived as less attractive. This is comparable to other SPACs that have seen high redemption rates, such as Digital World Acquisition Corp. (DWAC) or Gores Holdings VIII, which also experienced substantial redemptions prior to their respective de-SPAC transactions.
• The delisting from NYSE American due to failure to consummate a business combination within 36 months is a common outcome for SPACs that struggle to find or close a suitable target. This mirrors situations like those faced by other SPACs that have been delisted or moved to OTC markets after failing to meet exchange listing requirements or complete a merger within their specified timelines.
• The material weakness in internal control over financial reporting, particularly concerning the misallocation of restricted funds, suggests a lapse in financial governance that is a concern across all public companies, not just SPACs. While specific comparable incidents are not detailed, such weaknesses are generally viewed negatively by investors and regulators, similar to issues identified in companies like Enron or WorldCom, albeit on a much smaller scale and different context.
• The reliance on related-party loans and subscription agreements (e.g., from Sponsor, Polar Multi-Strategy Master Fund, Kevin Wright and Jeanine Percival Wright Revocable Trust) for working capital and extension payments is a typical characteristic of SPACs nearing their deadline, as they often lack independent operating revenue. This is a common funding mechanism, but the increasing reliance and the terms (e.g., conversion into equity) can dilute public shareholders and are often scrutinized by investors, similar to how PIPE (Private Investment in Public Equity) deals are structured in other SPAC transactions.

Corporate Governance

Related Party Transactions

• Due to related party: $211,029 as of September 30, 2025, representing payments of company expenses by the Sponsor and accrued administrative support services fees.
• Convertible note related party: $422,182 unsecured promissory note issued to the Sponsor on July 26, 2024, non-interest bearing and convertible into equity securities.
• Working Capital Loans: Total outstanding balance of $1,800,000 as of September 30, 2025, from the Sponsor or affiliates for working capital and extension payments, potentially convertible into units of the post-Business Combination entity.
• Subscription Agreements: Multiple agreements with Polar Multi-Strategy Master Fund and Kevin Wright and Jeanine Percival Wright Revocable Trust for capital contributions, which were loaned to the Company by the Sponsor, with provisions for repayment and issuance of Class A common stock upon business combination closing.
• Support Services: Agreement to pay the Sponsor $10,000 per month for office space, utilities, and administrative services.

Stakeholder Impact

• Shareholders: Significant redemptions have reduced the number of outstanding public shares and the Trust Account balance. Delisting to OTC Pink reduces liquidity and market visibility. The 'going concern' doubt poses a substantial risk to remaining shareholders.
• Creditors: The company's liquidity challenges and going concern doubt increase credit risk. Related party loans are a significant portion of liabilities.
• Management/Sponsor: The Sponsor continues to provide financial support through loans and capital contributions to extend the combination period and cover working capital, indicating a vested interest but also increased exposure to the company's risks. The Sponsor is also eligible for earnout shares post-merger.
• Underwriters: Citigroup waived deferred underwriting commissions contingent on the successful Business Combination with Ace Green Recycling, meaning they will only receive payment if the merger closes.

Next Steps

• Complete the initial Business Combination with Ace Green Recycling, Inc. before June 14, 2026.
• Continue implementing remediation efforts to address the identified material weakness in internal control over financial reporting.
• Potentially raise additional funds to cover tax liabilities, operational costs, and closing costs for the Business Combination.
• File a shelf registration statement for the resale of common stock and other equity securities held by certain Ace Green Recycling equity holders and the Sponsor within 30 days after the closing of the business combination.

Key Dates

Recommendation

The company faces severe challenges, including a 'going concern' warning, delisting from a major exchange, and a drastically depleted Trust Account due to high redemptions. While a net income was reported for Q3 2025, it was primarily due to a non-recurring excise tax reversal, not sustainable operational performance. The identified material weakness in internal controls further undermines investor confidence. Despite ongoing efforts to complete a business combination and secure related-party funding, the fundamental risks to liquidity and long-term viability are overwhelming, making the stock a strong sell for any seasoned investor or institution.

Keywords

SPAC, Business Combination, Ace Green Recycling, 10-Q, Quarterly Report, Going Concern, Delisting, Trust Account, Redemptions, Excise Tax, Financial Reporting, Corporate Governance, Liquidity, Merger, OTC Pink