FACT (FACT) S-4/A: merger with PAD to create Precision Aerospace & Defense Group
Rhea-AI Filing Summary
FACT II Acquisition Corp. files an amended Form S-4 registering 40,759,791 shares of common stock and 8,750,000 warrants in connection with a proposed business combination with Precision Aerospace & Defense Group, Inc.
The filing describes a domestication to Delaware, a merger by which PAD becomes a subsidiary and FACT is renamed Precision Aerospace & Defense Group, Inc., and detailed merger consideration, closing conditions and shareholder votes required at an extraordinary general meeting. The Trust Account balance is $185,334,240 and the agreement requires a $75,000,000 minimum cash condition (subject to waiver).
Positive
- None.
Negative
- None.
Insights
Structured transaction: domestication, merger and multi-condition closing.
The document outlines a cross-border domestication to Delaware followed by a merger of PAD into FACT, with FACT renamed Precision Aerospace & Defense Group, Inc.. The proxy/prospectus sets out the voting proposals required (Business Combination, Domestication, Stock Issuance, Charter) and related lock‑ups and support agreements.
Key dependencies include stockholder approvals, SEC effectiveness of the Registration Statement, NYSE conditional listing approval, HSR/other regulatory clearances, and satisfaction of a $75,000,000 minimum cash condition or PAD's waiver; timing and financing remain subject to those conditions.
Financing structure and dilution are explicit; cash and redemption sensitivity matter.
The filing quantifies a Trust Account balance of $185,334,240 and models a 50% redemptions scenario (approximately 8,750,000 Public Shares redeemed) with Public Shareholders owning ~24.5 post-closing. Sponsor and PAD stockholders’ relative ownership percentages under various redemption outcomes are described.
Absent external financing the parties expect to raise equity or use trust releases to meet the $75,000,000 minimum; investor outcomes depend on actual redemptions and any equity financing that may be completed prior to Closing.
Key Figures
Key Terms
Domestication legal
Trust Account financial
Minimum FACT Cash Amount financial
Redemption Rights corporate
Sponsor Support Agreement legal
As filed with the Securities and Exchange Commission on May 18, 2026
Registration No. 333-292541
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
__________________________________________
to
FORM
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________________________
__________________________________________
| | 6770 | N/A | ||
| (State or other jurisdiction of | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer |
For co-registrants, see “Table of Co-Registrants” on the following page
14 Wall Street, 20th Floor
New York, NY 10005
United States of America
Telephone: +1 (212) 618-1798
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
__________________________________________
Adam Gishen
Chief Executive Officer
14 Wall Street, 20th Floor
New York, NY 10005
United States of America
Telephone: +1 (212) 618-1798
(Name, address, including zip code, and telephone number, including area code, of agent for service)
__________________________________________
Copies of all communications, including communications sent to agent for service, should be sent to:
|
Brandon J. Bortner, Esq. |
Seth Brookman |
__________________________________________
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed merger described in the enclosed joint proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| | ☒ | Smaller reporting company | | |||
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
____________
* Prior to the consummation of the Business Combination described in the proxy statement/prospectus, FACT II Acquisition Corp. (“FACT”) intends to effect the Domestication, consisting of a deregistration under the Companies Act of the Cayman Islands (As Revised) and a domestication under Section 388 of the Delaware General Corporation Law, pursuant to which FACT’s jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware. All securities being registered will be issued by New FACT, the continuing entity following the Domestication, and New PAD, the continuing entity following the Business Combination as described in this proxy statement/prospectus, which will thereafter be renamed “Precision Aerospace & Defense Group, Inc.”
The Registrant and Co-Registrant hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant and Co-Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.
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TABLE OF CO-REGISTRANTS
|
Exact Name of Co-Registrant as Specified in its Charter(1)(2) |
State or Other |
Primary |
I.R.S. Employer |
|||
|
Precision Aerospace & Defense Group, Inc. |
Florida |
3728 |
99-0412555 |
____________
(1) The Co-Registrant has the following principal executive office:
Precision Aerospace & Defense Group, Inc.
7500 College Blvd, 5th Floor
Overland Park, KS 66210
(2) The agent for service for the Co-Registrant is:
Brent Borden
Chief Executive Officer
Precision Aerospace & Defense Group, Inc.
7500 College Blvd, 5th Floor
Overland Park, KS 66210
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The information in this preliminary proxy statement/prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and does not constitute the solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY — SUBJECT TO COMPLETION DATED MAY 18, 2026
PROXY STATEMENT FOR EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS OF
FACT II ACQUISITION CORP.
(A CAYMAN ISLANDS EXEMPTED COMPANY)
AND
PROSPECTUS FOR
40,759,791 SHARES OF COMMON STOCK
AND
8,750,000 WARRANTS OF
FACT II ACQUISITION CORP.
(AFTER ITS DOMESTICATION AS A CORPORATION INCORPORATED IN
THE STATE OF DELAWARE, THE CONTINUING ENTITY FOLLOWING
THE DOMESTICATION, WHICH WILL BE RENAMED
“PRECISION AEROSPACE & DEFENSE GROUP, INC.”
IN CONNECTION WITH THE BUSINESS COMBINATION DESCRIBED HEREIN)
On November 26, 2025, the board of directors (“FACT Board”) of FACT II Acquisition Corp., a Cayman Islands exempted company (“FACT,” “we,” “us” or “our”), unanimously approved the Business Combination Agreement and Plan of Merger, dated as of November 26, 2025, by and among FACT, FACT II Acquisition LLC, a Cayman Islands limited liability company (“Sponsor HoldCo”), Patriot Merger Subsidiary, Inc., a Florida corporation and wholly-owned subsidiary of FACT (“Merger Sub”), and Precision Aerospace & Defense Group, Inc., a Florida corporation (“PAD”), as amended by Amendment No. 1 thereto dated as of May 17, 2026 (as it may be amended, restated, supplemented, or otherwise modified from time to time, the “Business Combination Agreement”). The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) FACT will domesticate as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law (the “DGCL”) and Part XII of the Companies Act of the Cayman Islands (As Revised) (the “Cayman Companies Act”) (the “Domestication”); (ii) following the Domestication, Merger Sub will merge with and into PAD with PAD surviving the merger as a wholly owned subsidiary of FACT (the “Merger”), in accordance with the Business Combination Agreement and the Florida Business Corporation Act; and (iii) the parties will consummate the other transactions contemplated by the Business Combination Agreement and execute documents related thereto. The Domestication, the Merger, and the other transactions contemplated by the Business Combination Agreement are collectively referred to herein as the “Business Combination,” all as described in more detail in the accompanying proxy statement/prospectus. In connection with the consummation of the Business Combination (the “Closing” and the date of the Closing, the “Closing Date”), FACT will be renamed “Precision Aerospace & Defense Group, Inc.” (“New PAD”). As used herein, “New FACT” refers to FACT after the Domestication and prior to the consummation of the Merger. A copy of the Business Combination Agreement is attached to the accompanying proxy statement/prospectus as Annex A.
The Domestication will occur after the date of the Business Combination Agreement and before the Closing Date. In connection with the Domestication: (i) each of the then-issued and outstanding Class B ordinary shares, par value $0.0001 per share, of FACT (the “FACT Class B Shares”) shall convert automatically, on a one-for-one basis, into one Class A ordinary share, par value $0.0001 per share, of FACT (the “FACT Class A Shares”), (ii) each of the then-issued and outstanding FACT Class A Shares (including the FACT Class A Shares into which the FACT Class B Shares shall have converted as described in the immediately preceding clause (i)) shall convert automatically, on a one-for-one basis, into one share of Class A common stock, par value $0.0001 per share, of FACT (the “FACT Class A Common Stock” and the FACT Class A Common Stock, as converted into common stock, par value $0.0001 per share, of FACT at the effective time of the Merger (the “Effective Time”), the “FACT Common Stock,” and, following consummation of the Merger, the “New PAD Common Stock” and, together with the FACT Class A Shares, the “Public Shares” and the holders of Public Shares, the “Public Shareholders”); and (iii) each SPAC Warrant (as defined in the Business Combination Agreement) that is outstanding immediately prior to the Domestication shall, from and after the Domestication, represent the right to purchase one share of FACT Class A Common Stock at an exercise price of $11.50 per share, on the terms and conditions set forth in the applicable warrant agreement.
Within two business days after the Closing Date, PAD shall deposit, or cause to be deposited, in trust with or otherwise make available to an exchange agent acceptable to PAD (the “Exchange Agent”) for the benefit of the holders of shares of PAD Preferred Stock (as defined in the Business Combination Agreement), for exchange in
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accordance with the Business Combination Agreement, through the Exchange Agent, cash in an amount equal to the sum of the Preferred Stock Cash Payment and the Preferred Stock Dividend Payment (each as defined in the Business Combination Agreement). The consideration to be issued and paid to the holders of PAD’s capital stock (the “PAD Stockholders”) in connection with the Merger shall consist of the following: (i) each share of common stock of PAD, par value $0.001 per share (“PAD Shares”) that is issued and outstanding immediately prior to the Effective Time (other than any treasury shares and dissenting shares) will be automatically canceled and converted into the right to receive a number of Public Shares equal to 12,402,577 divided by the number of PAD Shares issued and outstanding immediately prior to the Effective Time; (ii) each share of Series A Preferred Stock of PAD, par value $0.001 per share (the “PAD Series A Preferred Stock”) (other than the treasury and dissenting shares), that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of the PAD Series A Preferred Stock, and (B) a number of Public Shares equal to 621,500 divided by the number of shares of PAD Series A Preferred Stock, Series B Preferred Stock of PAD, par value $0.001 (the “PAD Series B Preferred Stock”), and Series C Preferred Stock of PAD, par value $0.001 per shares (the “PAD Series C Preferred Stock”) issued and outstanding immediately prior to the Effective Time (the “Per Share Series A-C Preferred Stock Consideration”); (iii) each share of PAD Series B Preferred Stock (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of PAD Series B Preferred Stock, and (B) the Per Share Series A-C Preferred Stock Consideration; (iv) each share of PAD Series C Preferred Stock (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of PAD Series C Preferred Stock, and (B) the Per Share Series A-C Preferred Stock Consideration; (v) each share of Series D Preferred Stock of PAD, par value $0.001 per share (the “PAD Series D Preferred Stock”) (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of PAD Series D Preferred Stock, and (B) a number of Public Shares equal to 276,000 divided by the number of shares of PAD Series D Preferred Stock issued and outstanding immediately prior to the Effective Time; (vi) each share of Series E Preferred Stock of PAD, par value $0.001 per share (the “PAD Series E Preferred Stock,” and together with the PAD Series A Preferred Stock, the PAD Series B Preferred Stock, the PAD Series C Preferred Stock, and the PAD Series D Stock, the “PAD Preferred Stock”) (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $10.00 in cash, which amount is equal to the original purchase price per share of PAD Series E Preferred Stock, and (B) 1.5 Public Shares; and (vii) each option (whether vested or unvested) to purchase PAD Shares granted under PAD’s 2024 Omnibus Securities and Incentive Plan (each, a “PAD Option”) that is outstanding as of immediately prior to the Effective Time will be automatically canceled and converted into an option to purchase Public Shares upon the same terms and conditions as are in effect with respect to such PAD Option immediately prior to the Effective Time (each, a “New PAD Option”) (collectively, the “Merger Consideration”). Additionally, (A) provided that if any Specified Acquisition (as defined in the Business Combination Agreement) is consummated on or before the Closing Date, the Acquisition Shares (as defined in the Business Combination Agreement) issuable in respect of such Specified Acquisition will be issued to the applicable recipient pursuant to the terms of the definitive agreements providing for such Specified Acquisition, and (B) if any Specified Acquisition has not yet been consummated on or before the Closing Date, the Acquisition Shares issuable pursuant to the terms of the definitive agreements providing for such Specified Acquisition will not be issued and will be issued only upon the consummation, if any, of such Specified Acquisition and in accordance with the terms of the definitive agreements providing for such Specified Acquisition.
Under the Business Combination Agreement, the obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain closing conditions of the respective parties, including, without limitation: (i) the approval and adoption of the Business Combination Agreement and transactions contemplated thereby by requisite vote of FACT’s shareholders (the “FACT Shareholder Approval”); (ii) the approval and adoption of the Business Combination Agreement by PAD’s stockholders (the “PAD Stockholder Approval”); (iii) the absence of laws, rules, regulations, judgments, decrees, executive orders or awards making the Business Combination illegal or otherwise prohibiting its consummation or restraining or imposing any condition on its consummation; (iv) the registration statement of which this proxy statement/prospectus forms a part (the “Registration Statement”) having been declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement being in
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effect, and no proceedings seeking such a stop order having been initiated or threatened in writing by the SEC; and (v) (A) all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), with respect to the Business Combination having expired or been terminated, (B) at least 60 days shall have elapsed since the submission to the United States Department of State Directorate of Defense Trade Controls of all information required by 22 C.F.R. § 122.4(b), and (C) each consent of any Governmental Authority (as defined in the Business Combination Agreement) required to consummate the Business Combination having been obtained and shall be in full force and effect.
The obligations of PAD to consummate the Business Combination are subject to additional conditions, including, among others: (i) the truth and accuracy of the representations and warranties of FACT and Merger Sub, subject to customary bring-down standards; (ii) material compliance by FACT and Merger Sub with their respective obligations, agreements and covenants under the Business Combination Agreement; (iii) receipt by PAD of a closing certificate of FACT; (iv) there being no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to FACT; (v) FACT having provided the public holders of FACT Class A Shares the opportunity to make redemption elections with respect thereto; (vi) FACT’s initial listing application in connection with the Business Combination shall have been conditionally approved and, immediately following the Effective Time, FACT shall satisfy any applicable initial listing requirements of The New York Stock Exchange (“NYSE”); (vii) the aggregate cash available from FACT’s trust account (the “Trust Account”) and other sources as set forth in the Business Combination Agreement equaling no less than $75,000,000 (after deducting SPAC Transaction Expenses (as defined in the Business Combination Agreement) and any amounts paid to FACT’s shareholders that exercise their redemption rights in connection with the Business Combination) (the “Minimum FACT Cash Amount”); (viii) receipt of certain executed ancillary documents and the amended and restated certificate of incorporation of FACT shall have become effective; and (ix) FACT having taken all necessary and appropriate measures to have all funds held in the Trust Account be disbursed to FACT and released from the Trust Account to New PAD on the Closing Date.
The obligations of FACT and Merger Sub to consummate the Business Combination are subject to additional conditions, including, among other things: (i) the truth and accuracy of the representations and warranties of PAD, subject to customary bring-down standards; (ii) material compliance by PAD with its agreements and covenants under the Business Combination Agreement; (iii) no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to PAD having occurred since the date of the Business Combination Agreement that is continuing; and (iv) receipt of a closing certificate of PAD and certain executed ancillary documents.
Absent any external source of funding, the funds currently in the Trust Account would be the only source of funding to satisfy the Minimum FACT Cash Amount. As of the date of this proxy statement/prospectus, the balance of the Trust Account is $185,334,240. Absent any external source of funding, the Minimum FACT Cash Amount would not be satisfied if redemptions of Public Shares exceed 59% of the Public Shares outstanding. As the parties expect that redemptions will exceed such amount, the parties intend to satisfy the Minimum FACT Cash Amount through an equity financing (although no such financing has been obtained to date), amounts released to us from the Trust Account and any other sources of financing approved by PAD. In the event that the Minimum FACT Cash Amount is not satisfied as a result of redemptions of Public Shares that reduce the amount available to be released to us from the Trust Account, PAD may, in its sole discretion, waive the Minimum FACT Cash Amount. If PAD waives the Minimum FACT Cash Amount, FACT intends to file a Current Report on Form 8-K within four business days of such event; however, such condition may be waived at any time prior to the Closing, including after the deadline for submitting redemption requests or the extraordinary general meeting (“EGM”), and, given such timing, you may not be notified before the deadline for submitting redemption requests or the EGM. For more information, see “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement — Closing Conditions.”
In connection with the execution of the Business Combination Agreement, on November 26, 2025, Sponsor HoldCo entered into a support agreement with FACT and PAD (the “Sponsor Support Agreement”), pursuant to which Sponsor HoldCo agreed to vote: (i) in favor of each of the Business Combination Agreement, any ancillary document required by the Business Combination Agreement, the Domestication and the Business Combination, including the Merger, and any other matters necessary or appropriate for consummation of the Business Combination; and (ii) against any proposal relating to an Alternative Transaction (as defined below) or any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or FACT of, prevent or nullify any provision of the Business Combination Agreement. In addition, the Sponsor Support Agreement prohibits Sponsor HoldCo from, among other things, selling, assigning or transferring any FACT Class A Shares or FACT Class B Shares held by it, other than pursuant to the terms of the Sponsor Support
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Agreement or as expressly contemplated by the Business Combination Agreement, until the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement. For more information, see “Proposal No. 1 — The Business Combination Proposal — Ancillary Agreements — Sponsor Support Agreement.”
On November 28, 2025, the Board of Directors of PAD held a meeting at which it ratified, confirmed, and approved PAD’s entrance into the Business Combination Agreement and authorized and approved PAD’s entrance into each ancillary agreement to which PAD is a party, and authorized and approved the Merger.
Additionally, PAD, FACT and certain stockholders of PAD (the “PAD Supporting Stockholders”) have entered into support agreements (collectively, the “PAD Support Agreements”). Pursuant to the PAD Support Agreements, each PAD Supporting Stockholder has agreed to vote: (i) in favor of each of the Business Combination Agreement and the Business Combination and any other matters necessary or reasonably requested by PAD for consummation of the Merger or any other transactions contemplated by the Business Combination Agreement and the approval of the Business Combination; (ii) against any proposal relating to an Alternative Transaction; and (iii) against any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or FACT of, prevent or nullify any provision of the Business Combination Agreement. For more information, see “Proposal No. 1 — The Business Combination Proposal — Ancillary Agreements — PAD Support Agreements.”
In connection with the Closing, pursuant to the Business Combination Agreement, (i) PAD, FACT, Sponsor HoldCo and certain other holders of equity interests of FACT will enter into a lock-up agreement (the “Sponsor Lock-Up Agreement”) and (ii) FACT, PAD and certain holders of PAD’s equity interests will each enter into a lock-up agreement (the “PAD Shareholder Lock-Up Agreement” and, together with the Sponsor Lock-Up Agreement, the “Lock-Up Agreements”), in each case with New PAD.
Pursuant to the Lock-Up Agreements, Sponsor HoldCo, the holders of our equity interests thereto, including the Sponsor, signatory thereto, and the holders of PAD’s equity interests signatory thereto, as applicable, will agree not to transfer (except for certain permitted transfers): (i) any shares of New PAD Common Stock issued upon the conversion of PAD equity interests (except for shares of New PAD Common Stock into which 770,000 PAD Shares will convert, which shall be exempt from the transfer restrictions set forth in the PAD Shareholder Lock-Up Agreement), the Founder Shares, or any FACT Class A Shares (other than the restricted FACT Class A Shares), in each case held by such holders after the Closing, until 180 days after the Closing Date; and (ii) any shares of New PAD Common Stock issued upon the conversion of the restricted FACT Class A Shares and held by such holders after the Closing until 90 days after the Closing Date.
PAD is a Florida corporation that implements a strategic acquisition and integration model focused on established businesses within the aerospace and defense industry. Serving as a central coordinating entity, PAD fosters a cohesive family of synergistic subsidiaries, enhancing value through the integration of complementary suppliers.
On November 23, 2025, the FACT Board received an opinion from EntrepreneurShares LLC (“ERShares”) as to the fairness, as of such date, from a financial point of view to all FACT Shareholders (and not any particular group or class thereof) of the Transaction Consideration (as defined below) to be paid by FACT in the Merger pursuant to the Business Combination Agreement, which was based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on and scope of the review undertaken by ERShares, as set forth in such opinion, as more fully described in the subsection “The Business Combination — Opinion of EntrepreneurShares LLC.” A copy of ERShares’ opinion is attached hereto as Annex K. After careful consideration, the FACT Board has unanimously determined that the Business Combination is fair, advisable, and in the best interests of FACT and its shareholders, unanimously approved the Business Combination and unanimously recommends that shareholders vote “FOR” the adoption of the Business Combination Agreement, and approval of the transactions contemplated thereby, including the Domestication and Merger, and “FOR” all other proposals presented to FACT’s shareholders in this proxy statement/prospectus. The Business Combination was not structured to require the approval of at least a majority of FACT’s unaffiliated shareholders because such a vote is not required under Cayman Islands law. When you consider the recommendation of the proposals herein by the FACT Board, you should keep in mind that FACT II Acquisition Parent LLC, a Cayman Islands limited liability company, our sponsor (the “Sponsor”), Sponsor HoldCo, and FACT’s directors and officers and their affiliates have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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Immediately following the Closing, assuming the redemption of 8,750,000 Public Shares at approximately $10.59 per share (estimated using an assumed Closing Date of March 31, 2026), or approximately 50% of the Public Shares subject to redemption (the “50% Redemptions Scenario”), and without giving effect to any dilutive instruments, such as the exercise of the New PAD Options, it is expected that (i) Public Shareholders will own approximately 24.5% of the New PAD Common Stock outstanding at that time, (ii) the Sponsor and Sponsor HoldCo will own approximately 11.5% of the New PAD Common Stock outstanding at that time (which includes 3,433,179 Founder Shares, 331,837 Private Placement Shares (as defined below), 134,984 Public Shares (after reflecting the forfeiture of 1,878,333 FACT Forfeited Shares (as defined below) and 600,000 shares of New PAD Common Stock for potential issuance to the Sponsor as performance bonus shares (the “Sponsor Performance Bonus Shares”), and no forfeiture of Sponsor HoldCo Contributed Shares (as defined below)), (iii) FACT’s directors and advisor will own 0.8% of the New PAD Common Stock outstanding at that time, and (iv) PAD Stockholders will own approximately 40.8% of the New PAD Common Stock outstanding at that time. The Public Shareholders currently own 73% of the issued and outstanding FACT Ordinary Shares prior to the Business Combination. Accordingly, Public Shareholders, as a group, will experience immediate dilution as a consequence of the Business Combination. As redemptions increase, the overall percentage ownership held by Sponsor HoldCo and certain directors and officers, holding FACT Class B Shares (collectively, with the Sponsor and Sponsor HoldCo, the “FACT Insiders”) and PAD Stockholders will increase as compared to the overall percentage ownership and voting percentage held by the Public Shareholders, thereby increasing dilution to the Public Shareholders. For more information on the percentage of the issued and outstanding shares of New PAD Common Stock immediately following the Closing that are expected to be held by securityholders, in various redemption scenarios, see “Questions and Answers About the Business Combination — What equity stake will current FACT Shareholders and PAD Stockholders hold in New PAD immediately after the Closing?” and for more information about dilution to the Public Shareholders, see “Dilution.”
Compensation to be Received by the Sponsor, and FACT’s Officers and Directors in Connection with the Business Combination: Assuming the 50% Redemptions Scenario, Sponsor and Sponsor HoldCo will receive (i) 3,433,179 shares of New PAD Common Stock upon the exchange of 3,433,179 FACT Class B Shares that were initially purchased prior to the FACT IPO for approximately $0.0037 per share and (ii) 331,837 shares of New PAD Common Stock upon the exchange of 331,837 FACT Class A Shares that were initially purchased in a private placement that closed concurrently with the FACT IPO for $10.00 per share and (iii) 134,984 shares of New PAD Common Stock (assuming the forfeiture of 1,878,333 FACT Forfeited Shares and 600,000 Sponsor Performance Bonus Shares and no forfeiture of Sponsor HoldCo Contributed Shares. FACT’s independent directors and its Senior Advisor will each receive 30,000 and 20,000 shares of New PAD Common Stock, respectively, upon the exchange of 30,000 and 20,000 FACT Class B Shares held by them, respectively, which shares were issued to them as consideration for services rendered to FACT. The securities to be issued to Sponsor HoldCo and FACT’s officers and directors may result in a material dilution of the equity interests of non-redeeming Public Shareholders. See “Dilution,” “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination,” “Proposal No. 1 — The Business Combination Proposal — Compensation to be Received by the Sponsor, Sponsor HoldCo and FACT’s Officers and Directors in Connection with the Business Combination” and “Information About FACT — Executive and Director Compensation.”
Sponsor HoldCo and FACT’s officers and directors will also be reimbursed for loans, advances, and out-of-pocket expenses incurred by them related to identifying, negotiating, investigating and completing the Business Combination. No such loans, advances, or out-of-pocket expenses are outstanding as of the date of this proxy statement/prospectus.
FACT’s independent directors are not members of Sponsor HoldCo. None of the funds in the Trust Account will be used to compensate our officers or directors. Except for administrative services fees paid or to be paid to Sponsor HoldCo, no compensation of any kind, including finder’s and consulting fees, have been paid or will be paid to Sponsor HoldCo, officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of the Business Combination. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations, as discussed above. The reimbursement of expenses and advances to Sponsor HoldCo and FACT’s officers and directors may result in a material dilution of the equity interests of non-redeeming Public Shareholders. See “Dilution,” “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination,” “Proposal No. 1 — The Business Combination Proposal — Compensation to be Received by the Sponsor, Sponsor HoldCo and FACT’s Officers and Directors in Connection with the Business Combination” and “Information About FACT — Executive and Director Compensation.”
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None of our directors or officers has received any cash compensation for services rendered to us. Sponsor HoldCo, the Sponsor, directors and officers, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. No such loans, advances, or out-of-pocket expenses are outstanding as of the date of this proxy statement/prospectus. On November 26, 2025, we entered into an advisory agreement (the “Advisory Agreement”) with the Sponsor pursuant to which the Sponsor will provide certain services to us including, without limitation, in each case relating to the Business Combination, assisting us in preparing presentations, introducing us to potential investors, assisting us in arranging meetings with PAD Stockholders to the extent applicable, and assisting us with the preparation of any press releases and filings. The Advisory Agreement provides for us to pay to the Sponsor a fee of up to $240,000 (which, in our sole discretion, may be payable in up to 12 monthly installments). The Advisory Agreement was reviewed and approved by the FACT Board and our Audit Committee.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, any of Sponsor HoldCo, the Sponsor, any of their respective affiliates or certain of our directors and officers may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into FACT Class A Shares or units upon the consummation of our initial business combination at a price of $10.00 per FACT Class A Share or unit, as applicable, at the option of the lender. Such FACT Class A Shares would be identical to the shares sold in the private placements described herein, and such units would be identical to the units sold in the private placements described herein. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than Sponsor HoldCo, the Sponsor or an affiliate of either of Sponsor HoldCo or the Sponsor, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of the date of this proxy statement/prospectus, FACT had no outstanding borrowings under Working Capital Loans.
Potential conflicts of interest in connection with the Business Combination: There may be actual or potential material conflicts of interest between or among (i) the Sponsor, Sponsor HoldCo, FACT officers and directors, PAD officers and directors and (ii) unaffiliated security holders of FACT. Such conflicts of interest may include a material conflict of interest in determining whether to proceed with the Business Combination, the shares to be issued to the Sponsor, Sponsor HoldCo and FACT’s officers and directors in connection with the Business Combination, and the reimbursement of loans and advances. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for more information.
If FACT has not completed its initial business combination within 18 months from the closing of its initial public offering (“IPO”) (or a 24-month period if FACT has executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or during any extended time that we have to consummate a business combination beyond 18 months (or 24 months from the closing of the IPO if we have executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) as a result of a shareholder vote to amend our amended and restated memorandum and articles of association (an “Extension Period”), FACT will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of permitted withdrawals), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and the FACT Board, liquidate and dissolve, subject in each case to FACT’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. Sponsor HoldCo and FACT’s officers,
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directors, and advisor have no rights to liquidating distributions from the Trust Account with respect to any Founder Shares and any Public Shares held by them if FACT fails to complete an initial business combination within the completion window, although they will be entitled to liquidating distributions from assets outside the Trust Account.
FACT Class A Shares are listed on Nasdaq under the symbol “FACT.” On November 25, 2025, the last trading day before announcement of the execution of the Business Combination Agreement, the closing price of the FACT Class A Shares was $10.38. As of March 31, 2026, the closing price of the FACT Class A Shares was $10.59. FACT will apply for listing, to be effective at Closing, of the New PAD Common Stock on the NYSE under the symbol “PAD.” It is a condition to PAD’s obligation to consummate the Business Combination that the initial listing application with NYSE in connection with the Business Combination shall have been conditionally approved, and, immediately following the Effective Time, FACT shall satisfy any applicable initial listing requirements of NYSE. FACT and PAD believe that FACT will satisfy the initial listing requirements of NYSE at the Closing, but there can be no assurance such listing condition will be met. If such initial listing application condition is not met, the Business Combination may not be consummated unless such condition is waived by PAD. The NYSE initial listing application condition may be waived by PAD at any time prior to the Closing, including after the deadline for submitting redemption requests or the EGM. It is important for you to consider that, at the time of the deadline for submitting redemption requests or the EGM, FACT may not have received from NYSE either confirmation of the approval of the initial listing application or confirmation that approval will be obtained prior to the consummation of the Business Combination, and you will not be notified prior to the deadline for submitting redemption requests or the EGM if New PAD has not yet received such approval or confirmation. As a result, you may be asked to vote to approve the Business Combination and the other proposals included in this proxy statement/prospectus without knowing whether the New PAD Common Stock will be listed on NYSE or another securities exchange and, further, it is possible that such listing may never be achieved and the Business Combination could still be consummated if such condition is waived.
FACT is, and New PAD will be, an “emerging growth company” as defined in Rule 405 promulgated under the Securities Act and Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and has elected to comply with certain reduced public company reporting requirements. Investing in New PAD Common Stock involves a high degree of risk. See “Risk Factors” beginning on page 20 of the accompanying proxy statement/prospectus for a discussion of information that should be considered in connection with an investment in New PAD Common Stock.
This proxy statement/prospectus provides you with detailed information about the Business Combination and other matters to be considered at the EGM. FACT encourages you to carefully read this entire document. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 20.
When you review the information included in the accompanying proxy statement/prospectus and consider the FACT Board’s recommendation to vote in favor of the proposals described therein, you should keep in mind that the Sponsor, Sponsor HoldCo and FACT’s officers and directors have interests in the Business Combination that may conflict with your interests as a shareholder. For instance, the Sponsor, Sponsor HoldCo and FACT’s officers and directors will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to shareholders rather than liquidating FACT. See the sections entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” and “Beneficial Ownership of Securities” in the accompanying proxy statement/prospectus for further discussion.
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated , 2026 and is first being mailed to FACT’s shareholders on or about , 2026.
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PRELIMINARY PROXY STATEMENT/PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 18, 2026
FACT II Acquisition Corp.
14 Wall Street, 20th Floor
New York, NY 10005
Tel: (212) 618-1798
NOTICE OF EXTRAORDINARY GENERAL MEETING
TO BE HELD ON , 2026
To the Shareholders of FACT II Acquisition Corp.:
NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “EGM”) of FACT II Acquisition Corp., a Cayman Islands exempted company (“FACT”), will be held virtually at , Eastern Time, on , 2026. The EGM will be a virtual meeting conducted via live webcast at [•]. For the purposes of Cayman Islands law and the amended and restated memorandum and articles of association of FACT (as may be amended from time to time, the “FACT Articles”), the physical location of the EGM will be at the offices of Paul Hastings LLP at 2050 M Street NW, Washington, D.C. 20036. You are cordially invited to attend the EGM, which will be held for the following purposes:
(1) Proposal No. 1 — The Business Combination Proposal — To consider and vote upon a proposal to approve, subject to the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, by ordinary resolution, and adopt the Business Combination Agreement and Plan of Merger, dated as of November 26, 2025, as amended by Amendment No. 1 thereto dated as of May 17, 2026 (as it may be amended, restated, supplemented, or otherwise modified from time to time, the “Business Combination Agreement”), by and among FACT, FACT II Acquisition LLC, a Cayman Islands limited liability company (“Sponsor HoldCo”), Patriot Merger Subsidiary, Inc., a Florida corporation and a direct, wholly-owned subsidiary of FACT (“Merger Sub”), and Precision Aerospace & Defense Group, Inc., a Florida corporation (“PAD”), and the transactions contemplated by the Business Combination Agreement, pursuant to which the following will occur: (1) the domestication of FACT as a Delaware corporation, in which FACT will de-register from the Register of Companies in the Cayman Islands and transfer by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation in accordance with the FACT Articles, Section 388 of the Delaware General Corporation Law (the “DGCL”) and Part XII of the Companies Act of the Cayman Islands (As Revised) (the “Cayman Companies Act”) (the “Domestication”); (2) the merger of Merger Sub with and into PAD with PAD surviving the merger as a wholly-owned subsidiary of FACT (the “Merger”), in accordance with the Business Combination Agreement and the Florida Business Corporation Act; and (3) the other transactions contemplated by the Business Combination Agreement and documents related thereto (such transactions, together with the Domestication and the Merger, the “Business Combination,” the consummation of the Merger is referred to as the “Closing” and the date of the Closing is referred to as the “Closing Date”), all as described in more detail in the accompanying proxy statement/prospectus. References herein to “New PAD,” “combined company” and “post-combination company” denote FACT immediately following the consummation of the Business Combination. We refer to this proposal as the “Business Combination Proposal.” A copy of the Business Combination Agreement is attached to the accompanying proxy statement/prospectus as Annex A.
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as an ordinary resolution, that subject to the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the entry of FACT into the Business Combination Agreement and Plan of Merger, dated as of November 26, 2025, by and among FACT, Sponsor HoldCo, Merger Sub and PAD, as attached to the proxy statement/prospectus of the meeting as Annex A-1, as amended by Amendment No. 1 thereto dated as of May 17, 2026, as attached to the proxy statement/prospectus of the meeting as Annex A-2, as it may be amended, restated, supplemented, or otherwise modified from time to time (collectively, the “Business Combination Agreement”), the consummation of the transactions contemplated by the Business Combination Agreement and the performance by FACT of its obligations thereunder thereby be ratified, approved, adopted and confirmed in all respects.”
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(2) Proposal No. 2 — The Domestication Proposal — To consider and vote upon a proposal to approve, subject to the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal, by special resolution, the deregistration of FACT from the Register of Companies in the Cayman Islands and transfer by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation in accordance with the FACT Articles, Section 388 of the DGCL, and Part XII of the Cayman Companies Act. The Domestication is intended to be effected on the date that is one business day prior to the effective time of the Merger, including the filing with the Secretary of State of the State of Delaware a certificate of domestication with respect to the Domestication, together with the proposed amended and restated certificate of incorporation of New PAD (the “New PAD Charter”). Upon the effectiveness of the Domestication, FACT will become a Delaware corporation (“New FACT”) and will be renamed “Precision Aerospace & Defense Group, Inc.” All outstanding securities of FACT will convert into securities of New FACT, as described in more detail in the accompanying proxy statement/prospectus. We refer to this proposal as the “Domestication Proposal.”
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as a special resolution, that subject to the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal, FACT be de-registered in the Cayman Islands pursuant to article 47 of the amended and restated memorandum and articles of association of FACT and Part XII of the Companies Act of the Cayman Islands (As Revised) and transferred by way of continuation to Delaware as a corporation under the laws of the State of Delaware, and, conditioned upon, and with effect from, the registration of FACT as a corporation in the State of Delaware, the name of FACT be changed from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.” and the registered office of FACT be changed to “7500 College Blvd, 5th Floor, Overland Park, KS 66210.”
(3) Proposal No. 3 — The Stock Issuance Proposal — To consider and vote upon a proposal to approve, subject to the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal, by ordinary resolution, including for purposes of complying with the applicable provisions of Nasdaq Listing Rules 5635(a), (b) and (d), the issuance or potential issuance of (i) shares of New PAD Common Stock to in connection with the Business Combination Agreement, and (ii) any other issuances of preferred stock, common stock and securities convertible into or exercisable for common stock pursuant to subscription, purchase or similar agreements that FACT has entered, or may enter, into prior to the Closing of the Business Combination. We refer to this proposal as the “Stock Issuance Proposal.”
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as an ordinary resolution, that subject to the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal, for the purposes of complying with applicable listing rules of NYSE the issuance of (i) shares of common stock of New PAD (“New PAD Common Stock”) in connection with the Business Combination and (ii) any other issuances of preferred stock, common stock and securities convertible into or exercisable for common stock pursuant to subscription, purchase or similar agreements that FACT has entered, or may enter, into prior to the Closing of the Business Combination, be approved in all respects.”
(4) Proposal No. 4 — Charter Proposal — To consider and vote upon a proposal to approve, subject to the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal, by special resolution, the New PAD Charter. We refer to this proposal as the “Charter Proposal.” The form of the New PAD Charter is attached to the accompanying proxy statement/prospectus as Annex H.
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as a special resolution, that subject to the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal, the amended and restated memorandum and articles of association of FACT currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the proposed New PAD Charter (in the form attached to the proxy statement/prospectus of the meeting as Annex H) including, without limitation, the authorization of the change in authorized share capital as indicated therein, effective upon the effectiveness of the Domestication.”
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(5) Proposal No. 5 — The Advisory Charter Proposals — To consider and vote upon the following six separate proposals (collectively, the “Advisory Charter Proposals”) to approve, subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, on a non-binding and advisory basis by ordinary resolution the certain material differences between the FACT Articles and the New PAD Charter.
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as six separate ordinary resolutions on a non-binding and advisory basis only, subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, that the following governance provisions contained in the New PAD Charter be and are hereby approved and adopted:
• Proposal No. 5A — To amend the FACT Articles to authorize the change in the authorized capital stock of FACT from (i) 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares and 1,000,000 preference shares, par value $0.0001 per share, to (ii) 100,000,000 shares of New PAD Common Stock and 10,000,000 shares of undesignated preferred stock, par value $0.00001 per share.
• Proposal No. 5B — To amend the FACT Articles to authorize adopting the State of Delaware as the exclusive forum for certain stockholder litigation.
• Proposal No. 5C — To amend the FACT Articles to approve provisions requiring the affirmative vote of at least (i) a majority of New PAD’s then outstanding capital stock (except where a lower threshold is provided by the DGCL) for amendments to the New PAD Charter; and (ii) a majority of the New PAD Board or a majority of New PAD’s then outstanding capital stock for amendments to the New PAD Bylaws.
• Proposal No. 5D — To amend the FACT Articles to approve provisions permitting the removal of a director only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, voting together as a single class.
• Proposal No. 5E — To amend the FACT Articles to approve provisions requiring stockholders to take action at an annual or special meeting and prohibiting stockholder action by written consent in lieu of a meeting.
• Proposal No. 5F — To amend the FACT Articles to authorize (i) changing the corporate name from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.,” (ii) making New PAD’s corporate existence perpetual, and (iii) removing certain provisions related to FACT’s status as a blank check company that will no longer be applicable upon consummation of the Business Combination.”
(6) Proposal No. 6 — The Incentive Plan Proposal — To consider and vote upon a proposal to approve, subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, by ordinary resolution, the New PAD 2026 Omnibus Securities and Incentive Plan (the “New PAD Incentive Plan”). We refer to this proposal as the “Incentive Plan Proposal.”
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as an ordinary resolution, that subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the New PAD 2026 Omnibus Securities and Incentive Plan, in the form attached to the proxy statement/prospectus of the meeting as Annex J, be adopted and approved.”
(7) Proposal No. 7 — Director Election Proposal — To consider and vote upon a proposal to approve, subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, by ordinary resolution of the holders of FACT Class B Shares, the election of seven directors to serve on the New PAD board of directors until their respective successors are duly elected and qualified. We refer to this proposal as the “Director Election Proposal.”
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The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as an ordinary resolution of the holders of Class B ordinary shares, that subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the persons named below be elected to serve on the New PAD board of directors until their respective successors are duly elected and qualified, effective upon the consummation of the Business Combination.”
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Name of Director Nominee |
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Maynard Hellman |
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Ronald Buschur |
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Glenn Argenbright |
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Larry Thompson |
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Dave Lawrence |
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Adam Gishen |
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[•] |
(8) Proposal No. 8 — The Adjournment Proposal — To consider and vote upon a proposal to approve, by ordinary resolution, the adjournment of the EGM to a later date or dates, if necessary or desirable (the “Adjournment Proposal”).
The full text of the resolution to be considered and, if thought fit, passed and approved is as follows:
“RESOLVED, as an ordinary resolution, that the EGM be adjourned to a later date or dates, if the FACT Board deems it necessary or desirable, be approved.”
Approval of each of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal is a condition to consummating the Business Combination. We refer to such proposals, collectively, as the “Condition Precedent Proposals.” Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other Condition Precedent Proposal. The Advisory Charter Proposals, Director Election Proposal and Incentive Plan Proposal are each conditioned on the approval of the Condition Precedent Proposals and approval of each is a condition to consummating the Business Combination. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in the accompanying proxy statement/prospectus.
Only holders of record of FACT Class A Shares and FACT Class B Shares (together, the “FACT Ordinary Shares”) at the close of business on [•], 2026 (the “Record Date”) are entitled to notice of and to vote at and to have their votes counted at the EGM and any adjournment of the EGM.
This proxy statement/prospectus and accompanying proxy card is being provided to FACT’s shareholders in connection with the solicitation of proxies to be voted at the EGM and at any adjournment of the EGM. Whether or not you plan to attend the EGM, all of FACT’s shareholders are urged to read this proxy statement/prospectus, including the Annexes and the documents referred to herein, carefully and in their entirety. You should also carefully consider the risk factors described under the heading “Risk Factors” beginning on page 20 of this proxy statement/prospectus.
After careful consideration, the FACT Board has unanimously determined that the Business Combination is fair, advisable, and in the best interests of FACT and its shareholders, unanimously approved the Business Combination and unanimously recommends that shareholders vote “FOR” the adoption of the Business Combination Agreement, and approval of the transactions contemplated thereby, including the Domestication and Merger, and “FOR” all other proposals presented to FACT’s shareholders in this proxy statement/prospectus. The Business Combination was not structured to require the approval of at least a majority of FACT’s unaffiliated shareholders because such a vote is not required under Cayman Islands law. When you consider the recommendation of the proposals herein by the FACT Board, you should keep in mind that the Sponsor, Sponsor HoldCo and FACT’s directors and officers and their affiliates have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for further discussion of these considerations.
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Public Shareholders, other than the Sponsor, Sponsor HoldCo and the FACT Insiders, may request that FACT redeem all or a portion of his, her, or its Public Shares for cash if the Business Combination is consummated. As a holder of Public Shares, you will be entitled to receive cash for any Public Shares to be redeemed only if you:
(i) hold Public Shares or hold Public Shares through FACT Units and elect to separate your FACT Units into the underlying Public Shares and FACT Warrants prior to exercising your redemption rights with respect to the Public Shares;
(ii) submit a written request to Odyssey Transfer and Trust Company (“Odyssey”), FACT’s transfer agent, which request includes the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that FACT redeem all or a portion of your Public Shares for cash; and
(iii) tender or deliver your Public Shares (and share certificates (if any) and other redemption forms) to Odyssey, physically or electronically through The Depository Trust Company (“DTC”) DWAC (Deposit/Withdrawal at Custodian) system.
Holders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to [•], Eastern Time, on [•], 2026 (two business days before the scheduled date of the EGM) in order for their Public Shares to be redeemed.
Holders of Public Shares (other than the Sponsor, Sponsor HoldCo and the FACT Insiders) may elect to redeem all or a portion of their Public Shares regardless of if or how they vote in respect of the Business Combination Proposal. If the Business Combination is not consummated, the Public Shares will be returned to the respective holder, broker or bank.
If the Business Combination is consummated, and if a Public Shareholder (other than the Sponsor, Sponsor HoldCo and the FACT Insiders) properly exercises its right to redeem all or a portion of the Public Shares that it holds, including timely delivering such shares to Odyssey, FACT will redeem such Public Shares for a per-share price, payable in cash, equal to the pro rata portion of the funds held in the trust account established at the consummation of FACT’s initial public offering (the “Trust Account”), including interest earned on the funds held in the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals), calculated as of two business days prior to the consummation of the Business Combination (the “Redemption Price”). For illustrative purposes, as of the Record Date, this would have amounted to approximately $[•] per issued and outstanding Public Share. Prior to exercising redemption rights, Public Shareholders should verify the market price of the FACT Class A Shares, as they may receive higher proceeds from the sale of their Public Shares in the public market than from exercising their redemption rights if the market price per share is higher than the Redemption Price. FACT cannot assure shareholders that they will be able to sell their Public Shares in the open market, even if the market price per share is higher than the Redemption Price stated above, as there may not be sufficient liquidity in the FACT Class A Shares when Public Shareholders wish to sell their shares. If a Public Shareholder exercises its redemption rights in full, then it will be electing to exchange his, her or its Public Shares for cash and will no longer own Public Shares. See “The Extraordinary General Meeting — Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your Public Shares for cash.
Notwithstanding the foregoing, a Public Shareholder, together with any affiliate or any other person with whom he, she or it is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will be restricted from seeking redemption with respect to more than 15% of the issued and outstanding Public Shares. Accordingly, all Public Shares in excess of 15% held by a shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will not be redeemed.
Under the Business Combination Agreement, the obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain closing conditions of the respective parties, including, without limitation: (i) the approval and adoption of the Business Combination Agreement and transactions contemplated thereby by requisite vote of FACT’s shareholders (the “FACT Shareholder Approval”); (ii) the approval and adoption of the Business Combination Agreement by PAD’s stockholders (the “PAD Stockholder Approval”); (iii) the absence of laws, rules, regulations, judgments, decrees, executive orders or awards making the Business Combination illegal or otherwise prohibiting its consummation or restraining or imposing any condition on its
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consummation; (iv) the Registration Statement having been declared effective by the SEC under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement being in effect, and no proceedings seeking such a stop order having been initiated or threatened in writing by the SEC; and (v) (A) all applicable waiting periods under the HSR Act with respect to the Business Combination having expired or been terminated, (B) at least 60 days shall have elapsed since the submission to the United States Department of State Directorate of Defense Trade Controls of all information required by 22 C.F.R. § 122.4(b), and (C) each consent of any Governmental Authority (as defined in the Business Combination Agreement) required to consummate the Business Combination having been obtained and shall be in full force and effect.
The obligations of PAD to consummate the Business Combination are subject to additional conditions, including, among others: (i) the truth and accuracy of the representations and warranties of FACT and Merger Sub, subject to customary bring-down standards; (ii) material compliance by FACT and Merger Sub with their respective obligations, agreements and covenants under the Business Combination Agreement; (iii) receipt by PAD of a closing certificate of FACT; (iv) there being no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to FACT; (v) FACT having provided the Public Shareholders the opportunity to make redemption elections with respect thereto; (vi) FACT’s initial listing application in connection with the Business Combination shall have been conditionally approved and, immediately following the Effective Time, FACT shall satisfy any applicable initial listing requirements of NYSE; (vii) the aggregate cash available from the Trust Account and other sources as set forth in the Business Combination Agreement equaling no less than $75,000,000 (after deducting SPAC Transaction Expenses (as defined in the Business Combination Agreement) and any amounts paid to FACT’s shareholders that exercise their redemption rights in connection with the Business Combination) (the “Minimum FACT Cash Amount”); (viii) receipt of certain executed ancillary documents and the amended and restated certificate of incorporation of FACT shall have become effective; and (ix) FACT having taken all necessary and appropriate measures to have all funds held in the Trust Account be disbursed to FACT and released from the Trust Account to New PAD on the Closing Date.
The obligations of FACT and Merger Sub to consummate the Business Combination are subject to additional conditions, including, among other things: (i) the truth and accuracy of the representations and warranties of PAD, subject to customary bring-down standards; (ii) material compliance by PAD with its agreements and covenants under the Business Combination Agreement; (iii) no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to PAD having occurred since the date of the Business Combination Agreement that is continuing; and (iv) receipt of a closing certificate of PAD and certain executed ancillary documents.
Only holders of record of FACT Ordinary Shares at the close of business on the Record Date are entitled to notice of and to have their votes counted at the EGM and any adjournment of the EGM.
The approval of the Business Combination Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Business Combination Proposal is conditioned on the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Domestication Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Business Combination Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
The approval of the Domestication Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Domestication Proposal is conditioned on the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Domestication Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
The approval of the Stock Issuance Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Stock Issuance Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Charter Proposal is not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
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The approval of the Charter Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Charter Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Stock Issuance Proposal is not approved, the Charter Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
The approval of the Advisory Charter Proposals requires an ordinary resolution on a non-binding and advisory basis only, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Advisory Charter Proposals are conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Advisory Charter Proposals will have no effect, even if approved by holders of FACT Ordinary Shares.
The approval of the Incentive Plan Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Incentive Plan Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
Approval of the Director Election Proposal requires an ordinary resolution of the holders of the FACT Class B Shares, being the affirmative vote of a simple majority of the votes cast by the holders of the FACT Class B Shares, who, being entitled to do so, vote in person or by proxy at the EGM. The Director Election Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Director Election Proposal will have no effect, even if approved by holders of FACT Class B Shares.
The approval of the Adjournment Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Adjournment Proposal is not conditioned upon the approval of any other proposal to be voted on at the EGM.
In connection with FACT’s initial public offering (“IPO”), FACT’s initial shareholders, directors and officers, the Sponsor and Sponsor HoldCo entered into a letter agreement with FACT (the “Letter Agreement”), pursuant to which they agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of an initial business combination. Such redemption rights waiver was provided at the time of the IPO without any separate consideration paid. The FACT Insiders collectively own 6,595,833 FACT Ordinary Shares, or approximately 27% of the issued and outstanding FACT Ordinary Shares, as follows: (i) the Sponsor owns 0 FACT Class B Shares directly, 3,135,044 FACT Class B Shares indirectly through Sponsor HoldCo, and 17,500 FACT Class A Shares; (ii) the FACT independent directors each own 30,000 FACT Class B Shares, for an aggregate of 90,000 FACT Class B Shares; (iii) our Executive Chairman owns 130,000 FACT Class B Shares; and (iv) Sponsor HoldCo owns an aggregate of 422,500 FACT Class A Shares, (325,000 restricted FACT Class A Shares of which would vest only upon the consummation of our initial business combination) and 5,593,333 FACT Class B Shares.
Your vote is very important. Whether or not you plan to attend the EGM, please submit your vote as soon as possible by following the instructions in the accompanying proxy statement/prospectus to make sure that your shares are represented at the EGM. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the EGM. The Business Combination will be consummated only if the Condition Precedent Proposals are approved at the EGM, and if the other conditions to Closing are satisfied or waived. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other Condition Precedent Proposal. The Advisory Charter Proposals, Director Election Proposal and Incentive
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Plan Proposal are each conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in the accompanying proxy statement/prospectus.
If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the EGM. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the EGM in person, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the EGM and will not be voted. If a valid quorum is established, any such failure to vote or to provide voting instructions will have no effect on the outcome of any proposal in the accompanying proxy statement/prospectus. An abstention or broker non-vote will be counted towards the quorum requirement. Abstentions and broker non-votes will not count as votes cast at the EGM and otherwise will have no effect on a particular proposal because each proposal requires the affirmative vote of a particular number of votes cast and neither an abstention nor a broker non-vote is a vote cast. If you are a shareholder of record and you attend the EGM and wish to vote in person, you may withdraw your proxy and vote in person.
Your attention is directed to the remainder of the proxy statement/prospectus following this notice (including the Annexes and other documents referred to herein) for a more complete description of the Business Combination and related transactions and each of the proposals. You are encouraged to read this proxy statement/prospectus carefully and in its entirety, including the Annexes and other documents referred to herein. If you have any questions or need assistance voting your FACT Ordinary Shares, please contact Sodali & Co. (“Sodali”), our proxy solicitor, by email at [•]. Individuals may also call Sodali toll free at (800) 662-5200; banks and brokers can call (203) 658-9400. This notice of EGM and the proxy statement/prospectus are available at [•].
Thank you for your participation. We look forward to your continued support.
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By Order of the FACT Board of Directors |
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Robert Rackind |
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Executive Chairman |
Important Notice Regarding the Availability of Proxy Materials for the EGM to be held on , 2026: This notice of EGM and the related proxy statement will be available at [•].
IF YOU RETURN YOUR PROXY CARD SIGNED AND WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR PROXY CARD WILL APPOINT ROBERT RACKIND AND ADAM GISHEN AS YOUR PROXY TO VOTE YOUR SHARES IN THEIR DISCRETION. ROBERT RACKIND AND ADAM GISHEN WILL VOTE ANY UNDIRECTED PROXIES IN FAVOR OF EACH OF THE PROPOSALS. TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST (1) SUBMIT A WRITTEN REQUEST TO ODYSSEY AT LEAST TWO BUSINESS DAYS PRIOR TO THE SCHEDULED VOTE AT THE EGM, WHICH REQUEST MUST INCLUDE THE LEGAL NAME, PHONE NUMBER AND ADDRESS OF THE BENEFICIAL OWNER OF THE PUBLIC SHARES FOR WHICH REDEMPTION IS REQUESTED, THAT YOUR PUBLIC SHARES BE REDEEMED FOR CASH, AND (2) TENDER OR DELIVER YOUR PUBLIC SHARES (AND SHARE CERTIFICATES (IF ANY) AND OTHER REDEMPTION FORMS) TO ODYSSEY, PHYSICALLY OR ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT/WITHDRAWAL AT CUSTODIAN) SYSTEM, IN EACH CASE, IN ACCORDANCE WITH THE PROCEDURES AND DEADLINES DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. IF THE BUSINESS COMBINATION IS NOT CONSUMMATED, THEN THE PUBLIC SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “THE EXTRAORDINARY GENERAL MEETING — REDEMPTION RIGHTS” IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS FOR MORE SPECIFIC INSTRUCTIONS.
The accompanying proxy statement/prospectus is dated , 2026 and is first being mailed to shareholders on or about , 2026.
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ABOUT THIS DOCUMENT
This document, which forms part of a registration statement on Form S-4 filed with the SEC by FACT and PAD, constitutes a prospectus of FACT under Section 5 of the Securities Act, with respect to the shares of New PAD Common Stock to be issued under the Business Combination Agreement if the Business Combination described herein is consummated. This document also constitutes a notice of meeting and a proxy statement of FACT under Section 14(a) of the Exchange Act with respect to the EGM of FACT at which FACT Shareholders will be asked to consider and vote upon proposals to approve the Business Combination by the adoption of the Business Combination Agreement, among other matters.
You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. Neither the mailing of this proxy statement/prospectus to FACT Shareholders nor the issuance by New PAD of New PAD Common Stock in connection with the Business Combination will create any implication to the contrary.
Information contained in this proxy statement/prospectus regarding FACT has been provided by FACT and information contained in this proxy statement/prospectus regarding PAD has been provided by PAD. FACT does not have independent knowledge of the matters set forth herein regarding PAD or its subsidiaries, and PAD does not have independent knowledge of the matters set forth herein regarding FACT or its subsidiaries.
This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
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TABLE OF CONTENTS
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Frequently Used Terms |
iii |
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Financial Statement Presentation |
ix |
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Market and Industry Data |
x |
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Trademarks, Trade Names, and Service Marks |
xi |
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Cautionary Note Regarding Forward-Looking Statements |
xii |
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Questions and Answers About the Business Combination |
xv |
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Summary of the Proxy Statement/Prospectus |
1 |
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Risk Factors |
20 |
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The Extraordinary General Meeting |
64 |
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Proposal No. 1 — The Business Combination Proposal |
72 |
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Proposal No. 2 — The Domestication Proposal |
122 |
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Proposal No. 3 — The Stock Issuance Proposal |
125 |
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Proposal No. 4 — The Charter Proposal |
127 |
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Proposal No. 5 — The Advisory Charter Proposals |
131 |
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Proposal No. 6 — The Incentive Plan Proposal |
138 |
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Proposal No. 7 — The Director Election Proposal |
141 |
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Proposal No. 8 — The Adjournment Proposal |
143 |
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Material U.S. Federal Income Tax Considerations |
144 |
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Material Cayman Islands Tax Considerations |
156 |
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Selected Historical Financial Information of FACT |
157 |
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Selected Historical Financial Information of PAD |
158 |
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Unaudited Pro Forma Condensed Combined Financial Information |
159 |
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Dilution |
193 |
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Information About FACT |
196 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations of FACT |
213 |
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Information About PAD |
216 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations of PAD |
235 |
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Management of New PAD Following the Business Combination |
253 |
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Executive and Director Compensation of PAD |
259 |
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Beneficial Ownership of Securities |
263 |
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Certain Relationships and Related Persons Transactions |
267 |
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Comparison of Corporate Governance and Shareholder Rights |
273 |
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Shares Eligible for Future Sales |
279 |
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Description of New PAD Securities |
281 |
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Appraisal Rights and Dissenters’ Rights |
286 |
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Shareholder Communications |
286 |
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Delivery of Documents to Shareholders |
286 |
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Legal Matters |
286 |
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Other Matters |
286 |
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Experts |
286 |
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Future Stockholder Proposals |
287 |
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Householding Information |
287 |
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Where You Can Find More Information |
288 |
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Enforceability of Civil Liabilities |
289 |
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Index to Financial Statements |
F-1 |
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Annex A-1 — Business Combination Agreement (original dated as of November 26, 2025) |
A-1-1 |
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Annex A-2 — Business Combination Agreement Amendment |
A-2-1 |
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Annex B — Sponsor Support Agreement |
B-1 |
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Annex C — PAD Support Agreement |
C-1 |
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Annex D — Form of PAD Stockholder Written Consent* |
D-1 |
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Annex E — Form of Sponsor Lock-Up Agreement |
E-1 |
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Annex F — Form of PAD Shareholder Lock-Up Agreement |
F-1 |
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Annex G — Form of Registration Rights Agreement* |
G-1 |
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Annex H — Form of New PAD Charter |
H-1 |
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Annex I — Form of New PAD Bylaws |
I-1 |
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Annex J — Form of New PAD 2026 Omnibus Securities and Incentive Plan |
J-1 |
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Annex K — Opinion of ERShares International LLC |
K-1 |
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Annex L — Form of FACT II Acquisition Corp. Preliminary Proxy Card* |
L-1 |
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Part II — Information Not Required in Prospectus |
II-1 |
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* To be filed by amendment.
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FREQUENTLY USED TERMS
Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our” and “FACT” refer to FACT II Acquisition Corp. and the terms “New PAD,” “combined company” and “post-combination company” refer to New PAD (f/k/a FACT II Acquisition Corp. as of immediately following the consummation of the Business Combination) and its subsidiaries following the consummation of the Business Combination.
In this document:
“Acquisition Shares” means up to 5,447,084 shares of New Pad Common Stock that may be issued pursuant to pending PAD acquisitions and acquisitions for which PAD may enter into after the date of this proxy statement/prospectus.
“Adjournment Proposal” means the proposal to approve, by ordinary resolution, the adjournment of the EGM to a later date or dates, if necessary or desirable.
“Advisory Charter Proposals” means the six proposals to be considered at the EGM to approve on a non-binding and advisory basis by ordinary resolution certain material differences between the FACT Articles and the New PAD Charter.
“Aerofab” means Aerofab NDT, LLC, a Washington limited liability company.
“Alternative Transaction” means (i) with respect to PAD and its subsidiaries, a transaction (other than the Business Combination) concerning the sale of (A) 15% or more of the business or assets of the PAD and its subsidiaries on a consolidated basis or (B) 15% or more of the issued and outstanding shares or other equity interests or profits of PAD, in any case, whether such transaction takes the form of a sale of shares or other equity interests, assets, merger, consolidation, issuance of debt securities, management contract, joint venture or partnership, or otherwise, and (ii) with respect to FACT, a transaction (other than the Business Combination) concerning a business combination.
“Business Combination” means, collectively, the Merger, the Domestication and the other transactions contemplated by the Business Combination Agreement.
“Business Combination Agreement” means the Business Combination Agreement and Plan of Merger, dated as of November 26, 2025, by and among FACT, Sponsor HoldCo, Merger Sub, and PAD, as amended by Amendment No. 1 thereto dated as of May 17, 2026 (as it may be amended, restated, supplemented, or otherwise modified from time to time).
“Business Combination Proposal” means the proposal to be considered at the EGM to approve and adopt the Business Combination Agreement and the transactions contemplated by the Business Combination Agreement.
“Cayman Companies Act” means the Companies Act of the Cayman Islands (As Revised).
“CCM” means Cohen & Company Capital Markets, a division of Cohen & Company Securities, LLC (f/k/a Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC).
“Charter Proposal” means the proposal to be considered at the EGM to approve, by special resolution, the New PAD Charter.
“Class B Share Conversion” means the conversion of a FACT Class B Share into a FACT Class A Share on a one-for-one basis (a) at any time and from time to time at the option of each holder of a FACT Class B Share and (b) concurrently with or immediately following the consummation of a business combination, pursuant to the terms of the FACT Articles, subject to adjustment as defined therein.
“Closing” means the closing of the Business Combination.
“Closing Date” means the date the Closing occurs.
“Code” means the Internal Revenue Code of 1986, as amended.
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“completion window” means the time in which FACT has to complete its initial business combination pursuant to the terms of the FACT Articles, which is until the date that is within 18 months from the closing of its IPO (or 24 months from the closing of its IPO if it has executed a definitive agreement for an initial business combination within 18 months from the closing of its IPO), or by such earlier liquidation date as the FACT Board may approve.
“Condition Precedent Proposals” means the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the approval of each of which is a condition to consummating the Business Combination.
“DGCL” means the Delaware General Corporation Law.
“Director Election Proposal” means the proposal to be considered at the EGM to approve, by ordinary resolution, the election of seven directors to serve on the New PAD Board.
“Domestication” means the deregistration of FACT from the Cayman Islands and the registration by way of continuation of FACT as a corporation incorporated in the State of Delaware, in accordance with the FACT Articles, Section 388 of the DGCL and Part XII of the Cayman Companies Act.
“Domestication Proposal” means the proposal to be considered at the EGM to approve, by special resolution, the Domestication.
“DTC” means The Depository Trust Company.
“Effective Time” means the effective time of the Merger.
“EGM” means the extraordinary general meeting of the FACT Shareholders, to be held virtually at a.m., Eastern Time, on , 2026. The EGM will be a virtual meeting conducted via live webcast at [•]. For the purposes of Cayman Islands law and the FACT Articles, the physical location of the EGM will be at the offices of Paul Hastings LLP at 200 Park Avenue, New York, New York 10016.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“FACT” means FACT II Acquisition Corp., a Cayman Islands exempted company.
“FACT Articles” means the amended and restated memorandum and articles of association of FACT (as may be amended from time to time).
“FACT Board” means the board of directors of FACT.
“FACT Class A Common Stock” means the Class A common stock of FACT, par value $0.0001 per share, after the Domestication.
“FACT Class A Shares” means the Class A ordinary shares of FACT, par value $0.0001 per share, prior to the Domestication.
“FACT Class B Common Stock” means the Class B common stock of FACT, par value $0.0001 per share, after the Domestication.
“FACT Class B Shares” means the Class B ordinary shares of FACT, par value $0.0001 per share, prior to the Domestication.
“FACT Closing Cash” means the aggregate cash proceeds available for release to FACT from the Trust Account (net of the amount to be paid to redeeming Public Shareholders and after payment of any transaction expenses) and other sources as set forth in the Business Combination Agreement.
“FACT Common Stock” means, collectively, the FACT Class A Common Stock and FACT Class B Common Stock.
“FACT Forfeited Shares” means the Founder Shares, Private Placement Units and FACT Class A Shares to be forfeited by the Sponsor and Sponsor HoldCo to FACT, equal to 1,878,333.
“FACT Insiders” means the Sponsor, Sponsor HoldCo, and certain directors and officers of FACT holding FACT Class B Shares.
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“FACT Ordinary Shares” means FACT Class A Shares and FACT Class B Shares.
“FACT Shareholders” means holders of FACT Ordinary Shares.
“FACT Shareholder Approval” means the requisite vote by the FACT Shareholders to approve and adopt the Business Combination Agreement and transactions contemplated thereby.
“FACT Unaffiliated Shareholders” means holders of FACT Ordinary Shares other than (i) the Sponsor, (ii) Sponsor HoldCo, and (iii) officers, directors or affiliates of FACT.
“FACT Units” means the units sold in the IPO, each consisting of one FACT Class A Share and one-half of one redeemable public warrant.
“FACT Warrants” means collectively, the public warrants and the private placement warrants.
“Financings” means financing agreements, which shall have terms, and be in a form, reasonably acceptable to FACT and PAD, from third party investors (such investors, collectively, with any permitted assignees or transferees, the “Third-Party Investors”), pursuant to which the Third-Party Investors make or commit to participate in an equity financing in such form as PAD and FACT will mutually agree.
“Founder Shares” means the FACT Class B Shares purchased by the Sponsor in a private placement prior to the IPO, and the FACT Class A Shares that will be issued upon the conversion thereof.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Incentive Plan Proposal” means the proposal to be considered at the EGM to approve, by ordinary resolution, the New PAD Incentive Plan.
“IPO” means FACT’s initial public offering of its units, ordinary shares and warrants pursuant to its registration statement on Form S-1 declared effective by the SEC on November 25, 2024 (SEC File No. 333-281593).
“Letter Agreement” means the letter agreement entered into by FACT’s initial shareholders, directors and officers, the Sponsor and Sponsor HoldCo, pursuant to which they agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of an initial business combination.
“Lock-Up Agreements” means collectively the Sponsor Lock-Up Agreement and the PAD Shareholder Lock-Up Agreement.
“Maney” means Maney Aircraft, Inc., a California corporation.
“Merger” means the merger of Merger Sub with and into PAD with PAD surviving the merger as a wholly-owned subsidiary of FACT.
“Merger Sub” means Patriot Merger Subsidiary, Inc., a Florida corporation and a direct, wholly-owned subsidiary of FACT.
“Merger Consideration” means (i) an aggregate of 1 shares of New PAD Common Stock to be issued to the PAD Stockholders in exchange for their PAD Shares and shares of PAD Preferred Stock, (ii) the $ 2 payable to the former holders of shares of PAD Preferred Stock, and (iii) the New PAD Options into which the PAD Options will be converted, in each case as of the Effective Time.
“Minimum FACT Cash Amount” means the aggregate cash proceeds from the Trust Account (as defined below) and other sources as set forth in the Business Combination Agreement, equaling no less than $75,000,000 (after deducting SPAC Transaction Expenses (as defined in the Business Combination Agreement) and any amounts paid to FACT Shareholders that exercise their redemption rights in connection with the Business Combination).
“Nasdaq” means The Nasdaq Stock Market LLC.
“New FACT” means FACT after the consummation of the Domestication.
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1 To be inserted in the final amendment based on the total number of shares of Series E Preferred Stock sold.
2 To be inserted in the final amendment based on the total number of shares of Series E Preferred Stock sold.
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“New FACT Board” means the board of directors of New FACT.
“New PAD” means New FACT after the consummation of the Business Combination, which will be named “Precision Aerospace & Defense Group, Inc.”
“New PAD Board” means the board of directors of New PAD.
“New PAD Bylaws” means the proposed new bylaws of New PAD, to take effect upon the consummation of the Merger.
“New PAD Charter” means the proposed new certificate of incorporation of New PAD, to take effect upon the consummation of the Merger.
“New PAD Common Stock” means the FACT Class A Common Stock after the Merger.
“New PAD Incentive Plan” means the New PAD 2026 Omnibus Securities and Incentive Plan.
“New PAD Option” means an option to purchase Public Shares upon the same terms and conditions as were in effect with respect to the PAD Option immediately prior to the Effective Time.
“non-managing Sponsor HoldCo investors” means certain investors (none of which are affiliated with any member of FACT’s management, the Sponsor or any other investor, except for Robert Rackind, FACT’s Executive Chairman) that (i) purchased $88 million of FACT Units sold in the IPO at the offering price and (ii) purchased, indirectly through the purchase of non-managing Sponsor HoldCo membership interests, (A) an aggregate of 260,000 Private Placement Units at a price of $10.00 per unit and (B) 162,500 Private Placement Units and 325,000 restricted FACT Class A Shares, which shares would vest only upon the consummation of our initial business combination, at a combined price of $10.00 per Private Placement Security (as defined below) ($4,225,000 in the aggregate), reflecting the issuance of restricted FACT Class A Shares at no additional price; subject to each non-managing Sponsor HoldCo investor purchasing, indirectly through Sponsor HoldCo, the Private Placement Units or Private Placement Securities, as applicable, allocated to it, Sponsor HoldCo issued membership interests at a nominal purchase price to the non-managing Sponsor HoldCo investors at the closing of the IPO reflecting interests in an aggregate of 6,468,333 Founder Shares (which were subsequently reduced by 875,000 Founder Shares that were forfeited effective as of January 10, 2025 upon the expiry of the underwriters’ over-allotment option) (of which 3,135,044 Founder Shares are indirectly held by the Sponsor through Sponsor HoldCo) and 325,000 restricted FACT Class A Shares, as applicable, held by Sponsor HoldCo.
“NYSE” means the New York Stock Exchange.
“Odyssey” or “Transfer Agent” means Odyssey Transfer and Trust Company, FACT’s transfer agent.
“PAD” means Precision Aerospace & Defense Group, Inc., a Florida corporation.
“PAD Board” means the board of directors of PAD.
“PAD Option” means an option to purchase PAD Shares granted under PAD’s 2024 Omnibus Securities and Incentive Plan.
“PAD Preferred Stock” means the PAD Series A Preferred Stock, the PAD Series B Preferred Stock, the PAD Series C Preferred Stock, the PAD Series D Preferred Stock, and the PAD Series E Preferred Stock, collectively.
“PAD Series A Preferred Stock” means shares of Series A Preferred Stock of PAD, par value $0.001 per share.
“PAD Series B Preferred Stock” means shares of Series B Preferred Stock of PAD, par value $0.001 per share.
“PAD Series C Preferred Stock” means shares of Series C Preferred Stock of PAD, par value $0.001 per share.
“PAD Series D Preferred Stock” means shares of Series D Preferred Stock of PAD, par value $0.001 per share.
“PAD Series E Preferred Stock” means shares of Series E Preferred Stock of PAD, par value $0.001 per share.
“PAD Shareholder Lock-Up Agreement” means the lock-up agreement to be entered into in connection with the Closing pursuant to the Business Combination Agreement by FACT, PAD, certain holders of PAD’s equity interests and New PAD.
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“PAD Shares” means shares of common stock of PAD, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time.
“PAD Stockholder Approval” means the requisite vote by stockholders of PAD to approve and adopt the Business Combination Agreement and transactions contemplated thereby.
“PAD Stockholders” means holders of PAD’s capital stock.
“PAD Support Agreements” means, collectively, each of the Voting and Support Agreements, dated as of January 6, 2026 or January 19, 2026, by and among FACT, PAD and a PAD Supporting Stockholder.
“PAD Supporting Stockholders” means those stockholders of PAD who are parties to a PAD Support Agreement.
“Permitted Withdrawals” means amounts withdrawn from the Trust Account to pay franchise and income tax obligations.
“Private Placement” means the private placement, which closed simultaneously with the closing of the IPO, of an aggregate of 500,625 Private Placement Units at a price of $10.00 per Private Placement Unit and 162,500 Private Placement Securities at a price of $10.00 per Private Placement Security, generating gross proceeds of $6,631,250, as follows: (i) 17,500 Private Placement Units ($175,000 in the aggregate) with the Sponsor; (ii) (A) 260,000 Private Placement Units and (B) 162,500 Private Placement Units and 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) ($4,225,000 in the aggregate) with Sponsor HoldCo; (iii) 178,500 Private Placement Units ($1,785,000 in the aggregate) with CCM; and (iv) 44,625 Private Placement Units with Seaport ($446,250 in the aggregate).
“Private Placement Security” means collectively, two restricted FACT Class A Shares and a Private Placement Unit sold in the Private Placement.
“Private Placement Shares” means the FACT Class A Shares sold as part of the Private Placement Units.
“Private Placement Units” means the units issued to Sponsor HoldCo, CCM and Seaport in the Private Placement, which are identical to the units sold in the IPO, subject to certain limited exceptions described in the prospectus filed on November 26, 2024.
“private placement warrants” means the warrants sold as part of the Private Placement Units.
“Public Shareholder” means a holder of Public Shares.
“Public Shares” means collectively the FACT Class A Common Stock (prior to the consummation of the Merger) and the New PAD Common Stock (following consummation of the Merger) and the FACT Class A Shares.
“public warrants” means warrants sold as part of the units in the IPO.
“Record Date” means [•], 2026.
“Redemption Price” means the per-share price, payable in cash, equal to the pro rata portion of the funds held in the Trust Account including interest earned on the funds held in the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals), calculated as of two business days prior to the consummation of the Business Combination at which each Public Share may be redeemed in connection with the Business Combination, pursuant to the FACT Articles.
“Registration Statement” means the registration statement of which this proxy statement/prospectus forms a part.
“restricted FACT Class A Shares” means FACT Class A Shares issued pursuant to the Private Placement that may not, subject to certain limited exceptions as further described in “Shares Eligible for Future Sales” and “Description of New PAD Securities,” be transferred, assigned or sold by the holders until 90 days after the completion of our initial business combination and which shares would vest only upon the consummation of our initial business combination.
“Seaport” means Seaport Global Securities LLC.
“SEC” means the U.S. Securities and Exchange Commission.
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“Securities Act” means the Securities Act of 1933, as amended.
“Senior Advisor” means Rachelle du Rocher, a senior advisor to FACT.
“Sodali” means Sodali & Co., FACT’s proxy solicitor.
“Sponsor” means FACT II Acquisition Parent LLC, a Cayman Islands limited liability company.
“Sponsor HoldCo” means FACT II Acquisition LLC, a Cayman Islands limited liability company.
“Sponsor HoldCo Contributed Shares” means a number of shares of New PAD Common Stock that may be forfeited by Sponsor HoldCo, as determined by Sponsor HoldCo, in its sole discretion, in connection with (i) SPAC Transaction Expenses (as defined in the Business Combination Agreement) that exceed an expense cap as set forth in the Business Combination Agreement, and (ii) other liabilities and unpaid expenses of FACT being carried forward at the Closing.
“Sponsor Lock-Up Agreement” means the lock-up agreement to be entered into in connection with the Closing pursuant to the Business Combination Agreement by PAD, FACT, Sponsor HoldCo, certain other holders of equity interests of FACT and New PAD.
“Sponsor Support Agreement” means Sponsor Support Agreement, dated November 26, 2025, by and among FACT, PAD and Sponsor HoldCo, as it may be amended and supplemented from time to time.
“Stock Issuance Proposal” means the proposal to be considered at the EGM to approve, by ordinary resolution, including for purposes of complying with the applicable provisions of Nasdaq Listing Rules 5635(a), (b) and (d), the issuance or potential issuance of (i) shares of New PAD Common Stock to in connection with the Business Combination Agreement, and (ii) any other issuances of preferred stock, common stock and securities convertible into or exercisable for common stock pursuant to subscription, purchase or similar agreements that FACT has entered, or may enter, into prior to the Closing of the Business Combination.
“Transaction Consideration” means the aggregate equity consideration to be issued to PAD Stockholders (including holders of options, warrants and other convertible securities) in connection with the Business Combination, in the form of shares of New PAD Common Stock, based on a pre-money enterprise value of PAD of $317 million and after giving effect to adjustments for debt, cash and transaction expenses. For the avoidance of doubt, Transaction Consideration as used herein excludes any cash consideration payable to holders of PAD Preferred Stock, which is not reflected in the ERShares fairness opinion.
“Trust Account” means the trust account established in connection with the IPO.
“V&M” means AOP Precision Products, LLC, d/b/a V&M Precision Machining and Grinding, a Florida limited liability company.
“U.S. GAAP” means the accounting principles generally accepted in the United States of America.
“Working Capital Loans” means any loans provided by Sponsor HoldCo, the Sponsor, any of their respective affiliates, or FACT’s directors and officers to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination.
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FINANCIAL STATEMENT PRESENTATION
FACT
FACT is a blank check company, incorporated as a Cayman Islands exempted company on June 19, 2024 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. FACT currently has no material assets and does not currently operate any businesses. The financial statements of FACT included in this proxy statement/prospectus have been prepared in accordance with U.S. GAAP.
PAD
PAD was originally organized on July 8, 2016 as a limited liability company in the State of Florida as Precision Aerospace Group, LLC. On November 3, 2023, Precision Aerospace Group, LLC was converted to a Florida corporation and on April 16, 2025, it changed its name to Precision Aerospace & Defense Group, Inc. pursuant to the Articles of Conversion filed with the Florida Secretary of State. The financial statements of PAD included in this proxy statement/prospectus have been prepared in accordance with U.S. GAAP.
This proxy statement/prospectus contains:
• the audited financial statements of FACT as of December 31, 2025 and 2024 and for the year ended December 31, 2025 and the period from June 19, 2024 (inception) through December 31, 2024 and the unaudited financial statements of FACT as of March 31, 2026 and the three months ended March 31, 2026; and
• the audited financial statements of PAD as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024 and the unaudited financial statements of PAD as of March 31, 2026 and for the three months ended March 31, 2026.
Unless indicated otherwise, financial data presented in this proxy statement/prospectus have been taken from the audited and unaudited financial statements of FACT and PAD, as applicable, included in this proxy statement/prospectus.
In this proxy statement/prospectus, unless otherwise specified, all monetary amounts are in U.S. dollars, and all references to “$,” “US$,” “USD” and “dollars” mean U.S. dollars.
In this proxy statement/prospectus, certain monetary amounts, percentages and other figures included herein have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables and charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
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MARKET AND INDUSTRY DATA
In this proxy statement/prospectus, FACT and PAD rely on and refer to industry data, information and statistics regarding the industry and markets in which PAD competes from publicly available information, industry and general publications and research and studies conducted by third parties. Each of FACT and PAD has taken such care as it considers reasonable in the extraction and reproduction of information from such data from third-party sources.
Industry publications, research, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. The industry in which New PAD will operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” and elsewhere in this proxy statement/prospectus. Furthermore, such information and data cannot always be verified with complete certainty due to limits on the availability and reliability of data, the voluntary nature of the data gathering process and other limitations and uncertainties. Finally, while each of FACT and PAD believes its own internal estimates and research are reliable, and is not aware of any misstatements regarding such information and data presented in this proxy statement/prospectus, such research has not been verified by any independent source. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this proxy statement/prospectus. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under the section of this proxy statement/prospectus titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the forecasts or estimates from independent third parties and us.
Notwithstanding anything in this proxy statement/prospectus to the contrary, FACT and PAD are responsible for all disclosures in this proxy statement/prospectus.
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TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This proxy statement/prospectus contains references to trademarks and service marks belonging to other entities.
FACT, PAD and their respective affiliates own or have rights to trademarks, trade names and service marks that they use in connection with the operation of their businesses. In addition, their names, logos and website names and addresses are their trademarks or service marks. Other trademarks, trade names and service marks appearing in this proxy statement/prospectus are the property of their respective owners. Solely for convenience, in some cases, the trademarks, trade names and service marks referred to in this proxy statement/prospectus are listed without the applicable ®, ™ and ℠ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks, trade names and service marks. FACT and PAD do not intend their use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of them by, any other companies.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents incorporated by reference herein contain forward-looking statements within the meaning of applicable U.S. federal securities laws that involve risks and uncertainties, as well as assumptions, that, if proven incorrect or do not materialize, could cause the results of PAD, FACT or New PAD following the Business Combination to differ materially from those expressed or implied by these forward-looking statements. Forward-looking statements generally are identified by the words “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity” and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. For example, forward-looking statements include projections of earnings, revenues, synergies, accretion or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings, approvals and the closing related to the Business Combination; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing.
Forward-looking statements in this proxy statement/prospectus may include, for example, statements about:
• expectations related to the terms and timing of the completion of the Business Combination;
• the occurrence of any event giving rise to the right of a party to terminate the Business Combination Agreement;
• expectations related to the projected capitalization of New PAD following the completion of the Business Combination;
• projections relating to the future financial performance of FACT, PAD and New PAD;
• statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity;
• the expected directors and officers of New PAD after the completion of the Business Combination;
• the expected benefits of the Business Combination;
• the expected financial and business performance following the completion of the Business Combination;
• New PAD’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, and plans;
• the ability to expand the business of New PAD and provide new offerings, services and features and make enhancements to its business;
• potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transactions;
• developments and projections relating to New PAD’s competitors and industries;
• the ability to compete with existing and new competitors in existing and new markets and offerings;
• the ability to acquire new businesses or pursue strategic transactions;
• the expectations regarding the effects of existing and developing laws and regulations; and
• global and domestic economic conditions and their impact on demand for New PAD’s markets and offerings.
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The following factors or events, among others, could cause actual results to differ materially from those described in the forward-looking statements:
• FACT’s and PAD’s ability to establish and maintain strategic collaborations, licensing or other arrangements, and the terms and timing of such arrangements;
• the timing to consummate the Business Combination;
• the failure to satisfy the conditions to Closing;
• the risk that approval of the FACT Shareholders is not obtained;
• the amount of redemption requests made by the FACT Shareholders;
• the inherent uncertainty associated with financial or other projections;
• the inherent risks, costs and uncertainties associated with integrating the businesses successfully and risks of not achieving all or any of the anticipated benefits and synergies of the Business Combination, or the risk that the anticipated benefits and synergies of the Business Combination may not be fully realized or take longer to realize than expected;
• unexpected costs, liabilities or delays in connection with or with respect to the Business Combination;
• the diversion of FACT’s and PAD’s management’s time on issues related to the Business Combination;
• the occurrence of any event, change or other circumstance that could give rise to the termination of the Business Combination Agreement;
• the failure to consummate or delay in consummating the Business Combination;
• the effect of the announcement or pendency of the Business Combination on FACT’s or PAD’s customers, employees and business relationships, operating results, ability to retain and hire key personnel and businesses generally;
• the ability to obtain and/or maintain the listing of New PAD Common Stock on NYSE;
• changes in the financial or operating performance of FACT or PAD or more generally due to broader stock market movements and the performance of peer group companies;
• competitive pressures in the markets in which FACT and PAD operate;
• dilution caused by issuances of additional shares of New PAD Common Stock by New PAD;
• the risk that the anticipated tax treatment of the Business Combination is not obtained;
• potential legal proceedings relating to the Business Combination and the outcome of any such legal proceeding;
• economic uncertainty and capital markets disruption, which has been significantly impacted by the current U.S. presidential administration and accompanying regulatory activities and economic policies and events related thereto, ongoing military conflicts and geopolitical instability and inflation and interest rates;
• changes in laws or regulations; and
• changes in general economic conditions.
For additional information concerning factors that could cause actual conditions, events or results to materially differ from those described in the forward-looking statements, please refer to the section titled “Risk Factors” beginning on page 20 of this proxy statement/prospectus. Additionally, see the section titled “Where You Can Find More Information” beginning on page 288 of this proxy statement/prospectus.
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The risks and uncertainties described and referred to above are not exclusive and further information concerning FACT, PAD and New PAD and their respective businesses, including factors that potentially could materially affect their respective businesses, financial condition or operating results, may emerge from time to time. There may be additional risks that neither FACT nor PAD presently know or that FACT and PAD currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect FACT’s and PAD’s current expectations, plans, or forecasts of future events and are qualified in their entirety by reference to the cautionary statements herein. You are urged to consider these factors carefully in evaluating these forward-looking statements, and not to place undue reliance on any forward-looking statements. The forward-looking statements in this proxy statement/prospectus speak only as of the date of this proxy statement/prospectus. Except as required by law, none of FACT, PAD or New PAD assumes any obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION
The questions and answers below highlight only selected information from this proxy statement/prospectus and only briefly address some commonly asked questions about the EGM and the proposals to be presented at the EGM, including with respect to the Business Combination. The following questions and answers do not include all the information that is important to FACT Shareholders. Shareholders are urged to read carefully this entire proxy statement/prospectus, including the Annexes and the other documents referred to herein, to fully understand the Business Combination and the voting procedures for the EGM.
Q: Why am I receiving this proxy statement/prospectus?
A: You are receiving this proxy statement/prospectus because you are a FACT Shareholder and you are entitled to vote at the EGM to approve the matters set forth herein. This document serves as:
• a proxy statement of FACT to solicit proxies for the EGM to vote on the proposals set forth herein; and
• a prospectus of FACT to offer New PAD Common Stock to FACT Shareholders and PAD Stockholders (other than the PAD Supporting Stockholders) in the Business Combination.
FACT Shareholders are being asked to consider and vote upon, among other proposals, a proposal to approve and adopt the Business Combination Agreement and approve the Business Combination. FACT is proposing to consummate the Business Combination with PAD. FACT, Sponsor HoldCo, Merger Sub and PAD have entered into the Business Combination Agreement, the terms of which are described in this proxy statement/prospectus. A copy of the Business Combination Agreement is attached hereto as Annex A. FACT urges its shareholders to read the Business Combination Agreement in its entirety.
THE VOTE OF THE FACT SHAREHOLDERS IS IMPORTANT. FACT SHAREHOLDERS ARE URGED TO SUBMIT THEIR PROXIES AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS AND CAREFULLY CONSIDERING EACH OF THE PROPOSALS BEING PRESENTED AT THE EGM.
Q: What proposals are FACT Shareholders being asked to vote on?
A: At the EGM, FACT is asking holders of FACT Ordinary Shares to consider and vote upon the following proposals:
• the Business Combination Proposal;
• the Domestication Proposal;
• the Stock Issuance Proposal;
• the Charter Proposal;
• the Advisory Charter Proposals;
• the Incentive Plan Proposal;
• the Director Election Proposal (only holders of FACT Class B Shares may vote on this proposal); and
• the Adjournment Proposal (if presented).
If the FACT Shareholders do not approve each of the Condition Precedent Proposals, then unless certain conditions in the Business Combination Agreement are waived by the applicable parties to the Business Combination Agreement, the Business Combination Agreement could be terminated and the Business Combination may not be consummated. See the sections of this proxy statement/prospectus entitled “Proposal No. 1 — The Business Combination Proposal,” “Proposal No. 2 — The Domestication Proposal,” “Proposal No. 3 — The Stock Issuance Proposal” and “Proposal No. 4 — The Charter Proposal.”
FACT will hold the EGM to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the Business Combination and the other matters to be acted upon at the EGM. FACT Shareholders should read it carefully.
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After careful consideration, the FACT Board has determined that each of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal, the Charter Proposal, the Advisory Charter Proposals, the Incentive Proposal, the Director Election Proposal and the Adjournment Proposal, if presented, are fair, advisable, and in the best interests of FACT and its shareholders and unanimously recommends that you vote or give instruction to vote “FOR” each of those proposals.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
Q: Are the proposals conditioned on one another?
A: Yes. The Business Combination is conditioned on the approval of each of the Condition Precedent Proposals at the EGM. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other Condition Precedent Proposal. The Advisory Charter Proposals, Director Election Proposal and Incentive Plan Proposal are each also conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in the accompanying proxy statement/prospectus.
Q: I am a holder of Public Shares. Why am I receiving this proxy statement/prospectus?
A: Upon consummation of the Business Combination, and without any action on the part of any party or any other person, each outstanding FACT Class A Share (excluding Public Shares validly submitted for redemption and the FACT Forfeited Shares, but including FACT Class A Shares issued upon the Class B Share Conversion) will be reclassified as one share of New PAD Common Stock. This proxy statement/prospectus includes important information about New PAD and the business of New PAD and its subsidiaries following consummation of the Business Combination. FACT urges you to read the information contained in this proxy statement/prospectus carefully.
Q: Why is FACT proposing the Business Combination?
A: FACT was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses.
On November 25, 2024, FACT consummated its IPO of 17,500,000 FACT Units, generating gross proceeds of $175,000,000. Simultaneously with the consummation of the IPO and the issuance and sale of the FACT Units, FACT consummated the private placement of an aggregate of 500,625 Private Placement Units at a price of $10.00 per Private Placement Unit and 162,500 Private Placement Securities at a price of $10.00 per Private Placement Security, generating gross proceeds of $6,631,250, as follows: (A) 17,500 Private Placement Units ($175,000 in the aggregate) with the Sponsor, (B) (i) 260,000 Private Placement Units and (ii) 162,500 Private Placement Units and 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) ($4,225,000 in the aggregate) with Sponsor HoldCo, (C) 178,500 Private Placement Units ($1,785,000 in the aggregate) with CCM, and (D) 44,625 Private Placement Units with Seaport ($446,250 in the aggregate). Following the closing of the IPO, on November 27, 2024, an amount of $175,875,000 ($10.05 per unit) of the net proceeds of the IPO and the Private Placement was placed in the Trust Account, located in the United States, with Odyssey acting as trustee, and the funds were invested or held either (i) in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act, (ii) as uninvested cash, or (iii) in an interest bearing bank demand deposit account or other accounts at a bank, as determined by FACT, until the earlier of (A) the completion of a business combination and (B) the distribution of the funds in the Trust Account to the FACT Shareholders. Since the IPO, FACT’s activity has been limited to the evaluation of business combination target companies.
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PAD is a Florida corporation that implements a strategic acquisition and integration model focused on established businesses within the aerospace and defense industry. Serving as a central coordinating entity, PAD fosters a cohesive family of synergistic subsidiaries, enhancing value through the integration of complementary suppliers. The FACT Board considered a wide variety of factors in connection with its evaluation of the Business Combination, including the FACT Board’s review of the results of the due diligence conducted by FACT management and its advisors. As a result, the FACT Board concluded that the Business Combination with PAD would present a unique business combination opportunity and is in the best interests of FACT and its shareholders. The FACT Board also considered certain potentially material negative factors as well as certain potential conflicts of interest in arriving at that conclusion.
These factors are discussed in greater detail in the section entitled “Proposal No. 1 — The Business Combination Proposal — The FACT Board’s Reasons for the Approval of the Business Combination,” as well as in the section entitled “Risk Factors.”
Q: What are the reasons for the structure and timing of the Business Combination?
A: FACT was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses. Following the completion of the IPO, at the direction of the FACT Board, FACT’s management and directors commenced a search for potential business combination targets, leveraging FACT’s founders and executives, investment bankers, private equity firms and hedge funds and numerous other business relationships, as well as the prior experience and network of FACT’s management and directors. FACT reviewed over 100 potential business combination opportunities, entered into non-disclosure agreements with and conducted due diligence on 15 companies, and submitted non-binding letters of intent to representatives from five potential target companies other than PAD. FACT management ultimately decided not to pursue continued discussions with such alternate targets because FACT concluded that these other target businesses were not suitable business combination opportunities for FACT based on, among other factors, its due diligence indicating that the target businesses did not meet the criteria FACT had established at the time of its IPO, and instead FACT focused its efforts on PAD.
As contemplated by the Business Combination Agreement, the structure and timing of the Business Combination is consistent with common practice in initial business combination transactions consummated by special purpose acquisition companies. In addition, the timing for the consummation of the Business Combination provided for in the Business Combination Agreement, which was effectively as soon as reasonably practicable following the execution of the Business Combination Agreement, was determined and agreed by the parties in light of general business considerations weighing in favor of consummating the transaction promptly and the deadline for FACT to complete an initial business combination pursuant to the FACT Articles.
For more information, see “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination.”
Q: What will FACT Shareholders receive in the Business Combination?
A: Upon the Domestication, each outstanding FACT Class A Share (excluding Public Shares validly submitted for redemption and the FACT Forfeited Shares, but including FACT Class A Shares issued upon the Class B Share Conversion) will be reclassified as one share of New PAD Common Stock.
Q: What will PAD Stockholders receive in the Business Combination?
A: At the Effective Time, each share of PAD’s capital stock that is issued and outstanding as of immediately prior to the Effective Time (excluding treasury shares and dissenting shares) will be automatically canceled and converted into the right to receive shares of New PAD Common Stock as set forth in the Business Combination Agreement and, with respect to each share of PAD Preferred Stock, cash in the amount of $5.00 or, with respect to each share of PAD Series E Preferred Stock, $10.00, and an amount in cash equal to all dividends on such share of PAD Preferred Stock that are due and unpaid as of the Effective Time.
In considering the recommendation of the FACT Board to vote in favor of approval of the proposals set forth in this proxy statement/prospectus, FACT Unaffiliated Shareholders should keep in mind that the Sponsor, Sponsor HoldCo and FACT’s directors and officers, and entities affiliated with them, have interests in such proposals that are different from, or in addition to, those of FACT Unaffiliated Shareholders. See “Proposal No. 1 — The
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Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” and “Certain Relationships and Related Persons Transactions — FACT” for more information.
Q: Will FACT and PAD obtain new financing in connection with the Business Combination and are there any arrangements to help ensure that FACT will have sufficient funds to consummate the Business Combination and that New PAD has sufficient funds to operate PAD’s business following the Closing?
A: Under the Business Combination Agreement, the obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain closing conditions of the respective parties, including, without limitation, with respect to PAD’s obligations to consummate the Business Combination, that the aggregate cash available from the Trust Account and other sources as set forth in the Business Combination Agreement (after deducting SPAC Transaction Expenses (as defined in the Business Combination Agreement) and any amounts paid to FACT Shareholders that exercise their redemption rights in connection with the Business Combination) (the “FACT Closing Cash”) equaling no less than $75,000,000. Absent any external source of funding, the funds currently in the Trust Account would be the only source of funding to satisfy the Minimum FACT Cash Amount. As of the date of this proxy statement/prospectus, the balance of the Trust Account is $185,334,240. Absent any external source of funding, the Minimum FACT Cash Amount would not be satisfied if redemptions of Public Shares exceed 59% of the Public Shares outstanding. As the parties expect that redemptions will exceed such amount, the parties intend to satisfy the Minimum FACT Cash Amount through the Financings, amounts released to us from the Trust Account and any other sources of financing approved by PAD. In the event that the Minimum FACT Cash Amount is not satisfied as a result of redemptions of Public Shares that reduce the amount available to be released to us from the Trust Account, PAD may, in its sole discretion, waive the Minimum FACT Cash Amount. If PAD waives the Minimum FACT Cash Amount, FACT intends to file a Current Report on Form 8-K within four business days of such event; however, such condition may be waived at any time prior to the Closing, including after the deadline for submitting redemption requests or the EGM, and, given such timing, you may not be notified before the deadline for submitting redemption requests or the EGM. For more information, see “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement — Closing Conditions.”
In addition, PAD has commenced an offering of up to 200,000 shares of PAD Series E Preferred Stock at an offering price of $10.00 per share, or a maximum of $2,000,000. PAD will use the proceeds of the offering for general corporate purposes. PAD will terminate the offering of the PAD Series E Preferred Stock prior to the date on which the Registration Statement is declared effective.
Q: What equity stake will current FACT Shareholders and PAD Stockholders hold in New PAD immediately after the Closing?
A: The following tables illustrate estimated ownership levels in New PAD, immediately following the consummation of the Business Combination, based on varying levels of redemptions by Public Shareholders. In the following tables, although the No Redemptions Scenario and 50% Redemptions Scenario each assume that the $75.0 million Minimum FACT Cash Amount is satisfied through retained funds in the Trust Account, they also assume that $75.0 million in gross proceeds is raised through the Financings. The Full Redemptions Scenario represents redemptions in excess of the amount required to meet the Minimum FACT Cash Amount and assumes that the $75.0 million Minimum FACT Cash Amount is satisfied through the Financings. In the event that the Minimum FACT Cash Amount is not satisfied as a result of redemptions of Public Shares that reduce the amount available to be released to us from the Trust Account, PAD may, in its sole discretion, waive the Minimum FACT Cash Amount. If PAD waives the Minimum FACT Cash Amount, FACT intends to file a Current Report on Form 8-K within four business days of such event; however, such condition may be waived at any time prior to the Closing, including after the deadline for submitting redemption requests or the EGM, and, given such timing, you may not be notified before the deadline for submitting redemption requests or the EGM.
