FACT II Acquisition Corp.

FACT II Acquisition Corp. is a blank check company, incorporated in the Cayman Islands, whose primary business purpose is to effect a business combination with one or more operating businesses 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 is to identify opportunities where a combination of capital, talent, and network can improve customer experience and drive value for stakeholders, leveraging its management team's experience to improve profitability and demonstrate growth across mature and emerging markets ³.

The company's core business model revolves around identifying and acquiring a target business. It generates non-operating income from interest on cash held in its Trust Account ⁴. The primary customer segments are not explicitly defined as the company is a Special Purpose Acquisition Company (SPAC) seeking an acquisition. The company's leadership team has an extensive network supporting partnerships with public and private companies, as well as large financial sponsors, including senior executives, investment bankers, private equity funds, venture capital firms, and private business owners ⁵.

The company has identified several general criteria for evaluating prospective target businesses, including a large addressable market underpinning long-term growth prospects, significant revenue and earnings growth potential, a management team focused on profitable long-term growth and operating free cash flow, distinct business strengths driving competitive differentiation and attractive unit economics, scalable operations, and uncorrelated returns with minimal cyclicality risk ⁶. The company also seeks a reputable management team with a well-defined vision and credible track record, whose skills complement the founders' expertise and whose interests align with investors ⁷.

For the fiscal year ended December 31, 2025, FACT II Acquisition Corp. reported a net income of $5,017,538 ⁸. This was primarily driven by interest income on cash held in the Trust Account of $7,188,186 ⁹, a change on overallotment liability of $26,558 ¹⁰, and interest earned on a bank account of $27,824 ¹¹, offset by general and administrative expenses of $2,225,030 ¹². As of December 31, 2025, the company had cash of $544,791 in its operating bank account ¹³ and $183,785,456 held in the Trust Account ¹⁴. The company had a working capital deficiency of $613,884 as of the same date ¹⁵. For the period from June 19, 2024 (inception) through December 31, 2024, the company had a net loss of $71,891 ¹⁶.

The company consummated its Initial Public Offering (IPO) on November 27, 2024, issuing 17,500,000 units at $10.00 per unit, generating gross proceeds of $175,000,000 ¹⁷. Simultaneously, it sold 663,125 private placement units at $10.00 per unit, generating gross proceeds of $6,631,250 ¹⁸. Total transaction costs incurred were $11,028,226, comprising a $3,500,000 cash underwriting fee and $7,000,000 in deferred underwriting fees, plus $528,226 in other offering costs ¹⁹. The over-allotment option expired unexercised on January 10, 2025, resulting in the forfeiture of 875,000 founder shares by Sponsor HoldCo ²⁰.

On November 26, 2025, the company entered into a Business Combination Agreement with Precision Aerospace & Defense Group, Inc. (PAD) ²¹. This agreement outlines a domestication of FACT II Acquisition Corp. as a Delaware corporation, followed by a merger of a wholly-owned subsidiary (Merger Sub) into PAD, with PAD surviving as a wholly-owned subsidiary of the company ²². The merger consideration for PAD shareholders includes cash payments and a number of shares of FACT Common Stock, with specific allocations for different series of preferred stock and common stock ²³.

FACT II Acquisition Corp. has a definitive Business Combination Agreement with Precision Aerospace & Defense Group, Inc. (PAD), signed on November 26, 2025 ²⁴. The company has up to 24 months from the closing of its initial public offering (November 27, 2024) to consummate an initial business combination, as the Business Combination Agreement was entered into within 18 months of the IPO ²⁵. 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 this initial business combination ²⁶.

The proposed business combination with PAD involves a domestication of FACT II Acquisition Corp. as a Delaware corporation, followed by a merger where PAD will become a wholly-owned subsidiary ²⁷. The merger consideration for PAD shareholders includes cash and shares of FACT Common Stock, with specific amounts for different classes of PAD stock. For instance, each share of PAD Series A, B, and C Preferred Stock will convert into $5.00 in cash and a number of FACT Common Stock shares equal to 621,500 divided by the total outstanding shares of PAD Series A, B, and C Preferred Stock ²⁸. Each share of PAD Series D Preferred Stock will convert into $5.00 in cash and a number of FACT Common Stock shares equal to 300,000 divided by the total outstanding shares of PAD Series D Preferred Stock ²⁹. Outstanding PAD Options will convert into options to purchase FACT Class A Common Stock under the same terms ³⁰.

