FACT II Acquisition Corp.

FACT II Acquisition Corp. (the "Company") is a blank check company, incorporated as a Cayman Islands exempted company, whose primary business purpose is to effect a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses, referred to as its initial business combination ¹. The Company has not generated any revenues to date and does not anticipate generating operating revenues until the consummation of its initial business combination ². The Company's strategy focuses on leveraging its management team's experience and network to identify opportunities where a combination of capital, talent, and network can improve customer experience and drive stakeholder value ³.

The Company's core business model is that of a Special Purpose Acquisition Company (SPAC), which involves raising capital through an Initial Public Offering (IPO) and then seeking to acquire an existing operating business. Revenue generation is not expected until after the completion of this initial business combination ⁴. The Company's primary customer segments are not explicitly defined as it is a blank check company, but its strategy involves partnering with public and private companies, as well as large financial sponsors ⁵. The Company's leadership team has a broad network in both public and private sectors, spanning mature markets like the U.S. and Europe, and emerging markets such as Asia, Latin America, and Africa, which is expected to provide a range of potential business combination opportunities ⁶.

The Company has identified several criteria for evaluating prospective target businesses, including those with large addressable markets underpinning long-term growth prospects, significant revenue and earnings growth potential, a management team focused on profitable growth and operating free cash flow, distinct business strengths driving competitive differentiation, scalable operations, and uncorrelated returns with minimal cyclicality risk ⁷. The Company also seeks reputable management teams with well-defined visions and credible track records, whose skills complement the founders' expertise and whose interests align with investors ⁸.

For the fiscal year ended December 31, 2025, the Company reported a net income of $5,017,538 ⁹. This was primarily driven by interest income on cash held in the Trust Account of $7,188,186 ¹⁰, a change on overallotment liability of $26,558 ¹¹, and interest earned on a bank account of $27,824 ¹², offset by general and administrative expenses of $2,225,030 ¹³. As of December 31, 2025, the Company had cash of $544,791 ¹⁴ in its operating bank account and $183,785,456 ¹⁵ held in the Trust Account. The Company had a working capital deficiency of $613,884 ¹⁶ as of the same date.

The Company's IPO was consummated on November 27, 2024, raising gross proceeds of $175,000,000 ¹⁷ from the sale of 17,500,000 units at $10.00 per unit ¹⁸. Simultaneously, 663,125 private placement units were sold at $10.00 per unit, generating gross proceeds of $6,631,250 ¹⁹. Transaction costs amounted to $11,028,226 ²⁰, including a $3,500,000 ²¹ cash underwriting fee and $7,000,000 ²² in deferred underwriting fees. Cash used in operating activities for the year ended December 31, 2025, was $903,130 ²³.

A significant operational development is the Company's entry into a Business Combination Agreement on November 26, 2025, with Precision Aerospace & Defense Group, Inc. ("PAD") ²⁴. This agreement outlines a plan for the Company to domesticate as a Delaware corporation, followed by Merger Sub merging into PAD, with PAD surviving as a wholly-owned subsidiary of the Company ²⁵. The Business Combination is expected to close by March 31, 2026 ²⁶. In connection with this, Sponsor HoldCo has agreed to vote all its Class A and Class B ordinary shares in favor of the Business Combination ²⁷.

The Company's primary outlook is centered on the successful consummation of its proposed Business Combination with Precision Aerospace & Defense Group, Inc. ("PAD"), as per the agreement dated November 26, 2025 ²⁸. The Company has a window of up to 24 months from the closing of its initial public offering to complete an initial business combination, with the Business Combination Agreement with PAD falling within this timeframe ²⁹. If the proposed Business Combination with PAD is not consummated, the Company may seek an alternative target business ³⁰.

Regarding growth areas, the Company's strategy is to identify and acquire one or more businesses with a large addressable market, attractive long-term growth prospects, favorable secular trends, and superior unit economics that can be enhanced through diverse revenue drivers ³¹. The Company will evaluate businesses with significant potential for both organic growth and strategic mergers and acquisitions ³². The management team aims to leverage its experience in scaling businesses to accelerate growth in the acquired entity ³³.

The operational outlook involves the Company continuing to incur significant costs in pursuit of its acquisition plans ³⁴. Post-business combination, the Company intends to use the remaining proceeds from the Trust Account as working capital to finance the operations of the target business, make other acquisitions, and pursue growth strategies ³⁵. The Company's current executive offices are located at 14 Wall Street, 20th Floor, New York, New York 10005 ³⁶, and it does not intend to have any full-time employees prior to the completion of its initial business combination ³⁷.