In addition, Sponsor HoldCo will receive additional equity consideration in connection with the Business Combination. At Closing, New PAD will issue (i) 3,300,000 shares of New PAD Common Stock, minus (ii) the number of FACT Class A Shares held by Sponsor HoldCo immediately prior to Closing, including such FACT Class A Shares issuable upon the conversion or exchange of any other securities of FACT issued to the Sponsor at the IPO. Additionally, New PAD will reserve 1,200,000 shares of New PAD Common Stock for potential issuance to the Sponsor as performance bonus shares (the “Sponsor Performance Bonus Shares”) during the period
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beginning on the Closing Date and ending on the date that is five years after the Closing Date (the “Performance Bonus Period”). The Sponsor Performance Bonus Shares will be issued upon the occurrence of specified triggering events, including (i) Sponsor HoldCo securing research coverage for New PAD within a specified period following Closing (Triggering Event I), (ii) the volume-weighted average trading price of the shares of New PAD Common Stock equaling or exceeding $15.00 for 20 trading days within any 30 consecutive trading-day period during the Performance Bonus Period (Triggering Event II), and (iii) the Trust Account having a balance of at least $35.0 million or $70.0 million after redemptions at Closing (Triggering Event III). If earned, up to 1,200,000 Sponsor Performance Bonus Shares may be issued to Sponsor HoldCo in the aggregate.
Each of the following two tables summarizes, based on each person or group’s ownership, as of May 15, 2026, of either PAD securities (in the case of existing holders of PAD Shares, PAD Directors and Management, and holders of PAD Preferred Stock) or FACT securities (in the case of the Sponsor and its affiliates and the IPO underwriters) the pro forma shares of New PAD Common Stock issued and outstanding immediately after the Business Combination, presented under the three assumed redemption scenarios detailed below. The Third-Party Investors, TAP Financial Partners, Ltd. (“TAP”) and Brad Bowder do not own any PAD or FACT securities as of May 15, 2026.
The following table excludes the dilutive effect of New PAD Options and shares of New PAD Common Stock that will initially be available for issuance under the New PAD Incentive Plan.
|
Share Ownership in New PAD |
|||||||||||||||
|
Assuming No |
Assuming 50% |
Assuming Full |
|||||||||||||
|
Number of |
Approximate |
Number of |
Approximate |
Number of |
Approximate |
||||||||||
|
Existing Holders of PAD Shares (other than directors and management)(1) |
10,390,291 |
23.4 |
% |
10,390,291 |
29.1 |
% |
10,390,291 |
39.4 |
% |
||||||
|
PAD Directors and Management(1) |
3,137,286 |
7.1 |
% |
3,137,286 |
8.8 |
% |
3,137,286 |
11.9 |
% |
||||||
|
Maynard Hellman |
592,000 |
1.3 |
% |
592,000 |
1.7 |
% |
592,000 |
2.2 |
% |
||||||
|
Ronald Buschur |
350,000 |
0.8 |
% |
350,000 |
1.0 |
% |
350,000 |
1.3 |
% |
||||||
|
Glennon Argenbright |
180,000 |
0.4 |
% |
180,000 |
0.5 |
% |
180,000 |
0.7 |
% |
||||||
|
Larry Thompson |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
40,000 |
0.2 |
% |
||||||
|
Dave Lawrence(2) |
1,125,000 |
2.5 |
% |
1,125,000 |
3.1 |
% |
1,125,000 |
4.3 |
% |
||||||
|
Brent Borden(3) |
414,286 |
0.9 |
% |
414,286 |
1.2 |
% |
414,286 |
1.6 |
% |
||||||
|
Kevin Vermeulen II(4) |
436,000 |
1.0 |
% |
436,000 |
1.2 |
% |
140,000 |
1.7 |
% |
||||||
|
Holders of PAD Preferred Stock(1)(5) |
1,044,500 |
2.3 |
% |
1,044,500 |
2.9 |
% |
1,044,500 |
4.0 |
% |
||||||
|
Public Shareholders |
17,500,000 |
39.4 |
% |
8,750,000 |
24.5 |
% |
— |
0.0 |
% |
||||||
|
Sponsor and its affiliates |
4,120,000 |
9.3 |
% |
4,120,000 |
11.5 |
% |
3,520,000 |
13.4 |
% |
||||||
|
Adam Gishen(6) |
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||
|
Min Lee(6) |
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||
|
Richard Nespola, Jr.(6) |
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||
|
Joseph Wagman(6) |
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||
|
Robert Rackind(7) |
148,128 |
0.3 |
% |
148,128 |
0.4 |
% |
145,324 |
0.6 |
% |
||||||
|
Nell Cady-Kruse |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
James Rallo |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
Hella Alashkar |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
FACT II Acquisition LLC(6)(8) |
1,958,116 |
4.4 |
% |
1,958,116 |
5.5 |
% |
1,658,408 |
6.3 |
% |
||||||
|
Underwriters(9) |
223,125 |
0.5 |
% |
223,125 |
0.6 |
% |
223,125 |
0.8 |
% |
||||||
|
Third-Party Investors(10) |
7,500,000 |
16.9 |
% |
7,500,000 |
21.0 |
% |
7,500,000 |
28.4 |
% |
||||||
|
Brad Bowder(11) |
412,234 |
0.9 |
% |
412,234 |
1.2 |
% |
412,234 |
1.6 |
% |
||||||
|
TAP(12) |
137,112 |
0.3 |
% |
137,112 |
0.4 |
% |
137,112 |
0.5 |
% |
||||||
|
Total |
44,464,548 |
100.0 |
% |
35,714,548 |
100.0 |
% |
26,364,548 |
100.0 |
% |
||||||
____________
(1) Represents a portion of the Merger Consideration Shares.
xix
Table of Contents
(2) Dave Lawrence’s 1,125,000 shares are to be issued at Closing. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(3) Brent Borden’s shares reflect 414,286 fully vested shares granted by the PAD Board for his role as Chief Executive Officer. An additional 7,143 restricted shares will vest on each of July 1, 2026, October 1, 2026, and January 1, 2027, and an additional 7,142 restricted shares will vest on April 1, 2027.
(4) Kevin Vermeulen II’s shares consist of (i) 85,000 shares issued to him by PAD in 2025 for his services to PAD as provided through TAP and (ii) 351,000 shares originally issuable by PAD to TAP for its services to PAD and issued directly to Mr. Vermeulen at TAP’s direction as part of a distribution to TAP employees.
(5) Consists of shares of New PAD Common Stock issuable to the holders of PAD Preferred Stock at the Effective Time. Includes (i) 200,000 shares of New PAD Common Stock issuable to the holders of PAD Series A Preferred Stock, (ii) 146,500 shares of New PAD Common Stock issuable to the holders of PAD Series B Preferred Stock, (iii) 275,000 shares of New PAD Common Stock issuable to the holders of PAD Series C Preferred Stock, (iv) 276,000 shares of New PAD Common Stock issuable to the holders of PAD Series D Preferred Stock, and (v) 147,000 shares of New PAD Common Stock issuable to the holders of PAD Series E Preferred Stock as of May 15, 2026.
(6) The Sponsor is the managing member of Sponsor HoldCo. The members of the Sponsor are our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Each member holds an equal 25% interest in the Sponsor. Investment and voting decisions are made by a board of managers comprised of the four members, with majority vote required. Each member’s base ownership includes 404,310 Founder Shares and 2,257 Private Placement Units held through the Sponsor. Except for the 17,500 Private Placement Units that are held directly by the Sponsor, the Sponsor holds securities of the Company through Sponsor HoldCo. In the No Redemptions Scenario and the 50% Redemptions Scenario, each member’s ownership also includes 74,372 redemption-related Sponsor Performance Bonus Shares (73,959 Founder Shares and 413 Private Placement Units) per Note 10.
(7) Robert Rackind’s shares reflect 130,000 shares issued for his service on the FACT Board (already owned) plus Sponsor HoldCo investment shares from his $50,000 investment: 12,745 Founder Shares and 2,579 Private Placement Units vested at the Effective Time. In the No Redemptions Scenario and the 50% Redemptions Scenario, Mr. Rackind’s count includes 2,804 redemption-related Sponsor Performance Bonus Shares (2,332 Founder Shares and 472 Private Placement Units) per Note 10.
(8) Sponsor HoldCo’s shares exclude Robert Rackind’s Sponsor HoldCo investment shares, which are included in his personal share count (refer to Note 5). Includes 20,000 shares of New PAD Common Stock to be transferred to the Senior Advisor post-Closing.
(9) Represents Private Placement Units held by CCM and Seaport, and an aggregate of 28,687 Private Placement Units transferred thereby.
(10) Assumes that new shares pursuant to meeting the FACT Minimum Cash Amount of $75.0 million will be issued at $10.0 per share pursuant to the Financings.
(11) Consists of shares issuable to Brad Bowder (owner of Western Professional, Inc.) as consideration for PAD’s acquisition of Western Professional, Inc. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(12) Consists of shares issuable to TAP for mergers and acquisition consulting fees.
(13) Includes 600,000 redemption-related Sponsor Performance Bonus Shares, the issuance of which is automatically triggered where the amount remaining in the Trust Account after redemptions of Public Shares is (A) at least $35.0 million and (B) at least $70.0 million. All other shares reflect amounts vested at Closing. Up to 600,000 additional Sponsor Performance Bonus Shares (1,200,000 total) may be earned subject to separate milestones: 300,000 shares upon securing research coverage and 300,000 shares upon achieving a volume-weighted average price of $15.00 over a five-year period. The Maximum Redemptions Scenario excludes all Sponsor Performance Bonus Shares.
(14) Redemption-related Sponsor Performance Bonus Shares (600,000 total, per Note 9) are distributed in the No Redemptions Scenario and the 50% Redemptions Scenario as follows: 74,372 shares to each of the four Sponsor members (73,959 Founder Shares and 413 Private Placement Units each), 2,804 shares to Robert Rackind (2,332 Founder Shares and 472 Private Placement Units), and 299,708 shares to Sponsor HoldCo (remainder). Issuance of these shares is automatically triggered where the amount remaining in the Trust Account subsequent to all redemptions of Public Shares is at least (A) $35.0 million and (B) $70.0 million. In the Maximum Redemptions Scenario ($0 remaining in the Trust Account), these shares are not earned and are excluded from all share counts.
(15) Includes the Minimum FACT Cash Amount of $75.0 million.
The following table shows possible sources of dilution and the extent of such dilution that non-redeeming Public Shareholders could experience in connection with the consummation of the Business Combination. In an effort to illustrate the extent of such dilution, the table below assumes the exercise of all FACT Warrants and New PAD Options for cash, each of which will be exercisable for one share of New PAD Common Stock at a price
xx
Table of Contents
of approximately $10.00 per share, on the terms and subject to the conditions set forth in the applicable warrant agreement. The table excludes shares of New PAD Common Stock that will initially be available for issuance under the New PAD Incentive Plan, as such shares will not be outstanding on the Closing Date.
|
Share Ownership in New PAD, Dilutive Instruments |
|||||||||||||||
|
Assuming No |
Assuming 50% |
Assuming Full |
|||||||||||||
|
Number of |
Approximate |
Number of |
Approximate |
Number of |
Approximate |
||||||||||
|
Existing Holders of PAD Shares |
10,390,291 |
19.0 |
% |
10,390,291 |
22.6 |
% |
10,390,291 |
28.3 |
% |
||||||
|
PAD Directors and Management(1) |
3,137,286 |
5.7 |
% |
3,137,286 |
6.8 |
% |
3,137,286 |
8.5 |
% |
||||||
|
Maynard Hellman |
592,000 |
1.1 |
% |
592,000 |
1.3 |
% |
592,000 |
1.6 |
% |
||||||
|
Ronald Buschur |
350,000 |
0.6 |
% |
350,000 |
0.8 |
% |
350,000 |
1.0 |
% |
||||||
|
Glennon Argenbright |
180,000 |
0.3 |
% |
180,000 |
0.4 |
% |
180,000 |
0.5 |
% |
||||||
|
Larry Thompson |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
||||||
|
Dave Lawrence(2) |
1,125,000 |
2.1 |
% |
1,125,000 |
2.4 |
% |
1,125,000 |
3.1 |
% |
||||||
|
Brent Borden(3) |
414,286 |
0.8 |
% |
414,286 |
0.9 |
% |
414,286 |
1.1 |
% |
||||||
|
Kevin Vermeulen II(4) |
436,000 |
0.8 |
% |
436,000 |
0.9 |
% |
436,000 |
1.2 |
% |
||||||
|
Holders of PAD Preferred Stock(1)(5) |
1,197,500 |
2.2 |
% |
1,197,500 |
2.6 |
% |
1,197,500 |
3.3 |
% |
||||||
|
Public Stockholders |
17,500,000 |
31.9 |
% |
8,750,000 |
19.0 |
% |
— |
0.0 |
% |
||||||
|
Sponsor and its affiliates |
4,720,000 |
8.6 |
% |
4,720,000 |
10.3 |
% |
4,120,000 |
11.2 |
% |
||||||
|
Adam Gishen(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Min Lee(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Richard Nespola, Jr.(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Joseph Wagman(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Robert Rackind(7) |
150,931 |
0.3 |
% |
150,931 |
0.3 |
% |
148,128 |
0.4 |
% |
||||||
|
Nell Cady-Kruse |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
James Rallo |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
Hella Alashkar |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
FACT II Acquisition LLC(6)(8) |
2,257,825 |
4.1 |
% |
2,257,825 |
4.9 |
% |
1,958,116 |
5.3 |
% |
||||||
|
Underwriters(9) |
223,125 |
0.4 |
% |
223,125 |
0.5 |
% |
223,125 |
0.6 |
% |
||||||
|
Third-Party Investors(10) |
7,500,000 |
13.7 |
% |
7,500,000 |
16.3 |
% |
7,500,000 |
20.4 |
% |
||||||
|
Brad Bowder(11) |
412,234 |
0.8 |
% |
412,234 |
0.9 |
% |
412,234 |
1.1 |
% |
||||||
|
TAP(12) |
137,112 |
0.3 |
% |
137,112 |
0.3 |
% |
137,112 |
0.4 |
% |
||||||
|
New PAD Options(13) |
497,957 |
0.9 |
% |
497,957 |
1.1 |
% |
497,957 |
1.4 |
% |
||||||
|
FACT Private Warrants(14) |
331,563 |
0.6 |
% |
331,563 |
0.7 |
% |
331,563 |
0.9 |
% |
||||||
|
FACT Public Warrants(14) |
8,750,000 |
16.0 |
% |
8.750,000 |
19.0 |
% |
8,750,000 |
23.8 |
% |
||||||
|
Total |
54,797,068 |
100.0 |
% |
46,047,068 |
100.0 |
% |
36,697,068 |
100.0 |
% |
||||||
____________
(1) Represents a portion of the Merger Consideration Shares.
(2) Dave Lawrence’s 1,125,000 shares are to be issued at Closing. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(3) Brent Borden’s shares reflect 414,286 fully vested shares granted by the PAD Board for his role as Chief Executive Officer. An additional 7,143 restricted shares will vest on each of July 1, 2026, October 1, 2026, and January 1, 2027, and an additional 7,142 restricted shares will vest on April 1, 2027.
(4) Kevin Vermeulen II’s shares consist of (i) 85,000 shares issued to him by PAD in 2025 for his services to PAD as provided through TAP and (ii) 351,000 shares originally issuable by PAD to TAP for its services to PAD and issued directly to Mr. Vermeulen at TAP’s direction as part of a distribution to TAP employees.
(5) Consists of shares of New PAD Common Stock issuable to the holders of PAD Preferred Stock at the Effective Time. Includes (i) 200,000 shares of New PAD Common Stock issuable to the holders of PAD Series A Preferred Stock, (ii) 146,500 shares of New PAD Common Stock issuable to the holders of PAD Series B Preferred Stock, (iii) 275,000 shares of New PAD
xxi
Table of Contents
Common Stock issuable to the holders of PAD Series C Preferred Stock, (iv) 276,000 shares of New PAD Common Stock issuable to the holders of PAD Series D Preferred Stock, and (v) 300,000 shares of New PAD Common Stock issuable to the holders of PAD Series E Preferred Stock. As of May 15, 2026, 98,000 shares of Series E Preferred Stock are issued and outstanding; a maximum of 200,000 shares of Series E Preferred Stock may be issued.
(6) The Sponsor is the managing member of Sponsor HoldCo. The members of the Sponsor are our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Each member holds an equal 25% interest in the Sponsor. Investment and voting decisions are made by a board of managers comprised of the four members, with majority vote required. Each member’s base ownership includes 404,310 Founder Shares and 2,257 Private Placement Units held through the Sponsor. Except for the 17,500 Private Placement Units that are held directly by the Sponsor, the Sponsor holds securities of the Company through Sponsor HoldCo. Each member receives 74,372 Sponsor Performance Bonus Shares (consisting of 73,959 Founder Shares and 413 Private Placement Units), assuming the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is triggered. In the No Redemptions Scenario and the 50% Redemptions Scenario, each member’s ownership also includes 74,372 redemption-related Sponsor Performance Bonus Shares (73,959 Founder Shares and 413 Private Placement Units) per Note 11.
(7) Robert Rackind’s shares reflect 130,000 shares issued for his service on the FACT Board (already owned) plus Sponsor HoldCo investment shares from his $50,000 investment: 12,745 Founder Shares and 2,579 Private Placement Units vested at the Effective Time. Mr. Rackind then receives 2,804 redemption-related Sponsor Performance Bonus Shares (consisting of 2,332 Founder Shares and 472 Private Placement Units), assuming the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is triggered. In the No Redemptions Scenario and the 50% Redemptions Scenario, Mr. Rackind’s count includes 2,804 redemption-related Sponsor Performance Bonus Shares (2,332 Founder Shares and 472 Private Placement Units) per Note 11.
(8) Sponsor HoldCo’s shares exclude Robert Rackind’s Sponsor HoldCo investment shares, which are included in his personal share count (refer to Note 5). Includes 20,000 shares of New PAD Common Stock to be transferred to the Senior Advisor post-Closing.
(9) Represents Private Placement Units held by CCM and Seaport, and an aggregate of 28,687 Private Placement Units transferred thereby.
(10) Assumes that new shares pursuant to meeting the FACT Minimum Cash Amount of $75.0 million will be issued at $10.0 per share pursuant to the Financings.
(11) Consists of 412,234 shares issuable to Brad Bowder (owner of Western Professional, Inc.) as consideration for PAD’s acquisition of Western Professional, Inc. Does not include additional shares that may be issuable to Mr. Bowder based on Western Professional, Inc.’s future EBITDA performance. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(12) Consists of 137,112 shares issuable to TAP for merger and acquisition consulting fees for transactions in which TAP is involved. Does not include 45,000 shares issuable to TAP for merger and acquisition consulting fees upon the closing of PAD’s pending acquisition of Southern Precision Machining LLC.
(13) Consists of PAD Options converted to New PAD Options to purchase an aggregate of 497,957 shares of New PAD Common Stock at an exercise price of $10.00 per share, held as follows: options to purchase 27,083 shares held by each of Maynard Hellman, Glenn Argenbright, Ronald Buschur, and Larry Thompson; 15,625 held by David Lawrence; 360,000 held by TAP; and 14,000 held by an advisor to PAD.
(14) Assumes all warrants (with $11.50 strike prices) are converted into PAD Shares.
(15) Includes 600,000 redemption-related Sponsor Performance Bonus Shares, the issuance of which is automatically triggered where the amount remaining in the Trust Account after redemptions of Public Shares is (A) at least $35.0 million and (B) at least $70.0 million. All other shares reflect amounts vested at Closing. Up to 600,000 additional Sponsor Performance Bonus Shares (1,200,000 total) may be earned subject to separate milestones: 300,000 shares upon securing research coverage and 300,000 shares upon achieving a volume-weighted average price of $15.00 over a five-year period. The Maximum Redemptions Scenario excludes all Sponsor Performance Bonus Shares.
(16) Redemption-related Sponsor Performance Bonus Shares (600,000 total, per Note 10) are distributed as follows: 74,372 shares to each of the four Sponsor members (73,959 Founder Shares and 413 Private Placement Units each), 2,804 shares to Robert Rackind (2,332 Founder Shares and 472 Private Placement Units), and 299,708 shares to Sponsor HoldCo (remainder). Issuance of these shares is automatically triggered where the amount remaining in the Trust Account after redemptions of Public Shares is (A) at least $35.0 million and (B) at least $70.0 million. In the Maximum Redemptions Scenario ($0 remaining in the Trust Account), these shares are not earned and are excluded from all share counts.
(17) Includes the Minimum FACT Cash Amount of $75.0 million.
(18) Assumes that new shares pursuant to meeting the Minimum FACT Cash Amount of $75.0 million will be issued at $10.00 per share pursuant to the Financings.
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Warrants and Options Outstanding
|
Assuming |
Assuming 50% |
Assuming |
||||
|
Public warrants |
8,750,000 |
8,750,000 |
8,750,000 |
|||
|
Private placement warrants |
331,563 |
331,563 |
331,563 |
|||
|
Stock options(1) |
497,957 |
497,957 |
497,957 |
|||
|
PAD 2024 Omnibus Securities and Incentive Plan(2) |
— |
— |
— |
____________
(1) Consists of PAD Options converted to New PAD Options to purchase an aggregate of 497,957 shares of New PAD Common Stock at an exercise price of $10.00 per share, held as follows: options to purchase 27,083 shares held by each of Maynard Hellman, Glenn Argenbright, Ronald Buschur, and Larry Thompson; 15,625 held by David Lawrence; 360,000 held by TAP; and 14,000 held by an advisor to PAD.
(2) This excludes any potential dilution from the New PAD Incentive Plan.
Q: What is the effective purchase price attributed to the New PAD Common Stock to be received by the Public Shareholders, the Sponsor, Sponsor HoldCo, the other FACT Insiders, and the PAD Stockholders at Closing?
A. Pursuant to the Business Combination Agreement, Public Shareholders who do not redeem their Public Shares will receive one share of New PAD Common Stock for each FACT Class A Share held by them immediately prior to the Domestication. While FACT cannot be certain of the price such Public Shareholders paid for their Public Shares, assuming they purchased their Public Shares for $10.00 per share, which was the price of the FACT Class A Shares sold in the IPO, the effective purchase price paid per share of New PAD Common Stock issued to each Public Shareholder at Closing would be $10.00. On July 12, 2024, Sponsor HoldCo paid $25,000, or approximately $0.0037 per share, to cover certain of our offering and formation costs in exchange for an aggregate of 6,708,333 Founder Shares. On August 6, 2024, Sponsor HoldCo transferred 30,000 Founder Shares to each of our independent directors and 130,000 Founder Shares to our Executive Chairman (an aggregate of 220,000 Founder Shares), in each case at their original purchase price. In connection with the Business Combination, assuming the 50% Redemptions Scenario, an aggregate of 5,613,333 Founder Shares that were initially purchased for an aggregate of $25,000 (reflecting the forfeiture of 875,000 Founder Shares by Sponsor HoldCo due to the underwriters’ over-allotment option in connection with FACT’s IPO not being exercised), an additional 90,000 Founder Shares held by FACT’s independent directors, 130,000 Founder Shares held by FACT’s Executive Chairman and 20,000 Founder Shares to be held by Rachelle du Rocher, a senior advisor to FACT (the “Senior Advisor”) will be voluntarily converted on a one-for-one basis into FACT Class A Shares immediately prior to the Domestication, which will then automatically convert at the effective time of the Domestication into an equal number of shares of FACT Class A Common Stock, valued at approximately $[•] per share, which is the closing price of the FACT Class A Shares on [•], 2026, the Record Date. In connection with the closing of the IPO, the Sponsor and Sponsor HoldCo collectively purchased an aggregate of 440,000 Private Placement Units at a price of $10.00 per unit ($4,400,000 in the aggregate) in the Private Placement, which was comprised of (i) a direct purchase by the Sponsor of 17,500 Private Placement Units at a price of $10.00 per unit ($175,000 in the aggregate), and (ii) a purchase by Sponsor HoldCo of (a) an aggregate of 260,000 Private Placement Units at a price of $10.00 per unit and (b) 162,500 Private Placement Units and 325,000 restricted FACT Class A shares (which shares would vest only upon the consummation of our initial business combination) at a combined price of $10.00 per Private Placement Security ($4,225,000 in the aggregate), reflecting the issuance of restricted FACT Class A shares at no additional price. As a result of the low price that the Sponsor and Sponsor HoldCo paid for the Founder Shares, the Sponsor and Sponsor HoldCo may realize a positive rate of return on their investments even if the market price per share of New PAD Common Stock is below $10.00 per share after Closing, in which case the Public Shareholders may experience a negative rate of return on their investment.
For information about conflicts of interest with respect to the Sponsor and the other FACT Insiders, see “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.” For information about the compensation of the Sponsor and our officers and directors, see “Information About FACT — Executive and Director Compensation.” For information about the securities owned by the Sponsor and other FACT Insiders, including transfer restrictions and required surrender and forfeitures, see “Beneficial Ownership of Securities” and “Certain Relationships and Related Persons Transactions.”
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Q: Who is Sponsor HoldCo?
A. Sponsor HoldCo is FACT II Acquisition LLC, a Cayman Islands limited liability company. Sponsor HoldCo was formed by the Sponsor prior to the IPO for the purpose of holding all the Founder Shares (other than the Founder Shares held by our three independent directors and our Executive Chairman) and Private Placement Units and restricted FACT Class A Shares. The Sponsor is the managing member of, and controls, Sponsor HoldCo.
Sponsor HoldCo owns an aggregate of 422,500 FACT Class A Shares, 325,000 restricted FACT Class A shares (which shares would vest only upon consummation of our initial business combination) and 5,593,333 FACT Class B Shares (of which 3,135,044 Founder Shares are indirectly held by the Sponsor through Sponsor HoldCo).
Q: Who is the Sponsor?
A. The Sponsor is FACT II Acquisition Parent LLC, a Cayman Islands limited liability company. The members of the Sponsor are our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Each member holds an equal 25% interest in the Sponsor. Investment and voting decisions are made by a board of managers comprised of the four members, with majority vote required. The Sponsor is responsible for organizing, directing and managing the business and affairs of FACT from its incorporation, through the consummation of the IPO, the negotiation of the Business Combination Agreement, until the consummation of the Business Combination. The Sponsor’s activities included identifying and negotiating terms with the underwriter of the IPO, other third-party service providers such as FACT’s auditors and legal counsel, and FACT’s directors and officers, and searching for and negotiating with potential business combination targets. Other than its investment in FACT and its work on behalf of FACT, the Sponsor is not engaged in any business.
The Sponsor is the managing member of, and controls, Sponsor HoldCo. The non-managing Sponsor HoldCo investors have not been granted any shareholder or other rights in addition to those afforded to our other Public Shareholders, and have only been issued membership interests in Sponsor HoldCo, with no right to control Sponsor HoldCo or vote or dispose of any securities held by Sponsor HoldCo, including the Founder Shares, the Private Placement Units and the restricted FACT Class A shares (which shares would vest only upon the consummation of our initial business combination) held by Sponsor HoldCo. The non-managing Sponsor HoldCo investors are not required to (i) hold any units, FACT Class A Shares or public warrants purchased in the IPO or thereafter for any amount of time, (ii) vote any FACT Class A Shares they may own at the applicable time in favor of our initial business combination or (iii) refrain from exercising their right to redeem their Public Shares at the time of our initial business combination. The non-managing Sponsor HoldCo investors have the same rights to the funds held in the Trust Account with respect to the FACT Class A Shares underlying the FACT Units purchased in the IPO as the rights afforded to our other Public Shareholders.
In connection with the closing of the IPO, the Sponsor and Sponsor HoldCo collectively purchased an aggregate of 440,000 Private Placement Units at a price of $10.00 per unit ($4,400,000 in the aggregate) in the Private Placement, which was comprised of (i) a direct purchase by the Sponsor of 17,500 Private Placement Units at a price of $10.00 per unit ($175,000 in the aggregate), and (ii) a purchase by Sponsor HoldCo of (a) an aggregate of 260,000 Private Placement Units at a price of $10.00 per unit and (b) 162,500 Private Placement Units and 325,000 restricted FACT Class A shares (which shares would vest only upon the consummation of our initial business combination) at a combined price of $10.00 per Private Placement Security ($4,225,000 in the aggregate), reflecting the issuance of restricted FACT Class A shares at no additional price.
On November 26, 2025, we entered into the advisory agreement (the “Advisory Agreement”) with the Sponsor pursuant to which the Sponsor will provide certain services to us including, without limitation, in each case relating to the Business Combination, assisting us in preparing presentations, introducing us to potential investors, assisting us in arranging meetings with PAD Stockholders to the extent applicable, and assisting us with the preparation of any press releases and filings. The Advisory Agreement provides for us to pay to the Sponsor a fee of up to $240,000 (which, in our sole discretion, may be payable in up to 12 monthly installments). The Advisory Agreement was reviewed and approved by the FACT Board and our Audit Committee.
Past performance by our management team, including with respect to Freedom Acquisition I Corp., is not a guarantee of success with respect to the Business Combination with PAD. You should not rely on the historical record of the performance of our management team or businesses associated with them, including Freedom Acquisition I Corp., as indicative of our future performance of an investment in FACT or PAD or the returns we will, or are likely to, generate going forward.
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For information about conflicts of interest with respect to the Sponsor and Sponsor HoldCo, see “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.” For information about the compensation of the Sponsor and Sponsor HoldCo and our officers and directors, see “Information About FACT — Executive and Director Compensation.” For information about the securities owned by the Sponsor and Sponsor HoldCo, including transfer restrictions and required surrender and forfeitures, see “Beneficial Ownership of Securities” and “Certain Relationships and Related Persons Transactions.”
Q: Did the FACT Board obtain a third-party opinion in determining whether or not to proceed with the Business Combination?
A: Yes. On November 23, 2025, the FACT Board received an opinion from EntrepreneurShares LLC (“ERShares”) as to the fairness, as of such date, from a financial point of view to all FACT Shareholders (and not any particular group or class thereof) of the Transaction Consideration to be paid by FACT in the Merger pursuant to the Business Combination Agreement, which was based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on and scope of the review undertaken by ERShares, as set forth in such opinion, as more fully described in the subsection “The Business Combination — Opinion of EntrepreneurShares LLC.” A copy of ERShares’ opinion is attached hereto as Annex K.
Q: Has the announcement of the Business Combination affected the trading price of the FACT Class A Shares?
A: On November 25, 2025, the last trading day before announcement of the execution of the Business Combination Agreement, the closing price of the FACT Class A Shares was $10.38. As of May 1, 2026, the closing price of the FACT Class A Shares was $10.56.
Q: Are there material differences between my rights as a FACT Shareholder and my rights as a New PAD stockholder?
A: Yes, there are certain material differences between your rights as a FACT Shareholder and your rights as a New PAD stockholder. Please read the sections entitled “Description of New PAD Securities” and “Comparison of Corporate Governance and Shareholder Rights.”
Q: Do I have redemption rights?
A: If you are a holder of Public Shares, you have the right to demand that FACT redeem such shares for a pro rata portion of the cash held in the Trust Account including interest earned on the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals). These rights to demand redemption of the Public Shares are sometimes referred to herein as “redemption rights.” In connection with the IPO, the Sponsor, Sponsor HoldCo, FACT’s initial shareholders and FACT’s directors and officers entered into the Letter Agreement with FACT, pursuant to which they agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares held by them in connection with the completion of an initial business combination. Such redemption rights waiver was provided at the time of the IPO without any separate consideration paid. Additionally, pursuant to the Letter Agreement, the Sponsor, Sponsor HoldCo, FACT’s initial shareholders and each of FACT’s officers and directors agreed not to redeem any FACT Ordinary Shares held by them in connection with the Business Combination, as follows: (i) the Sponsor owns 0 FACT Class B Shares directly, 3,135,044 FACT Class B Shares indirectly through Sponsor HoldCo, and 17,500 FACT Class A Shares; (ii) the FACT independent directors each own 30,000 FACT Class B Shares, for an aggregate of 90,000 FACT Class B Shares; (iii) our Executive Chairman owns 130,000 FACT Class B Shares; and (iv) Sponsor HoldCo owns an aggregate of 422,500 FACT Class A Shares, 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) and 5,593,333 FACT Class B Shares. Such redemption rights waiver was provided without any separate consideration paid in connection with providing such waiver.
The closing price of the FACT Class A Shares on [•], 2026, the Record Date, was $[•]. The cash held in the Trust Account on the Record Date was approximately $[•] million ($[•] per Public Share). Prior to exercising redemption rights, FACT Shareholders should verify the market price of the FACT Class A Shares as they may receive higher proceeds from the sale of their Public Shares in the public market than from exercising their redemption rights if the market price per share is higher than the Redemption Price. FACT cannot assure shareholders that they will be able to sell their Public Shares in the open market, even if the market price per share is higher than the Redemption Price, as there may not be sufficient liquidity in the FACT Class A Shares when Public Shareholders wish to sell their shares.
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Notwithstanding the foregoing, a holder of Public Shares, together with any affiliate or any other person with whom he, she or it is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will be restricted from seeking redemption with respect to more than 15% of the issued and outstanding Public Shares. Accordingly, all Public Shares in excess of 15% held by a shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will not be redeemed.
Q: Will my ability to exercise redemption rights be impacted by how I vote on the Business Combination Proposal?
A: No. You may exercise your redemption rights irrespective of whether you vote your Public Shares for or against the Business Combination Proposal, Domestication Proposal, Stock Issuance Proposal, Charter Proposal, Advisory Charter Proposals, Incentive Plan Proposal, Director Election Proposal and Adjournment Proposal, or any other proposal described by this proxy statement/prospectus. As a result, the Business Combination Agreement can be approved by shareholders who will redeem their Public Shares and no longer remain shareholders, leaving shareholders who choose not to redeem their Public Shares holding shares in a company with a less liquid trading market, fewer shareholders, less cash and the potential inability to meet the listing standards of NYSE.
Q: How do I exercise my redemption rights?
A: If you are a holder of Public Shares and wish to exercise your redemption rights, you must, prior to [•] Eastern Time, on [•], 2026 (two business days prior to the scheduled vote at the EGM):
(a) (i) hold Public Shares or (ii) hold Public Shares through FACT Units and elect to separate your FACT Units into the underlying Public Shares and FACT Warrants prior to exercising your redemption rights with respect to the Public Shares;
(b) submit a written request to the Transfer Agent, which request includes the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that FACT redeem all or a portion of their Public Shares for cash; and
(c) deliver the certificates for your Public Shares (if any) along with your redemption forms to the Transfer Agent physically or electronically using the DTC’s DWAC (Deposit/Withdrawal at Custodian) system.
Any holder of Public Shares (other than the Sponsor, Sponsor HoldCo and the FACT Insiders) will be entitled to demand that such holder’s Public Shares be redeemed for a full pro rata portion of the amount then in the Trust Account including interest earned on the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals) which, for illustrative purposes, was approximately $[•] million, or $[•] per Public Share, as of [•], 2026.
Prior to exercising redemption rights, Public Shareholders should verify the market price of the FACT Class A Shares as they may receive higher proceeds from the sale of their Public Shares in the public market than from exercising their redemption rights if the market price per share is higher than the Redemption Price. FACT cannot assure shareholders that they will be able to sell their Public Shares in the open market, even if the market price per share is higher than the Redemption Price stated above, as there may not be sufficient liquidity in the FACT Class A Shares when Public Shareholders wish to sell their shares.
Any request for redemption, once made by a holder of Public Shares, may not be withdrawn unless the FACT Board determines (in its sole discretion) to permit the withdrawal of such redemption request (which it may do in whole or in part).
Any written demand of redemption rights must be received by Odyssey prior to the redemption deadline. No demand for redemption will be honored unless the holder’s Public Shares have been delivered (either physically or electronically) to Odyssey prior to the deadline for submitting redemption requests.
If the redemption demand is properly made as described above, then, if the Business Combination is consummated, FACT will redeem these Public Shares for a pro rata portion of funds deposited in the Trust Account. If you exercise your redemption rights, then you will be exchanging your Public Shares for cash and will not be entitled to New PAD Common Stock upon consummation of the Business Combination.
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Q: What are the U.S. federal income tax consequences of exercising my redemption rights?
A: The U.S. federal income tax consequences of a Public Shareholder exercising redemption rights depends on the particular facts and circumstances. Because the Domestication will occur after the redemption of Public Shares held by U.S. holders (as defined in “Material U.S. Federal Income Tax Considerations — U.S. Holders”) that exercise redemption rights, U.S. holders exercising redemption rights should not be subject to the potential tax consequences of Section 367(b) of the Internal Revenue Code of 1986, as amended (the “Code”), as a result of the Domestication. Please see the section entitled “Material U.S. Federal Income Tax Considerations — U.S. Holders — Tax Consequences to U.S. Holders of FACT Class A Shares Exercising Redemption Rights” and “— Non-U.S. Holders — Tax Consequences to Non-U.S. Holders of FACT Class A Shares Exercising Redemption Rights.”
If you are a holder of FACT Class A Shares contemplating exercising your redemption rights, you are urged to consult your tax advisor to determine the tax consequences thereof.
Q: What are the U.S. federal income tax consequences of the Domestication?
A: Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Considerations” below, the Domestication should qualify as a tax-deferred reorganization within the meaning of Section 368(a)(1)(F) of the Code. Due to the absence of direct guidance on the application of Section 368(a)(1)(F) of the Code to a corporation holding only investment-type assets, such as FACT, this result is not entirely clear. In general, and subject to the “passive foreign investment company,” or PFIC, rules and the rules under Section 367(b) of the Code discussed below, if the Domestication so qualifies, a U.S. holder should not recognize any gain or loss for U.S. federal income tax purposes in connection therewith.
In the case of an inbound transaction involving a foreign corporation, such as the Domestication, that qualifies as a reorganization within the meaning of Section 368(a)(1)(F) of the Code, U.S. holders of FACT Class A Shares will be subject to Section 367(b) of the Code and as a result:
• a U.S. holder whose FACT Class A Shares have a fair market value of less than $50,000 on the date of the Domestication, and who on the date of the Domestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of stock of FACT entitled to vote and less than 10% of the total value of all classes of stock of FACT, will generally not recognize any gain or loss on the exchange of FACT Class A Shares for New PAD Common Stock and will generally not be required to include any part of FACT’s earnings in income pursuant to the Domestication;
• a U.S. holder whose FACT Class A Shares have a fair market value of $50,000 or more on the date of the Domestication, and who on the date of the Domestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of stock of FACT entitled to vote and less than 10% of the total value of all classes of stock of FACT will generally recognize gain (but not loss) on the exchange of FACT Class A Shares for New PAD Common Stock pursuant to the Domestication. As an alternative to recognizing gain, such U.S. holders may file an election to include in income as a dividend the “all earnings and profits amount” (as defined in Treasury Regulations Section 1.367(b)-2(d)) attributable to their FACT Class A Shares, provided certain other requirements are satisfied; and
• a U.S. holder who on the date of the Domestication owns (actually and constructively) 10% or more of the total combined voting power of all classes of stock of FACT entitled to vote or 10% or more of the total value of all classes of stock of FACT will generally be required to include in income as a dividend the “all earnings and profits amount” (as defined in Treasury Regulations Section 1.367(b)-2(d)) attributable to its FACT Class A Shares on the exchange of FACT Class A Shares for New PAD Common Stock pursuant to the Domestication. Any such U.S. holder that is a corporation may, under certain circumstances, effectively be exempt from taxation on a portion or all of the deemed dividend pursuant to Section 245A of the Code.
Furthermore, if the Domestication qualifies as a reorganization under Section 368(a)(1)(F) of the Code, a U.S. holder of FACT Class A Shares may, in certain circumstances, still recognize gain (but not loss) upon the exchange of its FACT Class A Shares for the New PAD Common Stock pursuant to the Domestication under the PFIC rules of the Code. Proposed Treasury Regulations with a retroactive effective date have been promulgated under Section 1291(f) of the Code which generally require that a U.S. person who disposes of stock of a PFIC must recognize gain equal to the excess, if any, of the fair market value of New PAD Common Stock received in
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the Domestication over the U.S. holder’s adjusted tax basis in the corresponding FACT Class A Shares surrendered in exchange therefor, notwithstanding any other provision of the Code. Because FACT is a blank check company with no current active business, we believe that FACT may be classified as a PFIC for U.S. federal income tax purposes. As a result, these proposed Treasury Regulations, if finalized in their current form, may require a U.S. holder of FACT Class A Shares to recognize gain on the exchange of such shares for New PAD Common Stock pursuant to the Domestication, unless such U.S. holder has made certain tax elections with respect to such U.S. holder’s FACT Class A Shares. The tax on any such gain so recognized would be imposed at the rate applicable to ordinary income and an interest charge would apply based on complex rules designed to offset the tax deferral to such U.S. holder on the undistributed earnings, if any, of FACT. It is not possible to determine at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code will be adopted. For a more complete discussion of the potential application of the PFIC rules to U.S. holders as a result of the Domestication, see the discussion in the section titled “Material U.S. Federal Income Tax Considerations — U.S. Holders — PFIC Considerations for U.S. Holders of FACT Class A Shares.”
Additionally, the Domestication may cause non-U.S. holders (as defined in “Material U.S. Federal Income Tax Considerations — Non-U.S. Holders — Tax Consequences to Non-U.S. Holders of the Ownership and Disposition of FACT Common Stock received in the Business Combination”) to become subject to U.S. federal withholding taxes on any dividends paid in respect of such non-U.S. holder’s shares of New PAD Common Stock after the Domestication.
The tax consequences of the Domestication are complex and will depend on your particular circumstances. For a more complete discussion of the U.S. federal income tax considerations of the Domestication, see the section entitled “Material U.S. Federal Income Tax Considerations.” If you are a U.S. holder exchanging FACT Class A Shares in the Domestication, you are urged to consult your tax advisor to determine the tax consequences thereof.
Q: Do I have appraisal or dissenters’ rights if I object to the proposed Business Combination?
A: FACT Shareholders do not have appraisal or dissenters’ rights in connection with the Business Combination under the Cayman Companies Act. However, FACT Shareholders are still entitled to exercise the rights of redemption as set out in the subsection entitled “The Extraordinary General Meeting — Redemption Rights” and the FACT Board has determined that the redemption proceeds payable to FACT Shareholders who exercise such redemption rights represents the fair value of those FACT Ordinary Shares. See the section entitled “Appraisal Rights and Dissenters’ Rights” for more information.
Q: What happens to the funds deposited in the Trust Account after consummation of the Business Combination?
A: As of [•], 2026, the Record Date, there was approximately $[•] million in the Trust Account. Upon consummation of the Business Combination, the funds in the Trust Account will be used to pay holders of the Public Shares who properly exercise redemption rights, to fund New PAD’s or its subsidiaries’ working capital, growth and general corporate purposes and to pay fees and expenses incurred in connection with the Business Combination.
Q: What underwriting and placement agency fees are payable in connection with the Business Combination?
A: Pursuant to the Underwriting Agreement, dated November 25, 2024 (the “Underwriting Agreement”), by and among FACT, Cohen & Company Capital Markets, a division of Cohen & Company Securities, LLC (f/k/a Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC) (“CCM”) and Seaport Global Securities LLC (“Seaport”), CCM and Seaport were paid an upfront cash underwriting discount of $0.20 per Public Share, or $3,500,000 in the aggregate, paid upon the closing of the IPO (the “Upfront Discount”). In addition, CCM and Seaport are entitled to a deferred fee of (i) $0.40 per FACT Unit sold in the IPO, or $7,000,000 in the aggregate, payable based on the percentage of funds remaining in the Trust Account after redemptions of Public Shares (the “Deferred Discount”). The Deferred Discount will become payable from the amounts held in the Trust Account solely in the event that FACT completes a business combination, subject to the terms of the Underwriting Agreement. On September 19, 2025, FACT engaged BTIG, LLC (“BTIG”), as co-placement agent, and Craig-Hallum Capital Group LLC (“CHC”) as co-placement agent and financial advisor. BTIG and CHC will be entitled to a fee of 4% of the proceeds raised in connection with a private placement of securities or certain other capital raising in connection with the Business Combination. On April 2, 2026, FACT engaged Truist Securities, Inc. as placement agent in connection with a potential private investment of equity or equity-linked securities in connection with the Business Combination.
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Q: What happens if the Business Combination is not consummated?
A: If FACT does not complete the Business Combination for whatever reason, FACT would search for another target business with which to complete a Business Combination. If FACT does not complete an initial business combination within the 18 months from the closing of its IPO (or 24 months from the closing of its IPO if it has executed a definitive agreement for an initial business combination within 18 months from the closing of its IPO), or by such earlier liquidation date as the FACT Board may approve (the “completion window”), FACT will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), and as promptly as reasonably possible following such redemption, subject to the approval of FACT’s remaining shareholders and directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and subject to the other requirements of applicable law.
Q: What interests do the Sponsor, Sponsor HoldCo and FACT’s officers and directors have in the Business Combination?
A: The Sponsor, Sponsor HoldCo and FACT’s officers and directors have interests in the Business Combination that are different from or in addition to (and which may conflict with) the interests of unaffiliated FACT Shareholders. Further, FACT’s officers and directors have additional fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity, which are set forth in more detail in the section titled “Information About FACT — Conflicts of Interest.” We believe there were no such opportunities that were not presented as a result of the existing fiduciary or contractual obligations of our officers and directors to other entities. The FACT Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and Business Combination Agreement and in recommending to our shareholders that they vote in favor of the proposals to be presented at the EGM, including the Business Combination Proposal. FACT Shareholders should take these interests into account in deciding whether to approve the proposals presented at the EGM, including the Business Combination Proposal. These interests include, among other things:
• the fact that Sponsor HoldCo holds 5,613,333 Founder Shares that were initially purchased for an aggregate of $25,000 (reflecting the forfeiture of 875,000 Founder Shares by Sponsor HoldCo due to the over-allotment option of the underwriters in connection with FACT’s IPO not being exercised), and such shares will have a significantly higher value at the time of the Business Combination, estimated at approximately $[•] million based on the closing price of $[•] per FACT Class A Share on Nasdaq on [•], 2026. FACT estimates that, at the Closing, Sponsor HoldCo will hold an aggregate of 3,433,179 shares of New PAD Common Stock issued upon the conversion of such Founder Shares (assuming the 50% Redemptions Scenario), which, if unrestricted and freely tradeable, would be valued at approximately $[•] million, based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
• the fact that Sponsor HoldCo may receive additional equity consideration at Closing so that it will hold an aggregate of 3,300,000 shares of New PAD Common Stock immediately following the Closing, and may also receive up to 1,200,000 additional shares of New PAD Common Stock as Sponsor Performance Bonus Shares if specified triggering events occur during the Performance Bonus Period, including securing research coverage for the combined company, the trading price of New PAD Common Stock reaching specified thresholds, and the Trust Account meeting certain minimum balance thresholds following redemptions;
• the fact that, if the Trust Account is liquidated, including in the event FACT is unable to complete the Business Combination within the completion window, Sponsor HoldCo has agreed that it will be liable to FACT if and to the extent any claims by a third party for services rendered or products sold to FACT, or a prospective target business with which FACT has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable and up to $100,000 of interest to pay dissolution expenses;
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provided that such obligation will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account (whether or not such waiver is enforceable), any claims by FACT’s independent registered public accounting firm, or any claims under the indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act;
• the fact that the FACT Articles contain a waiver of the corporate opportunity doctrine, and there could have been business combination targets that would have been appropriate for a combination with FACT but were not offered due to a FACT director’s duties to another entity. FACT does not believe that the waiver of the corporate opportunity doctrine in the FACT Articles interfered with its ability to identify an acquisition target; and
• the continued indemnification of former and current directors and officers of FACT affiliates of FACT and the Sponsor and the continuation of directors’ and officer’s liability insurance after the Business Combination.
In addition, as a result of multiple business affiliations, our directors and officers have fiduciary, contractual or similar legal obligations to other entities, which may require our directors and officers to present a business combination opportunity to such other entity and only present it to us if such entity rejects the opportunity, subject to his or her fiduciary duties under Cayman Islands law. We believe, however, that there were no such corporate opportunities presented to our directors and officers that were not presented to FACT, and therefore that our directors’ and officers’ additional fiduciary, contractual, or similar legal obligations to other entities did not impact our search for a business combination target. For more information, see “Information About FACT — Conflicts of Interest.”
Q: What interests do the PAD directors and officers have in the Business Combination?
A: PAD’s directors and officers have interests in the Business Combination that are different from, or in addition to, those of the PAD Stockholders generally. These interests include, among other things, the interests listed below:
• PAD’s executive officers are expected to become executive officers of New PAD upon the Effective Time. Specifically, Brent Borden, who is the Chief Executive Officer of PAD, is expected to become the Chief Executive Officer of New PAD and Kevin Vermeulen II, who is the Chief Financial Officer of PAD, is expected to become the Chief Financial Officer of New PAD, in each case upon the Effective Time. In each case, they are expected to continue to receive the same compensation and benefits, including substantially similar equity awards, as they currently receive under their existing employment agreements with PAD and, pursuant to the terms of the Business Combination Agreement, will enter into employment agreements with New PAD to this effect.
• Upon the Effective Time, each current director of PAD is expected to become a member of the New PAD Board, and Maynard J. Hellman, PAD’s current Chairman of the Board, is expected to become the Chairman of the New PAD Board, and we expect that each such director of New PAD will receive the same remuneration as they currently receive for serving as members of the PAD Board.
• Each member of the PAD Board holds options to purchase 11,458 shares of New PAD Common Stock at $10.00 per share, which will be converted into New PAD Options.
• David Lawrence, a member of the PAD Board, is the Manager and former owner of PAD’s Aerodyn Engineering subsidiary, and pursuant to PAD’s agreement with him will receive, upon consummation of the Business Combination, approximately 1,125,000 shares of New PAD Common Stock and $34,515,000 in cash, as well as an aggregate of $3.0 million paid in installments of $750,000 on the first, third, fourth, and fifth anniversaries of the Closing Date.
Q: What conditions must be satisfied to complete the Business Combination?
A: Under the Business Combination Agreement, the obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain closing conditions of the respective parties, including, without limitation: (i) the approval and adoption of the Business Combination Agreement and transactions contemplated thereby by requisite vote of the FACT Shareholders (the “FACT Shareholder Approval”); (ii) the approval and adoption of the Business Combination Agreement by PAD’s stockholders (the “PAD Stockholder Approval”); (iii) the absence of laws, rules, regulations, judgments, decrees, executive orders or awards making the Business Combination illegal or otherwise prohibiting its consummation or restraining
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or imposing any condition on its consummation; (iv) the Registration Statement having been declared effective by the SEC under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement being in effect, and no proceedings seeking such a stop order having been initiated or threatened in writing by the SEC; and (v) (A) all applicable waiting periods under the HSR Act with respect to the Business Combination having expired or been terminated, (B) at least 60 days shall have elapsed since the submission to the United States Department of State Directorate of Defense Trade Controls of all information required by 22 C.F.R. § 122.4(b), and (C) each consent of any Governmental Authority (as defined in the Business Combination Agreement) required to consummate the Business Combination having been obtained and shall be in full force and effect.
The obligations of PAD to consummate the Business Combination are subject to additional conditions, including, among others: (i) the truth and accuracy of the representations and warranties of FACT and Merger Sub, subject to customary bring-down standards; (ii) material compliance by FACT and Merger Sub with their respective obligations, agreements and covenants under the Business Combination Agreement; (iii) receipt by PAD of a closing certificate of FACT; (iv) there being no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to FACT; (v) FACT having provided the public holders of FACT Class A Shares the opportunity to make redemption elections with respect thereto; (vi) FACT’s initial listing application in connection with the Business Combination shall have been conditionally approved and, immediately following the Effective Time, FACT shall satisfy any applicable initial listing requirements of NYSE; (vii) the aggregate cash available from the Trust Account and other sources as set forth in the Business Combination Agreement equaling no less than $75,000,000 (after deducting SPAC Transaction Expenses (as defined in the Business Combination Agreement) and any amounts paid to FACT Shareholders that exercise their redemption rights in connection with the Business Combination); (viii) receipt of certain executed ancillary documents and the amended and restated certificate of incorporation of FACT shall have become effective; and (ix) FACT having taken all necessary and appropriate measures to have all funds held in the Trust Account be disbursed to FACT and released from the Trust Account to New PAD on the Closing Date.
The obligations of FACT and Merger Sub to consummate the Business Combination are subject to additional conditions, including, among other things: (i) the truth and accuracy of the representations and warranties of PAD, subject to customary bring-down standards; (ii) material compliance by PAD with its agreements and covenants under the Business Combination Agreement; (iii) no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to PAD having occurred since the date of the Business Combination Agreement that is continuing; and (iv) receipt of a closing certificate of PAD and certain executed ancillary documents.
For more information, see “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement — Closing Conditions.”
Q: When do you expect the Business Combination to be completed?
A: It is currently expected that the Business Combination will be consummated in the second quarter of 2026. This date depends, among other things, on the approval of the proposals to be put to FACT Shareholders at the EGM. However, such meeting could be adjourned if the Adjournment Proposal is adopted by the FACT Shareholders at the EGM and FACT elects to adjourn the EGM to a later date or dates, if necessary or desirable. If the Adjournment Proposal is not approved, and a quorum is present, the FACT Board will not have the ability to adjourn the EGM to a later date in order to solicit further votes or take other steps to cause the conditions to the Business Combination to be satisfied, for example. In such event, the Business Combination would not be completed. For a description of the conditions for the completion of the Business Combination, see “Proposal No. 1 — The Business Combination Proposal.”
Q: Following the Business Combination, will FACT’s securities continue to trade on a stock exchange?
A: FACT will effect the Domestication from the Cayman Islands to Delaware, after which each outstanding FACT Class A Share will convert into one share of FACT Class A Common Stock (excluding Public Shares validly submitted for redemption and the FACT Forfeited Shares, but including FACT Class A Shares issued upon the Class B Share Conversion). It is a condition to the closing of the Business Combination that FACT’s initial listing application with NYSE in connection with the Business Combination shall have been conditionally approved. Under the Business Combination Agreement, this condition is for the benefit of both PAD and is subject to waiver by PAD.
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FACT will apply for listing, to be effective at Closing, of the New PAD Common Stock on NYSE under the symbol “PAD.” However, it is important for you to consider that, at the time of the deadline for submitting redemption requests or the EGM, New PAD may not have received from NYSE either confirmation of the listing of the New PAD Common Stock or confirmation that approval will be obtained prior to the consummation of the Business Combination, and you will not be notified prior to the deadline for submitting redemption requests or the EGM if New PAD has not yet received such approval or confirmation. As a result, you may be asked to vote to approve the Business Combination and the other proposals included in this proxy statement/prospectus without knowing whether New PAD’s securities will be listed on NYSE or another securities exchange and, further, it is possible that such listing may never be achieved and the Business Combination could still be consummated if such condition is waived.
Q: What do I need to do now?
A: FACT urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a FACT Shareholder. Shareholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.
Q: Who is entitled to vote at the EGM?
A: FACT has fixed [•], 2026, as the Record Date for the EGM. If you were a FACT Shareholder at the close of business on the Record Date, you are entitled to vote on matters that come before the EGM. However, a shareholder may only vote his, her or its shares if he, she or it is present in person or is represented by proxy at the EGM.
Q: How many votes do I have?
A: FACT Shareholders are entitled to one vote at the EGM for each FACT Ordinary Share held of record as of the Record Date; provided, however, that in respect of the Domestication Proposal only, a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Ordinary Shares will be entitled to one vote for every FACT Class A Ordinary Share held.
As of the close of business on the Record Date for the EGM, there were [•] FACT Ordinary Shares issued and outstanding, of which [•] were Public Shares.
Q: How do I vote?
A: The EGM will be held at [•], Eastern Time, on [•], 2026. The EGM will be a virtual meeting conducted via live webcast at [•]. For the purposes of Cayman Islands law and the FACT Articles, the physical location of the EGM will be the offices of Paul Hastings LLP, FACT’s legal counsel, at 2050 M Street NW, Washington, D.C. 20036.
If you are a holder of record of FACT Ordinary Shares on the Record Date, you may vote at the EGM or by submitting a proxy for the EGM. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. Any shareholder wishing to attend the meeting should register for the EGM by [•], Eastern Time, on [•], 2026, by contacting Sodali using one of the contact methods set forth below under the question “Who can help answer my questions?”
Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?
A: No. Your broker, bank or nominee cannot vote your shares unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee.
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Q: What constitutes a quorum?
A: A quorum of FACT Shareholders is necessary to hold a valid meeting. The holders of a majority of the FACT Ordinary Shares being individuals present in person or by proxy or if a corporation or other non-natural person by its duly authorized representative or proxy shall constitute a quorum at the EGM. In the absence of a quorum, the EGM shall stand adjourned to the same day in the next week at the same time and/or place or to such other day, time and/or place as the FACT Board may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting to commence, the FACT Shareholders present shall be a quorum. There are 24,321,458 FACT Ordinary Shares outstanding as of the Record Date and, therefore, as of the Record Date for the EGM, holders of 12,160,730 FACT Ordinary Shares would be required to attend the EGM (in person or by proxy) to achieve a quorum. As of the Record Date for the EGM, 32% of the non-affiliated holders of FACT Ordinary Shares (who comprise 73% of the total issued FACT Ordinary Shares) would be required to establish a quorum at the EGM, assuming the Sponsor, Sponsor HoldCo and other FACT Insiders who collectively own approximately 27% of the issued and outstanding FACT Ordinary Shares, are present (in person or by proxy) at the EGM.
Q: What vote is required to approve each proposal at the EGM?
A: The following votes are required for each proposal at the EGM:
• Business Combination Proposal: Approval of the Business Combination Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Business Combination Proposal is conditioned on the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Domestication Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Business Combination Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Domestication Proposal: Approval of the Domestication Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. In respect of the Domestication Proposal only, a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Ordinary Shares will be entitled to one vote for every FACT Class A Ordinary Share held. The Domestication Proposal is conditioned on the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Domestication Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Stock Issuance Proposal: Approval of the Stock Issuance Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Stock Issuance Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Charter Proposal is not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Charter Proposal: Approval of the Charter Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Charter Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Stock Issuance Proposal is not approved, the Charter Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
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• Advisory Charter Proposals: Approval of each Advisory Charter Proposal requires an ordinary resolution on a non-binding and advisory only basis, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The shareholder votes regarding these proposals are advisory in nature, and are not binding on FACT, the FACT Board, PAD or New PAD Board. The Advisory Charter Proposals are conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Advisory Charter Proposals will have no effect, even if approved by holders of FACT Ordinary Shares.
• Incentive Plan Proposal: Approval of the Incentive Plan Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Incentive Plan Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Director Election Proposal: Approval of the Director Election Proposal requires an ordinary resolution passed by a simple majority of such holders of FACT Class B Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Director Election Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Director Election Proposal will have no effect, even if approved by holders of FACT Class B Shares.
• Adjournment Proposal: Approval of the Adjournment Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Adjournment Proposal is not conditioned upon the approval of any other proposal to be voted on at the EGM.
As of the Record Date, the Sponsor, Sponsor HoldCo and other FACT Insiders collectively own approximately 27% of the issued and outstanding FACT Ordinary Shares. The FACT Insiders have agreed to vote all FACT Ordinary Shares they own in favor of all of the proposals being presented at the EGM. As at the Record Date, unaffiliated shareholders collectively own approximately 73% of the issued and outstanding FACT Ordinary Shares.
Assuming all issued and outstanding FACT Ordinary Shares as at the Record Date are voted at the EGM, we would need approximately 32% of all the unaffiliated FACT Ordinary Shares to vote in favor of the Business Combination Proposal, the Stock Issuance Proposal, the Advisory Charter Proposals, the Incentive Plan Proposal, and the Adjournment Proposal in order for such proposals to be approved by way of ordinary resolution at the EGM.
Assuming only a majority of the issued and outstanding FACT Ordinary Shares as at the Record Date are voted at the EGM (being 12,160,730 FACT Ordinary Shares, and the minimum number of FACT Ordinary Shares required to establish a quorum at the EGM), we would not need any holders of unaffiliated FACT Ordinary Shares to vote in favor of the Business Combination Proposal, the Stock Issuance Proposal, the Advisory Charter Proposals, the Incentive Plan Proposal, or the Adjournment Proposal in order for such proposals to be approved by way of ordinary resolution at the EGM.
Assuming all issued and outstanding FACT Ordinary Shares as at the Record Date are voted at the EGM, we would need holders of approximately 54.8% of all the unaffiliated FACT Ordinary Shares to vote in favor of the Charter Proposal in order for such proposal to be approved by way of special resolution at the EGM.
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Assuming only a majority of the issued and outstanding FACT Ordinary Shares as at the Record Date are voted at the EGM (being 12,160,730 FACT Ordinary Shares, and the minimum number of FACT Ordinary Shares required to establish a quorum at the EGM), we would need approximately 9.6% of all of the unaffiliated holders of FACT Ordinary Shares to vote in favor of the Advisory Charter Proposal in order for such proposal to be approved by way of special resolution at the EGM.
In the scenario of both a minimum and maximum quorum at the EGM, we do not require the vote of any holders of the 73% of unaffiliated FACT Ordinary Shares in order to approve the Domestication Proposal or the Director Election Proposal (due to the enhanced voting rights of the holders of the FACT Class B Shares under the FACT Articles).
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals.
In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section of this proxy statement/prospectus entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.”
The Business Combination was not structured to require the approval of at least a majority of FACT’s unaffiliated shareholders because such a vote is not required under Cayman Islands law.
Q: What happens if a substantial number of the Public Shareholders vote in favor of the proposals herein and exercise their redemption rights?
A: Public Shareholders are not required to vote in respect of the Business Combination Proposal in order to exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of Public Shareholders are reduced as a result of redemptions by Public Shareholders.
In the event of significant redemptions, with fewer Public Shares and Public Shareholders, the trading market for New PAD Common Stock may be less liquid than the market for FACT Class A Shares was prior to the Business Combination, and New PAD may not be able to meet the listing standards for NYSE or another national securities exchange. If the net proceeds of the Business Combination is less than PAD anticipates, including as a result of redemptions of Public Shares, and the Minimum FACT Cash Amount is waived by PAD, PAD may need to make adjustments to its business plans in light of available capital resources and PAD may need to seek additional funds earlier than PAD anticipates. See “Risk Factors — New PAD’s ability to raise capital timely in the future may be limited, or maybe unavailable on acceptable terms, if at all. New PAD’s failure to raise capital when needed could harm its business, operating results and financial condition. Debt issued to raise additional capital may reduce the value of New PAD Common Stock.”
The table below presents the Trust Account value per share to a Public Shareholder that elects not to redeem its shares across a range of varying redemption scenarios. This Trust Account value per share includes the per share cost of the Deferred Discount.
|
As of |
|||
|
Trust Account Value |
$ |
185,334,240 |
|
|
Total Public Shares |
|
17,500,000 |
|
|
Total Account Value per Public Share |
$ |
10.59 |
|
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|
No |
50% |
Full |
|||||||
|
Redemptions |
$ |
0 |
$ |
92,667,120 |
$ |
185,334,240 |
|||
|
Redemptions, shares |
|
0 |
|
8,750,000 |
|
17,500,000 |
|||
|
Deferred Discount |
$ |
7,000,000 |
$ |
3,500,000 |
$ |
0 |
|||
|
Cash left in Trust Account Post Redemptions Less Deferred Discount |
$ |
178,334,240 |
$ |
89,167,120 |
$ |
0 |
|||
|
Public Shares post-redemptions |
|
17,500,000 |
|
8,750,000 |
|
0 |
|||
|
Remaining Trust Proceeds Per Public Share |
$ |
10.19 |
$ |
10.19 |
$ |
N/A |
|||
____________
(1) This scenario assumes that no Public Shares are redeemed. This scenario also assumes payment of the Deferred Discount of $7.0 million using the funds in the Trust Account.
(2) This scenario assumes that 8,750,000 Public Shares, or 50% of the Public Shares subject to redemption, are redeemed for an aggregate payment of approximately $92,667,120 (based on the estimated per-share redemption price of $10.59 per share) from the Trust Account based on funds in the Trust Account as of March 31, 2026, which is a redemptions scenario that could occur. This scenario also assumes payment of the Deferred Discount of approximately $3.5 million using the funds in the Trust Account.
(3) The Full Redemptions Scenario represents the redemption of all Public Shares held by Public Shareholders. This scenario assumes that 17,500,000 Public Shares are redeemed for an aggregate payment of approximately $185,334,240 (based on the estimated per-share redemption price of approximately $10.59 per share) from the Trust Account based on funds in the Trust Account as of March 31, 2026, which is a redemptions scenario that could occur. This scenario also assumes no payment of the Deferred Discount using the funds in the Trust Account. Also assumes that PAD, in its sole discretion, waives the Minimum FACT Cash Amount and no additional equity financing is obtained.
Q: Can I vote at the EGM if I sell my FACT Class A Shares before the EGM?
A: The Record Date for the EGM is earlier than the date of the EGM and earlier than the date that the Business Combination is expected to be completed. If you transfer your FACT Class A Shares after the applicable Record Date, but before the EGM, unless you grant a proxy to the transferee, you will retain your right to vote at the EGM.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. Shareholders may send a later-dated, signed proxy card to Sodali at the address set forth at the end of this section, so that it is received prior to the vote at the EGM, or attend the EGM in person and vote. Shareholders also may revoke their proxy by sending a notice of revocation to FACT’s Chief Executive Officer, which must be received prior to the vote at the EGM. However, if your shares are held in “street name” by your broker, bank or another nominee, you must contact your broker, bank or other nominee to change your vote.
Q: What happens if I fail to take any action with respect to the EGM?
A: If you fail to take any action with respect to the EGM and the Business Combination is approved by shareholders and consummated, you will become a stockholder of New PAD. However, if you fail to take any action with respect to the EGM, you will nonetheless be able to elect to redeem your Public Shares in connection with the Business Combination, provided you follow the instructions in this proxy statement/prospectus for redeeming your shares. If you fail to take any action with respect to the EGM and the Business Combination Proposal is not approved, you will continue to be a FACT Shareholder.
Q: What should I do with my share certificates?
A: Those shareholders who do not elect to have their FACT Class A Shares redeemed for their pro rata share of the funds in the Trust Account should not submit their share certificates now. After the consummation of the Business Combination, New PAD will send instructions to FACT Shareholders regarding the exchange of their FACT Class A Shares for New PAD Common Stock. FACT Shareholders who exercise their redemption rights must deliver their share certificates to the Transfer Agent (either physically or electronically) prior to the deadline for submitting redemption requests described above.
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Q: What should I do if I receive more than one set of voting materials?
A: Shareholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your FACT Ordinary Shares.
Q: What is the recommendation of the FACT Board?
A: The FACT Board believes that the Business Combination Proposal and the other proposals to be presented at the EGM are fair, advisable, and in the best interests of the FACT Shareholders and recommends that FACT Shareholders vote “FOR” the approval of the Business Combination Proposal, “FOR” the approval of the Domestication Proposal, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Charter Proposal, “FOR” the approval of each of the Advisory Charter Proposals, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the Director Election Proposal and “FOR” the approval of the Adjournment Proposal, if presented.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of FACT and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.”
Q: How do the Sponsor. Sponsor HoldCo and FACT’s officers and directors intend to vote?
A: The Sponsor, Sponsor HoldCo and FACT’s officers and directors have agreed to vote in favor of all the proposals being presented at the EGM. No consideration has been or will be paid by FACT or PAD to the FACT Insiders in connection with such agreements. The Sponsor, Sponsor HoldCo and other FACT Insiders collectively own approximately 27% of the issued and outstanding FACT Ordinary Shares.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of FACT and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.”
Q: Do the Sponsor, Sponsor HoldCo and FACT’s officers and directors expect to purchase Public Shares from Public Shareholders or take other actions to incentivize non-redemption?
A: The Sponsor, Sponsor HoldCo and FACT’s officers and directors do not have any plans at this time to purchase Public Shares from Public Shareholders or to take any other actions to incentivize non-redemption. However, at any time prior to the EGM, during a period when they are not then aware of any material nonpublic information regarding FACT or its securities, the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates may purchase Public Shares in privately negotiated transactions or in the open market, although they are under no obligation to do so. There is no limit on the number of Public Shares that such persons may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares in such transactions. Such purchases may include a contractual acknowledgment that such shareholder, although still the record holder of FACT Ordinary Shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights.
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In the event that the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates purchase shares in privately negotiated transactions from Public Shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. The purpose of such transaction could be to increase the likelihood of obtaining shareholder approval of the Business Combination or satisfy the Minimum FACT Cash Amount, where it appears that such requirement would otherwise not be met. FACT expects any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of FACT Class A Shares and the number of beneficial holders of FACT Class A Shares may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of FACT’s securities on Nasdaq.
In the event that the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates were to purchase Public Shares from Public Shareholders, such purchases would be structured in compliance with the requirements of Rule 14e-5 under the Exchange Act. To the extent that the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates purchase Public Shares in compliance with the requirements of Rule 14e-5 under the Exchange Act, such shares would not be voted in favor of approving the Business Combination. See “The Extraordinary General Meeting — Potential Purchases of Public Shares” for more information.
Q: Who will solicit and pay the costs of soliciting proxies for the EGM?
A: FACT will pay the cost of soliciting proxies for the EGM. FACT has engaged Sodali to assist in the solicitation of proxies for the EGM. FACT has agreed to pay Sodali a fee of $22,500, plus disbursements. FACT will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of FACT Class A Shares for their expenses in forwarding soliciting materials to beneficial owners of FACT Class A Shares and in obtaining voting instructions from those owners. FACT’s directors and officers may also solicit proxies by telephone, mail, on the internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q: Who can help answer my questions?
A: If you have questions about the Business Combination or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact:
FACT II Acquisition Corp.
14 Wall Street, 20th Floor
New York, NY 10005
Tel: (212) 618-1798
or:
Sodali & Co.
333 Ludlow Street, 5th Floor, South Tower
Stamford, CT 06902
Tel: (800) 662-5200 (toll-free) or
(203) 658-9400 (banks and brokers can call collect)
Email: [_]
You may also obtain additional information about FACT from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of Public Shares and you intend to seek redemption of your Public Shares, you will need to tender or deliver your Public Shares (and share certificates (if any) and other redemption forms), either physically or electronically, to Odyssey at the address below prior to the vote at the EGM. If you have questions regarding the certification of your position or delivery of your shares, please contact:
Odyssey Transfer and Trust Company
860 Blue Gentian Rd, Suite 320
Eagan, MN 55121
Tel: (612) 482-5100
Attention: Corporate Actions
E-mail: redemptions@odysseytrust.com
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that may be important to you. To better understand the proposals to be submitted for a vote at the EGM, including the Business Combination Proposal and Domestication Proposal, you should read this entire document carefully, including the Business Combination Agreement attached as Annex A to this proxy statement/prospectus. The Business Combination Agreement is the legal document that governs the Business Combination and is also described in detail in this proxy statement/prospectus in the section entitled “Proposal No. 1 — The Business Combination Proposal.”
Parties to the Business Combination
FACT II Acquisition Corp.
FACT is a blank check company incorporated to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. FACT was incorporated on June 19, 2024 as a Cayman Islands exempted company.
The FACT Class A Shares and the FACT public warrants are currently listed on Nasdaq under the symbol “FACT” and “FACTW,” respectively. Certain of FACT Class A Shares and FACT public warrants currently trade as units consisting of one FACT Class A Share and one-half of one redeemable FACT public warrant and are listed on Nasdaq under the symbol “FACTU.” Upon consummation of the Business Combination, the units will automatically separate into their component parts and, as a result, will no longer trade as an independent security. Upon the Domestication, FACT’s name will change from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.” FACT intends to list the New PAD Common Stock and New PAD public warrants on the NYSE under the symbols “PAD” and “[•],” respectively, upon the Closing.
The mailing address of FACT’s principal executive offices is 14 Wall Street, 20th Floor, New York, New York 10005, and its phone number is (212) 618-1798.
Merger Sub
Merger Sub is a Florida corporation and wholly-owned subsidiary of FACT. Merger Sub was formed solely for the purpose of effecting the Business Combination and has not carried on any activities other than those in connection with the Business Combination. The address and telephone number for Merger Sub’s principal executive offices are the same as those for FACT.
Precision Aerospace & Defense Group, Inc., a Florida corporation
Precision Aerospace & Defense Group, Inc. implements a strategic acquisition and integration model focused on established businesses within the aerospace and defense industry. Serving as a central coordinating entity, PAD fosters a cohesive family of synergistic subsidiaries, enhancing value through the integration of complementary suppliers. PAD operates through three principal subsidiaries, each of which functions as a separate division and is the holding company for the applicable operating subsidiaries in its division: PADG Engineering and Sustainment Group, LLC; PADG Precision Manufacturing Group, LLC; and PADG Non-Destructive Testing Group, LLC. PAD’s principal operating subsidiaries, with histories dating back to 1945, are Maney, V&M, Aerofab, and Aerodyn Engineering LLC.
PAD’s mission is to strategically target, unite and build multidisciplinary businesses that support the commercial and military sectors through major original equipment manufacturers (“OEMs”) and the U.S. Department of War (“DoW”). Through accretive acquisitions, organic growth and operating synergies, we seek to create an industry-leading supplier, offering a robust suite of service offerings with unsurpassed quality, customer service and lead times.
PAD is engaged in contract production of aircraft parts, equipment and sub-assemblies (a series of parts fitted together to form a complex structure), engineering (design, development, and maintenance of aircraft and other related systems), specialized machining and manufacturing, and non-destructive testing (a set of testing and analysis processes that evaluate the quality and structural integrity of a manufactured product) primarily across the aerospace
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and defense industry, but also in the space, power generation, automotive, marine, and industrial sectors. Its customers include aerospace OEMs, federal defense contractors, major airlines, space pioneers and well-established commercial suppliers.
PAD’s principal objective is to continue to increase our revenues and cash flows by building out its three principal divisions to further differentiate itself as a premier manufacturer, creating bespoke solutions that meet its specific client requirements, delivering mission critical products and custom tailored manufacturing, engineering and testing solutions directly to major OEMs and Tier 1 suppliers within the aerospace and defense industry.
On December 23, 2024 PAD acquired Aerodyn Engineering LLC. In addition, PAD has entered into agreements to acquire two additional companies, Western Professional, Inc. and Southern Precision Machining, LLC.
Background of the Business Combination
FACT was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses. Following the completion the IPO, at the direction of the FACT Board, FACT’s management and directors commenced a search for potential business combination targets, leveraging FACT’s network of technology company founders and executives, investment bankers, private equity firms and hedge funds and numerous other business relationships, as well as the prior experience and network of FACT’s management and directors. FACT reviewed over 100 potential business combination opportunities, entered into non-disclosure agreements with and conducted due diligence on 15 companies, and submitted non-binding letters of intent to representatives from five potential target companies other than PAD. FACT management ultimately decided not to pursue continued discussions with such alternate targets because FACT concluded that these other target businesses were not suitable business combination opportunities for FACT based on, among other factors, its due diligence indicating that the target businesses did not meet the criteria FACT had established at the time of its IPO, and instead FACT focused its efforts on PAD.
FACT was initially introduced to PAD in May 2025 by BTIG. On May 29, 2025, FACT executed a non-disclosure agreement with BTIG to receive additional confidential due diligence materials regarding PAD. On July 15, 2025, FACT and PAD finalized and entered into the LOI. The terms of the Business Combination Agreement are the result of extensive negotiations between the representatives of FACT and PAD, each in consultation with its advisors, which occurred between July 2025 and November 2025.
As contemplated by the Business Combination Agreement, the structure and timing of the Business Combination is consistent with common practice in initial business combination transactions consummated by special purpose acquisition companies.
For more information, see “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination.”
The Business Combination Agreement
Pursuant to the Business Combination Agreement, and subject to the satisfaction or waiver of certain conditions set forth therein, the following will occur: (i) the Domestication of FACT as a Delaware corporation is intended to occur prior to the Closing Date, in which FACT will de-register from the Register of Companies in the Cayman Islands and transfer by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation in accordance with the FACT Articles, Section 388 of the DGCL and Part XII of the Cayman Companies Act; (ii) on the Closing Date, the Merger of Merger Sub with and into PAD with PAD surviving the Merger as a wholly-owned subsidiary of FACT, in accordance with the Business Combination Agreement and the Florida Business Corporation Act; and (iii) the other transactions contemplated by the Business Combination Agreement and documents related thereto, all as described in more detail elsewhere in this proxy statement/prospectus. In connection with the Closing, FACT will be renamed Precision Aerospace & Defense Group, Inc.
Immediately prior to the Domestication, (i) FACT will effect the redemption of the Public Shares that are validly submitted for redemption and not withdrawn, (ii) the Sponsor and Sponsor HoldCo will surrender to FACT the FACT Forfeited Shares, and (iii) the Class B Share Conversion will occur, whereby each holder of each issued and outstanding FACT Class B Share (other than the FACT Forfeited Shares) will irrevocably and unconditionally elect to convert, on a one-for-one basis, each FACT Class B Share held by it into one FACT Class A Share.
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At the effective time of the Domestication, each outstanding FACT Class A Share (excluding Public Shares validly submitted for redemption and the FACT Forfeited Shares, but including FACT Class A Shares issued upon the Class B Share Conversion) will be reclassified as one share of New PAD Common Stock.
On the Closing Date, Sponsor HoldCo will forfeit the Sponsor HoldCo Contributed Shares, if any, that Sponsor HoldCo determines to forfeit such shares in connection with FACT exceed a cap on certain expenses and FACT having other unpaid liabilities and expenses, and the Merger will occur. At the Effective Time, each share of PAD’s capital stock that is issued and outstanding as of immediately prior to the Effective Time (excluding treasury shares and dissenting shares) will be automatically canceled and converted into the right to receive a number of shares of New PAD Common Stock (see “— The Business Combination Agreement — Consideration” below).
Additionally, at the Effective Time, each outstanding and unexercised PAD Option will become a New PAD Option containing the same terms, conditions, vesting and other provisions as are currently applicable to such PAD Options, provided that each New PAD Option will be exercisable for the number of shares of New PAD Common Stock equal to the number of PAD Shares subject to such PAD Option immediately prior to the Effective Time, multiplied by the Per Share Common Merger Consideration, rounded down to the nearest whole share, at an exercise price equal to the per share exercise price of the PAD Option divided by the Per Share Common Merger Consideration, rounded up to the nearest whole cent.
Additionally, at the Effective Time, New PAD will issue (i) 3,300,000 shares of New PAD Common Stock, minus (ii) the number of FACT Class A Shares held by Sponsor HoldCo immediately prior to Closing, including such FACT Class A Shares issuable upon the conversion or exchange of any other securities of FACT issued to the Sponsor at the IPO. Additionally, at the Closing, New PAD will set aside 1,200,000 shares of New PAD Common Stock for issuance to the Sponsor (the “Sponsor Performance Bonus Shares”), subject to the following milestones:
• upon the date on which Sponsor HoldCo or any of its representatives secures research coverage for PAD, so long as the date on which such research coverage is obtained is prior to the later of (i) the date that is 180 days after the Closing Date or (ii) the date on which the New PAD files its second periodic report on Form 10-Q or Form 10-K after the Closing Date (the “Triggering Event I”), a one-time issuance of 300,000 Sponsor Performance Bonus Shares (as equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combinations, exchanges of shares or other like changes or transactions with respect to Sponsor Performance Bonus Shares, occurring on or after the Closing but prior to Triggering Event I);
• upon the date on which the volume-weighted average trading sale price of one share of FACT Common Stock on The Nasdaq Capital Market (or such other Exchange on which the FACT Class A Shares or the FACT Common Stock, as applicable, is then listed) is greater than or equal to $15.00 (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combinations, exchanges of shares or other like changes or transactions with respect to the shares of FACT Common Stock occurring on or after the Closing) for any 20 trading days within any 30 consecutive trading day period within the five years following the Closing Date but after the expiration period applicable to restrictions on the transfer of Sponsor Performance Bonus Shares set forth in the Sponsor Lock-Up Agreement, a one-time issuance of such number of Sponsor Performance Bonus Shares equal to the quotient of $4,500,000 divided by $15.00, which equates to 300,000 Sponsor Performance Bonus Shares; and
• a one-time issuance of (i) 300,000 Sponsor Performance Bonus Shares if, after the exercise of the redemption rights by the Public Shareholders, the Trust Account has a balance of not less than $35,000,000 as of the Closing or (ii) 600,000 Sponsor Performance Bonus Shares if, after the exercise of the redemption rights by the Public Shareholders, the Trust Account has a balance of not less than $70,000,000, in each case after giving effect to the Business Combination.
For more information about the Business Combination, please see the section titled “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement.” A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A.
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Transfer Restrictions
In connection with the Closing, pursuant to the Business Combination Agreement, (i) PAD, FACT, Sponsor HoldCo and certain holders of FACT equity interests, including the Sponsor, will enter into the Sponsor Lock-Up Agreement, pursuant to which Sponsor HoldCo’s, the Sponsor’s and such FACT Shareholders’ shares of New PAD Common Stock will be subject to (A) a 180-day lock-up if such shares are issued upon the conversion of the Founder Shares and any FACT Class A Shares, or (B) a 90-day lock-up if such shares are issued upon the conversion of the restricted FACT Class A Shares, and (ii) PAD, FACT and certain holders of PAD’s equity interests will enter into the PAD Shareholder Lock-Up Agreement, pursuant to which such holders of PAD’s equity interests’ shares of New PAD Common Stock will be subject to a 180-day lock-up, subject to a carve-out for the shares of New PAD Common Stock into which 770,000 PAD Shares will convert, which will be exempt from the transfer restrictions set forth in the PAD Shareholder Lock-Up Agreement.
For more information, see “Proposal No. 1 — The Business Combination Proposal — Ancillary Agreements — Lock-Up Agreements.”
Sources and Uses of Proceeds
The following table summarizes the anticipated sources and uses of funds in the Business Combination. Such tables is for illustrative purposes only. Where actual amounts are not known or knowable, the figures below represent good faith estimates of such amounts.
Sources and Uses of Proceeds (50% Redemptions Scenario) (in millions)
|
Sources ($ in millions): |
Uses: |
|||||||
|
Existing shareholder rollover(1)(2) |
$ |
124.0 |
Existing shareholder rollover(1)(2) |
$ |
124.0 |
|||
|
Conversion of PAD Preferred Stock(1)(3) |
|
10.4 |
Conversion of PAD Preferred Stock(1)(3) |
|
10.4 |
|||
|
Acquisition Shares(1)(4) |
|
16.7 |
Acquisition Shares(1)(4) |
|
16.7 |
|||
|
Cash in Trust Account(5) |
|
92.7 |
Cash payment to holders of PAD Preferred Stock(6) |
|
9.4 |
|||
|
FACT and affiliates rollover(2)(7) |
|
43.4 |
Acquisition costs(8) |
|
43.0 |
|||
|
Financings(9) |
|
75.0 |
Deal fees(10) |
|
17.9 |
|||
|
Credit Facility(11) |
|
25.0 |
FACT and affiliates rollover |
|
43.4 |
|||
|
|
|
Cash to balance sheet |
|
122.3 |
||||
|
Total Sources |
$ |
387.3 |
Total Uses |
$ |
387.3 |
|||
____________
(1) Assumes $151.1 million pre-transaction equity value (existing shareholder rollover of $124.0 million common equity, conversion of $10.4 million of shares of PAD Preferred Stock and $16.7 million of shares of New PAD Common Stock to fund additional acquisitions pursuant to agreements that PAD enters into prior to the Closing Date).
(2) Assumes 100% rollover equity.
(3) Represents conversion of PAD Preferred Stock into 1,044,500 shares of New PAD Common Stock (shares of PAD Series A Preferred Stock convert into 200,000 shares of New PAD Common Stock, shares of PAD Series B Preferred Stock convert into 146,500 shares of New PAD Common Stock, shares of PAD Series C Preferred Stock convert into 275,000 shares of New PAD Common Stock, shares of PAD Series D Preferred Stock convert into 276,000 shares of New PAD Common Stock, and 98,000 shares of PAD Series E Preferred Stock convert into 147,000 shares of New PAD Common Stock).
(4) Represents the equity issuable in connection with the pending acquisitions of Aerodyn Engineering, LLC and Western Professional, Inc.
(5) Assumes 50% potential redemptions = $92.7 million cash in the Trust Account (8,750,000 shares at $10.59 per share).
(6) Represents the cash portion of the Merger Consideration payable to holders of PAD Preferred Stock in an amount equal to the original purchase price, or $5.00 per share, plus accrued dividends outstanding with respect to the PAD Series A Preferred Stock and the PAD Series B Preferred Stock, the original purchase price, or $5.00 per share, with respect to the PAD Series C Preferred Stock and the PAD Series D Preferred Stock, and the original purchase price, or $10.00 per share, with respect to the PAD Series E Preferred Stock.
(7) Shares of New PAD Common Stock owned by the Sponsor and FACT Insiders pro-forma ownership at Closing ($33.0 million) and vested Sponsor Performance Bonus Shares ($6.0 million). This illustrative analysis assumes that the Sponsor and FACT Insiders do not own shares in excess of such cap. Figure also includes shares of $2.2 million held by the underwriters in the IPO and shares held by members of the FACT Board of $2.2 million.
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(8) Represents the cash and promissory note portion of the purchase price for Aerodyn Engineering, LLC, Aerofab NDT LLC, and Western Professional, Inc.
(9) Assumes that the Financings are in an aggregate amount equal to the Minimum FACT Cash Amount.
(10) Includes deferred underwriters’ fees, legal fees related to the Business Combination, and M&A advisory fees related to acquisitions.
(11) Assumes the proceeds of a $25.0 million credit facility (the “Credit Facility”) that PAD intends to obtain at or prior to the Closing, although PAD has not yet entered into a definitive agreement in connection with such Credit Facility.
Closing Conditions
Under the Business Combination Agreement, the obligations of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain closing conditions of the respective parties, including, without limitation: (i) the approval and adoption of the Business Combination Agreement and transactions contemplated thereby by requisite vote of the FACT Shareholders; (ii) the approval and adoption of the Business Combination Agreement by PAD’s stockholders; (iii) the absence of laws, rules, regulations, judgments, decrees, executive orders or awards making the Business Combination illegal or otherwise prohibiting its consummation or restraining or imposing any condition on its consummation; (iv) the Registration Statement having been declared effective by the SEC under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement being in effect, and no proceedings seeking such a stop order having been initiated or threatened in writing by the SEC; and (v) (A) all applicable waiting periods under the HSR Act with respect to the Business Combination having expired or been terminated, (B) at least 60 days shall have elapsed since the submission to the United States Department of State Directorate of Defense Trade Controls of all information required by 22 C.F.R. § 122.4(b), and (C) each consent of any Governmental Authority (as defined in the Business Combination Agreement) required to consummate the Business Combination having been obtained and shall be in full force and effect.
The obligations of PAD to consummate the Business Combination are subject to additional conditions, including, among others: (i) the truth and accuracy of the representations and warranties of FACT and Merger Sub, subject to customary bring-down standards; (ii) material compliance by FACT and Merger Sub with their respective obligations, agreements and covenants under the Business Combination Agreement; (iii) receipt by PAD of a closing certificate of FACT; (iv) there being no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to FACT; (v) FACT having provided the Public Shareholders the opportunity to make redemption elections with respect to their FACT Class A Shares; (vi) FACT’s initial listing application in connection with the Business Combination shall have been conditionally approved and, immediately following the Effective Time, FACT shall satisfy any applicable initial listing requirements of NYSE; (vii) the aggregate cash available from the Trust Account and other sources as set forth in the Business Combination Agreement equaling no less than $75,000,000 (after deducting SPAC Transaction Expenses (as defined in the Business Combination Agreement) and any amounts paid to FACT Shareholders that exercise their redemption rights in connection with the Business Combination); (viii) receipt of certain executed ancillary documents and the amended and restated certificate of incorporation of FACT shall have become effective; and (ix) FACT having taken all necessary and appropriate measures to have all funds held in the Trust Account be disbursed to FACT and released from the Trust Account to New PAD on the Closing Date.
The obligations of FACT and Merger Sub to consummate the Business Combination are subject to additional conditions, including, among other things: (i) the truth and accuracy of the representations and warranties of PAD, subject to customary bring-down standards; (ii) material compliance by PAD with its agreements and covenants under the Business Combination Agreement; (iii) no Material Adverse Effect (as defined in the Business Combination Agreement) with respect to PAD having occurred since the date of the Business Combination Agreement that is continuing; and (iv) receipt of a closing certificate of PAD and certain executed ancillary documents.
For more information, see “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement — Closing Conditions.”
Termination
The Business Combination Agreement may be terminated in certain circumstances, including, without limitation: (i) by mutual written consent of FACT and PAD; (ii) by FACT or PAD, if the Closing has not occurred by June 30, 2026 (the “Outside Date”); (ii) by FACT or PAD, if an applicable governmental or regulatory authority has issued a final and non-appealable order which permanently restrains or otherwise prohibits the Business Combination; (iii) by FACT or PAD if the other has breached any of its respective representations, warranties, agreements or covenants under the
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Business Combination Agreement, and such breach or failure would render certain conditions precedent to the Closing incapable of being satisfied, and such breach or failure is not cured by the time allotted in the Business Combination Agreement; (iv) by FACT or PAD, if the FACT Board or PAD Board, as applicable, has changed, withdrawn, withheld, qualified or modified, or publicly proposed to change, withdraw, withhold, qualify or modify its recommendation to the FACT Shareholders or holders of PAD’s equity interests, as applicable, to approve and adopt the Business Combination Agreement and related matters; or (v) by FACT or PAD, if the FACT Shareholder Approval is not obtained.
If the Business Combination Agreement is terminated, the agreement will become void, and there will be no liability under the Business Combination Agreement on the part of any party thereto, except for any liability on the part of any party for fraud or willful and material breach of the Business Combination Agreement.
Ancillary Agreements
In connection with the Business Combination, FACT and PAD have entered into, or intend to enter into on the Closing Date, several agreements, including the Sponsor Support Agreement, Lock-Up Agreements, and Registration Rights Agreement.
Ownership of New PAD after the Closing
At the Closing, PAD’s pre-Closing stockholders will own [•] shares of New PAD Common Stock, or [•]% of the shares to be outstanding and FACT’s pre-Closing stockholders will own [•] shares of New PAD Common Stock, or [•]% of the shares to be outstanding. Additionally, Sponsor will own an aggregate of 3,300,000 shares of New PAD Common Stock, or [•]% of the shares to be outstanding.
For more information about the consideration to be received in the Business Combination, these scenarios, and the underlying assumptions, see “Unaudited Pro Forma Condensed Combined Financial Information.” See also “Risk Factors — FACT Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that FACT’s current shareholders have on the management of New PAD.”
Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination
In considering the recommendation of the FACT Board to vote in favor of approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal, the Charter Proposal, the Incentive Plan, Director Election Proposal and Adjournment Proposal, shareholders should keep in mind that FACT’s Sponsor, Sponsor HoldCo, FACT’s directors and executive officers, and entities affiliated with them, have interests in such proposals that are different from, or in addition to, the interests of unaffiliated FACT Shareholders. See “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.”
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of FACT and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder.
The personal and financial interests of the Sponsor, Sponsor HoldCo and FACT’s directors and officers may have influenced their motivation in identifying and selecting PAD as a business combination target, completing an initial business combination with PAD and influencing the operation of the business following the Closing. In considering the recommendation of the FACT Board to vote for the proposals, FACT Shareholders should consider these interests.
Further, unaffiliated FACT Shareholders should keep in mind that PAD officers directors and entities affiliated with them have interests in such proposals that are different from, or in addition to, those of unaffiliated FACT Shareholders. See “Proposal No. 1 — The Business Combination Proposal — Interests of PAD’s Directors and Officers in the Business Combination” and “Certain Relationships and Related Persons Transactions” for more information related to certain transactions and arrangements between PAD and the PAD directors and officers.
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Compensation to be Received by the Sponsor, Sponsor HoldCo and FACT’s Officers and Directors in Connection with the Business Combination
Set forth below is a summary of the amount of compensation and securities received or to be received by the Sponsor, Sponsor HoldCo and FACT’s officers and directors in connection with the Business Combination.
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Securities to be Received |
Other Compensation |
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Sponsor |
10,680 shares of New PAD Common Stock upon the exchange of 10,680 Private Placement Units in the Domestication that were initially purchased in the Private Placement for $10.00 per unit (assuming the forfeiture of 5,169 FACT Forfeited Shares, no forfeiture of Sponsor HoldCo Contributed Shares and the issuance of 1,651 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered). Assumes that the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered. |
Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
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Sponsor HoldCo |
(i) 3,433,179 shares of New PAD Common Stock upon the exchange of 3,433,179 Founder Shares in the Domestication that were initially purchased prior to the IPO for approximately $0.0037 per share, (ii) 331,837 shares of New PAD Common Stock upon the exchange of 331,837 FACT Class A Shares in the Domestication that were initially purchased in the Private Placement for $10.00 per unit, and (iii) 134,984 shares of New PAD Common Stock upon the exchange of 134,894 restricted FACT Class A Shares in the Domestication that were initially purchased in the Private Placement (assuming the forfeiture of 1,873,164 FACT Forfeited Shares, no forfeiture of Sponsor HoldCo Contributed Shares and the issuance of 598,349 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered). Assumes that the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered. |
Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
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Securities to be Received |
Other Compensation |
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FACT’s Independent Directors |
Each of FACT’s independent directors will receive 30,000 shares of New PAD Common Stock upon the exchange of 30,000 Founder Shares held by them in the Domestication, which shares were issued to them as consideration for services rendered to FACT. |
Reimbursement for loans and advances to FACT; no such amounts are outstanding as of the date of this proxy statement/prospectus. Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
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FACT Executive Chairman |
Will receive 130,000 shares of New PAD Common Stock upon the exchange of 130,000 Founder Shares held by him in the Domestication, which shares were issued as consideration for services rendered to FACT. |
Reimbursement for loans and advances to FACT; no such amounts are outstanding as of the date of this proxy statement/prospectus. Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
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FACT’s Senior Advisor |
FACT’s Senior Advisor will receive 20,000 shares of New PAD Common Stock upon the exchange of 20,000 Founder Shares held by them in the Domestication, which shares were issued to them as consideration for services rendered to FACT. |
Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. |
The securities to be issued to the Sponsor, Sponsor HoldCo and FACT’s officers and directors in connection with the Business Combination may result in a material dilution of the equity interests of non-redeeming Public Shareholders. FACT’s independent directors are not members of the Sponsor or Sponsor HoldCo. None of the funds in the Trust Account will be used to compensate our officers or directors. Except as provided for under the Advisory Agreement (as defined below) and any other potential administrative services fees paid or to be paid to the Sponsor or Sponsor HoldCo, no compensation of any kind, including finder’s and consulting fees, have been paid or will be paid to the Sponsor, Sponsor HoldCo officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of the Business Combination. However, as detailed above, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations, as discussed above. The reimbursement of expenses and advances to the Sponsor, Sponsor HoldCo and FACT’s officers and directors may result in a material dilution of the equity interests of non-redeeming Public Shareholders.
Additionally, on November 26, 2025, we entered into the advisory agreement (the “Advisory Agreement”) with the Sponsor pursuant to which the Sponsor will provide certain services to us including, without limitation, in each case relating to the Business Combination, assisting us in preparing presentations, introducing us to potential investors, assisting us in arranging meetings with PAD Stockholders to the extent applicable, and assisting us with the preparation of any press releases and filings. The Advisory Agreement provides for FACT to pay to the Sponsor a fee of up to $240,000 (which, in our sole discretion, may be payable in up to 12 monthly installments). The Advisory Agreement was reviewed and approved by the FACT Board and our Audit Committee.