The company's operational outlook is focused on completing the business combination. It expects to continue incurring significant costs in pursuit of its acquisition plans ³¹. The funds held outside the Trust Account, which were $544,791 as of December 31, 2025 ³², are intended to be used primarily for identifying and evaluating target businesses, performing due diligence, travel, reviewing corporate documents, and structuring/negotiating the business combination ³³. The company does not believe it will need to raise additional funds for operating its business, but acknowledges that if its cost estimates are inaccurate or if a significant number of public shares are redeemed, it may need additional financing, potentially through issuing additional securities or incurring debt ³⁴.

Regarding capital allocation, the company has incurred $11,028,226 in transaction costs related to its IPO and private placement, including a $3,500,000 cash underwriting fee and $7,000,000 in deferred underwriting fees ³⁵. The deferred underwriting fees are payable only upon the completion of an initial business combination ³⁶. The company may also receive loans from Sponsor HoldCo, the Sponsor, their affiliates, or certain directors and officers to fund working capital deficiencies or transaction costs, with up to $2,000,000 of such loans for each person being convertible into Class A ordinary shares or units at $10.00 per share/unit upon business combination consummation ³⁷.

Management 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 ³⁸. The ability to complete the initial business combination may be negatively impacted by general market conditions, volatility in capital and debt markets, and geopolitical instability, such as the ongoing Russia-Ukraine conflict and conflicts in the Middle East ³⁹. These external factors could lead to market disruptions, volatility in commodity prices, credit and capital markets, supply chain interruptions, and increased cyber-attacks ⁴⁰.

The most material risks disclosed include the potential inability to complete the proposed Business Combination with PAD, which would result in substantial withdrawal costs and difficulty securing new financing, potentially leading to liquidation where public shareholders may receive only $10.05 per share or less, and warrants would expire worthless ⁴¹. Geopolitical instability, including the Russia-Ukraine conflict and Middle East conflicts, and potential instability in Venezuela, could lead to market volatility, decreased liquidity, and unavailability of third-party financing, adversely affecting the ability to consummate a business combination ⁴². Ongoing inflation in the United States and elsewhere could also make it more difficult to complete a business combination ⁴³. The company faces significant competition from other blank check companies and private investors, which could increase acquisition costs or prevent finding a suitable target ⁴⁴. There is a risk that the company could be deemed an investment company under the Investment Company Act, which would impose burdensome compliance requirements and restrict its activities, making it difficult to complete a business combination ⁴⁵. The company has a working capital deficiency of $613,884 and a weak cash position of $544,791 as of December 31, 2025, raising substantial doubt about its ability to continue as a going concern if a business combination is not completed by May 27, 2026 ⁴⁶. Furthermore, the nominal purchase price paid by Sponsor HoldCo and independent directors for 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 consummation ⁴⁷.

Management's overall tone emphasizes leveraging their extensive experience and global network to identify and execute a successful business combination, aiming to improve customer experience and drive stakeholder value. They highlight their proven track record in acquiring, building, operating, and scaling global financial services and complex operations businesses ⁴⁸. The company has entered into a Business Combination Agreement with Precision Aerospace & Defense Group, Inc. (PAD) on November 26, 2025, and anticipates PAD will continue as "New PAD" as a wholly-owned subsidiary post-merger ⁴⁹. A key strategic priority is to complete this initial business combination within 24 months from the closing of the initial public offering, which was November 27, 2024 ⁵⁰. Management also stresses their commitment to disciplined M&A, seeking businesses with large addressable markets, significant revenue and earnings growth potential, strong management teams focused on free cash flow, and scalable operations ⁵¹. They acknowledge the need to address a working capital deficiency of $613,884 and a weak cash position of $544,791 as of December 31, 2025, and plan to fund working capital needs through potential loans from affiliates, though these are not obligated ⁵².