In terms of planned capital allocation, the Company intends to use substantially all of the funds held in the Trust Account, including interest earned (net of franchise and income taxes and excluding deferred underwriting commissions), to complete its initial business combination ³⁸. The funds held outside the Trust Account, which amounted to $544,791 ³⁹ as of December 31, 2025, are primarily intended for identifying and evaluating target businesses, performing due diligence, and structuring and negotiating an initial business combination ⁴⁰. To fund working capital deficiencies or transaction costs, Sponsor HoldCo, the Sponsor, their affiliates, or certain directors and officers may loan funds, up to $2,000,000 ⁴¹ for each person, which may be convertible into Class A ordinary shares or units at $10.00 per share or unit ⁴².

The Company has flagged several structural headwinds and execution risks. The mandatory liquidation date, if a Business Combination does not occur by May 27, 2026, raises substantial doubt about the Company's ability to continue as a going concern ⁴³. Geopolitical instability, such as the ongoing Russia-Ukraine conflict and conflicts in the Middle East, could limit the Company's ability to complete its initial business combination due to increased market volatility, decreased market liquidity, and unavailability of third-party financing ⁴⁴. Additionally, ongoing inflation in the United States and elsewhere could make it more difficult to consummate a business combination ⁴⁵.

The Company faces several material risks, including the potential inability to complete the proposed Business Combination with PAD, which would result in substantial unrecoverable costs and difficulty in finding alternative financing or targets within the 24-month timeframe from the IPO closing, leading to liquidation where public shareholders may receive only $10.05 per share ⁴⁶, or less in certain circumstances, and warrants would expire worthless ⁴⁷. There is a risk that public shareholders may not have an opportunity to vote on the business combination, and even if a vote occurs, the sponsor and initial shareholders, who own at least 25% ⁴⁸ of the outstanding ordinary shares, have agreed to vote in favor, potentially overriding public shareholder sentiment ⁴⁹. The ability of public shareholders to redeem shares for cash may make the Company's financial condition unattractive to potential targets, and a large number of redemptions could prevent meeting closing conditions requiring a minimum net worth or cash, potentially diluting non-redeeming shareholders due to deferred underwriting commissions of $7,000,000 ⁵⁰. Geopolitical instability, including conflicts in Ukraine and the Middle East, and instability in Venezuela, could adversely affect the search for and consummation of a business combination, leading to market disruptions and increased volatility ⁵¹. Changes in directors' and officers' liability insurance could increase costs and difficulty in completing a business combination ⁵². The Company's status as a blank check company with no operating history and no revenues means there is no basis to evaluate its ability to achieve its business objective ⁵³. A working capital deficiency of $613,884 ⁵⁴ as of December 31, 2025, and a weak cash position of $544,791 ⁵⁵ raise substantial doubt about its ability to continue as a going concern ⁵⁶. If the Company is deemed an investment company under the Investment Company Act, it would face burdensome compliance requirements and restricted activities, hindering its ability to complete a business combination ⁵⁷. Conflicts of interest exist due to the management team's and sponsor's ownership of founder shares, purchased at approximately $0.0037 per share ⁵⁸, which could lead to substantial profit even if public shareholders incur losses ⁵⁹. The nominal purchase price of founder shares and the vesting of restricted Class A shares may result in significant dilution to the implied value of public shares upon business combination ⁶⁰. Third-party claims against the trust account could reduce the per-share redemption amount below $10.05 ⁶¹, and the sponsor's indemnification obligations may not be sufficient to cover such claims ⁶².

Management's message to shareholders emphasizes their extensive experience in acquiring, building, operating, and scaling global financial services and complex operations businesses, leveraging a broad network of relationships to source attractive targets ⁶³. They highlight their proven track record, including the successful funding and business combination of Freedom Acquisition I Corp. with Complete Solaria, Inc. ⁶⁴. The strategic priorities are centered on identifying and executing an initial business combination with a target business that possesses a large addressable market, significant revenue and earnings growth potential, a management team focused on profitable growth and operating free cash flow, distinct competitive differentiation, scalable operations, and uncorrelated returns with minimal cyclicality risk ⁶⁵. The Company has entered into a Business Combination Agreement with Precision Aerospace & Defense Group, Inc. on November 26, 2025 ⁶⁶, with the goal of consummating this transaction by March 31, 2026 ⁶⁷. Management intends to use substantially all funds in the Trust Account, including interest earned, to complete this initial business combination ⁶⁸. They acknowledge the working capital deficiency of $613,884 ⁶⁹ as of December 31, 2025, and the potential need for additional capital through loans from affiliates, though these affiliates are not obligated to provide such loans ⁷⁰.