10-Q: Concord II Faces Liquidation Risk Amid Low Cash

Concord Acquisition Corp II reports critically low cash, significant tax liabilities, and substantial doubt about its ability to continue as a going concern, with its merger agreement past its deadline.

Summary

• Concord Acquisition Corp II, a blank check company, reported a cash balance of $20,494 outside its Trust Account as of June 30, 2025.
• The cash held in the Trust Account has significantly decreased to $97,900 as of June 30, 2025, down from $23,791,131 at December 31, 2024, due to substantial share redemptions.
• The company has an excise tax liability of $2,621,114, including $170,738 in interest and penalties, and currently has insufficient funds to pay this liability.
• The proposed merger agreement with Events.com, Inc. is past its 'Outside Date' of May 31, 2025, and the company is in negotiations for an amendment, with no assurance of an extension.
• Management has determined that there is substantial doubt about the company's ability to continue as a going concern due to potential mandatory liquidation if a Business Combination is not completed by December 31, 2025.
• The company's Class A common stock, Units, and warrants were delisted from NYSE American and now trade on OTC Markets (OTCID and OTCQB).
• Net income for the six months ended June 30, 2025, was $462,043, a decrease from $1,796,413 for the same period in 2024.
• Operating costs for the six months ended June 30, 2025, were $833,046, a decrease from $910,715 for the same period in 2024.

Sentiment

Score: 2

Explanation: The company faces severe liquidity issues, a high risk of liquidation, an expired merger agreement deadline, delisting, and internal control deficiencies. The extremely low trust account balance and inability to pay taxes are critical negative indicators, pointing to a highly precarious financial position.

Positives

• Net income for the three months ended June 30, 2025, was $1,453,017, an increase from $1,106,895 for the same period in 2024.
• Operating costs decreased for both the three months ($358,705 vs. $565,464) and six months ($833,046 vs. $910,715) ended June 30, 2025, compared to 2024.
• Two underwriters waived their right to receive deferred underwriters commissions totaling $9,460,293.
• Secured a Capital Contribution Note for up to $600,000 and an unsecured promissory note for up to $650,000 from the Sponsor for working capital.
• Received $1,000,000 from Events.com as Interim Financing.

Negatives

• Cash held outside the Trust Account is critically low at $20,494 as of June 30, 2025.
• The Trust Account balance has been severely depleted to $97,900 due to significant redemptions, down from $23,791,131 at December 31, 2024.
• The company has an excise tax liability of $2,621,114, including $170,738 in interest and penalties, and lacks sufficient funds to pay it.
• The merger agreement with Events.com is past its 'Outside Date' of May 31, 2025, and an extension is not assured, risking termination.
• Management has expressed 'substantial doubt about the Company's ability to continue as a going concern' due to potential mandatory liquidation.
• The company was delisted from NYSE American and now trades on less liquid OTC Markets.
• Net income for the six months ended June 30, 2025 ($462,043), is significantly lower than the same period in 2024 ($1,796,413).
• Income from cash held in the Trust Account drastically decreased to $134,794 for the six months ended June 30, 2025, from $2,936,231 in 2024.
• Internal control over financial reporting was deemed 'not effective' due to a material weakness in accounting for complex financial instruments.

Risks

• Failure to complete a Business Combination by December 31, 2025, or any extended period, will lead to mandatory liquidation and dissolution.
• Insufficient funds available to operate the business prior to completing a Business Combination.
• Need for additional financing to complete a Business Combination or meet obligations if significant redemptions occur.
• Proceeds in the Trust Account could be subject to claims of creditors, potentially having priority over public stockholders.
• Uncertainty regarding the ability to consummate the Business Combination with Events.com due to the Merger Agreement being past its 'Outside Date' and ongoing negotiations.
• Potential for the U.S. federal 1% excise tax on stock repurchases to reduce cash available for a Business Combination.
• Global economic consequences from military conflicts and changes in international trade policies.
• Material weakness in internal control over financial reporting regarding complex financial instruments.
• Reliance on the Sponsor for working capital loans.
• Inherent uncertainty in fair value measurements for warrant liability and Capital Contribution Note due to unobservable inputs and management estimates.

Future Outlook

The company intends to consummate a Business Combination on or before December 31, 2025, or during any Extension Period, but acknowledges uncertainty in achieving this. It expects to incur increased expenses as a public company and for due diligence related to acquisition plans. The company may need to obtain additional financing to complete a Business Combination or meet its obligations, especially if further significant redemptions occur. The company is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBB) tax reform but does not currently believe it will have a material impact on its effective tax rate in the current year. It is also evaluating the impact of adopting ASU 2024-03, a new accounting standard for expense disaggregation disclosures.

Management Comments

• "Management has determined that the mandatory liquidation, should a Business Combination not occur and potential subsequent dissolution, as well as the potential for the Company to have insufficient funds available to operate its business prior to completing a Business Combination, raise substantial doubt about the Company’s ability to continue as a going concern."
• "The Company does not provide any assurance that both parties will ultimately agree to an extension, which could result in termination of the Merger Agreement."
• "Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures... were not effective as of June 30, 2025."
• "The Company has made changes in its internal control over financial reporting to enhance our processes to identify and appropriately apply applicable accounting requirements... The Company can offer no assurance that these changes will ultimately have the intended effects."