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Potential Purchases of Public Shares
The Sponsor, Sponsor HoldCo and FACT’s officers and directors do not have any plans at this time to purchase Public Shares from Public Shareholders. However, at any time prior to the EGM, during a period when they are not then aware of any material nonpublic information regarding FACT or its securities, the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates may purchase Public Shares in privately negotiated transactions or in the open market, although they are under no obligation to do so. There is no limit on the number of Public Shares that such persons may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares in such transactions. Such purchases may include a contractual acknowledgment that such shareholder, although still the record holder of FACT’s shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights.
In the event that the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates purchase shares in privately negotiated transactions from Public Shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. The purpose of such transaction could be to increase the likelihood of obtaining shareholder approval of the Business Combination or satisfy the Minimum FACT Cash Amount, where it appears that such requirement would otherwise not be met. FACT expects any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of FACT Class A Shares and the number of beneficial holders of FACT Class A Shares may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of FACT’s securities on Nasdaq.
In the event the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates were to purchase Public Shares from Public Shareholders, such purchases would be structured in compliance with the requirements of Rule 14e-5 under the Exchange Act. To the extent that the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates purchase Public Shares in compliance with the requirements of Rule 14e-5 under the Exchange Act, such shares would not be voted in favor of approving the Business Combination. See “The Extraordinary General Meeting — Potential Purchases of Public Shares” for more information.
The FACT Board’s Reasons for the Approval of the Business Combination
Before reaching their unanimous decisions that the Business Combination Agreement, each ancillary agreement, and the Business Combination are fair, advisable and in the best interests of FACT and its shareholders and the FACT Board each consulted with the FACT management team, their respective legal counsel and other advisors. The FACT Board considered a variety of factors in connection with their evaluation of the Business Combination. In light of the complexity of those factors, the FACT Board did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors they took into account in reaching their decision. Different individual members of the FACT Board may have given different weight to different factors in their evaluation of the Business Combination.
The FACT Board determined that the Business Combination presents an attractive business opportunity in light of a variety of factors, including but not limited to PAD’s market opportunity, end-to-end customer solutions, and experienced management team. The FACT Board also considered the potential detriments of the Business Combination to FACT, including PAD’s limited operating history, regulatory risks, the uncertainty of the potential benefits of the Business Combination being achieved, macroeconomic risks, the absence of possible structural protections for minority shareholders, and the risks and costs to FACT if the Business Combination is not achieved, including the risk that it may result in FACT being unable to complete a business combination and force FACT to liquidate. No unaffiliated representative was retained to act solely on behalf of the FACT Shareholders for purposes of negotiating the terms of the Business Combination Agreement on their behalf and/or preparing a report concerning the approval of the Business Combination.
For more information about the FACT Board’s reasons for the approval of the Business Combination, see “Proposal No. 1 — The Business Combination Proposal — The FACT Board’s Reasons for the Approval of the Business Combination.”
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Opinion of EntrepreneurShares LLC
On November 23, 2025, ERShares rendered its oral opinion to the FACT Board (which was subsequently confirmed in writing) to the effect that, as of such date and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by ERShares as set forth in its written opinion, the Transaction Consideration to be paid by FACT in the Merger pursuant to the Business Combination Agreement was fair, from a financial point of view, to all FACT Shareholders (and not any particular group or class thereof).
ERShares’s opinion was directed to the FACT Board (in its capacity as such) and only addressed the fairness, from a financial point of view, of the Transaction Consideration to be paid by FACT in the Merger pursuant to the Business Combination Agreement, and did not address any other terms, aspects or implications of the Business Combination, or any agreements, arrangements or understandings entered into in connection with the Business Combination. The summary of ERShares’s opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex K to this proxy statement/prospectus and which describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by ERShares in connection with the preparation of its opinion. Neither ERShares’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the FACT Board, FACT or any security holder as to whether they should elect to redeem their shares or how they should act or vote on any matter relating to the Business Combination or otherwise.
For a description of the opinion that the FACT Board received from ERShares, see “Proposal No. 1 — The Business Combination Proposal — Opinion of EntrepreneurShares LLC.”
The Extraordinary General Meeting
The following is a summary of the process and procedures for registering for and attending the EGM, and voting and redeeming your FACT Ordinary Shares in connection with the EGM. For more information, see the section entitled “The Extraordinary General Meeting.”
Date, Time and Place
The EGM will be held at , Eastern Time, on , 2026. The EGM will be a virtual meeting conducted via live webcast at [•]. For the purposes of Cayman Islands law and the FACT Articles, the physical location of the EGM will be the offices of Paul Hastings LLP, FACT’s legal counsel, at 2050 M Street NW, Washington, D.C. 20036.
Proposals to be Submitted at the EGM
At the EGM, FACT is asking holders of FACT Ordinary Shares to consider and vote upon the following proposals:
• the Business Combination Proposal;
• the Domestication Proposal;
• the Stock Issuance Proposal;
• the Charter Proposal;
• the Advisory Charter Proposals;
• the Incentive Plan Proposal;
• the Director Election Proposal (only holders of FACT Class B Shares may vote on this proposal); and
• the Adjournment Proposal (if presented).
Approval of each of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal is a condition to consummating the Business Combination. We refer to such proposals, collectively, as the “Condition Precedent Proposals”.
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Registering for the EGM
Any shareholder wishing to attend the meeting should register for the meeting by [•], Eastern Time, on [•], 2026. To register for the EGM, please follow these instructions, as applicable, to the nature of your ownership of FACT Ordinary Shares:
• If your shares are registered in your name with Odyssey and you wish to attend the EGM virtually, go to [•], enter the 12-digit control number included on your proxy card or notice of the EGM and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the EGM you will need to log back into the extraordinary general meeting site using your control number. Pre-registration is recommended, but is not required in order to attend virtually.
• Beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other nominee) who wish to attend the EGM must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to [•]. Beneficial shareholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the online EGM. After contacting Odyssey, a beneficial holder will receive an e-mail prior to the EGM with a link and instructions for entering the EGM online. Beneficial shareholders should contact Odyssey at least five business days prior to the EGM date in order to ensure access.
Record Date; Who is Entitled to Vote
FACT has fixed [•], 2026 as the Record Date for the EGM. FACT Shareholders at the close of business on the Record Date are entitled to vote or direct votes to be cast on matters that come before the EGM. Each share is entitled to one vote, except in respect of the Domestication Proposal, in which case a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Ordinary Shares will be entitled to one vote for every FACT Class A Ordinary Share held. Each FACT Shareholder may only vote his, her, or its shares if he, she, or it is present in person or is represented by proxy at the EGM. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that the shares you beneficially own are properly voted. FACT Warrants do not have voting rights. As of the close of business on the Record Date for the EGM, there were [•] FACT Ordinary Shares issued and outstanding, of which [•] were issued and outstanding Public Shares.
As of the Record Date, the Sponsor, Sponsor HoldCo and other FACT Insiders held of record and were entitled to vote an aggregate of [•] FACT Ordinary Shares. The FACT Ordinary Shares held by such persons currently constitute approximately [•]% of the FACT Ordinary Shares, outstanding as of the Record Date. Pursuant to the Sponsor Support Agreement, Sponsor HoldCo and the other FACT Insiders have agreed to vote any FACT Ordinary Shares held by them as of the Record Date in favor of the Business Combination, including voting in favor of each Condition Precedent Proposal. No consideration has been or will be paid by FACT or PAD to the FACT Insiders in connection with such agreement. To the extent that Sponsor, Sponsor HoldCo and other FACT Insiders or their affiliates purchase Public Shares in compliance with the requirements of Rule 14e-5 under the Exchange Act, such shares would not be voted in favor of approving the Business Combination.
Abstentions and Broker Non-Votes
With respect to each proposal in this proxy statement/prospectus, you may vote “FOR,” “AGAINST” or “ABSTAIN.”
If a FACT Shareholder fails to return a proxy card and does not attend the EGM in person (or virtually), then that FACT Shareholder’s shares will not be counted for purposes of determining whether a quorum is present at the EGM. If a valid quorum is established, any such failure to vote will have no effect on the outcome of any other proposal in this proxy statement.
Abstentions will be counted in connection with the determination of whether a valid quorum is established but will not constitute votes cast at the EGM and therefore will have no effect on any of the proposals as a matter of Cayman Islands law.
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Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. FACT believes that all the proposals presented to the FACT Shareholders at the EGM (including the Adjournment Proposal, if presented) will be considered non-discretionary and therefore your broker, bank, or nominee cannot vote your shares without your instruction. Proxies relating to “street name” shares that are returned to FACT but marked by brokers as “not voted” will be considered present for the purposes of establishing a quorum, but will not count as votes cast at the EGM, and otherwise will have no effect on a particular proposal under Cayman Islands law.
Quorum
A quorum of FACT Shareholders is necessary to hold a valid meeting. The holders of a majority of the FACT Ordinary Shares being individuals present in person or by proxy or if a corporation or other non-natural person by its duly authorized representative or proxy shall constitute a quorum at the EGM.
Vote required for Approval
The following votes are required to approve each proposal:
• Business Combination Proposal: Approval of the Business Combination Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Business Combination Proposal is conditioned on the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Domestication Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Business Combination Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Domestication Proposal: Approval of the Domestication Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. In respect of the Domestication Proposal only, a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Ordinary Shares will be entitled to one vote for every FACT Class A Ordinary Share held. The Domestication Proposal is conditioned on the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Domestication Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Stock Issuance Proposal: Approval of the Stock Issuance Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Stock Issuance Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Charter Proposal is not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Charter Proposal: Approval of the Charter Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Charter Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Stock Issuance Proposal is not approved, the Charter Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
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• Advisory Charter Proposals: Approval of each Advisory Charter Proposal requires an ordinary resolution on a non-binding and advisory only basis, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The shareholder votes regarding these proposals are advisory in nature, and are not binding on FACT, the FACT Board, PAD or New PAD Board. The Advisory Charter Proposals are conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Advisory Charter Proposals will have no effect, even if approved by holders of FACT Ordinary Shares.
• Incentive Plan Proposal: Approval of the Incentive Plan Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Incentive Plan Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Director Election Proposal: Approval of the Director Election Proposal requires an ordinary resolution passed by a simple majority of such holders of FACT Class B Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Director Election Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Director Election Proposal will have no effect, even if approved by holders of FACT Class B Shares.
• Adjournment Proposal: Approval of the Adjournment Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Adjournment Proposal is not conditioned upon the approval of any other proposal to be voted on at the EGM.
Redemption Rights
Pursuant to the FACT Articles,
(a) (i) hold Public Shares or (ii) hold Public Shares through FACT Units and elect to separate your FACT Units into the underlying Public Shares and FACT Warrants prior to exercising your redemption rights with respect to the Public Shares;
(b) submit a written request to the Transfer Agent, which request includes the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that FACT redeem all or a portion of their Public Shares for cash; and
(c) deliver the certificates for their Public Shares (if any) along with their redemption forms to the Transfer Agent physically or electronically using the DTC’s DWAC (Deposit/Withdrawal at Custodian) system.
Any holder of Public Shares (other than the Sponsor, Sponsor HoldCo and the FACT Insiders) will be entitled to demand that such holder’s Public Shares be redeemed for a full pro rata portion of the amount then in the Trust Account including interest earned on the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals) which, for illustrative purposes, was approximately $[•] million, or $[•] per Public Share, as of [•], 2026.
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Prior to exercising redemption rights, Public Shareholders should verify the market price of the FACT Class A Shares as they may receive higher proceeds from the sale of their Public Shares in the public market than from exercising their redemption rights if the market price per share is higher than the Redemption Price. FACT cannot assure shareholders that they will be able to sell their Public Shares in the open market, even if the market price per share is higher than the Redemption Price stated above, as there may not be sufficient liquidity in the FACT Class A Shares when Public Shareholders wish to sell their shares.
Any request for redemption, once made by a holder of Public Shares, may not be withdrawn unless the FACT Board determines (in its sole discretion) to permit the withdrawal of such redemption request (which it may do in whole or in part).
Any written demand of redemption rights must be received by the Transfer Agent prior to the redemption deadline. No demand for redemption will be honored unless the holder’s Public Shares have been delivered (either physically or electronically) to the Transfer Agent prior to the deadline for submitting redemption requests.
Notwithstanding the foregoing, a holder of Public Shares, together with any affiliate or any other person with whom he, she or it is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will be restricted from seeking redemption with respect to more than 15% of the issued and outstanding Public Shares. Accordingly, all Public Shares in excess of 15% held by a shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will not be redeemed.
See the section entitled “The Extraordinary General Meeting — Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your Public Shares for cash. See also “Questions and Answers about the Business Combination — Do I have redemption rights?, — Will my ability to exercise redemption rights be impacted by how I vote on the Business Combination Proposal?, — How do I exercise my redemption rights?” for additional information on the exercise of redemption rights.
As set forth in more detail elsewhere in this proxy statement/prospectus, the Public Shareholders that do not elect to redeem their Public Shares will experience immediate dilution as a result of the Business Combination. The Public Shareholders currently own approximately 73% of the issued and outstanding FACT Ordinary Shares. Even if no Public Shareholders redeem their Public Shares in the Business Combination, the Public Shareholders’ ownership will decrease from approximately [•]% of the FACT Ordinary Shares prior to the Business Combination to owning approximately [•]% of the total outstanding New PAD Common Stock at the Closing. As redemptions increase, the overall percentage ownership held by the Sponsor, Sponsor HoldCo and other FACT Insiders and PAD Stockholders will increase as compared to the overall percentage ownership and voting percentage held by Public Shareholders, thereby increasing dilution to Public Shareholders. See “Risk Factors — FACT Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that FACT’s current shareholders have on the management of New PAD.”
Holders of the FACT Warrants will not have redemption rights with respect to the FACT Warrants.
Appraisal Rights and Dissenters’ Rights
Proxy Solicitation
Proxies may be solicited by mail, telephone, on the internet, or in person. FACT has engaged Sodali to assist in the solicitation of proxies. FACT has agreed to pay Sodali a fee of $22,500, plus disbursements.
If a FACT Shareholder appoints a proxy, that FACT Shareholder may still vote its shares if it revokes its proxy before the EGM. A shareholder also may change its vote by submitting a later-dated proxy card as described in the section entitled “The Extraordinary General Meeting — Proxy Solicitation.”
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Revoking Your Proxy
If you are a FACT Shareholder of record and you appoint a proxy, you may revoke your proxy by taking any one of the following actions:
• notifying the General Counsel of FACT in writing before the EGM that you have revoked your proxy;
• signing and returning by mail a proxy card with a later date so that it is received prior to the EGM; or
• attending the EGM and voting electronically by visiting the website established for that purpose at [•] and entering the control number found on your proxy card, voting instruction form or notice you previously received. Attendance at the EGM will not, in and of itself, revoke a proxy.
If you are a non-record (beneficial) FACT Shareholder, you should follow the instructions of your bank, broker or other nominee regarding the revocation of voting instructions.
Regulatory Approvals
Each of FACT and PAD has agreed to use its commercially reasonable efforts, and to cooperate fully with the other, to take, or cause to be taken, all things reasonably necessary to complete the Business Combination, including its commercially reasonable efforts to (i) obtain all actions, nonactions, waivers, consents, approvals and other authorizations from all applicable authorities necessary to consummate the Business Combination and (ii) execute and deliver any additional instruments necessary to consummate the Business Combination. The parties have determined that the Business Combination is not reportable under the HSR Act, and the rules and regulations promulgated thereunder. Thus, the Business Combination is not subject to the termination or expiration of any waiting period under the HSR Act. The regulatory approvals to which completion of the Business Combination are subject are described in more detail in the section of this proxy statement/prospectus entitled “Proposal No. 1 — the Business Combination Proposal — The Business Combination Agreement — Regulatory Approvals.”
Stock Exchange Listing
The shareholders will vote on a proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635 the issuance of the New PAD Common Stock in connection with the Business Combination.
Recommendation to the FACT Shareholders
After careful consideration, the FACT Board unanimously (i) determined that the terms and conditions of the Business Combination Agreement, each ancillary agreement, and the Business Combination were fair, advisable, and in the best interests of FACT and its shareholders and (ii) approved the Business Combination Agreement, each ancillary agreement, the Business Combination and the other agreements and transactions contemplated thereby. The Business Combination was not structured to require the approval of at least a majority of FACT’s unaffiliated shareholders because such a vote is not required under Cayman Islands law. See the subsection entitled “The Extraordinary General Meeting — Recommendation of the FACT Board” for more information.
The FACT Board believes that each of Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal, the Charter Proposal, the Advisory Charter Proposals, the Incentive Plan Proposal, and the Adjournment Proposal (if put to a vote) is fair, advisable, and in the best interests of FACT and its shareholders and recommends that FACT Shareholders vote “FOR” each proposal being submitted to a vote of the FACT Shareholders at the EGM.
For a more complete description of the FACT Board’s reasons for the approval of the Business Combination and the unanimous recommendation of the FACT Board, see the subsection entitled “Proposal No. 1 — The Business Combination Proposal — The FACT Board’s Reasons for the Approval of the Business Combination.”
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U.S. Federal Income Tax Considerations
For a discussion summarizing material U.S. federal income tax considerations of the Domestication, the Merger, exercise of redemption rights and the ownership and disposition of New PAD Common Stock received in the Business Combination, please see “Material U.S. Federal Income Tax Considerations.”
Accounting Considerations
The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with U.S. GAAP as PAD has been determined to be the accounting acquirer under all redemption scenarios presented. Under this method of accounting, FACT, the legal acquirer, will be treated as the accounting acquiree for financial reporting purposes, and PAD, the legal acquiree, will be treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities, and results of operations of PAD will become the historical financial statements of New PAD, and FACT’s assets, liabilities, and results operations will be consolidated with PAD’s starting from the Closing Date. For accounting purposes, the financial statements of New PAD will represent a continuation of the financial statements of PAD, with the Business Combination being treated as the equivalent of PAD issuing stock for the net assets of FACT, accompanied by recapitalization. The net assets of FACT will be stated at historical carrying values, and no goodwill or other intangible assets will be recorded. Operations prior to the Business Combination will be presented as those of PAD in future final reporting of New PAD. For more information, see “Proposal No. 1 — The Business Combination Proposal — Expected Accounting Treatment for the Business Combination.”
Emerging Growth Company
We are an “emerging growth company” as defined in Rule 405 promulgated under the Securities Act and Rule 12b-2 under the Exchange Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. FACT has not elected, and New PAD is not expected to elect, to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as emerging growth companies, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
New PAD will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (A) following the fifth anniversary of the effectiveness of the IPO registration statement, (B) in which New PAD has total annual revenue of at least $1.235 billion, or (C) in which New PAD is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (ii) the date on which New PAD has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
Smaller Reporting Company
FACT is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
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Following the Closing, New PAD will be required to re-determine its status as a smaller reporting company prior to the time it makes its first filing with the SEC (other than the Current Report on Form 8-K filed with Form 10 Information (as defined in Rule 144(i)(3) of the Securities Act)). New PAD will be able to continue to take advantage of the smaller reporting company scaled disclosures if its voting and non-voting common stock held by non-affiliates is less than $250.0 million measured as of a date within four business days after the consummation of the Business Combination, or PAD’s annual revenue is less than $100.0 million as of the most recently completed fiscal year reported in the Current Report on Form 8-K filed with Form 10 Information (as defined in Rule 144(i)(3) of the Securities Act). If New PAD is no longer a smaller reporting company after this initial determination, it would need to reflect its re-determined status in any filing that is due after the 45-day period following the Closing. We expect that New PAD will remain a smaller reporting company after the Closing. To the extent that New PAD takes advantage of the reduced disclosure obligations available for smaller reporting companies, it may also make comparison of our financial statements with other public companies difficult or impossible.
Risk Factors Summary
In evaluating the proposals to be presented at the EGM, shareholders should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section of this proxy statement/prospectus entitled “Risk Factors” beginning on page 20. In particular, such risks include, but are not limited to, the following:
• PAD’s business model is dependent on acquisitions, mergers, business combinations, joint ventures, and/or similar transactions, and PAD may be unable to identify appropriate acquisition targets or to negotiate satisfactory terms with acquisition targets.
• PAD may not be able to consummate acquisitions or similar transactions on satisfactory terms or as quickly as it anticipates.
• PAD may not be able to achieve its business objectives if it cannot effectively integrate acquired businesses.
• If PAD’s due diligence investigations of potential acquisition targets are inadequate or if unanticipated risks related to the businesses of such targets materialize, PAD’s future business and financial results may be adversely affected.
• PAD may be required to raise capital or financing in connection with its acquisition activity and it may be unable to do so on attractive terms or at all. Further, any such capital raising or financing could dilute PAD’s stockholders.
• Charges to earnings resulting from acquisitions could have a material adverse effect on PAD’s business, financial position, and results of operations, could cause the market value of its common stock to decline, and subject PAD to other risks.
• PAD’s merger and acquisition activity may not result in efficiencies or synergies that it expects or generate the strategic advantages that it anticipates, and may be more expensive than it anticipates.
• PAD’s business focuses almost exclusively on the aerospace and defense industries and unfavorable developments in those industries could negatively affect its business.
• Reductions in aerospace and defense spending by U.S. and/or foreign governments or corporations could reduce PAD’s revenues.
• PAD’s customer base is highly concentrated in some of its subsidiaries and a substantial portion of its revenues and earnings depends upon the continued willingness of the U.S. Government and other customers in the defense industry to buy its products and solutions; PAD’s inability to diversify its customer base may adversely affect its business.
• PAD is subject to government regulation and its failure to comply with these regulations could cause the government to withdraw, suspend, or revoke PAD’s authorizations and approvals to do business and could subject it to penalties and sanctions that could harm its business.
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• PAD’s subsidiaries’ backlog is subject to reduction and cancellation, which could negatively impact PAD’s projections, revenues, and results of operations.
• PAD’s business could suffer if it is unable to maintain and increase its technological and manufacturing capabilities or develop new products and solutions on a timely basis.
• PAD has generated limited profits to date.
• PAD cannot assure you that its plans to raise capital will be successful.
• The Sponsor, Sponsor HoldCo, FACT’s directors and officers and their affiliates have interests in the Business Combination and the proposals described in this proxy statement/prospectus that are different from, or in addition to and/or in conflict with, those of the FACT Shareholders generally.
• FACT Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that FACT’s current shareholders have on the management of New PAD.
• The ability of the Public Shareholders to exercise redemption rights with respect to a large number of our shares could increase the probability that the Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your Public Shares.
• The FACT Board has not requested, and does not anticipate requesting, an updated opinion from its financial advisor reflecting changes in circumstances that may have occurred since the signing of the Business Combination Agreement.
• FACT may be targeted by securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Business Combination from being completed.
• The completion of the Business Combination is subject to certain closing conditions under the Business Combination Agreement, and any such conditions may not be satisfied on a timely basis, if at all.
• There may not be an active trading market for shares of New PAD Common Stock, which may cause New PAD Common Stock to trade at a discount from their initial trading price and make it difficult to sell any New PAD Common Stock.
• Future sales, or the perception of future sales, by New PAD or its stockholders in the public market could cause the market price for New PAD’s securities to decline.
• The cash payment to the holders of the outstanding shares of PAD Preferred Stock pursuant to the Business Combination Agreement is significant, and such payment could have a material adverse effect on New PAD’s financial health.
• New PAD’s actual financial position and results of operations may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.
• New PAD’s issuance of additional shares of New PAD Common Stock or convertible securities could make it difficult for another company to acquire it, may dilute your ownership of New PAD and could adversely affect its stock price.
• We are currently in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by the current U.S. presidential administration and accompanying regulatory activities and economic policies and events related thereto, ongoing military conflicts and geopolitical instability and inflation and interest rates.
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Market Price, Ticker Symbol and Dividends
FACT
Trading Market of FACT Securities
The FACT Class A Shares are currently listed on Nasdaq under the symbol “FACT.” The FACT Class A Shares commenced trading on Nasdaq on November 26, 2024.
The closing price of the FACT Class A Shares on November 25, 2025 the last trading day before announcement of the execution of the Business Combination Agreement, was $10.38. As of May 1, 2026, the closing price of the FACT Class A Shares was $10.56. Holders of FACT’s securities should obtain current market quotations for the securities. The market price of FACT’s securities could vary at any time prior to the Closing. Market price information regarding the FACT Class B Shares is not provided here because there is no established public trading market for the FACT Class B Shares.
Holders
As of [•], 2026, the Record Date, there were [•] record holders of FACT Class A Shares and [•] record holders of FACT Class B Shares. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose FACT Class A Shares are held of record by banks, brokers and other financial institutions.
Dividends
FACT has not paid any cash dividends to its shareholders to date and does not intend to pay cash dividends prior to the completion of the Business Combination.
PAD
Trading Market of PAD’s Securities
Historical market price information regarding PAD is not provided because there is no public market for its securities.
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RISK FACTORS
You should carefully consider the risks and uncertainties described below and the other information in this proxy statement/prospectus, including our financial statements and related notes appearing elsewhere in this proxy statement/prospectus before deciding whether to invest. Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of these risks occurs. This proxy statement/prospectus also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.
Risks Related to PAD and its Business
Unless the context otherwise requires, all references to “we,” “us,” or “our” in this subsection “Risks Related to PAD and its Business” refer to PAD and its subsidiaries.
Our business model is dependent on acquisitions, mergers, business combinations, joint ventures and/or similar transactions (“M&A Activity”). We may be unable to identify appropriate targets for M&A Activity or to negotiate satisfactory terms with M&A Activity targets.
Our current business strategy includes, in significant part, acquiring additional businesses, product lines, or technologies aimed at expanding or complementing our current business. To achieve these goals, we intend to enter into mergers, business combinations, joint ventures, or similar transactions. We continually evaluate opportunities to expand our business through strategic and complementary acquisitions in the aerospace and defense space, where targets often include niche suppliers with proprietary products. In many cases, we will be competing for these opportunities with third parties that may have substantially greater financial resources than we do.
Identifying suitable acquisition candidates can be difficult, time-consuming and costly, however, and we cannot assure you that we will be able to identify opportunities or complete currently pending M&A Activity on commercially reasonable terms or at all, which would have a material adverse effect on our business, prospectus, and ability to carry out our business plan.
We may not be able to consummate M&A Activity on satisfactory terms or as quickly as we anticipate.
Our ability to grow through M&A Activity, which is currently a major focus of our business plan and strategy, is dependent on several factors, including competition for acquisitions, our access to capital and other resources necessary to consummate acquisitions, and our ability to successfully integrate new business lines and train additional staff, including the staff of an acquired company. There can be no assurance that pending and planned M&A Activity will establish or expand our market presence, or that we will be able to successfully identify suitable acquisition candidates and consummate M&A Activity on favorable terms or as quickly as we expect.
In addition, future M&A Activity could materially and adversely affect our business, financial condition, results of operations, and liquidity. Possible impairment losses on goodwill and intangible assets, or restructuring charges could occur. These risks could have a material adverse effect on the business because they may result in substantial costs to us, disrupt our business, and harm our reputation in the marketplace.
We may not be able to achieve our business objectives if we cannot effectively integrate acquired operations of M&A Activity targets and/or their subsidiaries.
The process of integrating acquired operations into our existing operations has resulted and may continue to, result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing operations. Some of the risks associated with the integration of acquisitions include: potential disruption of our ongoing business; distraction of management; unforeseen claims and liabilities; unforeseen adjustments, taxes, charges, and write-offs; problems enforcing the indemnification obligations of sellers of businesses or joint venture partners for claims and liabilities; unexpected losses of customers of, or suppliers to, the acquired business; difficulty in conforming the acquired business’ standards, processes, procedures, and controls with our operations; variability in financial performance arising from the implementation of acquisition accounting; inability to coordinate new product and process development; loss of senior managers and other critical personnel; and challenges arising from the increased scope, geographic diversity, and complexity of our operations.
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The integration and management of an acquired company or business may strain our resources and technical, financial, and operating systems, especially when aligning disparate quality management systems to comply with industry certifications like AS9100, Federal Aviation Administration (“FAA”) approvals, or DoW standards. In addition, the integration of newly acquired businesses or products can result in significant one-time, or recurring, charges and costs, including transaction fees, due diligence expenses, facility integration, and inventory step-ups, which are likely to require significant capital expenditures or additional debt (the terms of which may not be favorable) to fund such acquisitions and integrations.
Our recent M&A Activity has highlighted the challenges associated with combining companies with different cultures, operating models, and systems. Integrating these businesses into our corporate structure requires substantial resources, time, and effort. For example, the integration of Aerofab necessitated unforeseen investments in outfitting a second location, which delayed the implementation of operations and integration of the Aerofab business. Additionally, implementing consistent cost accounting systems associated with such activity has been, and will continue to be, resource and capital intensive.
While M&A Activity has contributed to improved operating and net margins for PAD, it is important to note that not all acquisitions will necessarily yield immediate or similar financial benefits. Increased expenses associated with integrating acquired businesses, including the implementation of public company reporting requirements, may initially have an adverse impact on financial performance. Furthermore, the fees and expenses related to these acquisitions have significantly increased our consulting expenses, a trend we expect to continue as we pursue additional acquisitions.
If our due diligence investigations of potential M&A Activity targets are inadequate or if unanticipated risks related to the businesses of potential M&A Activity targets materialize, our future business and financial results may be adversely affected.
Due diligence in the aerospace and defense industry is inherently complex and resource-intensive, often requiring specialized audits of export compliance histories, security clearance statuses for key personnel, and backlog analyses of customer contracts with OEMs or prime contractors. Our due diligence may fail to identify all liabilities and risks associated with acquisitions, and we may not accurately assess the relative benefits and detriments of acquisitions and may pay acquisition consideration exceeding the value of the acquired business. Our failure to address these risks or other problems related to past or future acquisitions, investments, or strategic alliances could cause us to fail to realize the anticipated benefits of such transactions, incur unanticipated liabilities, and harm our business generally, any of which could materially and adversely impact our financial results.
We may not satisfactorily consummate pending acquisitions.
In addition to our completed M&A Activity, we have entered into two purchase agreements and a letter of intent related to pending M&A Activity. Our pending M&A Activity introduces additional risks, including the possibility the anticipated transactions will not close on the anticipated terms or timeline, or at all, which could result in wasted resources, opportunity costs, and potential legal disputes. While the signed purchase agreements related to our M&A Activity are subject to customary closing conditions, closing such transactions is still subject to numerous factors outside of our direct control, such as our ability to raise capital sufficient to pay the purchase price.
The letter of intent, while indicative of our intent to pursue this opportunity, is non-binding (except for limited provisions such as exclusivity or confidentiality) and thus carries heightened uncertainty about whether this transaction will ultimately be consummated. Such transaction may fail to progress to a definitive agreement if due diligence uncovers material issues, such as non-compliance with AS9100 quality standards, unresolved disputes over government-funded intellectual property, environmental liabilities at manufacturing facilities, or mismatches in cultural or operational fit that could complicate post-closing integration, or reveals hidden risks like overreliance on a single defense program vulnerable to budget sequestration, any of which could result in management’s decision to abandon the transaction despite deploying significant human capital and financial resources to date.
Moreover, pending acquisitions could strain our financial resources prior to closing, including costs for legal, financial, and technical advisors, as well as potential bridge financing. If consummated, they may amplify the integration risks described elsewhere in this risk factor discussion, such as difficulties in harmonizing IT systems for traceability of aerospace components, aligning with the National Aerospace and Defense Contractors Accreditation Program
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(“NADCAP”) processes, or realizing the anticipated synergies and benefits after integrating the acquired business. Failure to close or integrate these targets successfully could harm our reputation in the industry, deter future M&A Activity and opportunities, and adversely affect our stock price, similar to experiences reported by other aerospace and defense companies like Loar Group Holdings, which has disclosed in its filings the risks of deal terminations due to regulatory interventions in its acquisition pipeline, and Park Aerospace Corp., which has highlighted uncertainties in letters of intent leading to unconsummated transactions amid market volatility.
We cannot assure you that our pending M&A Activity will be completed or, if completed, that such transactions will deliver the expected strategic advantages, such as expanded market share in aftermarket services or enhanced technological capabilities in composite structures, without incurring unforeseen costs or liabilities.
PAD may be required to raise capital or financing in connection with its M&A Activity and it may be unable to do so on attractive terms or at all. Further, any such capital raising or financing could dilute our stockholders.
In addition to the operational and integration challenges associated with our M&A Activity, we face significant financing risks that could materially impact our ability to pursue and complete these transactions, as well as our overall financial condition in the aerospace and defense industry. Securing funding for acquisitions, whether through debt, equity issuances, or other means, is subject to market conditions, interest rate fluctuations, and lender scrutiny, particularly in a capital-intensive sector where investments often involve high upfront costs for specialized manufacturing equipment, regulatory compliance, and technology integration. In addition, the funding for any such M&A Activity could result in material dilution to our existing stockholders. For instance, in a high-interest environment or during periods of constrained credit markets — such as those influenced by economic downturns, inflationary pressures, or geopolitical uncertainties affecting global capital flows — we may be unable to obtain financing on attractive terms or at all, leading to increased borrowing costs, delayed closings, or abandoned opportunities. Additional debt would result in increased expenses and could result in covenants that would restrict our operations and our ability to incur additional debt or engage in other capital-raising activities. We have not made arrangements to obtain additional financing and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow and support our business and respond to business opportunities and challenges could be significantly limited.
Our M&A Activity may subject us to other risks.
M&A Activity and other strategic investments may also involve the following risks and uncertainties, amplified by the aerospace and defense industry’s cyclicality, geopolitical dependencies, and high barriers to entry:
• unanticipated costs and liabilities;
• difficulties in maintaining customer relations;
• the potential loss of key employees of the acquired businesses;
• the diversion of the attention of our senior management from the operation of our daily business;
• the potential adverse effect on our cash position to the extent that we use cash for the purchase price;
• the potential to incur large and immediate write-offs and restructuring and other related expenses; and
• the inability to maintain uniform standards, controls, policies and procedures.
Charges to earnings resulting from acquisitions could have a material adverse effect on our business, financial position, and results of operations and could cause the market value of our common stock to decline.
Under U.S. GAAP business combination accounting standards, we recognize the identifiable assets acquired, the liabilities assumed, and any non-controlling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is measured as the excess amount of consideration transferred, which is also generally measured at fair value, and the net of the acquisition
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date amounts of the identifiable assets acquired and the liabilities assumed. Our estimates of fair value are based upon assumptions we believe to be reasonable but that are inherently uncertain. After we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and cash flows:
• costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee retention, redeployment, or relocation expenses;
• impairment of goodwill or intangible assets, including acquired in-process research and development;
• amortization of intangible assets acquired;
• a reduction in the useful lives of intangible assets acquired;
• identification of or changes to assumed contingent liabilities, including, but not limited to, contingent purchase price consideration, income tax contingencies, and other non-income tax contingencies, after our final determination of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever comes first;
• charges to our operating results to eliminate certain duplicative pre-acquisition activities, to restructure our operations, or to reduce our cost structure; and
• charges to our operating results resulting from expenses incurred to effect the acquisition.
A significant portion of these adjustments could be accounted for as expenses that will decrease our net income and earnings per share for the periods in which those costs are incurred. Such charges could cause a material adverse effect on our business, financial position, and results of operations and could cause the market value of PAD Shares or, after the Closing, the New PAD Common Stock, to decline.
Our M&A Activity may not result in efficiencies or synergies that we expect or generate the strategic advantages that we anticipate, and may be more expensive than we anticipate.
We cannot assure you that we will realize the anticipated benefits of any pending acquisitions, such as expanded market share in aftermarket services or enhanced technological capabilities in composite structures, or in any future acquisitions, such as improved positions on major aircraft platforms or defense programs, given the lengthy qualification cycles that can span years. In addition, our inability to successfully operate and integrate newly acquired businesses appropriately, effectively, and in a timely manner could impair our ability to take advantage of future growth opportunities and other advances in technology, as well as on our revenues, gross margins, and expenses. Further, some acquisition targets may not have a developed business or may be experiencing inefficiencies and incur losses. Additionally, small aerospace and defense contractors that we consider suitable acquisition targets may be uniquely dependent on their prior owners and the loss of such owners’ services following the completion of acquisitions may adversely affect their business. Therefore, we may lose our investment in the event that the acquired businesses do not develop as planned, we cannot retain key employees, or that we are unable to achieve the anticipated cost efficiencies or reduction of losses.
Our business focuses almost exclusively on the aerospace and defense industries and unfavorable developments in those industries could negatively affect our business.
If unexpected global events, such as pandemics, cause a prolonged period of significant market disruption in the aerospace and defense industry, our business may be disproportionately impacted compared to companies that are more diversified in the industries they serve. A more diversified company with significant sales and earnings derived from outside the aerospace and defense sector may be able to recover more quickly from significant market disruptions.
Reductions in aerospace and defense, including homeland security, spending by U.S. and/or foreign governments or corporations could reduce our revenues.
As a significant percentage of our revenue is derived either directly or indirectly from contracts with the U.S. Government, changes in federal government budgetary priorities, in particular, in the aerospace and defense sector, could directly affect our financial performance. A significant decline in government expenditures, a shift of
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expenditures away from programs that we support, or a change in federal government contracting policies could cause federal government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty, or not to exercise options to renew contracts, any of which could result in decreased sales of our products and solutions.
Similarly, we derive revenue either directly or indirectly from contracts with foreign governments. As a result, changes in such government’s budgetary priorities could directly affect our financial performance. A significant decline in foreign government expenditures, a shift of expenditures away from programs that we support, or a change in foreign government contracting policies could cause foreign government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty, or not to exercise options to renew contracts, any of which could result in decreased sales of our products and solutions.
Our customer base is highly concentrated in some of our subsidiaries and a substantial portion of our revenues and earnings depends upon the continued willingness of the U.S. Government and other customers in the defense industry to buy its products and solutions; our inability to diversify our customer base may adversely affect our business.
Our customer base is concentrated in certain of our subsidiaries, which may pose a material risk to our business. Specifically, revenue for Maney is largely derived from Defense Logistics Agency Weapons Support (formerly DLA Aviation), which accounted for approximately 79%, 36%, and 64%, respectively, of its revenues in the first quarter of 2026 and during 2025 and 2024, while V&M Precision’s revenue is highly concentrated with Boeing, representing approximately 53%, 69%, and 95%, respectively, of its revenues during the first quarter of 2026 and in 2025 and 2024.
Although this concentration is a risk factor for these subsidiaries, it is important to note that not all of our subsidiaries face the same level of concentration. For instance, Aerodyn Engineering has a more diversified client base, though its largest client contributed 25%, 21%, and 27%, respectively, of its revenue during the first quarter of 2026 and in 2025 and 2024. Similarly, Aerofab also has a more diversified client base, with its largest client accounting for approximately 8%, 8%, and 4%, respectively, of its revenue during the first quarter of 2026 and in 2025 and 2024.
For PAD on a consolidated basis, our three largest customers accounted for an aggregate of 30.2%, 34.1%, and 47.5%, respectively, of its revenues during the first quarter of 2026 and in 2025 and 2024.
There can be no assurance that these customers will continue to purchase products from us at current levels, that we will retain these relationships, or that we will be able to establish comparable relationships with other customers if one or more of these customers reduces or terminates its business with us. While we are actively working to develop and secure new customer relationships with the goal of reducing dependency on any single customer, there can be no assurance that we will be successful in mitigating our customer concentration risk. If we are unable to attract new customers and diversify our concentrated customer base, the loss of any single customer could materially impact our business operations and cash flows.
If customers are not satisfied with our level of performance or if we otherwise fail to provide the products and services pursuant to customer contracts, we could become subject to litigation and our reputation in the industry may suffer, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
A significant percentage of our business involves fixed-price contracts; those contracts could result in lesser profits or losses if we experience cost overruns.
We have entered into multi-year, fixed-price contracts with many of our customers, pursuant to which we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of delivering the contracted-for products or solutions. This risk is greater in a high inflationary environment. In limited circumstances we accept a fixed-price contract for a product that we have not yet produced, and this increases the risk of cost overruns or delays in the completion of the design and manufacturing of the product. Some of our contracts do not permit us to recover increases in raw material prices, taxes, or labor costs.
Our operating margin is adversely affected when we incur contract costs that we cannot bill to customers. This cost growth can occur if, among other things, estimates to complete a contract increase due to technical challenges or if initial estimates used for calculating the contract price were incorrect. The cost estimation process requires
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significant judgment and expertise. Reasons for cost growth may include unavailability and productivity of labor, the nature and complexity of the work to be performed, the effect of change orders, the availability and cost of materials, tariffs, inflationary pressures, the effect of any delays in performance, availability and timing of funding from the customer, natural disasters, emergency conditions such as pandemics or other crises, and the inability to recover any claims included in the estimates to complete. A significant increase in costs from those estimated and set forth in our fixed-price contracts (that is, cost overruns) could result in a decrease in our revenues or even losses on one or more of these contracts, which could have a material adverse effect on our financial condition or results of operations.
We are subject to government regulation and failure to comply with these regulations could cause the government to withdraw, suspend, or revoke our authorizations and approvals to do business and could subject us to penalties and sanctions that could harm our business.
Our aerospace and defense operations are heavily regulated by U.S. federal agencies, including the Department of State (International Traffic in Arms Regulations (“ITAR”)), Department of Commerce (Export Administration Regulations (“EAR”)), FAA, and DoW (through Federal Acquisition Regulation/Defense Federal Acquisition Regulation Supplement and cybersecurity standards like NIST SP 800-171 and Cybersecurity Maturity Model Certification). These regulations and standards govern export controls, quality management (e.g., AS9100), counterfeit parts prevention, cybersecurity, and government contracting compliance. Due to our work on precision machining, non-destructive testing, and sustainment for defense and aerospace programs, we are subject to stringent oversight. We are also subject to similar oversight of applicable foreign regulatory agencies.
If new and more stringent government regulations are adopted or if industry oversight increases, we might incur significant expenses to comply with any new regulations or heightened industry oversight. In addition, our failure to comply with applicable regulations could result in the government withdrawing, suspending, or revoking our existing material authorizations, which would have a material adverse effect on our business. In addition, changes in these regulations and standards, increased enforcement, or evolving national security policies could adversely affect our ability to win or perform contracts, export products, or operate efficiently.
Failure to obtain approval to export, or a determination by the U.S. Government or similar agencies elsewhere in the world from which we failed to receive required approvals or licenses, could eliminate or restrict our ability to sell our products outside the United States or another country of origin, and the penalties that could be imposed by the U.S. Government or other applicable government for failure to comply with these laws could be significant. Each of these outcomes could have a material adverse effect on our business, prospects, revenues, and operating results.
Our subsidiaries’ backlog is subject to reduction and cancellation, which could negatively impact our projections, revenues, and results of operations.
Our backlog represents the estimated value of expected future sales under existing contracts and purchase orders. Backlog, however, is not necessarily indicative of future revenue to be realized or the timing of such revenue. Production quantities and delivery schedules under existing programs may change, and customers may modify, delay, or cancel orders. In addition, many of our contracts are subject to engineering changes, scope modifications, contract adjustments, or requests for equitable adjustment, which may affect program scope, pricing, or delivery schedules. As a result, the amounts included in backlog may change over time and may not be realized as revenue in the periods we expect or at all. In addition, a portion of our backlog relates to long-term production programs that may extend over several years. These programs are subject to changes in production rates, program requirements, and other factors that may affect the timing and amount of revenue recognized. Backlog amounts may also reflect assumptions regarding production quantities, pricing, contract scope, and other factors that may change over time. Changes in program requirements, production schedules, contract terms, or customer demand could affect our ability to convert backlog into revenue and could adversely affect our revenues and results of operations, and result in our not meeting our projections.
Our business is dependent on the cyclical nature of the military’s requests for quotes.
Our operating results may fluctuate significantly from period to period as a result of a variety of factors, including customer purchasing patterns, competitive pricing, debt service and principal reduction payments, and general economic conditions. There is no assurance that we will be successful in marketing any of our products, or
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that the revenues derived from the sale of such products will be significant. Further, military requests for quotes tend to be seasonal and cyclical, and often driven by the federal government’s budget cycle. Consequently, our revenues may vary by quarter, resulting in fluctuations to our operating results throughout the year.
We rely on short-term orders from our customers.
A variety of conditions, both specific to individual customers and generally affecting the customers’ respective industries, such as fluctuations in defense budgets and government spending priorities, delays or cancellations of major aircraft programs (including commercial jet production ramps or military procurement initiatives), geopolitical tensions (e.g., ongoing conflicts impacting global supply chains and energy prices), supply chain disruptions, economic downturns affecting airline profitability and fleet utilization, pandemics or public health crises leading to reduced flight hours and deferred maintenance, regulatory changes or certification delays, or cyclical downturns in aircraft manufacturing and aftermarket demand, can cause a customer to reduce or delay orders previously anticipated by us, which could materially and adversely impact our business, operating results, financial condition, and cash flows.
While some customers place orders based on long-term pricing agreements, such agreements are typically requirements-based and do not set forth minimum customer purchase obligations, exposing us to sudden variability in demand. Additionally, our customer base is concentrated among a limited number of key aerospace OEMs and Tier 1, 2, and 3 suppliers, the loss of any one or more such major customers, for any reason, could further exacerbate these risks and negatively impact our operations.
As one of our subsidiaries, Aerofab, relies heavily on short-term orders without guaranteed volumes, it must continually communicate with customers to validate forecasts, monitor production backlogs, and anticipate the future volume of purchase orders to mitigate potential inventory obsolescence or underutilization of capacity.
Our customers may require us to undergo a lengthy and expensive qualification process with respect to our products, with no assurance of sales. Any delay or failure in such qualification process could negatively affect our business and operating results.
Our customers frequently require that our products undergo an extensive qualification process, which may include testing for performance, structural integrity, and reliability. The qualification process may be lengthy and, even if completed in a satisfactory manner, does not guarantee any sales of the product to that customer. We devote substantial resources, including design, engineering, sales, marketing and management efforts, and often substantial expense, to qualifying our products with customers in before actually securing any sales. While such products have undergone these qualification processes for existing customers, any delay or failure in qualifying any of our products in the future may preclude or delay sales of such products, which could directly impede our currently anticipated growth assumptions and cause our business and operations to suffer.
International business and export compliance creates inherent risks to our business.
Our business conducts both domestic and international operations and derives a portion of its revenue from international customers. Our international operations are limited and revenue derived from customers outside the United States has historically represented an immaterial portion of our total revenues. While we adhere strictly to applicable export control laws and regulations, including ITAR, and have implemented comprehensive compliance programs with employee training and internal controls to manage export-related risks, several inherent risks remain and cannot be fully mitigated as such risks are outside of our direct control.
International business operations may expose us to risks such as currency fluctuations, which could impact our profitability and financial stability. Geopolitical instability, including conflicts (such as the conflict in Ukraine or the war in Iran) or trade disputes, can disrupt supply chains and affect our ability to conduct business in certain regions. Additionally, changes in trade policies, tariffs, or sanctions could alter the regulatory landscape and negatively impact our operations and market access. Despite these risks, we believe that our broad geographic footprint and internal risk management policies and practices help mitigate such risks. Despite the risks and challenges associated with international operations, PAD’s management views international business as a strategic growth opportunity and believes that PAD could capitalize on the benefits of global expansion while mitigating the associated risks.
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Our business could suffer if we are unable to maintain and increase our technological and manufacturing capabilities or develop new products and solutions on a timely basis.
Our operating results could be negatively affected if we are unable to maintain and increase our technological and manufacturing capabilities or develop new products and solutions on a timely basis, whether through acquisition or development of new products and solutions. Although we believe that we have certain technological and other advantages over our competitors, maintaining such advantages will require continued investment in research and development and sales and marketing initiatives. Our inability to introduce new products and solutions, whether through acquisition or development, could reduce our competitiveness. There can be no assurance that we will be able to make the technological or marketing advances necessary to maintain such competitive advantages or that we will recover the majority of expenses associated therewith.
The industries in which we operate are very competitive.
Our competition comes from other military and industrial aerospace contractors and machine shops. Most contracts that we bid on require us to employ specialized tooling, machines, and training, in addition to obtaining certain approvals, the delays and costs of which must be included in our initial bids. These additional initial costs often add significant costs to any first-time bid in the aerospace industry, which present a natural barrier to competition, especially for small batches, where such initial costs may exceed the cost of the parts themselves.
In addition, there is the possibility that new competitors could imitate our business model and produce competing products and solutions with similar a focus at competitive prices. Additionally, competitors could be better capitalized than we are, which could give them a significant advantage when bidding on new contracts, leading to the possibility that our current and future competitors could capture a significant portion of our current and intended market share.
We are vulnerable to disruptions and shortages in the supply of, and increases in the prices of, certain raw materials.
Our business is vulnerable to disruptions and shortages in the supply of, and increases in the price of, certain raw materials, including aluminum, steel, stainless steel, exotic alloys, plastics, and synthetics, that we use in our manufacturing processes. While we do not have a single supplier for any of these materials, the number of qualified suppliers for certain materials principally used in our manufacture of made-to-order parts is limited. While we have identified alternate suppliers for many of these raw materials, certain raw materials are produced by a relatively small number of suppliers, so our ability to shop for better prices or terms with respect to these necessary materials is somewhat limited. In some cases, substitutes for certain raw materials are not always readily available, and in the past there have been shortages for certain of these materials. Additionally, raw material substitutions for certain aircraft-related products may require approval from government agencies like the FAA, and securing such approvals cannot be guaranteed.
Due to our reliance on a limited number of external suppliers that possess proper approvals and certifications, when there are disruptions in our supply chain (delays in raw material shipments and/or outside processing centers), or if we receive materials that do not meet our quality assurance standards, our ability to timely fulfill contracts and/or ship purchase orders may be hampered. If we are required to seek contract extensions, we risk the deferment of revenue into future months/quarters, resulting in a shortfall of sales projections. These disruptions are difficult to determine or predict due to numerous variables which are outside of our direct control, and the financial impact is dependent on the size of the contract being impacted and whether the customer will agree to an extension or no extension at all.
Furthermore, there are many factors beyond our control that could cause shortages or interruptions in the supply of materials and other products central to our business, including adverse weather events, environmental factors, natural disasters, unanticipated decline in demand, labor or distribution problems, changes in law or policy, raw material safety issues by suppliers and their supply chains, and the financial health of suppliers and their supply chains. Our failure to take adequate steps to mitigate the likelihood or potential effect of such events, or to effectively manage such events if they occur, may materially adversely affect our business, financial condition, and operating results, particularly in circumstances where a material or product is sourced from a single supplier or location. In addition, unexpected delays in deliveries from suppliers or increases in transportation costs (including through increased fuel costs) could materially adversely affect our business, financial condition, and operating results.
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While we consider our relationships with suppliers to be strong, a shortage of materials or a disruption of in the supply chain, regardless of the cause, could materially increase our operating and production costs, and could materially adversely affect our business and results of operations. Likewise, significant increases in the cost of materials we purchase could also materially increase production and operating costs, and could have a material adverse effect on our business and results of operations if we are not able to pass through such increased costs to our customers. If one or more of our suppliers is required to temporarily close its manufacturing facilities, our ability to procure raw materials for our manufacturing processes may become limited, which could ultimately limit our ability to manufacture our products. While we believe, as we continue to acquire businesses, that we will be able to leverage the combined purchasing power and supply chain expertise of our operating companies to mitigate the potential impact of supply chain disruptions and to obtain more favorable terms from suppliers, due to many factors outside of our direct control such results cannot be certain to occur.
We depend upon the experience and expertise of our management team, and the loss of any of these individuals may impair our ability to operate effectively. Additionally, our failure to attract or retain key personnel may have an adverse effect on our business and operating results.
Our business is significantly dependent on our management team, and our success is particularly dependent on our Chief Executive Officer, Brent Borden and our Chief Financial Officer, Kevin Vermeulen II. The loss of Mr. Borden, who is critical to the execution of our business strategy, could significantly disrupt our operations, delay key initiatives, and adversely affect our ability to execute our business strategy effectively. Such a departure may also impact confidence in our business and our ability to attract and retain top talent.
The loss of Mr. Vermeulen could similarly have a material adverse effect on our business, as he is responsible for overseeing our financial strategy, financial reporting, budgeting and forecasting processes, liquidity management, internal controls, and relationships with auditors, lenders, and other financial counterparties. A transition in this role could result in disruptions to our financial operations, delays in financial reporting or compliance matters, and increased costs or management distraction while a replacement is identified and onboarded. In addition, the loss of any other member of our management team could significantly delay or prevent us from achieving our business objectives, which could materially harm our business and customer relationships.
If any of our key employees or directors leave, are unable to work, or fail to perform, or if we are unable to recruit and retain qualified replacements and successfully manage leadership transitions, we may be unable to execute our business strategy and our business, financial condition, and results of operation.
We have generated limited profits to date.
We have generated limited profits to date. Our business model is currently dependent on employing significant upfront costs and services, which directly and negatively impact our gross margins. Coupling this fact with our operating expenses, we have generated de minimis profits to date. We believe that as our business expands and if we are successful in acquiring complementary businesses, our increased size and scale will result in higher gross and net margins; however, such results cannot be guaranteed and depend on many factors that are outside of our direct control.
We cannot assure you that our plans to raise capital will be successful.
As of March 31, 2026, we had a working capital deficit of approximately $38.9 million. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our currently planned operations for approximately five months.
Our ability to continue operations beyond that period is dependent on our ability to raise additional capital, generate additional revenue, reduce expenses, or otherwise obtain additional sources of liquidity. If we are unable to obtain such funding or implement alternative measures on acceptable terms, we may be required to significantly curtail, delay, or discontinue certain operations or initiatives, which could have a material adverse effect on our business, financial condition, and prospects.
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We are subject to a variety of environmental regulations.
Our production processes require the use, storage, treatment, and disposal of certain materials that are considered hazardous under applicable environmental laws and we are subject to a variety of regulatory requirements relating to the handling of such materials and the release of emissions and effluents into the environment. Our failure to comply with such laws and regulations could have a negative impact on our business or results of operations. Other possible developments, such as the enactment or adoption of additional environmental laws and regulations, could result in substantial new and additional costs to us or otherwise result in major changes to our current business model and manufacturing processes, which in turn could negatively impact our business and operations.
PAD may be adversely impacted if it is unable to adequately protect its intellectual property and proprietary interests.
In certain cases, PAD may rely on trade secrets to protect its intellectual property, proprietary technology, and processes. While PAD does not currently hold any patents, trademarks, licenses, franchises, or royalty agreements, we rely on trade secrets as our primary means of protection. There can be no assurances that confidentiality obligations imposed on PAD’s customers and suppliers will be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies, both in order to protect proprietary rights as well as for competitive reasons, even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain due to the rapid development of the principles of law pertaining to this area. PAD is also subject to the risk that other companies may make claims that we infringed on their intellectual property, technology, information, and data, the defense of which could be significant and result in negative impacts to our business, reputation, operations, and cash flows.
Our business and operations may be adversely affected by cybersecurity breaches or other information technology system or network intrusions.
Our business and operations may be adversely affected by cybersecurity breaches, other information technology system or network intrusions, and vulnerabilities within our supply chain.
We depend on information technology and computerized systems to communicate and operate effectively, some of which are connected to networks maintained by third parties that are not under our direct control. We store sensitive data on third-party-managed servers and databases, including proprietary business information, intellectual property, and confidential employee and other personal data pertaining to our business, customers, suppliers, OEMs, employees, and other third parties. While we implement security measures designed to protect such information, we rely in part on the security and operational practices of these third-party service providers, and any failure or breach of their systems could result in unauthorized access to, disclosure of, or loss of such data. Attempts by others to gain unauthorized access to our information technology systems and data have become more frequent and sophisticated. These attempts, which might be related to industrial or foreign government espionage, activism, or other motivations, include covertly introducing malware and “ransomware” to our computers and networks, performing reconnaissance, impersonating authorized users, and stealing, corrupting or restricting our access to data, among other activities.
Additionally, our reliance on third-party products, software, and services within our supply chain exposes us to additional cybersecurity risks. A breach of a supplier or service provider could potentially disrupt our operations, damage our reputation, and result in financial loss.
As with most companies, we have experienced attempts to breach our systems and we have been the target of cybersecurity attacks, none of which has resulted in loss of data or materially affected our business, operations, or financial results. We have addressed past cybersecurity breaches by working with service providers specializing in incident response, risk management, and digital forensics services. In coordination with such service providers, we routinely aim to update our cybersecurity infrastructure, security tools (including firewalls and anti-virus software), and employee training and processes, with the goal of protecting our systems against cybersecurity threats and incidents, and to prevent their recurrence. While our employees have been trained and instructed to detect and investigate such incidents, cybersecurity attacks and other data security breaches can, and are expected to, occur in the future. Despite our concentrated efforts, we may be unable to implement adequate preventive or remediation measures, as breach and disruption techniques change frequently and are generally not detected until after an incident has occurred.
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The unauthorized access to, or use of, our intellectual property, confidential information, customer data, or personal information, or any disruption in the systems that store such information, could materially harm our competitive position, reputation, strategic initiatives, and otherwise reduce the value and expected benefits of our investment in research and development through the loss of trade secrets or other proprietary and competitively sensitive information. Additionally, any such unauthorized access or use of our sensitive information and systems could result in operational disruptions and delays, jeopardize the security of our facilities and information systems, interfere with our ability to access information systems at critical times, and otherwise materially and adversely affect our reputation, business, and financial results.
Any such intrusion may also result in PAD being subject to material fines, penalties, governmental investigations and proceedings, litigation, diminished competitive advantages through reputational damages, and increased operational expenses (including remediation and damage expenses), the impacts of which could be material and significant to us. Many victims of cyber-attacks also are forced to pay significant ransoms or incur significant expenses to recover critical business systems and data. Additionally, we may incur additional costs to comply with data security and cybersecurity protections and standards imposed by our customers or the laws and regulations of countries in which we conduct business. We may be similarly harmed if any of the foregoing incidents occur at third parties that are connected to our networks and that are not under our direct control, the cost of which and impact to us could be significant.
The competitive job market creates a challenge and potential risk as we grow and strive to attract and retain a highly skilled workforce.
The aerospace and defense industry faces intense competition for highly skilled professionals, such as aerospace engineers, certified machinists, non-destructive testing technicians, and avionics specialists, due to a tight labor market. Competitors may offer more attractive financial incentives, such as higher salaries, equity awards, or relocation packages, posing a risk of failing to attract or retain talent with critical security clearances or expertise required for contracts with major OEMs and defense contractors.
The industry also contends with challenges from an aging workforce nearing retirement, limited new talent due to stringent citizenship requirements for sensitive roles, skills gaps in emerging technologies, and potential disruptions from unionized labor. Significant investments in employee training for industry-specific quality standards or proprietary technologies increase their value to competitors, heightening turnover risks. High attrition could lead to costly recruitment, onboarding delays, and productivity losses, potentially disrupting contract timelines or delivery of our products and services. These factors may increase operating costs, reduce margins, hinder our ability to meet customer obligations, and reduce our ability to compete. Additionally, employee turnover can result in significant replacement costs and lost productivity.
Risks Related to FACT and the Business Combination
Unless the context otherwise requires, references in this subsection “Risks Related to FACT and the Business Combination” to “we,” “us,” and “our” generally refer to FACT in the present tense or New PAD from and after the Business Combination.
The Sponsor, Sponsor HoldCo, FACT’s directors and officers and their affiliates have interests in the Business Combination and the proposals described in this proxy statement/prospectus that are different from, or in addition to and/or in conflict with, those of the FACT Shareholders generally.
When you consider the recommendation of the FACT Board in favor of approval of the Business Combination Proposal and the other proposals included herein, you should keep in mind that the Sponsor, Sponsor HoldCo, FACT’s directors and officers and FACT’s Executive Chairman have interests in such proposals that are different from, in addition to and/or in conflict with, those of the FACT Shareholders generally. These interests include, among other things:
• the fact that Sponsor HoldCo holds 5,613,333 Founder Shares that were initially purchased for an aggregate of $25,000 (reflecting the forfeiture of 875,000 Founder Shares by Sponsor HoldCo due to the underwriters’ over-allotment option in connection with FACT’s IPO not being exercised), and such shares will have a significantly higher value at the time of the Business Combination, estimated at approximately $[•] based on the closing price of $[•] per FACT Class A Share on Nasdaq on [•], 2026. FACT estimates that, at the Closing, the Sponsor will hold an aggregate of 3,433,179 shares of New PAD Common Stock issued upon the conversion of such Founder Shares (assuming the 50% Redemptions Scenario), which, if unrestricted and freely tradeable, would be valued at approximately $[•], based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
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• the fact that Sponsor HoldCo may receive additional equity consideration at Closing so that it will hold an aggregate of 3,300,000 shares of New PAD Common Stock immediately following the Closing, and may also receive up to 1,200,000 additional shares of New PAD Common Stock as Sponsor Performance Bonus Shares if specified triggering events occur during the Performance Bonus Period, including securing research coverage for the combined company, the trading price of New PAD Common Stock reaching specified thresholds, and the Trust Account meeting certain minimum balance thresholds following redemptions;
• the fact that each of FACT’s independent directors, its Executive Chairman and its Senior Advisor hold 30,000, 130,000 and 20,000 Founder Shares, respectively, which shares were transferred to such persons by Sponsor HoldCo in connection with their service to FACT, and such shares will have value at the time of the Business Combination, estimated at approximately $[•] based on the closing price of $[•] per FACT Class A Share on Nasdaq on [•], 2026. FACT estimates that, at the Closing, FACT’s independent directors, its Executive Chairman and the Senior Advisor will hold 30,000, 130,000 and 20,000 shares of New PAD Common Stock, respectively, which, if unrestricted and freely tradeable, would be valued at approximately $[•] based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
• the fact that, as a result of the low purchase price paid for the FACT Class B Shares, if the Business Combination is completed, Sponsor HoldCo, FACT’s independent directors, its Executive Chairman and its Senior Advisor are likely to be able to make a substantial profit on their investment in FACT even at a time when the New PAD Common Stock has lost significant value. On the other hand, if the Business Combination is not completed and FACT liquidates without completing another initial business combination, Sponsor HoldCo, FACT’s independent directors, its Executive Chairman and its Senior Advisor would lose their entire investment in FACT;
• the fact that Sponsor HoldCo holds 422,500 FACT Class A Shares (excluding 325,000 restricted FACT Class A Shares, which shares would vest only upon the consummation of our initial business combination), initially purchased for $10.00 per share in the Private Placement, which will then automatically convert at the Effective Time into an equal number of shares of New PAD Common Stock. FACT estimates that, at the Closing, if unrestricted and freely tradeable, such shares would be valued at approximately $[•] based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
• the fact that the Sponsor, Sponsor HoldCo and FACT’s directors and officers who own FACT Ordinary Shares have each waived their right to redeem any FACT Ordinary Shares held by them in connection with the shareholder vote to approve the Business Combination;
• the fact that if FACT were to liquidate rather than complete the Business Combination, the Sponsor and Sponsor HoldCo will lose their entire investment in FACT, which totals approximately $4,425,000 as of the date of this proxy statement/prospectus, comprising the $25,000 purchase price for the FACT Class B Shares and the $4,400,000 purchase price for the FACT Class A Shares purchased by Sponsor and Sponsor HoldCo in the Private Placement, because the Sponsor and Sponsor HoldCo have waived their redemption rights with respect to such shares. The potential loss of this investment may have incentivized the Sponsor, Sponsor HoldCo and their affiliates to pursue the Business Combination on unfavorable terms in order to avoid a liquidation;
• the fact that if the Trust Account is liquidated, including in the event FACT is unable to complete the Business Combination within the completion window, Sponsor HoldCo has agreed that it will be liable to FACT if and to the extent any claims by a third party for services rendered or products sold to FACT, or a prospective target business with which FACT has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable and up to $100,000 of interest to pay dissolution expenses; provided that such obligation will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account (whether or not such waiver is enforceable), any claims by FACT’s independent registered public accounting firm, or any claims under the indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act;
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• the fact that the FACT Articles contain a waiver of the corporate opportunity doctrine, and there could have been business combination targets that would have been appropriate for a combination with FACT but were not offered due to a FACT director’s duties to another entity. FACT does not believe that the waiver of the corporate opportunity doctrine in the FACT Articles interfered with its ability to identify an acquisition target;
• the continued indemnification of former and current directors and officers of FACT, the Sponsor and Sponsor HoldCo and the continuation of directors’ and officer’s liability insurance after the Business Combination;
• the Sponsor, Sponsor HoldCo and FACT’s officers, directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on FACT’s behalf, such as identifying and investigating possible business targets and business combinations. However, if FACT fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, FACT may not be able to reimburse these expenses if the Business Combination with PAD or another business combination is not completed by November 27, 2026. As of the Record Date, the Sponsor, Sponsor Holdco and FACT’s officers, directors and their affiliates had incurred less than $[•] of unpaid reimbursable expenses; and
• the Sponsor, Sponsor HoldCo and FACT’s directors and officers have irrevocably waived the anti-dilution adjustments set forth in the FACT Articles, or any other anti-dilution or similar adjustment rights to which they may otherwise be entitled related to or arising from the Business Combination.
In addition, as a result of multiple business affiliations, our directors and officers have fiduciary, contractual or similar legal obligations to other entities, which may require our directors and officers to present a business combination opportunity to such other entity and only present it to us if such entity rejects the opportunity, subject to their fiduciary duties under Cayman Islands law. We believe, however, that there were no such corporate opportunities presented to our directors and officers that were not presented to FACT, and therefore that our directors’ and officers’ additional fiduciary, contractual, or similar legal obligations to other entities did not impact our search for a business combination target. For more information, see “Information About FACT — Conflicts of Interest.”
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals set forth in this proxy statement/prospectus. The financial and personal interests of the Sponsor, Sponsor HoldCo, as well as FACT’s directors and officers, may have influenced their motivation in identifying and selecting PAD as the Business Combination target, completing the Business Combination with PAD and influencing the operation of the business following the initial business combination. In considering the recommendation of the FACT Board to vote in favor of approval of the proposals set forth in this proxy statement/prospectus, unaffiliated FACT Shareholders should keep in mind that the Sponsor, Sponsor HoldCo and FACT’s directors and officers and entities affiliated with them, have interests in such proposals that are different from, or in addition to, those of unaffiliated FACT Shareholders.
The Sponsor, Sponsor HoldCo and the other FACT Insiders have agreed to vote in favor of the Business Combination and related transactions, regardless of how the Public Shareholders vote.
The Sponsor, Sponsor HoldCo and FACT’s officers and directors have agreed to vote in favor of all the proposals being presented at the EGM, regardless of how the Public Shareholders vote. No consideration has been or will be paid by FACT or PAD to the FACT Insiders in connection with such agreements. As of [•], 2026, the Sponsor, Sponsor HoldCo and the other FACT Insiders collectively owned 6,595,833 FACT Ordinary Shares, which represented 27% of the issued and outstanding FACT Ordinary Shares. The FACT Insiders also may from time to time purchase FACT Class A Shares prior to the Closing.
The Business Combination Proposal, Stock Issuance Proposal, Incentive Plan Proposal, and Adjournment Proposal require approval pursuant to an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. As a result, in addition to Founder Shares and the FACT Ordinary
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Shares held by the FACT Insiders, we would need 5,672,200 shares, or approximately 32.0%, of all the unaffiliated FACT Ordinary Shares to be voted in favor of the Business Combination Proposal, Stock Issuance Proposal, Incentive Plan Proposal, and Adjournment Proposal in order to approve each such proposal, assuming all outstanding FACT Ordinary Shares are present and cast a vote at the EGM. Assuming that only the holders of 12,160,730 of the issued and outstanding FACT Ordinary Shares, representing a quorum under the FACT Articles, vote at the EGM, we will not need any Public Shares in addition to the FACT Ordinary Shares held by FACT Insiders to be voted in favor of the Business Combination Proposal, Stock Issuance Proposal, Incentive Plan Proposal, and Adjournment Proposal in order to approve each such proposal.
Each of the Domestication Proposal and the Charter Proposal requires approval pursuant to a special resolution under Cayman Islands law, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. In respect of the Domestication Proposal only, a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Ordinary Shares will be entitled to one vote for every FACT Class A Ordinary Share held. As a result, in addition to Founder Shares and the FACT Ordinary Shares held by the FACT Insiders, we would need 9,713,646 shares, or approximately 54.8% of all the unaffiliated FACT Ordinary Shares to be voted in favor of the Charter Proposal in order to approve each such proposal, assuming all outstanding FACT Ordinary Shares are present and cast a vote at the EGM. Assuming that only the holders of 12,160,730 of the issued and outstanding FACT Ordinary Shares, representing a quorum under the FACT Articles, vote at the EGM, we will not need any Public Shares in addition to the FACT Ordinary Shares held by FACT Insiders to be voted in favor of the Charter Proposal.
Approval of the Director Election Proposal requires the affirmative vote of a simple majority of the votes cast by the holders of the FACT Class B Shares who, being entitled to do so, vote in person or by proxy at the EGM.
Each of the Advisory Charter Proposals requires approval pursuant to an ordinary resolution on a non-binding advisory basis only, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. As a result, in addition to Founder Shares and the FACT Ordinary Shares held by the FACT Insiders, we would need 1,701,660 shares, or approximately 9.6%, of all the unaffiliated FACT Ordinary Shares to be voted in favor of each of the Advisory Charter Proposals in order to approve each such proposal, assuming all outstanding FACT Ordinary Shares are present and cast a vote at the EGM. Assuming that only the holders of 12,160,730 of the issued and outstanding FACT Ordinary Shares, representing a quorum under the FACT Articles, vote at the EGM, we will not need any Public Shares in addition to the FACT Ordinary Shares held by FACT Insiders to be voted in favor of the Advisory Charter Proposals in order to approve each such proposal.
Past performance by our management team and their affiliates may not be indicative of future performance of an investment in us or in the future performance of the post-Business Combination entity.
Information regarding performance by, or businesses associated with, our management team or businesses associated with them is presented for informational purposes only. Past performance by our management team, including with respect to Freedom Acquisition I Corp., is not a guarantee of success with respect to the Business Combination with PAD. You should not rely on the historical record of the performance of our management team or businesses associated with them as indicative of our future performance of an investment in FACT or New PAD or the returns we will, or are likely to, generate going forward.
PAD’s financial projections presented in this proxy statement/prospectus represent management’s current estimates and are based on certain assumptions that may prove incorrect, and actual results could differ materially from such projections.
The projections for PAD presented in this proxy statement/prospectus are forward-looking and reflect assumptions about PAD’s acquisitions, revenues, expenses, and EBITDA margin, as well as certain general macroeconomic and industry assumptions, all of which are inherently uncertain and many of which are beyond the control of PAD and FACT. If any of these differ from PAD’s assumptions, then the projections may be materially and adversely affected.
In addition:
• The acquisition process with respect to some of the companies included within PAD’s fiscal year 2026 pro forma projections has not yet been completed, and may not be completed in 2026, or ever; and
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• The due diligence process with respect to some of the companies included within PAD’s fiscal year 2026 pro forma projections may result in the discovery of unanticipated risks and liabilities. Accordingly, the financial results that are forecasted in PAD’s financial projections may prove to be inaccurate and you should not rely upon them as an indicator of actual past or future results.
Moreover, the Initial Projections (as defined below) were prepared for use by the FACT Board and ERShares, and were the only projections used by the FACT Board. The March Projections (as defined below) were prepared by PAD for use by investors and ERShares. Accordingly, the Initial Projections provided to the FACT Board are no longer fully reflective of PAD Management’s future expected performance. There can be no assurance that the March Projections will be realized. For more information, see “Proposal No. 1 — The Business Combination Proposal — Financial Projections.”
FACT Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that FACT’s current shareholders have on the management of New PAD.
Under the Business Combination Agreement, the number of shares of New PAD Common Stock to be issued to PAD Stockholders in connection with the Merger is estimated to be approximately 41.8% of the issued and outstanding shares of New PAD Common Stock immediately following the consummation of the Business Combination, assuming the 50% Redemptions Scenario. Therefore, FACT Shareholders will experience immediate dilution. Currently, the Public Shareholders own approximately 72.0% of the issued and outstanding FACT Ordinary Shares. As described in more detail below, assuming the 50% Redemptions Scenario and a Redemption Price of approximately $10.59 per share (estimated using an assumed Closing Date of March 31, 2026), and without giving effect to any dilutive instruments, such as the exercise of the New PAD Options, it is expected that immediately after the consummation of the Business Combination, the Public Shareholders will hold approximately 24.5% of the issued and outstanding New PAD Common Stock.
The ability of the Public Shareholders to exercise redemption rights with respect to a large number of our shares could increase the probability that the Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your Public Shares.
The Business Combination Agreement requires us to have at least $75.0 million of cash at the Closing (after deducting certain transaction expenses). We do not know how many Public Shareholders may exercise their redemption rights. If a larger number of Public Shares are submitted for redemption than we initially expected, including as a result of redemptions of Public Shares, and the Minimum FACT Cash Amount is not met, PAD may elect not to consummate the Business Combination. If the Business Combination is unsuccessful, you would not receive your pro rata portion of the funds in the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with your exercise of redemption rights until we liquidate or you are able to sell your shares in the open market.
The Sponsor, Sponsor HoldCo and other FACT Insiders may elect to purchase shares from Public Shareholders, which may influence a vote on the Business Combination and reduce the public “float” of the FACT Class A Shares.
At any time prior to the EGM, subject to applicable securities laws (including with respect to material non-public information), the FACT Insiders or their affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of the Business Combination or not redeem their Public Shares. However, the FACT Insiders and their affiliates have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares in such transactions.
The purpose of any such transactions could be to increase the likelihood of obtaining shareholder approval of the Business Combination or satisfy the Minimum FACT Cash Amount if it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of the Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our shares may be reduced and the number of beneficial holders of our shares may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our shares on a national securities exchange. Any such purchases will be reported pursuant to
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Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. Additionally, in the event the FACT Insiders or their affiliates were to purchase Public Shares from Public Shareholders, such purchases would be structured in compliance with the requirements of Rule 14e-5 under the Exchange Act including, in pertinent part, through adherence to the following:
• if the FACT Insiders or their affiliates were to purchase Public Shares from Public Shareholders, they would do so at a price no higher than the Redemption Price;
• the FACT Insiders and their affiliates would not possess any redemption rights with respect to the Public Shares or, if they do acquire and possess redemption rights, they would waive such rights; and
• we would disclose in a Form 8-K, before the EGM to approve the Business Combination, the following material items:
• the amount of the Public Shares purchased outside of the redemption offer by the FACT Insiders or their affiliates, along with the purchase price;
• the purpose of the purchases by the FACT Insiders or their affiliates;
• the impact, if any, of the purchases by the FACT Insiders or their affiliates on the likelihood that the Business Combination will be approved;
• the identities of our security holders who sold to the FACT Insiders or their affiliates (if not purchased on the open market) or the nature of our security holders (e.g., 5% security holders) who sold to the FACT Insiders or their affiliates; and
• the number of the Public Shares for which we have received redemption requests pursuant to our redemption offer.
If a shareholder fails to receive notice of our offer to redeem the Public Shares in connection with the Business Combination, or fails to comply with the procedures for submitting or tendering its shares, such shares may not be redeemed.
If a shareholder fails to receive our proxy materials, such shareholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials that we will furnish to Public Shareholders in connection with the Business Combination will describe the various procedures that must be complied with in order to validly tender or submit Public Shares for redemption. For example, in this proxy statement/prospectus, we require the Public Shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to deliver their shares to Odyssey electronically prior to the date set forth in the proxy materials, which is two business days prior to the scheduled vote on the proposal to approve the Business Combination. In addition, we require a Public Shareholder seeking redemption of his, her or its Public Shares to also submit a written request for redemption to Odyssey two business days prior to the scheduled vote in which the name of the beneficial owner of such shares is included. In the event that a shareholder fails to comply with these or any other procedures disclosed in the proxy statement/prospectus, its shares may not be redeemed.
Public Shareholders may not know prior to the redemption deadline or prior to the EGM whether the Minimum FACT Cash Amount is satisfied.
If FACT receives valid redemption requests from holders of Public Shares prior to the redemption deadline, FACT may, at its sole discretion, following the redemption deadline and until the Closing Date, seek and permit withdrawals by one or more of such holders of their redemption requests. FACT may select which holders to seek such withdrawals of redemption requests from based on any factors FACT may deem relevant and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where FACT otherwise would not satisfy the Minimum FACT Cash Amount. There may be a period of time after the EGM and before the Closing when shareholders do not know whether this closing condition is satisfied. Accordingly, Public Shareholders may be required to make redemption and voting decisions without knowing whether all of the conditions to closing the Business Combination will be satisfied.
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A Public Shareholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account may not put such shareholder in a better future economic position.
The price at which a shareholder may be able to sell his, her or its shares of New PAD Common Stock in the future following the completion of the Business Combination is not determinable as of the date of this proxy statement/prospectus. Certain events following the consummation of the Business Combination may cause an increase in New PAD’s share price and may result in a lower value realized now than a Public Shareholder might realize in the future had the shareholder redeemed their Public Shares. Similarly, if a Public Shareholder does not redeem their Public Shares, the shareholder will bear the risk of ownership of New PAD Common Stock after the consummation of the Business Combination, and a shareholder may not be able to sell his, her or its shares of New PAD Common Stock in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. A Public Shareholder should consult, and rely solely upon, the shareholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.
If you, together with any affiliate or any other person with whom you are acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, are deemed to hold in excess of 15% of the issued and outstanding Public Shares, you will lose the ability to redeem all such shares in excess of 15% of the issued and outstanding Public Shares.
The FACT Articles provide that a Public Shareholder, together with any affiliate or any other person with whom he, she or it is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will be restricted from seeking redemption with respect to more than 15% of the issued and outstanding Public Shares, which we refer to as the “Excess Shares.” However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against the Business Combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete the Business Combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete the Business Combination.
If the net proceeds of the IPO and the Private Placement not being held in the Trust Account are insufficient to allow us to operate until the completion of the Business Combination, we will depend on loans from the Sponsor, Sponsor HoldCo or the management team to complete the Business Combination.
$[•] was available to us outside of the Trust Account, as of [•], 2026, to fund our working capital requirements. While we believe that the funds available to us outside of the Trust Account will be sufficient to allow us to operate until at least the completion of the Business Combination, we cannot assure you that our estimate is accurate.
None of the Sponsor, Sponsor HoldCo, members of our management team or any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to us upon the Closing. Such shares would be identical to the FACT Class A Shares purchased in the Private Placement. Prior to the Closing, we do not expect to seek loans from parties other than the Sponsor, Sponsor HoldCo or an affiliate of the Sponsor or Sponsor HoldCo, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. If we are unable to complete the Business Combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. Consequently, the Public Shareholders may only receive an estimated $10.00 per share, or possibly less, on our redemption of the Public Shares.
The net cash available to New PAD from the Trust Account in respect of each Public Share that is not redeemed will be materially less than the price per share ascribed in the Business Combination Agreement to the New PAD Common Stock to be issued to PAD Stockholders.
In recent litigation following the closing of other “deSPAC” transactions, plaintiffs have alleged that it was a material omission for the SPAC not to have disclosed in its proxy statement/prospectus that the “net cash per public share” of the SPAC was materially below the price per share ascribed to the combined company’s shares to be issued to the target shareholders in the business combination. While such litigation has been brought against Delaware SPACs in Delaware courts (and FACT is a Cayman Islands exempted company), and without acknowledging the relevance
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of the net cash per share information or the merits of any such claim, Public Shareholders should be aware that the net cash available to New PAD from the Trust Account in respect of each Public Share that is not redeemed will be materially less than the assumed approximately $[•] per share ascribed in the Business Combination Agreement to the New PAD Common Stock to be issued to PAD Stockholders (which is equal to the assumed Redemption Price for the Public Shares estimated using an assumed Closing Date of [•], 2026) due to expenses attributable to FACT and PAD and dilution from the Founder Shares that will remain outstanding upon the Closing.
If we are unable to consummate the Business Combination within the completion window, the Public Shareholders may be forced to wait beyond the end of the completion window before redemption from the Trust Account.
If we are unable to complete the Business Combination within the completion window, the proceeds then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less taxes payable and up to $100,000 of interest to pay dissolution expenses), will be used to fund the redemption of the Public Shares, as further described herein. Any redemption of Public Shareholders from the Trust Account will be effected automatically by function of the FACT Articles prior to any voluntary winding up. If we are required to wind-up, liquidate the Trust Account and distribute such amount therein, pro rata, to the Public Shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the Cayman Companies Act. In that case, investors may be forced to wait beyond the end of the completion window before the redemption proceeds of the Trust Account become available to them, and they receive the return of their pro rata portion of the proceeds from the Trust Account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we consummate the Business Combination prior thereto and only then in cases where investors have sought to redeem their FACT Class A Shares. Only upon our redemption or any liquidation will Public Shareholders be entitled to distributions if we are unable to complete the Business Combination.
There is substantial doubt regarding our ability to continue as a “going concern.”
In connection with our assessment of going concern considerations in accordance with FASB ASC 205-40, “Basis of Presentation — Going Concern,” our management has determined that if FACT is unable to complete an initial business combination by November 27, 2026, then FACT will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about FACT’s ability to continue as a going concern. Management plans to consummate the Business Combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should FACT be required to liquidate after November 27, 2026. Accordingly, our management has determined that the mandatory liquidation, should the Business Combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete the Business Combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
• restrictions on the nature of our investments; and
• restrictions on the issuance of securities, each of which may make it difficult for us to complete the Business Combination.
In addition, we may have imposed upon us burdensome requirements, including:
• registration as an investment company with the SEC;
• adoption of a specific form of corporate structure; and
• reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.
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In order not to be regulated as an investment company under the Investment Company Act, unless it can qualify for an exclusion, a company must ensure that it is engaged primarily in a business other than investing, reinvesting or trading of securities and that its activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business is to identify and complete a business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
The SEC recently provided guidance that the determination of whether a SPAC, like us, is an “investment company” under the Investment Company Act is a facts and circumstances determination requiring individualized analysis and depends on a variety of factors, including a SPAC’s duration, asset composition, business purpose and activities, and “is a question of facts and circumstances” requiring individualized analysis. When applying these factors to us we do not believe that our principal activities will subject us to being an investment company as defined in the Investment Company Act. To this end, FACT was incorporated for the purpose of completing an initial business combination with one or more businesses, such as the Business Combination with PAD. Since our inception, our business has been and will continue to be focused on identifying and completing an initial business combination, and thereafter, operating the post-transaction business or assets for the long term. Further, we do not plan to buy businesses or assets with a view to resale or profit from their resale and we do not plan to buy unrelated businesses or assets or to be a passive investor. In addition, the proceeds held in the Trust Account were invested in United States “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government treasury obligations. By restricting the investment of the proceeds of the IPO in this manner, and by focusing our directors’ and officers’ time toward, and operating our business for the purpose of, acquiring and growing businesses for the long term (rather than buying and selling businesses in the manner of a merchant bank or private equity fund or investing in assets for the purpose of achieving investment returns on such assets), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. Further, investing in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities. Instead, the Trust Account is intended as a holding place for funds pending the earliest to occur of either: (i) the completion of our initial business combination; (ii) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend the FACT Articles (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of the Public Shares if we do not complete our initial business combination within the completion window or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity; or (iii) absent an initial business combination within the completion window, our return of the funds held in the Trust Account to the Public Shareholders as part of our redemption of the Public Shares. If we do not invest the proceeds as described above, we may be deemed to be subject to the Investment Company Act.
If we were deemed to be an investment company for purposes of the Investment Company Act, we would need to register as such under and comply with the requirements set forth pursuant to the Investment Company Act. Compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete the Business Combination. We may also be forced to abandon our efforts to complete the Business Combination and instead be required to liquidate the Trust Account. In which case, our investors would not be able to realize the benefits of owning shares in a successor operating business, including the potential appreciation in the value of our securities following the Business Combination, and our warrants would expire worthless. For illustrative purposes, in connection with the liquidation of the Trust Account, the Public Shareholders may receive only approximately $[•] per Public Share, which is based on an assumed Closing Date of [•], 2026, or less in certain circumstances. Further, under the subjective test of an “investment company” pursuant to Section 3(a)(1)(A) of the Investment Company Act, even if the funds deposited in the Trust Account were invested in the assets discussed above, there is a risk that we could be deemed an investment company and subject to the Investment Company Act based on the length of time such funds are invested in such assets.
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To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of securities in the Trust Account, the interest earned on the funds held in the Trust Account may be materially reduced, which would reduce the dollar amount that the Public Shareholders would receive upon any redemption or liquidation of FACT.
We intend to initially hold the funds in the Trust Account as cash or in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. U.S. government treasury obligations are considered “securities” for purposes of the Investment Company Act, while cash is not. As noted above, one of the factors that the SEC identified as relevant to the determination of whether a SPAC that holds securities could potentially be deemed an “investment company” under the Investment Company Act is the SPAC’s duration. To mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, instruct Odyssey, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash until the earlier of consummation of the our initial business combination or our liquidation. Following such liquidation, the rate of interest we receive on the funds held in the Trust Account may be materially decreased. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the Trust Account and thereafter to hold all funds in the Trust Account in cash would reduce the dollar amount that the Public Shareholders would receive upon any redemption or liquidation of FACT.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to complete the Business Combination, and results of operations.
We are subject to rules and regulations by various national, regional and local governing bodies, including, for example, the SEC, and to new and evolving regulatory measures under applicable law. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly and our efforts to comply with such new and evolving laws and regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention. In addition, these changes could have a material adverse effect on our business, investments and results of operations.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. For example, on January 24, 2024, the SEC issued final rules and guidance relating to SPACs, like us, regarding, among other things: disclosure in SEC filings in connection with initial business combination transactions; the financial statement requirements applicable to transactions involving shell companies; the use of financial projections in SEC filings in connection with proposed initial business combination transactions; and the potential liability of certain participants in proposed initial business combination transactions. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. A failure to comply with applicable laws or regulations and any subsequent changes, as interpreted and applied, could have a material adverse effect on our business, including our ability to complete the Business Combination.
You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your Public Shares, potentially at a loss.
The Public Shareholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of (i) our completion of the Business Combination, and then only in connection with those FACT Class A Shares that such shareholder properly elected to redeem, subject to the limitations and on the conditions described herein, (ii) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend the FACT Articles (A) to modify the substance or timing of our obligation to allow redemption in connection with a business combination or to redeem 100% of the Public Shares if we do not complete a business combination within the completion window or (B) with respect to any other material provisions relating to shareholders’ rights or pre-Closing activity, and (iii) the redemption of the Public Shares if we are unable to complete a business combination within the completion window, subject to applicable law and as further described herein. In no other circumstances will a Public Shareholder have any right or interest of any kind in the Trust Account. Accordingly, to liquidate your investment, you may be forced to sell your Public Shares, potentially at a loss.
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We intend to issue additional shares pursuant to the New PAD Incentive Plan after the Closing. We may also issue additional FACT Class A Shares or preference shares to complete the Business Combination. Any such issuances would dilute the interest of our shareholders and likely present other risks.
The FACT Articles authorize the issuance of up to 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares, and 1,000,000 preference shares. As of December 12, 2025, there are 181,511,875 and 14,166,667 authorized but unissued FACT Class A Shares and FACT Class B Shares, respectively, available for issuance, which amounts do not take into account FACT Class A Shares issuable upon conversion of the FACT Class B Shares. Pursuant to the FACT Articles, immediately prior to the Domestication, the holders of the FACT Class B Shares will voluntarily convert each FACT Class B Share on a one-for-one basis into one FACT Class A Share. There are no preference shares issued and outstanding.
We intend to issue additional shares pursuant to the New PAD Incentive Plan after the Closing. We may also issue additional FACT Class A Shares or preference shares to complete the Business Combination. However, the FACT Articles provide, among other things, that prior to the Business Combination, we may not, other than in connection with the conversion of FACT Class B Shares to FACT Class A Shares pursuant to the FACT Articles, issue additional shares that would entitle the holders thereof to (i) receive funds from the Trust Account or (ii) vote on any initial business combination. These provisions of the FACT Articles, like all provisions of the FACT Articles, may be amended with a shareholder vote. The issuance of additional ordinary or preference shares:
• may significantly dilute the equity interest of investors in the IPO;
• may subordinate the rights of holders of FACT Class A Shares if preference shares are issued with rights senior to those afforded the FACT Class A Shares;
• could cause a change in control if a substantial number of FACT Class A Shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
• may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and
• may adversely affect prevailing market prices for the FACT Class A Shares.
The FACT Board has not requested, and does not anticipate requesting, an updated opinion from its financial advisor reflecting changes in circumstances that may have occurred since the signing of the Business Combination Agreement.
On November 23, 2025, ERShares delivered its oral opinion, which it subsequently confirmed in writing, to the FACT Board that, as of that date and based upon and subject to the assumptions and other matters described in the written opinion, the Transaction Consideration to be paid by FACT in the Merger pursuant to the Business Combination Agreement was fair, from a financial point of view, to all FACT Shareholders (and not any particular group or class thereof). FACT does not intend to obtain an updated opinion from ERShares prior to the consummation of the Business Combination. Changes in the proposed operations and prospects of PAD, general market and economic conditions and other factors that may be beyond the control of FACT or PAD may alter the value of FACT or PAD or the price of FACT’s shares by the time the Business Combination is completed. ERShares’ opinion speaks as of the date it was rendered, and does not speak as of any other date, and as such, ERShares’ opinion does not address the fairness of the Transaction Consideration, from a financial point of view, as of any date other than the date of such opinion, including at the time the Business Combination is completed.
For a description of the opinion, see “Proposal No. 1 — The Business Combination Proposal — Opinion of EntrepreneurShares LLC.” A copy of ERShares’ opinion, which sets forth the assumptions made, procedures followed, matters considered, and qualifications and limitations on and scope of the review undertaken by ERShares, is attached hereto as Annex K.
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We may issue notes or other debt securities, or otherwise incur substantial debt, to complete the Business Combination, subject to PAD’s consent, which may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us.
Although we have no commitments as of the date of this proxy statement/prospectus to issue any notes or other debt securities, or to otherwise incur outstanding debt following the IPO, we may choose to incur substantial debt to complete the Business Combination, subject to PAD’s consent, pursuant to the covenants set forth in the Business Combination Agreement. The incurrence of debt could have a variety of negative effects, including:
• default and foreclosure on our assets if our operating revenues after the Business Combination are insufficient to repay our debt obligations;
• acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
• our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
• using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
• limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete the Business Combination with which a substantial majority of our shareholders do not agree.
The FACT Articles do not provide a specified maximum redemption threshold. The Business Combination Agreement includes a Minimum FACT Cash Amount and, while we expect such condition to be met, it may be waived by PAD prior to the Closing. As a result, we may be able to complete the Business Combination even though a substantial majority of the Public Shareholders do not agree with the Business Combination and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to the Sponsor, Sponsor HoldCo and other FACT Insiders. In the event that the aggregate cash consideration we would be required to pay for all FACT Class A Shares that are validly submitted for redemption plus the FACT Closing Cash exceed the aggregate amount of cash available to us, unless PAD waives the Minimum FACT Cash Amount, we will not complete the Business Combination or redeem any shares, all FACT Class A Shares submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
In order to effectuate an initial business combination, SPACs have, in the recent past, amended various provisions of their charters and other governing instruments. We cannot assure you that we will not seek to amend the FACT Articles or governing instruments in a manner that will make it easier for us to complete an initial business combination, including the Business Combination, that some of our shareholders may not support.
In order to effectuate a business combination, SPACs have, in the recent past, amended various provisions of their charters and governing instruments. For example, SPACs have amended the definition of “business combination” thereunder, increased redemption thresholds and extended the time to consummate an initial business combination. Amending the FACT Articles requires a special resolution under Cayman Islands law, which requires the affirmative
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vote of at least two-thirds of the votes cast by the shareholders of the issued and outstanding shares present in person or represented by proxy and entitled to vote on such matter at a general meeting of FACT, and vote at the general meeting. In addition, the FACT Articles requires us to provide the Public Shareholders with the opportunity to redeem their Public Shares for cash if we propose an amendment to the FACT Articles (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of the Public Shares if we do not complete an initial business combination within the completion window or (ii) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity. To the extent that any of such amendments would be deemed to fundamentally change the nature of the securities offered through the registration statement filed in connection with the IPO, we would register, or seek an exemption from registration for, the affected securities. We cannot assure you that we will not seek to amend the FACT Articles or extend the time to consummate an initial business combination in order to effectuate our initial business combination.
We may be unable to obtain additional financing to complete the Business Combination or to fund the operations and growth of PAD, which could compel us to restructure or abandon the Business Combination.
If the funds retained in the Trust Account, net of redemptions, are not sufficient to meet the Minimum FACT Cash Amount, and if PAD waives the Minimum FACT Cash Amount, New PAD could be required to make adjustments to its business plans in light of available capital resources. For example, New PAD could elect not to pursue or to delay some of PAD’s current strategic objectives and pending acquisitions or may be required to raise additional capital earlier than anticipated. We cannot assure you that such financing will be available on acceptable terms, if at all. If we are unable to complete the Business Combination, the Public Shareholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to Public Shareholders. None of our officers, directors or shareholders is required to provide any financing to us in connection with or after the Business Combination.
We may not be able to complete the Business Combination as such initial business combination may be subject to regulatory review and approval requirement, including foreign investment regulations and review by government entities such as the Committee on Foreign Investment in the United States (“CFIUS”), or may be ultimately prohibited.
Sponsor and Sponsor HoldCo are incorporated in the Cayman Islands. The Sponsor is the managing member of Sponsor HoldCo. The members of the Sponsor are our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Messrs. Lee and Nespola, Jr. are U.S. citizens, and Messrs. Gishen and Wagman are British citizens. Investment and voting decisions of the Sponsor are made by the FACT Board, which is currently comprised of the four member managers. Each manager has one vote on all matters submitted to the FACT Board and with respect to any matter before the FACT Board, the act of a majority of the managers present shall be the act of the FACT Board. With respect to any action taken by the FACT Board without a meeting, such action requires the written consent of all the managers. Neither Mr. Gishen nor Mr. Wagman individually or collectively control the Sponsor.
The Business Combination may be subject to regulatory review and approval requirements by governmental entities, or ultimately prohibited. For example, CFIUS has authority to review direct or indirect foreign investments in U.S. companies. Among other things, CFIUS is empowered to require certain foreign investors to make mandatory filings, to charge filing fees related to such filings, and to self-initiate national security reviews of foreign direct and indirect investments in U.S. companies if the parties choose not to file voluntarily. If CFIUS determines that an investment subject to its jurisdiction presents national security risks, CFIUS has the power to require mitigation measures on the investment or can recommend that the President prohibit it or order divestment. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, the nationality of the parties, the level of beneficial ownership interest and the nature of any information or governance rights involved. For example, investments that result in “control” of a U.S. business by a foreign person always are subject to CFIUS jurisdiction. CFIUS’s expanded jurisdiction under the Foreign Investment Risk Review Modernization Act of 2018 and its implementing regulations that became effective on February 13, 2020, further includes investments that do not result in control of a U.S. business by a foreign person but afford foreign investors certain information or governance rights in certain U.S. businesses that have a nexus to “critical technologies,” “critical infrastructure” and/or “sensitive personal data”.
