10-Q: Athena SPAC Faces Delisting, Tax Woes Amid Merger Push

Athena Technology Acquisition Corp. II reports significant losses, mounting excise tax liabilities, and a going concern doubt, while actively pursuing a merger with Ace Green Recycling and seeking further extension.

Summary

• Athena Technology Acquisition Corp. II (SPAC) reported a net loss of $1,467,864 for the six months ended June 30, 2025, an increase from $836,945 in the same period of 2024.
• The company faces substantial doubt about its ability to continue as a going concern due to its liquidity position and a mandatory liquidation date of September 14, 2025, if a business combination is not completed or extended.
• Total liabilities increased to $20,518,689 as of June 30, 2025, from $19,041,812 at December 31, 2024, driven by increased accounts payable and accrued expenses, and related party notes.
• A significant excise tax liability of $3,688,337 (including interest and penalties) is outstanding as of June 30, 2025, with the IRS asserting $3,284,389.20 for the 2023 liability, which remains unpaid.
• The company's Class A common stock, units, and redeemable warrants were delisted from NYSE American on December 30, 2024, and now trade on OTC Pink.
• Athena has entered into a Business Combination Agreement with Ace Green Recycling, Inc., under which Ace Green Recycling security holders will become security holders of Athena, and Athena will issue up to 10,500,000 Earnout Shares to Ace Green Recycling shareholders and 1,500,000 shares to the Sponsor.
• The company has secured additional funding through promissory notes and subscription agreements with its Sponsor, Polar Multi-Strategy Master Fund, and Kevin Wright and Jeanine Percival Wright Revocable Trust, totaling $2,157,868 in Working Capital Loans outstanding as of June 30, 2025.
• A material weakness in internal control over financial reporting was identified due to the improper use of restricted funds from the Trust Account for general operating expenses, which has since been replenished by a Sponsor loan.

Sentiment

Score: 2

Explanation: The sentiment is highly negative due to significant and increasing net losses, a substantial and unpaid excise tax liability, a declared going concern doubt, and the company's delisting from a major exchange. While a business combination agreement is in place and funding is being secured from related parties, these positives are overshadowed by the severe financial distress, operational challenges, and the precarious nature of its continued existence as a public entity.

Positives

• A Business Combination Agreement has been signed with Ace Green Recycling, Inc., providing a clear path for the SPAC's primary objective.
• Citigroup Global Markets Inc. has agreed to waive $8,956,250 in deferred underwriting commissions upon the successful completion of the business combination with Ace Green Recycling.
• The company continues to receive financial support from its Sponsor and other investors (Polar Multi-Strategy Master Fund, Kevin Wright and Jeanine Percival Wright Revocable Trust) through loans and capital contributions to cover working capital and extension payments.
• Management is actively seeking a further extension of the business combination deadline until June 14, 2026, demonstrating continued efforts to complete the merger.

Negatives

• The company reported a net loss of $1,467,864 for the six months ended June 30, 2025, significantly higher than the $836,945 loss for the same period in 2024.
• A substantial doubt exists about the company's ability to continue as a going concern due to its current liquidity position and the approaching mandatory liquidation date of September 14, 2025.
• The aggregate excise tax payable, including interest and penalties, amounted to $3,688,337 as of June 30, 2025, with the 2023 and 2024 liabilities largely unpaid and accruing further penalties and interest.
• The company's Class A common stock, units, and redeemable warrants were delisted from NYSE American on December 30, 2024, and now trade on OTC Pink, indicating a loss of exchange listing status.
• Interest income on investments held in the Trust Account significantly decreased to $76,895 for the six months ended June 30, 2025, from $512,940 in the prior year period.
• General and administrative expenses increased to $1,360,614 for the six months ended June 30, 2025, from $1,158,045 in the prior year period.
• A material weakness in internal control over financial reporting was identified due to the improper use of restricted funds from the Trust Account for general operating expenses, indicating control deficiencies.