Industry Context

As a Special Purpose Acquisition Company (SPAC), Concord Acquisition Corp II is operating in a challenging market environment characterized by increased investor redemptions and regulatory scrutiny. The company's significant redemptions, resulting in a critically low Trust Account balance, are indicative of broader trends where SPACs struggle to retain capital through the de-SPAC process, especially as deadlines approach. The delisting from NYSE American and subsequent move to OTC Markets reflects a loss of institutional investor confidence and reduced liquidity, a common outcome for SPACs that fail to complete a timely and value-accretive business combination. The ongoing negotiations for the merger agreement extension with Events.com highlight the difficulties in closing SPAC deals, particularly when facing tight deadlines and adverse financial conditions.

Comparison to Industry Standards

• The company's Trust Account balance of $97,900, after starting with $250,000,000, indicates an extremely high redemption rate, significantly worse than the average SPAC. Many SPACs aim to retain a minimum cash condition (e.g., $50 million to $100 million) for their de-SPAC transaction, a threshold this company is far from meeting.
• The delisting from NYSE American and subsequent trading on OTC Markets is a severe negative deviation from industry standards, as major exchanges offer greater liquidity, visibility, and investor confidence compared to over-the-counter markets. Successful SPACs typically maintain their listing on major exchanges post-merger.
• Management's disclosure of 'substantial doubt about the Company's ability to continue as a going concern' is a critical red flag, indicating a high probability of liquidation if the business combination with Events.com is not completed by December 31, 2025. This is a significant departure from the expected trajectory of a SPAC, which is to either successfully merge or liquidate in an orderly manner, returning funds to shareholders.
• The identified material weakness in internal control over financial reporting, specifically concerning the accounting for complex financial instruments, suggests a deficiency in corporate governance and financial oversight that falls below best practices for publicly traded companies.

Management Changes

Corporate Governance

Related Party Transactions

• Sponsors paid $25,000 for Class B common stock and transferred an aggregate of 75,000 Founder Shares to three members of the board of directors.
• The company issued an unsecured promissory note for up to $650,000 to the Sponsor, which amended and superseded a previous note for up to $350,000. No amount was outstanding as of June 30, 2025.
• The company pays an affiliate of its Sponsor $20,000 per month for office space, utilities, and secretarial/administrative support. $360,000 was outstanding as of June 30, 2025.
• An outstanding balance of $364,730 was due to an affiliate of the Sponsor as of June 30, 2025, including administrative service fees and other expenses.
• The company entered into a March Subscription Agreement with the Sponsor and a Capital Contribution Note Investor, under which the Sponsor loaned $600,000 to the company for working capital.

Stakeholder Impact

• **Shareholders (Class A)**: Face significant risk of liquidation if the Business Combination fails, potentially receiving only a small per-share amount from the Trust Account. Delisting to OTC markets reduces liquidity and visibility.
• **Shareholders (Class B/Sponsor)**: The Sponsor has agreed to forfeit shares and may be liable for transaction expenses exceeding $10 million, indicating potential dilution or financial burden.
• **Warrant Holders**: Warrants will expire worthless if the Business Combination is not completed by the deadline.
• **Events.com**: The proposed merger is at risk due to the SPAC's severe financial issues and the expired 'Outside Date' of the Merger Agreement.
• **Creditors**: Claims of creditors could have priority over public stockholders if the Trust Account is liquidated.
• **Underwriters**: Two underwriters waived deferred commissions, impacting their expected compensation from the IPO.

Next Steps

• Negotiate an amendment to the Merger Agreement with Events.com for an extension to the 'Outside Date'.
• Complete the initial Business Combination with Events.com by December 31, 2025.
• Address the outstanding excise tax liability and associated interest and penalties.
• Improve internal control over financial reporting to remediate the identified material weakness.
• Potentially seek additional financing to support operations and the Business Combination.

Key Dates

Recommendation

The company faces an extremely high risk of liquidation by December 31, 2025, due to a critically low Trust Account balance ($97,900) and an expired merger agreement 'Outside Date' with no assured extension. It has insufficient funds to cover its substantial excise tax liability, has been delisted to less liquid OTC markets, and management has expressed 'substantial doubt about the Company's ability to continue as a going concern.' Furthermore, a material weakness in internal controls over financial reporting indicates significant operational deficiencies. These combined factors present an overwhelmingly negative outlook with minimal to no potential for recovery or upside for investors.

Keywords

SPAC, Blank Check Company, Business Combination, Events.com, Merger, 10-Q, SEC Filing, Financial Report, Liquidity, Going Concern, Redemption, Trust Account, Warrant Liability, Capital Raise, Corporate Governance, Internal Controls, Delisting, OTC Markets