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It is possible that non-U.S. persons could be involved in the Business Combination or another initial business combination (e.g., as existing shareholders of a target company or as private placement equity investors), which may increase the risk that our initial business combination becomes subject to regulatory review, including review by CFIUS. If the Business Combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing the Business Combination. If CFIUS were to review the Business Combination, CFIUS may decide to block or delay the Business Combination, impose conditions with respect to the Business Combination, recommend that the President of the United States order us to divest all or a portion of PAD that we acquired without first obtaining CFIUS approval, or impose penalties if CFIUS believes that a mandatory notification requirement applied and was not met. In addition, certain federally licensed businesses may be subject to rules or regulations that limit foreign ownership.
The process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete a business combination, our failure to obtain any required approvals within the completion window may require us to liquidate. If we are unable to consummate a business combination within the completion window, including as a result of extended regulatory review of the business combination, we will (i) cease all operations except for the purpose of winding-up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares for a pro rata portion of the funds held in the Trust Account, subject to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law, and (iii) following such redemption, liquidate and dissolve. In such event, our shareholders will miss the opportunity to benefit from an investment in a target company and the appreciation in value of such investment. Additionally, the FACT Warrants may expire worthless.
FACT and PAD will incur significant transaction and transition costs in connection with the Business Combination.
FACT and PAD have both incurred and expect to continue to incur significant, non-recurring costs in connection with consummating the Business Combination, and New PAD will experience recurring costs related to operating as a public company following the consummation of the Business Combination. New PAD may also incur additional costs to retain key employees. All expenses incurred in connection with the Business Combination Agreement and the Business Combination, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs.
FACT may be targeted by securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Business Combination from being completed.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on FACT’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Business Combination, then that injunction may delay or prevent the Business Combination from being completed or from being completed within the expected time frame, which may adversely affect FACT’s and PAD’s respective businesses, financial condition and results of operation.
If the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of FACT Class A Shares and/or shares of New PAD Common Stock may decline.
If the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of FACT Class A Shares prior to the Closing may decline. The market values of these securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement/prospectus, or the date on which FACT Shareholders vote on the Business Combination. Because the number of shares to be issued pursuant to the Business Combination Agreement is set forth in the Business Combination Agreement and will not be adjusted to reflect any changes in the market price of FACT Class A Shares, the market value of the shares of New PAD Common Stock issued in the Business Combination may be higher or lower than the values of these shares on earlier dates.
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In addition, following the Business Combination, the New PAD Common Stock will not have any redemption rights like the Public Shares had and fluctuations in the price of New PAD Common Stock could contribute to the loss of all or part of your investment. The trading price of New PAD Common Stock following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond FACT’s, PAD’s, or New PAD’s control. Inflationary pressures, increases in interest rates and other adverse economic and market forces may contribute to potential downward pressures in market value of FACT Class A Shares and New PAD Common Stock. Additionally, any of the risk factors discussed in this proxy statement/prospectus could have a material adverse effect on your investment in FACT Class A Shares and New PAD Common Stock, and such securities may trade at prices significantly below the price that you paid for them. In such circumstances, the trading price of FACT Class A Shares or New PAD Common Stock may not recover and may experience a further decline.
Broad market and industry factors may materially harm the market price of New PAD Common Stock irrespective of New PAD’s operating performance. The stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your securities at or above the price at which you acquired them. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to New PAD could depress New PAD’s share price regardless of New PAD’s business, prospects, financial conditions or results of operations. A decline in the market price of New PAD’s securities also could adversely affect New PAD’s ability to issue additional securities and, therefore, New PAD’s acquire additional entities in accordance with PAD’s business plan, as well as New PAD’s ability to obtain additional financing in the future.
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $10.00 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will consider whether competitive alternatives are reasonably available to us and will only enter into an agreement with such third party if management believes that such third party’s engagement would be in the best interests of FACT under the circumstances. WithumSmith+Brown, PC, our independent registered public accounting firm, and the underwriters of the IPO will not execute agreements with us waiving such claims to the monies held in the Trust Account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if we are unable to complete the Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by Public Shareholders could be less than the $10.00 per Public Share initially held in the Trust Account, due to claims of such creditors. Pursuant to the Letter Agreement, Sponsor HoldCo has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us (except for FACT’s independent auditors), or a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in
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the value of the trust assets, less taxes payable and up to $100,000 of interest to pay dissolution expenses; provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, we have not asked Sponsor HoldCo to reserve for such indemnification obligations, nor have we independently verified whether Sponsor HoldCo has sufficient funds to satisfy its indemnity obligations and we believe that Sponsor HoldCo’s only assets are securities of FACT. Therefore, we cannot assure you that Sponsor HoldCo would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Business Combination and redemptions could be reduced to less than $10.00 per Public Share. In such event, we may not be able to complete the Business Combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of Sponsor HoldCo, resulting in a reduction in the amount of funds in the Trust Account available for distribution to the Public Shareholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per Public Share due to reductions in the value of the trust assets, in each case less taxes payable, and Sponsor HoldCo asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against Sponsor HoldCo to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against Sponsor HoldCo to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to the Public Shareholders may be reduced below $10.00 per Public Share.
The completion of the Business Combination is subject to certain closing conditions under the Business Combination Agreement, and any such conditions may not be satisfied on a timely basis, if at all.
The completion of the Business Combination is subject to a number of conditions, including those in the Business Combination Agreement. The timing and completion of the Business Combination is not assured and is subject to risks, including the risks that we fail to obtain the FACT Shareholder Approval, meet the Minimum FACT Cash Amount and obtain approval for listing of New PAD Common Stock on NYSE, in each case subject to certain terms specified in the Business Combination Agreement (as described under “The Business Combination Agreement — Conditions to Closing”), or that other closing conditions are not satisfied.
The completion of the Business Combination is conditioned on, among other things, the FACT Closing Cash being equal to at least $75.0 million, which is the sum of the amount of cash available in the Trust Account and other sources as set forth in the Business Combination Agreement at Closing (after deducting FACT’s transaction expenses and giving effect to any redemptions). Each of FACT and PAD may agree to waive, in whole or in part, the conditions to its obligations to consummate the Business Combination, to the extent permitted by each of the parties’ organizational documents and applicable laws.
If FACT does not complete the Business Combination, FACT could be subject to various risks, including:
• the parties may be liable for damages to one another for the willful and material breach of the Business Combination Agreement;
• negative reactions from the financial markets, including declines in the price of the Public Shares due to the fact that current prices may reflect a market assumption that the Business Combination will be completed; and
• the attention of FACT management will have been diverted to the Business Combination rather than the pursuit of other opportunities in respect of an initial business combination.
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The exercise of FACT management’s discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the FACT Shareholders’ best interest.
In the period leading up to the Closing, events may occur that may require FACT to agree to amend the Business Combination Agreement, to consent to certain actions taken by PAD, or to waive rights that FACT is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of PAD’s business, a request by PAD to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement, or the occurrence of other events that would have a material adverse effect on PAD’s business. In any of such circumstances, it would be at FACT’s discretion, acting through the FACT Board, to grant its consent or waive those rights. The existence of financial and personal interests of one or more of the directors described in the preceding risk factors may result in a conflict of interest on the part of such director(s) between what he or she or they may believe is best for FACT and FACT Shareholders and what he or she or they may believe is best for himself or herself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, FACT does not believe that there will be any changes or waivers that FACT would be likely to make after the FACT Shareholder Approval has been obtained. While certain changes could be made without further FACT Shareholders’ approval, FACT will circulate a new or amended proxy statement/prospectus and re-solicit the FACT Shareholders if changes to the terms of the Business Combination that would have a material impact on the FACT Shareholders are required prior to the vote on the Business Combination Proposal.
During the pendency of the Business Combination, FACT will not be able to enter into an agreement with another party because of restrictions in the Business Combination Agreement. If the Business Combination is not completed, those restrictions may make it harder for FACT to complete an alternate business combination before its liquidation date.
While the Business Combination Agreement is in effect, neither FACT nor PAD may solicit, assist, facilitate the making, submission or announcement of, or intentionally encourage any alternative acquisition proposal, such as a merger, material sale of assets or equity interests or other Business Combination, with any third party, even though any such alternative acquisition could be more favorable to their respective shareholders than the Business Combination. In addition, if the Business Combination is not completed, these provisions will make it more difficult for FACT to complete an alternative business combination following the termination of the Business Combination Agreement due to the passage of time during which these provisions have remained in effect.
FACT (or New PAD) will not have any right to make damage claims against PAD for the breach of any representation, warranty or covenant made by PAD in the Business Combination Agreement.
The Business Combination Agreement provides that all of the representations, warranties and covenants of the parties contained therein shall not survive the Closing, except for those covenants that by their terms expressly apply in whole or in part after the Closing and then only with respect to breaches occurring after Closing and any claim based in whole or in part upon fraud. As a result, FACT (or New PAD) will have no remedy available to it if the Business Combination is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by PAD at the time of the Business Combination, unless such claim is based upon fraud.
We may not have sufficient funds to satisfy indemnification claims of our directors and officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account and to not seek recourse against the Trust Account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the Trust Account or (ii) we consummate the Business Combination. Our obligation to indemnify our officers and directors may discourage shareholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
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If, before distributing the proceeds in the Trust Account to the Public Shareholders, we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to the Public Shareholders, we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent that any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
If, after we distribute the proceeds in the Trust Account to the Public Shareholders, we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against us that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of the FACT Board may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of the FACT Board and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to the Public Shareholders, we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek to recover some or all amounts received by our shareholders. In addition, the FACT Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors.
Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
If we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by our shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby exposing themselves and FACT to claims, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of the Trust Account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable to a fine and to imprisonment for five years in the Cayman Islands.
FACT’s officers and directors may negotiate employment and consulting agreements with PAD. These agreements may provide for them to receive compensation following the Business Combination and, as a result, may cause them to have conflicts of interest in determining whether the Business Combination is the most advantageous.
FACT’s officers and directors may be able to remain with New PAD after the completion of the Business Combination only if they are able to negotiate employment or consulting agreements with PAD in connection with the Business Combination. While New PAD and PAD have no commitments as of the date of this proxy statement/prospectus to enter into employment or consulting agreements with FACT’s officers and directors, any such agreements that are entered into or negotiated could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services that they would render to New PAD. Such negotiations also could make such key personnel’s retention or resignation a condition to any such agreement. The personal and financial interests of such individuals may influence their motivation in completing the Business Combination, subject to their fiduciary duties under Cayman Islands law.
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Members of our management team and board of directors have significant experience as board members, officers or executives of other companies. As a result, certain of those persons have been, may be, or may become, involved in proceedings, investigations and litigation relating to the business affairs of the companies with which they were, are, or may in the future be, affiliated. This may have an adverse effect on us, which may impede our ability to consummate the Business Combination.
During the course of their careers, members of our management team and board of directors have had significant experience as board members, officers or executives of other companies. As a result of their involvement and positions in these companies, certain persons were, are now, or may in the future become, involved in litigation, investigations or other proceedings relating to the business affairs of such companies or transactions entered into by such companies. Any such litigation, investigations or other proceedings may divert our management team’s and board’s attention and resources away from identifying and selecting a target business or businesses for our initial business combination and may negatively affect our reputation, which may impede our ability to complete an initial business combination.
Members of our management team and affiliated companies may have been, and may in the future be, involved in civil disputes or governmental investigations unrelated to our business.
Members of our management team have been (and intend to be) involved in a wide variety of businesses. Such involvement has, and may lead to, media coverage and public awareness. As a result, members of our management team and affiliated companies may have been, and may in the future be, involved in civil disputes or governmental investigations unrelated to our business. Any such claims or investigations may be detrimental to our reputation and could negatively affect our ability to identify and complete an initial business combination and may have an adverse effect on the price of our securities.
Nasdaq may delist the FACT Class A Shares from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
The FACT Class A Shares are listed on Nasdaq. We cannot assure you that the FACT Class A Shares will continue to be listed on Nasdaq prior to the Closing. In order to continue listing our securities on Nasdaq prior to the Business Combination, we must maintain certain financial, distribution and share price levels. Generally, following our IPO, we must maintain a minimum market value of listed securities (generally $50,000,000) and a minimum number of holders of our securities (generally 400 public holders). Additionally, in connection with the Business Combination, we will be required to demonstrate compliance with NYSE’s initial listing requirements, which are more rigorous than NYSE’s continued listing requirements, in order to effect the listing of our securities on NYSE. For instance, our share price would generally be required to be at least $4.00 per share and we would be required to have a minimum of 400 round lot holders of our securities. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If Nasdaq delists the FACT Class A Shares from trading on its exchange and we are not able to list the FACT Class A Shares on another national securities exchange, we expect that the FACT Class A Shares could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
• a limited availability of market quotations for the FACT Class A Shares;
• reduced liquidity for the FACT Class A Shares;
• a determination that the FACT Class A Shares are a “penny stock,” which will require brokers trading in the FACT Class A Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the FACT Class A Shares;
• a limited amount of news and analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because the FACT Class A Shares are listed on Nasdaq, the FACT Class A Shares qualify as covered securities under the statute. Although the states are preempted from regulating the sale of the FACT Class A Shares, the federal statute does allow the states
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to investigate companies if there is a suspicion of fraud and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not qualify as covered securities under the statute and we would be subject to regulation in each state in which we offer our securities.
Risks Related to the Business Combination and New PAD
There may not be an active trading market for shares of New PAD Common Stock, which may cause New PAD Common Stock to trade at a discount from their initial trading price and make it difficult to sell any New PAD Common Stock.
Following the Business Combination, the price of New PAD Common Stock may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for New PAD Common Stock following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of New PAD Common Stock after the Business Combination may vary due to general economic conditions and forecasts, New PAD’s general business condition and the release of New PAD’s financial reports going forward. Additionally, if the New PAD Common Stock is not listed on, or become delisted for any reason from, a national securities exchange, the liquidity and price of New PAD Common Stock may be more limited than if New PAD Common Stock were quoted or listed on a national securities exchange. You may be unable to sell your shares of New PAD Common Stock unless a market can be established or sustained.
NYSE may not list the New PAD Common Stock, which could limit investors’ ability to effect transactions in New PAD Common Stock and subject it to additional trading restrictions.
We will apply for listing of the New PAD Common Stock on NYSE in connection with the consummation of the Business Combination. We will be required to meet certain initial listing requirements to be listed, including having a minimum number of round lot shareholders. We may not be able to meet the initial listing requirements in connection with the Business Combination. It is a condition to PAD’s obligations to consummate the Business Combination that FACT’s initial listing application with NYSE in connection with the Business Combination shall have been conditionally approved and, immediately following the Effective Time, that New PAD will satisfy any applicable initial listing requirements of NYSE, and in order to consummate the Business Combination PAD would need to waive this condition if NYSE has not approved the listing of the New PAD Common Stock. Further, even if the New PAD Common Stock is so listed, we may be unable to maintain such listing in the future. If we fail to meet the initial listing requirements and NYSE does not approve FACT’s application to list the New PAD Common Stock (and PAD waives the related closing condition), we could face significant material adverse consequences, including:
• a limited availability of market quotations for the New PAD Common Stock;
• a reduced level of trading activity in the secondary trading market for the New PAD Common Stock, resulting in reduced liquidity with respect thereto;
• a limited amount of news and analyst coverage for New PAD;
• determination that the shares of New PAD Common Stock are a “penny stock,” which will require brokers trading in shares of New PAD Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the New PAD Common Stock;
• a decreased ability to issue additional securities or obtain additional financing in the future; and
• New PAD’s securities would not be “covered securities” under the National Securities Markets Improvement Act of 1996, in which case its securities would be subject to regulation in each state where New PAD offers and sells securities.
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The cash payment to the holders of the outstanding shares of PAD Preferred Stock pursuant to the Business Combination Agreement is significant, and such payment could have a material adverse effect on New PAD’s financial health.
All shares of PAD Preferred Stock will be converted into shares of New PAD Common Stock at the Closing as set forth in the Business Combination Agreement. In addition, on the Closing Date, PAD will repay to the holders of shares of PAD Preferred Stock the original purchase price per share of the PAD Preferred Stock, or an aggregate of $8,264,394, along with the payment, in cash, of any accrued and unpaid dividends.
Our exposure to these redemption obligations at the Closing could limit New PAD’s ability to operate its business and impair its competitive position by, for example, limiting its flexibility in planning for, or reacting to, changes in its business and industry.
The announcement of the Business Combination could disrupt PAD’s relationships with its customers, suppliers and others, as well as its operating results and business generally.
Whether or not the Business Combination and related transactions are ultimately consummated, as a result of uncertainty related to the Business Combination, risks relating to the impact of the announcement of the Business Combination on PAD’s business include the following:
• its employees may experience uncertainty about their future roles, which might adversely affect New PAD’s ability to retain and hire key personnel and other employees; and
• customers, suppliers and other parties with which PAD maintains business relationships may experience uncertainty about its future and seek alternative relationships with third parties, seek to alter their business relationships with New PAD or fail to extend an existing relationship with New PAD.
If any of the aforementioned risks were to materialize, they could lead to significant costs that may impact New PAD’s results of operations and cash available to fund its business.
Third parties may terminate or alter existing contracts or relationships with PAD.
PAD has contracts with customers, affiliates, landlords and other entities that may require PAD to obtain consent from these other parties in connection with the Business Combination. If PAD cannot obtain these consents, the counterparties to these contracts and other third parties with which PAD currently has business relationships may have the ability to terminate, reduce the scope of, or otherwise materially adversely alter their relationships with PAD in anticipation of the Business Combination or with New PAD following the Business Combination, which may result in PAD or New PAD suffering a loss of potential future revenue or incurring liabilities in connection with a breach of such agreements and losing rights that are material to its business. Any such disruptions could limit New PAD’s ability to achieve the anticipated benefits of the Business Combination. The adverse effect of such disruptions could also be exacerbated by a delay in the consummation of the Business Combination or the termination of the Business Combination Agreement.
Future sales, or the perception of future sales, by New PAD or its stockholders in the public market could cause the market price for New PAD’s securities to decline.
The sale of shares of New PAD’s securities in the public market, including by entities to which FACT or PAD has issued shares in connection with transactions, or the perception that such sales could occur, could harm the prevailing market price of New PAD’s securities. These sales, or the possibility that these sales may occur, also might make it more difficult for New PAD to sell equity securities in the future at a time and at a price that it deems appropriate.
In the future, New PAD may establish additional equity incentive plans or issue securities in connection with investments or acquisitions. The number of shares of New PAD Common Stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of New PAD Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to PAD’s stockholders.
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New PAD may issue additional shares or other equity securities without your approval, which would dilute your ownership interest and may depress the market price of the New PAD Common Stock.
Pursuant to the New PAD Incentive Plan, following the consummation of the Business Combination, New PAD may initially issue an aggregate of up to 6,000,000 shares of New PAD Common Stock, which amount will automatically increase annually and may further be subject to increase from time to time. For additional information about the New PAD Incentive Plan, please read the discussion under the heading “Proposal No. 6 — The Incentive Plan Proposal.” New PAD may also issue additional shares of New PAD Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.
The issuance of additional shares or other equity securities of equal or senior rank would have the following effects:
• existing stockholders’ proportionate ownership interest in New PAD will decrease;
• the amount of cash available per share, including for payment of dividends in the future, may decrease;
• the relative voting strength of each share of previously outstanding New PAD Common Stock may be diminished; and
• the market price of New PAD Common Stock may decline.
Future issuances of debt securities, which would rank senior to the New PAD Common Stock upon any bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to the New PAD Common Stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in the New PAD Common Stock.
New PAD may attempt to increase its capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of New PAD’s debt securities, and lenders with respect to other borrowings that New PAD may make, would receive distributions of New PAD’s available assets prior to any distributions being made to holders of the New PAD Common Stock. Moreover, if New PAD issues preferred stock, the holders of such preferred stock could be entitled to preferences over holders of New PAD Common Stock in respect of the payment of dividends and the payment of liquidating distributions. Because New PAD’s decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond its control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of the New PAD Common Stock must bear the risk that any future offerings that New PAD conducts or borrowings it makes may adversely affect the level of return, if any, they may be able to achieve from an investment in the New PAD Common Stock.
New PAD does not intend to pay dividends on the New PAD Common Stock for the foreseeable future.
We currently intend for New PAD to retain all available funds and any future earnings to fund the development and growth of its business. As a result, we do not anticipate that New PAD will declare or pay any cash dividends on shares of New PAD Common Stock in the foreseeable future following completion of the Business Combination. Any decision to declare and pay dividends in the future will be made at the discretion of the New PAD Board and will depend on, among other things, New PAD’s business prospects, results of operations, financial condition, cash requirements and availability, certain restrictions related to its indebtedness, industry trends and other factors that the New PAD Board may deem relevant. Any such decision will also be subject to compliance with contractual restrictions and covenants in the agreements governing New PAD’s current and future indebtedness. In addition, New PAD may incur additional indebtedness, the terms of which may further restrict or prevent New PAD from paying dividends on the New PAD Common Stock. As a result, you may have to sell some or all of your shares of New PAD Common Stock after price appreciation in order to generate cash flow from your investment, which you may not be able to do. New PAD’s inability or decision not to pay dividends, particularly when others in its industry have elected to do so, could also adversely affect the market price of the New PAD Common Stock.
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Fluctuations in operating results, quarter to quarter earnings and other factors, including incidents involving customers and negative media coverage, may result in significant decreases in the price of New PAD’s securities.
The stock markets experience volatility that is often unrelated to operating performance of the companies whose securities are listed thereon. These broad market fluctuations may adversely affect the trading price of New PAD Common Stock and, as a result, there may be significant volatility in the market price of New PAD Common Stock. Separately, if New PAD is unable to achieve profitability in line with investor expectations, the market price of New PAD Common Stock will likely decline when it becomes apparent that such market expectations may not be realized. In addition to operating results, many economic factors outside of New PAD’s control could have an adverse effect on the price of New PAD Common Stock and increase fluctuations in its results. These factors include certain of the risks discussed herein, operating results of other companies in the same industry, changes in financial estimates or recommendations of securities analysts, speculation in the press or investment community, negative media coverage or risk of proceedings or government investigation, changes in government regulation, foreign currency fluctuations, uncertainty regarding tax policies, the possible effects of war, terrorist and other hostilities, and other factors affecting general conditions in the economy.
New PAD’s actual financial position and results of operations may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what New PAD’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated, or the future consolidated results of operations or financial position of New PAD. See “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
New PAD’s ability to raise capital timely in the future may be limited, or maybe unavailable on acceptable terms, if at all. New PAD’s failure to raise capital when needed could harm its business, operating results and financial condition. Debt issued to raise additional capital may reduce the value of New PAD Common Stock.
New PAD intends to make investments to support New PAD’s business and may require additional funds. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, New PAD may be unable to invest in future growth opportunities, which could harm New PAD’s business, operating results and financial condition. If New PAD incurs debt, the debt holders could have rights senior to holders of New PAD Common Stock to make claims on New PAD’s assets. The terms of any debt could restrict New PAD’s operations, including its ability to pay dividends on New PAD Common Stock.
As a result, New PAD shareholders bear the risk of future issuances of debt securities reducing the value of New PAD Common Stock.
New PAD may be exposed to risks of legal proceedings.
As a publicly traded company, New PAD will be subject to various regulatory requirements, which may result in investigations, claims, lawsuits, and other legal proceedings. While PAD has not faced material litigation to date, there is an increasing trend in legal actions related to environmental issues, climate change, ESG (environmental, social and governance) disclosures, and securities class actions. The outcome of any such proceedings is inherently uncertain due to factors such as new evidence, emerging legal theories, judicial decisions, and potential appeals, all of which can make predicting the results of litigation difficult.
Claims for indemnification by New PAD’s directors and officers may reduce its available funds to satisfy successful third-party claims against New PAD and may reduce the amount of money available to New PAD.
As permitted by Section 145 of the DGCL, the New PAD Charter and the New PAD Bylaws provide that:
• New PAD will indemnify its directors and officers for serving New PAD in those capacities or for serving other business enterprises at its request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of New PAD and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
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• New PAD may, in its discretion, indemnify other persons to the extent and in the manner authorized or permitted by law;
• New PAD will be required to advance expenses, as incurred, to its directors and officers in connection with defending or being a witness a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
• New PAD will not be obligated to indemnify a person with respect to proceedings initiated by that person against New PAD or its other indemnitees, except with respect to proceedings authorized by the New PAD Board or brought to enforce a right to indemnification;
• the rights conferred thereby are not exclusive to any rights an indemnitee may have under applicable law, an agreement, a vote of stockholders or disinterested directors, under any policy or policies of insurance purchased and maintained by New PAD on behalf of any indemnitee, or otherwise; and
• New PAD may not retroactively amend the New PAD Charter or the New PAD Bylaws to reduce its indemnification obligations thereunder.
Risks Related to New PAD Being a Public Company
The market price of New PAD Common Stock may fluctuate significantly following the Business Combination and may decline regardless of New PAD’s operating performance. You could lose all or part of your investment as a result.
The market price of New PAD Common Stock following the Business Combination is likely to be highly volatile and subject to wide fluctuations in response to various factors, many of which New PAD cannot control. The stock market has experienced volatility that has often been unrelated or disproportionate to the operating performance or prospects of particular companies. You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “— Risks Related to PAD and its Business” and the following:
• potential benefits of the Business Combination;
• statements regarding estimates and forecasts of New PAD’s operating and financial performance and prospects and projections of market opportunity;
• the size and growth potential of the markets for PAD’s products and services;
• coverage by or changes in financial estimates by securities analysts or failure to meet their expectations;
• fluctuations in the valuation of companies perceived by investors to be comparable to PAD;
• market conditions in the aerospace and defense industry;
• strategic actions by New PAD, including with respect to its growth and merger and acquisition strategies, or its competitors;
• changes in laws or regulations, including laws or regulations relating to environmental, health and safety matters or initiatives relating to climate change, or changes in the implementation of regulations by regulatory bodies, that adversely affect New PAD’s industry or New PAD;
• privacy and data protection laws, privacy or data breaches, or the loss of data;
• changes in accounting standards, policies, guidance, interpretations or principles;
• changes in senior management or key personnel;
• issuances, exchanges or sales, or expected issuances, exchanges or sales of New PAD’s capital stock;
• announcement or expectation of additional financing efforts;
• changes in New PAD’s dividend policy;
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• adverse resolution of new or pending litigation against New PAD;
• the uncertainty resulting from the invasion of Ukraine by Russia, the Israel-Hamas conflict, strategic competition and tensions between Taiwan, China and the United States and resulting sanctions, and other events (such as terrorist attacks, geopolitical unrest, natural disasters or a significant outbreak of other infectious diseases); and
• changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
These broad market and industry factors may materially reduce the market price of New PAD Common Stock, regardless of its actual operating performance. These fluctuations may be even more pronounced in the trading markets for New PAD Common Stock shortly following the closing of the Business Combination. Following periods of such volatility in the market price of a company’s securities, securities class action litigation has often been brought against such company. Because of the potential volatility of New PAD Common Stock, New PAD may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from New PAD’s business. The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and material adverse impact on the market price of our common stock following the Business Combination.
The requirements and increased costs of being a public company may strain New PAD’s resources, divert New PAD’s management’s attention and adversely affect New PAD’s ability to attract and retain qualified board members.
As a public company, New PAD will incur significant legal, accounting, and other expenses that PAD did not incur as a private company. New PAD will be subject to the reporting requirements of the Exchange Act, NYSE listing requirements, and other applicable securities rules and regulations, including regarding the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Such expenses may increase even more once New PAD no longer qualifies as an emerging growth company. We expect that New PAD will need to hire additional accounting, finance, and other personnel in connection with its becoming subject to, and its efforts to comply with, these requirements, and New PAD’s management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase New PAD’s legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that the rules and regulations applicable to New PAD as a public company may make it more difficult and more expensive for it to obtain director and officer liability insurance, which could make it more difficult for it to attract and retain qualified members of the New PAD Board. PAD is currently evaluating these rules and regulations and cannot predict or estimate the amount of additional costs that New PAD may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
New PAD’s issuance of additional shares of New PAD Common Stock or convertible securities could make it difficult for another company to acquire it, may dilute your ownership of New PAD and could adversely affect its stock price.
In connection with the Business Combination, New PAD intends to file a registration statement with the SEC on Form S-8 providing for the registration of the offer and sale of shares of New PAD Common Stock reserved for issuance and issuable pursuant to PAD Options and reserved for future issuance under the New PAD Incentive Plan. The New PAD Incentive Plan will provide for automatic increases in the shares of New PAD Common Stock reserved for grant or issuance thereunder, which could result in additional dilution to New PAD’s stockholders. Subject to the satisfaction of vesting conditions and the expiration of any applicable lockup restrictions, shares registered under the registration statement on Form S-8 will generally be available for resale immediately in the public market without restriction. From time to time in the future, New PAD may also issue additional shares of New PAD Common Stock or securities convertible into shares of New PAD Common Stock pursuant to a variety of transactions, including acquisitions. New PAD may also execute or have executed agreements that allow certain third parties the right to
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purchase additional shares of New PAD Common Stock or securities convertible into New PAD Common Stock. The issuance by New PAD of additional shares of New PAD Common Stock or securities convertible into shares of New PAD Common Stock would dilute your ownership of New PAD and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of the New PAD Common Stock.
We expect that New PAD will obtain financing or to further increase its capital resources by issuing additional shares of its capital stock or offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. New PAD may sell shares of New PAD Common Stock or other securities in any other offering at a price per share that is less than the price per share paid by the investors in the Business Combination, and investors purchasing shares of New PAD Common Stock or other securities in the future could have rights superior to existing shareholders. The price per share at which the additional shares of New PAD Common Stock or securities convertible or exchangeable into shares of New PAD Common Stock will be sold in future transactions may be higher or lower than the price per share paid by investors pursuant to the Business Combination. Further, issuing additional shares of New PAD’s capital stock, other equity securities, or securities convertible into equity may dilute the economic and voting rights of New PAD’s then-existing stockholders, reduce the market price of the New PAD Common Stock, or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred stock, if issued, could have a preference with respect to liquidating distributions or dividend payments that could limit New PAD’s ability to pay dividends to the holders of New PAD Common Stock. New PAD’s decision to issue securities in any future offering will depend on market conditions and other factors beyond its control, which may adversely affect the amount, timing or nature of its future offerings. As a result, holders of shares of New PAD Common Stock will bear the risk that its future offerings may reduce the market price of the New PAD Common Stock and dilute their percentage ownership. See the section entitled “Description of New PAD’s Securities.”
New PAD’s management team has limited experience managing a public company.
Members of the New PAD management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. The New PAD management team may not successfully or efficiently manage New PAD’s transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.
These new obligations and constituents will require significant attention from New PAD’s senior management and could divert their attention away from the day-to-day management of its business, which could harm its business, financial condition, and results of operations.
New PAD’s business and operations could be negatively affected if it becomes subject to any securities litigation or stockholder activism, which could cause New PAD to incur significant expense, hinder execution of business and growth strategy and negatively impact its stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the market price of New PAD Common Stock or other reasons may in the future cause it to become the target of securities litigation or stockholder activism. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert management’s and the New PAD Board’s attention and resources from New PAD’s business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to New PAD’s future, adversely affect its relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, New PAD may be required to incur significant legal fees and other expenses related to any securities litigation and activist stockholder matters. Further, its stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.
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Risks Related to the Domestication
The Domestication may result in adverse tax consequences for holders of FACT Class A Shares.
As discussed in “Material U.S. Federal Income Tax Considerations” below, the Domestication is intended to qualify as a tax-deferred reorganization within the meaning of Section 368(a)(1)(F) of the Code. However, due to the absence of direct guidance on the application of Section 368(a)(1)(F) of the Code to a corporation holding only investment-type assets, such as FACT, this result is not entirely clear. If the Domestication fails to qualify a tax-deferred reorganization within the meaning of Section 368(a)(1)(F) of the Code, a U.S. holder of FACT Class A Shares generally would recognize gain or loss with respect to his, her or its FACT Class A Shares in an amount equal to the difference, if any, between the fair market value of the corresponding New PAD Common Stock received in the Domestication and the U.S. holder’s adjusted tax basis in its FACT Class A Shares surrendered in exchange therefor.
Even if the Domestication qualifies as a tax-deferred reorganization within the meaning of Section 368(a)(1)(F), U.S. holders can be subject to the PFIC rules and the rules under Section 367(b) of the Code. Additionally, regardless of the tax-treatment of the Domestication, non-U.S. holders may become subject to withholding tax on any amounts treated as dividends paid on New PAD Common Stock after the Domestication.
For a more complete discussion of the U.S. federal income tax considerations of the Domestication, see the section entitled “Material U.S. Federal Income Tax Considerations.” If you are a holder exchanging FACT Class A Shares in the Domestication, you are urged to consult your tax advisor to determine the tax consequences thereof.
Upon consummation of the Business Combination, the rights and obligations of a New PAD stockholder will be governed by Delaware law and may differ from the rights and obligations of the FACT Shareholders under Cayman Islands law.
New PAD will be a Delaware corporation. Accordingly, its corporate structure as well as the rights and obligations of the holders of New PAD Common Stock may be less favorable to the rights of holders of FACT Class A Shares arising under Cayman Islands law and the FACT Articles. For a more detailed description of the rights of holders of New PAD Common Stock and how they may differ from the rights of holders of FACT Class A Shares, please see the section entitled “Comparison of Corporate Governance and Shareholder Rights.” The forms of the New PAD Charter and the New PAD Bylaws are attached as Annex H and Annex I, respectively, to this proxy statement/prospectus, and we urge you to read them.
Anti-takeover provisions in the New PAD Charter and the New PAD Bylaws that will be in effect following the Business Combination and Delaware law might discourage, delay or prevent a change in control of PAD or changes in PAD’s management and, therefore, depress the market price of New PAD Common Stock.
The New PAD Charter and the New PAD Bylaws that will be in effect following the Business Combination contain provisions that could depress the market price of New PAD Common Stock by acting to discourage, delay or prevent a change in control of New PAD or changes in New PAD’s management that the stockholders of New PAD may deem advantageous. These provisions, among other things, include:
• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
• the exclusive right of the New PAD Board to elect a director to fill a vacancy created by the expansion of the New PAD Board, the resignation, death, or removal of a director, or any other reason, which prevents stockholders from being able to fill vacancies on the New PAD Board;
• a prohibition on stockholder actions through written consent, which requires that all stockholder actions be taken at a meeting of New PAD stockholders;
• a requirement that special meetings of stockholders be called only by the New PAD Board acting by a majority of the directors then in office, the Chairman of the Board, or the Chief Executive Officer, such that stockholders have no right to call a special meeting;
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• advance notice requirements for stockholder proposals and nominations for election to the New PAD Board;
• controlling the procedures for the conduct and scheduling of stockholder meetings;
• a requirement that no member of the New PAD Board of directors may be removed from office by New PAD’s stockholders except for cause; and
• the authority of the PAD Board to issue preferred stock on terms determined by the New PAD Board without stockholder approval and which preferred stock may include rights superior to the rights of the holders of New PAD Common Stock.
In addition, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person that together with its affiliates owns, or within the last three years has owned, 15% of New PAD’s voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
Any provision of the New PAD Charter, New PAD Bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for New PAD’s stockholders to receive a premium for their shares of New PAD capital stock and could also affect the price that some investors are willing to pay for New PAD Common Stock.
The New PAD Charter that will be in effect following the Business Combination will designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by New PAD’s stockholders, which could limit New PAD’s stockholders’ ability to obtain a favorable judicial forum for disputes with New PAD or New PAD’s directors, officers, or employees.
The New PAD Charter that will be in effect following the Business Combination provides that, unless New PAD consents in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any state law claims for (i) any derivative action or proceeding brought on New PAD’s behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or employee to New PAD or its stockholders, (iii) any civil action to interpret, apply or enforce any provisions of the DGCL or to interpret, apply, enforce or determine the validity of the provisions of the New PAD Charter or the New PAD Bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein (the “Delaware Forum Provision”). The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. The New PAD Charter further provides that, unless New PAD consents in writing to the selection of an alternative forum, the federal district courts of the U.S. shall be the sole and exclusive forum for resolving any complaint asserting a cause or causes of action arising under the Securities Act or the Exchange Act or the respective rules and regulations promulgated under the Securities Act or Exchange Act or for resolving any claim for which the federal courts have exclusive jurisdiction (the “Federal Forum Provision”). In addition, the New PAD Charter provides that any person or entity purchasing or otherwise acquiring any interest in shares of New PAD Common Stock is deemed to have notice of and consented to the foregoing provisions; provided, however, that stockholders cannot and will not be deemed to have waived New PAD’s compliance with the federal securities laws and the rules and regulations thereunder.
The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing any such claims. Additionally, these forum selection clauses may limit New PAD’s stockholders’ ability to bring a claim in a forum that they find favorable for disputes with New PAD or New PAD’s directors, officers or employees, which may discourage such lawsuits against New PAD and its directors, officers and employees even though an action, if successful, might benefit New PAD’s stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court were “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce the Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, New PAD may incur additional costs associated with resolving such matters. The Federal Forum
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Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the federal district courts of the U.S. may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to New PAD than New PAD’s stockholders.
Risks Related to the Post-Business Combination Company
Subsequent to the Closing, New PAD may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and the price of its securities, which could cause you to lose some or all of your investment.
Although FACT has conducted due diligence on PAD, we cannot assure you that this diligence revealed all material issues that may be present in PAD, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of FACT’s or New PAD’s control will not later arise. As a result, New PAD may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with FACT’s preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on liquidity, the fact that New PAD reports charges of this nature could contribute to negative market perceptions about New PAD or its securities. In addition, charges of this nature may cause New PAD to violate net worth or other covenants to which it may be subject. Accordingly, any FACT Shareholder who chooses to remain a stockholder of New PAD following the Business Combination could suffer a reduction in the value of their shares.
Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by FACT’s officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation relating to the Business Combination contained an actionable material misstatement or material omission.
The Business Combination and our structure thereafter may not be tax-efficient to our shareholders. As a result of our business combination, our tax obligations may be more complex, burdensome and/or uncertain.
Although we are attempting to structure the Business Combination in a tax-efficient manner, tax structuring considerations are complex, the relevant facts and law are uncertain and may change, and we may prioritize commercial and other considerations over tax considerations. For example, in connection with the Business Combination, we intend to effect the Domestication of FACT to Delaware. We do not intend to make any cash distributions to shareholders to pay taxes in connection with the Business Combination or thereafter. Accordingly, a shareholder may need to satisfy any liability resulting from the Business Combination with cash from its own funds or by selling all or a portion of the shares received. In addition, shareholders may also be subject to additional income, withholding or other taxes with respect to their ownership of us after the Business Combination.
Following the consummation of the Business Combination, New PAD’s only significant asset will be its ownership interest in PAD and such ownership may not be sufficient to pay dividends or make distributions or loans to enable New PAD to pay any dividends on New PAD Common Stock or satisfy our other financial obligations.
Following the consummation of the Business Combination, New PAD will have no direct operations and no significant assets other than its ownership of PAD. New PAD will depend on PAD for distributions, loans and other payments to generate the funds necessary to meet its financial obligations, including its expenses as a publicly traded company and to pay any dividends with respect to shares of New PAD Common Stock. The financial condition and operating requirements of PAD may limit New PAD’s ability to obtain cash from PAD. The earnings from, or other available assets of, PAD may not be sufficient to pay dividends or make distributions or loans to enable New PAD to pay any dividends on the New PAD Common Stock or satisfy its other financial obligations. This lack of diversification may subject New PAD to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which New PAD will operate subsequent to the Business Combination.
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There are risks to Public Shareholders of becoming stockholders of New PAD through the Business Combination rather than acquiring securities of New PAD directly in an underwritten public offering, including no independent due diligence review by an underwriter and conflicts of interest.
Because there is no independent third-party underwriter involved in the Business Combination or the issuance of securities in connection therewith, investors will not receive the benefit of an outside independent review of New PAD’s, PAD’s and FACT’s respective finances and operations typically performed in an initial public securities offering. Underwritten public offerings of securities conducted by a licensed broker-dealer are subjected to a due diligence review by the underwriter or dealer manager to satisfy statutory duties under the Securities Act, the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the national securities exchange where such securities are listed. Additionally, underwriters or dealer-managers conducting such public offerings are subject to liability for material misstatements or omissions in a registration statement filed with the SEC in connection with the public offering. As no such review has been or will be conducted in connection with the Business Combination, FACT Shareholders must rely on the information in this proxy statement/prospectus and will not have the benefit of an independent review and investigation of the type normally performed by an underwriter in a public securities offering.
In addition, the Sponsor, Sponsor HoldCo, and FACT’s officers and directors have interests in the Business Combination that may be different from, or in addition to, the interests of unaffiliated FACT Shareholders. Such interests may have influenced FACT’s directors in making their recommendation that you vote in favor of the Business Combination Proposal and the other proposals described in this proxy statement/prospectus. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination.”
The process of taking a company public by means of a business combination with a SPAC is different from taking a company public through an underwritten public offering and may create risks for unaffiliated investors.
An underwritten offering involves a company engaging underwriters to purchase its shares and resell them to the public. An underwritten offering imposes statutory liability on the underwriters for material misstatements or omissions contained in the registration statement unless they are able to sustain the burden of providing that they did not know and could not reasonably have discovered such material misstatements or omissions. This is referred to as a “due diligence” defense and results in the underwriters undertaking a detailed review of the target company’s business, financial condition and results of operations. Going public via a business combination with a special purpose acquisition company (“SPAC”) does not involve any underwriters and does not generally necessitate the level of review required to establish a “due diligence” defense as would be customary in an underwritten offering.
In addition, going public via a business combination with a SPAC does not involve a book-building process as is the case in an underwritten public offering. In any underwritten public offering, the initial value of a company is set by investors who indicate the price at which they are prepared to purchase shares from the underwriters. In the case of a SPAC transaction, the value of the target company is established by means of negotiations between the target company, the SPAC and, in some cases, other investors who agree to purchase shares at the time of the business combination. The process of establishing the value of a company in a SPAC business combination may be less effective than the book-building process in an underwritten public offering and also does not reflect events that may have occurred between the date of the business combination agreement and the closing of the business combination. In addition, underwritten public offerings are frequently oversubscribed, resulting in additional potential demand for shares in the aftermarket following the underwritten public offering. There is no such book of demand built up in connection with a SPAC transaction and no underwriters with the responsibility of stabilizing the share price, which may result in the share price being harder to sustain after the transaction.
Risks Related to the Adjournment Proposal
If the Adjournment Proposal is not approved, and a quorum is present but an insufficient number of votes have been obtained to approve one or more Condition Precedent Proposals, the FACT Board will not have the ability to adjourn the EGM to a later date in circumstances where such adjournment is necessary or desirable.
If, at the EGM, the FACT Board determines that it would be necessary or desirable to adjourn the EGM to give FACT more time to consummate the Business Combination for whatever reason (such as if a Condition Precedent Proposal is not approved, or if additional time is needed to fulfill other closing conditions), the FACT Board will seek
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approval to adjourn the EGM to a later date or dates. If the Adjournment Proposal is not approved, and a quorum is present, the FACT Board will not have the ability to adjourn the EGM to a later date in order to solicit further votes or take other steps to cause the conditions to the Business Combination to be satisfied, for example. In such event, the Business Combination would not be completed.
General Risk Factors
We are currently in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by the current U.S. presidential administration and accompanying regulatory activities and economic policies and events related thereto, ongoing military conflicts and geopolitical instability and inflation and interest rates.
U.S. and global markets have recently been experiencing volatility and disruption caused by economic uncertainty, including as a result international trade disputes and ongoing military disputes and related geopolitical uncertainty. International trade disputes, including threatened or implemented tariffs by the Trump administration and threatened or implemented tariffs by foreign countries in retaliation, could adversely impact PAD’s business. Trade disputes could also adversely impact supply chains that could now or in the future increase costs for PAD or delay delivery of key inventories and supplies. Trade disputes can also be highly disruptive to global financial markets. The length and impact of the ongoing trade disputes and military conflicts are highly unpredictable. PAD and FACT are continuing to monitor the trade disputes, inflation, interest rates and the military conflicts and the impacts to global capital markets, to PAD’s business, and to the parties’ ability to complete the Business Combination.
The 1% excise tax included in the Inflation Reduction Act of 2022 may decrease the value of our securities following the Business Combination, hinder our ability to consummate the Business Combination, and decrease the amount of funds available for distribution.
The Inflation Reduction Act of 2022, among other things, imposes a 1% excise tax on certain repurchases (including certain redemptions) of stock by publicly traded U.S. corporations and certain U.S. subsidiaries of publicly traded non-U.S. corporations (each, a “covered corporation”). The excise tax is imposed on the repurchasing corporation itself, not its stockholders from whom the shares are repurchased (although it may reduce the amount of cash distributable in a current or subsequent redemption). The amount of the excise tax is generally 1% of the fair market value of the shares of stock repurchased by the repurchasing corporation during the same taxable year. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year (the “netting rule”). The U.S. Department of Treasury has authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax.
The U.S. Department of the Treasury’s Notice 2023-2 provides clarification on some aspects of the application of the excise tax. The notice generally provides that if a publicly traded U.S. corporation completely liquidates and dissolves, distributions in such complete liquidation and other distributions by such corporation in the same taxable year in which the final distribution in complete liquidation and dissolution is made are not subject to the excise tax.
As provided in the Business Combination Agreement, the redemption of FACT Class A Shares in connection with the Business Combination will take place at a time when we are a Cayman Islands exempted company. Furthermore, on April 12, 2024, the U.S. Department of Treasury published proposed regulations clarifying many aspects of the excise tax, including that where a non-U.S. corporation transfers its assets or is treated as transferring its assets to a U.S. corporation in an F reorganization (as defined below in “Material U.S. Federal Income Tax Considerations — Tax Treatment of the Domestication — F Reorganization”), the corporation is not treated as a U.S. corporation until the day after the reorganization. Therefore, subject to the timing of the redemption of FACT Class A Shares, we believe that the excise tax will not apply given that we will not be a “covered corporation” within the meaning of the Inflation Reduction Act at the time of the redemption of FACT Class A Shares. Although these proposed regulations are not final, taxpayers generally may rely on them until final regulations are issued.
However, the U.S. Department of Treasury has been given authority to provide proposed and final regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax. If our interpretation related to the existing provision of the excise tax is not correct or if future guidance were to treat us as a covered corporation for purposes of the excise tax, then it is possible that the excise tax will apply to any redemptions of the FACT Class A
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Shares after December 31, 2022, including redemptions in connection with the Business Combination or any other initial business combination, unless an exemption is available. Consequently, the value of your investment in our securities may decrease as a result of the excise tax. In the event that the excise tax applies, issuances of stock in connection with the Business Combination and any other equity issuances (whether in connection with the Business Combination or otherwise) issued in the same taxable year of a redemption may reduce the amount of the excise tax in connection with redemptions at such time under the netting rule.
FACT is, and we expect that New PAD will be, an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
FACT is, and we expect that New PAD will be, an “emerging growth company” as defined in Rule 405 under the Securities Act and Rule 12b-2 under the Exchange Act. Accordingly, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor internal control over financial reporting attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of the FACT Class A Shares held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 13(a) of the Exchange Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. A smaller reporting company can elect to opt out of the extended transition period and comply with the requirements that apply to nonemerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, FACT is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
Following the Closing, New PAD will be required to re-determine its status as a smaller reporting company prior to the time it makes its first filing with the SEC (other than the Current Report on Form 8-K filed with Form 10 Information (as defined in Rule 144(i)(3) of the Securities Act)). New PAD will be able to continue to take advantage of the smaller reporting company scaled disclosures if its voting and non-voting common stock held by non-affiliates is less than $250.0 million measured as of a date within four business days after the consummation of the Business Combination, or PAD’s annual revenue is less than $100.0 million as of the most recently completed fiscal year reported in the Current Report on Form 8-K filed with Form 10 Information (as defined in Rule 144(i)(3) of the Securities Act). If New PAD is no longer a smaller reporting company after this initial determination, it would need to reflect its re-determined status in any filing that is due after the 45-day period following the Closing. We expect that New PAD will remain a smaller reporting company after the Closing. To the extent that New PAD takes advantage of the reduced disclosure obligations available for smaller reporting companies, it may also make comparison of our financial statements with other public companies difficult or impossible.
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As we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.
We are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or officers, or enforce judgments obtained in the U.S. courts against our directors or officers.
Our corporate affairs are governed by the FACT Articles, the Cayman Companies Act (as the same may be supplemented or amended from time to time) and the common law of the Cayman Islands. We are also subject to the federal securities laws of the United States. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a federal court of the United States.
We have been advised by Conyers Dill & Pearman LLP, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given, provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be (i) final and conclusive, (ii) given by a court of competent jurisdiction (the courts of the Cayman Islands will apply the rules of the Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction) and (iii) for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
As a result of all of the above, Public Shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. company.
The FACT Articles provide that the courts of the Cayman Islands will be the exclusive forum for certain disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for complaints against us or our directors, officers or employees.
The FACT Articles provide that unless we consent in writing to the selection of an alternative forum, the courts of the Cayman Islands shall have exclusive jurisdiction over any claim or dispute arising out of or in connection with the FACT Articles or otherwise related in any way to each shareholder’s shareholding in us, including but not limited to: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of any fiduciary or other duty owed by any of our current or former director, officer or other employee to us or our shareholders; (iii) any action asserting a claim arising pursuant to any provision of the Cayman Companies Act or the FACT Articles; or (iv) any action asserting a claim against us governed by the internal affairs doctrine (as such concept
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is recognized under the laws of the United States) and that each shareholder irrevocably submits to the exclusive jurisdiction of the courts of the Cayman Islands over all such claims or disputes. The forum selection provision in the FACT Articles will not apply to actions or suits brought to enforce any liability or duty created by the Securities Act, Exchange Act or any claim for which the federal district courts of the United States are, as a matter of the laws of the United States, the sole and exclusive forum for determination of such a claim.
The FACT Articles also provide that, without prejudice to any other rights or remedies that we may have, each of our shareholders acknowledges that damages alone would not be an adequate remedy for any breach of the selection of the courts of the Cayman Islands as exclusive forum and that accordingly we shall be entitled, without proof of special damages, to the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the selection of the courts of the Cayman Islands as exclusive forum.
This choice of forum provision may increase a shareholder’s cost and limit the shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. Any person or entity purchasing or otherwise acquiring any of our shares or other securities, whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and have irrevocably agreed and consented to these provisions. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find this type of provisions to be inapplicable or unenforceable, and if a court were to find this provision in the FACT Articles to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could have adverse effect on our business and financial performance.
We employ a mail forwarding service, which may delay or disrupt our ability to receive mail in a timely manner.
Mail addressed to FACT and received at its registered office will be forwarded unopened to the forwarding address supplied by FACT to be dealt with. None of FACT, its directors, officers, advisors or service providers (including the organization which provides registered office services in the Cayman Islands) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address, which may impair your ability to communicate with us.
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THE EXTRAORDINARY GENERAL MEETING
FACT is furnishing this proxy statement/prospectus to FACT Shareholders as part of the solicitation of proxies by the FACT Board for use at the EGM to be held at [•], Eastern Time on [•], 2026, and at any adjournment thereof. This proxy statement/prospectus provides FACT Shareholders with information they need to know to be able to vote or instruct their vote to be cast at the EGM.
Date, Time and Place
The EGM will be held at [•], Eastern Time on [•], 2026. The EGM will be a virtual meeting conducted via live webcast at [•]. For the purposes of Cayman Islands law and the FACT Articles, the physical location of the EGM will be the offices of Paul Hastings LLP, FACT’s legal counsel, at 2050 M Street NW, Washington, D.C. 20036.
Purpose of the EGM
At the EGM, FACT is asking holders of FACT Ordinary Shares to consider and vote upon the following proposals:
• the Business Combination Proposal. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A;
• the Domestication Proposal;
• the Stock Issuance Proposal;
• the Charter Proposal;
• the Advisory Charter Proposals;
• the Incentive Plan Proposal;
• Director Election Proposal (only holders of FACT Class B Shares may vote on this proposal); and
• the Adjournment Proposal (if presented).
The Closing is conditioned upon the approval of each of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal is a condition to consummating the Business Combination. We refer to such proposals, collectively, as the “Condition Precedent Proposals.” Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other Condition Precedent Proposal. The Advisory Charter Proposals, Director Election Proposal and Incentive Plan Proposal are each conditioned on the approval of the Condition Precedent Proposals and approval of each is a condition to consummating the Business Combination. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Advisory Charter Proposals, Incentive Plan Proposal and Director Election Proposal will have no effect, even if approved by holders of FACT Ordinary Shares. The Adjournment Proposal is not conditioned upon the approval of any other proposal.
Recommendation of the FACT Board
The FACT Board, with the advice and assistance of representatives of EntrepreneurShares LLC, evaluated the terms of the Business Combination Agreement and the transactions contemplated thereby.
After careful consideration, the FACT Board unanimously determined that the terms and conditions of the Business Combination Agreement, each ancillary agreement, and the Business Combination were fair, advisable, and in the best interests of FACT and its shareholders and approved the Business Combination Agreement, each ancillary agreement, the Business Combination and the other agreements and transactions contemplated thereby.
The FACT Board believes that each of Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal, the Charter Proposal, each of the Advisory Charter Proposals, the Incentive Plan Proposal and the Adjournment Proposal (if put to a vote) is fair, advisable, and in the best interests of FACT and its shareholders and unanimously recommends that FACT Shareholders vote “FOR” each proposal being submitted to a vote of the FACT Shareholders at the EGM.
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For a more complete description of the FACT Board’s reasons for the approval of the Business Combination and the unanimous recommendation of the FACT Board, see the subsection entitled “Proposal No. 1 — The Business Combination Proposal — The FACT Board’s Reasons for the Approval of the Business Combination.”
When you consider the recommendation of the FACT Board in favor of approval of these proposals, you should keep in mind that, aside from their interests as shareholders, the Sponsor, Sponsor HoldCo and FACT’s directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of unaffiliated FACT Shareholders. Please see the subsection entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo and FACT’s Directors and Officers in the Business Combination.”
Registering for the EGM
Any shareholder wishing to attend the meeting should register for the EGM by , Eastern Time on , 2026. To register for the EGM, please follow these instructions, as applicable, to the nature of your ownership of FACT Ordinary Shares:
• If your shares are registered in your name with Odyssey and you wish to attend the EGM virtually, go to [•], enter the 12-digit control number included on your proxy card or notice of the EGM and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the EGM you will need to log back into the extraordinary general meeting site using your control number. Pre-registration is recommended, but is not required in order to attend virtually.
• Beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other nominee) who wish to attend the EGM must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to Sodali & Co. Beneficial shareholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the online EGM. After contacting Odyssey, a beneficial holder will receive an e-mail prior to the EGM with a link and instructions for entering the EGM online. Beneficial shareholders should contact Odyssey at least five business days prior to the EGM date in order to ensure access.
Record Date; Who is Entitled to Vote
FACT has fixed [•], 2026 as the Record Date for the EGM. FACT Shareholders at the close of business on the Record Date are entitled to vote or direct votes to be cast on matters that come before the EGM. Each share is entitled to one vote, except in respect of the Domestication Proposal, in which case a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Shares will be entitled to one vote for every FACT Class A Share held. The shareholder may only vote his, her, or its shares if he, she, or it is present in person or is represented by proxy at the EGM. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that the shares you beneficially own are properly voted. FACT Warrants do not have voting rights. As of the close of business on the Record Date for the EGM, there were 24,321,458 FACT Ordinary Shares issued and outstanding, of which 17,825,000 were issued and outstanding Public Shares.
As of the Record Date, the Sponsor, Sponsor HoldCo and other FACT Insiders held of record and were entitled to vote an aggregate of [•] FACT Ordinary Shares. The FACT Ordinary Shares held by such persons currently constitute approximately [•]% of the outstanding FACT Ordinary Shares. Pursuant to the Sponsor Support Agreement, Sponsor HoldCo has agreed to vote any FACT Ordinary Shares held by it as of the Record Date in favor of the Business Combination, including voting in favor of each Condition Precedent Proposal. No consideration has been or will be paid by FACT or PAD to Sponsor HoldCo in connection with such agreements. To the extent that Sponsor, Sponsor HoldCo and other FACT Insiders or their affiliates purchase Public Shares in compliance with the requirements of Rule 14e-5 under the Exchange Act, such shares would not be voted in favor of approving the Business Combination.
Abstentions and Broker Non-Votes
With respect to each proposal in this proxy statement/prospectus, you may vote “FOR,” “AGAINST” or “ABSTAIN.”
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If a FACT Shareholder fails to return a proxy card and does not attend the EGM in person (or virtually), then the FACT Shareholder’s shares will not be counted for purposes of determining whether a quorum is present at the EGM. If a valid quorum is established, any such failure to vote will have no effect on the outcome of any other proposal in this proxy statement.
Abstentions will be counted in connection with the determination of whether a valid quorum is established but will not constitute votes cast at the EGM and therefore will have no effect on any of the proposals as a matter of Cayman Islands law.
Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. FACT believes that all the proposals presented to the FACT Shareholders at the EGM (including the Adjournment Proposal, if presented) will be considered non-discretionary and therefore your broker, bank, or nominee cannot vote your shares without your instruction. Proxies relating to “street name” shares that are returned to FACT but marked by brokers as “not voted” will be considered present for the purposes of establishing a quorum, but will not count as votes cast at the EGM, and otherwise will have no effect on a particular proposal under Cayman Islands law.
Quorum
A quorum of FACT Shareholders is necessary to hold a valid meeting. The holders of a majority of the FACT Ordinary Shares being individuals present in person or by proxy or if a corporation or other non-natural person by its duly authorized representative or proxy shall constitute a quorum at the EGM.
Vote Required for Approval
The following votes are required to approve each Proposal:
• Business Combination Proposal: Approval of the Business Combination Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy and entitled to vote thereon at the EGM, vote at the EGM. The Business Combination Proposal is conditioned on the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Domestication Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Business Combination Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Domestication Proposal: Approval of the Domestication Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. In respect of the Domestication Proposal only, a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Shares will be entitled to one vote for every FACT Class A Share held. The Domestication Proposal is conditioned on the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Domestication Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Stock Issuance Proposal: Approval of the Stock Issuance Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Stock Issuance Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Charter Proposal is not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
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• Charter Proposal: Approval of the Charter Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Charter Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Stock Issuance Proposal is not approved, the Charter Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Advisory Charter Proposals: Approval of each Advisory Charter Proposal requires an ordinary resolution on a non-binding and advisory only basis, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The shareholder votes regarding these proposals are advisory in nature, and are not binding on FACT, the FACT Board, PAD or New PAD Board. The Advisory Charter Proposals are conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Advisory Charter Proposals will have no effect, even if approved by holders of FACT Ordinary Shares.
• Incentive Plan Proposal: Approval of the New PAD Incentive Plan Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Incentive Plan Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
• Director Election Proposal: Approval of the Director Election Proposal requires an ordinary resolution passed by a simple majority of such holders of FACT Class B Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Director Election Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Director Election Proposal will have no effect, even if approved by holders of FACT Class B Shares.
• Adjournment Proposal: Approval of the Adjournment Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The Adjournment Proposal is not conditioned upon the approval of any other proposal to be voted on at the EGM.
Voting Your Shares
Each FACT Class A Share and each FACT Class B Share that you own in your name entitles you to one vote on each Proposal on which such FACT Ordinary Share is entitled to vote, except in respect of the Domestication Proposal, in which case a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Shares will be entitled to one vote for every FACT Class A Share held. Your proxy card shows the number of SPAC Ordinary Shares that you own.
If you are a FACT Shareholder of record, you may vote by mail or at the EGM.
Voting by Mail. You can appoint a proxy to vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. By signing and dating the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the EGM in the manner you indicate. We encourage you to sign, date and return the proxy card even if you plan to attend the EGM so that your shares will be voted if you are unable to attend the EGM. If you
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receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted as recommended by the FACT Board. The FACT Board unanimously recommends voting “FOR” the approval of the Business Combination Proposal, “FOR” the approval of the Domestication Proposal, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Charter Proposal, “FOR” the approval of the Advisory Charter Proposals, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the Director Election Proposal and “FOR” the approval of the Adjournment Proposal, if presented, to the EGM. Proxy cards submitted by mail must be received at the address specified on the enclosed prepaid envelope by the close of business, New York City time, on , 2026.
Voting at the EGM. If you attend the EGM, you may also submit your vote at the EGM via the EGM website at [•] in which case any votes that you previously submitted by mail will be superseded by the vote that you cast at the EGM.
Beneficial owners of shares held in street name may instruct their bank, broker, or other nominee how to vote their shares. Beneficial owners should refer to the materials provided to them by their bank, broker, or other nominee for information on communicating these voting instructions. Beneficial owners may not vote their shares in person at the EGM unless they obtain a legal proxy from the shareholder of record, present it to the inspector of election at the EGM, and produce valid identification. Beneficial owners should contact their bank, broker, or other nominee for instructions regarding obtaining a legal proxy.
Who Can Answer Your Questions About Voting Your Shares
If you have questions about the EGM or how to vote your shares, you should contact:
FACT II Acquisition Corp.
14 Wall Street, 20th Floor
New York, NY 10005
Tel: (212) 618-1798
or:
Sodali & Co.
333 Ludlow Street, 5th Floor, South Tower
Stamford, CT 06902
Tel: (800) 662-5200 (toll-free) or
(203) 658-9400 (banks and brokers can call collect)
Email: [_]
You may also obtain additional information about FACT from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of Public Shares and you intend to seek redemption of your Public Shares, you will need to tender or deliver your Public Shares (and share certificates (if any) and other redemption forms), either physically or electronically, to Odyssey at the address below prior to the vote at the EGM. If you have questions regarding the certification of your position or delivery of your shares, please contact:
Odyssey Transfer and Trust Company
860 Blue Gentian Rd, Suite 320
Eagan, MN 55121
Tel: (612) 482-5100
Attention: Corporate Actions
E-mail: redemptions@odysseytrust.com
Proxy Solicitation
Proxies may be solicited by mail, telephone, on the internet, or in person. FACT has engaged Sodali to assist in the solicitation of proxies. FACT has agreed to pay Sodali a fee of $[•], plus disbursements.
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If a FACT Shareholder appoints a proxy, that FACT Shareholder may still vote its shares if it revokes its proxy before the EGM. A FACT Shareholder also may change its vote by submitting a later-dated proxy card as described in the section entitled “— Voting Your Shares.”
Revoking Your Proxy
If you are a FACT Shareholder of record and you appoint a proxy, you may revoke your proxy by taking any one of the following actions:
• notifying the General Counsel of FACT in writing before the EGM that you have revoked your proxy;
• signing and returning by mail a proxy card with a later date so that it is received prior to the EGM; or
• attending the EGM and voting electronically by visiting the website established for that purpose at [•] and entering the control number found on your proxy card, voting instruction form or notice you previously received. Attendance at the EGM will not, in and of itself, revoke a proxy.
If you are a non-record (beneficial) FACT Shareholder, you should follow the instructions of your bank, broker or other nominee regarding the revocation of proxies.
Redemption Rights
Pursuant to the FACT Articles, a Public Shareholder (other than the Sponsor, Sponsor HoldCo or a FACT Founder, Officer or Director) may request that FACT redeem all or a portion of his, her or its Public Shares for cash if the Business Combination is consummated. Holders of Public Shares who wish to exercise their redemption rights must, prior to [•], Eastern Time, on [•], 2026 (which date is two business days before the scheduled vote at the EGM):
(a) (i) hold Public Shares or (ii) hold Public Shares through FACT Units and elect to separate your FACT Units into the underlying Public Shares and FACT Warrants prior to exercising your redemption rights with respect to the Public Shares;
(b) submit a written request to the Transfer Agent, which request includes the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that FACT redeem all or a portion of their Public Shares for cash; and
(c) deliver the certificates for your Public Shares (if any) along with your redemption forms to the Transfer Agent physically or electronically using the DTC’s DWAC (Deposit/Withdrawal at Custodian) system.
Any holder of Public Shares (other than the Sponsor, Sponsor HoldCo and the FACT Insiders) will be entitled to demand that such holder’s Public Shares be redeemed for a pro rata portion of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (less up to US$100,000 of interest to pay dissolution expenses and which interest shall be net of Permitted Withdrawals), which, for illustrative purposes, was approximately $[•] million, or $[•] per Public Share, as of [•], 2026.
Prior to exercising redemption rights, Public Shareholders should verify the market price of the FACT Class A Shares as they may receive higher proceeds from the sale of their Public Shares in the public market than from exercising their redemption rights if the market price per share is higher than the Redemption Price. FACT cannot assure shareholders that they will be able to sell their Public Shares in the open market, even if the market price per share is higher than the Redemption Price stated above, as there may not be sufficient liquidity in the FACT Class A Shares when Public Shareholders wish to sell their shares.
Any request for redemption, once made by a holder of Public Shares, may not be withdrawn unless the FACT Board determines (in its sole discretion) to permit the withdrawal of such redemption request (which it may do in whole or in part).
Any written demand of redemption rights must be received by Odyssey prior to the redemption deadline. No demand for redemption will be honored unless the holder’s Public Shares have been delivered (either physically or electronically) to Odyssey prior to the deadline for submitting redemption requests.
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Notwithstanding the foregoing, a holder of Public Shares, together with any affiliate or any other person with whom he, she or it is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will be restricted from seeking redemption with respect to more than 15% of the issued and outstanding Public Shares. Accordingly, all Public Shares in excess of 15% held by a shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a partnership, syndicate or other group for the purposes of acquiring, holding or disposing of shares, will not be redeemed.
As set forth in more detail elsewhere in this proxy statement/prospectus, the Public Shareholders that do not elect to redeem their Public Shares will experience immediate dilution as a result of the Business Combination. The Public Shareholders currently own approximately 73% of the issued and outstanding FACT Ordinary Shares. Even if no Public Shareholders redeem their Public Shares in the Business Combination, the Public Shareholders’ ownership will decrease from approximately [•]% of the FACT Ordinary Shares prior to the Business Combination to owning approximately [•]% of the total outstanding New PAD Common Stock at the Closing. As redemptions increase, the overall percentage ownership held by the Sponsor, Sponsor HoldCo, other FACT Insiders and PAD Stockholders will increase as compared to the overall percentage ownership and voting percentage held by Public Shareholders, thereby increasing dilution to Public Shareholders. See “Risk Factors — FACT Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that FACT’s current shareholders have on the management of New PAD.”
Holders of the FACT Warrants will not have redemption rights with respect to the FACT Warrants.
Appraisal Rights and Dissenters’ Rights
FACT Shareholders do not have appraisal rights in connection with the Business Combination or the Domestication under the DGCL. FACT Shareholders do not have appraisal or dissenters’ rights in connection with the Business Combination or the Domestication under Cayman Islands law.
Potential Purchases of Public Shares
At any time prior to the EGM, subject to applicable securities laws (including with respect to material non-public information), the Sponsor, Sponsor HoldCo, FACT Insiders or their affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of the Business Combination or not redeem their Public Shares. However, the FACT Insiders and their affiliates have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares in such transactions.
The purpose of any such transactions could be to increase the likelihood of obtaining shareholder approval of the Business Combination or satisfy the Minimum FACT Cash Amount, where it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of the Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our shares may be reduced and the number of beneficial holders of our shares may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our shares on a national securities exchange. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. Additionally, in the event the FACT Insiders or their affiliates were to purchase Public Shares from Public Shareholders, such purchases would be structured in compliance with the requirements of Rule 14e-5 under the Exchange Act including, in pertinent part, through adherence to the following:
• if the FACT Insiders or their affiliates were to purchase Public Shares from Public Shareholders, they would do so at a price no higher than the Redemption Price;
• if the FACT Insiders or their affiliates were to purchase Public Shares from Public Shareholders, such shares would not be voted in favor of approving the Business Combination;
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• the FACT Insiders and their affiliates would not possess any redemption rights with respect to the Public Shares or, if they do acquire and possess redemption rights, they would waive such rights; and
• we would disclose in a Form 8-K, before the EGM to approve the Business Combination, the following material items:
• the amount of the Public Shares purchased outside of the redemption offer by the FACT Insiders or their affiliates, along with the purchase price;
• the purpose of the purchases by the FACT Insiders or their affiliates;
• the impact, if any, of the purchases by the FACT Insiders or their affiliates on the likelihood that the Business Combination will be approved;
• the identities of our security holders who sold to the FACT Insiders or their affiliates (if not purchased on the open market) or the nature of our security holders (e.g., 5% security holders) who sold to the FACT Insiders or their affiliates; and
• the number of Public Shares for which we have received redemption requests pursuant to our redemption offer.
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PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL
Structure of the Business Combination
General Overview
FACT, Sponsor HoldCo and PAD have entered into the Business Combination Agreement. The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein which include, but are not limited to, obtaining the required shareholder approval, following the Domestication, Merger Sub will merge with and into PAD, with PAD surviving as a wholly-owned subsidiary of FACT.
Domestication
Prior to and as a condition of the Closing, pursuant to the Domestication, FACT will de-register in the Cayman Islands and transfer by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation in accordance with the FACT Articles, Section 388 of the DGCL, and Part XII of the Cayman Companies Act. For more information, see the subsection of this proxy statement/prospectus entitled “Proposal No. 2 — The Domestication Proposal.”
FACT Forfeited Shares and Class B Share Conversion
Immediately prior to the Domestication, (i) FACT will effect the redemption of the Public Shares that are validly submitted for redemption and not withdrawn, (ii) the Sponsor and Sponsor HoldCo will, effective as of immediately prior to the Domestication and conditioned upon the Closing, forfeit to FACT the FACT Forfeited Shares, and (iii) the Class B Share Conversion will occur. At the effective time of the Domestication, each outstanding FACT Class A Share (excluding Public Shares validly submitted for redemption and the FACT Forfeited Shares, but including FACT Class A Shares issued upon the Class B Share Conversion) will be reclassified as one share of New PAD Common Stock.
Closing
Following the Domestication, Merger Sub will be merged with and into PAD, as a result of which PAD will be the surviving company and a wholly-owned subsidiary of FACT.
The following diagrams illustrate in simplified terms the current structure of FACT and PAD, the Merger and the expected structure of PAD immediately following the Closing.
Simplified Pre-Combination Structure
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The Domestication
The Merger
Simplified Post-Combination Structure(1)
____________
(1) Does not include any Third-Party Investor in connection with any Financing.
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Ownership of New PAD after the Closing
Background of the Business Combination
FACT is a blank check company incorporated on June 19, 2024, as a Cayman Islands exempt company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The proposed Business Combination was the result of an extensive search for a potential transaction using the network and investing and operating experience of FACT’s management team, including the FACT Board. The terms of the Business Combination Agreement were the result of extensive negotiations between FACT’s management team and representatives of PAD, each in consultation with its advisors. The following is a description of the background of these negotiations, the proposed Business Combination and related transactions.
Prior to the consummation of the IPO, neither FACT, nor anyone on its behalf, engaged in any substantive discussions, directly or indirectly, with any potential business combination target with respect to an initial business combination with FACT. On November 26, 2024, FACT consummated its IPO of 17,500,000 FACT Units, with each unit consisting of one FACT Class A Share and one half of one redeemable public warrant, generating total gross proceeds of $175,000,000. Prior to the consummation of the IPO, Sponsor HoldCo purchased an aggregate of 6,708,333 shares of common stock of FACT (“Founder Shares”) for an aggregate purchase price of $25,000 or approximately $0.0037 per share. Sponsor HoldCo subsequently transferred an aggregate of 220,000 Founder Shares to FACT’s Executive Chairman and independent directors. Simultaneously with the consummation of the IPO, FACT consummated the sale of 500,625 Private Placement Units at a price of $10.00 per Private Placement Unit and 162,500 Private Placement Securities at a price of $10.00 per Private Placement Security, generating gross proceeds of $6,631,250, as follows: (i) 17,500 Private Placement Units ($175,000 in the aggregate) with the Sponsor; (ii) (A) 260,000 Private Placement Units and (B) 162,500 Private Placement Securities ($4,225,000 in the aggregate) with Sponsor HoldCo; (iii) 178,500 Private Placement Units ($1,785,000 in the aggregate) with CCM; and (iv) 44,625 Private Placement Units with Seaport ($446,250 in the aggregate).
Following the completion of the IPO, FACT considered numerous potential target businesses with the objective of consummating its initial business combination. FACT’s efforts to identify and evaluate potential business combination opportunities were led by the Sponsor’s members: Adam Gishen (Chief Executive Officer of FACT), Min Lee (Chief Financial Officer of FACT), Richard Nespola, Jr. and Joseph Wagman. FACT’s Senior Advisor provided administrative and organizational support to FACT’s management team in connection with these activities. In consideration for these advisory services, Sponsor HoldCo agreed to reserve 20,000 founder shares to sell and transfer to our Senior Advisor, following the consummation of an initial business combination. Representatives of FACT contacted and were contacted by numerous individuals and entities who presented ideas for business combination opportunities, including numerous technology companies. FACT considered businesses that it believed had attractive long-term growth potential, were well-positioned within their industry and would benefit from the substantial intellectual capital, operational and investment experience, and network of FACT’s management team.
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During this search process, FACT reviewed over 100 potential business combination opportunities, entered into non-disclosure agreements with and conducted due diligence on 15 companies, and submitted non-binding letters of intent to representatives from five potential target companies other than PAD. These potential targets were in the financial services, industrial services, paving and contracting, software and technology, and real estate industries. FACT ultimately determined not to proceed with any of its other potential acquisition opportunities because, in the judgment of the FACT Board and management, the other potential business combination targets did not meet the valuation expectations of FACT or otherwise did not present as attractive or feasible a business combination opportunity as PAD.
In connection with its search process, FACT retained various financial and other advisors to assist it in its evaluation of potential business combination opportunities, including CCM, which had assisted FACT in connection with its evaluation of potential target companies.
Prior to its introduction to FACT, PAD had been evaluating potential pathways to become a publicly listed company. In connection with those efforts, PAD had engaged BTIG to assist in exploring strategic alternatives, including a potential transaction with a special purpose acquisition company (“SPAC”). On April 29, 2025, a representative from BTIG contacted representatives of FACT via email regarding a potential target in the aerospace and defense sector that was contemplating a business combination transaction with a SPAC. On May 15, 2025, BTIG introduced PAD as a potential business combination opportunity to FACT’s management. On May 29, 2025, FACT executed a non-disclosure agreement with BTIG to receive additional confidential due diligence materials regarding PAD. Shortly after the execution of the non-disclosure agreement, FACT and its representatives were provided with access to a virtual data room of PAD, which included business and legal due diligence materials as well as financial information of PAD. In addition, representatives of PAD provided FACT with summary financial information and projections of the post-deSPAC entity, including certain assumptions regarding the acquisition of certain target companies by PAD.
During this period, discussions on behalf of FACT were led by Adam Gishen, together with Richard Nespola, Jr., Min Lee and Joseph Wagman. Discussions on behalf of PAD were led by Brent Borden, Chief Executive Officer of PAD, together with Ron Buschur, Vice Chairman of the PAD Board. Representatives of BTIG facilitated the introduction and provided market data related to PAD’s public market peer group, including valuation multiples of revenue and EBITDA and other operating key performance indicators of comparable aerospace and defense companies, which FACT’s management used as reference points in evaluating PAD’s potential valuation and growth profile. After reviewing these materials, FACT arranged its first introductory call with PAD’s senior management on June 4, 2025, during which PAD’s management provided to FACT’s management an overview of its business, financial profile and growth strategy.
From May 5, 2026 to June 27, 2026, PAD executed a targeted search and evaluation of potential SPAC partners that included a company overview and discussion with multiple candidates, assessing each candidate’s management team experience, transaction structure, strategic fit, and capital in trust. PAD conducted comprehensive reviews of each SPAC’s advantages, risks, and value-creation capabilities, including alignment with the company’s business model, financial outlook, and growth strategy, ultimately selecting FACT as a partner to support a successful public market transition.
On June 11, 2025, representatives of FACT held a call with BTIG to discuss valuation multiples in the aerospace and defense sector and address certain industry due diligence items to inform a proposal for a letter of intent (“LOI”) to PAD. Following that call, representatives of FACT requested additional materials from BTIG, including a list of companies in the defense sector comparable to PAD and their current and forward valuation multiples, as well as a revenue and EBITDA bridge analysis for 2026. On June 12, 2025, BTIG provided FACT with these additional materials. On June 13, 2025, FACT presented an initial non-binding LOI proposal to PAD and BTIG. On June 20, 2025, PAD and BTIG provided a revised LOI to FACT. On June 27, 2025, FACT and PAD held an additional management call during which the parties exchanged preliminary information concerning PAD’s commercial performance, financial outlook and strategic priorities, and FACT provided further detail regarding its investment criteria, valuation framework and expectations for potential transaction structures. During these discussions, representatives of FACT and PAD began discussing potential valuation parameters for a business combination transaction. FACT’s management indicated that it generally evaluated potential targets using valuation multiples derived from comparable publicly traded aerospace and defense companies, while PAD’s management emphasized the company’s expected growth trajectory and acquisition pipeline as justification for valuation metrics that would reflect projected future financial performance.
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On June 29, 2025, FACT presented a revised LOI to PAD and BTIG that addressed key considerations, including a minimum cash condition, governance and sponsor share earnout provisions. In presenting this revised draft, representatives of FACT indicated that the revised LOI reflected the parties’ latest discussion points, including a $75.0 million minimum cash condition, one board seat for the Sponsor and earnout provisions with triggers at a volume-weighted average trading price (“VWAP”) of $12.50 and $15.00 for any 20 out of 30 consecutive trading days. On July 1, 2025, representatives of FACT (Adam Gishen and Richard Nespola, Jr.), PAD and BTIG met in person in New York at BTIG’s offices, followed by lunch, to discuss the LOI and potential business combination. The meeting focused on PAD’s key business lines, mergers and acquisitions pipeline, capital requirements and the feasibility of pursuing a business combination transaction within the time period by which FACT must consummate its initial business combination. The parties also discussed the potential involvement and support from FACT’s management and directors, including capital markets strategy, corporate governance, and execution of future mergers and acquisitions initiatives. Following the meeting, representatives of FACT, PAD and BTIG engaged in several discussions by telephone and videoconference and exchanged revised drafts of the LOI to address the remaining key terms of the proposed transaction. These discussions focused on, among other things, the minimum cash condition, governance matters, the provisions relating to the Sponsor Performance Bonus Shares, the management incentive pool, transaction expenses, debt financing considerations and other potential incentive programs. During this period, representatives of PAD continued to review the proposed LOI with its legal advisors and the PAD Board. Following the discussions by the representatives of FACT, PAD and BTIG, the parties exchanged additional drafts of the LOI to incorporate changes discussed by the parties, including revised language regarding the Sponsor Performance Bonus Shares with shares released to the Sponsor subject to the following milestones: (i) securing research coverage for PAD; (ii) having a VWAP of $12.50 and $15.00; and (iii) securing an optimal amount of trust capital participation which would be agreed at a future date. Over subsequent days, the LOI, including the Sponsor Performance Bonus Shares provision and the corresponding milestones, was further negotiated to state that Sponsor Performance Bonus Shares would be released to the Sponsor subject to (i) securing research coverage (25% of the Sponsor Performance Bonus Shares) for PAD, (ii) achieving a VWAP of $15.00 for 20 of 30 trading days following the 180 day lock up provision (25% of the Sponsor Performance Bonus Shares) and (iii) securing an optimal amount of trust capital participation which would be agreed prior to the signing of the Business Combination Agreement (50% of Sponsor Performance Bonus Shares). Total Sponsor Performance Bonus Shares were envisaged to be approximately 1,200,000 (based at the time of the LOI on a percentage of fully diluted shares at the time), as subsequently confirmed in the Business Combination Agreement. On July 15, 2025, following these discussions and upon receipt of PAD Board approval, FACT and PAD entered into a confidential non-binding LOI. The LOI contemplated an enterprise value of between $275 million and $300 million (approximately a 12-13x multiple of PAD’s 2026 estimated pro forma EBITDA); a commitment by FACT that it shall have primary capital from a portion of the funds remaining in the Trust Account; and a targeted equity placement at the closing of the business combination to finance the consummation of the Merger. The parties also agreed that $75.0 million would be the minimum cash condition to support PAD’s anticipated acquisition strategy following the closing of the proposed business combination. The LOI further contemplated that key decisions regarding placement agents, investor mix, pricing parameters and covenant structure would be made jointly with PAD management, and that the initial size and composition of the combined company’s board of directors would be set by PAD, provided that the Sponsor would designate one member of the combined company’s board of directors. The parties also agreed in principle to a post-closing lock-up restriction on the trading of the combined company’s securities held by certain key shareholders. The LOI also included a confidentiality provision with respect to the use and disclosure of information provided by each party to the other party in connection with the proposed business combination. The LOI further contemplated an exclusivity period, which would continue until the earlier of (i) the termination or expiration of the LOI and (ii) the execution of an initial business combination agreement.
On July 29, 2025, with the authorization of the PAD Board and PAD’s management, representatives of Lucosky Brookman LLP (“LB”), legal counsel to PAD, delivered an initial draft of the Business Combination Agreement to representatives of Paul Hastings LLP (“Paul Hastings”), legal counsel to FACT. The initial draft of the Business Combination Agreement reflected the general terms agreed to by the parties in the LOI and other provisions.
Between July 29, 2025 and November 26, 2025, the representatives and advisors for FACT and PAD, including Paul Hastings and LB, held numerous conference calls and exchanged multiple drafts of the Business Combination Agreement and the related ancillary agreements, including the Sponsor Support Agreement, the PAD Support Agreements, the Sponsor Lock-Up Agreement, the PAD Shareholder Lock-Up Agreement, the New PAD Charter, and engaged in negotiations of such documents and agreements. The various drafts exchanged reflected the parties’ negotiations on, among other things, the transaction structure, the contemplated financing in connection with the
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transaction, the overall suite of representations, warranties and covenants to be provided by each party under the Business Combination Agreement and other provisions related to risk allocation. The key terms under these agreements were negotiated on the basis of prior discussions on these topics, including the terms of the LOI.
Following the circulation of the initial draft of the agreement, Paul Hastings circulated a revised draft of the Business Combination Agreement on August 8, 2025, with changes that included: (i) removing the Sponsor as a party to the Business Combination Agreement; (ii) eliminating the concept of Preferred Stock of FACT as consideration to be issued in the transaction such that all classes of capital stock of PAD would be exchanged for Public Shares; (iii) adding the concept of FACT issuing to the Sponsor additional equity consideration, including the Sponsor Performance Bonus Shares, in connection with the transaction; (iv) substantive revisions to the representations and warranties of the FACT and of PAD; (v) adding provisions related to any change in the FACT Board’s recommendation to the FACT Shareholders regarding how they should vote with respect to approval of the Business Combination Agreement and related matters; (vi) forfeiture of FACT Class A Shares if FACT has liabilities or expenses that exceed an expense cap; (vii) eliminating conditions relating to binding agreement on certain working capital loans of FACT and the execution of employment agreement with certain PAD management personnel to be engaged by New PAD; and (viii) adding an exception to the exclusivity provisions and giving FACT the ability to terminate the Business Combination Agreement if consistent with its fiduciary obligations under applicable Cayman Islands law. In response to Paul Hastings’ proposed changes, LB circulated an updated draft of the Business Combination Agreement on August 13, 2025, with changes that included: (a) adding back the Sponsor as a party to the Business Combination Agreement; (b) indicating that the parties executing support agreements are PAD’s officers, directors, affiliates, and holders of 5% or more of the voting equity securities of PAD; (c) changing the formulation of additional Sponsor equity consideration proposed under the prior draft; (d) changing the formulation of the Sponsor Performance Bonus Shares calculation and triggers to one or more fixed number or percentage rather than the greater of two numbers or percentages; (e) adding reciprocal provisions related to change of the PAD Board’s recommendation to the PAD Stockholders regarding how to vote on the agreement and related matters;, (f) adding a superior proposal exception to the parties’ exclusivity obligations; (g) adding back the condition relating to binding agreement on certain working capital loans; (h) adding the concept of termination fees for each of FACT and PAD and related triggers; and (i) removed language on a proposed exception to FACT’s exclusivity obligation and its right to terminate the Business Combination Agreement due to fiduciary obligations under applicable Cayman Islands laws.
During the period between August 13, 2025, and September 15, 2025, the parties and their advisers continued to negotiate open issues in the Business Combination Agreement, and LB and Paul Hastings circulated further updated drafts of the Business Combination Agreement with changes reflecting interim developments addressing, among other things, the voting power represented by signatories to the support agreements, revisions to the overall suite of representations, warranties and covenants to be provided by each party therein, an expense cap relating to the Financings, lock-up agreement leak out terms, setting the date after which the parties could terminate the agreement if the Business Combination has not been consummated, and the fiduciary obligation exception to the exclusivity provisions and termination trigger. The draft Business Combination Agreement was also reviewed by PAD’s regulatory counsel, McGuireWoods LLP (“McGuireWoods”), and LB circulated an updated draft of the Business Combination Agreement on October 8, 2025, that included changes reflecting the comments and suggested revisions from McGuireWoods based on it review, in particular those involving representations, warranties, and covenants relating to regulatory compliance and filings, and governmental contracts to which PAD is a party. LB circulated a further revised draft of the Business Combination Agreement on October 25, 2025, with changes reflecting interim developments, including incorporation of the Merger Sub and the parties’ agreement on a cap on the maximum transaction expenses that FACT could incur and its related mechanics. This updated draft also reflected the parties’ continuing negotiations on open issues, including the fiduciary obligation exception to the exclusivity provisions and the termination trigger.
On October 31, 2025, Paul Hastings circulated another revised draft of the Business Combination Agreement that, among other things, further reflected the parties’ understanding with respect to the issuance of certain Public Shares in connection with one or more PAD acquisitions and the mechanics related thereto, defined consideration for the transaction in the form of number of shares instead of percentage of ownership, updated threshold dollar amounts relating to government contracts, and refined the definitions section. Between November 1, 2025 and November 26, 2025, the parties and their advisers continued to discuss and revise the draft Business Combination Agreement and to prepare the same for final review and confirmation by the parties.
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In August 2025 and September 2025, FACT and PAD prepared an investor presentation to approach investors regarding potential financings in connection with the proposed business combination. On September 10, 2025, FACT entered into an engagement letter with CHC in connection with a proposed private placement, backstop financing or other financing by FACT in relation to, or in connection with, the contemplated business combination. Under that engagement, Craig-Hallum agreed to assist with identifying potential investors, formulating a marketing strategy, preparing presentation materials, coordinating due diligence with prospective investors, evaluating proposals and assisting in negotiations and closing. On September 19, 2025, FACT, Craig-Hallum, BTIG and PAD entered into a joinder agreement pursuant to which BTIG joined, in a limited capacity, as lead placement agent with Craig-Hallum in connection with a potential offering of securities related to the contemplated business combination. In September 2025, representatives of FACT and PAD commenced outreach to select potential investors in connection with potential financing options related to the contemplated business combination. During this process, certain institutional investors were wall-crossed and provided with confidential information regarding the contemplated transaction to assess their interest in participating in a potential private investment in public equity or related financing.
On September 10, 2025, the PAD Board held a meeting to discuss, among other things, the status of the Business Combination Agreement and the negotiations being undertaken in connection therewith, and resolved that it was in the best interest of PAD to continue with the proposed business combination and that Maynard J. Hellman, as Chairman of the PAD Board, be authorized to execute the Business Combination Agreement on behalf of PAD.
On September 29, 2025, the FACT Board held a meeting, together with members of FACT management and representatives of Paul Hastings, at which management provided an update regarding the status of discussions between FACT and PAD regarding the potential business combination. An update was also provided regarding discussions with potential third-party investors, along with an overview of PAD’s business. On October 6, 2025, FACT and PAD held a conference call to discuss the status of the Business Combination Agreement, support agreements and other ancillary documents. On October 15, 2025, Richard Nespola, Jr. met with Ron Buschur and Brent Borden in Washington, D.C. to discuss a proposed equity raise and receive an update on the status of the Business Combination Agreement. On October 23, 2025, PAD and FACT received an initial financing term sheet from BC Partners Advisors L.P. (“BC Partners”) through BTIG and Craig-Hallum for a potential financing in connection with the contemplated business combination. The parties reviewed this proposed financing structure as part of their broader evaluation of financing alternatives to support PAD’s post-closing growth strategy and acquisition pipeline. On October 24, 2025, FACT management organized a meeting for PAD management and Craig-Hallum to meet with the FACT Board to discuss current market conditions and potential financing arrangements. At such meeting, Craig-Hallum provided (i) a general overview and update regarding the aerospace and defense industry and the financial markets for SPACs, and (ii) an update regarding discussions with potential third-party investors in connection with a business combination between FACT and PAD. On October 29, 2025, FACT communicated to PAD comments on the initial BC Partners financing term sheet regarding financing costs, certain covenants and the proposed equity investment. On October 30, 2025, PAD shared consolidated comments on the financing term sheet with BC Partners, and updated FACT on the status of key transaction documents, including the Business Combination Agreement, disclosure schedules, and support agreements.
On October 30, 2025, the FACT Board engaged EntrepreneurShares LLC (“ERShares”) to provide a fairness opinion with respect to the contemplated business combination between FACT and PAD. Under its engagement, ERShares was to evaluate the transaction from a financial point of view and provide a fairness opinion letter, discuss the transaction and fairness opinion with the FACT Board and management and provide appropriate disclosure for the Registration Statement on Form S-4 of which this proxy statement/prospectus is a part regarding its fairness opinion. ERShares’ fairness materials reflect that it reviewed, among other things, audited financial statements of FACT and PAD, industry reports, discussions with FACT and PAD management, PAD presentations, financial databases, the LOI, the draft Business Combination Agreement, materials in PAD’s data room and financial projections prepared by PAD management.
On November 3, 2025, PAD received a revised BC Partners term sheet. On November 4, 2025, PAD and FACT reviewed the support agreements and discussed lock-up provisions associated with shares of certain PAD Stockholders. On November 6, 2025, PAD and FACT discussed transaction expenses incurred and related provisions governing the allocation of transaction expenses in the Business Combination Agreement. On November 10, 2025, PAD and FACT
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continued discussions to finalize the dilution model for the transaction, merger consideration, disclosure schedules, lock-up provisions and investor presentation, and FACT and BC Partners discussed the latest draft of the BC Partners term sheet. On November 11 and November 12, 2025, PAD and FACT discussed the BC Partners financing and the status of the Business Combination Agreement. On November 13, 2025, PAD entered into a non-binding indicative term sheet with BC Partners relating to a potential credit facility and equity financing of up to an anticipated aggregate amount of $80 million in connection with the contemplated business combination; the term sheet is subject to numerous conditions, including, without limitation, the completion of due diligence and the execution and delivery of definitive documentation.
On November 18, 2025, PAD and FACT discussed final deal points, including pro forma capitalization and related share counts. On November 19, 2025, PAD and FACT discussed the issuance of a press release to announce entry into the Business Combination Agreement and prepared an initial draft on November 20, 2025. Between November 23, 2025 and November 24, 2025, PAD and FACT discussed the investor presentation for the transaction announcement, interim operating covenants and consent rights for future acquisitions of PAD.
On November 23, 2025, the FACT Board convened a meeting with members of management and representatives of Paul Hastings and ERShares. Representatives of Paul Hastings provided an overview of the terms of the proposed transaction documents, including the Business Combination Agreement, as well as legal due diligence findings. Representatives of ERShares presented to the FACT Board its financial analyses and rendered to the FACT Board its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken as set forth in such opinion, the consideration to be paid by FACT to the PAD Stockholders, in the aggregate, in connection with the Business Combination pursuant to the Business Combination Agreement was fair, from a financial point of view, to all FACT Shareholders (and not any particular group or class thereof). The FACT Board deliberated on these matters and subsequently (i) determined that it is in FACT’s commercial interests that FACT approve the Business Combination Agreement and related transaction documents and the transactions contemplated thereby, and (ii) recommended that the shareholders of FACT approve and adopt the Business Combination Agreement.
On November 26, 2025, the FACT Board approved the Business Combination Agreement, the Sponsor Support Agreement, forms of the related transaction documents, and the Advisory Agreement, which was also approved by FACT’s audit committee. Later, on November 26, 2025, FACT, PAD, Merger Sub and Sponsor HoldCo entered into the Business Combination Agreement; FACT, Sponsor HoldCo and PAD entered into the Sponsor Support Agreement; and FACT and the Sponsor entered into the Advisory Agreement. On November 28, 2025, the PAD Board held a meeting at which it ratified, confirmed, and approved PAD’s entry into the Business Combination Agreement and authorized and approved PAD’s entry into each ancillary agreement to which PAD is a party, and authorized and approved the Merger.
On November 28, 2026, the PAD Board held a meeting where the members of the PAD Board present unanimously (i) ratified, confirmed and approved PAD’s entrance into the Business Combination Agreement, the Sponsor Support Agreement and the Lock-Up Agreements and (ii) recommended, authorized, and approved the Merger and determined that the Merger is in the best interests of the PAD Stockholders.
On December 1, 2025, FACT and PAD issued a joint press release announcing, among other things, the parties’ entry into the Business Combination Agreement. On December 3, 2025, FACT and PAD issued a public announcement and hosted an investor call regarding the Business Combination. In the subsequent weeks, representatives of FACT and PAD continued their outreach to potential third-party investors in connection with the Business Combination.
Following the execution of the Business Combination Agreement and the initial filing of the Registration Statement on January 2, 2026, FACT, PAD and their respective advisors continued to work toward the satisfaction of the closing conditions to the Business Combination, including, among other items, the preparation of amendments to the Registration Statement and the evaluation of financing alternatives intended to satisfy the Minimum FACT Cash Amount, and continued the review of PAD’s acquisition pipeline, acquisition perimeter and related financial performance.
On January 23, 2026, representatives of FACT and PAD held a call to review the capital raise strategy for the Business Combination, including potential sources of cash in connection with any non-redemptions from the Trust Account, or a potential private investment in public equity or other equity financing.
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On February 26, 2026, FACT’s management and the FACT Board held a meeting during which FACT management reviewed the status of the contemplated Business Combination. The matters discussed included, among other items, updates regarding (i) the planned investor day meeting with PAD’s management, (ii) PAD’s pending and current acquisitions in the transaction perimeter and related financial performance, (iii) the status of PAD’s potential financing with BC Partners, and (iv) the estimated timeline for closing the Business Combination.
On March 9, 2026, representatives of FACT held a call with ERShares to notify ERShares of the upcoming investor day presentation. FACT also provided ERShares with an update regarding PAD’s pending and current acquisitions in the transaction perimeter and previewed updated financial projections. The Initial Projections were prepared for use by the FACT Board and ERShares, and were the only projections used by the FACT Board. The March Projections were prepared by PAD for use by investors and ERShares. ERShares indicated that an updated fairness opinion would not be required because (i) PAD’s revised financial projections were materially consistent with the prior projections that ERShares had used to prepare its fairness opinion, and (ii) ERShares’ fairness opinion analysis had conservative valuation scenarios that excluded PAD’s previously targeted inorganic growth with respect to M&A Activity.
On March 12, 2026, FACT and PAD management held an investor day presentation in New York City with market participants regarding PAD, the Business Combination and the related financing process.
On March 27, 2026, LB sent an email to Paul Hastings, copying PAD and FACT, suggesting the need for an amendment to the Business Combination Agreement in light of PAD’s issuance of shares of PAD Series E Preferred Stock, and suggesting that such amendment (i) address the merger consideration payable to the holders of shares of Series E Preferred Stock and (ii) revise Section 6.24 of the Business Combination Agreement (“Management Employment Agreements”) to clarify that only PAD’s Chief Executive Officer and Chief Financial Officer would enter into employment agreements with New PAD.