Risks

• Substantial doubt about the ability to continue as a going concern due to insufficient working capital and borrowing capacity to meet needs through the mandatory liquidation date of September 14, 2025.
• Failure to complete the initial Business Combination with Ace Green Recycling by the extended deadline, which could lead to liquidation and warrant holders receiving no funds.
• Significant and increasing U.S. federal excise tax liabilities, including penalties and interest, which remain largely unpaid and could further reduce cash available for operations or redemptions.
• The delisting of securities from NYSE American and subsequent trading on OTC Pink may reduce liquidity and investor interest.
• Reliance on the Sponsor and other related parties for ongoing funding of working capital and extension payments, with no assurance of continued support.
• Potential adverse impact from challenging and uncertain macroeconomic conditions, including geopolitical tensions, inflation, interest rates, and trade issues, on the ability to consummate a business combination.
• Material weakness in internal control over financial reporting, which could lead to further financial misstatements or operational inefficiencies.
• Warrants may expire worthless if a business combination is not completed within the Combination Period.
• The deferred underwriting commissions of $8,956,250 are contingent on the successful Business Combination with Ace Green Recycling; if the merger fails, these fees may still be owed or impact the Trust Account.

Future Outlook

The company expects to continue incurring significant costs in pursuit of its acquisition plans and does not anticipate generating operating revenues until after the completion of its initial business combination. Management has determined there is not sufficient time to complete the initial Business Combination before the mandatory liquidation date of September 14, 2025, and is seeking stockholder approval to extend this date to June 14, 2026. There is no assurance that the company will be able to extend the mandatory liquidation date or consummate any business combination by the proposed new date.

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 continues to evaluate the macroeconomic environment as a result of challenging and uncertain market conditions, and while it is reasonably possible that market conditions could have a negative effect on identifying a target company for and consummating a business combination, the specific impact is not readily determinable.

Industry Context

Athena Technology Acquisition Corp. II operates as a Special Purpose Acquisition Company (SPAC), a segment of the financial market focused on acquiring private companies to take them public. The company's proposed business combination with Ace Green Recycling, Inc. places it within the battery recycling industry, a sector gaining increasing attention due to the global push for sustainable energy and electric vehicle adoption. The SPAC market has faced increased scrutiny and redemptions in recent years, making it challenging for SPACs to complete mergers. Athena's ongoing struggles with extensions, redemptions, and delisting reflect broader difficulties within the SPAC industry, where many blank-check companies are racing against liquidation deadlines and facing high investor redemption rates. The company's pivot to OTC Pink trading further highlights the challenges faced by SPACs that fail to complete a timely merger or maintain exchange listing standards.

Comparison to Industry Standards

• Compared to other SPACs, Athena's high redemption rates (e.g., 23,176,961 shares redeemed in June 2023, 910,258 in March 2024, 977,625 in December 2024) are indicative of a challenging market environment for SPACs, where investor confidence and willingness to hold shares through extensions have significantly declined.
• The company's delisting from NYSE American and move to OTC Pink is a negative outlier compared to successful SPACs that complete their business combinations and maintain major exchange listings, reflecting a failure to meet continued listing standards due to the inability to consummate a business combination within the required timeframe.
• The significant and growing excise tax liability, coupled with the company's inability to pay it, suggests a more severe financial strain than typically seen in well-managed SPACs, which usually have sufficient funds or clear plans to cover such obligations.
• The reliance on continuous related-party loans and capital contributions from the Sponsor and specific investors (Polar, Kevin Wright and Jeanine Percival Wright Revocable Trust) for operational expenses and extension payments is common for SPACs nearing their liquidation deadline but highlights a lack of independent funding sources or a robust trust account balance after redemptions, unlike SPACs that maintain substantial trust assets.
• The identified material weakness in internal control over financial reporting, specifically regarding the misuse of restricted funds, indicates a governance issue that is not standard for well-controlled public companies, including SPACs, and could deter potential investors or partners.

