Business Context and Reporting Period
Company: FACT II Acquisition Corp. (FACT), a Cayman Islands exempted company and emerging growth company.
Reporting Date: November 26, 2025.
Event: Entry into a Material Definitive Agreement (Business Combination Agreement) with Precision Aerospace & Defense Group, Inc. ("PAD").
Transaction Overview: FACT will domesticate as a Delaware corporation and merge with PAD via a wholly-owned subsidiary. PAD will survive as a wholly-owned subsidiary of FACT ("New PAD").
Key Financial Metrics and Transaction Terms
Merger Consideration:
- PAD Common Stock: Converted into FACT Common Stock based on a fixed pool of 12,388,291 shares divided by the number of outstanding PAD shares.
- PAD Series A, B, and C Preferred Stock: Converted into $5.00 cash per share (original purchase price) plus a pro-rata share of 621,500 FACT Common Stock shares.
- PAD Series D Preferred Stock: Converted into $5.00 cash per share plus a pro-rata share of 300,000 FACT Common Stock shares.
- Options: PAD options convert to FACT Class A Common Stock options on the same terms.
Minimum Cash Requirement: The transaction requires a minimum of $75,000,000 in cash proceeds from FACT's trust account and other sources (after transaction expenses and redemptions).
Advisory Fee: FACT agreed to pay its Sponsor up to $240,000 for advisory services related to the transaction.
Financial Statements: This 8-K filing does not provide revenue, profit, cash flow, or margin data for FACT or PAD. Such data is expected in the forthcoming Form S-4 Registration Statement.
Material Changes and Conditions to Closing
Structural Changes: FACT will transition from a Cayman Islands entity to a Delaware corporation. PAD will become a subsidiary of FACT.
Key Closing Conditions:
- Approval by FACT and PAD shareholders.
- Effectiveness of the SEC Registration Statement (Form S-4).
- Expiration of Hart-Scott-Rodino antitrust waiting periods.
- 60-day clearance period from the U.S. Department of State Directorate of Defense Trade Controls.
- Receipt of all required governmental consents.
- Minimum cash threshold of $75,000,000 met.
- No Material Adverse Effect on either party.
Guidance, Outlook, and Risks
Timeline: The Registration Statement is expected to be filed within 40 days of the agreement date. The Closing is expected to occur after conditions are satisfied, with a termination date of March 31, 2026, if not consummated earlier.
Lock-Up Agreements:
- Sponsor and FACT Existing Investors: 180-day lock-up on shares issued upon conversion.
- Restricted Class A FACT common stock holders: 90-day lock-up on New PAD common stock.
Risks and Contingencies:
- Failure to obtain regulatory approvals (including defense trade controls).
- Shareholder redemptions reducing cash below the $75,000,000 minimum.
- Failure to meet Nasdaq listing requirements post-merger.
- Material Adverse Effects impacting either party.
- Forward-looking statements regarding PAD's market growth and acquisition targets are subject to significant uncertainty.
Investor Verification Checklist
- Verify the final number of PAD shares outstanding to calculate the exact exchange ratio for common and preferred stock.
- Monitor the upcoming Form S-4 Registration Statement for detailed financial projections and risk factors.
- Track shareholder redemption rates to ensure the $75,000,000 minimum cash condition is met.
- Confirm the status of regulatory approvals, specifically the 60-day defense trade control clearance.
- Review the definitive proxy statement for details on the Sponsor's voting support and potential conflicts of interest.