Following discussions with PAD regarding the terms of the amendment, LB subsequently prepared, and on April 1, 2026, sent to Paul Hastings (copying PAD and FACT), a proposed draft of an amendment to the Business Combination Agreement that (i) provided that, upon the Effective Time, each share of PAD Series E Preferred Stock would be converted into the right to receive (A) $10.00 in cash, which amount is equal to the original purchase price per share of the PAD Series E Preferred Stock, and (B) a number of Public Shares equal to 225,000 divided by the aggregate number of Shares of PAD Series E Preferred Stock outstanding immediately prior to the Closing, (ii) lowered the total number of Public Shares to be issued in exchange for the outstanding shares of PAD Series D Preferred Stock from 300,000 to 276,000 (given that only 368,000 shares of the PAD Series D Preferred Stock had been issued out of the 400,000 authorized), (iii) changed references to listing the New PAD Common Stock and the New PAD public warrants on Nasdaq to NYSE, consistent with the parties’ prior agreement in this regard, (iv) replaced Section 6.24 of the Business Combination Agreement to provide that FACT and PAD shall cause FACT to enter into employment agreements with each of PAD’s Chief Executive Officer and Chief Financial Officer, (v) extended the Outside Date from March 31, 2026 to June 30, 2026, and (vi) revise certain definitions to address the fact that the holders of PAD Series D Preferred Stock and PAD Series E Preferred Stock would not be entering into PAD Support Agreements.
On April 2, 2026, FACT entered into an engagement letter with Truist Securities, Inc. (“Truist”) pursuant to which Truist was engaged as placement agent in connection with a potential private investment of equity or equity-linked securities in connection with the Business Combination.
On April 27, 2026, Paul Hastings provided to LB, FACT and PAD a proposed revised draft of the amendment to the Business Combination Agreement. This draft proposed extending the Outside Date to May 31, 2026 instead of June 30, 2026.
Throughout April 2026, FACT, PAD and Truist held regular calls and exchanged updates regarding the process for a potential private investment of equity or equity-linked securities in connection with the Business Combination, investor outreach, due diligence workstreams and anticipated timing of such potential financing.
On or about May 1, 2026, FACT, PAD and their counsel held an online meeting at which they discussed the current draft of the amendment to the Business Combination Agreement and agreed to use a formula to set the number of Public Shares into which each share of PAD Series E Preferred Stock would convert upon the Effective Time, instead of providing for a set number of Public Shares into which all outstanding shares of PAD Series E Preferred Stock would convert, as the offering of the PAD Series E Preferred Stock had not been completed.
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On May 6, 2026, LB circulated to Paul Hastings, PAD and FACT a revised draft of the amendment that (i) provided that at the Effective Time, each outstanding share of PAD Series E Preferred Stock would convert into the right to receive 1.5 Public Shares (plus an amount in cash equal to the $10.00 purchase price of such share), (ii) provided for an Outside Date of June 30, 2026, and (iii) changed the number of Public Shares that would be issued in exchange for the outstanding PAD Shares at the Effective Time from 12,388,291 to 12,402,577, to reflect the issuance of 14,286 additional PAD Shares to Brent Borden, upon the vesting of restricted stock units, since the date that the parties executed the original Business Combination Agreement.
On May 7, 2026, Paul Hastings circulated to LB, FACT and PAD a revised draft of the amendment to the Business Combination Agreement that made certain clean-up and non-substantive changes to the amendment, following which the parties agreed that the terms of the amendment would be as set forth in such draft. On May 17, 2026, FACT and PAD executed Amendment No. 1 to the Business Combination Agreement.
FACT Board’s Reasons for the Approval of the Business Combination
As detailed above, the prospectus for the IPO identified the general criteria and guidelines that FACT’s management team believed would be important in evaluating prospective target businesses, although in such prospectus FACT also indicated it may enter into a business combination with a target business that does not meet these criteria and guidelines. PAD met a number of the criteria and guidelines that were identified in the IPO prospectus, and following due diligence conducted by FACT’s management and its advisors, and following detailed discussions with PAD, FACT believed PAD to be an attractive business combination target.
The FACT Board considered a wide variety of factors in connection with their evaluation of the proposed business combination between FACT and PAD. In light of the complexity of those factors, the FACT Board, as a whole, did not consider it practicable to, nor did they attempt to, quantify or otherwise assign relative weights to the specific factors they took into account in reaching their decision. Rather, the FACT Board based their evaluation, negotiation and recommendation of the Business Combination on the totality of the information presented to, and considered by, them. The FACT Board considered all of these factors as a whole and, on balance, concluded that they supported a favorable determination that the Business Combination Agreement, the related transaction documents and actions, and the Business Combination are in the best interests of FACT and its shareholders. The FACT Board evaluated the reasons described below with the assistance of FACT’s advisors. Individual members of the FACT Board may have given different weight to different factors. This explanation of the reasons for the FACT Board’s approval of the Business Combination, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.”
Before reaching their decision, the FACT Board reviewed the results of the due diligence conducted by FACT’s management, which included:
• meetings with PAD’s management team to understand and analyze PAD’s business and prospects;
• legal due diligence conducted by Paul Hastings;
• review of PAD’s financial information; and
• review of the proposed structure of the Business Combination and drafts of definitive documents.
The factors considered by the FACT Board included, but were not limited to, the following (which are not weighted or in any order of significance):
• Large and Durable Addressable Market. The FACT Board considered the size, growth trajectory, and fundamental resiliency of the aerospace and defense (“A&D”) industry. The FACT Board noted that global commercial aerospace build rates continue to increase to address significant OEM order backlogs, while U.S. and allied defense budgets remain elevated due to modernization initiatives and ongoing geopolitical tensions. The FACT Board further noted the heightened focus on domestic supply-chain stability, reshoring, and increased reliance on qualified U.S. suppliers capable of providing high-quality, mission-critical components and services. PAD’s operating subsidiaries serve multiple segments of this market, including engineering & sustainment, precision manufacturing, and non-destructive testing, which the FACT Board believes positions PAD to benefit from sustained long-term demand.
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• Systemic Shift Toward More Nimble Suppliers. The FACT Board considered the A&D industry’s continued shift away from large prime contractors to more direct relationships with more nimble suppliers that can deliver critical supply chain materials and capabilities with greater speed, efficiency, and lower costs through streamlined direct working relationship, which is a key component of PAD’s market positioning.
• Ability to Provide Integrated, End-to-End Customer Solutions. The FACT Board considered PAD’s acquisition-driven strategy to combine complementary capabilities within a single coordinated platform. The FACT Board concluded that this model allows PAD to offer a more comprehensive solution set to major OEMs, Tier 1 suppliers, prime defense contractors, and government agencies, thereby improving customer value and reducing supply-chain complexity compared to standalone providers. The FACT Board also noted the longstanding operating histories, technical expertise, and customer relationships of PAD’s core subsidiaries, which collectively establish a foundation for expanded program participation and deeper penetration across both commercial and defense platforms. With PAD’s existing and pending pipeline of acquisitions, the FACT Board believes PAD will be well-positioned to further enhance its suite of offerings and capabilities, allowing it to expand sales opportunities into larger and more valuable long-term opportunities.
• Attractive Business Model and Consolidation Strategy. The FACT Board considered PAD’s strategy of executing acquisitions of established A&D companies and integrating them to realize operational efficiencies, cross-facility synergies, future cost savings, and enhanced operating leverage. The FACT Board recognized that the A&D supply chain remains highly fragmented and that customers place a premium on suppliers able to scale production, reduce lead times, and provide consistent quality across multiple service disciplines. The FACT Board believes that PAD’s asset-lite structure, centralized leadership, shared technology systems, and operational improvement initiatives provide a foundation for increased margins and competitive differentiation.
• Financial Profile and Prospects for Growth. The FACT Board believes that PAD’s long-standing relationships across commercial aerospace, defense, and industrial sectors, combined with its long-term contracts and the potential for revenue growth and margin expansion from integration initiatives, provides the foundation for sustainable profitable growth and strong gross and EBITDA margins. The FACT Board concluded that continued increases in commercial aircraft production rates, sustained defense spending, and diversification into space, power generation, and industrial markets collectively support a favorable long-term outlook. The FACT Board further noted that the Business Combination is expected to enhance PAD’s ability to pursue future acquisitions and execute its growth strategy.
• Experienced Management Team and Board Composition. The FACT Board considered the experience and qualifications of PAD’s senior management team, including their backgrounds in aerospace engineering, precision manufacturing, non-destructive testing, defense procurement, and multi-entity integration. The PAD senior management team’s prior experience leading companies with high-growth and complex operations, thereby demonstrating scale success, was also a factor that was considered by the FACT Board. The FACT Board believes that the combined experience of PAD’s leadership and the oversight of the combined company’s board of directors, which is expected to include certain directors of PAD, a designee of Sponsor HoldCo, and independent directors with relevant industry experience, will support the combined company’s ability to execute its operational improvement plans, integrate acquisitions, and drive long-term stockholder value.
In the course of its deliberations, the FACT Board considered a variety of uncertainties, risks and other challenges relevant to the Business Combination, including the below (which are not weighted or in any order of significance):
• Macroeconomic Risks. The risk that the combined company’s business could be adversely affected by broader macroeconomic conditions, including inflation, supply chain disruptions, or a recession.
• Risks Related to Pending Acquisitions. The risk that the Business Combination Agreement is not strictly conditioned on the simultaneous closing of all pending subsidiary acquisitions. While the PAD Board expects PAD’s management to execute these acquisitions to meet management projections for revenue and EBITDA for fiscal year 2026, there is no contractual guarantee that these targets will be acquired prior to or at the time of the Business Combination closing. If PAD fails to close these acquisitions as expected, the combined company may launch with a smaller asset base and lower revenue than projected.
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• Capital Requirements and Funding. The risk that the combined company may not have sufficient capital to fund the purchase price of the target subsidiaries if redemptions by the Public Shareholders are high and alternative financing is not secured. This could necessitate a restructuring of the growth plan or a reduction in the company’s scale.
• Susceptibility to Reductions in Government and Commercial Spending. The risk that changes in the geopolitical environment or shifting U.S. administration priorities could lead to sequestration, budget cuts, or delays in government defense spending. Similarly, on the commercial side, the risk that major OEMs could pull back on production rates, directly impacting PAD’s revenue stream.
• Benefits May Not Be Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe. This includes the risk that PAD may fail to successfully integrate the disparate IT systems, cultures, and operating procedures of the acquired subsidiaries, delaying the realization of anticipated synergies.
• Redemption Risk. The risk that a significant number of Public Shareholders may elect to redeem their Public Shares prior to the consummation of the Business Combination, which would reduce the amount of cash available to the combined company for growth initiatives and general corporate purposes.
• Limitations of Due Diligence. The risk that the due diligence process undertaken by FACT and its advisors may not have revealed all material issues that may be present with regard to PAD and its subsidiaries, and that it is not possible to entirely eliminate the risk of unknown liabilities.
• Public Market Risks. The risk that the price of the combined company’s securities may be volatile and may decline following the Business Combination. The FACT Board also considered the significant burden and cost of complying with public company reporting requirements and the risk that PAD’s management, which has historically operated privately, may face challenges in adapting to these rigorous standards.
• Liquidation Risk. The risk that the Business Combination may not be consummated within the completion window, in which case FACT would be forced to liquidate and dissolve, and its warrants would expire worthless.
• Litigation. The possibility of litigation challenging the Transactions or that an adverse judgment granting injunctive relief could enjoin or otherwise interfere with the consummation of the Business Combination.
• Fees and Expenses. The fees and expenses associated with completing the Business Combination.
• Other Risks. Various other risks associated with the business of PAD, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement.
• Interests of Certain Persons. The FACT Board also considered the fact that FACT’s and PAD’s officers and directors may have interests in the Business Combination that are different from or in addition to (and that may conflict with) the interests of the Public Shareholders (see “Interests of PAD’s Directors and Officers in the Business Combination”).
• Public Shareholders Will Have a Minority Ownership Interest in New PAD. The fact that the Public Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination and, as a result, the Public Shareholders will collectively own a minority interest in New PAD after the Closing. As redemptions increase, the overall percentage ownership and voting percentage held by the PAD Stockholders, Cormorant, and the other equity investors will increase as compared to the overall percentage ownership and voting percentage held by Public Shareholders, thereby increasing dilution to the Public Shareholders. Having a minority ownership interest may reduce the influence that current Public Shareholders have on the management of New PAD. For more information, see “Dilution.”
In recommending the Business Combination to the FACT Shareholders, the FACT Board considered each of the above factors along with ERShares’ opinion described below under the heading “Opinion of EntrepreneurShares LLC.”
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The FACT Board concluded that the potential benefits that they expected FACT and its shareholders to achieve as a result of the Business Combination outweighed the potential negative factors associated with the Business Combination. Accordingly, the FACT Board unanimously determined that the Business Combination Agreement and the Business Combination were in the best interests of FACT and its shareholders. No unaffiliated representative was retained to act solely on behalf of the FACT Shareholders for purposes of negotiating the terms of the Business Combination Agreement on their behalf and/or preparing a report concerning the approval of the Business Combination.
Benefits and Detriments of the Business Combination
The following describes the potential benefits and detriments to certain groups of stakeholders in connection with the Business Combination:
• FACT:
• Sponsor and Sponsor HoldCo: The Sponsor and Sponsor HoldCo expect to receive substantial consideration in the Business Combination, including the following shares, calculated assuming the 50% Redemptions Scenario: (i) 3,433,179 shares of New PAD Common Stock upon the exchange of 3,433,179 FACT Class B Shares that were initially purchased prior to the FACT IPO for approximately $0.0037 per share and (ii) 331,837 shares of New PAD Common Stock upon the exchange of 331,837 FACT Class A Shares that were initially purchased in the Private Placement for $10.00 per share, and (iii) 134,984 shares of New PAD Common Stock upon the exchange of 134,894 restricted FACT Class A Shares in the Domestication that were initially purchased in the Private Placement (assuming the forfeiture of 1,878,333 Sponsor and FACT Forfeited Shares and 600,000 unvested Sponsor Performance Bonus Shares and no forfeiture of Sponsor HoldCo Contributed Shares). The Sponsor and Sponsor HoldCo are also entitled to continued indemnification by New PAD following the Closing pursuant to the terms of the Business Combination Agreement. The Sponsor and Sponsor HoldCo are also entitled to the repayment of any out-of-pocket expenses, advances or loans made by the Sponsor or Sponsor HoldCo (of which there are none as of the date of this proxy statement/prospectus). For more information, see “— Compensation to be Received by the Sponsor, Sponsor HoldCo and FACT’s Officers and Directors in Connection with the Business Combination.” The Sponsor and Sponsor HoldCo will only be able to realize a return on their equity in FACT (which may be materially higher than the return realized by Public Shareholders) if FACT completes a business combination.
• FACT Independent Directors,
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redemption of such Founder Shares. FACT’s independent directors and advisor are also entitled to the repayment of any out-of-pocket expenses, advances or loans made by them (of which there are none as of the date of this proxy statement/prospectus). Accordingly, in the event that FACT liquidates, the FACT independent directors and advisor may lose their entire investment.
• PAD: The PAD Board determined that the Merger presents an attractive business opportunity in light of certain factors, including that the Merger will expand both the access to capital for PAD and the range of investors potentially available to PAD as a public company, taking into account PAD’s expected cash resources and need for additional capital and the potential infusion of capital at Closing, as well as the ability to use publicly traded New PAD’s Common Stock as consideration for the acquisitions that PAD is currently contemplating as well as to attract talent and engage in additional strategic transactions going forward. The PAD Board also considered the potential uncertainties and risks of the Merger to PAD, including the possibility that the Merger might not be completed in a timely manner or at all, the potential adverse effect of the public announcement of the Merger on PAD’s reputation and its ability to obtain financing in the future in the event that the Merger is not completed, the costs involved in connection with completing the Merger, the time and effort of PAD management required to complete the Merger, the related disruptions or potential disruptions to PAD’s business operations and future prospects, and related administrative challenges associated with combining the companies. For more information, see “— PAD’s Reasons for the Business Combination” and various risks described under the section entitled “Risk Factors.”
• Unaffiliated Public Shareholders:
PAD Series E Preferred Stock Offering
On February 16, 2026, PAD commenced an offering of up to 200,000 shares of PAD Series E Preferred Stock at an offering price of $10.00 per share, or a maximum of $2,000,000. Pursuant to the Certificate of Designation of the Series E Preferred Stock, each share of PAD Series E Preferred Stock will automatically convert into PAD Shares in an amount equal to the purchase price thereof divided by the price per share paid by purchasers in PAD’s initial public listing, multiplied by 1.5. In addition, on the date of PAD’s public listing, PAD will repay to the holders of the PAD Series E Preferred Stock the per-share purchase price of such shares. The Certificate of Designation also provides that there will be a prohibition on the resale of the PAD Shares issued upon conversion of the shares of Series E Preferred Stock until the earlier of six months after the initial date of PAD’s public listing or the written consent of the lead underwriter’s in such public listing to the termination of such prohibition.
The shares of PAD Series E Preferred Stock will be redeemed by PAD in cash equal to the original per-share purchase price, in 20 annual quarterly installments over five years, if PAD is not publicly listed by March 31, 2028.
The holders of shares of PAD Series E Preferred Stock have no voting rights (other than as required by law) and are not entitled to receive dividends.
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PAD will use the proceeds of the offering for general corporate purposes.
PAD will terminate the offering of the PAD Series E Preferred Stock prior to the date on which the Registration Statement is declared effective.
Opinion of EntrepreneurShares LLC
FACT selected ERShares to provide a fairness opinion based on ERShares’ qualifications, experience, and reputation.
ERShares delivered its oral opinion to the FACT Board, subsequently confirmed in writing on November 23, 2025 (the “Opinion”), which sets forth, among other things, the procedures followed, assumptions made, matters considered, and qualifications and limitations on the scope of review undertaken in rendering the Opinion, which is attached to this proxy statement/prospectus as Annex K. The Opinion confirmed that, as of November 23, 2025, the Transaction Consideration to be issued or paid to the shareholders of PAD is fair from a financial point of view to all FACT Shareholders (and not any particular group or class thereof). The Opinion does not constitute a recommendation to the relevant directors and officers of FACT or to any other persons in respect of the Business Combination, including as to how any holders of FACT Class A Shares should vote or act in respect of the Business Combination.
In connection with its analyses in rendering the Opinion, ERShares, among other things:
• Reviewed the financial terms and conditions of the proposed Business Combination set forth in the draft Business Combination Agreement circulated on November 10, 2025;
• Reviewed certain operating information provided to ERShares by management of PAD;
• Reviewed certain guideline public companies and precedent transactions which ERShares viewed as having attributes similar to PAD;
• Reviewed other publicly available industry information (e.g., various equity analyst reports, macroeconomic reports, and public information about guideline companies) available from databases such as S&P Capital IQ (“CapIQ”); and
• Engaged in confirmatory discussions with FACT and PAD regarding PAD’s business and key assumptions and risks associated with PAD’s business plans.
In connection with its analyses, ERShares reviewed and utilized certain financial forecasts and projections for PAD prepared by the management of PAD, including the Initial Projections for revenue (projected revenue of approximately (i) $123 million, pro forma for certain pending and assumed planned acquisitions, and (ii) $83 million, pro forma for certain pending acquisitions) and EBITDA (projected EBITDA of approximately (i) $24 million, pro forma for certain pending and assumed planned acquisitions, and (ii) $16 million, pro forma for certain pending acquisitions) for fiscal year 2026. For purposes of its analysis and the Opinion, ERShares assumed and relied upon the accuracy and completeness of the financial and other publicly available information, and all of the information supplied or otherwise made available to, discussed with, or reviewed by ERShares, without any independent verification of such information (and assumed no responsibility or liability for any independent verification of such information), and further relied upon the assurances of FACT management that they were not aware of any facts or circumstances that would make such information provided to ERShares inaccurate or misleading.
ERShares also assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Business Combination Agreement were true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the Business Combination Agreement, and that all conditions to the consummation of the Business Combination would be satisfied without waiver or modification thereof. ERShares further assumed, in all respects material to its analysis, that all governmental, regulatory, or other consents, approvals or releases necessary for the consummation of the Business Combination would be obtained without any delay, limitation, restriction, or condition that could materially affect the consummation of the Business Combination or reduce the contemplated benefits to the holders of FACT Ordinary Shares.
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ERShares did not, in connection with the Opinion, conduct any physical inspection of properties or facilities associated with PAD. The Opinion is necessarily based upon information made available to ERShares as of November 23, 2025, and financial, economic, market, and other conditions as they existed and could be evaluated as of that date, and does not reflect any subsequent developments. ERShares does not have any obligation to update, revise, or reaffirm the Opinion.
ERShares was not asked to opine on, and the Opinion does not express any views on, (i) any other terms of the Business Combination (except as expressly addressed therein), (ii) FACT’s underlying business decision to proceed with or effect the Business Combination, (iii) the merits of the Business Combination relative to any alternative transaction or business strategy that may be available to FACT, (iv) the amount or nature of the compensation to any officer, director, or employee, or any class of such persons, relative to the compensation to be received by the holders of any class of securities, creditors, or other constituencies of FACT or PAD in the Business Combination, or relative to or in comparison with the Transaction Consideration paid to PAD Shareholders, (v) the fairness of the Business Combination to any particular group or class of securities, creditors, or other constituencies of FACT other than as set forth in the Opinion, or (vi) the solvency, creditworthiness, or fair value of PAD or any other participant in the Business Combination under any applicable laws relating to bankruptcy, insolvency, or similar matters. The Opinion also does not constitute legal, tax, accounting, or regulatory advice.
Set forth below is a summary of the material financial analyses carried out by ERShares, in connection with ERShares rendering the Opinion. The following summary, however, does not purport to be a complete description of the analyses performed by ERShares. The order of the analyses described, and the results of these analyses do not represent relative importance or weight given to these analyses by ERShares. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before November 23, 2025 and is not necessarily indicative of current market conditions.
Summary of ERShares’ Financial Analysis of Company
Market Method
The primary method EntrepreneurShares used as the basis for the fairness opinion assessment was a Market Method, which relied on a combination of (i) a Guideline Publicly Traded Companies Analysis (“GPC Analysis”), (ii) a Guideline Company Analysis (“GCM Analysis”) and (iii) a Guideline Transaction Analysis (“GTM Analysis”) as further described below.
Guideline Publicly Traded Company (“GPC”) Analysis
The GPC Analysis is a market indicator used to value a business. ERShares reviewed and analyzed publicly available data on CapIQ about companies that were considered to have attributes similar to PAD. There are no guideline public companies that are directly comparable to PAD’s future prospective business. ERShares selected a group of 34 guideline public companies that it considered to have attributes similar to PAD (“GPC Guideline Companies”) to use for purposes of the GPC Analysis.
ERShares utilized the platform and analytical tools of CapIQ’s public company database (the “database,” unless otherwise indicated, as accessed as of November 23, 2025 (the “Access Date”)), to assist with the identification of GPC Guideline Companies and to obtain certain publicly available information about those companies. Of the total number of companies with securities listed on a U.S. national securities exchange (“Public Companies”) included in the database, ERShares selected the 34 GPC Guideline Companies.
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The GPC Guideline Companies are as follows:
|
• A2Z Cust2Mate Solutions Corp. (NasdaqCM:AZ) • AerSale Corporation (NasdaqCM:ASLE) • Air Industries Group (NYSEAM:AIRI) • AIRO Group Holdings, Inc. (NasdaqGM:AIRO) • Archer Aviation Inc. (NYSE:ACHR) • BETA Technologies, Inc. (NYSE:BETA) • Byrna Technologies Inc. (NasdaqCM:BYRN) • CPI Aerostructures, Inc. (NYSEAM:CVU) • DEFSEC Technologies Inc. (TSXV:DFSC) • Draganfly Inc. (CNSX:DPRO) • EHang Holdings Limited (NasdaqGM:EH) • Eve Holding, Inc. (NYSE:EVEX) • Firefly Aerospace Inc. (NasdaqGM:FLY) • Innovative Aerosystems, Inc. (NasdaqGS:ISSC) • Intuitive Machines, Inc. (NasdaqGM:LUNR) • Karman Holdings Inc. (NYSE:KRMN) • Loar Holdings Inc. (NYSE:LOAR) |
• Momentus Inc. (NasdaqCM:MNTS) • National Presto Industries, Inc. (NYSE:NPK) • New Horizon Aircraft Ltd. (NasdaqCM:HOVR) • Optex Systems Holdings, Inc (NasdaqCM:OPXS) • Park Aerospace Corp. (NYSE:PKE) • Redwire Corporation (NYSE:RDW) • Safe Pro Group Inc. (NasdaqCM:SPAI) • Satellogic Inc. (NasdaqCM:SATL) • Sidus Space, Inc. (NasdaqCM:SIDU) • SIFCO Industries, Inc. (NYSEAM:SIF) • Silynxcom Ltd. (NYSEAM:SYNX) • TAT Technologies Ltd. (NasdaqGM:TATT) • Vertical Aerospace Ltd. (NYSE:EVTL) • Virgin Galactic Holdings, Inc. (NYSE:SPCE) • VirTra, Inc. (NasdaqCM:VTSI) • VisionWave Holdings, Inc. (NasdaqGM:VWAV) • Voyager Technologies, Inc. (NYSE:VOYG) |
• Worldwide Presence: Of the total number of companies included in the database, ERShares selected a group of 69,335 Public Companies with securities listed on various national exchanges globally in order to incorporate in the GPC Guideline Companies with operations and foci outside as well as inside of United States of America (the “Worldwide Presence Category”).
• All Industrials: Within the companies in the Worldwide Presence Category, ERShares narrowed its search to approximately 9,368 Public Companies that fall within the Global Industry Classification Standards classifications developed by S&P, Dow Jones Indices and MSCI, as of the Access Date general “Industrials” classification (the “Industrials Category”).
• Capital Goods: Within the companies in the Industrials Category, ERShares narrowed its search to approximately 6,457 Public Companies that fall within the Global Industry Classification Standards classifications developed by S&P, Dow Jones Indices and MSCI, as of the Access Date sub-category “Capital Goods” classification (the “Capital Goods”).
• Oil and Gas Refining and Marketing or Aerospace and Defense Category: ERShares’ search was further narrowed to approximately 326 companies within the Capital Goods sub-category, which ERShares considered to have attributes or potential similarities to PAD. These categories include several aerospace propulsion and engineered-component companies, which ERShares considered potentially relevant due to PAD’s component-manufacturing operations.
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• All Major Exchanges: ERShares’ search was further narrowed to approximately 253 companies within the Oil and Gas Refining and Marketing or Aerospace and Defense category, which were listed on major global exchanges.
• Major US Exchanges: ERShares’ search was further narrowed to approximately 70 companies within all the major exchange listing category, which were listed on major US exchanges given the company’s prospective listing on a major US exchange.
• Revenue less than $500M: Among the companies within the Oil and Gas Refining and Marketing or Aerospace and Defense Category listed on major US exchanges, ERShares’ search was further narrowed down to approximately 34 companies that had revenues less than $500M, which ERShares considered most relevant to the Company given its current operations.
For each of the companies listed above, ERShares reviewed the Enterprise Value to Next-Twelve-Months Revenue (“EV/NTM Revenue”), Enterprise Value to Next-Twelve-Months EBITDA (“EV/NTM EBITDA”), Enterprise Value to Last-Twelve-Months Revenue (“EV/LTM Revenue”), and Enterprise Value to Last-Twelve-Months EBITDA (“EV/LTM EBITDA”) multiples, as reported in the most recent public filings and consensus research estimates available as of the Access Date. ERShares observed the following approximate ranges:
• EV/NTM Revenue: 5.43x to 16.58x
• EV/NTM EBITDA: 21.79x to 25.46x
• EV/LTM Revenue: 4.75x to 15.18x
• EV/LTM EBITDA: 15.80x to 23.54x
ERShares calculated representative multiple ranges using the mean and median of the above metrics and applied these ranges to the PAD-provided management projections for revenue and EBITDA for fiscal year 2026. As the 2026 projections included revenue and EBITDA accretion associated with anticipated acquisition activity, ERShares also evaluated the valuation indications assuming such acquisitions were not completed.
Application of these selected multiple ranges resulted in an implied enterprise value range for PAD of approximately $217 million to $2.04 billion. ERShares compared this implied valuation range to the proposed pre-money enterprise value of approximately $317 million.
As an additional analytical reference, ERShares reviewed the highest and lowest revenue multiples observed among the broader comparable universe. ERShares noted a high multiple of approximately 178x on NTM revenue and a low multiple of approximately 0.7x on LTM revenue. Applying these extreme values to the PAD-provided asset base produced an implied enterprise value range of approximately $50 million to $21.9 billion. ERShares used this broad range solely as a high-level boundary check for reasonableness. ERShares did not rely on these extreme multiples in forming its valuation conclusion.
Based on this analysis and comparison, ERShares concluded that the implied enterprise value of PAD derived from the GPC Analysis fell within the range parameters indicated by the selected peers. On that basis, ERShares concluded that the proposed transaction consideration was fair, from a financial point of view, to all FACT Shareholders (and not any particular group or class thereof), under this methodology.
Guideline Company (“GCM”) Analysis
The GCM Analysis is a market indicator used to value a business. ERShares reviewed and analyzed publicly available data on CapIQ about companies that were considered to have attributes similar to PAD. There are no guideline public companies that are directly comparable to PAD’s future prospective business. ERShares selected a group of 14 guideline public companies that it considered to have attributes similar to the Company (“GCM Guideline Companies”) to use for purposes of the GCM Analysis.
ERShares utilized the database, unless otherwise indicated, as of the Access Date, to assist with the identification of GCM Guideline Companies and to obtain certain publicly available information about those companies. Of the total number of companies with securities listed on a U.S. national securities exchange included in the database, ERShares selected the 14 GCM Guideline Companies.
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The GCM Guideline Companies are as follows:
|
• AAR Corp. (NYSE:AIR) • Astronics Corporation (NasdaqGS:ATRO) • Curtiss-Wright Corporation (NYSE:CW) • Ducommun Incorporated (NYSE:DCO) • HEICO Corporation (NYSE:HEI) • Hexcel Corporation (NYSE:HXL) • Moog Inc. (NYSE:MOG.A) |
• VSE Corporation (NasdaqGS:VSEC) • Woodward, Inc. (NasdaqGS:WWD) • CPI Aerostructures, Inc. (NYSEAM:CVU) • Mercury Systems, Inc. (NasdaqGS:MRCY) • TransDigm Group Incorporated (NYSE:TDG) • AerSale Corporation (NasdaqCM:ASLE) • Howmet Aerospace Inc. (NYSE:HWM) |
For each of the companies listed above, ERShares reviewed the Enterprise Value to Next-Twelve-Months Revenue (“EV/NTM Revenue”), Enterprise Value to Next-Twelve-Months EBITDA (“EV/NTM EBITDA”), Enterprise Value to Last-Twelve-Months Revenue (“EV/LTM Revenue”), and Enterprise Value to Last-Twelve-Months EBITDA (“EV/LTM EBITDA”) multiples, as reported in the most recent public filings and consensus research estimates available as of the Access Date. ERShares observed the following approximate ranges:
• EV/NTM Revenue: 3.21x to 4.50x
• EV/NTM EBITDA: 18.56x to 19.83x
• EV/LTM Revenue: 3.15x to 4.61x
• EV/LTM EBITDA: 21.15x to 23.93x
ERShares calculated representative multiple ranges using the mean and median of the above metrics and applied these ranges to the Company-provided management projections for revenue and EBITDA for fiscal year 2026. As the 2026 projections included revenue and EBITDA accretion associated with anticipated acquisition activity, ERShares also evaluated the valuation indications assuming such acquisitions were not completed.
Application of these selected multiple ranges resulted in an implied enterprise value range for PAD of approximately $227 million to $554 million. ERShares compared this implied valuation range to the proposed pre-money enterprise value of approximately $317 million.
As an additional analytical reference, ERShares reviewed the highest and lowest revenue multiples observed among the broader comparable universe. ERShares noted a high multiple of approximately 9.63x on NTM revenue and a low multiple of approximately 0.7x on LTM revenue. Applying these extreme values to the PAD-provided asset base produced an implied enterprise value range of approximately $50 million to $1.18 billion. ERShares used this broad range solely as a high-level boundary check for reasonableness. ERShares did not rely on these extreme multiples in forming its valuation conclusion.
Based on this analysis and comparison, ERShares concluded that the implied enterprise value of PAD derived from the GCM Analysis fell within the range parameters indicated by the selected peers. On that basis, ERShares concluded that the proposed transaction consideration was fair, from a financial point of view, to all FACT Shareholders (and not any particular group or class thereof), under this methodology.
Proxy Guideline Company Analysis
As a supplementary analytical reference within the broader GCM Companies Group, ERShares also reviewed a subset of two publicly traded companies that it considered to exhibit margin characteristics and earnings quality most closely aligned with the Company. From the broader universe described above, ERShares selected Howmet Aerospace Inc. and HEICO Corporation as additional proxy peers due to their similar operating profiles and financial performance relative to PAD.
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ERShares noted that both companies operate highly engineered, mission-critical aerospace component businesses with sustained net income margins that closely bracket PAD’s current and projected performance levels. ERShares further observed that Howmet Aerospace provides a relevant benchmark for precision manufacturing scale, vertical integration, and operational efficiency, while HEICO Corporation reflects a diversified aerospace components model with meaningful aftermarket exposure and high-margin engineered product lines.
ERShares calculated representative multiple ranges using the mean and median of the above metrics and applied these ranges to the PAD-provided management projections for revenue and EBITDA for fiscal year 2026. As the 2026 projections included revenue and EBITDA accretion associated with anticipated acquisition activity, ERShares also evaluated the valuation indications assuming such acquisitions were not completed.
Application of these selected multiple ranges resulted in an implied enterprise value range for PAD of approximately $493 million to $1.13 billion, which ERShares compared to the proposed pre-money enterprise value of approximately $317 million.
ERShares considered this subset solely as an additional qualitative and quantitative reference point in assessing the reasonableness of PAD’s projected profitability profile within the broader aerospace and defense supplier landscape. This supplemental comparison did not constitute a separate valuation methodology, nor was it independently determinative of the Opinion.
Guideline Transaction (“GTM”) Analysis
The GTM Analysis is a market method examining comparable transactions based on ERShares’ review and analysis of publicly available data (sourced through the subscription database Pitchbook) about initial public offerings, M&A and Buyout/LBO. Within these guidelines, the following factors were considered in determining the appropriateness of transactions for inclusion in the GTM Analysis carried out by ERShares: (i) sector; (ii) deal completion/announced; and (iii) deal status. Utilizing the criteria set forth above, ERShares identified 6 guideline transactions (the “GTM Guideline Transactions” and collectively, the “Guideline Transactions Group”) that ERShares considered relevant for comparative purposes, though, as described below, none of the selected transactions has characteristics identical to the proposed Business Combination or involves businesses that are identical to the Company. The categories of transactions used by ERShares as criteria for inclusion in the Guideline Transactions Group can be summarized as follows, based on information accessed by ERShares through Pitchbook on November 23, 2025:
The GTM Guideline Transactions are as follows:
|
• TriMas Aerospace • Nasmyth Group • Ekoscan Integrity |
• Evident Inspection Technologies • Kencoa Aerospace • Dexon Technology |
• Business Products and Services Sector: ERShares focused on transactions involving companies falling in the Pitchbook Industries and Verticals Business Products and Services Sector, specifically in the commercial products, computer hardware and commercial services group, primarily focused on the aerospace industry which it considered most likely to encompass companies that have similarities to PAD in terms of operation characteristics and trajectories.
• Generating Revenues: Among transactions falling into the Business Products and Services (Aerospace) category, ERShares selected transactions involving privately owned companies generating revenues. ERShares considered these types of transactions to be similar to the proposed Business Combination, given the similarities these companies had to the characteristics of PAD.
• Guideline Transaction Date: Among the Business Products and Services (Aerospace) category, EntrepreneurShares selected transactions consummated/announced after January 1, 2023 (“Recent Guideline Transaction Dates”), as EntrepreneurShares considered these transactions to be of greater potential relevance to a GTM Analysis than transactions consummated during prior periods due to market conditions and other factors relevant to Business Products and Services (aerospace) companies transactions generally.
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For each of the companies listed above, ERShares reviewed the Enterprise Value to Revenue (“EV/Revenue”) and Enterprise Value to EBITDA (“EV/EBITDA”) multiples, as reported in the pitchbook research estimates available as of the Access Date. ERShares observed the following approximate ranges:
• EV/Revenue: 2.53x to 3.11x
• EV/EBITDA: 14.08x to 16.00x
ERShares calculated representative multiple ranges using the mean and median of the above metrics and applied these ranges to the PAD-provided management projections for revenue and EBITDA for fiscal year 2026. As the 2026 projections included revenue and EBITDA accretion associated with anticipated acquisition activity, ERShares also evaluated the valuation indications assuming such acquisitions were not completed.
Application of these selected multiple ranges resulted in an implied enterprise value range for PAD of approximately $179 million to $323 million. ERShares compared this implied valuation range to the proposed pre-money enterprise value of approximately $317 million.
As an additional analytical reference, ERShares reviewed the highest and lowest revenue multiples observed among the broader comparable universe. ERShares noted a high multiple of approximately 23.19x on EBITDA and a low multiple of approximately 0.31x on revenue. Applying these extreme values to the PAD-provided asset base produced an implied enterprise value range of approximately $22 million to $557 million. ERShares used this broad range solely as a high-level boundary check for reasonableness. ERShares did not rely on these extreme multiples in forming its valuation conclusion.
Based on this analysis and comparison, ERShares concluded that the implied enterprise value of PAD derived from the GTM Analysis fell within the range parameters indicated by the selected peers. On that basis, ERShares concluded that the proposed transaction consideration was fair, from a financial point of view, to all FACT Shareholders (and not any particular group or class thereof), under this methodology.
Miscellaneous
The foregoing summary of certain financial analyses does not purport to be a complete description of the analyses or data presented by ERShares and is qualified in its entirety by reference to the full text of the Opinion, which is as attached as Annex K to this proxy statement/prospectus. In connection with the evaluation of the Transaction Consideration, ERShares performed a variety of financial and comparative analyses for the purpose of rendering the Opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary descriptions. In arriving at its opinion, ERShares considered the results of all analyses as a whole and did not form a conclusion based on any single analysis. Rather, ERShares made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. In addition, ERShares may have given certain analyses and factors more or less weight than others and may have determined certain assumptions more or less probable than others. As a result, the range of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of ERShares with respect to the actual value or potential future value of PAD. Further, ERShares’ analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of FACT, PAD or their respective officers, managers and advisors. All projections, estimates, or valuations contained herein are illustrative and inherently subject to significant economic, market, and regulatory uncertainties. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying the Opinion.
The Opinion was addressed to the FACT Board for its use in evaluating the proposed Business Combination. The Opinion does not constitute a recommendation to any shareholder as to how to vote with respect to the Business Combination. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. The results, information and estimates contained in these analyses are not intended to be, and should not be interpreted or construed as, indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Furthermore, ERShares’ analysis is dependent entirely on information, that was provided to ERShares by PAD, without independent verification by ERShares. Illustrative
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information, business plans, prospects and other information that was used in, and the results derived from, ERShares’ analyses are inherently subject to substantial uncertainty, and ERShares assumes no responsibility if future results are materially different.
In connection with its engagement, ERShares received the following compensation. FACT agreed to pay ERShares a fee of $75,000. $10,000 of the fee was paid upon commencement of the engagement and $65,000 of the fee was paid upon delivery of the oral opinion. The fee was not contingent upon the conclusion reached in the Opinion or the successful completion of the Business Combination.
Sources and Uses of Proceeds
The following table summarizes the anticipated sources and uses of funds in the Business Combination. Such table is for illustrative purposes only. Where actual amounts are not known or knowable, the figures below represent good faith estimates of such amounts.
Sources and Uses of Proceeds (50% Redemptions Scenario) (in millions)
|
Sources ($ in millions): |
Uses: |
|||||||
|
Existing shareholder rollover(1)(2) |
$ |
124.0 |
Existing shareholder rollover(1)(2) |
$ |
124.0 |
|||
|
Conversion of PAD Preferred Stock(1)(3) |
|
10.4 |
Conversion of PAD Preferred |
|
10.4 |
|||
|
Acquisition Shares(1)(4) |
|
16.7 |
Acquisition Shares(1)(4) |
|
16.7 |
|||
|
Cash in Trust Account(5) |
|
92.7 |
Cash repayment to holders of PAD Preferred Stock(6) |
|
9.4 |
|||
|
FACT and affiliates rollover(2)(7) |
|
43.4 |
Acquisition costs(8) |
|
43.0 |
|||
|
Financings(9) |
|
75.0 |
Deal fees(10) |
|
17.9 |
|||
|
Credit Facility(11) |
|
25.0 |
FACT and affiliates rollover |
|
43.4 |
|||
|
|
|
Cash to balance sheet |
|
122.3 |
||||
|
Total Sources |
$ |
387.3 |
Total Uses |
$ |
387.3 |
|||
____________
(1) Assumes $151.1 million pre-transaction equity value (existing shareholder rollover of $124.0 million common equity, conversion of $10.4 million of shares of PAD Preferred Stock and $16.7 million of shares of New PAD Common Stock to fund additional acquisitions pursuant to agreements that PAD enters into prior to the Closing Date).
(2) Assumes 100% rollover equity.
(3) Represents conversion of PAD Preferred Stock into 1,044,500 shares of New PAD Common Stock (shares of PAD Series A Preferred Stock convert into 200,000 shares of New PAD Common Stock, shares of PAD Series B Preferred Stock convert into 146,500 shares of New PAD Common Stock, shares of PAD Series C Preferred Stock convert into 275,000 shares of New PAD Common Stock, shares of PAD Series D Preferred Stock convert into 276,000 shares of New PAD Common Stock, and 98,000 shares of PAD Series E Preferred Stock convert into 147,000 shares of New PAD Common Stock).
(4) Represents the equity issuable in connection with the pending acquisitions of Aerodyn Engineering, LLC and Western Professional, Inc.
(5) Assumes 50% potential redemptions = $92.7 million cash in the Trust Account (8,750,000 shares at $10.59 per share).
(6) Represents the cash portion of the Merger Consideration payable to holders of PAD Preferred Stock in an amount equal to the original purchase price, or $5.00 per share, plus accrued dividends outstanding with respect to the PAD Series A Preferred Stock and the PAD Series B Preferred Stock, the original purchase price, or $5.00 per share, with respect to the PAD Series C Preferred Stock and the PAD Series D Preferred Stock, and the original purchase price, or $10.00 per share, with respect to the PAD Series E Preferred Stock.
(7) Shares of New PAD Common Stock owned by the Sponsor and FACT Insiders pro-forma ownership at Closing ($33.0 million) and vested Sponsor Performance Bonus Shares ($6.0 million). This illustrative analysis assumes that the Sponsor and FACT Insiders do not own shares in excess of such cap. Figure also includes shares of $2.2 million held by the underwriters in the IPO and shares held by members of the FACT Board of $2.2 million.
(8) Represents the cash and promissory note portion of the purchase price for Aerodyn Engineering, LLC, Aerofab NDT LLC, and Western Professional, Inc.
(9) Assumes that the Financings are in an aggregate amount equal to the Minimum FACT Cash Amount.
(10) Includes deferred underwriters’ fees, legal fees related to the Business Combination, and M&A advisory fees related to acquisitions.
(11) Assumes the proceeds of a $25.0 million credit facility (the “Credit Facility”) that PAD intends to obtain at or prior to the Closing, although PAD has not yet entered into a definitive agreement in connection with such Credit Facility.
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Satisfaction of 80% Test
It is a requirement under Nasdaq rules that FACT completes one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of FACT’s signing a definitive agreement in connection with its initial business combination.
As of the date of the execution of the Business Combination Agreement, the balance of funds in the Trust Account was approximately $183.2 million, plus taxes payable on the income earned on the Trust Account, and 80% thereof was approximately $146.6 million. Based on the implied pre-money equity value of PAD of approximately $133.1 million with another $54.5 million of equity to fund acquisitions (or approximately $136.9 million adjusted using the treasury share method to account for currently outstanding options and the exclusion of approximately $20 million in unallocated shares under PAD’s existing incentive plan), the FACT Board determined that such requirement was met. In light of the financial background and experience of the members of FACT’s management team and the FACT Board, the FACT Board believes that the members of FACT’s management team and FACT Board are qualified to determine whether the Business Combination meets the 80% test.
Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination
In considering the recommendation of the FACT Board to vote in favor of approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal, the Charter Proposal, the Incentive Plan Proposal, the Director Election Proposal and the Adjournment Proposal, FACT Shareholders should keep in mind that the Sponsor, Sponsor HoldCo, and FACT’s directors and executive officers, and entities affiliated with them, have interests in such proposals that are different from, or in addition to, the interests of unaffiliated FACT Shareholders. Further, FACT’s officers and directors have additional fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity, which are set forth in more detail in the section titled “Information About FACT — Conflicts of Interest.” We believe that there were no such opportunities that were not presented as a result of the existing fiduciary or contractual obligations of our officers and directors to other entities. The FACT Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and Business Combination Agreement and in recommending to our shareholders that they vote in favor of the proposals to be presented at the EGM, including the Business Combination Proposal. FACT Shareholders should take these interests into account in deciding whether to approve the proposals presented at the EGM, including the Business Combination Proposal. These interests include, among other things:
• the fact that Sponsor HoldCo holds 5,613,333 Founder Shares that were initially purchased for an aggregate of $25,000 (reflecting the forfeiture of 875,000 Founder Shares by Sponsor HoldCo due to the over-allotment option of the underwriters in connection with FACT’s IPO not being exercised), and such shares will have a significantly higher value at the time of the Business Combination, estimated at approximately $[•] based on the closing price of $[•] per FACT Class A Share on Nasdaq on [•], 2026. FACT estimates that, at the Closing, the Sponsor will hold an aggregate of [•] shares of New PAD Common Stock issued upon the conversion of such Founder Shares (assuming the 50% Redemptions Scenario and the forfeiture of [•] FACT Forfeited Shares and no forfeiture of Sponsor HoldCo Contributed Shares), which, if unrestricted and freely tradeable, would be valued at approximately $[•], based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
• the fact that Sponsor HoldCo may receive additional equity consideration at Closing so that it will hold an aggregate of 3,300,000 shares of New PAD Common Stock immediately following the Closing, and may also receive up to 1,200,000 additional shares of New PAD Common Stock as Sponsor Performance Bonus Shares if specified triggering events occur during the Performance Bonus Period, including securing research coverage for the combined company, the trading price of New PAD Common Stock reaching specified thresholds, and the Trust Account meeting certain minimum balance thresholds following redemptions;
• the fact that each of FACT’s independent directors, its Executive Chairman and its Senior Advisor hold 30,000, 130,000 and 20,000 Founder Shares, respectively, which shares were transferred to such persons by Sponsor HoldCo in connection with their service to FACT, and such shares will have value at the time of the Business Combination, estimated at approximately $[•] based on the closing price of $[•] per FACT Class A Share on Nasdaq on [•], 2026. FACT estimates that, at the Closing, FACT’s independent directors,
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its Executive Chairman and its Senior Advisor will hold 30,000, 130,000 and 20,000 shares of New PAD Common Stock each, respectively, if unrestricted and freely tradeable, would be valued at approximately $[•], based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
• the fact that, as a result of the low purchase price paid for the Founder Shares, if the Business Combination is completed, the Sponsor and FACT’s independent directors and advisor are likely to be able to make a substantial profit on their investment in FACT even at a time when the New PAD Common Stock has lost significant value. Accordingly, the economic interests of the Sponsor and FACT’s independent directors and advisor diverge from the economic interests of Public Shareholders because the Sponsor and FACT’s independent directors and advisor will realize a gain on its investment from the completion of any business combination while Public Shareholders will realize a gain only if the post-closing trading price exceeds $10.00 per share;
• the fact that Sponsor and Sponsor HoldCo collectively hold 440,000 Private Placement Units (including 325,000 restricted FACT Class A Shares owned by Sponsor HoldCo that would vest only upon the consummation of our initial business combination), initially purchased for $10.00 per share in the Private Placement, which will then automatically convert at the effective time of the Domestication into an equal number of shares of New PAD Common Stock. FACT estimates that, at the Closing, if unrestricted and freely tradeable, such units would be valued at approximately $[•], based on the $[•] closing price of the FACT Class A Shares on [•], 2026;
• the fact that Sponsor, Sponsor HoldCo, and FACT’s directors and advisor who own FACT Ordinary Shares have each waived their right to redeem any FACT Ordinary Shares held by them in connection with the shareholder vote to approve the Business Combination;
• the fact that, if FACT were to liquidate rather than complete an initial business combination, the Sponsor and Sponsor HoldCo will lose their entire investment in FACT, which totals approximately $4,425,000 as of the date of this proxy statement/prospectus, comprising the $25,000 purchase price for the Founder Shares and the $4,400,000 purchase price for the Private Placement Units and Private Placement Securities purchased by Sponsor in the Private Placement. The potential loss of this investment may have incentivized Sponsor and its affiliates to pursue a business combination transaction on unfavorable terms in order to avoid a liquidation;
• the fact that, if the Trust Account is liquidated, including in the event FACT is unable to complete an initial business combination within the completion window, the Sponsor and Sponsor HoldCo has agreed that it will be liable to FACT if and to the extent any claims by a third party for services rendered or products sold to FACT, or a prospective target business with which FACT has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable and up to $100,000 of interest to pay dissolution expenses; provided that such obligation will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account (whether or not such waiver is enforceable), any claims by FACT’s independent registered public accounting firm, or any claims under the indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act;
• the fact that, pursuant to the Registration Rights Agreement, the Sponsor, Sponsor HoldCo, and FACT’s independent directors and advisor will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the New PAD Common Stock following the consummation of the Business Combination. FACT estimates that the Sponsor, Sponsor HoldCo, and FACT’s independent directors and advisor will hold an aggregate of [•] shares of New PAD Common Stock subject to registration rights, assuming the 50% Redemptions Scenario, the forfeiture of [•] FACT Forfeited Shares and no forfeiture of Sponsor HoldCo Contributed Shares, and using a Redemption Price of approximately $[•];
• the fact that the FACT Articles contain a waiver of the corporate opportunity doctrine, and there could have been business combination targets that would have been appropriate for a combination with FACT but were not offered due to a FACT director’s duties to another entity. FACT does not believe that the waiver of the corporate opportunity doctrine in the FACT Articles interfered with its ability to identify an acquisition target; and
• the continued indemnification of former and current directors and officers of FACT, Sponsor and Sponsor HoldCo and the continuation of directors’ and officer’s liability insurance after the Business Combination.
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In addition, as a result of multiple business affiliations, our directors and officers have fiduciary, contractual or similar legal obligations to other entities, which may require our directors and officers to present a business combination opportunity to such other entity and only present it to us if such entity rejects the opportunity, subject to his or her fiduciary duties under Cayman Islands law. We believe, however, that there were no such corporate opportunities presented to our directors and officers that were not presented to FACT, and therefore that our directors’ and officers’ additional fiduciary, contractual, or similar legal obligations to other entities did not impact our search for a business combination target. For more information, see “Information About FACT — Conflicts of Interest.”
Compensation to be Received by the Sponsor, Sponsor HoldCo and FACT’s Officers and Directors in Connection with the Business Combination
Set forth below is a summary of the amount of compensation and securities received or to be received by the Sponsor, Sponsor HoldCo, and FACT’s officers and directors in connection with the Business Combination.
|
Securities to be Received |
Other Compensation |
|||
|
Sponsor |
10,680 shares of New PAD Common Stock upon the exchange of 10,680 Private Placement Units in the Domestication that were initially purchased in the Private Placement for $10.00 per unit (assuming the forfeiture of 5,169 FACT Forfeited Shares, no forfeiture of Sponsor HoldCo Contributed Shares and the issuance of 1,651 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered). Assumes that the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered. |
Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
||
|
Sponsor HoldCo |
(i) 3,433,179 shares of New PAD Common Stock upon the exchange of 3,433,179 Founder Shares in the Domestication that were initially purchased prior to the IPO for approximately $0.0037 per share, (ii) 331,837 shares of New PAD Common Stock upon the exchange of 331,837 FACT Class A Shares in the Domestication that were initially purchased in the Private Placement for $10.00 per unit, and (iii) 134,984 shares of New PAD Common Stock upon the exchange of 134,894 restricted FACT Class A Shares in the Domestication that were initially purchased in the Private Placement (assuming the forfeiture of 1,873,164 FACT Forfeited Shares, no forfeiture of Sponsor HoldCo Contributed Shares and the issuance of 598,349 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered).Assumes that the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is not triggered. |
Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
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|
Securities to be Received |
Other Compensation |
|||
|
FACT’s Independent Directors |
Each of FACT’s independent directors will receive 30,000 shares of New PAD Common Stock upon the exchange of 30,000 Founder Shares held by them in the Domestication, which shares were issued to them as consideration for services rendered to FACT. |
Reimbursement for loans and advances to FACT; no such amounts are outstanding as of the date of this proxy statement/prospectus. Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
||
|
FACT Executive Chairman |
Will receive 130,000 shares of New PAD Common Stock upon the exchange of 130,000 Founder Shares held by him in the Domestication, which shares were issued as consideration for services rendered to FACT. |
Reimbursement for loans and advances to FACT; no such amounts are outstanding as of the date of this proxy statement/prospectus. Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. Continued indemnification and the continuation of directors’ and officer’s liability insurance after the Business Combination. |
||
|
FACT’s Senior Advisor |
FACT’s Senior Advisor will receive 20,000 shares of New PAD Common Stock upon the exchange of 20,000 Founder Shares held by them in the Domestication, which shares were issued to them as consideration for services rendered to FACT. |
Reimbursement for out-of-pocket expenses incurred related to identifying, negotiating, investigating and completing the Business Combination; no such amounts are outstanding as of the date of this proxy statement/prospectus. |
The securities to be issued to the Sponsor, Sponsor HoldCo, and FACT’s officers and directors may result in a material dilution of the equity interests of non-redeeming Public Shareholders. FACT’s independent directors are not members of the Sponsor and are not affiliates of Sponsor HoldCo. None of the funds in the Trust Account will be used to compensate our officers or directors. Except for administrative services fees paid or to be paid to the Sponsor, no compensation of any kind, including finder’s and consulting fees, have been paid or will be paid to the Sponsor, Sponsor HoldCo, officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of the Business Combination. However, as detailed above, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations, as discussed above. The reimbursement of expenses and advances to the Sponsor, Sponsor HoldCo, and FACT’s officers and directors may result in a material dilution of the equity interests of non-redeeming Public Shareholders.
Certain Engagements in Connection with the Business Combination
FACT engaged BTIG, CHC and Truist as co-placement agents, and named CCM and CHC as financial advisors, and CCM and Seaport as capital markets advisors. For more information, see “Questions and Answers About the Business Combination — What underwriting and placement agency fees are payable in connection with the Business Combination?”
In addition, each of BTIG, CCM, CHC, Seaport and Truist is a securities firm engaged in a wide range of activities for its own accounts and the accounts of others including securities underwriting, trading and brokerage activities, financing, investment banking and management, prime brokerage, individual wealth management, commodities and derivatives trading, foreign exchange, and financial advisory services. Each of BTIG, CCM, CHC, Seaport and Truist (and each their respective affiliates, directors and officers), in the course of their business, may, for its own account or the accounts of others, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, in any of the Company’s or any other company’s debt or equity securities or loans or any related derivative
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instrument. In addition, at any given time each of the placement agents and/or any of their affiliates may have been and/or could be engaged by one or more entities that may be competitors with, or otherwise adverse to, the Company in matters unrelated to any proposed transaction.
PAD’s Reasons for the Business Combination
The PAD Board evaluated a range of strategic alternatives to support PAD’s long-term growth, capital needs, and stockholder value. After consideration of the Business Combination Agreement and the terms of the Merger, including consultation with independent financial and legal advisors, the PAD Board adopted resolutions (i) determining that the Merger is in the best interests of PAD’s stockholders and recommending, authorizing and approving the Merger and (ii) ratifying, confirming, and approving PAD’s entry into the Business Combination Agreement.
In reaching its decision to recommend and approve the Merger and ratify PAD’s entry into the Business Combination Agreement, the PAD Board consulted with PAD’s management, as well as its financial and legal advisors, and considered a number of factors, including:
i. the Merger will expand both PAD’s access to capital and the range of investors potentially available to it as a public company, compared to the investors to which PAD could otherwise have access if it continued to operate as a privately-held company;
ii. PAD’s expected cash resources, its need for additional capital and the potential infusion of capital at Closing from anticipated simultaneous closing of equity and/or debt financings;
iii. the ability to use the publicly traded New PAD Common Stock as consideration for the acquisitions that PAD is currently contemplating as well as to attract talent and engage in additional strategic transactions going forward, which the PAD Board views as key to scaling in a competitive market;
iv. the PAD Board’s belief that the Merger, in light of PAD’s prior efforts with respect to conducting an initial public offering during 2024, provides a viable public listing strategy and access to available capital, and addresses the risk of the potential lack of an available market for an initial public offering at a later date;
v. the PAD Board’s belief that a de-SPAC structure to raising capital mitigates execution risk because the transaction’s valuation and financing commitments are negotiated and secured in advance of closing, whereas a traditional initial public offering is priced immediately before trading and can be affected by short-term market volatility;
vi. the PAD Board’s belief that the transaction with FACT in particular will benefit PAD and New PAD by providing access to the Sponsor’s capital markets expertise, introductions to potential investors that are current investors and/or contacts of the Sponsor, and support in transitioning to public company operations; and
vii. that the Merger will provide PAD’s existing stockholders both liquidity opportunities and ongoing ownership in a well-capitalized public company, and the likelihood of available alternatives (including continuing as a privately held company, attempting an initial public offering again either currently or at a later date, or being acquired by another entity, and the associated risks of delay, non-consummation or unavailability thereof) offering stockholders a comparable outcome.
The PAD Board also considered a number of uncertainties and risks concerning the Merger, including the following:
i. the possibility that the Merger might not be completed in a timely manner or at all, and the potential adverse effect of the public announcement of the Merger on PAD’s reputation and its ability to obtain financing in the future in the event that the Merger is not completed;
ii. the costs involved in connection with completing the Merger, the time and effort of PAD’s management required to complete the Merger, the related disruptions or potential disruptions to PAD’s business operations and future prospects, and related administrative challenges associated with combining the companies;
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iii. the additional expenses and obligations to which PAD’s business will be subject following the Merger that PAD has not previously been subject to, and the operational changes to PAD’s business, in each case that may result from being a public company;
iv. the risk that the current FACT Shareholders can redeem their FACT Class A Shares for cash in connection with the consummation of the Merger, thereby reducing the amount of cash available to New PAD following the consummation of the Merger; and
v. the possibility of litigation challenging the Merger.
The foregoing discussion of the factors considered by the PAD Board is not intended to be exhaustive but, rather, includes the material factors considered by the PAD Board. In reaching its decision to ratify and approve PAD’s entry into the Business Combination Agreement and recommend, authorize and approve the Merger, the PAD Board did not quantify or assign any relative weights to the factors considered and individual directors may have given different weights to different factors. The PAD Board considered all these factors as a whole, including discussions with, and questioning of, PAD’s management and financial and legal advisors, concluded that the potentially negative factors associated with the Merger were outweighed by the potential benefits that it expected that the PAD Stockholders would receive as a result of the Merger and, overall, considered these factors to be favorable to and to support its determination.
Interests of PAD’s Directors and Officers in the Business Combination
PAD’s directors and officers have interests in the Business Combination that are different from, or in addition to, those of the PAD Stockholders generally.
These interests include the interests listed below:
• PAD’s executive officers are expected to become executive officers of New PAD upon the Effective Time. Specifically, Brent Borden, who is the Chief Executive Officer of PAD, is expected to become the Chief Executive Officer of New PAD and Kevin Vermeulen II, who is the Chief Financial Officer of PAD, is expected to become the Chief Financial Officer of New PAD, in each case upon the Effective Time. In each case, they are expected to continue to receive the same compensation and benefits, including substantially similar equity awards, as they currently receive under their existing employment agreements with PAD and, pursuant to the terms of the Business Combination Agreement, will enter into employment agreements with New PAD to this effect.
• The current directors of PAD are expected to become directors of New PAD upon the Effective Time. Specifically: Maynard Hellman, who is the Chairman of PAD, is expected to become the Chairman of New PAD; Ronald Buschur, who is the Vice Chairman of PAD, is expected to become the Vice Chairman of New PAD; Glenn Argenbright, who is a director of PAD, is expected to become a director of New PAD; Larry Thompson, who is a director of PAD, is expected to become a director of New PAD; and Dave Lawrence, who is a director of PAD, is expected to become a director of New PAD, in each case upon the Effective Time. In each case, they are expected to continue to receive the same compensation and benefits, including substantially similar equity awards, as they currently receive under their existing agreements with PAD.
• Each member of the PAD Board holds options to purchase 20,833 PAD Shares at $5.00 per share, which will be converted into New PAD Options.
• David Lawrence, a member of the PAD Board, is the Manager and former owner of PAD’s Aerodyn subsidiary, and pursuant to PAD’s agreement with him will receive, upon consummation of the Business Combination, approximately 1,125,000 shares of New PAD Common Stock and $34,515,000 in cash.
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In addition, three of PAD’s Directors own shares of PAD Preferred Stock, which will be converted into the right to receive shares of New PAD Common Stock and $5.00 cash per share, upon consummation of the Business Combination, as follows:
• Larry Thompson — 10,000 shares of PAD Series A Preferred Stock, 30,000 shares of PAD Series C Preferred Stock and 16,000 shares of PAD Series D Preferred Stock.
• Glennon Argenbright — 40,000 shares PAD Series C Preferred Stock.
• Maynard J. Hellman — 20,000 shares of PAD Series C Preferred Stock.
Further, certain of PAD’s directors are holders of, and/or are affiliated with entities that are holders of, PAD equity interests and in such capacity will be entitled to receive the applicable portion of the Merger Consideration payable to all holders of such equity interests pursuant to the terms of the Business Combination Agreement.
Financial Projections
The FACT Board considered certain financial projections of PAD for the years ending December 31, 2025 and December 31, 2026, as prepared by PAD’s management in November 2025 (the “Initial Projections”), in connection with its review and approval of the Business Combination Agreement and the Business Combination, as set forth below:
|
2025 |
2026 |
2026 |
||||||||||
|
Revenue |
$ |
73,414 |
|
$ |
84,950 |
|
$ |
128,882 |
|
|||
|
% Growth |
|
1.3 |
% |
|
15.7 |
% |
|
75.6 |
% |
|||
|
Cost of Sales |
|
43,374 |
|
|
46,634 |
|
|
54,687 |
|
|||
|
% of Revenue |
|
59.1 |
% |
|
54.9 |
% |
|
42.4 |
% |
|||
|
|
|
|
|
|
|
|||||||
|
Gross Profit |
|
30,040 |
|
|
38,316 |
|
|
74,195 |
|
|||
|
% of Revenue |
|
40.9 |
% |
|
45.1 |
% |
|
57.6 |
% |
|||
|
Total Operating Expense (Excl. D&A) |
|
15,665 |
|
|
22,112 |
|
|
49,140 |
|
|||
|
% of Revenue |
|
21.3 |
% |
|
26.0 |
% |
|
38.1 |
% |
|||
|
|
|
|
|
|
|
|||||||
|
EBITDA |
|
14,375 |
|
|
16,205 |
|
|
25,055 |
|
|||
|
% of Revenue |
|
19.6 |
% |
|
19.1 |
% |
|
19.4 |
% |
|||
PAD’s management prepared the Initial Projections in a combined format, that is, on a pro forma consolidated basis with PAD’s existing subsidiaries and pending acquisitions (which pending acquisitions for purposes of 2025 included Rompec Aerospace, Inc., Diagnostic Solutions International, Inc. and J&T Investments, LLC). PAD’s management included a 2026 inorganic growth target assumption with the Initial Projections, including, on a pro forma consolidated basis, the expected results of additional entities targeted for acquisition in the 2026 calendar year. PAD has not yet entered into definitive acquisition agreements with these additional entities targeted for acquisition.
PAD included certain pro forma financial information for the years ending December 31, 2024 and December 31, 2025, and certain pro forma financial projections for the year ended December 31, 2026, in each case as prepared by PAD’s management in March 2026 (the “March Projections”), in an investor presentation presented at and released in connection with PAD’s Investor Day held on March 12, 2026. There can be no assurance that the March Projections will be realized.
The Initial Projections were prepared for use by the FACT Board and ERShares, and were the only projections used by the FACT Board. The March Projections were prepared by PAD for use by investors and ERShares. Accordingly, the Initial Projections provided to the FACT Board are no longer fully reflective of PAD Management’s future expected performance. There can be no assurance that the March Projections will be realized.
PAD’s management provided the March Projections in a combined format (on a pro forma consolidated basis with PAD’s existing subsidiaries and the pending acquisitions of Western Professional, Inc., Southern Precision Machining, LLC, and, an entity with which PAD is currently negotiating an acquisition agreement, Diagnostic Solutions International, LLC) for the fiscal years ending December 31, 2024 through December 31, 2026. PAD’s management included a 2026 inorganic growth target assumption, including, on a pro forma consolidated basis, the
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expected results of additional entities targeted for acquisition in the 2026 calendar year. PAD has not yet entered into definitive acquisition agreements with these additional entities targeted for acquisition. The fiscal years ending December 31, 2024 and December 31, 2025 reflect actual operating results. The following is a summary table of the March Projections:
|
2024 |
2025 |
2026 |
2026 |
|||||||||||||
|
Revenue |
$ |
72,450 |
|
$ |
72,980 |
|
$ |
83,834 |
|
$ |
130,834 |
|
||||
|
% Growth |
|
NA |
|
|
0.7 |
% |
|
14.9 |
% |
|
69.0 |
% |
||||
|
Cost of Sales |
|
46,882 |
|
|
45,786 |
|
|
51,675 |
|
|
76,545 |
|
||||
|
% of Revenue |
|
64.7 |
% |
|
62.7 |
% |
|
61.6 |
% |
|
58.5 |
% |
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Gross Profit |
|
25,568 |
|
|
27,194 |
|
|
32,159 |
|
|
54,289 |
|
||||
|
% of Revenue |
|
35.3 |
% |
|
37.3 |
% |
|
38.4 |
% |
|
41.5 |
% |
||||
|
Total Operating Expense (Excl. D&A) |
|
16,250 |
|
|
15,498 |
|
|
16,366 |
|
|
29,094 |
|
||||
|
% of Revenue |
|
22.4 |
% |
|
21.2 |
% |
|
19.5 |
% |
|
22.2 |
% |
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
EBITDA |
|
11,660 |
|
|
13,263 |
|
|
15,778 |
|
|
25,195 |
|
||||
|
% of Revenue |
|
16.1 |
% |
|
18.2 |
% |
|
18.8 |
% |
|
19.3 |
% |
||||
The Initial Projections and the March Projections (collectively the “Projections”) were not prepared with a view toward compliance with published guidelines of the SEC regarding projections, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or U.S. GAAP. The Projections have not been audited. Kreit & Chiu CPA, LLP has not audited, reviewed, examined, compiled, or applied agreed-upon procedures with respect to the Projections and, accordingly, Kreit & Chiu CPA, LLP does not express an opinion or any other form of assurance with respect thereto. The Kreit & Chiu CPA, LLP reports included in this proxy statement/prospectus relate to PAD’s previously issued financial statements. They do not extend to the Projections and should not be read to do so.
The Projections were based upon various estimates and assumptions that relate only to the periods presented and on information known or estimated as of the date the Projections were prepared. There can be no assurance that the Projections will be realized or that actual results will not be significantly lower or higher than estimated. FACT Shareholders and PAD Stockholders are urged to review the section entitled “Risk Factors” in this proxy statement/prospectus for a description of the risks relating to PAD’s business. FACT Shareholders and PAD Stockholders should also read the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this proxy statement/prospectus for additional information regarding the risks inherent in forward-looking information such as the Projections.
The Initial Projections and the March Projections differ as PAD has since terminated definitive agreements with Rompec Aerospace, Inc. and J & T Investments, LLC, and entered into a definitive acquisition agreement with Southern Precision Machining. The removal of Rompec Aerospace and Pro-Con Manufacturing and the inclusion of Southern Precision Machining LLC in the March Projections is the primary reason for the differences between the Initial Projections and the March Projections.
Comparing the Initial Projections with the March Projections with respect to the information presented for the year ended December 31, 2025, the removal of Rompec Aerospace, Inc. and J & T Investments, LLC resulted in decreases in Revenues, Gross Profit, and EBITDA of $12.8 million, $6.7 million, and $2.9 million, respectively. This was partially offset from the addition of Southern Precision Machining LLC, which resulted in increases in Revenues, Gross Profit, and EBITDA of $17.5 million, $5.4 million, and $2.9 million, respectively. Additionally, delays in scheduled shipments and extended lead times from outside service providers contributed to decreases in Revenues, Gross Profit, and EBITDA of $5.2 million, $1.5 million, and $1.2 million, respectively, in the 2025 results reflected in the March Projections, which included actual results for the 2025 calendar year, compared to the Initial Projections.
Comparing the Initial Projections with the March Projections with respect to the information presented for the year ended December 31, 2026, the removal of Rompec Aerospace, Inc. and J & T Investments, LLC resulted in decreases in Revenues, Gross Profit, and EBITDA of $14.8 million, $7.4, million and $3.3 million, respectively. This was partially offset by the addition of Southern Precision Machining LLC’s results, which resulted in increases in Revenues, Gross Profit, and EBITDA of $20.4 million, $6.3 million, and $3.8 million, respectively. The 2026 results
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included in the March Projections also reflected additional decreases by in Revenues, Gross Profit, and EBITDA of $6.8 million, $5.1 million, and ($0.9 million), respectively. These differences are not attributable to any material adverse development, but rather management’s adoption of more conservative assumptions as additional operational data became available during the intervening period. Management revised the 2026 projections as reflected in the March Projections downward to take a more conservative posture toward the timing of revenue recognition of purchase orders and expected order conversion timelines, and a decision to limit revenue assumptions to substantially awarded or high-confidence backlog rather than probability-weighted pipeline, reflecting defense procurement uncertainties including continuing resolution dynamics and shifting prime contractor release schedules.
Comparing the Initial Projections with the March Projections with respect to the information presented for the year ended December 31, 2026, the Projections included assumptions of additional acquisition targets that differed between the Initial Projections and March Projections. The Initial Projections included acquisition targets that resulted in increases in Revenues, Gross Profit, and EBITDA of $43.9 million, $16.4 million and $8.9 million, respectively. The March Projections included acquisition targets that resulted in increases in Revenues, Gross Profit, and EBITDA of $47.0 million, $22.1 million and $9.4 million, respectively. These differences are not attributable to any material adverse development, but rather as a result of management’s consistent reevaluation of the M&A landscape for additional entities targeted for acquisition with which PAD has not yet entered into definitive acquisition agreements.
PAD, as a matter of course, does not publicly disclose forecasts, internal projections as to future performance, revenues, earnings, or other projected results of operations due to the inherent unpredictability and subjectivity of underlying assumptions and projections. PAD’s financial results for the fiscal years ended December 31, 2024 and 2025, materially differed, and future financial results may materially differ, from those expressed in the Projections due to a number of factors, some of which are beyond PAD’s ability to control or predict. PAD cannot make any assurances that the Projections will be realized or that PAD’s future financial results will not materially vary from the Projections. In particular, the Projections should not be used as public guidance.
Material Bases and Assumptions
The Projections are based on the following material bases, assumptions, and factors:
Material Bases
The projections are derived from:
a.PAD’s existing contracted backlog as of December 31, 2025, representing executed customer agreements with fixed or determinable pricing and delivery schedules. PAD’s backlog totaled $89.6 million, with $52.7 million schedules to ship in 2026. This accounts for 63% of PAD’s 2026 revenue projection;
b.PAD management’s expectations of its near-term sales pipeline, informed by ongoing commercial discussions with existing customers (including expected renewals, expansions, and reorders based on historical purchasing patterns) and with prospective customers in active procurement processes. Additionally, assumptions incorporate new customer approvals, entry into repair and overhaul following recent certification, increased military platform work, and expanded commercial aerospace programs;
c. PAD management’s expectations on broader industry tailwinds in aerospace and defense non-destructive testing, — including production rate increases, maintenance, repair and overhaul demand on aging fleets, and continuation of outsourcing trends;
d. PAD’s observed year-to-date bookings trends through March 1, 2026, extrapolated forward based on management’s view of seasonality, customer concentration, and end-market demand;
e. Projected cost of revenue assumes stable input costs based on existing supplier arrangements, anticipated efficiencies from manufacturing initiatives, and a stable mix of direct labor/materials/overhead. Gross margin is projected to improve from approximately 37% to approximately 38% over the projection period; and
f. Projected operating expenses reflect management’s current operating plan and are generally expected to scale with the growth of the business, consistent with PAD’s historical cost structure and recent operating experience. Public-company costs of approximately $1.0 million annually are included beginning in 2026 to reflect incremental expenses associated with operating as a public company following the Business Combination.
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Material Assumptions
The projections assume the successful completion of the following transactions on substantially the terms currently contemplated:
a. PAD’s acquisition of Southern Precision Machining LLC;
b. PAD’s acquisition of Western Professional, Inc.; and
c. PAD’s acquisition of Diagnostic Solutions International, LLC, with respect to which PAD has entered into a non-binding letter of intent Diagnostic Solutions International, LLC.
No specific growth rate or discount rate was applied in preparing the projections. For additional information on these transactions, see “Recent and Pending Acquisitions.”
Macroeconomic and industry assumptions. The Projections assume no material adverse change in (i) general economic conditions, (ii) the regulatory environment applicable to PAD’s business, (iii) the competitive landscape in PAD’s end markets, (iv) interest rates, foreign exchange rates, or commodity prices beyond currently observable forward curves, and (v) PAD’s ability to attract and retain key personnel. The Projections also assume the timely consummation of the Business Combination and PAD’s continued access to capital on terms consistent with management’s current expectations.
PAD’s expects its projected EBITDA margin to continue to improve due to increased revenues across its subsidiaries driven by expanded capacity, new customer acquisitions, and expansion to additional customer programs, along with a reduction in expenses as a percentage of revenue as revenues are projected to increase at a higher rate than the projected growth in expenses. PAD expects to achieve cost efficiencies through increased economies of scale, including greater utilization of existing and newly expanded production capacity expected to result from pending acquisitions, improved labor efficiencies, ramp-up of specialized personnel from partial to full utilization, and leveraging of centralized back-office and support functions across subsidiaries, which will allow PAD to manage increased production volumes and new customer programs without a proportional increase in overhead, technology, or operational support expenses. Additional margin benefits are expected from approvals and certifications enabling bids on larger, higher-margin parts and entry into repair and overhaul work. These projected cost savings are expected to be partially offset by increased investment in personnel and training to support capacity expansion, inflation, material costs that are largely variable to revenue growth, phased capital expenditures tied to facility and equipment expansion, and costs associated with integrating and realizing efficiencies from any future acquisitions.
PAD expects its expenses as a percentage of revenue to decrease over time as revenues are expected to increase from PAD’s M&A Activity and synergies with entities it expects to acquire pursuant to pending acquisitions. PAD expects revenues and expenses to grow at different rates, as PAD has economies of scale and a decentralized management that can manage multiple locations without the need for additional manning, technology, marketing, or operational support expenses. PAD expects expense growth to remain consistent over time (at a lower rate than revenue growth) at a subsidiary level. At group headquarter level, PAD expects that there will be consistent expense growth over time as PAD’s management team expands; as noted above, however, PAD does not expect expenses to grow at the same rate as its revenues.
PAD believes that the assumptions used to derive the Projections are both reasonable and supportable. In preparing the Projections, PAD’s management relied on several factors, including (i) the significant collective experience of the PAD Board and PAD’s executive team, and (ii) PAD’s historical performance, including track record and approach to growth. The Projections, while presented with numerical specificity, reflect numerous assumptions, and estimates with respect to PAD’s performance, industry performance, general business, economic, regulatory, market and financial conditions and other matters, many of which are difficult to predict, subject to significant economic and competitive uncertainties and beyond PAD’s control.
Expected Accounting Treatment for the Business Combination
The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with U.S. GAAP as PAD has been determined to be the accounting acquirer under all redemption scenarios presented. Under this method of accounting, FACT, the legal acquirer, will be treated as the accounting acquiree for financial reporting
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purposes, and PAD, the legal acquiree, will be treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities, and results of operations of PAD will become the historical financial statements of New PAD, and FACT’s assets, liabilities, and results operations will be consolidated with PAD’s starting from the Closing Date. For accounting purposes, the financial statements of New PAD will represent a continuation of the financial statements of PAD, with the Business Combination being treated as the equivalent of PAD issuing stock for the net assets of FACT, accompanied by recapitalization. The net assets of FACT will be stated at historical carrying values, and no goodwill or other intangible assets will be recorded. Operations prior to the Business Combination will be presented as those of PAD in future final reporting of New PAD.
PAD was determined to be the accounting acquirer under all of the redemption scenarios presented based on the evaluation of the following facts and circumstances:
• PAD is the larger entity based on the presence of substantive operations and employee base and will assume the ongoing operations of New PAD;
• PAD Stockholders will have the greatest voting interest that ranges from 35.5% to 48.0% in New PAD under various redemption scenarios;
• PAD’s existing stockholders will have the greatest ability to influence decisions regarding the election and removal of the New PAD Board;
• PAD will hold a majority of New PAD’s Directors;
• PAD’s operations prior to the acquisition will comprise the only ongoing operations of New PAD;
• PAD’s senior management will comprise the senior management of New PAD;
• New PAD will assume PAD’s name;
• PAD’s headquarters will become New PAD headquarters; and
• FACT does not meet the definition of a business.
The final allocation of consideration payable to PAD equity holders will be determined upon the completion of the Business Combination and related events and could differ materially from the three scenarios presented.
The Business Combination Agreement
This subsection of the proxy statement/prospectus describes the material provisions of the Business Combination Agreement, but does not purport to describe all of the terms of the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus and incorporated herein by reference. You are urged to read the Business Combination Agreement in its entirety because it is the primary legal document that governs the Business Combination.
The Business Combination Agreement contains representations, warranties and covenants that the respective parties thereto made to each other as of the date of the Business Combination Agreement and/or other specific dates. The assertions and obligations embodied in those representations, warranties, and covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties thereto in connection with negotiating the Business Combination Agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in part by the underlying disclosure schedules of PAD (the “PAD Disclosure Schedules”) and the disclosure schedules of FACT (the “FACT Disclosure Schedules”), that are not filed publicly and that are subject to a contractual standard of materiality different from that generally applicable to shareholders and were used for the purpose of allocating risk among the parties rather than establishing matters as facts. Additionally, the representations and warranties of the parties to the Business Combination Agreement may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement/prospectus. Accordingly, no person should rely on the representations and warranties in the Business Combination Agreement or the summaries thereof in this proxy statement/prospectus as characterizations of the actual state of facts about the FACT, PAD, or any other matter.
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Merger Consideration
The Merger Consideration to be issued and paid to the PAD Stockholders in connection with the Merger shall consist of the following: (i) each PAD Share that is issued and outstanding immediately prior to the Effective Time (other than any treasury shares and dissenting shares) will be automatically canceled and converted into the right to receive a number of Public Shares equal to 12,402,577 divided by the number of PAD Shares issued and outstanding immediately prior to the Effective Time; (ii) each share of PAD Series A Preferred Stock (other than the treasury and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of the PAD Series A Preferred Stock, and (B) a number of Public Shares equal to 621,500 divided by the number of shares of PAD Series A Preferred Stock, PAD Series B Preferred Stock and PAD Series C Preferred Stock issued and outstanding immediately prior to the Effective Time; (iii) each share of PAD Series B Preferred Stock (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of PAD Series B Preferred Stock, and (B) the Per Share Series A-C Preferred Stock Consideration; (iv) each share of PAD Series C Preferred Stock (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of PAD Series C Preferred Stock, and (B) the Per Share Series A-C Preferred Stock Consideration; (v) each share of PAD Series D Preferred Stock (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash, which amount is equal to the original purchase price per share of PAD Series D Preferred Stock, and (B) a number of Public Shares equal to 276,000 divided by the number of shares of PAD Series D Preferred Stock issued and outstanding immediately prior to the Effective Time; each share of PAD Series E Preferred Stock (other than any treasury shares and dissenting shares) that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $10.00 in cash, which amount is equal to the original purchase price per share of PAD Series E Preferred Stock, and (B) 1.5 Public Shares; and (vii) each PAD Option that is outstanding as of immediately prior to the Effective Time will be automatically canceled and converted into an option to purchase Public Shares upon the same terms and conditions as are in effect with respect to such PAD Option immediately prior to the Effective Time.
In addition, as discussed below in “Information About PAD,” PAD has entered into agreements to acquire two companies, Western Professional, Inc. and Southern Precision Machining, LLC; PAD is also negotiating an acquisition agreement with Diagnostic Solutions International, LLC (collectively, the “Pending Acquisitions”). The Business Combination Agreement also permits PAD (or its subsidiaries) to enter into agreements with respect to additional acquisitions (the “Company Acquisitions” and, together with the Pending Acquisitions, the “Specified Acquisitions”) before the Closing, as long as the number of shares of New PAD Common Stock issuable with respect to the Specified Acquisitions (the “Acquisition Shares”), regardless of whether they would be consummated before or after the Closing, would not exceed 5,447,084. With respect to the Specified Acquisitions, the Business Combination Agreement provides that (i) if any Specified Acquisition is consummated on or before the Closing Date, the Acquisition Shares issuable in respect of such Specified Acquisition will be issued to the applicable recipient pursuant to the terms of the definitive agreement(s) providing for such Specified Acquisition, and (ii) if any Specified Acquisition has not been consummated on or before the Closing Date, the Acquisition Shares issuable pursuant to the terms of the definitive agreement(s) providing for such Specified Acquisition shall not be issued and will be issued only upon the consummation, if any, of such Specified Acquisition and in accordance with the terms of the definitive agreements providing for such Specified Acquisition. As a result, any shares of New PAD Common Stock issued in respect of a Specified Acquisition will be in addition to, and will not reduce, the number of shares of New PAD Common Stock otherwise issuable to the PAD Stockholders pursuant to the Merger.
Sponsor Additional Consideration and Performance Bonus Shares
At the Closing, New PAD will issue or allocate to Sponsor HoldCo (i) 3,300,000 shares of New PAD Common Stock, minus (ii) the number of FACT Class A Shares held by Sponsor HoldCo immediately prior to Closing, including such FACT Class A Shares issuable upon the conversion or exchange of any other securities of FACT issued to the Sponsor at the IPO.
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Additionally, at the Closing, New PAD will set aside the Sponsor Performance Bonus Shares, subject to the following milestones:
• upon the date on which Sponsor HoldCo or any of its representatives secures research coverage for PAD, so long as the date on which such research coverage is obtained is prior to the later of (i) the date that is 180 days after the Closing Date or (ii) the date on which the New PAD files its second periodic report on Form 10-Q or Form 10-K after the Closing Date (the “Triggering Event I”), a one-time issuance of 300,000 Sponsor Performance Bonus Shares (as equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combinations, exchanges of shares or other like changes or transactions with respect to Sponsor Performance Bonus Shares, occurring on or after the Closing but prior to Triggering Event I);
• upon the date on which the volume-weighted average trading sale price of one Sponsor Performance Bonus Share on The Nasdaq Capital Market (or such other Exchange on which the FACT Class A Shares or the FACT Common Stock, as applicable, is then listed) is greater than or equal to $15.00 (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combinations, exchanges of shares or other like changes or transactions with respect to the Sponsor Performance Bonus Shares occurring on or after the Closing) for any 20 trading days within any 30 consecutive trading day period within the five years following the Closing Date but after the expiration period applicable to restrictions on the transfer of Sponsor Performance Bonus Shares set forth in the Sponsor Lock-Up Agreement, a one-time issuance of such number of Sponsor Performance Bonus Shares equal to the quotient of $4,500,000 divided by $15.00, which equates to 300,000 Sponsor Performance Bonus Shares; and
• a one-time issuance of (i) 300,000 Sponsor Performance Bonus Shares if, after the exercise of the redemption rights by the Public Shareholders, the Trust Account has a balance of not less than $35,000,000 as of the Closing or (ii) 600,000 Sponsor Performance Bonus Shares if, after the exercise of the redemption rights by the Public Shareholders, the Trust Account has a balance of not less than $70,000,000, in each case after giving effect to the Business Combination.
Representations and Warranties
The Business Combination Agreement contains representations and warranties of PAD, FACT, and Merger Sub, certain of which are qualified by materiality and material adverse effect and knowledge and, as applicable, are further modified and limited by the Disclosure Schedules. The representations and warranties of FACT are also qualified by information included in FACT’s public filings, filed or submitted to the SEC on or prior to the date of the Business Combination Agreement (subject to certain exceptions contemplated by the Business Combination Agreement).
Representations and Warranties of PAD
The Business Combination Agreement contains representations and warranties made by PAD to FACT relating to a number of matters pertaining to PAD, including the following, in each case subject to certain specified exceptions or qualifications set forth in the Business Combination Agreement and PAD Disclosure Schedules:
• organization, qualification to do business, good standing and corporate power of PAD;
• power and authority to execute, deliver and perform its obligations under the Business Combination Agreement and the ancillary agreements;
• capitalization of PAD;
• subsidiaries of PAD;
• governmental and regulatory consents required in connection with the execution of the Business Combination Agreement or the ancillary agreements or the consummation of the Business Combination;
• relevant information from PAD to determine that no pre-merger filing is necessary under the HSR Act;
• absence of conflicts with organizational documents, applicable laws or certain agreements and instruments and the absence of liens as a result of entering into the Business Combination Agreement or the ancillary agreements or consummating the Business Combination;
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• financial statements of PAD;
• absence of any changes constituting a Material Adverse Effect;
• compliance in all material respects with applicable laws;
• necessary license and permits of PAD;
• absence of any current or pending litigation against PAD;
• matters relating to material contracts of PAD;
• matters relating to indebtedness of PAD;
• matters relating to the intellectual property of PAD;
• tax matters of PAD;
• internal accounting controls of PAD;
• matters relating to real property, personal property and assets of PAD;
• employee and employment matters (including employee benefits) of PAD;
• compliance with environmental laws;
• related party transactions of PAD;
• matters relating to PAD’s insurance;
• matters relating PAD’s top customers, vendors and suppliers;
• matters relating to cybersecurity and the protection of personal data;
• compliance of anti-corruption laws, sanctions laws, export control laws, and international trade control laws of various jurisdictions;
• that PAD is not an investment company within the meaning of the Investment Company Act;
• broker’s and finder’s fees incurred by PAD related to the Business Combination; and
• matters relating to government contracts of PAD.
Representations and Warranties of FACT and Merger Sub
The Business Combination Agreement contains representations and warranties made by FACT and Merger Sub to PAD relating to a number of matters pertaining to FACT and Merger Sub, including the following, in each case subject to certain specified exceptions or qualifications set forth in the Business Combination Agreement and FACT Disclosure Schedules:
• organization, qualification to do business, good standing and corporate power of FACT and Merger Sub;
• power and authority to execute, deliver and perform their obligations under the Business Combination Agreement and the ancillary agreements;
• governmental and regulatory consents required in connection with the execution of the Business Combination Agreement or the ancillary agreements or the consummation of the Business Combination;
• relevant information from FACT to determine that no pre-merger filing is necessary under the HSR Act;
• absence of conflicts with organizational documents, applicable laws or certain agreements and instruments and the absence of liens as a result of entering into the Business Combination Agreement or the ancillary agreements or consummating the Business Combination;
• capitalization of FACT and Merger Sub;
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• FACT’s internal control over financial reporting;
• compliance of SEC filings with applicable laws and SEC rules and requirements, as well as financial statements;
• absence of any changes constituting a Material Adverse Effect;
• FACT’s compliance with applicable laws;
• necessary license and permits of FACT;
• tax matters of FACT;
• employee and employment matters (including employee benefits) of FACT;
• matters relating to intellectual property, real property, personal property and assets of FACT;
• matters relating to material contracts of FACT;
• related party transactions of FACT;
• that FACT is not an investment company within the meaning of the Investment Company Act;
• broker’s and finder’s fees of FACT related to the Business Combination;
• compliance of anti-corruption laws, sanctions laws, export control laws, and international trade control laws of various jurisdictions;
• matters relating to FACT’s insurance;
• absence of any current or pending litigation against FACT; and
• balance in the Trust Account, arrangements and contracts pertaining to the Trust Account, and effects of the Business Combination on the Trust Account.
Material Adverse Effect
Under the Business Combination Agreement, certain of the representations and warranties of PAD, FACT and Merger Sub are qualified in whole or in part by a material adverse effect standard for purposes of determining whether a breach of such representations and warranties has occurred.
Pursuant to the Business Combination Agreement, “Material Adverse Effect” means any fact, event, occurrence, change or effect that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect upon (i) the business, assets, liabilities, results of operations or financial condition of such entity and its subsidiaries, taken as a whole, or (ii) the ability of such entity or any of its subsidiaries to consummate the Business Combination or to perform its obligations under the Business Combination Agreement or the Ancillary Documents to which it is or will be party; provided, however, that for purposes of clause (i) above, any fact, event, occurrence, change or effect directly or indirectly attributable to, resulting from, relating to or arising out of the following (by themselves or when aggregated with any other, facts, events, occurrences, changes or effects) shall not be deemed to be, constitute, or be taken into account when determining whether there has or may or would have occurred a Material Adverse Effect:
(i) general global, national, regional, state or local changes in the financial or securities markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets) or general economic or political or social conditions in the country or region in which such entity or any of its subsidiaries do business;
(ii) changes, conditions or effects that generally affect the industries in which such entity or any of its subsidiaries operate;
(iii) changes or proposed changed in U.S. GAAP or other applicable accounting principles or mandatory changes in the regulatory accounting requirements (or any interpretation thereof) applicable to any industry in which such entity and its subsidiaries principally operate;
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(iv) conditions caused by acts of God, epidemic, pandemics (including COVID-19 or any mutation or variation thereof, or any COVID-19 Measures or any change in such COVID-19 Measures or interpretations following the date of the Business Combination Agreement), terrorism, war (whether or not declared), natural or man-made disaster (including fires, flooding, earthquakes, hurricanes and tornados), civil unrest, terrorism or other force majeure or comparable events;
(v) any failure in and of itself by such person and its subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance for any period (provided that the underlying cause of any such failure may be considered in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent not excluded by another exception herein);
(vi) changes attributable to the public announcement or pendency of the transactions (including the impact thereof on relationships with customers, suppliers or employees);
(vii) changes or proposed changes in applicable law (or any interpretation thereof) after the date of the Business Combination Agreement;
(viii) any actions required to be taken, or required not to be taken, pursuant to the terms of the Business Combination Agreement;
(ix) in respect of PAD, any action taken by, or at the written request of, FACT and in respect of FACT, any action taken by, or at the written request of, PAD; or
(x) with respect to FACT, the consummation and effects of the right to redeem all or a portion of its FACT Class A Shares (in connection with the Business Combination or otherwise) as set forth in the FACT Articles;
provided further, however, that any event, occurrence, fact, condition, or change referred to in clauses (i)-(iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, occurrence, fact, condition, or change has a disproportionate effect on such entity and its subsidiaries, taken as a whole, compared to other participants in the industries and geographic location in which such person or any of its subsidiaries conducts its businesses (in which case only the incremental disproportionate impact may be taken into account). Notwithstanding the foregoing, with respect to FACT, the aggregate amount redeemed pursuant to redemption rights shall not be deemed to be a Material Adverse Effect on FACT.
Survival of Representations and Warranties
Except as expressly provided the Business Combination Agreement or in the case of a fraud claim against a person, none of the representations, warranties, covenants, obligations or other agreements in the Business Combination Agreement or in any other certificate, statement or instrument delivered pursuant to the Business Combination Agreement, including any rights arising out of any breach of such representations, warranties, covenants, obligations, agreements and other provisions, will survive the Closing (and there will be no liability after the Closing in respect thereof), except for those covenants and agreements contained therein that by their terms expressly apply in whole or in part after at or after the Closing, and then only in respect to any breaches occurring at or after the Closing.
Covenants and Agreements
Conduct of Business of PAD
PAD has agreed that from the date of the Business Combination Agreement through the earlier of the termination of the Business Combination Agreement or the Closing Date (the “Interim Period”), it will, subject to certain specified exceptions, including as set forth on PAD Disclosure Schedules, by obtaining prior consent of FACT (which consent may not be unreasonably withheld, conditioned or delayed) or as required by applicable law:
(i) conduct its business, in all material respects, in the ordinary course of business;
(ii) comply in all material respects with all laws applicable to it and its business and assets; and
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(iii) preserve intact, in all material respects, its business organization, keep available the services of its managers, directors, officers, employees and consultants, preserve intact in all material respects the possession, control and condition of its material assets, and preserve intact in all material respects its relationships with all material customers and suppliers, in each case consistent with the ordinary course of business; provided that no action or inaction by PAD with respect to matters specifically addressed by clauses (i) through (xxii) described below shall be deemed a breach of the foregoing unless such action or inaction would constitute a breach of such specific provision of (i) through (xxiv) described below.
