FACT II Acquisition Corp.

FACT II Acquisition Corp. (the "Company") is a blank check company, also known as a Special Purpose Acquisition Company (SPAC), incorporated in the Cayman Islands. Its primary business purpose is to effect a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more operating businesses ¹. The Company has not generated any revenues to date and does not expect to generate 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 centered on 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 directly applicable to the Company itself, as it is a SPAC seeking an acquisition. However, its strategy involves partnering with public and private companies and large financial sponsors ⁵. The Company's leadership team has a broad network in both public and private sectors, with access to mature markets (U.S. and Europe) and emerging markets (Asia, Latin America, and Africa), which is expected to provide a range of potential business combinations ⁶.

The Company has identified several general criteria for evaluating prospective target businesses, including those with a large addressable market 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 and attractive unit economics, scalable operations, and uncorrelated returns with minimal cyclicality risk ⁷. 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 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 and interest earned on a bank account of $27,824 ¹¹, along with a change on overallotment liability of $26,558 ¹². These were 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.

Comparing to the period from June 19, 2024 (inception) through December 31, 2024, the Company's financial performance shifted from a net loss of $71,891 ¹⁶ to a net income of $5,017,538 ¹⁷ in 2025. This improvement is largely attributable to increased interest income on cash held in the Trust Account, which grew from $722,270 ¹⁸ in the prior period to $7,188,186 ¹⁹ in 2025, and a positive change in overallotment liability of $26,558 ²⁰ in 2025 compared to $285,738 ²¹ in 2024. Operating costs also decreased from $1,079,899 ²² in 2024 to general and administrative expenses of $2,225,030 ²³ in 2025.

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 a merger where Merger Sub (a wholly-owned subsidiary of the Company) will merge into PAD, with PAD surviving as a wholly-owned subsidiary of the Company, to be referred to as "New PAD" ²⁵. The merger consideration for PAD shareholders includes cash payments for preferred stock and a number of shares of FACT Common Stock ²⁶. The underwriters' over-allotment option expired unexercised on January 10, 2025, leading to the forfeiture of 875,000 founder shares by Sponsor HoldCo ²⁷.

The Company's primary outlook is centered on the consummation of its proposed Business Combination with Precision Aerospace & Defense Group, Inc. (PAD) ²⁸. The Business Combination Agreement was entered into on November 26, 2025 ²⁹, and the Company has up to 24 months from the closing of its initial public offering (November 27, 2024) to complete an initial business combination, as a definitive agreement was executed within 18 months ³⁰. If the proposed Business Combination with PAD is not consummated, the Company may seek an alternative target business ³¹.

The Company intends to use substantially all of the funds held in the Trust Account, which totaled $183,785,456 ³² as of December 31, 2025, including interest earned (net of franchise and income taxes and excluding deferred underwriting commissions), to complete its initial business combination ³³. Any remaining proceeds will be used as working capital to finance the operations of the target business, make other acquisitions, and pursue growth strategies ³⁴. The Company also has cash of $544,791 ³⁵ in its operating bank account, which it intends to use for identifying and evaluating target businesses, performing due diligence, travel, reviewing corporate documents, and structuring/negotiating the business combination ³⁶.

Management does not believe it will need to raise additional funds for operating expenses prior to the initial business combination ³⁷. However, if the estimated costs for identifying a target, due diligence, and negotiation are less than actual amounts, the Company may have insufficient funds ³⁸. Additional financing may be required to complete the initial business combination or if a significant number of public shares are redeemed, potentially leading to the issuance of additional securities or incurrence of debt ³⁹. Sponsor HoldCo, the Sponsor, or their affiliates may loan funds to cover working capital deficiencies or transaction costs, with up to $2,000,000 ⁴⁰ of such loans for each person being convertible into Class A ordinary shares or units at $10.00 ⁴¹ per share/unit at the lender's option ⁴².

The Company's capital allocation plans include a deferred underwriting fee of $7,000,000 ⁴³, which is payable to the underwriters only upon the completion of an initial business combination and is based on the percentage of funds remaining in the trust account after redemptions of public shares ⁴⁴. The Company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities 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 new financing or a new target within the 24-month timeframe, 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. Geopolitical instability, such as the Russia-Ukraine conflict and Middle East conflicts, and instability in Venezuela, could adversely affect the search for a target, the target's operations, and the availability of financing ⁴⁸. Ongoing inflation could also make it more difficult to consummate a business combination ⁴⁹. Changes in directors' and officers' liability insurance could increase costs and hinder negotiations ⁵⁰. The Company's status as a blank check company with no operating history and no revenues means investors have no basis to evaluate its ability to achieve its business objective ⁵¹. A working capital deficiency of $613,884 ⁵² as of December 31, 2025, and a weak cash position of $544,791 ⁵³ raise substantial doubt about its ability to continue as a going concern if a business combination is not completed ⁵⁴. Furthermore, the Company could be deemed an investment company under the Investment Company Act, imposing burdensome compliance requirements and restricting activities, making it difficult to complete a business combination ⁵⁵. Third-party claims against the Trust Account could reduce the per-share redemption amount below $10.05 ⁵⁶. The nominal purchase price of approximately $0.0037 per share ⁵⁷ paid by Sponsor HoldCo and certain independent directors for founder shares, and the vesting of restricted Class A shares, may result in significant dilution to public shareholders upon consummation of a business combination ⁵⁸.

Management's message emphasizes leveraging their extensive experience in acquiring, building, operating, and scaling global financial services and complex operations businesses to identify opportunities that combine capital, talent, and network to improve customer experience and drive value for all stakeholders. They highlight their proven management team's ability to execute business strategy, improve profitability, and demonstrate growth across mature and emerging markets. The leadership team's broad network is expected to drive the sourcing of unique opportunities, and their track record includes successfully deploying technology in regulated businesses and attracting talent for business scale-up. Management also stresses their extensive experience in disciplined M&A. The Company has entered into a Business Combination Agreement with Precision Aerospace & Defense Group, Inc. (PAD) on November 26, 2025 ⁵⁹, and has until November 27, 2026, to consummate an initial business combination ⁶⁰. Management does not believe they will need to raise additional funds to meet operating expenditures ⁶¹.