Corporate Governance

Related Party Transactions

• The Sponsor purchased 10,062,500 Founder Shares for $25,000 on August 31, 2021.
• The Sponsor purchased 950,000 Private Placement Units for $9,500,000 and an additional 3,750 Private Placement Units for $37,500.
• The Sponsor converted 8,881,250 Class B common stock shares into Class A common stock on June 21, 2023.
• Due to related party amounted to $211,029 as of June 30, 2025, representing payments of company expenses by the Sponsor and accrued administrative support services fees.
• The company issued an unsecured promissory note to the Sponsor for $422,182 on July 26, 2024, which is non-interest bearing and convertible into equity.
• An unsecured and non-interest-bearing promissory note for $1,500,000 was issued to the Sponsor on October 10, 2024 (effective April 10, 2024), for monthly extension payments and working capital.
• The Sponsor loaned funds to the company from contributions by Polar Multi-Strategy Master Fund ($500,000 total as of Dec 6, 2024, and an additional $400,000 on Aug 11, 2025) and Kevin Wright and Jeanine Percival Wright Revocable Trust ($500,000 on Feb 9, 2025) to fund extensions and working capital.
• The company pays the Sponsor a monthly fee of $10,000 for office space, utilities, and administrative services.
• The Sponsor has agreed to be liable to the company for claims by third parties or target businesses that reduce the Trust Account below a certain threshold, with exceptions.

Stakeholder Impact

• **Shareholders:** Face significant risk of loss due to the company's going concern doubt, potential liquidation, and the delisting of shares to OTC Pink, which reduces liquidity. Existing shareholders have experienced substantial redemptions and dilution from new share issuances related to funding.
• **Sponsor (Athena Technology Sponsor II, LLC):** Continues to provide significant financial support through loans and capital contributions, indicating a strong commitment to the business combination, but also bears substantial financial risk if the merger fails or the company liquidates.
• **Ace Green Recycling (Target Company):** The proposed merger is critical for Ace Green Recycling to become a public entity, but the SPAC's financial instability and ongoing delays pose a risk to the successful completion and timing of the transaction.
• **Creditors (including IRS):** The company has significant unpaid excise tax liabilities and other accrued expenses, which could lead to further penalties or legal action if not resolved, impacting the company's ability to meet its obligations.
• **Underwriters (Citigroup):** Their deferred underwriting commissions of $8,956,250 are contingent on the successful business combination, meaning they face a risk of not receiving these fees if the merger does not close.

Next Steps

• Hold a special meeting on September 10, 2025, for stockholders to vote on a proposal to amend the Charter to extend the business combination period to June 14, 2026.
• Continue efforts to consummate the Business Combination with Ace Green Recycling.
• Address and resolve the outstanding excise tax liabilities, including penalties and interest, and file the 2024 excise tax return.
• Continue implementing remediation efforts to address the identified material weakness in internal control over financial reporting.
• Repay the balance of the Polar Capital Investment and Kevin Wright and Jeanine Percival Wright Revocable Trust contributions within five business days of the De-SPAC Closing.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial and increasing net loss, a significant working capital deficit, and a declared 'going concern' doubt. The mounting, unpaid excise tax liabilities, coupled with the IRS asserting a large claim, present an immediate and critical financial burden. The delisting from NYSE American to OTC Pink severely impacts liquidity and investor confidence. While a business combination agreement with Ace Green Recycling exists, the repeated extensions and the company's precarious financial state make its successful completion highly uncertain. The heavy reliance on related-party funding, which is essentially debt that needs to be repaid upon closing, adds to the risk. Given the high probability of liquidation, the significant financial liabilities, and the lack of a clear path to solvency without a highly uncertain business combination, the stock carries extreme risk and is likely to see further value erosion.

Keywords

SPAC, Special Purpose Acquisition Company, Ace Green Recycling, Business Combination, Merger, 10-Q, Quarterly Report, SEC Filing, Going Concern, Excise Tax, Delisting, Trust Account, Working Capital, Related Party Loans, Corporate Governance, Financial Reporting, Battery Recycling