During the Interim Period, PAD also agreed not to, and to cause its subsidiaries not to, subject to certain specified exceptions, including as set forth on the PAD Disclosure Schedules, by obtaining prior consent of FACT (which consent may not be unreasonably withheld, conditioned or delayed) or as required by applicable law:
(i) amend, waive or otherwise change, in any material respect, its articles of incorporation and bylaws, memorandum and articles of association or similar organizational documents, in each cases, as amended;
(ii) authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any of its equity securities or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its equity securities, or other securities, including any securities convertible into or exchangeable for any of its shares or other equity securities or securities of any class and any other equity-based awards, or engage in any hedging transaction with a third party with respect to such securities other than for any such issuances that are taken into account in the calculation of Aggregate Fully Diluted Company Shares (as defined in the Business Combination Agreement);
(iii) split, combine, recapitalize, subdivide, reclassify any of its shares or other equity interests or issue any other securities in respect thereof or pay or set aside any dividend or other distribution (whether in cash, equity or property or any combination thereof) in respect of its equity interests, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its securities;
(iv) (A) enter into or materially amend definitive documentation in connection with or relating to any Pending Acquisition; provided, however, that in no case shall PAD be restricted in any way to amend any such documentation for the extension or continuation of such documentation in respect of a Pending Acquisition; provided, further, that such extension or continuation does not prevent a Pending Acquisition; or (B) enter into or materially amend any definitive documentation in connection with or relating to a Company Acquisition if the consummation of such Company Acquisition, when aggregated with the consummation of all other Company Acquisitions and Pending Acquisitions (determined without regard to whether such Company Acquisitions and Pending Acquisitions are or will be consummated prior to or after the Closing), would result in the issuance of more than 5,447,084 Acquisition Shares in the aggregate;
(v) (A) incur, create, assume or otherwise become liable for any indebtedness for borrowed money (directly, contingently or otherwise) in excess of $5,000,000 in the aggregate, (B) make a loan or advance to or investment in any third party (other than advancement of expenses to employees in the ordinary course of business), or (C) guarantee or endorse any indebtedness for borrowed money in excess of $1,000,000 individually or $5,000,000 in the aggregate, in each case, except for (1) any such transactions among PAD and its subsidiaries and (2) hedging or over-the-counter derivatives transactions in the ordinary course of business;
(vi) except as required pursuant to any PAD benefit plan or PAD collective bargaining agreement, (A) increase the wages, salaries or compensation of its employees, other than in the ordinary course of business, by more than 10% in the aggregate or 5% with respect to any one employee, (B) make or commit to make any bonus payment (whether in cash, property or securities) to any employee, other than in the ordinary course of business, (C) grant any severance, change in control or termination or similar pay, other than as provided for in any written agreements, in the ordinary course of business, or consistent with past practice, (D) establish any trust or take any other action to secure the payment of any compensation payable by PAD or any of its subsidiaries, (E) materially increase other benefits of any current or former employee, or enter into, establish, materially amend or terminate any company benefit plan with, (F) take any action to accelerate any payments or benefits, or the funding of any payments or benefits, payable or to become payable to any current or former employee or individual service provider, (G) hire any
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employee with annual compensation that could exceed $200,000 or engage any person as an independent contractor with annual payments greater than or equal to $200,000, or (H) terminate the employment of any employee with an annual compensation that could exceed $200,000 other than due to death or disability, or for cause;
(vii) waive any restrictive covenant obligations of any employee or individual independent contractor of PAD or any of its subsidiaries;
(viii) unless required by a PAD benefit plan or a PAD collective bargaining agreement, (A) modify, extend or enter into any PAD collective bargaining agreement, or (B) recognize or certify any labor union, labor organization, works council or other employee-representative body as the bargaining representative for any employees of PAD or any of its subsidiaries;
(ix) (A) make any material tax election or change or rescind any material election in respect of taxes, (B) settle any action in respect of taxes, (C) make any material change to its methods of tax accounting, (D) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of taxes may be issued (other than any extension resulting from an extension to file any tax return obtained in the ordinary course of business), (E) enter into a tax sharing agreement, tax indemnification agreement, tax allocation agreement or similar contract (other than customary commercial contracts not primarily related to taxes), (F) file any amended tax return, any past-due tax return or any tax return in a jurisdiction where PAD or any of its subsidiaries did not file a tax return of the same type in the immediately preceding tax period or a claim for refund of taxes with respect to the income, operations or property of PAD or any of its subsidiaries, (G) enter into any “closing agreement” as described in Section 7121 of the Code (or any comparable, analogous or similar provision under any state, local or non-U.S. tax law) pertaining to taxes with any federal, state, local, foreign or other governmental, quasi-governmental, regulatory or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body (“Governmental Authority”), (H) change its jurisdiction of tax residence, (I) obtain any tax ruling, (J) surrender any right to claim a material tax refund, (K) prepare any tax returns in a manner which is materially inconsistent with the past practices of PAD or any of its subsidiaries with respect to the treatment of items on prior tax returns or (L) incur any material liability for taxes other than in the ordinary course of business consistent with past practice;
(x) (A) other than in the ordinary course of business or between PAD and any of its subsidiaries, (1) sell, assign, transfer or license any intellectual property owned by PAD to any person, other than Incidental Licenses (as defined in the Business Combination Agreement), (2) abandon, permit to lapse, or otherwise dispose of any material registered owned intellectual property, or (3) disclose any material trade secrets owned or held by PAD or any of its subsidiaries to any person who has not entered into a written confidentiality agreement or is not otherwise subject to enforceable confidentiality obligations;
(xi) (A) modify or amend in a manner that is materially adverse to PAD or any of its subsidiaries, or voluntarily terminate (other than non-renewals occurring in the ordinary course of business), any PAD material contract, (B) waive, delay the exercise of, release or assign any material rights or claims under any PAD material contract, or (C) enter into any contract that would be the type of PAD material contract set forth in certain sections of the Business Combination Agreement if entered into prior to the date of the Business Combination Agreement outside of the ordinary course of business;
(xii) fail to maintain its books, accounts, and records in all material respects in the ordinary course of business consistent with past practices;
(xiii) enter into any new (A) line of business or (B) jurisdiction with respect to its current line of business;
(xiv) fail to use commercially reasonable efforts to keep in force insurance policies or replacement or revised policies providing insurance coverage with respect to its assets, operations and activities in such amount and scope of coverage as are currently in effect;
(xv) waive, release, assign, settle or compromise any claim or action (including any action relating to the Business Combination Agreement or the transactions contemplated thereby), other than waivers, releases, assignments, settlements or compromises that involve only the payment of monetary damages (and not
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the imposition of equitable relief on, or the admission of wrongdoing by, such party or its affiliates) not in excess of $200,000 (individually or in the aggregate), or otherwise pay, discharge or satisfy any liabilities or obligations, unless such amount has been or will be reserved in PAD’s financial statements, as applicable;
(xvi) acquire, including by merger, consolidation, acquisition of equity interests or assets, or any other form of business combination, any corporation, partnership, limited liability company, other business organization or any division thereof, or any of assets of any such person;
(xvii) make any capital expenditures in excess of $1,000,000 individually for any project (or set of related projects) or $2,000,000 in the aggregate;
(xviii) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;
(xix) sell, lease, license, transfer, exchange or swap, mortgage or otherwise pledge or encumber (including securitizations), or otherwise dispose of any material portion of the properties, assets or rights of PAD or any of its subsidiaries, taken as a whole;
(xx) enter into any agreement, understanding or arrangement with respect to the voting or transfer of equity securities of PAD or any of its subsidiaries;
(xxi) make any change in accounting methods, principles or practices, except as required by U.S. GAAP or PAD’s auditors;
(xxii) (A) enter into, amend, waive or terminate (other than terminations in accordance with their terms) any transaction with any related person or (B) enter into any contract or arrangement that would have been required to be listed on the PAD Disclosure Schedules if entered into prior to the date of the Business Combination Agreement (other than compensation and benefits and advancement of expenses, in each case, provided in the ordinary course of business);
(xxiii) take any action that would reasonably be expected to significantly delay or impair the obtaining of any Consents of any Governmental Authority to be obtained in connection with the Business Combination Agreement; or
(xxiv) authorize or agree to do any of the foregoing actions.
Conduct of Business of FACT
FACT has agreed that, during the Interim Period, it will, subject to certain specified exceptions, including as set forth on the FACT Disclosure Schedules of the Business Combination Agreement or by obtaining prior consent of PAD (which consent will not be unreasonably withheld, conditioned or delayed) or as required by applicable:
(i) conduct its business, in all material respects, in the ordinary course;
(ii) comply with all laws applicable to FACT and its businesses, assets and employees; and
(iii) preserve intact, in all material respects, its business organization, keep available the services of its managers, directors, officers, employees and consultants, and preserve intact in all material respects the possession, control and condition of its material assets, in each case in the ordinary course of business.
During the Interim Period, FACT also agreed not to, subject to certain specified exceptions, including as set forth on the FACT Disclosure Schedules, by obtaining prior consent of PAD (which consent may not be unreasonably withheld, conditioned or delayed) or as required by applicable law:
(i) amend, waive or otherwise change, in any material respect, its articles of incorporation and bylaws, memorandum and articles of association or similar organizational documents, in each cases, as amended;
(ii) authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any of its equity securities (including the FACT Class A Shares) or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its shares or other equity
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securities, or other securities, including any securities convertible into or exchangeable for any of its equity securities (including the FACT Class A Shares) or other security interests of any class and any other equity-based awards, or engage in any hedging transaction with a third party with respect to such securities;
(iii) split, combine, recapitalize, subdivide, reclassify any of its shares or other equity interests (including the FACT Class A Shares) or issue any other securities in respect thereof or pay or set aside any dividend or other distribution (whether in cash, equity or property or any combination thereof) in respect of its equity interests, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its securities, except for redemptions from the Trust Account that are required in accordance with the prospectus relating to the IPO;
(iv) (A) incur, create, assume or otherwise become liable for any indebtedness for borrowed money (directly, contingently or otherwise), (B) make a loan or advance to or investment in any third party, or (C) guarantee or endorse any indebtedness for borrowed money of any person, in each case, in excess of $250,000 individually or $1,000,000 in the aggregate;
(v) amend, waive or otherwise change the Investment Management Trust Agreement by and between FACT and Odyssey in its capacity as trustee in any manner;
(vi) voluntarily terminate (other than non-renewals occurring in the ordinary course of business), waive or assign any material right under any material agreement (including any FACT material contract) to which it is a party, or enter into any contract that would be a FACT material contract if entered into prior to the date of the Business Combination Agreement;
(vii) establish any subsidiary or enter into any new line of business;
(viii) fail to use commercially reasonable efforts to keep in force insurance policies or replacement or revised policies providing insurance coverage with respect to its assets, operations and activities in such amount and scope of coverage as are currently in effect;
(ix) waive, release, assign, settle or compromise any claim or action (including any action relating the Business Combination Agreement or the transactions contemplated thereby), other than waivers, releases, assignments, settlements or compromises that involve only the payment of monetary damages (and not the imposition of equitable relief on, or the admission of wrongdoing by, FACT) not in excess of $100,000 (individually or in the aggregate), unless such amount has been reserved in FACT’s financial statements;
(x) acquire, including by merger, consolidation, acquisition of equity interests or assets, or any other form of business combination, any corporation, partnership, limited liability company, other business organization or any division thereof, or any of assets of any such person in each case, if the aggregate amount of consideration paid or transferred by FACT would exceed $50,000;
(xi) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization (other than with respect to the Merger);
(xii) enter into any agreement, understanding or arrangement with respect to the voting or transfer of its equity securities (including the FACT Class A Shares);
(xiii) (A) make, change or rescind any material election in respect of taxes, (B) settle any action in respect of taxes, (C) make any material change to its methods of tax accounting, (D) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of taxes may be issued (other than any extension resulting from an extension to file any tax return obtained in the ordinary course of business), (E) enter into a tax sharing agreement, tax indemnification agreement, tax allocation agreement or similar contract (other than customary commercial contracts not primarily related to taxes), (F) file any amended tax return, any past-due tax return or any tax return in a jurisdiction where FACT did not file a tax return of the same type in the immediately preceding tax period or a claim for refund of taxes with respect to its income, operations or property, (G) enter into or terminate any “closing agreement” as described in Section 7121 of the Code (comparable, analogous or similar provision under any state, local or non-U.S. tax law) pertaining to taxes with any Governmental Authority, (H) change
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its jurisdiction of tax residence, (I) obtain any tax ruling, (J) surrender any right to claim a material tax refund, (K) prepare any tax returns in a manner which is materially inconsistent with the past practices with respect to the treatment of items on prior tax returns or (L) incur any material liability for taxes other than in the ordinary course of business consistent with past practice;
(xiv) adopt or enter into any FACT benefit plan (including granting or establishing any form of compensation or benefits to any current or former employee, officer, director or other individual service provider of FACT);
(xv) incur any expenses other than in connection with the implementation of the Business Combination in excess of $250,000 in the aggregate; or
(xvi) authorize or agree to do any of the foregoing actions.
Financial Statements and other Financial Information
Pursuant to the Business Combination Agreement, PAD agreed to use its reasonable best efforts to provide FACT (i) by August 22, 2025, unaudited consolidated financial statements of PAD for the three and six months ended June 30, 2025, and (ii) any other financial statements of PAD required to be delivered by applicable law in connection with the Registration Statement as promptly as reasonably practicable in each case, prepared in accordance with U.S. GAAP.
PAD Support Agreements
Pursuant to the Business Combination Agreement, PAD, FACT, and PAD Stockholders constituting at least a majority of (i) the outstanding PAD Shares and shares of PAD Series A Preferred Stock, PAD Series B Preferred Stock, and PAD Series C Preferred Stock voting as a single class, (ii) the PAD Shares, voting as a separate class, and (iii) each of the PAD Series A Preferred Stock, the PAD Series B Preferred Stock, and the PAD Series C Preferred Stock, each voting as a separate class, have entered into the PAD Support Agreements, pursuant to which each such PAD Supporting Stockholder has agreed to vote: (i) in favor of the Business Combination Agreement and the Business Combination and any other matters necessary or reasonably requested by PAD for consummation of the Merger or any other transactions contemplated by the Business Combination Agreement and the approval of the Business Combination; (ii) against any proposal relating to an Alternative Transaction; and (iii) against any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or FACT of, prevent or nullify any provision of the Business Combination Agreement.
FACT Public Filings
Pursuant to the Business Combination Agreement, FACT agreed to keep current and timely file all of the forms, reports, schedules, statements, and other documents required to be filed by FACT with the SEC and comply in all material respects with securities laws.
Joint Covenants of PAD and FACT
Employment Agreements
Pursuant to the Business Combination Agreement, FACT and PAD agreed to cause FACT to enter into employment agreements with PAD management personnel listed in the PAD Disclosure Schedules.
Exclusivity
Pursuant to the Business Combination Agreement, during the Interim Period, neither PAD nor FACT will, and each agreed to cause each of their respective representatives not to, without the prior written consent of the other, directly or indirectly, (i) solicit, initiate or knowingly facilitate or assist the making, submission or announcement of, or intentionally encourage, any Acquisition Proposal (as defined below), (ii) furnish any non-public information regarding it or its affiliates (or, with respect to PAD, its subsidiaries) or their respective businesses, operations, assets, liabilities, financial condition, prospects or employees to any person or group (other than a party to the Business Combination Agreement or their respective representatives) in connection with or in response to an Acquisition Proposal, (iii) engage or participate in discussions or negotiations with any person or group with respect to, or that
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would reasonably be expected to lead to, an Acquisition Proposal, (iv) approve, endorse or recommend, or publicly propose to approve, endorse or recommend, any Acquisition Proposal, (v) negotiate or enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement in furtherance of any Acquisition Proposal, or (vi) release any third party from, or waive any provision of, any confidentiality agreement.
An “Acquisition Proposal” means any inquiry, proposal or offer, or any indication of interest in making an offer or proposal, from any person or group at any time relating to an Alternative Transaction, and “Alternative Transaction” means (i) with respect to the PAD and its subsidiaries, a transaction (other than the Business Combination) concerning the sale of (A) 15% or more of the business or assets of PAD and its subsidiaries on a consolidated basis or (B) 15% or more of the issued and outstanding shares or other equity interests or profits of PAD, whether such transaction takes the form of a sale of shares or other equity interests, assets, merger, consolidation, issuance of debt securities, management contract, joint venture or partnership, or otherwise, and (ii) with respect to FACT, a transaction (other than the Business Combination) concerning a business combination.
Further, each of FACT, Sponsor HoldCo and PAD must notify the others as promptly as practicable (and in any event within 48 hours after receipt thereof) if they receive any inquiry, proposal or offer, request for information or requests for discussions or negotiations regarding or constituting any Acquisition Proposal or any bona fide inquiry, proposal or offers, request for information or request for discussions or negotiations that would reasonably be expected to result in an Acquisition Proposal, specifying the material terms and conditions thereof (including any changes thereto) and the identity of the person making any such inquiry, proposal, offer or request for information. Each party must keep the others promptly informed of the status of any such inquiries, proposals, offers or requests for information.
Notice of Certain Events
Further, during the Interim Period, each of FACT and PAD agreed to promptly notify the other if it (i) receives any notice or other communication in writing from any third party (including any Governmental Authority) alleging that the consent of such third party is required in connection with the Business Combination or (ii) discovers any fact or circumstance that, or becomes aware of the occurrence of any event that, would cause or would reasonably be expected to cause or result in any of the conditions to Closing not being satisfied or the satisfaction of those conditions being materially delayed. No such notice shall constitute an acknowledgment or admission by the party providing the notice regarding whether any of the conditions to the Closing have been satisfied or in determining whether any of the representations, warranties or covenants contained in the Business Combination Agreement have been breached.
Cooperation with Registration Statement, Proxy Statement/Prospectus, other Filings
Each of PAD and FACT agreed to (i) as promptly as reasonably practicable (and in any event within 40 days) after the date of the Business Combination Agreement, jointly prepare, and that FACT shall file, the Registration Statement, (ii) take any and all reasonable and necessary actions required to satisfy the requirements of the Securities Act, the Exchange Act and other applicable laws in connection with the Registration Statement, and (iii) use their commercially reasonable efforts to cause the Registration Statement to be declared effective.
Directors’ and Officers’ Indemnifications and Liability Insurance
Pursuant to the Business Combination Agreement, FACT, Sponsor HoldCo and PAD agreed that all rights to exculpation, indemnification and advancement of expenses existing in favor of the current or former directors and officers of PAD and each of its subsidiaries and FACT and each person who served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise at the request of the applicable party (the “D&O Indemnified Persons”) as provided in the articles of incorporation and bylaws, memorandum and articles of association or similar organizational documents, in each case, as amended (the “Organizational Documents”) of PAD and each of its subsidiaries and FACT or under any indemnification, employment or other similar agreements between any D&O Indemnified Person, on the one hand, and PAD or any of its subsidiaries or FACT, on the other hand, in each case as in effect on the date of the Business Combination Agreement, shall survive the Closing and continue in full force and effect in accordance with their respective terms to the extent permitted by applicable law. For a period of six years after the Effective Time, FACT shall cause the Organizational Documents of PAD and each of its subsidiaries and New PAD to contain provisions no less favorable with respect to exculpation and indemnification of and advancement of expenses to D&O Indemnified Persons than are set forth as of the date the Business Combination Agreement in the Organizational Documents of PAD or any of its subsidiaries to the extent permitted by applicable law.
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Pursuant to the Business Combination Agreement, for the benefit of PAD’s directors and officers, PAD shall be permitted, prior to the Effective Time, to obtain and fully pay the premium for a “tail” insurance policy that provides coverage for up to a six year period from and after the Effective Time for events occurring prior to the Effective Time that is substantially equivalent to and in any event not less favorable in the aggregate than PAD’s existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage. For the benefit of FACT’s directors and officers, FACT shall be permitted, prior to the Effective Time, to obtain and fully pay the premium for a “tail” insurance policy that provides coverage for up to a six year period from and after the Effective Time for events occurring prior to the Effective Time that is substantially equivalent to and in any event not less favorable in the aggregate than FACT’s existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage. In lieu of separate policies, PAD and FACT may mutually agree to obtain a “tail” insurance policy that provides coverage for up to a six year period from and after the Effective Time for events occurring prior to the Effective Time that is substantially equivalent to and in any event not less favorable in the aggregate than PAD and FACT’s existing policies or, if substantially equivalent insurance coverage is unavailable, the best available coverage. If obtained, FACT and PAD (or New PAD, as applicable) shall, for a period of six years after the Effective Time, maintain such “tail” insurance policy(ies) in full force and effect, and continue to honor the obligations thereunder, and FACT and PAD/New PAD shall timely pay or cause to be paid all premiums with respect thereto.
Financing
Pursuant to the Business Combination Agreement, FACT and PAD each agreed to use its, and to cause its affiliates to use their, commercially reasonable efforts to do promptly, or cause to be done, all things necessary, proper or advisable to obtain financing agreements, which shall have terms, and be in a form, reasonably acceptable to FACT and PAD, from third party investors (such investors, collectively, with any permitted assignees or transferees, the “Third-Party Investors”), pursuant to which the Third-Party Investors make or commit to participate in an equity financing in such form as PAD and FACT will mutually agree (a “Financing” and, collectively, the “Financings”). FACT and PAD also agreed to keep each other and their respective financial advisors and legal counsels reasonably informed with respect to any Financing and to reasonably cooperate with each other and provide reasonable assistance and information as reasonably requested by the other in connection with any Financing. FACT and PAD also each agreed to use its commercially reasonable efforts to cause such Financing to occur. No Financing has been obtained as of the date of this proxy statement/prospectus.
Closing Conditions
The Closing is conditioned upon the satisfaction or waiver by the applicable parties to the Business Combination Agreement of the conditions set forth below. Therefore, unless these conditions are satisfied or waived (to the extent they can be waived) by the applicable parties to the Business Combination Agreement, the Business Combination may not be consummated. There can be no assurance that the parties to the Business Combination Agreement would waive any such conditions to Closing.
Conditions to the Obligations of Each Party
The obligation of the parties to consummate the Business Combination is conditioned upon the satisfaction or waiver of certain customary closing conditions by each of the parties, including among other things:
(i) The approval and adoption of the Business Combination Agreement, the Business Combination and other matters by the FACT Shareholders and the PAD Stockholders;
(ii) No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) or order, decree, ruling, judgment, injunction, writ, binding determination or decision, verdict or judicial award that is then in effect and that has the effect of making the Business Combination illegal or otherwise prohibiting, restraining or imposing any condition on the consummation of the Business Combination;
(iii) The Registration Statement shall have been declared effective in accordance with the provisions of the Securities Act, no stop order shall have been issued by the SEC that remains in effect with respect to the Registration Statement, and no proceeding seeking such a stop order shall have been threatened or initiated by the SEC and not withdrawn; and
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(iv) (A) all applicable waiting periods under the HSR Act with respect to the Business Combination shall have expired or been terminated, (B) at least 60 days shall have elapsed since the submission to the United States Department of State Directorate of Defense Trade Controls of all information required by 22 C.F.R. § 122.4(b), and (C) each consent, approval, waiver, authorization, waiting period expiration or termination, or permit of, or notice to or declaration or filing with, any Governmental Authority required to consummate the Business Combination shall have been obtained and shall be in full force and effect.
Conditions to the Obligations of PAD
The obligations of PAD to consummate the Business Combination is subject to the satisfaction or waiver (where permissible) by PAD of all of the following further conditions:
(i) All of the fundamental representations and warranties of FACT and Merger Sub, as identified in the Business Combination Agreement, shall be true and correct in all respects on and as of the date thereof and the Closing Date as if made on the Closing Date, except for those representations and warranties that address matters only as of a particular date (which representations and warranties shall have been so true and correct as of such date), other than de minimis inaccuracies;
(ii) All of the other representations and warranties of FACT and Merger Sub set forth in the Business Combination Agreement shall be true and correct on and as of the date thereof and the Closing Date as if made on the Closing Date, subject to certain exceptions;
(iii) Each of FACT and Merger Sub shall have performed in all material respects all of its obligations and complied in all material respects with all of its agreements and covenants under the Business Combination Agreement to be performed or complied with by each on or prior to the Closing Date;
(iv) No Material Adverse Effect shall have occurred with respect to FACT since the date of the Business Combination Agreement that is continuing and uncured;
(v) FACT shall have delivered to PAD a certificate, dated as of the Closing Date, signed by an officer of FACT, certifying as to the satisfaction of the conditions specified in clauses (i) through (iv) above;
(vi) FACT shall have provided the Public Shareholders (prior to giving effect to any conversion of FACT Class B Shares into FACT Class A Shares) with the opportunity to make redemption elections with respect to their FACT Class A Shares pursuant to redemption rights;
(vii) FACT shall have made all necessary and appropriate arrangements with Odyssey in its capacity as trustee under the Investment Management Trust Agreement by and between FACT and Odyssey to have (A) all of the funds held in the Trust Account disbursed to FACT in accordance with the Business Combination Agreement on the Closing Date, and (B) all such funds released from the Trust Account available to New PAD on the Closing Date;
(viii) A counterpart to the ancillary agreement required to be executed by FACT and Merger Sub at or prior to the Closing Date shall have been executed and delivered to PAD;
(ix) The FACT Organizational Documents shall have been amended and restated in their entirety in substantially the form attached as an exhibit to the Business Combination Agreement;
(x) FACT’s initial listing application with NYSE in connection with the Business Combination shall have been conditionally approved and, immediately following the Effective Time, FACT shall satisfy any applicable initial listing requirements of NYSE, and FACT shall not have received any notice of non-compliance therewith, and the FACT Class A Shares and the FACT Warrants shall have been approved for listing on NYSE;
(xi) FACT shall have a minimum amount of cash available at Closing of not less than $75,000,000, after deducting transaction expenses of FACT of up to $2,500,000 and accounting for all redemptions of FACT Class A Shares pursuant to redemption rights. The sources of funds comprising the Minimum FACT Cash Amount shall consist of (A) funds held by FACT, whether inside or outside the Trust Account, (B) funds committed pursuant to commitments entered into in connection the Financings, and/or (C) such other source or combination of sources as agreed to by PAD in writing; and
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(xii) FACT shall have entered into binding written agreements with the holders of any working capital loans (to the extent not included within $2,500,000 cap for FACT transaction expenses) to convert the unpaid amounts to equity immediately prior to Closing, such that the equity dilution will be borne by either the Sponsor or the FACT Shareholders, but not the PAD Stockholders.
Conditions to the Obligations of FACT and Merger Sub
The obligations of FACT and Merger Sub to consummate the Business Combination are subject to the satisfaction or waiver by FACT (where permissible) of all of the following further conditions:
(i) All of the fundamental representations and warranties of PAD, as identified in the Business Combination Agreement, shall be true and correct in all respects on and as of the date thereof and the Closing Date as if made on the Closing Date, except for those representations and warranties that address matters only as of a particular date (which representations and warranties shall have been so true and correct as of such date), other than de minimis inaccuracies;
(ii) All of the other representations and warranties of PAD set forth in the Business Combination Agreement shall be true and correct on and as of the date thereof and the Closing Date as if made on the Closing Date, subject to certain exceptions;
(iii) PAD shall have performed in all material respects all of its obligations and complied in all material respects with all of its agreements and covenants under the Business Combination Agreement to be performed or complied with by it on or prior to the Closing Date;
(iv) No Material Adverse Effect shall have occurred with respect to PAD since the date of the Business Combination Agreement that is continuing and uncured;
(v) PAD shall have delivered to FACT a certificate, dated as of the Closing Date, signed by an officer of FACT, certifying as to the satisfaction of the conditions specified in clauses (i) through (iv) above; and
(vi) A counterpart to the ancillary agreement required to be executed by PAD and the PAD Stockholders at or prior to the Closing shall have been executed and delivered to FACT.
Termination; Effectiveness
PAD and FACT may terminate the Business Combination Agreement by mutual written consent. In addition, the Business Combination Agreement may be terminated by written notice to the other:
(i) by either FACT or PAD if the Business Combination has not been consummated by June 30, 2026, unless a breach or violation by such party or its affiliates of any representation, warranty, covenant or obligation under the Business Combination Agreement was the principal cause of the failure of the Closing to occur by such date;
(ii) by either FACT or PAD if an applicable governmental, regulatory or administrative authority has enacted, issued or enforced a final and non-appealable law, rule, regulation, judgment, decree, order or award making the Business Combination illegal or otherwise prohibiting, restraining or imposing any condition on its consummation, unless a failure by such party or its affiliates to comply with of any provision of the Business Combination Agreement is a principal cause thereof;
(iii) by either FACT or PAD if the other party has breached any of its representations, warranties covenants or agreements contained in the Business Combination Agreement, and such failure or breach would render the conditions to the terminating party’s obligations to consummate the Business Combination incapable of being satisfied and such breach or failure is not cured by the time allotted in the Business Combination Agreement;
(iv) by either FACT or PAD if the board of directors of the other has changed, withdrawn withheld, qualified or modified, or publicly proposed to change, withdraw, withhold, qualify or modify its recommendation to the party’s shareholders to vote to approve and adopt the Business Combination Agreement and related matters; or
(v) by either FACT or PAD if the EGM is held and the FACT Shareholder Approval is not obtained.
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Waiver and Amendments
The Business Combination Agreement may be amended, supplemented or modified only by execution of a written instrument signed by PAD and FACT.
Each of FACT (on behalf of itself and Merger Sub) and PAD may in its sole discretion (i) extend the time for the performance of any obligation or other act of any other party to the Business Combination Agreement, (ii) waive any inaccuracy in the representations and warranties by such other party contained in the Business Combination Agreement or in any document delivered pursuant thereto, and (iii) waive compliance by such other party with any covenant or condition contained in the Business Combination Agreement. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the applicable parties, and no failure or delay by a party in exercising any right or remedy under the Business Combination Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right thereunder.
Expenses
Except as otherwise set forth in the Business Combination Agreement, each of FACT, Sponsor HoldCo and PAD is responsible for paying its own expenses incurred in connection with the Business Combination Agreement and the Business Combination. The Business Combination Agreement provides that all costs and expenses in connection with (i) filing for applicable antitrust and regulatory approvals, (ii) the preparation, filing and mailing of the Registration Statement, and (iii) obtaining a combined D&O tail insurance policy, if applicable, will be borne by FACT and PAD equally. The Business Combination Agreement also caps FACT’s expenses at $2,500,000, which cap is not applicable to any deferred underwriting fees or any capital raising fees (subject to certain exceptions).
Ancillary Agreements
PAD Support Agreements
Pursuant to the Business Combination Agreement, PAD, FACT and certain shareholders of PAD entered into a PAD Support Agreement. Pursuant to the PAD Support Agreements, each PAD Supporting Stockholder agreed to vote: (i) in favor of each of the approval and adoption of the Business Combination Agreement and any other matters in which a vote, consent, approval or election is necessary or sought with respect to the Business Combination; (ii) against any proposal relating to an Alternative Transaction; and (iii) against any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or us of, prevent or nullify any provision of the Business Combination Agreement.
The PAD Support Agreements also prohibit the PAD Supporting Stockholders from, among other things, selling, assigning or transferring any capital stock of PAD held by them, other than pursuant to the terms of the PAD Support Agreement or as expressly contemplated by the Business Combination Agreement, until the earlier of (i) the Closing and (ii) the valid termination Business Combination Agreement.
Sponsor Support Agreement
In connection with the execution of the Business Combination Agreement, on November 26, 2025, FACT, PAD and Sponsor HoldCo entered into the Sponsor Support Agreement. Under the Sponsor Support Agreement, among other things, Sponsor HoldCo agreed to vote, at any meeting of our shareholders, and in any action by written consent of our shareholders, all of its FACT Class A Shares and FACT Class B Shares: (i) in favor of each of the Business Combination Agreement, any ancillary document required by the Business Combination Agreement, the Domestication and the Business Combination, including the Merger, and any other matters necessary or appropriate for consummation of the Business Combination; and (ii) against any proposal relating to an Alternative Transaction or any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or us of, prevent or nullify any provision of the Business Combination Agreement. In addition, the Sponsor Support Agreement prohibits Sponsor HoldCo from, among other things, selling, assigning or transferring any FACT Class A Shares or FACT Class B Shares held by it, other than pursuant to the terms of the Sponsor Support Agreement or as expressly contemplated by the Business Combination Agreement, until the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement.
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Lock-Up Agreements
At the Closing, pursuant to the Business Combination Agreement, (i) we, PAD, Sponsor HoldCo and certain holders of FACT equity interests will enter into the Sponsor Lock-Up Agreement, and (ii) we, PAD and certain holders of PAD’s equity interests will each enter into the PAD Shareholder Lock-Up Agreement.
Pursuant to the Lock-Up Agreements, Sponsor HoldCo, the holders of our equity interests thereto, including the Sponsor, signatory thereto, and the holders of PAD’s equity interests signatory thereto, as applicable, will agree not to transfer (except for certain permitted transfers): (i) any shares of New PAD Common Stock issued upon the conversion of PAD equity interests (except for shares of New PAD Common Stock into which 770,000 PAD Shares will convert, which shall be exempt from the transfer restrictions set forth in the PAD Shareholder Lock-Up Agreement),the Founder Shares and or any FACT Class A Shares (other than the restricted FACT Class A Shares), in each case held by such holders after the Closing, until 180 days after the Closing Date; and (ii) any shares of New PAD Common Stock issued upon the conversion of the restricted FACT Class A Shares and held by such holders after the Closing until 90 days after the Closing Date.
Registration Rights Agreement
Concurrently with the Closing, New PAD, Sponsor HoldCo and certain former PAD Stockholders will enter into a new Registration Rights Agreement in a form to be agreed to by FACT, Merger Sub, Sponsor HoldCo and PAD.
We estimate that approximately [•] million shares of New PAD Common Stock will be subject to registration rights pursuant to the Registration Rights Agreement immediately following Closing, representing approximately [•]% of the total issued and outstanding shares of New PAD Common Stock following the Business Combination, assuming the 50% Redemptions Scenario, the forfeiture of [•] FACT Forfeited Shares and no forfeiture of Sponsor HoldCo Contributed Shares by Sponsor HoldCo.
Advisory Agreement
On November 26, 2025, we entered into the Advisory Agreement with the Sponsor pursuant to which the Sponsor will provide certain services to us including, without limitation, in each case relating to the Business Combination, assisting us in preparing presentations, introducing us to potential investors, assisting us in arranging meetings with stockholders of PAD to the extent applicable, and assisting us with the preparation of any press releases and filings. The Advisory Agreement provides for us to pay to the Sponsor a fee of up to $240,000 (which, in our sole discretion, may be payable in up to 12 monthly installments). The Advisory Agreement was reviewed and approved by the FACT Board and our Audit Committee.
Regulatory Approvals
Each of FACT and PAD has agreed to use its commercially reasonable efforts, and to cooperate fully with the other, to take, or cause to be taken, all things reasonably necessary to consummate the Business Combination, including its commercially reasonable efforts to (i) obtain all actions, nonactions, waivers, consents, approvals and other authorizations necessary from all Governmental Authorities necessary to complete the Business Combination and (ii) execute and deliver any additional instruments necessary to consummate the Business Combination.
The parties have determined that the Business Combination is not reportable under the HSR Act, and the rules and regulations promulgated thereunder. Thus, the Business Combination is not subject to the termination or expiration of any waiting period under the HSR Act.
Vote Required for Approval
The Closing is conditioned on approval of each proposal to be voted on at the EGM other than the Adjournment Proposal and the Business Combination Proposal is conditioned on the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Domestication Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Business Combination Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
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Approval of the Business Combination Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Failure to vote by proxy or to vote in person at the EGM or an abstention from voting will have no effect on the outcome of the vote on the Business Combination Proposal.
The Sponsor, Sponsor HoldCo and FACT Insiders have agreed to vote any FACT Ordinary Shares owned by them in favor of the Business Combination.
The FACT Insiders collectively own 6,595,833 FACT Ordinary Shares, or approximately 27% of the issued and outstanding FACT Ordinary Shares as follows: (i) the Sponsor owns 0 FACT Class B Shares directly, 3,135,044 FACT Class B Shares indirectly through Sponsor HoldCo, and 17,500 FACT Class A Shares; (ii) the FACT independent directors each own 30,000 FACT Class B Shares, for an aggregate of 90,000 FACT Class B Shares; (iii) our Executive Chairman owns 130,000 FACT Class B Shares; and (iv) Sponsor HoldCo owns an aggregate of 422,500 FACT Class A Shares, 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) and 5,593,333 FACT Class B Shares. Accordingly, we will need 5,672,200 Public Shares to vote in favor of the Business Combination Proposal to approve it if all FACT Ordinary Shares are present and cast votes, and no Public Shares to approve it if only a minimum quorum is present.
Resolution to be Voted Upon
“RESOLVED, as an ordinary resolution, that subject to the approval of the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the entry of FACT into the Business Combination Agreement and Plan of Merger, dated as of November 26, 2025, by and among FACT, Sponsor HoldCo, Merger Sub and PAD, as attached to the proxy statement/prospectus of the meeting as Annex A-1, as amended by Amendment No. 1 thereto dated as of May 17, 2026, as attached to the proxy statement/prospectus of the meeting as Annex A-2, as it may be amended, restated, supplemented, or otherwise modified from time to time (collectively, the “Business Combination Agreement”), the consummation of the transactions contemplated by the Business Combination Agreement and the performance by FACT of its obligations thereunder thereby be ratified, approved, adopted and confirmed in all respects.”
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 2 — THE DOMESTICATION PROPOSAL
Overview
FACT is asking its shareholders to approve, by special resolution, a change of FACT’s jurisdiction of incorporation by de-registering as an exempted company and transfer by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation in accordance with the FACT Articles, Section 388 of the DGCL, and Part XII of the Cayman Companies Act.
To effect the Domestication, FACT will (i) file an application to deregister with the Registrar of Companies in the Cayman Islands (“Cayman Registrar”), together with the necessary accompanying documents, (ii) file a Certificate of Domestication with the Secretary of State of the State of Delaware in accordance with the provisions thereof and Section 388 of the DGCL pursuant to which FACT will be domesticated and continue as a Delaware corporation (“New FACT”), and (iii) obtain a certificate of de-registration from the Cayman Registrar. In connection with the Domestication, and upon the consummation of the Business Combination, the corporate name of FACT will change to “Precision Aerospace & Defense Group, Inc.” and the registered office of FACT will be changed to “7500 College Blvd, 5th Floor, Overland Park, KS 66210.”
In accordance with applicable law, the Certificate of Domestication will provide that at the effective time of the Domestication, by virtue of the Domestication, and without any action on the part of any shareholder, each then issued and outstanding FACT Class B Share will be converted, on a one-for-one basis, into one FACT Class A Share, each then issued and outstanding FACT Class A Share will be converted, on a one-for-one basis, into a share of FACT Common Stock, and each issued and outstanding FACT Warrant will automatically represent the right to purchase one share of FACT Class A Common Stock.
The Domestication Proposal, if approved, will approve a change of FACT’s jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Accordingly, while FACT is currently governed by the Cayman Companies Act, upon the Domestication, New FACT will be governed by the DGCL. FACT encourages shareholders to carefully consult the information in “Comparison of Corporate Governance and Shareholder Rights.”
Reasons for Domestication
The FACT Board believes that it would be in the best interests of FACT, simultaneously with the completion of the Business Combination, to effect the Domestication. Further, the FACT Board believes that any direct benefit that the DGCL provides to a corporation also indirectly benefits its shareholders, who are the owners of the corporation. In addition, because PAD principally operates within the United States, it was the view of the FACT Board that New FACT should be structured as a corporation organized in the United States.
The FACT Board believes that there are several reasons why a reincorporation in Delaware is in the best interests of FACT and its shareholders. These additional reasons can be summarized as follows:
• Prominence, Predictability and Flexibility of Delaware Law. For many years, Delaware has followed a policy of encouraging incorporation in its state and, in furtherance of that policy, has been a leader in adopting, construing, and implementing comprehensive, flexible corporate laws responsive to the legal and business needs of corporations organized under its laws. Many corporations have chosen Delaware initially as a state of incorporation or have subsequently changed corporate domicile to Delaware. Because of Delaware’s prominence as the state of incorporation for many major corporations, both the legislature and courts in Delaware have demonstrated the ability and a willingness to act quickly and effectively to meet changing business needs. The DGCL is frequently revised and updated to accommodate changing legal and business needs and is more comprehensive, widely used and interpreted than other state corporate laws. This favorable corporate and regulatory environment is attractive to businesses such as PAD’s.
• Well-Established Principles of Corporate Governance. There is substantial judicial precedent in the Delaware courts as to the legal principles applicable to measures that may be taken by a corporation and to the conduct of a company’s board of directors, such as under the business judgment rule and other standards. Because the judicial system is based largely on legal precedents, the abundance of Delaware case law provides clarity and predictability to many areas of corporate law. FACT believes
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that such clarity would be advantageous to New FACT, the New FACT board of directors (the “New FACT Board”) and management to make corporate decisions and take corporate actions with greater assurance as to the validity and consequences of those decisions and actions. Further, investors and securities professionals are generally more familiar with Delaware corporations, and the laws governing such corporations, increasing their level of comfort with Delaware corporations relative to other jurisdictions. The Delaware courts have developed considerable expertise in dealing with corporate issues, and a substantial body of case law has developed construing Delaware law and establishing public policies with respect to corporate legal affairs. Moreover, Delaware’s vast body of law on the fiduciary duties of directors provides appropriate protection for New FACT’s stockholders from possible abuses by directors and officers.
• Increased Ability to Attract and Retain Qualified Directors. Reincorporation from the Cayman Islands to Delaware is attractive to directors, officers, and stockholders alike. New FACT’s incorporation in Delaware may make New FACT more attractive to future candidates for the New FACT Board because many such candidates are already familiar with Delaware corporate law from their past business experiences. To date, FACT has not experienced difficulty in retaining directors or officers, but directors of public companies are exposed to significant potential liability. Thus, candidates’ familiarity and comfort with Delaware laws — especially those relating to director indemnification (as discussed below) — draw such qualified candidates to Delaware corporations. The FACT Board therefore believes that providing the benefits afforded to directors by Delaware law will enable New FACT to compete more effectively with other public companies in the recruitment of talented and experienced directors and officers. Moreover, Delaware’s vast body of law on the fiduciary duties of directors provides appropriate protection for FACT’s stockholders from possible abuses by directors and officers.
The frequency of claims and litigation pursued against directors and officers has greatly expanded the risks facing directors and officers of corporations in carrying out their respective duties. The amount of time and money required to respond to such claims and to defend such litigation can be substantial. While both Cayman Islands and Delaware law permit a corporation to include a provision in its governing documents to reduce or eliminate the monetary liability of directors for breaches of fiduciary duty in certain circumstances, FACT believes that, in general, Delaware law is more developed and provides more guidance than Cayman Islands law on matters regarding a company’s ability to limit director liability. As a result, FACT believes that the corporate environment afforded by Delaware will enable New FACT to compete more effectively with other public companies in attracting and retaining new directors.
Reasons for Name Change
The FACT Board believes that it would be in the best interests of FACT to, in connection with the Domestication and the Business Combination, change its corporate name to “Precision Aerospace & Defense Group, Inc.” to more accurately reflect the business purpose and activities of PAD.
Regulatory Approvals; Third-Party Consents
FACT is not required to make any filings or to obtain any approvals or clearances from any antitrust regulatory authorities in the United States or other countries in order to complete the Domestication. However, because the Domestication is intended to occur one business day prior to the Business Combination, it will not occur unless the Business Combination can be completed, which will require the approvals as described under “Proposal No. 1 — The Business Combination Proposal.” FACT must comply with applicable United States federal and state securities laws in connection with the Domestication, including the filing with Nasdaq of a press release disclosing the Domestication, among other things.
The Domestication will not breach any covenants or agreements binding upon FACT and will not be subject to any additional federal or state regulatory requirements, except compliance with the laws of the Cayman Islands and Delaware necessary to effect the Domestication.
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Vote Required for Approval
Approval of the Domestication Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. In respect of the Domestication Proposal only, a holder of FACT Class B Shares will be entitled to 10 votes for every FACT Class B Share held and a holder of FACT Class A Ordinary Shares will be entitled to one vote for every FACT Class A Ordinary Share held. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the EGM and otherwise will have no effect on the outcome of the vote on the Domestication Proposal.
The Domestication Proposal is conditioned on the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Stock Issuance Proposal or the Charter Proposal is not approved, the Domestication Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
Resolution to be Voted Upon
“RESOLVED, as a special resolution, that subject to the approval of the Business Combination Proposal, the Stock Issuance Proposal and the Charter Proposal, FACT be de-registered in the Cayman Islands pursuant to article 47 of the amended and restated memorandum and articles of association of FACT and Part XII of the Companies Act of the Cayman Islands (As Revised) and transferred by way of continuation to Delaware as a corporation under the laws of the State of Delaware, and, conditioned upon, and with effect from, the registration of FACT as a corporation in the State of Delaware, the name of FACT be changed from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.” and the registered office of FACT be changed to “7500 College Blvd, 5th Floor, Overland Park, KS 66210.”
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE DOMESTICATION PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 3 — THE STOCK ISSUANCE PROPOSAL
Overview
Under Nasdaq Listing Rule 5635(a), shareholder approval is required prior to the issuance of securities in connection with the acquisition of another company if, due to the present or potential issuance of common stock, including shares issued pursuant to an earn-out provision or similar type of provision, or securities convertible into or exercisable for common stock, such securities are not issued in a public offering for cash and (i) have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of common stock (or securities convertible into or exercisable for common stock) or (ii) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities.
Under Nasdaq Listing Rule 5635(b), shareholder approval is required prior to an issuance of securities when the issuance or potential issuance will result in a change of control of the issuer.
Under Nasdaq Listing Rule 5635(d), shareholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for common stock) at a price that is less than the lower of (i) the closing price immediately preceding the signing of the binding agreement or (ii) the average closing price of the common stock for the five trading days immediately preceding the signing of the binding agreement, if the number of shares of common stock (or securities convertible into or exercisable for common stock) to be issued equals to 20% or more of the shares of common stock, or 20% or more of the voting power, outstanding before the issuance.
The aggregate shares of New PAD Common Stock that New PAD is expected to issue in connection with the Business Combination will exceed 20% of both the voting power and the aggregate number of shares of FACT Common Stock outstanding before such issuance and may result in a change of control under the applicable NYSE Listing Rules. Accordingly, FACT is seeking the approval of the FACT Shareholders for the issuance or potential issuance of shares of FACT Common Stock or shares of New PAD Common Stock in connection with the Business Combination and any other issuances of shares of FACT Common Stock or shares of New PAD Common Stock and securities convertible into or exercisable for shares of FACT Common Stock or shares of New PAD Common Stock pursuant to subscription, purchase or other similar agreements that FACT, New FACT or New PAD may enter into prior to the Closing.
Vote Required for Approval
Approval of the Stock Issuance Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Failure to vote in person (including by virtual attendance) or by proxy at the EGM, if a valid quorum is otherwise established, will have no effect on the outcome of the vote on the Stock Issuance Proposal. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast for the Stock Issuance Proposal and will have no effect on the outcome of the vote on the Stock Issuance Proposal.
The Stock Issuance Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Charter Proposal is not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
Resolution to be Voted Upon
“RESOLVED, as an ordinary resolution, that subject to the approval of the Business Combination Proposal, the Domestication Proposal and the Charter Proposal, for the purposes of complying with applicable listing rules of NYSE the issuance of (i) shares of common stock of New PAD (“New PAD Common Stock”) in connection with the Business Combination; and (ii) any other issuances of preferred stock, common stock and securities convertible into or exercisable for common stock pursuant to subscription, purchase or similar agreements that FACT has entered, or may enter, into prior to the Closing of the Business Combination, be approved in all respects.”
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Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT FACT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE STOCK ISSUANCE PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 4 — THE CHARTER PROPOSAL
Overview
If the Condition Precedent Proposals, including the Domestication Proposal are approved and the Business Combination is consummated, FACT will replace the FACT Articles, under the Cayman Companies Act, with the New PAD Charter and the New PAD Bylaws, pursuant to the DGCL.
We are asking the FACT Shareholders to consider and vote upon and to adopt the New PAD Charter in connection with the replacement of the FACT Articles with the New PAD Charter and the New PAD Bylaws. The Charter Proposal is conditioned on the approval of the Condition Precedent Proposals. Therefore, if any of the Condition Precedent Proposals is not approved, the Charter Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
The following is a summary of the key changes effected by the Proposed Charter:
1. Name Change: Change our name from FACT II Acquisition Corp. to “Precision Aerospace & Defense Group, Inc.”
2. Corporate Purpose: Provide that the purpose of New PAD is “to engage in any lawful act or activity for which corporations may be organized under the DGCL” and to delete all provisions pertaining to a blank-check company.
3. Authorized Shares: Provide for a single class of common stock of New PAD, entitled to one vote for each share of common stock held of record by such holder on all matters on which stockholders generally are entitled to vote (other than certain amendments relating to preferred stock) and provide for a capital structure of New PAD that will enable it to continue as an operating company governed by the DGCL. The capital structure of FACT will be changed from (i) 100,000,000 shares of New PAD Common Stock and (ii) 10,000,000 shares of undesignated New PAD preferred stock, par value $0.00001 per share.
4. Exclusive Forum Provisions: Establish that, unless New PAD consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of New PAD, (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any current or former director, officer or other employee or stockholder of New PAD to New PAD or New PAD’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the New PAD Charter or the New PAD Bylaws (including the interpretation, validity or enforceability thereof) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine; provided, however, that the exclusive forum provision will not apply to any causes of action arising under the Securities Act, or the Exchange Act, or the respective rules and regulations promulgated under the Securities Act or Exchange Act or to any claim for which the federal courts have exclusive jurisdiction. Unless New PAD consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, the Exchange Act, or the respective rules and regulations promulgated thereunder or any claim for which the federal courts have exclusive jurisdiction.
5. Adoption of Majority Vote Requirement in certain instances: Establish that any amendment to the New PAD Charter will generally require approval by holders of at least a majority of our then outstanding capital stock entitled to vote thereon (except where a lower threshold is provided by the DGCL). Establish that the New PAD Bylaws may be amended by the New PAD Board or by the stockholders by the affirmative vote of the holders of at least a majority of voting power of the outstanding shares of capital stock entitled to vote on such amendment, voting as a single class.
6. Removal of Directors: Provide that any director may be removed only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, subject to the rights, if any, of any series of new PAD preferred stock.
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7. Action by Written Consent of the Stockholders: Eliminate the right of stockholders to act by written consent.
8. Provisions Related to Status as Blank Check Company: Provide for certain amendments to better reflect New PAD’s existence as an operating company. For example, the proposed New PAD Charter would remove the requirement to dissolve New PAD and allow it to continue as a corporate entity with perpetual existence following the consummation of the Business Combination.
Reasons for the Amendments
The FACT Board’s reasons for proposing the New PAD Charter are set forth below. The following is a summary of the key changes effected by the New PAD Charter, but this summary is qualified in its entirety by reference to the full text of the New PAD Charter, a copy of which is included as Annex H:
1. Name Change: Currently, our name is FACT II Acquisition Corp. The FACT Board believes the name of the post-combination company should more closely align with the name of the post-Business Combination operating business and therefore has proposed the name change.
2. Corporate Purpose: The FACT Board believes that this change is appropriate to remove language applicable to a blank check company.
3. Authorized Shares: The principal purpose of this change is to provide for an authorized capital structure of New PAD that will enable it to continue as an operating company governed by the DGCL. The FACT Board believes that it is important for FACT to have available for issuance a number of authorized shares of common stock and preferred stock sufficient to support its growth and to provide flexibility for future corporate needs.
4. Exclusive Forum Provisions: Adopting Delaware as the exclusive forum for certain stockholder litigation is intended to assist New PAD in avoiding multiple lawsuits in multiple jurisdictions regarding the same matter. The ability to require such claims to be brought in a single forum will help to assure consistent consideration of the issues, the application of a relatively known body of case law and level of expertise and should promote efficiency and cost-savings in the resolutions of such claims. The FACT Board believes that the Delaware courts are best suited to address disputes involving such matters given that after the Domestication, New PAD will be incorporated in Delaware. Delaware law generally applies to such matters and the Delaware courts have a reputation for expertise in corporate law matters. Delaware offers a specialized Court of Chancery to address corporate law matters, with streamlined procedures and processes, which help provide relatively quick decisions. This accelerated schedule can minimize the time, cost and uncertainty of litigation for all parties. The Court of Chancery has developed considerable expertise with respect to corporate law issues, as well as a substantial and influential body of case law construing Delaware’s corporate law and long-standing precedent regarding corporate governance. This provides stockholders and the post-combination company with more predictability regarding the outcome of intra-corporate disputes. In the event that the Court of Chancery does not have jurisdiction, the other state or, if applicable, federal courts located in Delaware would be the most appropriate forums because these courts have more expertise on matters of Delaware law compared to other jurisdictions. The choice of forum provision is intended to apply to the fullest extent permitted by law to the above-specified types of actions and proceedings, including any derivative actions asserting claims under state law, and is intended to require, in each case, to the fullest extent permitted by law, that any Securities Act and Exchange Act claims be brought in the federal district courts of the United States in accordance with the choice of forum provision. In addition, this amendment would promote judicial fairness and avoid conflicting results, as well as make New PAD’s defense of applicable claims less disruptive and more economically feasible, principally by avoiding duplicative discovery.
5. Adoption of Majority Vote Requirement in certain instances: The FACT Articles provide that amendments may be made by a special resolution under the Cayman Companies Act, being the affirmative vote of at least two-thirds of the issued and outstanding FACT Ordinary Shares represented in person or by proxy and entitled to vote thereon and who vote at a general meeting.
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Any amendment to the New PAD Charter will generally require approval by holders of at least a majority of our then outstanding capital stock entitled to vote thereon (except where a lower threshold is provided by the DGCL). The proposed New PAD Charter provides that the New PAD Bylaws may be amended by the New PAD Board and may also be amended by the stockholders by the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of capital stock entitled to vote on such amendment, voting as a single class. The FACT Board believes this standard appropriately balances stockholder rights with the need for the company to maintain flexibility to address future corporate needs and evolving governance practices.
6. Removal of Directors: The FACT Articles provide that before a Business Combination, holders of FACT Class B Shares may remove any director, and that after a Business Combination, shareholders may by Ordinary Resolution remove any director. Under the DGCL, unless a company’s certificate of incorporation provides otherwise, removal of a director only for cause is automatic with a classified board. The New PAD Charter provides that any director may be removed only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, subject to the rights, if any, of any series of preferred stock. The FACT Board believes that such a standard will (i) increase board continuity and the likelihood that experienced board members with familiarity of New PAD’s business operations would serve on the board at any given time and (ii) make it more difficult for a potential acquiror or other person, group or entity to gain control of the New PAD Board.
7. Action by Written Consent of the Stockholders: Under the proposed New PAD Charter, New PAD’s stockholders will have the ability to propose items of business (subject to the restrictions set forth therein) at duly convened stockholder meetings. Eliminating the right of stockholders to act by written consent limits the circumstances under which stockholders can act on their own initiative to remove directors, or alter or amend New PAD’s organizational documents outside of a duly called special or annual meeting of the stockholders of New PAD. Further, the FACT Board believes that continuing to limit stockholders’ ability to act by written consent will (i) reduce the time and effort our board of directors and management would need to devote to stockholder proposals, which time and effort could distract our directors and management from other important company business and (ii) facilitate transparency and fairness by allowing all stockholders to consider, discuss, and vote on pending stockholder actions. In addition, the elimination of the stockholders’ ability to act by written consent may have certain anti-takeover effects by forcing a potential acquirer to take control of the board of directors only at a duly called special or annual meeting. This proposal is, however, not in response to any effort of which FACT is aware to obtain control of New PAD, and FACT and its management do not presently intend to propose other anti-takeover measures in future proxy solicitations. Further, the FACT Board does not believe that the effects of the elimination of stockholder action by written consent will create a significant impediment to a tender offer or other effort to take control of New PAD. Inclusion of these provisions in the proposed New PAD Charter might also increase the likelihood that a potential acquirer would negotiate the terms of any proposed transaction with the board of directors and thereby help protect stockholders from the use of abusive and coercive takeover tactics.
8. Provisions Related to Status as Blank Check Company: The FACT Board believes that making corporate existence perpetual is desirable to reflect the Business Combination. Additionally, perpetual existence is the usual period of existence for corporations, and the FACT Board believes that it is the most appropriate period for FACT following the Business Combination. The elimination of certain provisions related to FACT’s status as a blank check company is desirable because these provisions will serve no purpose following the Business Combination. For example, the proposed New PAD Charter does not include the requirement to dissolve New PAD and allow it to continue as a corporate entity with perpetual existence following the consummation of the Business Combination. Perpetual existence is the usual period of existence for public corporations, and the FACT Board believes it is the most appropriate period for New PAD following the Business Combination. In addition, certain other provisions in FACT’s current organizational documents require that proceeds from the IPO be held in the Trust Account until a business combination or liquidation of FACT has occurred. These provisions cease to apply once the Business Combination is consummated and are therefore not included in the proposed New PAD Charter.
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Vote Required for Approval
Approval of the Charter Proposal requires a special resolution, being a resolution passed by at least two-thirds of such holders of FACT Ordinary Shares who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the EGM and otherwise will have no effect on the outcome of the vote on the Charter Proposal.
The Charter Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal. Therefore, if any of the Business Combination Proposal, the Domestication Proposal or the Stock Issuance Proposal is not approved, the Charter Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
Resolution to be Voted Upon
“RESOLVED, as a special resolution, that subject to the approval of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal, the amended and restated memorandum and articles of association of FACT currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the proposed New PAD Charter (in the form attached to the proxy statement/prospectus of the meeting as Annex H) including, without limitation, the authorization of the change in authorized share capital as indicated therein, effective upon the effectiveness of the Domestication.”
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT FACT SHAREHOLDERS VOTE “FOR” THE CHARTER PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 5 — THE ADVISORY CHARTER PROPOSALS
Overview
If the Condition Precedent Proposals, including the Charter Proposal, are approved and the Business Combination is consummated, FACT will replace the FACT Articles, under the Cayman Companies Act, with the proposed New PAD Charter and the New PAD Bylaws, under the DGCL.
We are asking the FACT Shareholders to consider and vote upon and to approve, on a non-binding and advisory basis, by ordinary resolution, six separate proposals in connection with the replacement of the FACT Articles with the proposed New PAD Charter and the New PAD Bylaws. These six proposals are being presented separately in accordance with SEC guidance to give shareholders the opportunity to present their separate views on important corporate governance provisions of the New PAD Charter and will be voted upon on a non-binding advisory basis. This separate vote is not otherwise required by Cayman Islands or Delaware law, but pursuant to SEC guidance, FACT is required to submit these provisions to its shareholders separately for approval. The shareholder votes regarding these proposals are advisory in nature, and are not binding on FACT, the FACT Board, New PAD or the New PAD Board. Furthermore, the Business Combination is not conditioned on the separate approval of the Advisory Charter Proposals (separate and apart from the approval of the Charter Proposal). Accordingly, regardless of the outcome of the non-binding advisory vote on these proposals, FACT intends that the New PAD Charter will take effect from the registration of FACT in the State of Delaware as a corporation under the laws of the State of Delaware, assuming approval of the Business Combination Proposal and the Charter Proposal.
The proposed New PAD Charter differs materially from the FACT Articles. The following sets forth a summary of the principal changes proposed between the FACT Articles and the New PAD Charter. This summary is qualified by reference to the complete text of the FACT Articles, which are included as an exhibit to the Registration Statement, and the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All shareholders are encouraged to read the New PAD Charter in its entirety for a more complete description of its terms. Additionally, as the FACT Articles are governed by the Cayman Companies Act and the New PAD Charter will be governed by the DGCL, FACT encourages shareholders to carefully consult the information set out under the section of this proxy statement/prospectus entitled “Comparison Of Corporate Governance And Shareholder Rights — Comparison of Shareholder Rights Under Applicable Corporate Law.”
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FACT Articles, under the Cayman |
Proposed New PAD Charter, |
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Authorized Shares |
The FACT Articles authorize 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares, and 1,000,000 preference shares, par value of $0.0001 per share, of FACT. |
The proposed New PAD Charter authorizes 110,000,000 total shares, consisting of 100,000,000 shares of New PAD Common Stock and 10,000,000 shares of undesignated preferred stock, par value $0.00001 per share. |
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Exclusive Forum Provision |
The FACT Articles adopt the courts of the Cayman Islands as the exclusive forum for certain disputes, provided, however, that the exclusive forum provision will not apply to any causes of action arising under the Securities Act, or the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. |
The proposed New PAD Charter adopts Delaware as the exclusive forum for certain disputes, provided, however, that the exclusive forum provision will not apply to any causes of action arising under the Securities Act, or the Exchange Act, or the respective rules and regulations promulgated under the Securities Act or Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. |
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FACT Articles, under the Cayman |
Proposed New PAD Charter, |
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Adoption of Majority Vote Requirement to Amend the New PAD Charter |
The FACT Articles provide that amendments to the FACT Articles (other than with respect to Articles 29.1 and 47.1 of the FACT Articles) may be made by a special resolution under the Cayman Companies Act, being the affirmative vote of at least two-thirds of the issued and outstanding FACT Ordinary Shares represented in person or by proxy and entitled to vote thereon and who vote at a general meeting. |
Any amendment to the New PAD Charter will generally require approval by holders of at least a majority of New PAD’s then outstanding capital stock entitled to vote thereon (except where a lower threshold is provided by the DGCL). The proposed New PAD Charter provides that the New PAD Bylaws may be amended by the New PAD Board or by the stockholders by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of capital stock entitled to vote on such amendment, voting as a single class. |
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Removal of Directors |
The FACT Articles provide that before a Business Combination, holders of FACT Class B Shares may remove any director, and that after a Business Combination, shareholders may by ordinary resolution remove any director. |
The proposed New PAD Charter permits the removal of a director only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, subject to the rights, if any, of any series of Preferred Stock. |
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Action by Written Consent of Stockholders |
The FACT Articles permit shareholders to approve matters by unanimous written resolution. |
The proposed New PAD Charter requires stockholders to take action at an annual or special meeting and prohibits stockholder action by written consent in lieu of a meeting. |
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Other Changes in Connection with Adoption of the proposed New PAD Charter |
The FACT Articles include reference to the company’s status as a blank check company with nominal operations prior to the consummation of a business combination. |
The proposed New PAD Charter does not include provisions related to FACT’s status as a blank check company, which no longer will apply upon consummation of the Business Combination, as FACT will cease to be a blank check company at such time. |
Advisory Charter Proposal 5A — Authorized Shares
FACT Shareholders are being asked to approve and adopt an amendment to the FACT Articles to authorize the change in the authorized capital stock of FACT from 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares, and 1,000,000 preference shares, par value of $0.0001 per share, to 100,000,000 shares of New PAD Common Stock and 10,000,000 shares of undesignated preferred stock, par value $0.00001 per share.
In order to ensure that New PAD has sufficient authorized capital for future issuances, the FACT Board has approved, subject to shareholder approval, that the proposed New PAD Charter change the authorized capital stock of FACT from 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares, and 1,000,000 FACT preference shares, par value $0.0001 per share, to 100,000,000 shares of New PAD Common Stock and 10,000,000 shares of undesignated preferred stock, par value $0.00001 per share.
This summary is qualified by reference to the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All FACT Shareholders are encouraged to read the proposed New PAD Charter in its entirety for a more complete description of its terms.
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Advisory Charter Proposal 5B — Exclusive Forum Provision
FACT Shareholders are being asked to approve and adopt an amendment to the New PAD Charter to authorize adopting Delaware as the exclusive forum for certain stockholder litigation.
The New PAD Charter stipulates that, unless the New PAD consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the New PAD, (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any current or former director, officer or other employee or stockholder of the New PAD to the New PAD or the New PAD’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the New PAD Charter or the New PAD Bylaws (including the interpretation, validity or enforceability thereof) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine; provided, however, that (x) if, and only if, the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, then another state court of the State of Delaware or, if no state court of the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware shall be the sole and exclusive forum for such action or proceeding, and (y) the exclusive forum provision will not apply to any causes of action arising under the Securities Act, or the Exchange Act, or the respective rules and regulations promulgated under the Securities Act or Exchange Act or to any claim for which the federal courts have exclusive jurisdiction. Unless New PAD consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, the Exchange Act, or the respective rules and regulations promulgated thereunder or any claim for which the federal courts have exclusive jurisdiction.
This summary is qualified by reference to the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All FACT Shareholders are encouraged to read the proposed New PAD Charter in its entirety for a more complete description of its terms.
Advisory Charter Proposal 5C — Adoption of Majority Vote Requirement to Amend the New PAD Charter
FACT Shareholders are being asked to approve and adopt an amendment to the FACT Articles to approve provisions providing that any amendment to the New PAD Charter will generally require approval by holders of at least a majority of New PAD’s then outstanding capital stock entitled to vote thereon (except where a lower threshold is provided by the DGCL). The proposed New PAD Charter provides that the New PAD Bylaws may be amended by the New PAD Board or by the stockholders by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of capital stock entitled to vote on such amendment, voting as a single class.
This summary is qualified by reference to the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All FACT Shareholders are encouraged to read the proposed New PAD Charter in its entirety for a more complete description of its terms.
Advisory Charter Proposal 5D — Removal of Directors
FACT Shareholders are being asked to approve and adopt an amendment to the FACT Articles to approve provisions permitting the removal of a director only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, subject to the rights, if any, of any series of preferred stock.
This summary is qualified by reference to the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All FACT Shareholders are encouraged to read the proposed New PAD Charter in its entirety for a more complete description of its terms.
Advisory Charter Proposal 5E — Action by Written Consent of Stockholders
FACT Shareholders are being asked to approve and adopt an amendment to the FACT Articles to approve provisions requiring stockholders to take action at an annual or special meeting and prohibiting stockholder action by written consent in lieu of a meeting.
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This summary is qualified by reference to the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All FACT Shareholders are encouraged to read the proposed New PAD Charter in its entirety for a more complete description of its terms.
Advisory Charter Proposal 5F — Other Changes in Connection with Adoption of the proposed New PAD Charter
FACT Shareholders are being asked to approve and adopt an amendment to the FACT Articles to authorize (i) changing the corporate name from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.”, (ii) making New PAD’s corporate existence perpetual, and (iii) removing certain provisions related to FACT’s status as a blank check company that will no longer be applicable upon consummation of the Business Combination.
The proposed New PAD Charter will not contain provisions related to a blank check company (including those related to operation of the Trust Account, winding up of FACT’s operations should FACT not complete a business combination by a specified date, and other such blank check-specific provisions as are present in the FACT Articles) because following the consummation of the Business Combination, New PAD will not be a blank check company.
This summary is qualified by reference to the complete text of the proposed New PAD Charter, a copy of which is attached to this proxy statement/prospectus as Annex H. All FACT Shareholders are encouraged to read the proposed New PAD Charter in its entirety for a more complete description of its terms.
Implementation of each of the Advisory Charter Proposals will result, upon the Domestication, in the wholesale replacement of the FACT Articles with the proposed New PAD Charter. While certain material changes between the FACT Articles with the proposed New PAD Charter have been unbundled into distinct Charter Proposals or otherwise identified in this Advisory Charter Proposal 5, there are other differences between the FACT Articles with the proposed New PAD Charter (arising from, among other things, differences between the Cayman Companies Act and the DGCL and the typical form of organizational documents under each such body of law) that will be approved (subject to the approval of the aforementioned related proposals and consummation of the Business Combination) if FACT Shareholders approve the Charter Proposal.
Reasons for the Amendments
Advisory Charter Proposal 5A — Authorized Shares
The principal purpose of this proposal is to provide for an authorized capital structure of New PAD that will enable it to continue as an operating company governed by the DGCL. The FACT Board believes that it is important for New PAD to have available for issuance a number of authorized shares of common stock and preferred stock sufficient to support its growth and to provide flexibility for future corporate needs.
Advisory Charter Proposal 5B — Exclusive Forum Provision
Adopting Delaware as the exclusive forum for certain stockholder litigation is intended to assist New PAD in avoiding multiple lawsuits in multiple jurisdictions regarding the same matter. The ability to require such claims to be brought in a single forum will help to assure consistent consideration of the issues, the application of a relatively known body of case law and level of expertise and should promote efficiency and cost-savings in the resolutions of such claims. The FACT Board believes that the Delaware courts are best suited to address disputes involving such matters given that after the Domestication, New PAD will be incorporated in Delaware. Delaware law generally applies to such matters and the Delaware courts have a reputation for expertise in corporate law matters. Delaware offers a specialized Court of Chancery to address corporate law matters, with streamlined procedures and processes, which help provide relatively quick decisions. This accelerated schedule can minimize the time, cost and uncertainty of litigation for all parties. The Court of Chancery has developed considerable expertise with respect to corporate law issues, as well as a substantial and influential body of case law construing Delaware’s corporate law and long-standing precedent regarding corporate governance. This provides stockholders and the post-combination company with more predictability regarding the outcome of intra-corporate disputes. In the event the Court of Chancery does not have jurisdiction, the other state or, if applicable, federal courts located in Delaware would be the most appropriate forums because these courts have more expertise on matters of Delaware law compared to other jurisdictions. The choice of forum provision is intended to apply to the fullest extent permitted by law to the above-specified types of actions and proceedings, including any derivative actions asserting claims under state law, and is intended to require, in each case, to the fullest extent permitted by law,
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that (i) any derivative action or proceeding brought on behalf of the New PAD, (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any current or former director, officer or other employee or stockholder of the New PAD to the New PAD or the New PAD’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the New PAD Charter or the New PAD Bylaws (including the interpretation, validity or enforceability thereof) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine; provided, however, that (x) if, and only if, the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, then another state court of the State of Delaware or, if no state court of the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware shall be the sole and exclusive forum for such action or proceeding, and (y) the exclusive forum provision will not apply to any causes of action arising under the Securities Act, or the Exchange Act, or the respective rules and regulations promulgated under the Securities Act or Exchange Act or to any claim for which the federal courts have exclusive jurisdiction. Unless New PAD consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, the Exchange Act, or the respective rules and regulations promulgated thereunder or to any claim for which the federal courts have exclusive jurisdiction.
In addition, this amendment would promote judicial fairness and avoid conflicting results, as well as make New PAD’s defense of applicable claims less disruptive and more economically feasible, principally by avoiding duplicative discovery.
Advisory Charter Proposal 5C — Adoption of Majority Vote Requirement to Amend the New PAD Charter
The FACT Articles amendments may be made by a special resolution under the Cayman Companies Act, being the affirmative vote of at least two-thirds of the FACT Ordinary Shares represented in person or by proxy and entitled to vote thereon and who vote at a general meeting.
FACT Shareholders are being asked to approve and adopt an amendment to the FACT Articles to approve provisions providing that any amendment to the New PAD charter will generally require approval by holders of at least a majority of New PAD’s then outstanding capital stock entitled to vote thereon (except where a lower threshold is provided by the DGCL). The proposed New PAD Charter provides that the New PAD Bylaws may be amended by the New PAD Board or by the stockholders by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of capital stock entitled to vote on such amendment, voting as a single class.
The amendments are intended to protect the proposed New PAD Bylaws and certain key provisions of the proposed New PAD Charter from arbitrary amendment and to prevent stockholders from taking actions that may be harmful to other stockholders or making changes to provisions that are intended to protect all stockholders.
Advisory Charter Proposal 5D — Removal of Directors
The FACT Articles provide before a business combination, holders of FACT Class B Shares may remove any director, and that after a business combination, shareholders may by Ordinary Resolution remove any director. Under the DGCL, unless a company’s certificate of incorporation provides otherwise, removal of a director only for cause is automatic with a classified board. The proposed New PAD Charter permits the removal of a director only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, subject to the rights, if any, of any series of preferred stock. The FACT Board believes that such a standard will (i) increase board continuity and the likelihood that experienced board members with familiarity of New PAD’s business operations would serve on the board at any given time and (ii) make it more difficult for a potential acquiror or other person, group or entity to gain control of the New PAD Board.
Advisory Charter Proposal 5E — Action by Written Consent of Stockholders
Under the proposed New PAD Charter, New PAD’s stockholders will have the ability to propose items of business (subject to the restrictions set forth therein) at duly convened stockholder meetings. Eliminating the right of stockholders to act by written consent limits the circumstances under which stockholders can act on their own initiative to remove directors, or alter or amend New PAD’s organizational documents outside of a duly called special or annual meeting of the stockholders of New PAD. Further, the FACT Board believes that continuing to limit stockholders’
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ability to act by written consent will (i) reduce the time and effort our board of directors and management would need to devote to stockholder proposals, which time and effort could distract our directors and management from other important company business and (ii) facilitate transparency and fairness by allowing all stockholders to consider, discuss, and vote on pending stockholder actions.
In addition, the elimination of the stockholders’ ability to act by written consent may have certain anti-takeover effects by forcing a potential acquirer to take control of the New PAD Board only at a duly called special or annual meeting. This proposal, however, is not in response to any effort of which FACT is aware to obtain control of New PAD, and FACT and its management do not presently intend to propose other anti-takeover measures in future proxy solicitations. Further, the FACT Board does not believe that the effects of the elimination of stockholder action by written consent will create a significant impediment to a tender offer or other effort to take control of New PAD. Inclusion of these provisions in the proposed New PAD Charter might also increase the likelihood that a potential acquirer would negotiate the terms of any proposed transaction with the board of directors and thereby help protect stockholders from the use of abusive and coercive takeover tactics.
Advisory Charter Proposal 5F — Other Changes in Connection with Adoption of the proposed New PAD Charter
The FACT Board believes that changing New PAD’s corporate name from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.” and making corporate existence perpetual is desirable to reflect the Business Combination and to clearly identify New PAD as the publicly traded entity. Additionally, perpetual existence is the usual period of existence for corporations, and the FACT Board believes that it is the most appropriate period for FACT following the Business Combination.
The elimination of certain provisions related to FACT’s status as a blank check company is desirable because these provisions will serve no purpose following the Business Combination. For example, the proposed New PAD Charter does not include the requirement to dissolve FACT and allows it to continue as a corporate entity with perpetual existence following the consummation of the Business Combination. Perpetual existence is the usual period of existence for public corporations, and the FACT Board believes it is the most appropriate period for New PAD following the Business Combination. In addition, certain other provisions in FACT’s current organizational documents require that proceeds from the IPO be held in the Trust Account until a business combination or liquidation of FACT has occurred. These provisions cease to apply once the Business Combination is consummated and are therefore not included in the proposed New PAD Charter.
Vote Required for Approval
Approval of each Advisory Charter Proposal requires an ordinary resolution on a non-binding and advisory only basis, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. The shareholder votes regarding these proposals are advisory in nature, and are not binding on FACT, the FACT Board, PAD or New PAD Board. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the EGM and otherwise will have no effect on the outcome of the vote on the Advisory Charter Proposals.
The Advisory Charter Proposals are conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Advisory Charter Proposals will have no effect, even if approved by holders of FACT Ordinary Shares.
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Resolution to be Voted Upon
“RESOLVED, as six separate ordinary resolutions on a non-binding and advisory basis only, subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, that the following governance provisions contained in the New PAD Charter be and are hereby approved and adopted:
• Proposal No. 5A — To amend the FACT Articles to authorize the change in the authorized capital stock of FACT from (i) 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares and 1,000,000 preference shares, par value $0.0001 per share, to (ii) 100,000,000 shares of New PAD Common Stock and 10,000,000 shares of undesignated preferred stock, par value $0.00001 per share.
• Proposal No. 5B — To amend the FACT Articles to authorize adopting the State of Delaware as the exclusive forum for certain stockholder litigation.
• Proposal No. 5C — To amend the FACT Articles to approve provisions requiring the affirmative vote of at least (i) a majority of New PAD’s then outstanding capital stock (except where a lower threshold is provided by the DGCL) for amendments to the New PAD Charter; and (ii) a majority of the New PAD Board or a majority of New PAD’s then outstanding capital stock for amendments to the New PAD Bylaws.
• Proposal No. 5D — To amend the FACT Articles to approve provisions permitting the removal of a director only for cause and only by the affirmative vote of not less than a majority of the outstanding shares entitled to vote at an election of directors, voting together as a single class.
• Proposal No. 5E — To amend the FACT Articles to approve provisions requiring stockholders to take action at an annual or special meeting and prohibiting stockholder action by written consent in lieu of a meeting.
• Proposal No. 5F — To amend the FACT Articles to authorize (i) changing the corporate name from “FACT II Acquisition Corp.” to “Precision Aerospace & Defense Group, Inc.,” (ii) making New PAD’s corporate existence perpetual, and (iii) removing certain provisions related to FACT’s status as a blank check company that will no longer be applicable upon consummation of the Business Combination.”
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT FACT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF EACH OF THE ADVISORY CHARTER PROPOSALS.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 6 — THE INCENTIVE PLAN PROPOSAL
Overview
Assuming each of the Condition Precedent Proposals is approved, FACT is asking its shareholders to approve the New PAD Incentive Plan. The New PAD Incentive Plan will be adopted by the FACT Board prior to the date of the EGM and subject to shareholder approval at the EGM. The New PAD Incentive Plan will become effective as of the latest to occur of (i) the date of its initial adoption by the FACT Board, (ii) the date of its initial approval by the FACT Shareholders, or (iii) the Effective Time, assuming approval of this proposal by the FACT Shareholders.
The following is a summary of the material terms of the New PAD Incentive Plan. A copy of the New PAD Incentive Plan is attached to this proxy statement/prospectus as Annex J.
Purpose of the New PAD Incentive Plan
The purpose of the New PAD Incentive Plan is to enhance New PAD’s and its subsidiaries’ ability to attract, retain and motivate persons who make (or are expected to make) important contributions to New PAD by providing these individuals with equity ownership opportunities and/or equity-linked compensatory opportunities. Equity awards and equity-linked compensatory opportunities are intended to motivate high levels of performance and align the interests of directors, employees and consultants with those of stockholders by giving directors, employees and consultants the perspective of an owner with an equity or equity-linked stake in New PAD and providing a means of recognizing their contributions to New PAD’s success. The FACT Board believes that equity ownership opportunities and/or equity-linked compensatory opportunities are necessary to remain competitive in its industry and are essential to recruiting and retaining the highly qualified employees who help New PAD meet its goals.
Summary of the New PAD Incentive Plan
The following summarizes the expected material terms of the New PAD Incentive Plan. This summary is qualified in its entirety by reference to the full text of the New PAD Incentive Plan.
Administration. The Compensation Committee of the New PAD Board or such other committees (the “Committee”) to which the New PAD Board delegates such power or authority will serve as the plan administrator of the New PAD Incentive Plan. The Committee has full authority to determine eligibility, grant timing, award types and terms, vesting and forfeiture conditions, forms of payment, interpret the plan and awards, and correct defects. The New PAD Board may exercise the powers and duties of the Committee from time to time without further action of the Committee and may also delegate to one or more officers or directors of New PAD limited authority to grant awards under the New PAD Incentive Plan (subject to limitations imposed under Section 16 of the Exchange Act and other applicable law and regulation).
Share Reserve. The aggregate number of shares (including shares underlying the Incentive Share Options (the “ISOs”)) issuable under the New PAD Incentive Plan shall not exceed 6,000,000, plus an annual increase on the first day of each calendar year beginning January 1, 2026 and ending on and including December 31, 2036 equal to 10% of the outstanding shares of New PAD Common Stock shares as of the prior year-end. Shares subject to awards that lapse, expire, are forfeited, canceled or otherwise terminate without issuance again become available for awards, subject to plan limitations. The total of equity grant date fair value and cash compensation to any non-employee director in any calendar year shall not exceed $250,000, subject to the specific exception for service as non-executive chair.
If an award (or any portion thereof) granted under the New PAD Incentive Plan expires, is forfeited, is canceled or otherwise terminates without the issuance of shares, any shares subject to such award again become available for grant under the New PAD Incentive Plan, subject to the limitations set forth in the New PAD Incentive Plan. For the avoidance of doubt, only awards that terminate without share issuance will return shares to the share reserve, and no other events shall increase the number of shares available other than as expressly provided in the New PAD Incentive Plan.
The New PAD Incentive Plan provides that the sum of (i) any cash compensation paid to a non-employee director and (ii) the aggregate grant-date fair value (determined in accordance with FASB ASC Topic 718, or any successor standard) of all equity awards granted to such non-employee director as compensation for board or committee service in any calendar year shall not exceed $250,000, subject to the specific exception provided for service as non-executive chair as set forth in the New PAD Incentive Plan.
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Eligibility. New PAD’s directors, employees and consultants, and employees and consultants of New PAD’s subsidiaries, will be eligible to receive awards, provided that awards may be granted only to natural persons providing bona fide services, and not in connection with capital-raising or for promoting or maintaining a market for the Company’s securities. ISOs may only be granted to employees of New PAD or its parent or subsidiary corporations.
Types of Awards. Authorized awards include stock options, stock appreciation rights, restricted stock and restricted stock units, unrestricted share awards, performance units and distribution equivalent rights as provided in the plan.
• Stock Options and Share Appreciation Rights. Options shall have a maximum term of five years (or shorter as provided in the award agreement); Share Appreciation Rights (“SARs”) shall also have a maximum term of five years or a shorter term as set by the Committee consistent with the plan. Permitted exercise methods include cash, delivery of previously owned shares, broker-assisted cashless exercise (including sale or margin loan), and share reduction to cover the price, as provided in the award agreement.
• Restricted Stock. Restricted stock is subject to transfer restrictions and vesting conditions during the restriction period; the Committee may provide for voting and dividend rights, with forfeiture of dividends if the underlying shares do not vest.
• RSUs. Restricted Share Units vest and settle in cash or shares of New PAD Common Stock at the times and on the conditions specified by the Committee and the applicable award agreement, consistent with applicable tax requirements.
• Other Stock or Cash Based Awards. Unrestricted share awards and performance units may be granted as provided in the plan; cash payment may be used where specified in the applicable award agreement.
• Dividend Equivalents. Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of New PAD Common Stock. Distribution Equivalent Rights may be granted as a separate award, payable in cash or reinvested as determined by the Committee (including interest equivalents), and paid or forfeited as specified in the award agreement.
Adjustments; Corporate Transactions. The Committee may provide for assumption, substitution, cash-out or other treatment of awards in connection with a transaction, including acceleration where provided in an award agreement, subject to the New PAD Incentive Plan’s adjustment provisions.
Repricings. Without stockholder approval, the Committee may not reduce the exercise or base price of any outstanding option or SAR, cancel and regrant or exchange an option or SAR for cash or another award to effect a reduction in price, or otherwise take any action that would be treated as a repricing under the New PAD Incentive Plan.
Amendment and Termination. The New PAD Board may amend or terminate the New PAD Incentive Plan; stockholder approval is required for changes required by law or exchange rules, any increase to the share reserve, any increase to the non-employee director compensation limit; no amendment or termination may materially and adversely impair an outstanding award without the holder’s consent. The New PAD Incentive Plan will remain in effect until the 10th anniversary of its adoption, unless terminated earlier.
Clawback Provisions. All awards will be subject to any New PAD’s clawback policy adopted to comply with applicable law and NYSE listing standards.
New Plan Benefits
No awards have been previously granted under the New PAD Incentive Plan and no awards have been granted that are contingent on stockholder approval of the New PAD Incentive Plan. The awards that are to be granted to any participant or group of participants are indeterminable at the date of this proxy statement/prospectus because participation and the types of awards that may be granted under the New PAD Incentive Plan are subject to the discretion of the plan administrator. Consequently, no new plan benefits table is included in this proxy statement/prospectus.
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Interests of Certain Persons in this Proposal
All members of the New PAD Board and all executive officers of New PAD will be eligible to receive awards made under the New PAD Incentive Plan and, thus, have a personal interest in the approval of the New PAD Incentive Plan. Nevertheless, the FACT Board believes that it is important to provide incentives and rewards for superior performance and the retention of experienced and highly qualified officers, employees, directors, consultants and other service providers by adopting the Incentive Plan.
Vote Required for Approval
Approval of the Incentive Plan Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the EGM and otherwise will have no effect on the outcome of the vote on the Incentive Plan Proposal.
The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Incentive Plan Proposal will have no effect, even if approved by holders of FACT Ordinary Shares.
Resolution to be Voted Upon
“RESOLVED, as an ordinary resolution, that subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the New PAD 2026 Omnibus Securities and Incentive Plan, in the form attached to the proxy statement/prospectus of the meeting as Annex J, be adopted and approved.”
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT FACT SHAREHOLDERS VOTE “FOR” THE INCENTIVE PLAN PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 7 — THE DIRECTOR ELECTION PROPOSAL
Overview
Pursuant to the Business Combination Agreement, FACT has agreed to take all necessary action, including causing the members of the FACT Board to resign, so that effective at the Closing, the entire New PAD Board will consist of the seven individuals set forth below. Directors of New PAD will be elected annually and serve until the next annual meeting of stockholders, or until any such director’s successor is elected and qualified, subject to such director’s earlier death, disability, disqualification, resignation, retirement or removal.
FACT is proposing the approval by ordinary resolution of the election of the following individuals, who will take office immediately following the Closing and who will constitute all the members of the New PAD Board: Maynard Hellman, Ronald Buschur, Glenn Argenbright, Larry Thompson, Dave Lawrence and [•].
Holders of FACT Class B Shares have the right to appoint all of our directors prior to consummation of the Business Combination and holders of our Public Shares will therefore not have the right to vote on the Director Election Proposal at the EGM.
[•], Maynard Hellman, Ronald Buschur, Glenn Argenbright, and Larry Thompson are expected to qualify as independent directors under NYSE’s listing standards.
There are no family relationships among any of New PAD’s director nominees and PAD’s current executive officers.
Subject to the rights of holders of any series of preferred stock to elect directors, the number of directors that constitutes the entire New PAD Board will be fixed solely by resolution of the New PAD Board.
Any director or the New PAD Board may be removed, but only for cause, by the holders of at least majority in voting power of the then outstanding shares of capital stock of New PAD entitled to vote thereon, voting as a single class. Subject to the rights of holders of any series of Preferred Stock, vacancies occurring on the New PAD Board for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled solely by vote of a majority of the remaining members of the New PAD Board, even if less than a quorum, or by a sole remaining director, and not by stockholders of New PAD. A person so elected by the New PAD Board to fill a vacancy or newly created directorship will hold office for the remaining term of his or her predecessor or until such director’s earlier death, disability, resignation, retirement, disqualification or removal.
The Director Election Proposal is conditioned on the approval of each of the Condition Precedent Proposals. Therefore, if each of the Condition Precedent Proposals is not approved, the Director Election Proposal will have no effect, even if approved by holders of FACT Class B Shares.
The FACT Board knows of no reason why any of the nominees will be unavailable or decline to serve as a director. The information presented below is as of the date of this proxy statement/prospectus and is based in part on information furnished by the nominees and in part from FACT’s and PAD’s records.
Information about Director Nominees
|
Name |
Position |
|
|
Maynard Hellman |
Director Nominee |
|
|
Ronald Buschur |
Director Nominee |
|
|
Glenn Argenbright |
Director Nominee |
|
|
Larry Thompson |
Director Nominee |
|
|
Dave Lawrence |
Director Nominee |
|
|
Adam Gishen |
Director Nominee |
|
|
[•] |
Director Nominee |
Information regarding each nominee is set forth in the section of this proxy statement/prospectus entitled “Management of New PAD Following the Business Combination.”
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Other than in connection with the Business Combination Agreement, as discussed below in the section of this proxy statement/prospectus entitled “Management of New PAD Following the Business Combination,” there is no arrangement or understanding between the persons described above and any other person pursuant to which the person was selected to his or her office or position.
For more information about the anticipated members of the New PAD Board following the Closing, see the sections of this proxy statement/prospectus entitled “Management of New PAD Following the Business Combination”; and for more information about the compensation of the members of the PAD Board and executive officers of PAD prior to the Closing, see the section of this proxy statement/prospectus entitled “Executive and Director Compensation of PAD.”
Vote Required for Approval
Approval of the Director Election Proposal requires an ordinary resolution passed by a simple majority of such holders of FACT Class B Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the EGM and otherwise will have no effect on the Director Election Proposal.
The Director Election Proposal is conditioned on the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal. Therefore, if the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal are not approved, the Director Election Proposal will have no effect, even if approved by holders of FACT Class B Shares. Holders of our Public Shares do not have the right to vote on the election of directors prior to the consummation of our Business Combination. Accordingly, we will not need any Public Shares to vote in favor of the Director Election Proposal to approve it at the EGM.
Resolution to be Voted Upon
“RESOLVED, as an ordinary resolution of the holders of Class B ordinary shares, that subject to the approval of the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Charter Proposal, the persons named below be elected to serve on the New PAD board of directors until their respective successors are duly elected and qualified, effective upon the consummation of the Business Combination.”
|
Name of Director |
||||
|
Maynard Hellman |
||||
|
Ronald Buschur |
||||
|
Glenn Argenbright |
||||
|
Larry Thompson |
||||
|
Dave Lawrence |
||||
|
Adam Gishen |
||||
|
[•] |
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT FACT SHAREHOLDERS VOTE “FOR” THE DIRECTOR ELECTION PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 8 — THE ADJOURNMENT PROPOSAL
Overview
The Adjournment Proposal allows the FACT Board to submit a proposal to approve, by ordinary resolution, the adjournment of the EGM to a later date or dates, if necessary or desirable. The purpose of the Adjournment Proposal is to permit further solicitation of proxies and votes and to provide additional time for the parties to consummate the Business Combination.
Consequences if the Adjournment Proposal is Not Approved
If the Adjournment Proposal is presented to the EGM and is not approved by the FACT Shareholders, the FACT Board may not be able to adjourn the EGM to a later date or dates, if necessary or desirable. In such events, the Business Combination may not be completed.
Vote Required for Approval
Approval of the Adjournment Proposal requires an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the EGM and otherwise will have no effect on a particular proposal under Cayman Islands law.
The Adjournment Proposal is not conditioned upon the approval of any other proposal to be voted on at the EGM.
The FACT Insiders collectively own 6,595,833 FACT Ordinary Shares, or approximately 27% of the issued and outstanding FACT Ordinary Shares, as follows: (i) the Sponsor owns 0 FACT Class B Shares directly, 3,135,044 FACT Class B Shares indirectly through Sponsor HoldCo, and 17,500 FACT Class A Shares; (ii) the FACT independent directors each own 30,000 FACT Class B Shares, for an aggregate of 90,000 FACT Class B Shares; (iii) our Executive Chairman owns 130,000 FACT Class B Shares; and (iv) Sponsor HoldCo owns an aggregate of 422,500 FACT Class A Shares, 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) and 5,593,333 FACT Class B Shares. Accordingly, we will need 5,672,200 Public Shares to vote in favor of the Adjournment Proposal to approve it if all FACT Ordinary Shares are present and cast votes, and no Public Shares to approve it if only a minimum quorum is present.
Resolution to be Voted Upon
“RESOLVED, as an ordinary resolution, that the EGM be adjourned to a later date or dates, if the FACT Board deems it necessary or desirable, be approved.”
Recommendation of the FACT Board
THE FACT BOARD UNANIMOUSLY RECOMMENDS THAT FACT SHAREHOLDERS VOTE “FOR” THE ADJOURNMENT PROPOSAL.
The existence of financial and personal interests of one or more of FACT’s directors may result in a conflict of interest on the part of such director(s) between what he, she or they may believe is in the best interests of FACT and its shareholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that shareholders vote for the proposals. In addition, the Sponsor, Sponsor HoldCo and FACT’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Sponsor HoldCo, and FACT’s Directors and Officers in the Business Combination” for a further discussion of these considerations.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary is a discussion of material U.S. federal income tax considerations (i) of the Domestication to U.S. holders and non-U.S. holders (each as defined below) of FACT Class A Shares, (ii) of the exercise of redemption rights by U.S. holders and non-U.S. holders of FACT Class A Shares, (iii) of the Merger to U.S. holders and non-U.S. holders of PAD Shares and (iv) the ownership and disposition of FACT Common Stock received in the Business Combination to non-U.S. holders of FACT Common Stock. This section applies only to holders that hold their FACT Class A Shares, PAD Shares or FACT Class A Common Stock as capital assets for U.S. federal income tax purposes (generally, property held for investment) and does not address the Sponsor, Sponsor HoldCo or their affiliates, representatives, employees or other stakeholders. Furthermore, this section applies only to holders of PAD Shares that acquired PAD Shares for cash and not in connection with the Merger.
This section is general in nature and does not discuss all aspects of U.S. federal income taxation that might be relevant to a particular holder in light of such holder’s circumstances or status, nor does it address tax considerations applicable to a holder subject to special rules, including:
• financial institutions or financial services entities;
• broker-dealers;
• governments or agencies or instrumentalities thereof;
• insurance companies;
• dealers or traders subject to a mark-to-market method of tax accounting with respect to FACT Class A Shares, FACT Common Stock or PAD Shares;
• persons holding FACT Class A Shares, PAD Shares or FACT Common Stock as part of a “straddle,” hedge, integrated transaction or similar transaction, or persons deemed to sell FACT Class A Shares, PAD Shares or FACT Common Stock under constructive sale provisions of the Code;
• U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
• partnerships or other pass-through entities for U.S. federal income tax purposes or beneficial owners in such entities;
• holders who are controlled foreign corporations or passive investment foreign companies (“PFIC”);
• regulated investment companies;
• real estate investment trusts;
• persons who acquired FACT Class A Shares, PAD Shares and FACT Common Stock through the exercise or cancellation of employee stock options or otherwise as compensation for their services;
• persons owning (directly, indirectly, or constructively) 10% or more of the total combined voting power of all classes of stock entitled to vote of, or 10% or more of the total value of all classes of shares of, FACT, PAD or New PAD, except to the extent otherwise discussed herein;
• U.S. holders that hold their FACT Class A Shares, PAD Shares or FACT Common Stock through a non-U.S. broker or other non-U.S. intermediary;
• U.S. expatriates or former long-term residents of the United States;
• persons that are subject to “applicable financial statement rules” under Section 451(b) of the Code;
• persons that exercise appraisal rights in connection with the Merger;
• individual retirement or other tax-deferred accounts; or
• tax-exempt entities.
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If a partnership (or any entity or arrangement so characterized for U.S. federal income tax purposes) holds FACT Class A Shares, PAD Shares or FACT Common Stock, the tax treatment of such partnership and a person treated as a partner of such partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships holding any FACT Class A Shares, PAD Shares or FACT Common Stock and persons that are treated as partners of such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences to them.
This discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations all as of the date hereof, changes to any of which subsequent to the date of this proxy statement/prospectus may affect the tax consequences described herein (possibly with retroactive effect).
This discussion does not take into account proposed changes in such tax laws and does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes (such as estate or gift tax consequences, the alternative minimum tax or the Medicare tax on investment income). Each of the foregoing is subject to change, possibly with retroactive effect. You should consult your own tax advisors with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state, local or foreign jurisdiction.
FACT and PAD have not and do not intend to seek any rulings from the U.S. Internal Revenue Service (the “IRS”) regarding the Domestication, the Merger, an exercise of redemption rights or any other matters discussed herein. There can be no assurance that the IRS will not take positions concerning the tax consequences of the transactions that are inconsistent with the considerations discussed below or that any such positions would not be sustained by a court.
THE FOLLOWING IS FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE DOMESTICATION, THE MERGER, AN EXERCISE OF REDEMPTION RIGHTS AND ANY OTHER MATTERS DISCUSSED HEREIN, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX LAWS.
Tax Treatment of the Domestication — F Reorganization
The U.S. federal income tax consequences of the Domestication will depend primarily upon whether the Domestication qualifies as a “reorganization” within the meaning of Section 368 of the Code.
Under Section 368(a)(1)(F) of the Code, a reorganization (an “F Reorganization”) is a “mere change in identity, form or place of organization of one corporation, however effected.” Pursuant to the Domestication, FACT will de-register from the Register of Companies in the Cayman Islands by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation in accordance with the FACT Articles, Section 388 of the DGCL and Part XII of the Cayman Companies Act.
It is intended that the Domestication qualify as an F Reorganization for U.S. federal income tax purposes. Based upon customary assumptions, as well as certain representations to be received by, and covenants and undertakings of, FACT, Merger Sub and PAD, it is the opinion of Paul Hastings LLP that the Domestication should qualify as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code. However, the completion of the Domestication is not conditioned upon the receipt of an opinion of counsel regarding the U.S. federal income tax consequences of the Domestication. An opinion of counsel represents counsel’s legal judgment but is not binding on the IRS or any court. None of the parties to the Domestication intend to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Domestication, and as a result, no assurance can be given that the IRS will not challenge the treatment of the Domestication discussed herein or that a court would not sustain such a challenge. If any of the facts, assumptions, representations, covenants or undertakings by FACT, Merger Sub or PAD are incorrect, incomplete or inaccurate or are violated, the accuracy of the opinion may be affected or if the IRS were to successfully challenge the F Reorganization status of the Domestication, the U.S. federal income tax consequences of the Domestication could differ from those described herein. Except to the extent otherwise discussed herein, the remainder of this discussion assumes the Domestication qualifies as an F Reorganization. However, due to the absence of direct guidance on the application of Section 368(a)(1)(F) of the Code to a corporation holding only investment-type assets, such as FACT, this result is not entirely clear. Accordingly, due to the absence of such guidance, it is not possible to predict whether the IRS or a court considering the issue would take a contrary position.
FACT generally does not expect to recognize any gain or loss for U.S. federal income tax purposes as a result of the Domestication.
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Tax Treatment of the Merger
The U.S. federal income tax consequences of the Merger will depend primarily upon whether the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code.
