FACT II Acquisition Corp. 10-Q Summary
Business Context and Reporting Period
Company: FACT II Acquisition Corp. (a Cayman Islands exempted company and shell company).
Reporting Period: Quarter ended March 31, 2026.
Business Model: A blank check company formed to effect a merger, share exchange, or asset acquisition. The Company has not commenced operations other than searching for a business combination.
Key Development: On November 26, 2025, the Company entered into a Business Combination Agreement with Precision Aerospace & Defense Group, Inc. ("PAD"). The transaction involves the Company's domestication to Delaware and a merger with PAD.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Income | $1,034,133 | $1,447,897 |
| General & Administrative Expenses | $517,616 | $364,345 |
| Interest Income (Trust Account) | $1,548,784 | $1,785,684 |
| Cash & Equivalents (Operating) | $412,909 | $1,222,026 |
| Cash Held in Trust Account | $185,334,240 | $183,785,456 |
| Total Liabilities | $9,519,706 | $9,161,472 |
| Deferred Underwriting Fee | $7,000,000 | $7,000,000 |
| Shares Outstanding (Class A Public) | 17,500,000 | 17,500,000 |
| Shares Outstanding (Class B Founder) | 5,833,333 | 5,833,333 |
Material Changes vs. Prior Period
- Net Income Decline: Net income decreased by approximately $413,764 (28.6%) compared to Q1 2025. This was primarily driven by a reduction in interest earned on the Trust Account ($1.55M vs. $1.79M) and the absence of a $26,558 gain from the change in fair value of the over-allotment liability recorded in the prior year.
- Operating Expenses Increase: General and administrative expenses increased by $153,271 (42.1%) to $517,616, reflecting ongoing costs associated with the proposed business combination and public company compliance.
- Operating Cash Flow: Net cash used in operating activities improved to $(131,882) from $(225,895) in the prior year, despite higher expenses, due to changes in operating assets and liabilities (specifically accrued expenses and deferred legal fees).
- Trust Account Growth: The Trust Account balance increased by $1,548,784 due to interest earnings, raising the per-share redemption value to approximately $10.59 from $10.50.
Outlook, Risks, and Contingencies
- Business Combination Status: The Company is actively pursuing the merger with Precision Aerospace & Defense Group, Inc. (PAD). Completion is subject to shareholder approval and customary closing conditions.
- Liquidity and Going Concern: Management has determined that the Company's liquidity condition and the mandatory liquidation date (November 27, 2026, unless extended) raise substantial doubt about its ability to continue as a going concern. The Company relies on funds outside the Trust Account ($412,909) for operations and may require Working Capital Loans from the Sponsor or affiliates.
- Deferred Fees: A deferred underwriting fee of $7,000,000 is payable only upon the successful completion of a Business Combination.
- Geopolitical Risks: The filing highlights risks related to global conflicts (Russia-Ukraine, Israel-Hamas, Iran) and trade policies, which could impact capital markets and the ability to consummate a transaction.
- Warrants: There are 9,081,563 warrants outstanding (8,750,000 Public and 331,563 Private). Public warrants become exercisable 30 days after a Business Combination or 12 months post-IPO, whichever is later, at $11.50 per share.
Investor Verification Checklist
- Merger Approval: Verify the status of shareholder votes required to approve the PAD Business Combination and the domestication to Delaware.
- Redemption Rights: Confirm the current redemption price per share ($10.59) and the potential for redemptions to reduce the cash available for the transaction.
- Extension Period: Monitor whether the Company will need to seek shareholder approval to extend the deadline beyond November 27, 2026, to complete the merger.
- Working Capital: Assess the sufficiency of the $412,909 operating cash balance to fund operations until the merger closes or liquidation occurs.
- Deferred Fees: Note that the $7,000,000 deferred underwriting fee is contingent on the deal closing; if the deal fails, this liability is waived.