It is intended that the Merger qualifies as an “reorganization” within the meaning of Section 368(a) of the Code. Based upon customary assumptions, as well as certain representations to be received by, and covenants and undertakings of, FACT, Merger Sub and PAD, it is the opinion of [•] that the Merger should qualify as a “reorganization” within the meaning of Section 368(a) of the Code. However, the completion of the Merger is not conditioned upon the receipt of an opinion of counsel regarding the U.S. federal income tax consequences of the Merger. An opinion of counsel represents counsel’s legal judgment but is not binding on the IRS or any court. None of the parties to the Merger intend to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Merger, and as a result, no assurance can be given that the IRS will not challenge the treatment of the Merger discussed herein or that a court would not sustain such a challenge. If any of the facts, assumptions, representations, covenants or undertakings by FACT, Merger Sub or PAD are incorrect, incomplete or inaccurate or are violated, the accuracy of the opinion may be affected or if the IRS were to successfully challenge the “reorganization” status of the Merger, the U.S. federal income tax consequences of the Merger could differ from those described herein, including the holders of PAD Shares could be required to fully recognize gain with respect to such PAD Shares as a result of the Merger. Except to the extent otherwise discussed herein, the remainder of this discussion assumes the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code. However, due to the absence of authority directly addressing the treatment of all of the particular facts of the Merger for U.S. federal income tax purposes and the series of related transactions described herein, this result is not entirely clear. Accordingly, due to the absence of such direct authority, it is not possible to predict whether the IRS or a court considering the issue would take a contrary position.
PAD generally does not expect to recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger.
U.S. Holders
This section applies to you if you are a “U.S. holder.” A U.S. holder is a beneficial owner of FACT Class A Shares, PAD Shares or FACT Common Stock (as applicable) that is, for U.S. federal income tax purposes:
• an individual who is a citizen or resident of the United States;
• a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) under the laws of the United States, any state thereof or the District of Columbia;
• an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
• a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust, or (ii) the trust has validly elected to be treated as a United States person.
Tax Consequences of the Domestication to U.S. Holders of FACT Class A Shares
Assuming the Domestication qualifies as an F Reorganization, U.S. holders generally will not recognize taxable gain or loss on the Domestication for U.S. federal income tax purposes, except as provided below under the caption headings “— Effect of Section 367 of the Code to U.S. Holders of FACT Class A Shares” and “— PFIC Considerations for U.S. Holders of FACT Class A Shares — Effect of PFIC Rules on the Domestication,” and the Domestication will be treated for U.S. federal income tax purposes as if FACT (i) transferred all of its assets and liabilities to New PAD in exchange for all of the outstanding common stock of New PAD; and (ii) then distributed the New PAD Common Stock to the FACT Shareholders in liquidation of FACT. The taxable year of FACT will be deemed to end on the date of the Domestication.
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Assuming the Domestication qualifies as an F Reorganization: (i) the tax basis of a share of FACT Common Stock received by a U.S. holder in the Domestication will equal the U.S. holder’s adjusted tax basis in FACT Class A Shares surrendered in exchange therefor, increased by any amount included in the income of such U.S. holder as a result of Section 367 of the Code (as discussed below) and (ii) the holding period for a share of FACT Common Stock received by a U.S. holder will include such U.S. holder’s holding period for the FACT Class A Shares surrendered in exchange therefor.
If the Domestication fails to qualify as an F Reorganization, a U.S. holder generally would recognize gain or loss with respect to its FACT Class A Shares in an amount equal to the difference between the fair market value of the shares of FACT Common Stock received in the Domestication and the U.S. holder’s adjusted tax basis in its FACT Class A Shares surrendered in the Domestication. In such event, such U.S. holder’s basis in the shares of FACT Common Stock would be equal to their fair market value on the date of the Domestication, and such U.S. holder’s holding period for such shares of FACT Common Stock would begin on the day following the date of the Domestication. Shareholders who hold different blocks of FACT Class A Shares (generally, FACT Class A Shares purchased or acquired on different dates or at different prices) should consult their own tax advisors to determine how the above rules apply to them.
Effect of Section 367 of the Code to U.S. Holders of FACT Class A Shares
Section 367 of the Code applies to certain non-recognition transactions involving foreign corporations, including an in-bound F Reorganization. Section 367 of the Code imposes U.S. federal income tax on certain U.S. persons in connection with transactions that would otherwise be tax-free. Section 367(b) of the Code generally will apply to U.S. holders of FACT Class A Shares on the date of the Domestication.
U.S. Holders that Own At Least 10 Percent of the FACT Class A Shares
Subject to the discussion under “— PFIC Considerations for U.S. Holders of FACT Class A Shares” below, a U.S. holder who, on the date of the Domestication, beneficially owns at least 10% by vote or value in FACT generally will be required to include in income as a deemed dividend deemed paid by FACT the “all earnings and profits amount” (as defined in the Treasury Regulations under Section 367(b) of the Code) attributable to the FACT Class A Shares held directly by such U.S. holder.
U.S. Holders That Own FACT Class A Shares with a Fair Market Value of $50,000 or More And Less Than 10 Percent of the FACT Class A Shares
Subject to the discussion under “— PFIC Considerations for U.S. Holders of FACT Class A Shares” below, a U.S. holder who, on the date of the Domestication, beneficially owns (directly, indirectly, or constructively, including as a result of applicable attribution rules) FACT Class A Shares with a fair market value of $50,000 or more but less than 10% of the total combined voting power of all classes of FACT Class A Shares entitled to vote and less than 10% of the total value of all classes of stock of FACT will generally recognize gain (but not loss) with respect to the FACT Common Stock received in the Domestication unless such holder elects to recognize the “all earnings and profits” amount attributable to such holder as described below. Any such gain would be equal to the excess of the fair market value of such common stock received over the U.S. holder’s adjusted tax basis in the FACT Class A Shares deemed to be surrendered in exchange therefor. Subject to the PFIC rules discussed below, such gain would be capital gain and should be long-term capital gain if the U.S. holder held the FACT Class A Shares for longer than one year. Complex attribution rules apply in determining whether a U.S. holder owns 10% or more of the total combined voting power of all classes of our ordinary shares entitled to vote or owns 10% or more of the total value of all classes of our ordinary shares. All U.S. holders are urged to consult their own tax advisors with respect to those attribution rules.
In lieu of recognizing any gain as described in the preceding paragraph, such U.S. holder may instead elect to include in income all earnings and profits amount attributable to its FACT Class A Shares under Section 367(b) of the Code. There are, however, strict conditions for making this election. This election must comply with applicable Treasury Regulations and generally must include, among other things:
• a statement that the Domestication is a Section 367(b) exchange (within the meaning of the applicable Treasury Regulations);
• a complete description of the Domestication;
• a description of any stock, securities or other consideration transferred or received in the Domestication;
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• a statement describing the amounts required to be taken into account for U.S. federal income tax purposes as income or as an adjustment to basis, earnings and profits or other tax attributes;
• a statement that the U.S. holder is making the election that includes (A) a copy of the information that the U.S. holder received from FACT (or New PAD) establishing and substantiating the U.S. holder’s all earnings and profits amount with respect to the U.S. holder’s FACT Class A Shares, and (B) a representation that the U.S. holder has notified FACT (or New PAD) that the U.S. holder is making the election; and
• certain other information required to be furnished with the U.S. holder’s tax return or otherwise furnished pursuant to the Code or the Treasury Regulations.
The election must be attached by the U.S. holder to its timely filed U.S. federal income tax return for the year of the Domestication, and the U.S. holder must send notice of making the election to FACT (or New PAD) no later than the date such tax return is filed. At the time of the Domestication, FACT may have cumulative earnings and profits stemming from interest earned on the Trust Account, the amount of which will be based on prevailing interest rates, and such amounts of earnings and profits may be material.
U.S. holders are strongly urged to consult a tax advisor regarding the consequences of making the election described above and the appropriate filing requirements with respect to such election.
U.S. Holders that Own FACT Class A Shares with a Fair Market Value of Less Than $50,000
Subject to the discussion in “— PFIC Considerations for U.S. Holders of FACT Class A Shares” below, a U.S. holder who, at the time of the Domestication, beneficially owns (or is considered to own) FACT Class A Shares with a fair market value of less than $50,000 and less than 10% of the total combined voting power of all classes of FACT Class A Shares entitled to vote and less than 10% of the total value of all classes of stock of FACT should not be required to recognize any gain or loss under Section 367(b) of the Code in connection with the Domestication, and generally should not be required to include any part of the all earnings and profits amount in income.
PFIC Considerations for U.S. Holders of FACT Class A Shares
In addition to Section 367(b) of the Code, the Domestication may be a taxable event to U.S. holders to the extent that Section 1291(f) of the Code applies, if FACT is or ever was a PFIC under Section 1297 of the Code (as discussed further in “— Effect of PFIC Rules on the Domestication” below).
General. A foreign corporation generally will be a PFIC for U.S. federal income tax purposes with respect to a taxable year of the foreign corporation if either:
• at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income; or
• at least 50% of its assets in a taxable year, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income.
Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.
Because FACT is a blank check company with no current active business and, based upon the composition of its income (i.e. interest) and assets (i.e. cash) and upon a review of its financial statements, FACT believes that it is likely classified as a PFIC.
Consequences if a PFIC. If FACT is determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder of FACT Class A Shares and such U.S. holder did not make a timely qualified electing fund (“QEF”) election for FACT’s first taxable year as a PFIC in which such U.S. holder held (or was deemed to hold) such FACT Class A Shares (or a QEF election along with a “purging election”) or did not make a timely mark-to-market election as discussed below, then as described below, such U.S. holder generally will be subject to special rules with respect to: (i) any gain recognized by the U.S. holder on the sale or other disposition of
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its FACT Class A Shares; and (ii) any “excess distribution” made to the U.S. holder (generally, any distributions to such U.S. holder during a taxable year of the U.S. holder that are greater than 125% of the average annual distributions received by such U.S. holder in respect of the FACT Class A Shares during the three preceding taxable years of such U.S. holder or, if shorter, such U.S. holder’s holding period for the FACT Class A Shares). Under these rules:
• the U.S. holder’s gain or excess distribution will be allocated ratably over the U.S. holder’s holding period for the FACT Class A Shares;
• the amount of gain allocated to the U.S. holder’s taxable year in which the U.S. holder recognized the gain or received the excess distribution, or to the period in the U.S. holder’s holding period before the first day of the first taxable year in which FACT is a PFIC, will be taxed as ordinary income;
• the amount of gain allocated to other taxable years (or portions thereof) of the U.S. holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. holder; and
• the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. holder.
Any “all earnings and profits amount” included in income by a U.S. holder as a result of the Domestication under Section 367 of the Code, as discussed above, would generally be treated as gain subject to these rules.
QEF Election. In general, if FACT is determined to be a PFIC, a U.S. holder may avoid the PFIC tax consequences described above in respect to its FACT Class A Shares by making a timely QEF election to include in income its pro rata share of FACT net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed (unless an election is made), in each taxable year of the U.S. holder in which or with which FACT’s taxable year ends. In general, for a QEF election to be valid a U.S. holder must make a timely QEF election for the taxable year that is the first year of the U.S. holder’s holding period for its FACT Class A Shares during which FACT qualified as a PFIC. The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. holder generally makes a QEF election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a “PFIC Annual Information Statement,” to a timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS. U.S. holders should consult their own tax advisors regarding the availability and tax consequences of a retroactive QEF election under their particular circumstances. However, in order to comply with the requirements of a QEF election, a U.S. holder must receive a PFIC annual information statement from FACT.
Mark-to-Market Election. Alternatively, if a U.S. holder, at the close of its taxable year, owns shares in a PFIC that are treated as marketable stock, the U.S. holder may make a mark-to-market election with respect to such shares for such taxable year. If the U.S. holder makes a valid mark-to-market election for the first taxable year of the U.S. holder in which the U.S. holder holds (or is deemed to hold) FACT Class A Shares and for which FACT is determined to be a PFIC, such U.S. holder generally will not be subject to the PFIC rules described above in respect of its FACT Class A Shares. Instead, in general, the U.S. holder will include as ordinary income each year the excess, if any, of the fair market value of its FACT Class A Shares at the end of its taxable year over the adjusted basis in its FACT Class A Shares. The U.S. holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its FACT Class A Shares over the fair market value of its FACT Class A Shares at the end of its taxable year (but only to the extent of the net amount of previously included income, i.e., net of mark-to-market losses, as a result of the mark-to-market election). The U.S. holder’s basis in its FACT Class A Shares will be adjusted to reflect any such income or loss amounts, and the required income inclusions as well as any further gain recognized on a sale or other taxable disposition of the FACT Class A Shares will be treated as ordinary income. Any amount allowed as a deduction under the mark-to-market regime will be treated as an ordinary loss.
The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the SEC, including Nasdaq (on which FACT Class A Shares have been listed), or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. U.S. holders are urged to consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to the FACT Class A Shares under their particular circumstances.
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Effect of PFIC Rules on the Domestication. Even if the Domestication qualifies as an F Reorganization, Section 1291(f) of the Code requires that, to the extent provided in Treasury Regulations, a U.S. person that disposes of stock of a PFIC must recognize gain notwithstanding any other provision of the Code. No final Treasury Regulations are currently in effect under Section 1291(f) of the Code. Proposed Treasury Regulations under Section 1291(f) of the Code (the “Proposed Regulations”) were promulgated in 1992, with a retroactive effective date once they become finalized. If finalized in their current form, the Proposed Regulations may require taxable gain recognition by a U.S. holder subject to the PFIC rules with respect to its exchange of FACT Class A Shares for FACT Common Stock received in the Domestication if FACT was classified as a PFIC at any time during such U.S. holder’s holding period in FACT Class A Shares. Therefore, U.S. holders of FACT Class A Shares that have not made a timely QEF election or mark-to-market election (as described above) may, pursuant to the Proposed Regulations, be subject to taxation on the Domestication to the extent their shares have a fair market value in excess of their tax basis. Any such gain would generally be treated as an “excess distribution” made in the year of the Domestication and subject to the special tax and interest charge rules discussed above.
It is difficult to predict whether, in what form and with what effective date, final Treasury Regulations under Section 1291(f) of the Code will be adopted. The rules dealing with PFICs and with the QEF election and purging election (or a mark-to-market election) are very complex and are affected by various factors in addition to those described above. Accordingly, a U.S. holder of FACT Class A Shares should consult its own tax advisors concerning the application of the PFIC rules to such FACT Class A Shares under such U.S. holder’s particular circumstances.
Tax Consequences to U.S. Holders of FACT Class A Shares Exercising Redemption Rights
This section is addressed to U.S. holders of FACT Class A Shares that elect to exercise redemption rights to receive cash in exchange for FACT Class A Shares and is subject in its entirety to the discussion of the PFIC rules as discussed above.
The U.S. federal income tax consequences to a U.S. holder of FACT Class A Shares that exercises its redemption rights to receive cash from the Trust Account in exchange for all or a portion of its common stock will depend on whether the redemption qualifies as a sale of the common stock redeemed under Section 302 of the Code or is treated as a distribution under Section 301 of the Code. If the redemption qualifies as a sale of such U.S. holder’s common stock redeemed, the holder will generally recognize capital gain or capital loss equal to the difference, if any, between the amount of cash received and such holder’s tax basis in the common stock redeemed.
Whether a redemption qualifies for sale treatment will depend largely on the total amount of common stock treated as held by the U.S. holder relative to all common stock outstanding both before and after the redemption. The redemption of common stock will generally be treated as a sale of the common stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to the U.S. holder, (ii) results in a “complete termination” of the U.S. holder’s interest in FACT (or New PAD) or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. holder.
In determining whether any of the foregoing tests are satisfied, a U.S. holder takes into account not only common stock actually owned by the U.S. holder, but also common stock constructively owned by the U.S. holder. A U.S. holder may constructively own, in addition to shares owned directly, shares owned by certain related individuals and entities in which the U.S. holder has an interest or that have an interest in such U.S. holder, as well as any shares the U.S. holder has a right to acquire by exercise of an option, which would generally include common stock which could be acquired pursuant to an exercise of any warrants by such U.S. holder.
In order to meet the substantially disproportionate test, the percentage of the outstanding voting shares actually and constructively owned by the U.S. holder immediately following the redemption of common stock must, among other requirements, be less than 80% of the percentage of the outstanding voting shares actually and constructively owned by the U.S. holder immediately before the redemption. There will be a complete termination of such U.S. holder’s interest if either (i) all of the common stock actually and constructively owned by such U.S. holder are redeemed or (ii) all of the common stock actually owned by such U.S. holder are redeemed and such U.S. holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of any common stock actually and constructively owned by certain family members and such U.S. holder does not constructively own any other common stock and otherwise complies with specific conditions.
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In order for the redemption of common stock to not be essentially equivalent to a dividend, the redemption must result in a “meaningful reduction” of the U.S. holder’s proportionate interest in FACT (and, following the Domestication, New PAD). Whether the redemption will result in a meaningful reduction in a U.S. holder’s proportionate interest in New PAD will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.”
If the redemption does not qualify as a sale of the common stock redeemed, the U.S. holder will be treated as receiving a corporate distribution from FACT. Such distribution will generally be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of FACT’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of any such earnings and profits will generally be applied against and reduce the U.S. holder’s basis in its other common stock (but not below zero) and, to the extent in excess of such basis, will be treated as capital gain from the sale or exchange of such redeemed shares. After the application of these rules, any remaining tax basis of the U.S. holder in such holder’s redeemed common stock will generally be added to the U.S. holder’s adjusted tax basis in its remaining common stock, or, if it has none, to the U.S. holder’s adjusted tax basis in possibly other common stock constructively owned by such holder.
To the extent the redemption of Public Shares held by U.S. holders that exercise redemption rights is deemed to occur prior to redemption of Public Shares held by U.S. holders that exercise redemption rights will occur prior to the Domestication, U.S. holders exercising redemption rights should not be subject to the potential tax consequences of Section 367(b) of the Code as a result of the Domestication, but will be subject to the potential tax consequences of the PFIC rules discussed further above.
U.S. holders who directly, indirectly, or constructively own five percent or more of stock of FACT (by vote or value) may be subject to special reporting requirements with respect to a redemption, and such U.S. holders should consult with their own tax advisors with respect to any applicable reporting requirements.
All U.S. holders are urged to consult with their own tax advisors as to the tax consequences of a redemption of all or a portion of their common stock pursuant to an exercise of redemption rights.
Tax Consequences of the Merger to U.S. Holders of PAD Shares
A U.S. holder of PAD Shares that receives FACT Common Stock in exchange for shares of PAD Shares in the Merger should not recognize gain or loss for U.S. federal income tax purposes as a result of the Merger. A U.S. holder’s aggregate tax basis in the FACT Common Stock received in exchange for the PAD Shares surrendered in connection with the Merger should equal such U.S. holder’s aggregate adjusted tax basis in the shares of PAD Shares exchanged therefor. A U.S. holder’s holding period in the FACT Common Stock received should include the holding period for such U.S. holder’s shares of PAD Shares surrendered in exchange therefor.
If a U.S. holder has acquired different blocks of PAD Shares at different times or at different prices, then such U.S. holder’s tax basis and holding period in shares of FACT Common Stock received in the Merger generally should be determined with reference to each block of PAD Shares. Any such U.S. holders should consult their own tax advisors with respect to identifying the bases or holding periods of the shares of FACT Common Stock received in the Merger.
If the Merger was determined not to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then, for U.S. federal income tax purposes, a U.S. holder generally would recognize gain or loss with respect to its PAD Shares in an amount equal to the difference between the fair market value of the shares of FACT Common Stock received in the Merger and the U.S. holder’s adjusted tax basis in its PAD Shares surrendered in the Merger. Such gain or loss generally will be a capital gain or loss. If a U.S. holder’s holding period in the PAD Shares surrendered in the Merger is greater than one year as of the date of the Merger, the gain or loss will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. Such U.S. holder’s basis in the shares of FACT Common Stock would be equal to their fair market value on the date of the Merger, and such U.S. holder’s holding period for such shares of FACT Common Stock would begin on the day following the date of the Merger. Shareholders who hold different blocks of PAD Shares (generally, ordinary shares purchased or acquired on different dates or at different prices) should consult their own tax advisors to determine how the above rules apply to them.
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ALL U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE DOMESTICATION, THE MERGER, AN EXERCISE OF REDEMPTION RIGHTS AND ANY OTHER MATTERS DISCUSSED ABOVE.
Non-U.S. Holders
A “non-U.S. holder” is a beneficial owner of FACT Class A Shares, PAD Shares or FACT Common Stock that is, for U.S. federal income tax purposes:
• a non-resident alien individual;
• a foreign corporation; or
• an estate or trust that is not a U.S. holder.
Such term, however, generally does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition. If you are such an individual, you are urged to consult your tax advisor regarding the U.S. federal income tax consequences of the sale or other disposition of FACT Class A Shares, PAD Shares or FACT Common Stock.
Tax Consequences of the Domestication to Non-U.S. Holders of FACT Class A Shares
FACT does not expect the Domestication to result in any material U.S. federal income tax consequences to non-U.S. holders of FACT Class A Shares.
Tax Consequences to Non-U.S. Holders of FACT Class A Shares Exercising Redemption Rights
This section is addressed to non-U.S. holders of FACT Class A Shares that elect to exercise redemption rights to receive cash in exchange for all or a portion of their FACT Class A Shares. For purposes of this discussion, a “redeeming non-U.S. holder” is a non-U.S. holder that elects to exercise redemption rights in respect of all or a portion of its FACT Class A Shares.
The U.S. federal income tax consequences to a redeeming non-U.S. holder will depend on whether the redemption qualifies as a sale of the common stock redeemed, as described above under “— U.S. Holders — Tax Consequences to U.S. Holders That Elect to Exercise Redemption Rights.” If such a redemption qualifies as a sale of common stock, the U.S. federal income tax consequences to the redeeming non-U.S. holder generally will be as described above under “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of FACT Common Stock.” If such a redemption does not qualify as a sale of common stock, the redeeming non-U.S. holder generally will be treated as receiving a distribution, the U.S. federal income tax consequences of which are described above under “— Distributions.”
Tax Consequences of the Merger to Non-U.S. Holders of PAD Shares
The U.S. federal income tax consequences of the Merger for non-U.S. holders of PAD Shares should be similar to those for U.S. holders of PAD Shares as described above under “— U.S. Holders — Tax Consequences of the Merger to U.S. Holders.”
However, non-U.S. holders of PAD Shares may be subject to U.S. federal income tax on any gain realized if PAD is or has been a USRPHC (as defined below) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the Merger or the period during which the non-U.S. holder held PAD Shares, in which case any gain recognized by such non-U.S. holder would be subject to tax at generally applicable U.S. federal income tax rates. PAD believes that it is not, and has not been at any time since its formation, a USRPHC.
In addition, if the Merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then, for U.S. federal income tax purposes, a non-U.S. holder of PAD Shares would recognize gain or loss if the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if an applicable tax treaty so requires, is attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. holder). Such gain will be subject to tax, net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder. In addition, any such gains of a non-U.S. holder of PAD
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Shares that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate (or lower applicable treaty rate) on such non-U.S. holder’s effectively connected earnings and profits (subject to adjustments). Such non-U.S. holder’s basis in the shares of FACT Common Stock would be equal to their fair market value on the date of the Merger, and such non-U.S. holder’s holding period for such shares of FACT Common Stock would begin on the day following the date of the Merger. Shareholders who hold different blocks of PAD Shares (generally, ordinary shares purchased or acquired on different dates or at different prices) should consult their tax advisors to determine how the above rules apply to them.
If PAD is not and has not been a USRPHC (as defined below) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the Merger or the period during which the non-U.S. holder held PAD Shares, and the gain is not effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if an applicable tax treaty so requires, is not attributable to a U.S. permanent establishment or fixed base maintained by the PAD Non-U.S. holder), no gain or loss would be recognized as a result of the Merger by non-U.S. holders. With respect to the foregoing sentence, PAD does not believe it is, or was during the period of time referred to in the foregoing sentence, a USRPHC, and PAD will deliver to FACT in connection with the Business Combination a certificate certifying that no interest in PAD is, or has been during the period of time referred to in the foregoing sentence, a “United States real property interests.”
Tax Consequences to Non-U.S. Holders of the Ownership and Disposition of FACT Common Stock received in the Business Combination
Distributions
Any distribution of cash or property (or a constructive distribution) New PAD makes to a non-U.S. holder of FACT Common Stock, to the extent paid out of New PAD’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles), generally will constitute a dividend for U.S. federal income tax purposes. Any such dividends paid or deemed paid to a non-U.S. holder in respect of FACT Common Stock that is not effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States, as described below, generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividend, unless such non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E, as applicable). In satisfying the foregoing withholding obligation with respect to a distribution, the applicable withholding agent may withhold up to 30% of either (i) the gross amount of the entire distribution, even if the amount of the distribution is greater than the amount constituting a dividend, as described above, or (ii) the amount of the distribution New PAD projects will be a dividend, based upon a reasonable estimate of both its current and accumulated earnings and profits for the taxable year in which the distribution is made. If U.S. federal income tax is withheld on the amount of a distribution in excess of the amount constituting a dividend, the non-U.S. holder may obtain a refund of all or a portion of the excess amount withheld by timely filing a claim for refund with the IRS. Any such distribution not constituting a dividend generally will be treated, for U.S. federal income tax purposes, first as reducing the non-U.S. holder’s adjusted tax basis in such FACT Common Stock (but not below zero) and, to the extent such distribution exceeds the non-U.S. holder’s adjusted tax basis, as gain from the sale or other taxable disposition of such FACT Common Stock, which will be treated as described under “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of FACT Common Stock” below.
Dividends (including constructive dividends) New PAD pays to a non-U.S. holder that are effectively connected with such non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment or fixed base of the non-U.S. holder) generally will not be subject to the foregoing U.S. federal withholding tax, provided such non-U.S. holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, unless an applicable income tax treaty provides otherwise, such dividends generally will be subject to U.S. federal income tax, net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder. In addition, if the non-U.S. holder is a corporation, such U.S. holder’s effectively connected earnings and profits (subject to adjustments) may be subject to a U.S. federal “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).
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Gain on Sale, Taxable Exchange or Other Taxable Disposition of FACT Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a sale, exchange or other disposition of FACT Common Stock unless:
• the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment or fixed base of the non-U.S. holder);
• the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
• New PAD is or has been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the non-U.S. holder’s holding period, and either (i) New PAD has ceased to be regularly traded on an established securities market or (ii) the non-U.S. holder has owned or is deemed to have owned under constructive ownership rules, at any time during the shorter of the five-year period preceding the disposition or the non-U.S. holder’s holding period, more than 5% of New PAD’s common stock.
Unless an applicable tax treaty provides otherwise, any gain described in the first bullet point above generally will be subject to U.S. federal income tax, net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, in addition, a non-U.S. holder described in the first bullet point that is a foreign corporation will be subject to U.S. federal “branch profits tax” at a 30% rate (or a lower applicable tax treaty rate) on such non-U.S. holder’s effectively connected earnings and profits (subject to adjustments).
Any gain of a non-U.S. holder described in the second bullet point above (which may be offset by U.S. source capital losses during the taxable year of the disposition) generally will be subject to a flat 30% U.S. federal income tax rate (or a lower applicable tax treaty rate).
Unless an applicable tax treaty provides otherwise, any gain described in the third bullet point above that is recognized by such non-U.S. holder on the sale, exchange or other taxable disposition of FACT Common Stock generally will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of such FACT Common Stock from a non-U.S. holder may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such disposition if such FACT Common Stock are not treated as “regularly traded on an established securities market.” New PAD will generally be classified as a USRPHC if the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. New PAD does not expect to be classified as a USRPHC following the Merger. However, such determination is factual in nature and subject to change, and no assurance can be provided as to whether New PAD is or will be a USRPHC with respect to a non-U.S. holder following the Merger or at any future time.
ALL NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM OF THE DOMESTICATION, THE MERGER, AN EXERCISE OF REDEMPTION RIGHTS AND HOLDING FACT COMMON STOCK RECEIVED IN THE BUSINESS COMBINATION.
Information Reporting and Backup Withholding
Dividend payments with respect to FACT Common Stock, proceeds from the sale, exchange, redemption or other taxable disposition of FACT Common Stock and amount received in the Merger may be subject to information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. holder who furnishes a correct taxpayer identification number and makes other required certifications, or who is otherwise exempt from backup withholding and establishes such exempt status. A non-U.S. holder generally will eliminate the requirement for information reporting (other than with respect to dividends) and backup withholding by providing certification of its non-U.S. status on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.
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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s United States federal income tax liability, and a holder generally may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.
Foreign Account Tax Compliance Act
Pursuant to the Foreign Account Tax Compliance Act, set forth in Sections 1471 through 1474 of the Code and the Treasury Regulations and administrative guidance promulgated thereunder (commonly referred to as “FATCA”), foreign financial institutions (which include hedge funds, private equity funds, mutual funds and any other investment vehicles regardless of their size) must comply with information reporting rules with respect to their U.S. account holders and investors or bear a withholding tax on certain payments made to them (including such payments made to them in their capacity as intermediaries). Generally, if a foreign financial institution or certain other foreign entity does not comply with these reporting requirements, “withholdable payments” to the noncomplying entity will be subject to a 30% withholding tax. For this purpose, withholdable payments include U.S.-source payments otherwise subject to nonresident withholding tax and, subject to the discussion of the proposed Treasury Regulations below, the entire gross proceeds from the sale of certain equity or debt instruments of U.S. issuers. This withholding tax will apply to a non-compliant foreign financial institution regardless of whether the payment would otherwise be exempt from U.S. nonresident withholding tax.
Withholding under FATCA will generally apply to payments of dividends on FACT Common Stock to foreign financial institutions that are not in compliance with FATCA. The U.S. Department of the Treasury has released proposed regulations which, if finalized in their present form, would eliminate the U.S. federal withholding tax of 30% applicable to the gross proceeds of a sale or disposition of equity interests. In its preamble to the proposed regulations, the U.S. Department of Treasury stated that taxpayers may generally rely on the proposed regulations until final regulations are issued.
Similar withholding requirements to the foregoing apply to dividends on and, subject to the proposed regulations, gross proceeds from the sale of, FACT Common Stock held by an investor that is a non-financial foreign entity unless such entity provides certain information regarding the entity’s “substantial United States owners,” which the applicable withholding agent will in turn be required to provide to the Secretary of the Treasury.
If a dividend payment is both subject to withholding under FATCA and subject to the withholding tax discussed above, the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. Each non-U.S. holder is urged to consult its tax advisor regarding these rules and whether they may be relevant to such non-U.S. holder’s ownership and disposition of FACT Common Stock.
Foreign entities located in jurisdictions that have entered into intergovernmental agreements with the United States in connection with FATCA may be subject to different rules. All holders are urged to consult with their tax advisors regarding the possible implications of the above rules under, or related to, FATCA on their investment in FACT Common Stock.
THE DISCUSSION ABOVE IS FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE DOMESTICATION, THE MERGER, AN EXERCISE OF REDEMPTION RIGHTS AND ANY OTHER MATTERS DISCUSSED HEREIN, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX LAWS.
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MATERIAL CAYMAN ISLANDS TAX CONSIDERATIONS
The following summary contains a description of material Cayman Islands income tax consequences of the acquisition, ownership and disposition of ordinary shares, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase ordinary shares. The summary is based upon the tax laws of Cayman Islands and regulations thereunder as of the date hereof, which are subject to change.
Prospective investors should consult their professional advisors on the possible tax consequences of buying, holding or selling any shares under the laws of their country of citizenship, residence or domicile.
The following is a discussion of material Cayman Islands income tax consequences of an investment in FACT Ordinary Shares. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.
Under Existing Cayman Islands Laws
Payments of dividends and capital in respect of FACT Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of interest and principal or a dividend or capital to any holder of FACT Ordinary Shares, as the case may be, nor will gains derived from the disposal of FACT Ordinary Shares be subject to Cayman Islands income or corporation tax. The Cayman Islands currently has no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax.
No stamp duty is payable in respect of the issue of FACT’s securities or on an instrument of transfer in respect of any of FACT’s securities.
The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to FACT levied by the Government of the Cayman Islands except for stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties which are applicable to any payments made by or to FACT. There are no exchange control regulations or currency restrictions in the Cayman Islands.
FACT has been incorporated under the laws of the Cayman Islands as an exempted company with limited liability and, as such, has applied for and received an undertaking from the Financial Secretary of the Cayman Islands in the following form:
The Tax Concessions Law
Undertaking as to Tax Concessions
In accordance with the Tax Concessions Law, the following undertaking is hereby given to:
FACT II Acquisition Corp. “the Company”
(a) That no law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and
(b) In addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable:
(i) on or in respect of the shares, debentures or other obligations of the Company; or
(ii) by way of the withholding in whole or part, of any relevant payment as defined in The Tax Concessions Law.
These concessions shall be for a period of TWENTY years from the 8th day of July 2024.
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SELECTED HISTORICAL FINANCIAL INFORMATION OF FACT
The following tables contain summary historical financial data for FACT. Such data as of December 31, 2025 and for the year then ended has been derived from the audited consolidated financial statements of FACT included elsewhere in this proxy statement/prospectus. The summary historical interim financial data of FACT as of March 31, 2026 and for the three months ended March 31, 2026 and March 31, 2025 are derived from FACT’s unaudited interim consolidated financial statements included elsewhere in this proxy statement/prospectus.
The information below is only a summary and should be read in conjunction with FACT’s consolidated financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement/prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of FACT.” FACT’s historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.
|
Three Months Ended March 31, |
||||||||
|
2026 |
2025 |
|||||||
|
Statement of Operations |
|
|
|
|
||||
|
General and administrative expenses |
$ |
517,616 |
|
|
364,345 |
|
||
|
|
|
|
|
|||||
|
Loss from operations |
|
(517,616 |
) |
|
(364,345 |
) |
||
|
Other income: |
|
|
|
|
||||
|
Change in fair value of over-allotment liability |
|
— |
|
|
26,558 |
|
||
|
Interest earned on bank account |
|
2,965 |
|
|
— |
|
||
|
Interest earned on cash held in Trust Account |
|
1,548,784 |
|
|
1,785,684 |
|
||
|
Total other income |
|
1,551,749 |
|
|
1,812,242 |
|
||
|
Net Income |
$ |
1,034,133 |
|
$ |
1,447,897 |
|
||
|
|
|
|
|
|||||
|
Weighted average shares outstanding of Class A ordinary shares |
|
18,488,125 |
|
|
18,488,125 |
|
||
|
Basic and diluted net income per ordinary share, Class A |
$ |
0.04 |
|
$ |
0.06 |
|
||
|
Weighted average shares outstanding, Class B ordinary shares |
|
5,833,333 |
|
|
5,833,333 |
|
||
|
Basic and diluted net income per ordinary share, Class B |
$ |
0.04 |
|
$ |
0.06 |
|
||
|
As of |
As of |
|||||||
|
Balance Sheet Data: |
|
|
|
|
||||
|
Total assets |
$ |
185,815,214 |
|
$ |
184,422,847 |
|
||
|
Total liabilities |
|
9,519,706 |
|
|
9,161,472 |
|
||
|
Class A Ordinary Shares subject to possible redemption, 17,500,000 shares at redemption value of approximately $10.59 and $10.50 per share at |
|
185,334,240 |
|
|
183,785,456 |
|
||
|
Preference Shares, $0.0001 par value; 1,000,000 shares authorized; none |
|
— |
|
|
— |
|
||
|
Class A Ordinary Shares, $0.0001 par value; 200,000,000 shares authorized; 988,125 issued and outstanding at March 31, 2026 and December 31, 2025 (excluding 17,500,000 shares subject to possible redemption) |
|
99 |
|
|
99 |
|
||
|
Class B Ordinary Shares, $0.0001 par value; 20,000,000 shares authorized; 5,833,333 shares issued and outstanding at March 31, 2026 and December 31, 2025 |
|
583 |
|
|
583 |
|
||
|
Total shareholders’ deficit |
$ |
(9,038,732 |
) |
$ |
(8,524,081 |
) |
||
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SELECTED HISTORICAL FINANCIAL INFORMATION OF PAD
The following tables contain summary historical financial data for PAD. The information presented below is derived from PAD’s audited consolidated financial statements at and for the fiscal years ended December 31, 2025, and December 31, 2024, and unaudited consolidated financial statements at and for the three months ended March 31, 2026, in each case included elsewhere in this proxy statement/prospectus.
The information presented below is only a summary and should be read alongside PAD’s consolidated financial statements and accompanying footnotes included elsewhere in this proxy statement/prospectus. You should read the following financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PAD.” The summary consolidated financial data in this section is not intended to replace PAD’s consolidated financial statements and related notes and are qualified in their entirety thereby. PAD’s historical results are not necessarily indicative of the results to be expected in the future or for any full year period.
|
At |
At |
At |
||||||||||
|
Balance Sheet Data: |
|
|
|
|
|
|
||||||
|
Total assets |
$ |
79,514,738 |
|
$ |
77,858,642 |
|
$ |
66,739,651 |
|
|||
|
Total liabilities |
|
75,829,681 |
|
|
75,333,427 |
|
|
64,579,660 |
|
|||
|
Total stockholders’ equity (deficit) |
$ |
(2,953,042 |
) |
$ |
(3,476,278 |
) |
$ |
(1,305,009 |
) |
|||
|
For the |
|
|||||||||||
|
December 31, |
December 31, |
|||||||||||
|
Cash Flow Statement Data: |
|
|
|
|
|
|
||||||
|
Net cash provided by (used in) operating activities |
$ |
2,339,494 |
|
$ |
(1,129,756 |
) |
$ |
(3,145,100 |
) |
|||
|
Net cash (used in) investing activities |
|
(1,624,275 |
) |
|
(2,977,929 |
) |
|
(528,861 |
) |
|||
|
Net cash provided by (used in) financing activities |
|
(540,377 |
) |
|
5,270,195 |
|
|
3,470,433 |
|
|||
|
Net increase (decrease) in cash |
|
174,842 |
|
|
1,162,510 |
|
|
(203,628 |
) |
|||
|
Cash, beginning of period |
|
2,437,666 |
|
|
1, 275,156 |
|
|
1,478,784 |
|
|||
|
Cash, end of period |
$ |
2,612,508 |
|
$ |
2,437,666 |
|
$ |
1,275,156 |
|
|||
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below shall have the same meaning as terms defined and included elsewhere in this proxy statement/prospectus.
FACT is providing the following unaudited pro forma condensed combined financial information to aid in the analysis of the financial aspects of the Business Combination, other events contemplated by the Business Combination Agreement, and other transactions described below.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and presents the combination of the historical financial information of FACT and PAD, adjusted to give effect to the Business Combination.
The unaudited pro forma condensed combined balance sheet as of December 31, 2025, combines the historical audited balance sheet of FACT as of December 31, 2025, with the historical audited condensed consolidated balance sheet of PAD as of December 31, 2025, on a pro forma basis as if the Business Combination had been consummated on December 31, 2025.
The unaudited pro forma combined statement of operations for the year ended December 31, 2025, combines the historical audited statements of operations of FACT for the year ended December 31, 2025 and the historical audited consolidated statement of operations of PAD for the year ended December 31, 2025, on a pro forma basis as if the Business Combination had been consummated on January 1, 2025.
The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following historical financial statements and the accompanying notes, which are included elsewhere in this proxy statement/prospectus, as well as the disclosures contained in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of FACT” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PAD”:
• the historical audited financial statements of FACT as of and for the year ended December 31, 2025, and the related notes included elsewhere in this proxy statement/prospectus.
• the historical unaudited consolidated condensed financial statements of PAD as of and for the year ended December 31, 2025, and the related notes included elsewhere in this proxy statement/prospectus.
Expected accounting treatment of the Business Combination
The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with U.S. GAAP as PAD has been determined to be the accounting acquirer under all redemption scenarios presented. Under this method of accounting, FACT, the legal acquirer, will be treated as the accounting acquiree for financial reporting purposes and PAD, the legal acquiree, will be treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities, and results of operations of PAD will become the historical financial statements of New PAD and FACT’s assets, liabilities, and results operations will be consolidated with PAD’s starting from the Closing Date. For accounting purposes, the financial statements of New PAD will represent a continuation of the financial statements of PAD, with the Business Combination being treated as the equivalent of PAD issuing stock for the net assets of FACT, accompanied by recapitalization. The net assets of FACT will be stated at historical carrying values, and no goodwill or other intangible assets will be recorded. Operations prior to the Business Combination will be presented as those of PAD in future final reporting of New PAD.
PAD was determined to be the accounting acquirer under all of the redemption scenarios presented based on the evaluation of the following facts and circumstances:
• PAD is the larger entity based on the presence of substantive operations and employee base and will assume the ongoing operations of New PAD;
• PAD Stockholders will have the greatest voting interest that ranges from 35.5% to 48.0% in New PAD under various redemption scenarios;
• PAD’s existing stockholders will have the greatest ability to influence decisions regarding the election and removal of the New PAD Board;
• PAD will hold a majority of New PAD’s Directors;
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• PAD’s operations prior to the acquisition will comprise the only ongoing operations of New PAD;
• PAD’s senior management will comprise the senior management of New PAD;
• New PAD will assume PAD’s name;
• PAD’s headquarters will become New PAD headquarters; and
• FACT does not meet the definition of a business.
The final allocation of consideration payable to PAD equity holders will be determined upon the completion of the Business Combination and related events and could differ materially from the three scenarios presented.
Description of the Business Combination
On November 26, 2025, FACT entered into the original Business Combination Agreement, and on May 17, 2026, into Amendment No. 1 to the Business Combination Agreement, with the Sponsor, Sponsor HoldCo, Merger Sub, and PAD.
Pursuant to the Business Combination Agreement, Merger Sub will merge with and into PAD, as a result of which the separate corporate existence of Merger Sub shall cease and PAD shall continue as the surviving entity and a wholly owned subsidiary of FACT. Each (i) PAD Share issued and outstanding immediately prior to the Effective Time shall automatically be cancelled and converted into the right to receive a number of Public Shares equal to 12,402,577 divided by the number of PAD Shares issued and outstanding immediately prior to the Effective Time; (ii) share of PAD Series A Preferred Stock, PAD Series B Preferred Stock, and PAD Series C Preferred Stock that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash and (B) a number of Public Shares equal to 621,500 divided by the number of shares of PAD Series A Preferred Stock, PAD Series B Preferred Stock and PAD Series C Preferred Stock issued and outstanding immediately prior to the Effective Time; (iii) share of PAD Series D Preferred Stock that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $5.00 in cash and (B) a number of Public Shares equal to 276,000 divided by the number of shares of PAD Series D Preferred Stock issued and outstanding immediately prior to the Effective Time; and (iv) share of PAD Series E Preferred Stock that is issued and outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive (A) $10.00 in cash and (B) 1.5 Public Shares.
The Business Combination Agreement contemplates the cancellation and exchange of all issued and outstanding PAD Shares into 12,402,577 shares of New PAD Common Stock in each of the No Redemptions Scenario, 50% Redemptions Scenario and Full Redemptions Scenario.
Share Ownership of New PAD
Each of the following two tables summarizes, based on each person or group’s ownership, as of May 15, 2026, of either PAD securities (in the case of existing holders of PAD Shares, PAD Directors and Management, and holders of PAD Preferred Stock) or FACT securities (in the case of the Sponsor and its affiliates and the IPO underwriters), the pro forma shares of New PAD Common Stock issued and outstanding immediately after consummation of the Business Combination, presented under the three assumed redemption scenarios detailed below. The Third-Party Investors, TAP, and Brad Bowder do not own any PAD or FACT securities as of May 15, 2026. The table below does not include (i) 8,750,000 shares of New PAD Common Stock that underlie the public warrants, (ii) 331,563 shares of New PAD Common Stock that underlie the private placement warrants, (iii) 497,957 New PAD Options, and (iv) certain Sponsor Performance Bonus Shares (collectively, the “Dilutive Interests”), in each case because none of the Dilutive Interests are exercisable or issuable immediately following the consummation of the Business Combination.
• No Redemptions Scenario: This scenario assumes that no Public Shares are redeemed. This scenario further assumes the reclassification of unredeemed Public Shares to permanent equity of $185.3 million, payment of the estimated transaction costs of FACT of $11.6 million, FACT Forfeited Shares of 1,878,333, 600,000 Sponsor Performance Bonus Shares, no forfeiture of Sponsor HoldCo Contributed Shares, and that $75.0 million in additional equity financing is obtained from the sale of 7,500,000 Public Shares (based on an assumed per-share price of $10.00 per share). Also reflects the anticipated $25.0 million proceeds from the Credit Facility.
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• 50% Redemptions Scenario: This scenario assumes that 8,750,000 Public Shares, or 50% of the Public Shares subject to redemption, are redeemed for an aggregate payment of approximately $92.7 million (based on the estimated per-share redemption price of approximately $10.59 per share) from the Trust Account based on funds in the Trust Account as of March 31, 2026. This scenario further assumes the reclassification of unredeemed Public Shares to permanent equity of $92.7 million, payment of the estimated transaction costs of FACT of $8.1 million, FACT Forfeited Shares of 1,878,333, 600,000 Sponsor Performance Bonus Shares, no forfeiture of Sponsor HoldCo Contributed Shares, and that $75.0 million in additional equity financing is obtained from the sale of 7,500,000 Public Shares (based on an assumed estimated per-share price of $10.00 per share). Also reflects the anticipated $25.0 million proceeds from the Credit Facility.
• Full Redemptions Scenario: This scenario assumes that 17,500,000 Public Shares held by the Public Shareholders are redeemed for an aggregate payment of approximately $185.3 million (based on the estimated per-share redemption price of approximately $10.59 per share) from the Trust Account based on funds in the Trust Account as of March 31, 2026. This scenario further assumes reclassification of unredeemed Public Shares to permanent equity of $0, payment of the estimated transaction costs of FACT of $7.6 million, FACT Forfeited Shares of 1,878,333, no Sponsor Performance Bonus Shares, no forfeiture of Sponsor HoldCo Contributed Shares, and that $75.0 million in additional equity financing is obtained from the sale of 7,500,000 Public Shares (based on an assumed estimated per-share price of $10.00 per share). The Full Redemptions Scenario represents the redemption of all Public Shares held by Public Shareholders. Also reflects the anticipated $25.0 million proceeds from the Credit Facility.
|
Share Ownership in New PAD |
|||||||||||||||
|
Assuming No |
Assuming 50% |
Assuming Full |
|||||||||||||
|
Number of |
Approximate |
Number of |
Approximate |
Number of |
Approximate |
||||||||||
|
Existing Holders of PAD Shares (other than management and directors)(1) |
10,390,291 |
23.4 |
% |
10,390,291 |
29.1 |
% |
10,390,291 |
39.4 |
% |
||||||
|
PAD Directors and Management(1) |
3,130,143 |
7.1 |
% |
3,130,143 |
8.8 |
% |
3,130,143 |
11.9 |
% |
||||||
|
Maynard Hellman |
592,000 |
1.3 |
% |
592,000 |
1.7 |
% |
592,000 |
2.2 |
% |
||||||
|
Ronald Buschur |
350,000 |
0.8 |
% |
350,000 |
1.0 |
% |
350,000 |
1.3 |
% |
||||||
|
Glennon Argenbright |
180,000 |
0.4 |
% |
180,000 |
0.5 |
% |
180,000 |
0.7 |
% |
||||||
|
Larry Thompson |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
40,000 |
0.2 |
% |
||||||
|
Dave Lawrence(2) |
1,125,000 |
2.5 |
% |
1,125,000 |
3.2 |
% |
1,125,000 |
4.3 |
% |
||||||
|
Brent Borden(3) |
414,286 |
0.9 |
% |
414,286 |
1.2 |
% |
414,286 |
1.6 |
% |
||||||
|
Kevin Vermeulen II(4) |
436,000 |
1.0 |
% |
436,000 |
1.2 |
% |
436,000 |
1.7 |
% |
||||||
|
Holders of PAD Preferred Stock(1)(5) |
1,044,500 |
2.3 |
% |
1,044,500 |
2.9 |
% |
1,044,500 |
4.0 |
% |
||||||
|
Public Shareholders |
17,500,000 |
39.4 |
% |
8,750,000 |
24.6 |
% |
— |
0.0 |
% |
||||||
|
Sponsor and its affiliates |
4,120,000 |
9.3 |
% |
4,120,000 |
11.6 |
% |
3,520,000 |
13.4 |
% |
||||||
|
Adam Gishen(6) |
480,939 |
1.1 |
% |
480,939 |
1.4 |
% |
406,567 |
1.5 |
% |
||||||
|
Min Lee(6) |
480,939 |
1.1 |
% |
480,939 |
1.4 |
% |
406,567 |
1.5 |
% |
||||||
|
Richard Nespola, Jr.(6) |
480,939 |
1.1 |
% |
480,939 |
1.4 |
% |
406,567 |
1.5 |
% |
||||||
|
Joseph Wagman(6) |
480,939 |
1.1 |
% |
480,939 |
1.4 |
% |
406,567 |
1.5 |
% |
||||||
|
Robert Rackind(7) |
148,128 |
0.3 |
% |
148,128 |
0.4 |
% |
145,324 |
0.6 |
% |
||||||
|
Nell Cady-Kruse |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
James Rallo |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
Hella Alashkar |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
FACT II Acquisition LLC(6)(8) |
1,958,116 |
4.4 |
% |
1,958,116 |
5.5 |
% |
1,658,408 |
6.3 |
% |
||||||
|
Underwriters(9) |
223,125 |
0.5 |
% |
223,125 |
0.6 |
% |
223,125 |
0.8 |
% |
||||||
|
Third-Party Investors(10) |
7,500,000 |
16.9 |
% |
7,500,000 |
21.0 |
% |
7,500,000 |
28.4 |
% |
||||||
|
Brad Bowder(11) |
412,234 |
0.9 |
% |
412,234 |
1.2 |
% |
412,234 |
1.6 |
% |
||||||
|
TAP(12) |
137,112 |
0.3 |
% |
137,112 |
0.4 |
% |
137,112 |
0.5 |
% |
||||||
|
Total |
44,464,548 |
100.0 |
% |
35,714,548 |
100.0 |
% |
26,364,548 |
100.0 |
% |
||||||
____________
(1) Represents a portion of the Merger Consideration Shares.
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(2) Dave Lawrence’s 1,125,000 shares are to be issued at Closing. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(3) Brent Borden’s shares reflect 414,286 fully vested shares granted by the PAD Board for his role as Chief Executive Officer. An additional 7,143 restricted shares will vest on each of July 1, 2026, October 1, 2026, and January 1, 2027, and an additional 7,142 restricted shares will vest on April 1, 2027.
(4) Kevin Vermeulen II’s shares consist of (i) 85,000 shares issued to him by PAD in 2025 for his services to PAD as provided through TAP and (ii) 351,000 shares originally issuable by PAD to TAP for its services to PAD and issued directly to Mr. Vermeulen at TAP’s direction as part of a distribution to TAP employees.
(5) Consists of shares of New PAD Common Stock issuable to the holders of PAD Preferred Stock at the Effective Time. Includes (i) 200,000 shares of New PAD Common Stock issuable to the holders of PAD Series A Preferred Stock, (ii) 146,500 shares of New PAD Common Stock issuable to the holders of PAD Series B Preferred Stock, (iii) 275,000 shares of New PAD Common Stock issuable to the holders of PAD Series C Preferred Stock, (iv) 276,000 shares of New PAD Common Stock issuable to the holders of PAD Series D Preferred Stock, and (v) 147,000 shares of New PAD Common Stock issuable to the holders of PAD Series E Preferred Stock as of May 15, 2026.
(6) The Sponsor is the managing member of Sponsor HoldCo. The members of the Sponsor are our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Each member holds an equal 25% interest in the Sponsor. Investment and voting decisions are made by a board of managers comprised of the four members, with majority vote required. Each member’s base ownership includes 404,310 Founder Shares and 2,257 Private Placement Units held through the Sponsor. Except for the 17,500 Private Placement Units that are held directly by the Sponsor, the Sponsor holds securities of the Company through Sponsor HoldCo. In the No Redemptions Scenario and the 50% Redemptions Scenario, each member’s ownership also includes 74,372 redemption-related Sponsor Performance Bonus Shares (73,959 Founder Shares and 413 Private Placement Units) per Note 10.
(7) Robert Rackind’s shares reflect 130,000 shares issued for his service on the FACT Board (already owned) plus Sponsor HoldCo investment shares from his $50,000 investment: 12,745 Founder Shares and 2,579 Private Placement Units vested at the Effective Time. In the No Redemptions Scenario and the 50% Redemptions Scenario, Mr. Rackind’s count includes 2,804 redemption-related Sponsor Performance Bonus Shares (2,332 Founder Shares and 472 Private Placement Units) per Note 10.
(8) Sponsor HoldCo’s shares exclude Robert Rackind’s Sponsor HoldCo investment shares, which are included in his personal share count (refer to Note 5). Includes 20,000 shares of New PAD Common Stock to be transferred to the Senior Advisor post-Closing.
(9) Represents Private Placement Units held by CCM and Seaport, and an aggregate of 28,687 Private Placement Units transferred thereby.
(10) Assumes that new shares pursuant to meeting the FACT Minimum Cash Amount of $75.0 million will be issued at $10.0 per share pursuant to the Financings.
(11) Consists of shares issuable to Brad Bowder (owner of Western Professional, Inc.) as consideration for PAD’s acquisition of Western Professional, Inc. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(12) Consists of shares issuable to TAP for mergers and acquisition consulting fees.
(13) Includes 600,000 redemption-related Sponsor Performance Bonus Shares, the issuance of which is automatically triggered where the amount remaining in the Trust Account after redemptions of Public Shares is (A) at least $35.0 million and (B) at least $70.0 million. All other shares reflect amounts vested at Closing. Up to 600,000 additional Sponsor Performance Bonus Shares (1,200,000 total) may be earned subject to separate milestones: 300,000 shares upon securing research coverage and 300,000 shares upon achieving a volume-weighted average price of $15.00 over a five-year period. The Maximum Redemptions Scenario excludes all Sponsor Performance Bonus Shares.
(14) Redemption-related Sponsor Performance Bonus Shares (600,000 total, per Note 9) are distributed in the No Redemptions Scenario and the 50% Redemptions Scenario as follows: 74,372 shares to each of the four Sponsor members (73,959 Founder Shares and 413 Private Placement Units each), 2,804 shares to Robert Rackind (2,332 Founder Shares and 472 Private Placement Units), and 299,708 shares to Sponsor HoldCo (remainder). Issuance of these shares is automatically triggered where the amount remaining in the Trust Account subsequent to all redemptions of Public Shares is at least (A) $35.0 million and (B) $70.0 million. In the Maximum Redemptions Scenario ($0 remaining in the Trust Account), these shares are not earned and are excluded from all share counts.
(15) Includes the Minimum FACT Cash Amount of $75.0 million.
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The following table presents pro forma ownership of New PAD inclusive of the Dilutive Interests. The following table assumes (i) the Dilutive Interests have been fully exercised and/or vested, (ii) any conditions to the issuance of such Dilutive Interests have been fully satisfied, and (iii) such Dilutive Interests were issued in connection with the consummation of the Business Combination, such that the implied ownership of New PAD immediately following the consummation of the Business Combination is as follows:
|
Share Ownership in New PAD, Dilutive Instruments |
|||||||||||||||
|
Assuming No |
Assuming 50% |
Assuming Full |
|||||||||||||
|
Number of |
Approximate |
Number of |
Approximate |
Number of |
Approximate |
||||||||||
|
Existing Holders of PAD Shares (other than management and directors)(1) |
10,390,291 |
19.0 |
% |
10,390,291 |
22.6 |
% |
10,390,291 |
28.3 |
% |
||||||
|
PAD Directors and Management(1) |
3,130,143 |
5.7 |
% |
3,130,143 |
6.8 |
% |
3,130,143 |
8.5 |
% |
||||||
|
Maynard Hellman |
592,000 |
1.1 |
% |
592,000 |
1.3 |
% |
592,000 |
1.6 |
% |
||||||
|
Ronald Buschur |
350,000 |
0.6 |
% |
350,000 |
0.8 |
% |
350,000 |
1.0 |
% |
||||||
|
Glennon Argenbright |
180,000 |
0.3 |
% |
180,000 |
0.4 |
% |
180,000 |
0.5 |
% |
||||||
|
Larry Thompson |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
||||||
|
Dave Lawrence(2) |
1,125,000 |
2.1 |
% |
1,125,000 |
2.5 |
% |
1,125,000 |
3.1 |
% |
||||||
|
Brent Borden(3) |
414,283 |
0.8 |
% |
414,283 |
0.9 |
% |
414,283 |
1.1 |
% |
||||||
|
Kevin Vermeulen II(4) |
436,000 |
0.8 |
% |
436,000 |
0.9 |
% |
436,000 |
1.2 |
% |
||||||
|
Holders of PAD Preferred Stock(1)(5) |
1,044,500 |
2.2 |
% |
1,044,500 |
2.6 |
% |
1,044,500 |
3.3 |
% |
||||||
|
Public Stockholders |
17,500,000 |
31.9 |
% |
8,750,000 |
19.0 |
% |
— |
0.0 |
% |
||||||
|
Sponsor and its affiliates |
4,720,000 |
8.6 |
% |
4,720,000 |
10.3 |
% |
4,120,000 |
11.2 |
% |
||||||
|
Adam Gishen(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Min Lee(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Richard Nespola, Jr.(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Joseph Wagman(6) |
555,311 |
1.0 |
% |
555,311 |
1.2 |
% |
480,939 |
1.3 |
% |
||||||
|
Robert Rackind(7) |
150,931 |
0.3 |
% |
150,931 |
0.3 |
% |
148,128 |
0.4 |
% |
||||||
|
Nell Cady-Kruse |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
James Rallo |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
Hella Alashkar |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||
|
FACT II Acquisition LLC(6)(8) |
2,257,825 |
4.1 |
% |
2,257,825 |
4.9 |
% |
1,958,116 |
5.3 |
% |
||||||
|
Underwriters(9) |
223,125 |
0.4 |
% |
223,125 |
0.5 |
% |
223,125 |
0.6 |
% |
||||||
|
Third-Party Investors(10) |
7,500,000 |
13.7 |
% |
7,500,000 |
16.3 |
% |
7,500,000 |
20.4 |
% |
||||||
|
TAP Financial Partners |
137,112 |
0.3 |
% |
137,112 |
0.3 |
% |
137,112 |
0.4 |
% |
||||||
|
Brad Bowder(11) |
412,234 |
0.8 |
% |
412,234 |
0.9 |
% |
412,234 |
1.1 |
% |
||||||
|
TAP(12) |
137,112 |
0.3 |
% |
137,112 |
0.3 |
% |
137,112 |
0.4 |
% |
||||||
|
New PAD Options(13) |
497,957 |
0.9 |
% |
497,957 |
1.1 |
% |
497,957 |
1.4 |
% |
||||||
|
FACT Private Warrants(14) |
331,563 |
0.6 |
% |
331,563 |
0.7 |
% |
331,563 |
0.9 |
% |
||||||
|
FACT Public Warrants(14) |
8,750,000 |
16.0 |
% |
8,750,000 |
19.0 |
% |
8,750,000 |
23.8 |
% |
||||||
|
Total |
54,797,068 |
100.0 |
% |
46,047,068 |
100.0 |
% |
36,697,068 |
100.0 |
% |
||||||
____________
(1) Represents a portion of the Merger Consideration Shares.
(2) Dave Lawrence’s 1,125,000 shares are to be issued at Closing. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(3) Brent Borden’s shares reflect 414,286 fully vested shares granted by the PAD Board for his role as Chief Executive Officer. An additional 7,143 restricted shares will vest on each of July 1, 2026, October 1, 2026, and January 1, 2027, and an additional 7,142 restricted shares will vest on April 1, 2027.
(4) Kevin Vermeulen II’s shares consist of (i) 85,000 shares issued to him by PAD in 2025 for his services to PAD as provided through TAP and (ii) 351,000 shares originally issuable by PAD to TAP for its services to PAD and issued directly to Mr. Vermeulen at TAP’s direction as part of a distribution to TAP employees.
(5) Consists of shares of New PAD Common Stock issuable to the holders of PAD Preferred Stock at the Effective Time. Includes (i) 200,000 shares of New PAD Common Stock issuable to the holders of PAD Series A Preferred Stock, (ii) 146,500 shares of New PAD Common Stock issuable to the holders of PAD Series B Preferred Stock, (iii) 275,000 shares of New PAD Common Stock issuable to the holders of PAD Series C Preferred Stock, (iv) 276,000 shares of New PAD Common Stock
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Table of Contents
issuable to the holders of PAD Series D Preferred Stock, and (v) 300,000 shares of New PAD Common Stock issuable to the holders of PAD Series E Preferred Stock. As of May 15, 2026, 98,000 shares of Series E Preferred Stock are issued and outstanding; a maximum of 200,000 shares of Series E Preferred Stock may be issued.
(6) The Sponsor is the managing member of Sponsor HoldCo. The members of the Sponsor are our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Each member holds an equal 25% interest in the Sponsor. Investment and voting decisions are made by a board of managers comprised of the four members, with majority vote required. Each member’s base ownership includes 404,310 Founder Shares and 2,257 Private Placement Units held through the Sponsor. Except for the 17,500 Private Placement Units that are held directly by the Sponsor, the Sponsor holds securities of the Company through Sponsor HoldCo. Each member receives 74,372 Sponsor Performance Bonus Shares (consisting of 73,959 Founder Shares and 413 Private Placement Units), assuming the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is triggered. In the No Redemptions Scenario and the 50% Redemptions Scenario, each member’s ownership also includes 74,372 redemption-related Sponsor Performance Bonus Shares (73,959 Founder Shares and 413 Private Placement Units) per Note 11.
(7) Robert Rackind’s shares reflect 130,000 shares issued for his service on the FACT Board (already owned) plus Sponsor HoldCo investment shares from his $50,000 investment: 12,745 Founder Shares and 2,579 Private Placement Units vested at the Effective Time. Mr. Rackind then receives 2,804 redemption-related Sponsor Performance Bonus Shares (consisting of 2,332 Founder Shares and 472 Private Placement Units), assuming the issuance of 600,000 Sponsor Performance Bonus Shares associated with obtaining analyst coverage and a volume-weighted average price of over $15.00 is triggered. In the No Redemptions Scenario and the 50% Redemptions Scenario, Mr. Rackind’s count includes 2,804 redemption-related Sponsor Performance Bonus Shares (2,332 Founder Shares and 472 Private Placement Units) per Note 11.
(8) Sponsor HoldCo’s shares exclude Robert Rackind’s Sponsor HoldCo investment shares, which are included in his personal share count (refer to Note 5). Includes 20,000 shares of New PAD Common Stock to be transferred to the Senior Advisor post-Closing.
(9) Represents Private Placement Units held by CCM and Seaport, and an aggregate of 28,687 Private Placement Units transferred thereby.
(10) Assumes that new shares pursuant to meeting the FACT Minimum Cash Amount of $75.0 million will be issued at $10.0 per share pursuant to the Financings.
(11) Consists of 412,234 shares issuable to Brad Bowder (owner of Western Professional, Inc.) as consideration for PAD’s acquisition of Western Professional, Inc. Does not include additional shares that may be issuable to Mr. Bowder based on Western Professional, Inc.’s future EBITDA performance. Such shares are not being offered pursuant to this proxy statement/prospectus and the issuance thereof is not being registered in the Registration Statement.
(12) Consists of 137,112 shares issuable to TAP for merger and acquisition consulting fees for transactions in which TAP is involved. Does not include 45,000 shares issuable to TAP for merger and acquisition consulting fees upon the closing of PAD’s pending acquisition of Southern Precision Machining LLC.
(13) Consists of PAD Options converted to New PAD Options to purchase an aggregate of 497,957 shares of New PAD Common Stock at an exercise price of $10.00 per share, held as follows: options to purchase 27,083 shares held by each of Maynard Hellman, Glenn Argenbright, Ronald Buschur, and Larry Thompson; 15,625 held by David Lawrence; 360,000 held by TAP; and 14,000 held by an advisor to PAD.
(14) Assumes all warrants (with $11.50 strike prices) are converted into PAD Shares.
(15) Includes 600,000 redemption-related Sponsor Performance Bonus Shares, the issuance of which is automatically triggered where the amount remaining in the Trust Account after redemptions of Public Shares is (A) at least $35.0 million and (B) at least $70.0 million. All other shares reflect amounts vested at Closing. Up to 600,000 additional Sponsor Performance Bonus Shares (1,200,000 total) may be earned subject to separate milestones: 300,000 shares upon securing research coverage and 300,000 shares upon achieving a volume-weighted average price of $15.00 over a five-year period. The Maximum Redemptions Scenario excludes all Sponsor Performance Bonus Shares.
(16) Redemption-related Sponsor Performance Bonus Shares (600,000 total, per Note 10) are distributed as follows: 74,372 shares to each of the four Sponsor members (73,959 Founder Shares and 413 Private Placement Units each), 2,804 shares to Robert Rackind (2,332 Founder Shares and 472 Private Placement Units), and 299,708 shares to Sponsor HoldCo (remainder). Issuance of these shares is automatically triggered where the amount remaining in the Trust Account after redemptions of Public Shares is (A) at least $35.0 million and (B) at least $70.0 million. In the Maximum Redemptions Scenario ($0 remaining in the Trust Account), these shares are not earned and are excluded from all share counts.
(17) Includes the Minimum FACT Cash Amount of $75.0 million.
(18) Assumes that new shares pursuant to meeting the Minimum FACT Cash Amount of $75.0 million will be issued at $10.00 per share pursuant to the Financings.
Warrants and Options Outstanding
|
Assuming |
Assuming 50% |
Assuming |
||||
|
Public warrants |
8,750,000 |
8,750,000 |
8,750,000 |
|||
|
Private placement warrants |
331,563 |
331,563 |
331,563 |
|||
|
Stock options(1) |
440,332 |
440,332 |
440,332 |
|||
|
PAD 2024 Omnibus Securities and Incentive Plan(2) |
— |
— |
— |
____________
(1) PAD Options outstanding. Includes: 23,958 PAD Options granted to each of Maynard Hellman, Chairman, Glennon Argenbright, Director, Ronald Buschur, Director, and Larry Thompson, Director; 12,500 PAD Options granted to David Lawrence, Director; 12,000 PAD Options granted to an advisor to PAD; and 320,000 PAD Options granted to TAP.
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(2) This excludes any potential dilution from the New PAD Incentive Plan.
Share ownership presented in the two tables above is only presented for illustrative purposes and does not necessarily reflect what New PAD’s share ownership will be after the Effective Time. FACT and PAD cannot predict how many of the Public Shareholders will exercise their right to have their Public Shares redeemed for cash. As a result, the redemption amount and the number of Public Shares redeemed in connection with the Business Combination may differ from the amounts presented above, and therefore the ownership percentages of Public Shareholders may also differ if the actual redemptions are different from these assumptions. The Public Shareholders that do not elect to redeem their Public Shares will experience immediate dilution as a result of the Business Combination. The Public Shareholders currently own approximately 73% of the issued and outstanding FACT Ordinary Shares. As noted in the above table, even if no Public Shareholders redeem their Public Shares in the Business Combination, the Public Shareholders’ ownership will decrease from approximately 73% of the FACT Ordinary Shares prior to the Business Combination to owning approximately 43% of the total outstanding shares of New PAD Common Stock at the Effective Time. As redemptions increase, the overall percentage ownership held by the Sponsor, Sponsor HoldCo and other FACT Insiders, and the PAD Stockholders will increase as compared to the overall percentage ownership and voting percentage held by the Public Shareholders, thereby increasing dilution to the Public Shareholders. For more information about the consideration to be received in the Business Combination, these scenarios, and the underlying assumptions, see “Unaudited Pro Forma Condensed Combined Financial Information.” See also “Risk Factors — FACT Shareholders will experience immediate dilution as a consequence of the issuance of New PAD Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that FACT’s current shareholders have on the management of New PAD.”
Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The adjustments in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an illustrative understanding of New PAD upon consummation of the Business Combination. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial information are described in the accompanying notes.
The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination occurred on the dates indicated, and does not reflect adjustments for any anticipated synergies, operating efficiencies, tax savings or cost savings. Any cash proceeds remaining after the consummation of the Business Combination are expected to be used for general corporate purposes. The unaudited pro forma condensed combined financial information does not purport to project the future operating results or financial position of PAD following the completion of the Business Combination. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of this unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available and analyses are performed.
FACT and PAD have not had any historical operational relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The unaudited pro forma combined financial information contained herein assumes that the FACT Shareholders approve the Business Combination. Pursuant to the Existing Charter, the Public Shareholders may elect to redeem their Public Shares for cash even if they approve the Business Combination. FACT cannot predict how many of the Public Shareholders will exercise their right to redeem their Public Shares for cash. As a result, the unaudited pro forma condensed combined financial information has been prepared, assuming the following three redemption scenarios after giving effect to the Business Combination. There can be no assurance regarding which scenario will be closest to the actual results. Under each scenario, PAD is considered the accounting acquirer, as further discussed under “— Proposal No. 1 — The Business Combination Proposal — Expected Accounting Treatment for the Business Combination” above and in Note 1, Basis of Presentation, of the unaudited pro forma condensed combined financial information.
165
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2026
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Cash and cash |
$ |
412,909 |
$ |
2,612,508 |
$ |
212,007,918 |
|
$ |
215,033,335 |
$ |
122,840,798 |
|
$ |
125,866,215 |
$ |
33,673,678 |
|
$ |
36,699,095 |
||||||||||||||
|
|
|
|
285,334,240 |
|
(B) |
|
|
192,667,120 |
|
(BB) |
|
|
100,000,000 |
|
(BBB) |
|
|||||||||||||||||
|
|
|
|
(37,312,027 |
) |
(C) |
|
|
(37,312,027 |
) |
(C) |
|
|
(37,312,027 |
) |
(C) |
|
|||||||||||||||||
|
|
|
|
(5,722,344 |
) |
(D) |
|
|
(5,722,344 |
) |
(D) |
|
|
(5,722,344 |
) |
(D) |
|
|||||||||||||||||
|
|
|
|
(828,106 |
) |
(E) |
|
|
(828,106 |
) |
(E) |
|
|
(828,106 |
) |
(E) |
|
|||||||||||||||||
|
|
|
|
(1,400,000 |
) |
(F) |
|
|
(1,400,000 |
) |
(F) |
|
|
(1,400,000 |
) |
(F) |
|
|||||||||||||||||
|
|
|
|
(6,638,099 |
) |
(G) |
|
|
(6,638,099 |
) |
(G) |
|
|
(6,638,099 |
) |
(G) |
|
|||||||||||||||||
|
|
|
|
(8,044,781 |
) |
(H) |
|
|
(8,044,781 |
) |
(H) |
|
|
(8,044,781 |
) |
(H) |
|
|||||||||||||||||
|
|
|
|
(13,380,965 |
) |
(I) |
|
|
(9,880,965 |
) |
(II) |
|
|
(6,380,965 |
) |
(III) |
|
|||||||||||||||||
|
Account receivables |
|
|
5,462,124 |
|
|
|
5,462,124 |
|
|
|
5,462,124 |
|
|
|
5,462,124 |
||||||||||||||||||
|
Inventories |
|
|
12,073,509 |
|
|
|
12,073,509 |
|
|
|
12,073,509 |
|
|
|
12,073,509 |
||||||||||||||||||
|
Related party receivable, current |
|
|
410,126 |
|
|
|
410,126 |
|
|
|
410,126 |
|
|
|
410,126 |
||||||||||||||||||
|
Other current assets |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|||||||||||||||||||
|
Prepaid expenses and other assets |
|
68,065 |
|
429,879 |
|
|
|
497,944 |
|
— |
|
|
497,944 |
|
— |
|
|
497,944 |
|||||||||||||||
|
Due from the Sponsor |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
||||||||||||||
|
Total current assets |
$ |
480,974 |
$ |
20,988,146 |
$ |
212,007,918 |
|
$ |
233,477,038 |
$ |
122,840,798 |
|
$ |
144,309,918 |
$ |
33,673,678 |
|
$ |
55,142,798 |
||||||||||||||
|
Investments held in Trust Account |
|
185,334,240 |
|
— |
|
(185,334,240 |
) |
(W) |
|
— |
|
(185,334,240 |
) |
(W) |
|
— |
|
(185,334,240 |
) |
(W) |
|
— |
|||||||||||
|
Property and |
|
|
7,277,759 |
|
|
|
7,277,759 |
|
|
|
7,277,759 |
|
|
|
7,277,759 |
||||||||||||||||||
|
Goodwill |
|
|
43,535,539 |
|
|
|
43,535,539 |
|
|
|
43,535,539 |
|
|
|
43,535,539 |
||||||||||||||||||
|
Right-of-use asset |
|
|
6,690,638 |
|
|
|
6,690,638 |
|
|
|
6,690,638 |
|
|
|
6,690,638 |
||||||||||||||||||
|
Other Assets |
|
|
|
1,022,656 |
|
5,722,344 |
|
(J) |
|
6,745,000 |
|
5,722,344 |
|
(J) |
|
6,745,000 |
|
5,722,344 |
|
(J) |
|
6,745,000 |
|||||||||||
|
Total assets |
$ |
185,815,214 |
$ |
79,514,738 |
$ |
32,396,022 |
|
$ |
297,725,974 |
$ |
(56,771,098 |
) |
$ |
208,558,854 |
$ |
(145,938,218 |
) |
$ |
119,391,734 |
||||||||||||||
166
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2026 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||||||
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Trade payables & accrued expenses |
|
138,741 |
|
6,839,351 |
|
|
|
6,978,092 |
|
|
|
6,978,092 |
|
|
|
6,978,092 |
|||||||||||||||||
|
Due to related party |
|
|
1,963,441 |
|
|
|
1,963,441 |
|
|
|
1,963,441 |
|
|
|
1,963,441 |
||||||||||||||||||
|
Note payable – related party, net of discount |
|
|
47,741,346 |
|
(20,765,000 |
) |
(K) |
|
26,976,346 |
|
(20,765,000 |
) |
(K) |
|
26,976,346 |
|
(20,765,000 |
) |
(K) |
|
26,976,346 |
||||||||||||
|
Contingent |
|
|
87,348 |
|
|
|
87,348 |
|
|
|
87,348 |
|
|
|
87,348 |
||||||||||||||||||
|
Current portion of lease liabilities |
|
|
1,028,949 |
|
|
|
1,028,949 |
|
|
|
1,028,949 |
|
|
|
1,028,949 |
||||||||||||||||||
|
Redeemable Preferred Stock |
|
|
828,106 |
|
(828,106 |
) |
(E) |
|
— |
|
(828,106 |
) |
(E) |
|
— |
|
(828,106 |
) |
(E) |
|
— |
||||||||||||
|
Deferred revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Employee benefits payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Short-term borrowings |
|
|
475,991 |
|
|
|
475,991 |
|
|
|
475,991 |
|
|
|
475,991 |
||||||||||||||||||
|
Federal and other |
|
|
279,220 |
|
|
|
279,220 |
|
|
|
279,220 |
|
|
|
279,220 |
||||||||||||||||||
|
Excise tax payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Other current |
|
|
|
693,918 |
|
|
|
|
693,918 |
|
|
|
|
693,918 |
|
|
|
|
693,918 |
||||||||||||||
|
Total current liabilities |
$ |
138,741 |
$ |
59,937,670 |
$ |
(21,593,106 |
) |
$ |
38,483,305 |
$ |
(21,593,106 |
) |
$ |
38,483,305 |
$ |
(21,593,106 |
) |
$ |
38,483,305 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Deferred underwriting & legal fees payable |
$ |
9,380,965 |
$ |
|
$ |
(9,380,965 |
) |
(I) |
$ |
— |
$ |
(9,380,965 |
) |
(I) |
$ |
— |
$ |
(9,380,965 |
) |
(I) |
$ |
— |
|||||||||||
|
Long-term debt |
|
|
6,985,862 |
|
(2,797,027 |
) |
(L) |
|
4,188,835 |
|
(2,797,027 |
) |
(L) |
|
4,188,835 |
|
(2,797,027 |
) |
(L) |
|
4,188,835 |
||||||||||||
|
Non-current portion of lease liabilities |
|
|
7,219,661 |
|
|
|
7,219,661 |
|
— |
|
|
7,219,661 |
|
|
|
7,219,661 |
|||||||||||||||||
|
Redeemable preferred stock |
|
|
1,400,000 |
|
(1,400,000 |
) |
(F) |
|
— |
|
(1,400,000 |
) |
(F) |
|
— |
|
(1,400,000 |
) |
(F) |
|
— |
||||||||||||
|
Contingent consideration, non-current |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
|
|
— |
|||||||||||||||||
|
Deferred tax liability |
|
|
|
286,488 |
|
|
|
|
286,488 |
|
|
|
|
286,488 |
|
|
|
|
286,488 |
||||||||||||||
|
Total liabilities |
$ |
9,519,706 |
$ |
75,829,681 |
$ |
(35,171,098 |
) |
$ |
50,178,289 |
$ |
(35,171,098 |
) |
$ |
50,178,289 |
$ |
(35,171,098 |
) |
$ |
50,178,289 |
||||||||||||||
167
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2026 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||
|
COMMITMENTS AND CONTINGENCIES (Note 6) |
|
|
|
||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
|
Class A ordinary shares subject to possible redemption, 17,500,000 shares at redemption value of approximately $10.59 and $10.50 per share at March 31, 2026 and December 31, 2025, respectively |
185,334,240 |
(185,334,240 |
) |
(W) |
— |
(185,334,240 |
) |
(W) |
— |
(185,334,240 |
) |
(W) |
— |
||||||||||||
|
|
|
|
|||||||||||||||||||||||
|
Equity |
|
|
|
||||||||||||||||||||||
|
Common stock |
12,395 |
31,986 |
|
44,381 |
23,236 |
|
35,631 |
13,886 |
|
26,281 |
|||||||||||||||
|
1,674 |
|
(R) |
1,674 |
|
(R) |
1,674 |
|
(R) |
|||||||||||||||||
|
25,000 |
|
(B) |
16,250 |
|
(BB) |
7,500 |
|
(BBB) |
|||||||||||||||||
|
4,343 |
|
(T) |
4,343 |
|
(T) |
3,743 |
|
(T) |
|||||||||||||||||
|
969 |
|
(U) |
969 |
|
(U) |
969 |
|
(U) |
|||||||||||||||||
|
Preferred stock, Series A, $0.001 par value: 400,000 shares authorized at March 31, 2026 and December 31, 2025; 400,000 shares issued and outstanding at December 31, 2025. |
— |
|
— |
|
— |
|
— |
||||||||||||||||||
168
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2026 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||
|
Preferred stock, Series B, $0.001 par value: 400,000 shares authorized at March 31, 2026 and December 31, 2025; 293,000 shares issued and outstanding at March 31, 2026 and December 31, 2025. |
1,547,616 |
(1,547,616 |
) |
(G) |
— |
(1,547,616 |
) |
(G) |
— |
(1,547,616 |
) |
(G) |
— |
||||||||||||
|
Preferred stock, Series C, $0.001 par value: 550,000 shares authorized at March 31, 2026 and December 31, 2025; 550,000 shares issued and outstanding at March 31, 2026 and December 31, 2025. |
2,775,483 |
(2,775,483 |
) |
(G) |
— |
(2,775,483 |
) |
(G) |
— |
(2,775,483 |
) |
(G) |
— |
||||||||||||
|
Preferred stock, Series D, $0.001 par value: 400,000 shares authorized at March 31, 2026 and December 31, 2025; 368,000 and 348,000 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively. |
1,840,000 |
(1,840,000 |
) |
(G) |
— |
(1,840,000 |
) |
(G) |
— |
(1,840,000 |
) |
(G) |
— |
||||||||||||
169
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2026 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
|||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
|||||||||||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||||||||||
|
Preferred stock, Series E, $0.001 par value: 200,000 and 0 shares authorized at March 31, 2026 and December 31, 2025, respectively; 47,500 and 0 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively. |
|
475,000 |
|
(475,000 |
) |
(G) |
|
(475,000 |
) |
(G) |
— |
|
(475,000 |
) |
(G) |
— |
|
|||||||||||||
|
Preferred Stock |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||
|
Additional |
|
11,621,707 |
|
280,933,901 |
|
292,555,608 |
|
188,275,531 |
|
199,897,238 |
|
95,617,761 |
|
107,239,468 |
|
|||||||||||||||
|
|
|
260,334,240 |
|
(B) |
|
167,667,120 |
|
(BB) |
|
75,000,000 |
|
(BBB) |
|
|||||||||||||||||
|
|
|
45,765,000 |
|
(K) |
|
45,765,000 |
|
(K) |
|
45,765,000 |
|
(K) |
|
|||||||||||||||||
|
|
|
828,106 |
|
(E) |
|
828,106 |
|
(E) |
|
828,106 |
|
(E) |
|
|||||||||||||||||
|
|
|
1,400,000 |
|
(F) |
|
1,400,000 |
|
(F) |
|
1,400,000 |
|
(F) |
|
|||||||||||||||||
|
|
|
2,797,027 |
|
(L) |
|
2,797,027 |
|
(L) |
|
2,797,027 |
|
(L) |
|
|||||||||||||||||
|
|
|
6,638,099 |
|
(G) |
|
6,638,099 |
|
(G) |
|
6,638,099 |
|
(G) |
|
|||||||||||||||||
|
|
|
(31,986 |
) |
(V) |
|
(23,236 |
) |
(V) |
|
(13,886 |
) |
(V) |
|
|||||||||||||||||
|
|
|
99 |
|
(P) |
|
99 |
|
(P) |
|
99 |
|
(P) |
|
|||||||||||||||||
|
|
|
583 |
|
(Q) |
|
583 |
|
(Q) |
|
583 |
|
(Q) |
|
|||||||||||||||||
|
|
|
(8,866,205 |
) |
(M) |
|
(8,866,205 |
) |
(M) |
|
(8,866,205 |
) |
(M) |
|
|||||||||||||||||
|
|
|
(37,312,027 |
) |
(C) |
|
(37,312,027 |
) |
(C) |
|
(37,312,027 |
) |
(C) |
|
|||||||||||||||||
|
|
|
9,380,965 |
|
(I) |
|
9,380,965 |
|
(I) |
|
9,380,965 |
|
(I) |
|
|||||||||||||||||
|
Noncontrolling |
|
175,602 |
|
|
175,602 |
|
|
175,602 |
|
|
175,602 |
|
||||||||||||||||||
|
Accumulated deficit |
(9,039,414 |
) |
(14,762,746 |
) |
(21,425,746 |
) |
(O) |
(45,227,906 |
) |
(17,925,746 |
) |
(OO) |
(41,727,906 |
) |
(14,425,746 |
) |
(OOO) |
(38,227,906 |
) |
|||||||||||
|
Accumulated other comprehensive |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||
170
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2026 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||||||
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|||||||||||||||||||
|
Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized |
|
99 |
|
|
(99 |
) |
(P) |
|
— |
|
(99 |
) |
(P) |
|
— |
|
(99 |
) |
(P) |
|
— |
||||||||||||
|
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized |
|
583 |
|
|
|
(583 |
) |
(Q) |
|
— |
|
(583 |
) |
(Q) |
|
— |
|
(583 |
) |
(Q) |
|
— |
|||||||||||
|
Total Shareholder’s (Deficit)/Equity |
|
176,295,508 |
|
3,685,057 |
|
67,567,120 |
|
|
247,547,685 |
|
(21,600,000 |
) |
|
158,380,565 |
|
(110,767,120 |
) |
|
69,213,445 |
||||||||||||||
|
Total liabilities, redeemable shares and equity |
$ |
185,815,214 |
$ |
79,514,738 |
$ |
32,396,022 |
|
$ |
297,725,974 |
$ |
(56,771,098 |
) |
$ |
208,558,854 |
$ |
(145,938,218 |
) |
$ |
119,391,734 |
||||||||||||||
171
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
|
(A) |
(B) |
Assuming |
Assuming |
Assuming |
||||||||||||||||||||||||||||||||
|
Particulars |
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||||||||||||||||
|
Revenues |
$ |
— |
|
$ |
10,536,487 |
|
$ |
|
$ |
10,536,487 |
|
|
$ |
10,536,487 |
|
|
$ |
10,536,487 |
|
|||||||||||||||||
|
Cost of revenues |
|
— |
|
|
6,355,700 |
|
|
|
|
|
6,355,700 |
|
|
|
|
6,355,700 |
|
|
|
|
6,355,700 |
|
||||||||||||||
|
Gross Profit |
|
— |
|
|
4,180,787 |
|
|
— |
|
|
4,180,787 |
|
— |
|
|
4,180,787 |
|
— |
|
|
4,180,787 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Selling and general and administrative |
|
517,616 |
|
|
2,809,340 |
|
|
21,425,746 |
|
(1.1) |
|
24,752,702 |
|
17,925,746 |
|
(1.2) |
|
21,252,702 |
|
14,425,746 |
|
(1.3) |
|
17,752,702 |
|
|||||||||||
|
Total operating expenses |
|
517,616 |
|
|
2,809,340 |
|
|
21,425,746 |
|
|
24,752,702 |
|
17,925,746 |
|
|
21,252,702 |
|
14,425,746 |
|
|
17,752,702 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Gain on Sale of property, net |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
||||||||||||||
|
Operating Income (loss) |
|
(517,616 |
) |
|
1,371,447 |
|
|
(21,425,746 |
) |
|
(20,571,915 |
) |
(17,925,746 |
) |
|
(17,071,915 |
) |
(14,425,746 |
) |
|
(13,571,915 |
) |
||||||||||||||
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Interest expense |
|
— |
|
|
(362,340 |
) |
|
|
|
(362,340 |
) |
|
|
(362,340 |
) |
|
|
(362,340 |
) |
|||||||||||||||||
|
Step acquisition gain |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||||||||||||||||||
|
Revaluation of |
|
— |
|
|
(82,502 |
) |
|
|
|
(82,502 |
) |
|
|
(82,502 |
) |
|
|
(82,502 |
) |
|||||||||||||||||
|
Loss from equity method investment |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|||||||||||||||||
|
Other income |
|
— |
|
|
26,416 |
|
|
|
|
26,416 |
|
|
|
26,416 |
|
|
|
26,416 |
|
|||||||||||||||||
|
Change in fair value |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||||||||||||||||||
172
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 — (Continued)
|
(A) |
(B) |
Assuming |
Assuming |
Assuming |
|||||||||||||||||||||||||
|
Particulars |
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
|||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||
|
Interest earned on bank account |
2,965 |
|
|
2,965 |
|
|
2,965 |
|
|
2,965 |
|
||||||||||||||||||
|
Interest earned on |
1,548,784 |
|
|
|
|
1,548,784 |
|
(774,392 |
) |
(2) |
774,392 |
|
(1,548,784 |
) |
(2) |
— |
|
||||||||||||
|
Total other income |
1,551,749 |
(418,426 |
) |
— |
|
1,133,323 |
|
(774,392 |
) |
358,931 |
|
(1,548,784 |
) |
(415,461 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net income (loss) before income taxes |
1,034,133 |
953,021 |
|
(21,425,746 |
) |
(19,438,592 |
) |
(18,700,138 |
) |
(16,712,984 |
) |
(15,974,530 |
) |
(13,987,376 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Provision for income tax expense (benefit) |
— |
301,912 |
|
|
|
301,912 |
|
|
|
301,912 |
|
|
|
301,912 |
|
||||||||||||||
|
Net income (loss) |
1,034,133 |
651,109 |
|
(21,425,746 |
) |
(19,740,504 |
) |
(18,700,138 |
) |
(17,014,896 |
) |
(15,974,530 |
) |
(14,289,288 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net income attributable to non-controlling interest |
— |
4,395 |
|
|
|
4,395 |
|
|
|
4,395 |
|
|
|
4,395 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net income (loss) attributable to Precision Aerospace & Defense Group, Inc. |
1,034,133 |
646,714 |
|
(21,425,746 |
) |
(19,744,899 |
) |
(18,700,138 |
) |
(17,019,291 |
) |
(15,974,530 |
) |
(14,293,683 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Preferred stock accrued undeclared dividends |
— |
61,606.00 |
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net loss attributable to common stockholders |
1,034,133 |
585,108 |
|
(21,425,746 |
) |
(19,744,899 |
) |
(18,700,138 |
) |
(17,019,291 |
) |
(15,974,530 |
) |
(14,293,683 |
) |
||||||||||||||
173
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 — (Continued)
|
(A) |
(B) |
Assuming |
Assuming |
Assuming |
||||||||||||||||||||||||||||
|
Particulars |
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||||||||||||
|
Basic earnings (loss) per share attributable to common stockholders: |
$ |
— |
$ |
0.05 |
$ |
$ |
(0.44 |
) |
$ |
(0.48 |
) |
$ |
$ |
(0.54 |
) |
|||||||||||||||||
|
Diluted earnings (loss) per share attributable to common stockholders: |
$ |
— |
$ |
0.05 |
$ |
$ |
(0.44 |
) |
$ |
(0.48 |
) |
$ |
$ |
(0.54 |
) |
|||||||||||||||||
|
Basic and diluted net loss per ordinary share, Class A ordinary shares |
$ |
0.04 |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
$ |
— |
|
|||||||||||||||||
|
Basic and diluted net loss per ordinary share, Class B ordinary shares |
$ |
0.04 |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
$ |
— |
|
|||||||||||||||||
|
Weighted average shares outstanding basic |
|
— |
|
12,394,244 |
|
|
44,464,548 |
|
|
35,714,548 |
|
|
|
26,364,548 |
|
|||||||||||||||||
|
Weighted average shares outstanding diluted |
|
— |
|
12,394,244 |
|
|
44,464,548 |
|
|
35,714,548 |
|
|
|
26,364,548 |
|
|||||||||||||||||
|
Weighted average shares outstanding of Class A ordinary shares |
|
18,488,125 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|||||||||||||||||
|
Weighted average shares outstanding, Class B ordinary shares(1) |
|
5,833,333 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|||||||||||||||||
174
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2025
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Cash and cash |
$ |
544,791 |
$ |
2,437,666 |
$ |
211,467,117 |
|
(A) |
$ |
214,449,574 |
$ |
123,074,389 |
|
(A) |
$ |
126,056,846 |
$ |
34,681,661 |
|
(A) |
$ |
37,664,118 |
|||||||||||
|
|
|
|
283,785,456 |
|
(B) |
|
|
191,892,728 |
|
(BB) |
|
|
100,000,000 |
|
(BBB) |
|
|||||||||||||||||
|
|
|
|
(37,248,855 |
) |
(C) |
|
|
(37,248,855 |
) |
(C) |
|
|
(37,248,855 |
) |
(C) |
|
|||||||||||||||||
|
|
|
|
(5,722,344 |
) |
(D) |
|
|
(5,722,344 |
) |
(D) |
|
|
(5,722,344 |
) |
(D) |
|
|||||||||||||||||
|
|
|
|
(662,901 |
) |
(E) |
|
|
(662,901 |
) |
(E) |
|
|
(662,901 |
) |
(E) |
|
|||||||||||||||||
|
|
|
|
(1,500,000 |
) |
(F) |
|
|
(1,500,000 |
) |
(F) |
|
|
(1,500,000 |
) |
(F) |
|
|||||||||||||||||
|
|
|
|
(6,001,493 |
) |
(G) |
|
|
(6,001,493 |
) |
(G) |
|
|
(6,001,493 |
) |
(G) |
|
|||||||||||||||||
|
|
|
|
(8,044,781 |
) |
(H) |
|
|
(8,044,781 |
) |
(H) |
|
|
(8,044,781 |
) |
(H) |
|
|||||||||||||||||
|
|
|
|
(13,137,965 |
) |
(I) |
|
|
(9,637,965 |
) |
(II) |
|
|
(6,137,965 |
) |
(III) |
|
|||||||||||||||||
|
Account receivables |
|
|
6,306,360 |
|
|
|
6,306,360 |
|
|
|
6,306,360 |
|
|
|
6,306,360 |
||||||||||||||||||
|
Inventories |
|
|
10,762,313 |
|
|
|
10,762,313 |
|
|
|
10,762,313 |
|
|
|
10,762,313 |
||||||||||||||||||
|
Related party receivable, current |
|
|
409,000 |
|
|
|
409,000 |
|
|
|
409,000 |
|
|
|
409,000 |
||||||||||||||||||
|
Other current assets |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|||||||||||||||||||
|
Prepaid expenses and other assets |
|
92,600 |
|
364,959 |
|
|
|
457,559 |
|
— |
|
|
457,559 |
|
— |
|
|
457,559 |
|||||||||||||||
|
Due from the Sponsor |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
||||||||||||||
|
Total current assets |
$ |
637,391 |
$ |
20,280,298 |
$ |
211,467,117 |
|
$ |
232,384,806 |
$ |
123,074,389 |
|
$ |
143,992,078 |
$ |
34,681,661 |
|
$ |
55,599,350 |
||||||||||||||
|
Investments held in Trust Account |
|
183,785,456 |
|
— |
|
(183,785,456 |
) |
(W) |
|
— |
|
(183,785,456 |
) |
(W) |
|
— |
|
(183,785,456 |
) |
(W) |
|
— |
|||||||||||
|
Property and |
|
|
6,079,110 |
|
|
|
6,079,110 |
|
|
|
6,079,110 |
|
|
|
6,079,110 |
||||||||||||||||||
|
Goodwill |
|
|
43,535,539 |
|
|
|
43,535,539 |
|
|
|
43,535,539 |
|
|
|
43,535,539 |
||||||||||||||||||
|
Right-of-use asset |
|
|
6,861,569 |
|
|
|
6,861,569 |
|
|
|
6,861,569 |
|
|
|
6,861,569 |
||||||||||||||||||
|
Other Assets |
|
|
|
1,102,126 |
|
5,722,344 |
|
(J) |
|
6,824,470 |
|
5,722,344 |
|
(J) |
|
6,824,470 |
|
5,722,344 |
|
(J) |
|
6,824,470 |
|||||||||||
|
Total assets |
$ |
184,422,847 |
$ |
77,858,642 |
$ |
33,404,005 |
|
$ |
295,685,494 |
$ |
(54,988,723 |
) |
$ |
207,292,766 |
$ |
(143,381,451 |
) |
$ |
118,900,038 |
||||||||||||||
175
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2025 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||||||
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Trade payables & accrued expenses |
|
23,507 |
|
5,865,301 |
|
|
|
5,888,808 |
|
|
|
5,888,808 |
|
|
|
5,888,808 |
|||||||||||||||||
|
Due to related party |
|
|
1,838,391 |
|
|
|
1,838,391 |
|
|
|
1,838,391 |
|
|
|
1,838,391 |
||||||||||||||||||
|
Note payable – related party, net of |
|
|
47,980,433 |
|
(20,865,000 |
) |
(K) |
|
27,115,433 |
|
(20,865,000 |
) |
(K) |
|
27,115,433 |
|
(20,865,000 |
) |
(K) |
|
27,115,433 |
||||||||||||
|
Contingent Consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Current portion of lease liabilities |
|
|
1,067,778 |
|
|
|
1,067,778 |
|
|
|
1,067,778 |
|
|
|
1,067,778 |
||||||||||||||||||
|
Redeemable Preferred Stock |
|
|
662,901 |
|
(662,901 |
) |
(E) |
|
— |
|
(662,901 |
) |
(E) |
|
— |
|
(662,901 |
) |
(E) |
|
— |
||||||||||||
|
Deferred revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Employee benefits payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Short-term borrowings |
|
|
791,643 |
|
|
|
791,643 |
|
|
|
791,643 |
|
|
|
791,643 |
||||||||||||||||||
|
Federal and other taxes on income |
|
|
17,402 |
|
|
|
17,402 |
|
|
|
17,402 |
|
|
|
17,402 |
||||||||||||||||||
|
Excise tax payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
||||||||||||||||||
|
Other current liabilities |
|
|
|
642,821 |
|
|
|
|
642,821 |
|
|
|
|
642,821 |
|
|
|
|
642,821 |
||||||||||||||
|
Total current liabilities |
$ |
23,507 |
$ |
58,866,670 |
$ |
(21,527,901 |
) |
$ |
37,362,276 |
$ |
(21,527,901 |
) |
$ |
37,362,276 |
$ |
(21,527,901 |
) |
$ |
37,362,276 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Deferred underwriting & legal fees payable |
$ |
9,137,965 |
$ |
$ |
(9,137,965 |
) |
(I) |
$ |
— |
$ |
(9,137,965 |
) |
(I) |
$ |
— |
$ |
(9,137,965 |
) |
(I) |
$ |
— |
||||||||||||
|
Long-term debt |
|
|
7,167,450 |
|
(2,633,855 |
) |
(L) |
|
4,533,595 |
|
(2,633,855 |
) |
(L) |
|
4,533,595 |
|
(2,633,855 |
) |
(L) |
|
4,533,595 |
||||||||||||
|
Non-current portion of lease liabilities |
|
|
7,548,067 |
|
|
|
7,548,067 |
|
— |
|
|
7,548,067 |
|
|
|
7,548,067 |
|||||||||||||||||
|
Redeemable preferred stock |
|
|
1,500,000 |
|
(1,500,000 |
) |
(F) |
|
— |
|
(1,500,000 |
) |
(F) |
|
— |
|
(1,500,000 |
) |
(F) |
|
— |
||||||||||||
|
Contingent consideration, non-current |
|
|
4,846 |
|
|
|
4,846 |
|
— |
|
|
4,846 |
|
|
|
4,846 |
|||||||||||||||||
|
Deferred tax liability |
|
|
|
246,394 |
|
|
|
|
246,394 |
|
|
|
|
246,394 |
|
|
|
|
246,394 |
||||||||||||||
|
Total liabilities |
$ |
9,161,472 |
$ |
75,333,427 |
$ |
(34,799,721 |
) |
$ |
49,695,178 |
$ |
(34,799,721 |
) |
$ |
49,695,178 |
$ |
(34,799,721 |
) |
$ |
49,695,178 |
||||||||||||||
176
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2025 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||
|
COMMITMENTS AND CONTINGENCIES (Note 6) |
|
|
|
||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
|
Class A ordinary shares subject to possible redemption, 17,500,000 shares at redemption value of approximately $10.50 and $10.09 per share at December 31, 2025 and December 31, 2024, respectively |
183,785,456 |
(183,785,456 |
) |
(W) |
— |
(183,785,456 |
) |
(W) |
— |
(183,785,456 |
) |
(W) |
— |
||||||||||||
|
|
|
|
|||||||||||||||||||||||
|
Equity |
|
|
|
||||||||||||||||||||||
|
Common stock |
12,388 |
31,900 |
|
44,288 |
23,150 |
|
35,538 |
13,800 |
|
26,188 |
|||||||||||||||
|
1,674 |
|
(R) |
1,674 |
|
(R) |
1,674 |
|
(R) |
|||||||||||||||||
|
25,000 |
|
(B) |
16,250 |
|
(BB) |
7,500 |
|
(BBB) |
|||||||||||||||||
|
4,343 |
|
(T) |
4,343 |
|
(T) |
3,743 |
|
(T) |
|||||||||||||||||
|
883 |
|
(U) |
883 |
|
(U) |
883 |
|
(U) |
|||||||||||||||||
|
Preferred stock, Series A, $0.001 par value: 400,000 shares authorized at December 31, 2025 and 2024; 400,000 shares issued and outstanding at December 31, 2025 and 2024. |
— |
|
— |
|
— |
|
— |
||||||||||||||||||
177
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2025 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||
|
Preferred stock, Series B, $0.001 par value: 400,000 shares authorized at December 31, 2025 and 2024; 293,000 shares issued and outstanding at December 31, 2025 and 2024. |
1,511,493 |
(1,511,493 |
) |
(G) |
— |
(1,511,493 |
) |
(G) |
— |
(1,511,493 |
) |
(G) |
— |
||||||||||||
|
Preferred stock, Series C, $0.001 par value: 550,000 and 400,000 shares authorized at December 31, 2025 and 2024, respectively; 550,000 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively. |
2,750,000 |
(2,750,000 |
) |
(G) |
— |
(2,750,000 |
) |
(G) |
— |
(2,750,000 |
) |
(G) |
— |
||||||||||||
|
Preferred stock, Series D, $0.001 par value: 400,000 and 0 shares authorized at December 31, 2025 and 2024, respectively; 348,000 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively. |
1,740,000 |
(1,740,000 |
) |
(G) |
— |
(1,740,000 |
) |
(G) |
— |
(1,740,000 |
) |
(G) |
— |
||||||||||||
|
Preferred Stock |
|
— |
|
— |
|
— |
|||||||||||||||||||
178
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2025 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
|||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
|||||||||||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||||||||||
|
Additional paid-in-capital |
|
11,674,587 |
|
279,142,203 |
|
290,816,790 |
|
187,258,225 |
|
198,932,812 |
|
95,374,847 |
|
107,049,434 |
|
|||||||||||||||
|
|
|
258,785,456 |
|
(B) |
|
166,892,728 |
|
(BB) |
|
75,000,000 |
|
(BBB) |
|
|||||||||||||||||
|
|
|
45,865,000 |
|
(K) |
|
45,865,000 |
|
(K) |
|
45,865,000 |
|
(K) |
|
|||||||||||||||||
|
|
|
662,901 |
|
(E) |
|
662,901 |
|
(E) |
|
662,901 |
|
(E) |
|
|||||||||||||||||
|
|
|
1,500,000 |
|
(F) |
|
1,500,000 |
|
(F) |
|
1,500,000 |
|
(F) |
|
|||||||||||||||||
|
|
|
2,633,855 |
|
(L) |
|
2,633,855 |
|
(L) |
|
2,633,855 |
|
(L) |
|
|||||||||||||||||
|
|
|
6,001,493 |
|
(G) |
|
6,001,493 |
|
(G) |
|
6,001,493 |
|
(G) |
|
|||||||||||||||||
|
|
|
(31,900 |
) |
(V) |
|
(23,150 |
) |
(V) |
|
(13,800 |
) |
(V) |
|
|||||||||||||||||
|
|
|
99 |
|
(P) |
|
99 |
|
(P) |
|
99 |
|
(P) |
|
|||||||||||||||||
|
|
|
583 |
|
(Q) |
|
583 |
|
(Q) |
|
583 |
|
(Q) |
|
|||||||||||||||||
|
|
|
(8,164,394 |
) |
(M) |
|
(8,164,394 |
) |
(M) |
|
(8,164,394 |
) |
(M) |
|
|||||||||||||||||
|
|
|
(37,248,855 |
) |
(C) |
|
(37,248,855 |
) |
(C) |
|
(37,248,855 |
) |
(C) |
|
|||||||||||||||||
|
|
|
9,137,965 |
|
(I) |
|
9,137,965 |
|
(I) |
|
9,137,965 |
|
(I) |
|
|||||||||||||||||
|
Noncontrolling Interest |
|
171,207 |
|
|
171,207 |
|
|
171,207 |
|
|
171,207 |
|
||||||||||||||||||
|
Accumulated deficit |
(8,524,763 |
) |
(15,334,460 |
) |
(21,182,746 |
) |
(O) |
(45,041,969 |
) |
(17,682,746 |
) |
(OO) |
(41,541,969 |
) |
(14,182,746 |
) |
(OOO) |
(38,041,969 |
) |
|||||||||||
|
Accumulated other comprehensive loss |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||
|
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at September 30, 2025 and December 31, 2024 |
|
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||
|
Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 988,125 issued and outstanding at December 31, 2025 and December 31, 2024 (excluding 17,500,000 shares subject to possible redemption) |
99 |
|
|
(99 |
) |
(P) |
— |
|
(99 |
) |
(P) |
— |
|
(99 |
) |
(P) |
— |
|
||||||||||||
179
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2025 — (Continued)
|
Particulars |
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||
|
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
||||||||||||||||||||||||||||||||
|
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 5,833,333 and 6,708,333 shares issued and outstanding at December 30, 2025 and December 31, 2024, respectively |
|
583 |
|
|
|
(583 |
) |
(Q) |
|
— |
|
(583 |
) |
(Q) |
|
— |
|
(583 |
) |
(Q) |
|
— |
|||||||||||
|
Total Shareholder’s (Deficit)/Equity |
|
175,261,375 |
|
2,525,215 |
|
68,203,726 |
|
|
245,990,316 |
|
(20,189,002 |
) |
|
157,597,588 |
|
(108,581,730 |
) |
|
69,204,860 |
||||||||||||||
|
Total liabilities, redeemable shares and equity |
$ |
184,422,847 |
$ |
77,858,642 |
$ |
33,404,005 |
|
$ |
295,685,494 |
$ |
(54,988,723 |
) |
$ |
207,292,766 |
$ |
(143,381,451 |
) |
$ |
118,900,038 |
||||||||||||||
180
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2025
|
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||||||
|
Particulars |
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||||||||||||||||
|
Revenues |
$ |
— |
|
$ |
36,226,790 |
|
$ |
|
$ |
36,226,790 |
|
|
$ |
36,226,790 |
|
|
$ |
36,226,790 |
|
|||||||||||||||||
|
Cost of revenues |
|
— |
|
|
21,809,722 |
|
|
|
|
|
21,809,722 |
|
|
|
|
21,809,722 |
|
|
|
|
21,809,722 |
|
||||||||||||||
|
Gross Profit |
|
— |
|
|
14,417,068 |
|
|
— |
|
|
14,417,068 |
|
— |
|
|
14,417,068 |
|
— |
|
|
14,417,068 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Selling and general and |
|
2,225,030 |
|
|
14,580,030 |
|
|
21,182,746 |
|
(1.1) |
|
37,987,806 |
|
17,682,746 |
|
(1.2) |
|
34,487,806 |
|
14,182,746 |
|
(1.3) |
|
30,987,806 |
|
|||||||||||
|
Total operating expenses |
|
2,225,030 |
|
|
14,580,030 |
|
|
21,182,746 |
|
|
37,987,806 |
|
17,682,746 |
|
|
34,487,806 |
|
14,182,746 |
|
|
30,987,806 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Gain on Sale of property, |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
||||||||||||||
|
Operating Income (loss) |
|
(2,225,030 |
) |
|
(162,962 |
) |
|
(21,182,746 |
) |
|
(23,570,738 |
) |
(17,682,746 |
) |
|
(20,070,738 |
) |
(14,182,746 |
) |
|
(16,570,738 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Interest expense |
|
— |
|
|
(1,649,447 |
) |
|
|
|
(1,649,447 |
) |
|
|
(1,649,447 |
) |
|
|
(1,649,447 |
) |
|||||||||||||||||
|
Step acquisition gain |
|
— |
|
|
993,164 |
|
|
|
|
993,164 |
|
|
|
993,164 |
|
|
|
993,164 |
|
|||||||||||||||||
|
Revaluation of contingent consideration |
|
— |
|
|
(1,658,070 |
) |
|
|
|
(1,658,070 |
) |
|
|
(1,658,070 |
) |
|
|
(1,658,070 |
) |
|||||||||||||||||
|
Loss from equity method investment |
|
— |
|
|
(85,055 |
) |
|
|
|
(85,055 |
) |
|
|
(85,055 |
) |
|
|
(85,055 |
) |
|||||||||||||||||
|
Other income |
|
— |
|
|
89,962 |
|
|
|
|
89,962 |
|
|
|
89,962 |
|
|
|
89,962 |
|
|||||||||||||||||
|
Change in fair value of over-allotment liability |
|
26,558 |
|
|
|
|
|
|
26,558 |
|
|
|
26,558 |
|
|
|
26,558 |
|
||||||||||||||||||
|
Interest earned on bank account |
|
27,824 |
|
|
|
|
|
|
27,824 |
|
|
|
27,824 |
|
|
|
27,824 |
|
||||||||||||||||||
|
Interest earned on cash held in Trust Account |
|
7,188,186 |
|
|
|
|
|
|
|
|
7,188,186 |
|
(3,594,093 |
) |
(2) |
|
3,594,093 |
|
(7,188,186 |
) |
(2) |
|
— |
|
||||||||||||
|
Total other income |
|
7,242,568 |
|
|
(2,309,446 |
) |
|
— |
|
|
4,933,122 |
|
(3,594,093 |
) |
|
1,339,029 |
|
(7,188,186 |
) |
|
(2,255,064 |
) |
||||||||||||||
|
Net income (loss) before income taxes |
|
5,017,538 |
|
|
(2,472,408 |
) |
|
(21,182,746 |
) |
|
(18,637,616 |
) |
(21,276,839 |
) |
|
(18,731,709 |
) |
(21,370,932 |
) |
|
(18,825,802 |
) |
||||||||||||||
181
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2025 — (Continued)
|
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||||||||||||||||
|
Particulars |
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||||||||||||||||
|
Provision for income tax expense (benefit) |
|
— |
|
484,650 |
|
|
|
|
|
484,650 |
|
|
|
|
484,650 |
|
|
|
|
|
484,650 |
|
||||||||||||||
|
Net income (loss) |
|
5,017,538 |
|
(2,957,058 |
) |
|
(21,182,746 |
) |
|
(19,122,266 |
) |
(21,276,839 |
) |
|
(19,216,359 |
) |
|
(21,370,932 |
) |
|
(19,310,452 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net income attributable to non-controlling interest |
|
— |
|
17,076 |
|
|
|
|
|
17,076 |
|
|
|
|
17,076 |
|
|
|
|
|
17,076 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net income (loss) attributable to Precision Aerospace & Defense Group, Inc. |
|
5,017,538 |
|
(2,974,134 |
) |
|
(21,182,746 |
) |
|
(19,139,342 |
) |
(21,276,839 |
) |
|
(19,233,435 |
) |
|
(21,370,932 |
) |
|
(19,327,528 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Preferred stock accrued undeclared dividends |
|
— |
|
143,093.00 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net loss attributable to common stockholders |
|
5,017,538 |
|
(3,117,227 |
) |
|
(21,182,746 |
) |
|
(19,139,342 |
) |
(21,276,839 |
) |
|
(19,233,435 |
) |
|
(21,370,932 |
) |
|
(19,327,528 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Basic earnings (loss) per share attributable to common stockholders: |
$ |
— |
$ |
(0.30 |
) |
$ |
|
$ |
(0.43 |
) |
|
$ |
(0.54 |
) |
$ |
|
$ |
(0.73 |
) |
|||||||||||||||||
|
Diluted earnings (loss) per share attributable to common stockholders: |
$ |
— |
$ |
(0.30 |
) |
$ |
|
$ |
(0.43 |
) |
|
$ |
(0.54 |
) |
$ |
|
$ |
(0.73 |
) |
|||||||||||||||||
|
Basic and diluted net loss per ordinary share, Class A ordinary shares |
$ |
0.21 |
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
$ |
|
$ |
— |
|
|||||||||||||||||
|
Basic and diluted net loss per ordinary share, Class B ordinary shares |
$ |
0.21 |
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
$ |
|
$ |
— |
|
|||||||||||||||||
182
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2025 — (Continued)
|
(A) |
(B) |
Assuming no redemptions |
Assuming 50% redemptions |
Assuming full redemptions |
||||||||||||||||||
|
Particulars |
FACT II |
Precision |
Transaction |
Pro forma |
Transaction |
Pro forma |
Transaction |
Pro forma |
||||||||||||||
|
(Historical) |
(Historical) |
|||||||||||||||||||||
|
Weighted average shares outstanding basic |
— |
10,312,547 |
44,464,548 |
35,714,548 |
26,364,548 |
|||||||||||||||||
|
Weighted average shares outstanding diluted |
— |
10,312,547 |
44,464,548 |
35,714,548 |
26,364,548 |
|||||||||||||||||
|
Weighted average shares outstanding of Class A ordinary shares |
18,488,125 |
— |
— |
— |
— |
|||||||||||||||||
|
Weighted average shares outstanding, Class B ordinary shares(1) |
5,833,333 |
— |
— |
— |
— |
|||||||||||||||||
____________
(1.1) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios and $9.1 million of incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account and the Financings).
(1.2) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios, and $5.6 million of incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account and the Financings).
(1.3) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios and $5.1 million of incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash).
(2) Represents accrued interest on the redeemed portion of the investments held in the Trust Account.
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Table of Contents
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
The unaudited pro forma condensed combined financial information has been adjusted to give effect to transaction accounting adjustments related to the Business Combination linking the effects of the Business Combination to the historical financial information.
The Business Combination will be accounted for as a reverse recapitalization in accordance with the FASB’s ASC Topic 805, “Business Combinations.” PAD has been determined to be the accounting acquirer. Under the reverse recapitalization model, the Business Combination will be treated as PAD issuing equity for the net assets of FACT, with no goodwill or intangible assets recorded.
The pro forma adjustments have been prepared as if the Business Combination had been consummated on December 31, 2025, in the case of the unaudited pro forma condensed combined balance sheet, and as if the Business Combination had been consummated on January 1, 2025, the beginning of the earliest period presented, in the case of the unaudited pro forma condensed combined statements of operations.
The pro forma condensed combined balance sheet as of March 31, 2026, has been prepared using the following:
• PAD’s historical unaudited condensed consolidated balance sheet as of March 31, 2026, as included in this proxy statement/prospectus; and
• FACT’s historical unaudited condensed consolidated balance sheet as of March 31, 2026, as included in this proxy statement/prospectus.
The pro forma condensed combined statement of operations for the three months ended March 31, 2026, has been prepared using the following:
• PAD’s historical unaudited condensed consolidated statement of operations for the three months ended March 31, 2026, as included in this proxy statement/prospectus; and
• FACT’s historical unaudited condensed consolidated statement of operations for the three months ended March 31, 2026, as included in this proxy statement/prospectus.
The pro forma condensed combined balance sheet as of December 31, 2025, has been prepared using the following:
• PAD’s historical audited consolidated balance sheet as of December 31, 2025, as included in this proxy statement/prospectus; and
• FACT’s historical audited consolidated balance sheet as of December 31, 2025, as included in this proxy statement/prospectus.
The pro forma condensed combined statement of operations for the year ended December 31, 2025, has been prepared using the following:
• PAD’s historical audited consolidated balance sheet as of December 31, 2025, as included in this proxy statement/prospectus; and
• FACT’s historical audited consolidated balance sheet as of December 31, 2025, as included in this proxy statement/prospectus.
The adjustments presented in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of PAD after giving effect to the Business Combination. Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying
184
Table of Contents
notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information. FACT has elected not to present any “management adjustments.”
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the combined company. They should be read in conjunction with the historical financial statements and notes thereto of PAD and FACT.
2. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2026
The transaction accounting adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2026, are as follows:
(A) Derived from the unaudited condensed consolidated balance sheet of FACT as of March 31, 2026.
(B) Derived from the unaudited condensed consolidated balance sheet of PAD as of March 31, 2026.
(A) Reflects the total adjustment to cash and cash equivalents as outlined in footnotes B:I that become available for general use by New PAD following the Closing under each of the three redemption scenarios.
(B) Reflects the cash proceeds of (i) $185.3 million to be received from the Trust Account under the No Redemptions Scenario, (ii) $75.0 million to be received from the issuance and sale of 7,500,000 shares of New PAD Common Stock from the Financings at an assumed sale price of $10.00 per share, and (iii) the anticipated $25.0 million proceeds from the Credit Facility. Adjustment (i) and (ii) impact the New PAD Common Stock (based on the par value of $0.0001 per share) and the remainder of $185.3 million and $75.0 million is recorded in additional paid-in-capital.
(BB) Reflects the cash proceeds of (i) $92.7 million to be received from the Trust Account after redemptions at the estimated redemption price of approximately $10.59 per share under the 50% Redemptions Scenario, (ii) $75.0 million to be received from the issuance and sale of 7,500,000 shares of New PAD Common Stock from the Financings at an assumed sale price of $10.00 per share, and (iii) the anticipated $25.0 million proceeds from the Credit Facility. Adjustments (i) and (ii) impact the New PAD Common Stock (based on the par value of $0.0001 per share) and the remainder of $92.7 million and $75.0 million is recorded in additional paid-in-capital.
(BBB) Reflects the cash proceeds of (i) $0 to be received from the Trust Account and the Minimum FACT Cash Amount of $75.0 million to be received from the issuance and sale of 7,500,000 shares of New PAD Common Stock in the Financings at an assumed sale price of $10.00 per share under the Full Redemptions Scenario, and (ii) the anticipated $25.0 million proceeds from the Credit Facility. The $75.0 million adjustment impacts the New PAD Common Stock (based on the par value of $0.0001 per share) and the remainder of $75.0 million recorded in additional paid-in-capital.
(C) Reflects the cash payments made to settle the cash consideration owed in relation to the past acquisitions of (i) Aerodyn Engineering LLC ($34,615,000) and (ii) Aerofab NDT, LLC ($2,797,027).
(D) Reflects the cash payments made to settle the cash consideration owed in relation to the acquisition of Western Professional, Inc.
(E) Reflects the cash proceeds paid for current portion of the PAD Series A Preferred Stock.
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Table of Contents
(F) Reflects the cash proceeds paid for long-term portion of the PAD Series A Preferred Stock.
(G) Reflects the conversion of the PAD Series B Preferred Stock, the PAD Series C Preferred Stock, the PAD Series D Preferred Stock and the PAD Series E Preferred Stock into an aggregate of 768,750 shares of New PAD Common Stock and reclassification of its carrying value of $7.7 million into the equity of New PAD upon the Closing under each of the three redemption scenarios.
(H) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios.
(I) Reflects $2,380,965 of deferred legal expenses and incremental underwriting costs ($10,000,000) in the No Redemptions Scenario with $75.0 million to be received from the Financings, from the sale of 7,500,000 shares of New PAD Common Stock at the assumed sale price of $10.00 per share (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account and the Financings). Also includes a 4.0% underwriting fee ($1,000,000) applied to the cash received from the Credit Facility.
(II) Reflects $ 2,380,965 of deferred legal expenses and incremental underwriting costs ($6,500,000) in the 50% Redemptions Scenario with $75.0 million to be received from the Financings, from the sale of 7,500,000 shares of New PAD Common Stock at the assumed sale price of $10.00 per share (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account and the Financings). Also includes a 4.0% underwriting fee ($1,000,000) applied to the cash received from the Credit Facility.
(III) Reflects $ 2,380,965 of deferred legal expenses and incremental underwriting costs ($3,000,000) in the Full Redemptions Scenario and the Minimum FACT Cash Amount of $75.0 million to be received from the Financings, from the sale of 7,500,000 shares of New PAD Common Stock at the assumed sale price of $10.00 per share. Also includes a 4.0% underwriting fee ($1,000,000) applied to the cash received from the Credit Facility.
(J) Reflects the preliminary allocation of $5.7 million in cash consideration paid in connection with the acquisition of Western Professional, Inc. to the assets acquired, based on their estimated fair values as of the closing of such acquisition. The final allocation of the purchase price will be determined after the closing of the acquisition and may differ from the preliminary estimates presented herein upon completion of a detailed valuation of the acquired assets and any liabilities assumed.
(K) Reflects the liquidation and reclassification of the $45,865,000 promissory note to Aerodyn Engineering, LLC. This note is settled with a cash payment of $34,515,000 and 1,125,000 shares of New PAD Common Stock at a price of $10.00 per share under each of the three redemption scenarios. Also reflects the anticipated $25.0 million of proceeds from the Credit Facility. As of the date of this proxy statement/prospectus, PAD has not yet entered into a definitive credit agreement and the material terms of the Credit Facility, including the interest rate, maturity date, collateral requirements, financial covenants, and repayment terms, have not yet been determined. There can be no assurance that PAD will be able to obtain the Credit Facility on favorable terms, or at all. The pro forma financial statements presented herein assume the full $25.0 million is available and drawn at Closing. To the extent that the actual terms of the Credit Facility, including amounts available and drawn, differ materially from the assumptions reflected herein, the pro forma financial information would be adjusted accordingly.
(L) Reflects the liquidation and reclassification of the DMNDT LLC promissory note ($1,875,000 plus interest of $222,770) and the ASG LLC promissory note ($625,000 plus interest of $74,257) for the acquisition of Aerofab NDT, LLC. These notes are settled with a total cash payment of $2,797,02 under each of the three redemption scenarios.
(M) Reflects the cash portion of the Merger Consideration or an aggregate of $8,866,205 as follows: (i) 400,000 shares of PAD Series A Preferred Stock for $2,162,901; (ii) 293,000 shares of PAD Series B Preferred Stock for $1,511,493; (iii) 550,000 shares of PAD Series C Preferred Stock for $2,750,000; (iv) 348,000 shares of PAD Series D Preferred Stock for $1,740,000; and (v) 47,500 shares of PAD Series E Preferred Shares for $475,000.
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Table of Contents
(O) Reflects the preliminary estimated direct and incremental transaction costs to be incurred by PAD related to the Business Combination of approximately $21.4 million for underwriting under the No Redemptions Scenario, consultants, and other fees reflected in the unaudited pro forma condensed combined balance sheet under each of the three redemption scenarios. PAD has reflected the direct and incremental transaction costs related to the Business Combination as an addition to New PAD’s accumulated deficit of $8.0 million, and to derecognize the deferred underwriting fee liability of New PAD and accrued legal fees of $9.4 million.
(OO) Reflects the preliminary estimated direct and incremental transaction costs to be incurred by PAD related to the Business Combination of approximately $17.9 million for underwriting under the 50% Redemptions Scenario, consultants, and other fees reflected in the unaudited pro forma condensed combined balance sheet under each of the three redemption scenarios. PAD has reflected the direct and incremental transaction costs related to the Business Combination as an addition to New PAD’s accumulated deficit of $8.0 million, and to derecognize the deferred underwriting fee liability of New PAD and accrued legal fees of $9.4 million.
(OOO)Reflects the preliminary estimated direct and incremental transaction costs to be incurred by PAD related to the Business Combination of approximately $14.4 million for underwriting under the Full Redemptions Scenario, consultants, and other fees reflected in the unaudited pro forma condensed combined balance sheet under each of the three redemption scenarios. PAD has reflected the direct and incremental transaction costs related to the Business Combination as an addition to New PAD’s accumulated deficit of $8.0 million, and to derecognize the deferred underwriting fee liability of New PAD and accrued legal fees of $9.4 million.
(P) Reflects the reclassification of par value (based on the par value of $0.0001 per share) of 988,125 FACT Class B Shares for no consideration, or FACT Forfeited Shares, pursuant to the Business Combination Agreement under each of the three redemption scenarios.
(Q) Reflects the reclassification of par value (based on the par value of $0.0001 per share) of 5,833,333 FACT Class B Shares for no consideration, or FACT Forfeited Shares, pursuant to the Business Combination Agreement under each of the three redemption scenarios.
(R) Reflects the reclassification of par value (based on the par value of $0.0001 per share) from the shares of New PAD Common Stock issued as acquisition consideration for (i) the acquisition of Aerodyn Engineering, LLC (1,125,000 shares of New PAD Common Stock), (ii) the acquisition of Western Professional, Inc. (412,234 shares of New PAD Common Stock) and (iii) mergers and acquisitions consulting fees (137,112 shares of New PAD Common Stock) under each of the three redemption scenarios.
(S) Reflects the reclassification of par value of the Public Shares (based on the par value of $0.0001 per share) into New PAD Common Stock and the remainder of $185.3 million recorded in additional paid-in-capital under the No Redemptions Scenario.
(T) Reflects the reclassification of par value (based on the par value of $0.0001 per share) of shares held by the Sponsor and its affiliates after considering shares surrendered are exchanged for shares of PAD Common Stock on a one-for-one basis. In the No Redemptions Scenario and the 50% Redemptions Scenario, also includes 600,000 additional Sponsor Performance Bonus Shares earned for achieving the following separate milestone: the Trust Account having a balance of at least $70.0 million at Closing after the exercise of redemption rights by the Public Shareholders, after giving effect to the Business Combination.
(U) Reflects the reclassification of par value from the conversion of PAD Preferred Stock into New PAD Common Stock under each of the three redemption scenarios and the remainder of $9.7 million recorded in additional paid-in-capital (based on the par value of $0.0001 per share).
(V) Reflects adjustments to par value reflected in (R) — (U).
(W) Reflects the total adjustment and liquidation of $185.3 million of cash held in the Trust Account.
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Table of Contents
3. Adjustments to audited Pro Forma Condensed Combined Statements of Operations for the three months ended March 31, 2026
The transaction accounting adjustments included in the unaudited pro forma condensed combined statements of operations are as follows:
(A) Derived from the condensed consolidated statement of operations of FACT for the three months ended March 31, 2026.
(B) Derived from the consolidated statement of operations of PAD for the three months ended March 31, 2026.
(1.1) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios and $13.4 million of Sponsor deferred legal fees and incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account, the Financings and the Credit Facility).
(1.2) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing of Business Combination under each of the three redemption scenarios, and $9.9 million of Sponsor deferred legal fees and incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account, the Financings and the Credit Facility).
(1.3) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing of Business Combination under each of the three redemption scenarios and $6.4 million of Sponsor deferred legal fees and incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account, the Financings and the Credit Facility).
(2) Represents accrued interest from the redeemed portion of the investments held in Trust Account.
4. Net income/(loss) per share for the three months ended March 31, 2026
Represents the net income/(loss) per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2025. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net income/(loss) per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented.
The unaudited pro forma combined per share information has been presented under the three assumed redemption scenarios.
|
Three Months Ended March 31, 2026 |
||||||||||||
|
Assuming |
Assuming |
Assuming |
||||||||||
|
Numerator: |
|
|
|
|
|
|
||||||
|
Proforma net loss |
$ |
(19,744,899 |
) |
$ |
(17,019,291 |
) |
$ |
(14,293,683 |
) |
|||
|
|
|
|
|
|
|
|||||||
|
Denominator: |
|
|
|
|
|
|
||||||
|
Weighted average shares outstanding – Basic and diluted |
|
44,464,548 |
|
|
35,714,548 |
|
|
26,364,548 |
|
|||
|
Basic and diluted net loss per share |
$ |
(0.44 |
) |
$ |
(0.48 |
) |
$ |
(0.54 |
) |
|||
|
Three Months Ended March 31, 2025 |
|||||||||
|
Assuming |
Assuming |
Assuming |
|||||||
|
Numerator: |
|
|
|
||||||
|
Proforma net profit |
$ |
2,166,176 |
$ |
2,166,176 |
$ |
2,166,176 |
|||
|
|
|
|
|||||||
|
Denominator: |
|
|
|
||||||
|
Weighted average shares outstanding – Basic and diluted |
|
44,464,548 |
|
35,714,548 |
|
26,364,548 |
|||
|
Basic and diluted net loss per share |
$ |
0.05 |
$ |
0.06 |
$ |
0.08 |
|||
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Table of Contents
5. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2025
The transaction accounting adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2025, are as follows:
(A) Derived from the audited balance sheet of FACT as of December 31, 2025.
(B) Derived from the unaudited consolidated balance sheet of PAD as of December 31, 2025.
(A) Reflects the adjustment to cash and cash equivalents as outlined in footnotes B:I that become available for general use by New PAD following the Closing under each of the three redemption scenarios.
(B) Reflects the cash proceeds of (i) $183.8 million to be received from the Trust Account under the No Redemptions Scenario, (ii) $75.0 million to be received from the issuance and sale of 7,500,000 shares of New PAD Common Stock from the Financings at an assumed sale price of $10.00 per share, and (iii) the anticipated $25.0 million proceeds from the Credit Facility. This adjustment impacts the New PAD Common Stock (based on the par value of $0.0001 per share) and the remainder of $183.8 million recorded in additional paid-in-capital.
(BB) Reflects the cash proceeds of (i) $91.9 million to be received from the Trust Account after redemptions at the estimated redemption price of approximately $10.59 per share under the 50% Redemptions Scenario, (ii) $75.0 million to be received from the issuance and sale of 7,500,000 shares of New PAD Common Stock from the Financings at an assumed sale price of $10.00 per share, and (iii) the anticipated $25.0 million proceeds from the Credit Facility. This adjustment impacts the New PAD Common Stock (based on the par value of $0.0001 per share) and the remainder of $91.9 million recorded in additional paid-in-capital.
(BBB) Reflects the cash proceeds of (i) $0 to be received from the Trust Account and the Minimum FACT Cash Amount of $75.0 million to be received from the issuance and sale of 7,500,000 shares of New PAD Common Stock in the Financings at an assumed sale price of $10.00 per share under the Full Redemptions Scenario, and (ii) the anticipated $25.0 million proceeds from the Credit Facility. This adjustment impacts the New PAD Common Stock (based on the par value of $0.0001 per share) and the remainder of $75.0 million recorded in additional paid-in-capital.
(C) Reflects the cash payments made to settle the cash consideration owed in relation to the past acquisitions of (i) Aerodyn Engineering LLC ($34,615,000) and (ii) Aerofab NDT, LLC ($2,633,855).
(D) Reflects the cash payments made to settle the cash consideration owed in relation to the acquisition of Western Professional, Inc.
(E) Reflects the cash proceeds paid for current portion of the PAD Series A Preferred Stock.
(F) Reflects the cash proceeds paid for long-term portion of the PAD Series A Preferred Stock.
(G) Reflects the conversion of the PAD Series B Preferred Stock, the PAD Series C Preferred Stock and the PAD Series D Preferred Stock into an aggregate of 682,500 shares of New PAD Common Stock and reclassification of its carrying value of $6.8 million into the equity of New PAD upon the Closing under each of the three redemption scenarios.
(H) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios.
(I) Reflects $2,137,965 of deferred legal expenses and incremental underwriting costs ($10,000,000) in the No Redemptions Scenario with $75.0 million to be received from the Financings, from the sale of 7,500,000 shares of New PAD Common Stock at the assumed sale price of $10.00 per share (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account and the Financings). Also includes a 4.0% underwriting fee ($1,000,000) applied to the cash received from the anticipated Credit Facility.
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(II) Reflects $2,137,965 of deferred legal expenses and incremental underwriting costs ($6,500,000) in the 50% Redemptions Scenario with $75.0 million to be received from the Financings, from the sale of 7,500,000 shares of New PAD Common Stock at the assumed sale price of $10.00 per share (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account and the Financings). Also includes a 4.0% underwriting fee ($1,000,000) applied to the cash received from the Credit Facility.
(III) Reflects $2,137,965 of deferred legal expenses and incremental underwriting costs ($3,000,000) in the Full Redemptions Scenario and $75.0 million to be received from the Financings, from the sale of 7,500,000 shares of New PAD Common Stock at the assumed sale price of $10.00 per share. Also includes a underwriting fee ($1,000,000), representing a 4.0% underwriting fee applied to the cash received from the Credit Facility.
(J) Reflects the preliminary allocation of $5.7 million in cash consideration paid in connection with the acquisition of Western Professional, Inc. to the assets acquired, based on their estimated fair values as of the closing of such acquisition. The final allocation of the purchase price will be determined after the closing of the acquisition and may differ from the preliminary estimates presented herein upon completion of a detailed valuation of the acquired assets and any liabilities assumed.
(K) Reflects the liquidation and reclassification of the $45,865,000 promissory note to Aerodyn Engineering, LLC. This note is settled with a cash payment of $34,615,000 and 1,125,000 shares of New PAD Common Stock at a price of $10.00 per share under each of the three redemption scenarios. Also reflects the anticipated $25.0 million proceeds from the Credit Facility. As of the date of this proxy statement/prospectus, PAD has not yet entered into a definitive credit agreement with respect to the Credit Facility and the material terms thereof, including the interest rate, maturity date, collateral requirements, financial covenants, and repayment terms, have not yet been determined. There can be no assurance that PAD will be able to obtain the Credit Facility on favorable terms, or at all. The pro forma financial statements presented herein assume the full $25.0 million is available and drawn at Closing. To the extent that the actual terms of the Credit Facility, including amounts available and drawn, differ materially from the assumptions reflected herein, the pro forma financial information would be adjusted accordingly.
(L) Reflects the liquidation and reclassification of the DMNDT LLC promissory note ($1,875,000 plus interest of $68,266) and the ASG LLC promissory note ($625,000 plus interest of $65,589) for the acquisition of Aerofab NDT, LLC. These notes are settled with a total cash payment of $2,633,855 under each of the three redemption scenarios.
(M) Reflects the cash portion of the Merger Consideration or an aggregate of $8,164,394 as follows: (i) 400,000 shares of PAD Series A Preferred Stock for $2,162,901; (ii) 293,000 shares of PAD Series B Preferred Stock for $1,511,493; (iii) 550,000 shares of PAD Series C Preferred Stock for $2,750,000; and (iv) 348,000 shares of PAD Series D Preferred Stock for $1,740,000.
(O) Reflects the preliminary estimated direct and incremental transaction costs to be incurred by PAD related to the Business Combination of approximately $21.2 million for underwriting under the No Redemptions Scenario, consultants, and other fees reflected in the unaudited pro forma condensed combined balance sheet under each of the three redemption scenarios. PAD has reflected the direct and incremental transaction costs related to the Business Combination as an addition to New PAD’s accumulated deficit of $8.0 million, and to derecognize the deferred underwriting fee liability of New PAD and accrued legal fees of $9.1 million.
(OO) Reflects the preliminary estimated direct and incremental transaction costs to be incurred by PAD related to the Business Combination of approximately $17.7 million for underwriting under the 50% Redemptions Scenario, consultants, and other fees reflected in the unaudited pro forma condensed combined balance sheet under each of the three redemption scenarios. PAD has reflected the direct and incremental transaction costs related to the Business Combination as an addition to New PAD’s accumulated deficit of $8.0 million, and to derecognize the deferred underwriting fee liability of New PAD and accrued legal fees of $9.1 million.
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(OOO) Reflects the preliminary estimated direct and incremental transaction costs to be incurred by PAD related to the Business Combination of approximately $14.2 million for underwriting under the Full Redemptions Scenario, consultants, and other fees reflected in the unaudited pro forma condensed combined balance sheet under each of the three redemption scenarios. PAD has reflected the direct and incremental transaction costs related to the Business Combination as an addition to New PAD’s accumulated deficit of $8.0 million, and to derecognize the deferred underwriting fee liability of New PAD and accrued legal fees of $9.1 million.
(P) Reflects the reclassification of par value (based on the par value of $0.0001 per share) of 988,125 FACT Class B Shares for no consideration, or FACT Forfeited Shares, pursuant to the Business Combination Agreement under each of the three redemption scenarios.
(Q) Reflects the reclassification of par value (based on the par value of $0.0001 per share) of 5,833,333 FACT Class B Shares for no consideration, or FACT Forfeited Shares, pursuant to the Business Combination Agreement under each of the three redemption scenarios.
(R) Reflects the reclassification of par value (based on the par value of $0.0001 per share) from the shares of New PAD Common Shares issued as acquisition consideration for (i) the acquisition of Aerodyn Engineering, LLC (1,125,000 shares of New PAD Common Stock), (ii) the acquisition of Western Professional, Inc. (412,234 shares of New PAD Common Stock) and (iii) M&A consulting fees (137,112 shares of New PAD Common Stock) under each of the three redemption scenarios.
(S) Reflects the reclassification of par value from FACT II Public Shareholders (based on the par value of $0.0001 per share) into New PAD Common Stock and the remainder of $183.8 million recorded in additional paid-in-capital under the No Redemptions Scenario.
(T) Reflects the reclassification of par value (based on the par value of $0.0001 per share) of shares held by the Sponsor and its affiliates after considering shares surrendered are exchanged for shares of PAD Common Stock on a one-for-one basis. In the No Redemptions Scenario and 50% Redemptions Scenario, also includes 600,000 additional Sponsor Performance Bonus Shares earned for achieving the following separate milestone: the Trust Account having a balance of at least $70.0 million at Closing after the exercise of redemption rights by the Public Shareholders, after giving effect to the Business Combination.
(U) Reflects the reclassification of par value from the conversion of PAD Preferred Stock into New PAD Common Stock under each of the three redemption scenarios and the remainder of $8.2 million recorded in additional paid-in-capital (based on the par value of $0.0001 per share).
(V) Reflects adjustments to par value reflected in (R) — (U).
(W) Reflects the total adjustment and liquidation of $183.8 million of cash held in the Trust Account.
Unaudited Condensed Combined Pro Forma Adjustments to the Statements of Operations
6. Adjustments to audited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2025
The transaction accounting adjustments included in the unaudited pro forma condensed combined statements of operations are as follows:
(A) Derived from the audited statement of operations of FACT for the year ended December 31, 2025.
(B) Derived from the audited statement of operations of PAD for the year ended December 31, 2025.
(1.1) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing under each of the three redemption scenarios and $13.1 million of Sponsor deferred legal fees and incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account, the Financings and the Credit Facility).
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(1.2) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing of Business Combination under each of the three redemption scenarios, and $9.6 million of Sponsor deferred legal fees and incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account, the Financings and the Credit Facility).
(1.3) Reflects $8.0 million of estimated PAD direct transaction costs for legal, consulting and other fees that are expected to be incurred through the Closing of Business Combination under each of the three redemption scenarios and $6.1 million of Sponsor deferred legal fees and incremental underwriting costs (representing a 4.0% underwriting fee applied to the cash remaining in the Trust Account, the Financings and the Credit Facility).
(2) Represents accrued interest from the redeemed portion of the investments held in Trust Account.
7. Net income/(loss) per share
Represents the net income/(loss) per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2025. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net income/(loss) per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented.
The unaudited pro forma combined per share information has been presented under the three assumed redemptions.
|
Year Ended December 31, 2025 |
||||||||||||
|
Assuming |
Assuming |
Assuming |
||||||||||
|
Numerator: |
|
|
|
|
|
|
||||||
|
Proforma net loss |
$ |
(19,139,342 |
) |
$ |
(19,233,435 |
) |
$ |
(19,327,528 |
) |
|||
|
|
|
|
|
|
|
|||||||
|
Denominator: |
|
|
|
|
|
|
||||||
|
Weighted average shares outstanding – Basic and diluted |
|
44,464,548 |
|
|
35,714,548 |
|
|
26,364,548 |
|
|||
|
Basic and diluted net loss per share |
$ |
(0.43 |
) |
$ |
(0.54 |
) |
$ |
(0.73 |
) |
|||
|
Year Ended December 31, 2024 |
||||||||||||
|
Assuming |
Assuming |
Assuming |
||||||||||
|
Numerator: |
|
|
|
|
|
|
||||||
|
Proforma net profit |
$ |
(4,704,693 |
) |
$ |
(4,776,584 |
) |
$ |
(4,776,584 |
) |
|||
|
|
|
|
|
|
|
|||||||
|
Denominator: |
|
|
|
|
|
|
||||||
|
Weighted average shares outstanding – Basic and diluted |
|
44,464,548 |
|
|
35,714,548 |
|
|
26,364,548 |
|
|||
|
Basic and diluted net loss per share |
$ |
(0.11 |
) |
$ |
(0.13 |
) |
$ |
(0.18 |
) |
|||
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DILUTION
FACT Shareholders who acquired Public Shares in the IPO will have their ownership interests diluted to the extent of the difference between the initial public offering price of $10.00 per Public Share sold in the IPO and the net tangible book value per share at the time of the Business Combination assuming various sources of material probable dilution described below but excluding the effects of the consummation of the Business Combination itself.
As of March 31, 2026, FACT’s net tangible book value was $0.3 million, calculated as total assets of $185.8 million less total liabilities (excluding FACT transaction expenses associated liabilities) of $0.14 million and less Public Shares subject to redemption classified in temporary equity of $185.3 million). The number of FACT Ordinary Shares outstanding as of March 31, 2026, was 24,321,458, which includes 18,488,125 FACT Class A Shares and 5,833,333 FACT Class B Shares.
The following table presents the net tangible book value per share at various redemption levels that may occur in connection with the consummation of the Business Combination assuming various sources of material probable dilution, but excluding the effects of the Business Combination transaction itself. This presentation takes into account the reclassification of unredeemed Public Shares to permanent equity, and the payment of FACT’s estimated transaction costs in connection with the Business Combination. In addition to excluding the Business Combination itself, this presentation excludes 497,957 shares of New PAD Common Stock that will be issuable upon the exercise of the New PAD Options and shares of New PAD Common Stock that will initially be available for issuance under the New PAD Incentive Plan.
| No Redemptions | 50% Redemptions | 75% Redemptions | Full Redemptions | |||||||||||||||||
| Shares | Tangible | Shares | Tangible | Shares | Tangible | Shares | Tangible | |||||||||||||
| FACT net tangible book value (excluding FACT transaction associated liabilities) per share as of March 31, 2026 | | $ | | | $ | | | $ | | | $ | | ||||||||
| FACT Shareholders after the Redemption of Public Shares, Forfeiture of | |
| |
| |
| |
| ||||||||||||
| Initial offering price of FACT Class A Shares | $ | | $ | | $ | | $ | | ||||||||||||
| Net tangible book value per share giving effect to dilutive securities and other related events, excluding the Business Combination | $ | | $ | | $ | | $ | | ||||||||||||
| Dilution to non-redeeming shareholders | $ | | $ | | $ | | $ | | ||||||||||||
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The calculation of net tangible book value is as follows:
| Numerator Adjustments: | No | 50% | 75% | Full | ||||||||||||
| Net tangible book value of FACT (excluding FACT transaction associated liabilities) as of March 31, 2026 | $ | |
| $ | |
| $ | |
| $ | |
| ||||
| Adjustment to reflect reclassification of unredeemed Public Shares to permanent equity. | $ | |
| $ | |
| $ | |
| $ | |
| ||||
| Adjustment to reflect payment of transaction expenses of FACT(5) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Adjustment to reflect the Financings | $ | |
| $ | |
| $ | |
| $ | |
| ||||
| Historical net tangible book value of FACT adjusted for redemptions, reclassification of unredeemed Public Shares to permanent equity, execution of the Financings and payment of transaction costs(4) | $ | |
| $ | |
| $ | |
| $ | |
| ||||
| Denominator Adjustments: | No | 50% | 75% | Full | ||||||||
| Shares outstanding held by the FACT Shareholders as of March 31, 2026(6) | |
| |
| |
| |
| ||||
| Adjustment to reflect assumed redemption of FACT Class A Shares |
|
| ( | ) | ( | ) | ( | ) | ||||
| Adjustment to reflect assumed forfeiture of Founder Shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||
| Adjustment to reflect assumed Sponsor Performance Bonus Shares (net of Sponsor Performance Bonus Shares vested at close of Business Combination(7) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
| Adjustment to reflect the Financings(8) | |
| |
| |
| |
| ||||
| FACT Shareholders after the Redemption of Shares | |
| |
| |
| |
| ||||
____________
(1) This scenario assumes that no Public Shares are redeemed. This scenario further assumes the reclassification of unredeemed Public Shares to permanent equity of $185.3 million, adjustment to reflect the Financings of $75,000,000, payment of the estimated transaction costs of FACT (net of associated liabilities) of $15.9 million, forfeited Founder Shares of 1,878,333, and Sponsor Performance Bonus Shares (net of vested shares) of 600,000.
(2) This scenario assumes that 50% Public Shares are redeemed. This scenario further assumes the reclassification of unredeemed Public Shares to permanent equity of $92.7 million, adjustment to reflect the Financings of $75,000,000, payment of the estimated transaction costs of FACT (net of associated liabilities) of $12.4 million, forfeited Founder Shares of 1,878,333, and Sponsor Performance Bonus Shares (net of vested shares) of 600,000.
(3) This scenario assumes that 75% Public Shares are redeemed. This scenario further assumes the reclassification of unredeemed Public Shares to permanent equity of $46.3 million, adjustment to reflect the Financings of $75,000,000, payment of the estimated transaction costs of FACT (net of associated liabilities) of $10.6 million, forfeited Founder Shares of 1,878,333, and Sponsor Performance Bonus Shares (net of vested shares) of 900,000.
(4) This scenario assumes that 100% Public Shares are redeemed. This scenario further assumes no reclassification of unredeemed Public Shares to permanent equity, adjustment to reflect the Financings of $75,000,000, payment of the estimated transaction costs of FACT (net of associated liabilities) of $8.9 million, forfeited Founder Shares of 1,878,333, and Sponsor Performance Bonus Shares (net of vested shares) of 1,200,000.
(5) Estimated SPAC transaction expenses includes deferred legal payables, other expenses and (i) $7.0 million of deferred underwriting expense for No Redemptions scenario, (ii) $3.5 million of deferred underwriting expense for 50% Redemption scenario, and (iii) 4% of $75,000,000.0 for the Financings’ financing costs.
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(6) The amount reflected (i) does not include the Class A Ordinary Shares that may be issued upon the exercise of the warrants included in the Private Placement Units held by Sponsor HoldCo, which are not exercisable within 60 days hereof, and (ii) includes the 325,000 restricted Class A Ordinary Shares held by Sponsor HoldCo, which would vest only upon the consummation of FACT’s initial business combination.
(7) Total Sponsor Performance Bonus Shares count of 1,200,000. For the No Redemptions Scenario and the 50% Redemptions Scenario, share counts include 600,000 redemption-related Sponsor Performance Bonus Shares that are automatically triggered where the amount remaining the Trust Account after redemptions of Public Shares equals at least $35.0 million and $70.0 million, respectively. Up to 600,000 additional Sponsor Performance Bonus Shares where the amount remaining the Trust Account after redemptions of Public Shares equals at least $35.0 million and $70.0 million, respectively (1,200,000 total) may be earned subject to separate milestones: 300,000 shares upon securing research coverage and 300,000 shares upon achieving a volume-weighted average price of $15.00 over a five-year period. The Maximum Redemptions Scenario excludes all Sponsor Performance Bonus Shares.
(8) Assumes new shares issued in connection with the Financings of $75.0 million will be issued at $10.00 per share.
After taking into account the effects of the consummation of the Business Combination itself, for each of the No Redemptions Scenario, the 50% Redemptions Scenario, the 75% Redemptions Scenario, and the Full Redemptions Scenario, the valuation of PAD would need to equal $368,175,480, $280,675,480, $[•], and $262,175,480, respectively, in order for the non-redeeming shareholders’ interest per share to be at least equal to the IPO price per Public Share ($10.00 per share).
This required disclosure is not a guarantee that the trading price of the New PAD Common Stock will not be below the IPO offering price, nor is the disclosure a guarantee that the combined company valuation will attain one of the stated levels of valuation.
The above table shows possible sources of dilution and the extent of such dilution that non-redeeming Public Shareholders could experience in connection with the consummation of the Business Combination. Material probable dilution at the Domestication and/or the Closing may occur from items including the following:
• a total of 440,000 Private Placement Units (including 325,000 restricted FACT Class A Shares, which shares would vest only upon the consummation of our initial business combination), initially purchased for $10.00 per share in the Private Placement, which will then automatically convert at the effective time of the Domestication into 440,000 shares of New PAD Common Stock, 220,000 private warrants of New PAD and 325,000 shares of New PAD Common Stock. The exercise of the private warrants of New PAD pursuant to their terms will be dilutive to Public Shareholders.
• a total of 155,550 Private Placement Units with CCM initially purchased for $10.00 per share in the Private Placement, which will then automatically convert at the effective time of the Domestication into 155,500 shares of New PAD Common Stock and 77,775 private warrants of New PAD. The exercise of the private warrants of New PAD pursuant to their terms will be dilutive to Public Shareholders.
• a total of 38,888 Private Placement Units with Seaport initially purchased for $10.00 per share in the Private Placement, which will then automatically convert at the effective time of the Domestication into 19,444 shares of New PAD Common Stock and 22,312 private warrants of New PAD. The exercise of the private warrants of New PAD pursuant to their terms will be dilutive to Public Shareholders.
• the $75.0 million expected to be raised in the Financings by selling 75,000,000 shares of New PAD Common Stock at $10.00 per share.
• Any FACT Class A Shares that are not redeemed will convert into shares of New PAD Common Stock at Closing. The exercise of the FACT Public Warrants, which will convert to public warrants of New PAD, will be dilutive to shareholders of New PAD.
• New PAD will set aside a total of 1,200,000 Sponsor Performance Bonus Shares for issuance to the Sponsor, subject to the achievement of certain milestones (see “Proposal No. 1 — The Business Combination Proposal — Sponsor Additional Consideration and Performance Bonus Shares” for additional information).
• 497,957 shares of New PAD Common Stock underlying TAP options.
• 412,234 shares issuable to Brad Bowder, the owner of Western Professional, Inc., as consideration for PAD’s acquisition of Western Professional, Inc.
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INFORMATION ABOUT FACT
General
We are a blank check company, incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We have neither engaged in any operations nor generated any revenue to date. Based on our business activities, FACT is a “shell company” as defined under the Exchange Act because we have no operations and nominal assets consisting almost entirely of cash.
FACT’s IPO
On July 12, 2024, Sponsor HoldCo paid $25,000, or approximately $0.0037 per share, to cover certain of our offering and formation costs in exchange for an aggregate of 6,708,333 Founder Shares. On August 6, 2024, Sponsor HoldCo transferred 30,000 Founder Shares to each of our independent directors and 130,000 Founder Shares to our Executive Chairman (an aggregate of 220,000 Founder Shares), in each case at their original purchase price.
On November 27, 2024, FACT consummated the IPO of 17,500,000 FACT Units at $10.00 per unit, generating gross proceeds of $175,000,000.
Simultaneously with the closing of the IPO, FACT consummated the sale of 500,625 Private Placement Units at a price of $10.00 per Private Placement Unit and 162,500 Private Placement Securities at a price of $10.00 per Private Placement Security, generating gross proceeds of $6,631,250, as follows: (i) 17,500 Private Placement Units ($175,000 in the aggregate) with the Sponsor; (ii) (A) 260,000 Private Placement Units with Sponsor HoldCo and (B) 162,500 Private Placement Securities ($4,225,000 in the aggregate) with Sponsor HoldCo; (iii) 178,500 Private Placement Units ($1,785,000 in the aggregate) with CCM; and (iv) 44,625 Private Placement Units with Seaport ($446,250 in the aggregate). On April 30, 2026, CCM transferred 22,950 Private Placement Units pursuant to a waiver of transfer restrictions on the Private Placement Units by FACT. The transferee of the Private Placement Units is subject to the same transfer restrictions as CCM with respect to the transferred Private Placement Units. On April 30, 2026, Seaport transferred 5,737 Private Placement Units pursuant to a waiver of transfer restrictions on the Private Placement Units by FACT. The transferee of the Private Placement Units is subject to the same transfer restrictions as Seaport with respect to the transferred Private Placement Units. The Private Placement Units that were purchased by the Sponsor, Sponsor HoldCo, CCM and Seaport are identical to the FACT Units, except that they (including the underlying securities) are (i) subject to certain limited exceptions, (ii) will be subject to transfer restrictions until 180 days following the consummation of the Company’s initial business combination and (iii) will be entitled to registration rights. The Private Placement Securities that were purchased by Sponsor HoldCo are identical to the Private Placement Units except that they include restricted FACT Class A Shares, which will be subject to transfer restrictions until 90 days following the consummation of the Company’s initial business combination and which shares would vest only upon the consummation of our initial business combination.
Following the closing of the IPO, on November 27, 2024, an amount of $175,875,000 ($10.05 per Unit) of the net proceeds of the IPO and the Private Placement was placed in the Trust Account, located in the United States, with Odyssey acting as trustee, and the funds were invested or held either (i) in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act, (ii) as uninvested cash, or (iii) an interest bearing bank demand deposit account or other accounts at a bank, as determined by FACT, until the earlier of (A) the completion of a business combination and (B) the distribution of the funds in the Trust Account to the FACT Shareholders. No later than 18 months after the closing of the IPO (or 24 months from the closing of the IPO if FACT has executed a definitive agreement for an initial business combination within 18 months from the IPO), the amounts held in the Trust Account will be held as cash or cash items, including in demand deposit accounts.
Effecting FACT’s Initial Business Combination
On November 26, 2025, we entered into a Business Combination Agreement with Sponsor HoldCo, PAD, and Merger Sub, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement, the following will occur: (i) FACT will domesticate as a Delaware corporation in accordance with Section 388 of the DGCL and Part XII of the Cayman Companies Act; (ii) following the Domestication, Merger
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Sub will merge with and into PAD with PAD surviving the merger as a wholly-owned subsidiary of FACT, in accordance with the Business Combination Agreement and the Florida Business Corporation Act; and (iii) FACT will consummate the other transactions contemplated by the Business Combination Agreement. See “Proposal No. 1 — The Business Combination Proposal” for more information.
We are not presently engaged in, and we will not engage in, any operations until the consummation of the Business Combination. We intend to effectuate the Business Combination using cash held in the Trust Account, and shares issued to PAD.
If not all of the funds released from the Trust Account are used for redemptions of FACT Class A Shares, we may use the balance of the cash released to us from the Trust Account for general corporate purposes, including to pay transaction expenses and for FACT’s working capital.
Fair Market Value of PAD’s Business; 80% test
Pursuant to the FACT Articles and Nasdaq listing rules, FACT’s initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of the signing of the definitive agreement to enter into the business combination. FACT will not complete a business combination unless it acquires a controlling interest in a target company or is otherwise not required to register as an investment company under the Investment Company Act. The FACT Board determined that this test was met in connection with the Business Combination.
Shareholder Approval of the Business Combination
Under the FACT Articles, because FACT is seeking shareholder approval in connection with the Business Combination, it may only complete such the Business Combination if it receives an ordinary resolution, being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at the EGM, vote at the EGM. Further, pursuant to the FACT Articles, in connection with such shareholder approval, FACT must provide the Public Shareholders with the opportunity to redeem their Public Shares. See “The Extraordinary General Meeting” for more information.
Potential Purchases of Public Shares
The Sponsor, Sponsor HoldCo and FACT’s officers and directors do not have any plans at this time to purchase Public Shares from Public Shareholders or to take any other actions to incentivize non-redemption. However, at any time prior to the EGM, during a period when they are not then aware of any material nonpublic information regarding FACT or our securities, the Sponsor, Sponsor HoldCo and FACT’s officers and directors or their affiliates may purchase Public Shares in privately negotiated transactions or in the open market, although they are under no obligation to do so. There is no limit on the number of Public Shares that such persons may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares in such transactions. Such purchases may include a contractual acknowledgment that such shareholder, although still the record holder of FACT Ordinary Shares, is no longer the beneficial owner thereof and therefore agrees not to exercise our redemption rights.
In the event that the Sponsor, Sponsor HoldCo, and FACT’s officers and directors or their affiliates purchase shares in privately negotiated transactions from Public Shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. The purpose of such transaction could be to increase the likelihood of obtaining shareholder approval of the Business Combination or satisfy the Minimum FACT Cash Amount, where it appears that such requirement would otherwise not be met. FACT expects any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of FACT Class A Shares and the number of beneficial holders of FACT Class A Shares may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of FACT’s securities on Nasdaq.
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In the event that the Sponsor, Sponsor HoldCo, and FACT’s officers and directors or their affiliates were to purchase Public Shares from Public Shareholders, such purchases would be structured in compliance with the requirements of Rule 14e-5 under the Exchange Act. To the extent that the Sponsor, Sponsor HoldCo, and FACT’s officers and directors or their affiliates purchase Public Shares in compliance with the requirements of Rule 14e-5 under the Exchange Act, such shares would not be voted in favor of approving the Business Combination. See “The Extraordinary General Meeting — Potential Purchases of Public Shares” for more information.
Redemption of Public Shares and Liquidation if No Initial Business Combination
The FACT Articles provide that FACT will have only 18 months from the closing of the IPO (or 24 months from the closing of the IPO if FACT has executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) to complete an initial business combination. If FACT has not completed its initial business combination within such 18-month period (or 24-month period from the closing of the IPO if FACT has executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or during any extended time that we have to consummate a business combination beyond 18 months (or 24 months from the closing of the IPO if we have executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) as a result of a shareholder vote to amend the FACT Articles (an “Extension Period”), FACT will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of permitted withdrawals), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and FACT’s board of directors, liquidate and dissolve, subject in each case to FACT’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to FACT’s warrants, which will expire worthless if FACT fails to complete an initial business combination within the 18-month time period (or 24-month period if FACT has executed a definitive agreement for an initial business combination within 18 months from the IPO) or during any Extension Period.
The Sponsor, FACT’s initial shareholders, directors and officers, as applicable, have entered into a letter agreement with FACT, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if FACT fails to complete an initial business combination within 18 months from the closing of the IPO (or 24 months from the closing of the IPO if FACT has executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or during any Extension Period. However, if FACT’s initial shareholders acquire Public Shares, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if FACT fails to complete an initial business combination within the allotted time frame. The underwriters agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event FACT does not complete an initial business combination within the allotted time frame and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares.
Sponsor HoldCo, FACT’s directors and officers have agreed, pursuant to a written agreement with FACT, that they will not propose any amendment to the FACT Articles (i) to modify the substance or timing of FACT’s obligation to allow redemption in connection with an initial business combination or to redeem 100% of the Public Shares if it does not complete an initial business combination within 18 months from the closing of the IPO (or 24 months from the closing of the IPO if it has executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or (ii) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, in each case unless FACT provides the Public Shareholders with the opportunity to redeem their FACT Class A Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of permitted withdrawals), divided by the number of then issued and outstanding Public Shares.
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FACT expects that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the $1,634,250 of proceeds held outside the Trust Account, although it cannot assure investors that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the Trust Account not required for permitted withdrawals, FACT may request the trustee to release to FACT an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If FACT were to expend all of the net proceeds of the IPO and the sale of the Private Placement Units and restricted FACT Class A Shares, other than the proceeds deposited in the Trust Account, and without taking into account interest, if any, earned on the funds held in the Trust Account, the per-share redemption amount received by shareholders upon FACT’s dissolution would be approximately $10.05. The proceeds deposited in the Trust Account could, however, become subject to the claims of FACT’s creditors which would have higher priority than the claims of the Public Shareholders. FACT cannot assure investors that the actual per-share redemption amount received by shareholders will not be substantially less than $10.05. While FACT intends to pay such amounts, if any, it cannot assure investors that it will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account, including but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will enter into an agreement with a third party that has not executed a waiver only if management believes that such third party’s engagement would be in the best interests of FACT under the circumstances. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where FACT is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if we have not completed an initial business combination within the required time period, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption.
Sponsor HoldCo has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.05 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest that may be withdrawn for permitted withdrawals, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then Sponsor HoldCo will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether Sponsor HoldCo has sufficient funds to satisfy its indemnity obligations and believe that Sponsor HoldCo’s only assets are securities of FACT and, therefore, Sponsor HoldCo may not be able to satisfy those obligations. None of our other officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
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In the event that the proceeds in the Trust Account are reduced below (i) $10.05 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest that may be withdrawn for permitted withdrawals, and Sponsor HoldCo asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against Sponsor HoldCo to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against Sponsor HoldCo to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be substantially less than $10.05 per share.
We will seek to reduce the possibility that Sponsor HoldCo will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Sponsor HoldCo will also not be liable as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. We will have access to up to $177,509,250 from the proceeds of the IPO and the sale of the Private Placement Units and restricted FACT Class A Shares, with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, FACT Shareholders who received funds from the Trust Account could be liable for claims made by creditors. In the event that our offering expenses exceed our estimate of $622,000, we may fund such excess with funds from the funds not to be held in the Trust Account. In such case, the amount of funds we intend to be held outside the Trust Account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $622,000, the amount of funds we intend to be held outside the Trust Account would increase by a corresponding amount.
If we file a winding-up or bankruptcy or insolvency petition or an involuntary winding-up or bankruptcy or insolvency petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable insolvency law, and may be included in our insolvency estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any insolvency claims deplete the Trust Account, we cannot assure you we will be able to return $10.05 per share to the Public Shareholders. Additionally, if we file a winding-up or bankruptcy or insolvency petition or an involuntary winding-up or bankruptcy or insolvency petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or insolvency laws as a voidable performance. As a result, a bankruptcy court could seek to recover some or all amounts received by our shareholders. Furthermore, the FACT Board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
The Public Shareholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (i) our completion of an initial business combination, and then only in connection with those FACT Class A Shares that such shareholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend the FACT Articles (A) to modify the substance or timing of our obligation to allow redemption in connection with an initial business combination or to redeem 100% of the Public Shares if we do not complete our initial business combination within 18 months from the closing of the IPO (or 24 months from the closing of the IPO if we have executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or (B) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity; and (iii) the redemption of the Public Shares if we have not completed an initial business combination within 18 months from the closing of the IPO (or 24 months from the closing of the IPO if we have executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or during any Extension Period, subject to applicable law. In no other circumstances will a FACT Shareholder have any right or interest of any kind to or in the Trust Account. Holders of warrants will not have any right to the proceeds held in the Trust Account with respect to the warrants.
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Facilities
We currently maintain our executive offices at 14 Wall Street, 20th Floor, New York, NY 10005, United States of America. We consider our current office space adequate for our current operations.
Employees
We currently have two officers and do not intend to have any full-time employees prior to the completion of our initial business combination. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that any such person will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.
The Sponsor
The Sponsor is FACT II Acquisition Parent LLC, a Cayman Islands limited liability company, which has the following four members: our Chief Executive Officer, Adam Gishen, our Chief Financial Officer, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Messrs. Lee and Nespola, Jr. are U.S. citizens, and Messrs. Gishen and Wagman are British citizens. The Sponsor owns 25% of our issued and outstanding FACT Ordinary Shares as of the date of this proxy statement/prospectus. The Sponsor is controlled by Adam Gishen, Min Lee, Richard Nespola, Jr. and Joseph Wagman. Each of Adam Gishen, Min Lee, Richard Nespola, Jr. and Joseph Wagman holds an equal 25% interest in the Sponsor. Investment and voting decisions of the Sponsor are made by the FACT Board, which is currently comprised of the four members. Each manager has one vote on all matters submitted to the FACT Board and with respect to any matter before the FACT Board, the act of a majority of the managers present shall be the act of the FACT Board. With respect to any action taken by the FACT Board without a meeting, such action requires the written consent of all the managers. Neither Mr. Gishen nor Mr. Wagman individually or collectively control the Sponsor. For more information about the Sponsor and its controlling persons, please see the section of this proxy statement/prospectus entitled “Beneficial Ownership of Securities.” Past performance by our management team is not a guarantee of success with respect to the Business Combination. You should not rely on the historical record of the performance of our management team, or businesses associated with them, as indicative of our future performance of an investment in FACT or PAD or the returns we will, or are likely to, generate going forward.
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Directors and Executive Officers; Biographies
Our officers and directors are as follows:
|
Name |
Age |
Position |
||
|
Robert Rackind |
54 |
Executive Chairman and Director |
||
|
Adam Gishen |
50 |
Chief Executive Officer and Director |
||
|
Min Lee |
46 |
Chief Financial Officer |
||
|
Nell Cady-Kruse |
64 |
Director |
||
|
James Rallo |
60 |
Director |
||
|
Hella Alashkar |
43 |
Director |
Robert Rackind, Executive Chairman
Robert Rackind is our Executive Chairman. Mr. Rackind is a global real estate investment, management, and development professional with over 30 years of top-down investment and finance experience, combined with bottom-up development and asset management expertise. He has managed and invested over €50 billion across various jurisdictions, including the UK, France, Switzerland, Germany, Spain, Italy, Luxembourg, the Nordics, Asia-Pacific, and North America. His expertise spans a wide range of asset classes, such as office, logistics, industrial, residential, care homes, student accommodation, build-to-rent, and hotels. Mr. Rackind recently served in Zurich as the Global Head of Real Estate at Credit Suisse Asset Management (“CSAM”) from June 2022 to October 2023, managing approximately CHF 43 billion in assets under management (AUM). His responsibilities included investments through direct, indirect, close-ended, open-ended, co-investment, joint ventures, and listed vehicles. Notably, Mr. Rackind identified and helped close the $830 million acquisition of the Diplomat Hotel and Convention Centre in Hollywood Beach, Florida. Prior to his tenure at CSAM, Mr. Rackind founded and grew the EQT AB Real Estate platform to €11.5 billion AUM from January 2015 to December 2021. This growth was achieved through a mix of organic close-ended pan-European funds and inorganic corporate M&A, including the $1.8 billion acquisition of Exeter Property Group, a leading North American logistics real estate investment management platform. Mr. Rackind’s career also includes senior roles at Wainbridge from December 2009 to December 2014 as founding partner, Cambridge Place Investment Management from April 2006 to August 2009, Meyer Bergman from November 2004 to March 2006, Hines from June 1999 to November 2004, HRO from July 1998 to June 1999, Baltic Plc from August 1996 to July 1998, and Weatherall Green & Smith from January 1994 to July 1996. Mr. Rackind has also served as a director of Aram Advisors Ltd. He holds a B.Sc. (Hons) in Valuation & Estate Management from the University of the West of England, Bristol.
Adam Gishen, Chief Executive Officer
Adam Gishen is our Chief Executive Officer and a director. Mr. Gishen previously served as the Chief Executive Officer of Freedom Acquisition I Corp. from December 2020 to July 2023, prior to its business combination with Complete Solaria, Inc. (subsequently renamed SunPower Inc.) (Nasdaq: SPWR), a leading solar technology, services and installation company, and has since served as a director of SunPower Inc. Mr. Gishen has over 20 years of experience in financial services. Mr. Gishen served in several senior roles at Credit Suisse from 2015 to 2020, including Head of Investor Relations, Corporate Communications, Marketing and Branding from 2019 to 2020 and Head of Investor Relations and Corporate Communications from 2017 to 2019. Prior to 2015, Mr. Gishen was a Partner at Ondra Partners, a financial advisory firm, and prior to that, a Managing Director at Nomura in London and Lehman Brothers from 1999 to 2008 where he specialized in Equity Capital Markets. He graduated from University of Leeds.
Min Lee, Chief Financial Officer
Min Lee is our Chief Financial Officer. Mr. Lee has approximately 20 years of financial experience and previously served as Senior Advisor of Freedom Acquisition I Corp. from 2021 to 2023. In 2019, Mr. Lee co-founded BFY Capital, a specialty private credit investment platform focused on consumer brands in the natural and organic food, beverage, beauty and pet industries. Prior to BFY, from 2016 to 2018, Mr. Lee was the CFO of Patch of Land, a Series A funded real estate marketplace lending and fintech start-up, where he led all capital markets, fundraising, finance, accounting and investor relations activities for the company. From 2008 to 2016, Mr. Lee was a director in Credit Suisse’s Investment Banking division in Los Angeles, where he advised gaming, lodging & leisure, financial sponsors and media entertainment clients. He has executed over 25 M&A, equity and leveraged finance transactions,
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totaling over $15 billion in transaction value. Prior to 2006, Mr. Lee worked at The Walt Disney Company (NYSE: DIS) as a Senior Analyst in the Corporate Treasury group for five years where he oversaw pension fund allocations for a $1 billion alternatives portfolio and managed the company’s foreign exchange risks. Mr. Lee holds an MBA from the New York University Stern School of Business and a B.A. from the University of California, Los Angeles.
Nell Cady-Kruse, Director
Nell Cady-Kruse has served as our director since November 25, 2024. Since April 2022, Ms. Cady-Kruse has served as an independent director for Varagon Capital Corp., a BDC, and has chaired the governance committee. Since 2020, she has also served on the Senior Advisory Board for No One Left Behind, a charitable organization focusing on supporting former interpreters and U.S. government employees eligible for the Iraqi and Afghan Special Immigrant Visa. Since February 2025, Ms. Cady-Kruse has served as an independent member of the board risk committee for the Public Investment Fund, the sovereign wealth fund of the Kingdom of Saudi Arabia. From May 2022 to July 2023, Ms. Cady-Kruse served as an independent director on the board of Freedom Acquisition I Corp. She also served on the board and chaired the board risk committees for Barclays US from September 2017 to December 2023 and Barclays Bank Delaware from September 2016 to December 2023. Prior to board service, Ms. Cady-Kruse was a senior global executive at Standard Chartered Bank, as global Chief Risk Officer, Wholesale Banking, retiring in 2014. Over her career, Ms. Cady-Kruse specialized in leveraged finance, corporate credit and structured finance, portfolio management, private equity, and risk management & strategy, and worked at Bankers Trust (August 1985 to December 2000), Credit Suisse (February 2022 to December 2010), and Standard Chartered Bank (January 2011 to August 2014), in the U.S., Europe and Asia. Ms. Cady-Kruse is a CFA Charterholder and holds a CIPM (Certificate in Investment Performance Measurement). She is a Leadership Fellow of the National Association of Corporate Directors and holds a Certificate in Cybersecurity Oversight from Carnegie Mellon Software Engineering Institute. Ms. Cady-Kruse has served on numerous boards, including Futurebank, Bankers Trust of California, the Risk Management Institute of the National University of Singapore and Young Enterprise London. Ms. Cady-Kruse holds a B.Sc. with Honors in Agricultural Economics from Cornell University and an MBA from Cornell University.
James Rallo, Director
James Rallo has served as our director since November 25, 2024. Mr. Rallo has over 33 years of financial experience assisting public and privately held companies to grow worldwide. He has worked with global enterprises in technology, healthcare, retail and government agencies to strategically increase their corporate value, to identify and manage risks, and to communicate effectively with internal and external stakeholders on topics of cross functional business transformation. Most recently, between 2020 and 2024, Mr. Rallo served as Chief Financial Officer of Xometry (Nasdaq: XMTR), a leading technology company in the advanced manufacturing industry. As Chief Financial Officer, Mr. Rallo played a key role in Xometry’s initial public offering and was responsible for driving investments, global expansion and acquisitions. Prior to joining Xometry, between 2005 and 2019, Mr. Rallo served in various capacities, most recently as Chief Financial Officer and President of Liquidity Services, at Liquidity Services (Nasdaq: LQDT), a large provider of reverse logistics infrastructure for government entities and Fortune 500 retailers, where he played a key role in the company’s initial public offering. Prior to Liquidity Services, Mr. Rallo served as the Chief Financial Officer of Sleep Service of America, a nationwide outsourcer of sleep labs to the largest hospital chains in the country. Prior to that, Mr. Rallo was an investment banker for five years focused on IPOs, mergers and acquisitions, and debt and equity fundraising. Mr. Rallo started his career at Deloitte and spent 5 years as a public accountant. Mr. Rallo holds an MBA from the Robert H. Smith School of Business at the University of Maryland and a B.S. in Business and Accounting from Washington and Lee University.
Hella Alashkar, Director
Hella Alashkar has served as our director since November 25, 2024. Ms. Alashkar has 20 years of experience in underwriting, negotiating, and structuring private transactions across various sectors. She has built and led high-growth investment platforms for global asset managers, universal banking groups, and boutique investment houses. She has demonstrable expertise in navigating large-scale, capital-intensive growth propositions; and, more recently, she has focused on investments in high-impact companies catalyzing transformative change in hard-to-abate industries. In 2013, Ms. Alashkar co-founded the Swiss-based private investment firm, 1648 Capital, where she continues to serve on the board and oversee select global direct private investments alongside the firm’s corporate and family-office advisory activities. Ad interim, Ms. Alashkar has also held various roles at Deutsche Bank, ultimately serving as Global
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Head of Private Markets for institutional wealth clients. At Deutsche Bank, she spearheaded the private placements business, combining origination with distribution and primarily focusing on pre-IPO equity rounds and private credit syndications. She played a key leadership role in capital raising, marketing complex investment opportunities, and negotiating sophisticated financing structures. More recently, Ms. Alashkar served as Head of Direct Private Investments at J. Safra Sarasin, where she created a buy-side platform for private capital investors, leading origination, due diligence, and active management of investments in several private companies.
Ms. Alashkar is a Chartered Financial Analyst® charterholder. She holds a Master of Finance from London Business School and a Bachelor of Laws from King’s College London. Committed to the energy transition, Ms. Alashkar recently engaged in Cambridge University’s program on Climate Change for Decision-Makers. Ms. Alashkar has board experience and a strong background in corporate governance and risk management. Recognized for her leadership, she has received numerous industry awards, including Deutsche Bank’s Global Leadership Award for Innovative Investment Solutions in 2019 and Women in Finance Investment Banking Director of the Year (Europe) in 2017. Her insights are regularly featured in industry discussions, reflecting her commitment to advancing private markets and sustainable investments.
Executive and Director Compensation
None of our directors or officers has received any cash compensation for services rendered to us. Sponsor HoldCo, the Sponsor, directors and officers, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to Sponsor HoldCo, the Sponsor, directors, officers or our or any of their respective affiliates. Any such payments prior to an initial business combination will be made from funds held outside the Trust Account (other than any permitted withdrawals). Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and consummating an initial business combination. Other than in connection with the Advisory Agreement, no compensation of any kind, including finder’s and consulting fees, will be paid by the company to Sponsor HoldCo, the Sponsor, directors and officers, or our or any of their respective affiliates, prior to completion of our initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation from the combined company. All compensation will be fully disclosed to shareholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our shareholders in connection with a proposed business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the initial proposed business combination, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our officers after the completion of our initial business combination will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We are not party to any agreements with our directors and officers that provide for benefits upon termination of employment. We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our directors and officers may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we do not believe that the ability of our management to remain with us after the consummation of our initial business combination should be a determining factor in our decision to proceed with any potential business combination.
Set forth below is a summary of the amount of compensation and securities received or to be received by the Sponsor, Sponsor HoldCo, and officers and directors of FACT in connection with the Business Combination.
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Number and Terms of Office of Officers and Directors
The FACT Board consists of five members. Prior to FACT’s initial business combination, only the holders of Founder Shares have the right to vote to appoint all of our directors and remove members of the board of directors for any reason, and holders of Public Shares will not have the right to vote on the appointment of directors during such time. These provisions of the FACT Articles may only be amended by a special resolution passed by at least 90% of holders of the FACT Ordinary Shares as, being entitled to do so vote in person or, where proxies are allowed, by proxy, at a general meeting of the company. Each of our directors will generally hold office for a three-year term. Subject to any other special rights applicable to the shareholders, any vacancies on the FACT Board may be filled by the affirmative vote of a majority of the directors present and voting at the meeting of the FACT Board or by a majority of the holders of the FACT Ordinary Shares (or, prior to our initial business combination, holders of Founder Shares).
Our officers are appointed by the FACT Board and serve at the discretion of the FACT Board, rather than for specific terms of office. The FACT Board is authorized to appoint persons to the offices set forth in the FACT Articles as it deems appropriate.
Director Independence
The rules of Nasdaq require that a majority of the FACT Board be independent within one year of our IPO. An “independent director” is defined generally as a person who, in the opinion of the FACT Board, has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). The FACT Board has determined that each of Nell Cady-Kruse, James Rallo and Hella Alashkar are “independent directors” as defined in Nasdaq listing standards and applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.
Committees of the FACT Board of Directors
The FACT Board has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Our audit committee, compensation committee, and nominating and corporate governance committee are composed solely of independent directors. The rules of Nasdaq and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of Nasdaq require that the compensation committee and the nominating and corporate governance committee of a listed company be comprised solely of independent directors. Each committee operates under a charter that was approved by the FACT Board and has the composition and responsibilities described below.
Audit Committee
We have established an audit committee of the FACT Board. The members of our audit committee are James Rallo, Nell Cady-Kruse, and Hella Alashkar. James Rallo serves as chair of the audit committee.
Each member of the audit committee is financially literate and the FACT Board has determined that James Rallo qualifies as an “audit committee financial expert” as defined in applicable SEC rules and has accounting or related financial management expertise.
We adopted an audit committee charter, which details the purpose and principal functions of the audit committee, including:
• assisting board oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our independent registered public accounting firm’s qualifications and independence, and (iv) the performance of our internal audit function and independent registered public accounting firm;
• the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other registered public accounting firm engaged by us;
• pre-approving all audit and non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
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• reviewing and discussing with the independent registered public accounting firm all relationships the independent registered public accounting firm has with us in order to evaluate their continued independence;
• setting clear hiring policies for employees or former employees of the independent registered public accounting firm;
• setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
• obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
• meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm, including reviewing our specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
• reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
• reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Compensation Committee
We have established a compensation committee of the FACT Board. The members of our compensation committee are Hella Alashkar, Nell Cady-Kruse and James Rallo. Hella Alashkar serves as chair of the compensation committee. We adopted a compensation committee charter, which details the purpose and responsibility of the compensation committee, including:
• reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
• reviewing and making recommendations to our board of directors with respect to the compensation, and any incentive-compensation and equity-based plans that are subject to board approval of all of our other officers;
• reviewing our executive compensation policies and plans;
• implementing and administering our incentive compensation equity-based remuneration plans;
• assisting management in complying with our proxy statement and annual report disclosure requirements;
• approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
• producing a report on executive compensation to be included in our annual proxy statement; and
• reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
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Notwithstanding the foregoing, as indicated above, other than the obligations of the Sponsor, Sponsor HoldCo or an affiliate or advisor thereof and reimbursement of expenses, or as set forth under “Certain Relationships And Related Persons Transactions — FACT — Advisory Agreement,” no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing shareholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Nominating and Corporate Governance Committee
We have established a nominating and corporate governance committee of the board of directors. The members of our nominating and corporate governance committee are Nell Cady-Kruse, James Rallo and Hella Alashkar. Nell Cady-Kruse serves as chair of the nominating and corporate governance committee. We adopted a nominating and corporate governance committee charter, which will detail the purpose and responsibilities of the nominating and corporate governance committee, including:
• identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board of directors, and recommending to the board of directors candidates for nomination for election at the annual general meeting or to fill vacancies on the board of directors;
• developing and recommending to the board of directors and overseeing implementation of our corporate governance guidelines;
• coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the Company; and
• reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary.
The charter also provides that the nominating and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other retention terms.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the FACT Board considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders. Prior to our initial business combination, holders of the Public Shares will not have the right to recommend director candidates for nomination to the FACT Board.
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one or more executive officers serving on the FACT Board.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics applicable to our directors, officers and employees (“Code of Ethics”) that complies with the rules and regulations of Nasdaq. The Code of Ethics codifies the business and ethical principles that govern all aspects of our business. A copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
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Insider Trading Policy
We have adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees and their respective immediate family members, which are reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable Nasdaq listing standards while they are in possession of material nonpublic information.
Conflicts of Interest
Under Cayman Islands law, directors and officers owe the following fiduciary duties:
• duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole;
• duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose;
• duty to not improperly fetter the exercise of future discretion;
• duty to exercise powers fairly as between different sections of shareholders;
• duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and
• duty to exercise independent judgment.
In addition to the above, directors also owe a duty of care, which is not fiduciary in nature. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge, skill and experience of that director.
As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders, provided that there is full disclosure by the directors. This can be done by way of permission granted in the FACT Articles or alternatively by shareholder approval at general meetings.
In addition, members of our management team and the FACT Board directly or indirectly, own Founder Shares and/or Private Placement Securities, as set forth in “Beneficial Ownership of Securities,” and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Sponsor Holdco paid a nominal aggregate purchase price of $25,000 for the Founder Shares, or approximately $0.0037 per share. Accordingly, our management team, which owns interests in Sponsor Holdco, through the Sponsor, and directors who own Founder Shares may be more willing to pursue a business combination with a riskier or less-established target business than would be the case if Sponsor Holdco had paid the same per share price for the Founder Shares as the Public Shareholders paid for their Public Shares.
As described herein, certain members of our management team may receive compensation upon consummation of our initial business combination, and accordingly, they may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination as such compensation will not be received unless we consummate such business combination.
In the event that the Sponsor or members of our management team provide loans to us to finance transaction costs and/or incur expenses on our behalf in connection with an initial business combination, such persons may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination as such loans may not be repaid and/or such expenses may not be reimbursed unless we consummate such business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, either of Sponsor HoldCo, the Sponsor, any of their respective affiliates or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the
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proceeds of the Trust Account released to us. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into FACT Class A Shares or units upon the consummation of our initial business combination at a price of $10.00 per FACT Class A Share or unit, as applicable, at the option of the lender. Such FACT Class A Shares would be identical to the Private Placement Shares, and such units would be identical to the Private Placement Securities. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than Sponsor HoldCo, the Sponsor or an affiliate of either of Sponsor HoldCo or the Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account.
Similarly, if we agree to pay the Sponsor or a member of our management team a finder’s fee, advisory fee, consulting fee or success fee in order to effectuate the completion of our initial business combination, such persons may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination as any such fee may not be paid unless we consummate such business combination.
Our management team, in their capacities as directors, officers or employees of the Sponsor or its affiliates or in their other endeavors, may choose to present potential business combinations to the related entities described above, current or future entities affiliated with or managed by either of Sponsor HoldCo, the Sponsor, or third parties, before they present such opportunities to us, subject to his or her fiduciary duties under Cayman Islands law and any other applicable fiduciary duties.
Our directors and officers presently have, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our directors or officers becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she may need to honor these fiduciary or contractual obligations to present such business combination opportunity to such entity, or in the case of a non-compete restriction, may not present such opportunity to us at all, subject to his or her fiduciary duties under Cayman Islands law. The FACT Articles provide that, to the fullest extent permitted by applicable law: (i) no individual serving as a director or an officer shall have any duty, except and to the extent expressly assumed by contract, to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us; and (ii) we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any potential transaction or matter which may be a corporate opportunity for any director or officer, on the one hand, and us, on the other. Our directors and officers are also not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence. See “Risk Factors — The Sponsor, Sponsor HoldCo, FACT’s directors and officers and their affiliates have interests in the Business Combination and the proposals described in this proxy statement/prospectus that are different from, or in addition to and/or in conflict with, those of the FACT Shareholders generally.” We do not believe, however, that any of the foregoing fiduciary duties or contractual obligations will materially affect our ability to identify and pursue business combination opportunities or complete our initial business combination.
Potential investors should also be aware of the following potential conflicts of interest:
• None of our directors or officers is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities.
• In the course of their other business activities, our directors and officers may become aware of investment and business opportunities that may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented. For a complete description of our management’s other affiliations, see below.
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• The Sponsor, initial shareholders, directors and officers have agreed to waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the consummation of our initial business combination. Additionally, the Sponsor and initial shareholders have agreed to waive their redemption rights with respect to their Founder Shares if we fail to consummate our initial business combination within 18 months after the closing of the IPO (or 24 months from the closing of the IPO if we have executed a definitive agreement for an initial business combination within 18 months from the closing of the IPO) or during any Extension Period. However, if the Sponsor or initial shareholders (or any of our directors, officers or affiliates) acquire Public Shares, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if we fail to consummate our initial business combination within the prescribed time frame. If we do not complete our initial business combination within such applicable time period, the proceeds of the sale of the Private Placement Units and restricted FACT Class A Shares held in the Trust Account will be used to fund the redemption of our Public Shares, and the Private Placement Units will expire worthless. With certain limited exceptions, the Founder Shares will not be transferable, assignable or salable by our initial shareholders until 180 days after completion of our initial business combination. With certain limited exceptions, the Private Placement Units (including the underlying private placement warrants, the Private Placement Shares and the FACT Class A Shares issuable upon exercise of the private placement warrants), will not be transferable, assignable or salable by the Sponsor or Sponsor HoldCo until 180 days after the completion of our initial business combination. With certain limited exceptions, the restricted FACT Class A Shares will not be transferable, assignable or salable by our initial shareholders until 90 days after completion of our initial business combination. In addition, the restricted FACT Class A Shares would vest only upon the consummation of our initial business combination. As the sponsor and directors and officers may directly or indirectly own ordinary shares and warrants and own Founder Shares, our directors and officers may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination.
• Our directors and officers may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether to proceed with a particular business combination.
• Our directors and officers may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such directors and officers was included by a target business as a condition to any agreement with respect to our initial business combination.
• On October 14, 2024, a member of the Sponsor (the “Borrower”), issued a promissory note in the principal amount of up to £200,000 (the “Note”) to Robert Rackind, our Executive Chairman, who is the Borrower’s father-in-law. Pursuant to the Note, Mr. Rackind agreed to lend to the Borrower, (i) an aggregate of £40,000, which Mr. Rackind disbursed to the Borrower in two disbursements of £20,000 each on July 1, 2024 and August 5, 2024, respectively, and (ii) £160,000 upon the consummation of the IPO. For purposes of the Cash Method (as defined below) only, the Note bears interest on the principal amount outstanding thereunder at a rate of eight percent per annum, and the Note is due and payable in full upon the consummation of the initial business combination either, at the payment method election of the Borrower, (i) in cash in an amount equal to the sum of (A) the aggregate principal amount outstanding under the Note and (B) accrued interest, which amount shall not be greater than the sum of £200,000 and accrued interest (such payment method, the “Cash Method”), or (ii) in kind by transferring to Mr. Rackind or his designee 25% of the aggregate amount of membership interests of the Sponsor held directly or indirectly by the Borrower. In the event that we liquidate and dissolve without having consummated an initial business combination, the Borrower shall have no obligation to repay the principal amount outstanding under the Note or any accrued interest. The Note contains certain customary events of default and related remedies and acceleration provisions.
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The conflicts described above may not be resolved in our favor.
Accordingly, as a result of multiple business affiliations, our directors and officers have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Below is a table summarizing the entities to which our directors and officers and certain of our affiliates currently have fiduciary duties or contractual obligations that may present a conflict of interest:
|
Individual |
Entity |
Entity’s Business |
Affiliation |
|||
|
Robert Rackind |
— |
— |
— |
|||
|
Adam Gishen |
Complete Solaria, Inc. |
Solar technology, services and installation company |
Director |
|||
|
Min Lee |
BFY Capital |
Specialized financing company in natural products industry |
Managing Member |
|||
|
Pavilion Entertainment |
Television and film production and distribution company |
Investor and advisor |
||||
|
Nell Cady-Kruse |
Varagon Capital Corp. |
Business development company |
Director |
|||
|
No One Left Behind |
Charitable organization focusing on supporting former interpreters and U.S. government employees eligible for the Iraqi and Afghan Special Immigrant Visa |
Member of Senior Advisory Board |
||||
|
James Rallo |
— |
— |
— |
|||
|
Hella Alashkar |
1648 Capital |
Venture capital firm with consulting and advisory services |
Co-Founder |
We are not prohibited from pursuing an initial business combination with a company that is affiliated with either of Sponsor HoldCo, the Sponsor, our directors or officers, or non-managing Sponsor HoldCo investors, or making the acquisition through a joint venture or other form of shared ownership with either of Sponsor HoldCo, the Sponsor, our directors or officers, or non-managing Sponsor HoldCo investors; accordingly, such affiliated person(s) may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination as such affiliated person(s) would have interests different from the Public Shareholders and would likely not receive any financial benefit unless we consummated such business combination. In the event we seek to complete our initial business combination with such a company, we, or a committee of independent and disinterested directors, would obtain an opinion from an independent investment banking firm that is a member of FINRA or from a valuation or appraisal firm that such an initial business combination is fair to our shareholders from a financial point of view. Furthermore, in no event will Sponsor Holdco, the Sponsor or any of our directors or existing officers, or any of their respective affiliates, be paid by the company any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the completion of our initial business combination. In addition, pursuant to Nasdaq listing rules, our initial business combination must be approved by a majority of our independent directors.
In addition, Sponsor HoldCo, the Sponsor or any of their respective affiliates may make additional investments in the company in connection with the initial business combination, although Sponsor HoldCo, the Sponsor and their affiliates have no obligation or current intention to do so. If Sponsor HoldCo, the Sponsor or any of their respective affiliates elects to make additional investments, such proposed investments could influence Sponsor HoldCo and the Sponsor’s motivation to complete an initial business combination.
In the event that we submit our initial business combination to the Public Shareholders for a vote, the Sponsor, initial shareholders, directors and officers have agreed, pursuant to the terms of a letter agreement entered into with us, to vote any Founder Shares and Public Shares held by them in favor of our initial business combination. The non-managing Sponsor HoldCo investors are not required to (i) hold any units, FACT Class A Shares or public warrants they may purchase in the IPO or thereafter for any amount of time, (ii) vote any FACT Class A Shares they may own
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at the applicable time in favor of our initial business combination or (iii) refrain from exercising their right to redeem their Public Shares at the time of our initial business combination. The non-managing Sponsor HoldCo investors will have the same rights to the funds held in the Trust Account with respect to the FACT Class A Shares underlying the units they purchased in the IPO as the rights afforded to the other Public Shareholders.
Legal Proceedings
As of the date of this proxy statement/prospectus, to the knowledge of our management, there was no material litigation, arbitration or governmental proceeding pending against us or any members of our management team in their capacity as such, and we and the members of our management team have not been subject to any such proceeding.
Periodic Reporting and Audited Financial Statements
FACT has registered its securities under the Exchange Act and has reporting obligations, including the requirement to file annual and quarterly reports with the SEC. In accordance with the requirements of the Exchange Act, FACT’s annual reports contain consolidated financial statements audited and reported on by FACT’s independent registered public accounting firm.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF FACT
The following discussion and analysis should be read in conjunction with the financial statements and related notes included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this proxy statement/prospectus.
References herein to “we,” “us,” “FACT” or the “Company” refer to FACT II Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to FACT II Acquisition Parent LLC, and references to “Sponsor HoldCo” refer to FACT II Acquisition LLC.
Overview
We are a blank check company incorporated on June 19, 2024 as a Cayman Islands exempted company, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash derived from the proceeds of the IPO and the sale of the Private Placement Securities, FACT Ordinary Shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from June 19, 2024 (inception) through March 31, 2026 were organizational activities, those necessary to prepare for our IPO, described below, and, subsequent to the IPO, identifying a target company for our initial business combination and negotiating and attempting to complete the Business Combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. Subsequent to our IPO, we generate non-operating income in the form of interest income on cash held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2026, we had net income of $1,034,133, which consists of interest income on cash held in the Trust Account of $1,548,784 and interest earned on bank account of $2,965, offset by general and administrative expenses of $517,616.
For the three months ended March 31, 2025, we had net income of $1,447,897, which consists of interest income on cash held in the Trust Account of $1,785,684 and change on overallotment liability of $26,558, offset by operating costs of $364,345.
For the year ended December 31, 2025, we had net income of $5,017,538, which consists of interest income on cash held in the Trust Account of $7,188,186, change on overallotment liability of $26,558 and interest earned on bank account of $27,824, offset by general and administrative expenses of $2,225,030.
For the period from June 19, 2024 (inception) through December 31, 2024, we had net loss of $71,891, which consists of interest income on cash held in the Trust Account of $722,270 and change on overallotment liability of $285,738, offset by operating costs of $1,079,899.
Liquidity and Capital Resources
Our liquidity needs have been satisfied prior to the consummation of our IPO through receipt from the Sponsor of $25,000 for the sale of the Founder Shares. On November 25, 2024, the registration statement relating to our IPO was declared effective by the SEC. On November 27, 2024, we consummated our IPO of 17,500,000 FACT Units at $10.00 per unit, generating gross proceeds of $175,000,000. CCM and Seaport acted as underwriters of the IPO, which has now terminated.
Simultaneously with the closing of our IPO, we consummated the sale of 663,125 Private Placement Units at a price of $10.00 per Private Placement Unit, generating gross proceeds of $6,631,250, as follows: (i) 17,500 Private Placement Units ($175,000 in the aggregate) with the Sponsor; (ii) (A) 260,000 Private Placement Units and
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(B) 162,500 Private Placement Units and 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) ($4,225,000 in the aggregate) with Sponsor HoldCo; (iii) 178,500 Private Placement Units ($1,785,000 in the aggregate) with CCM; and (iv) 44,625 Private Placement Units with Seaport ($446,250 in the aggregate).
Following the closing of our IPO and the concurrent Private Placement, a total of $175,875,000 was placed in the Trust Account. We incurred $11,028,226 of transaction costs, consisting of $3,500,000 of cash underwriting fee, $7,000,000 of deferred underwriting fee, and $528,226 of other offering costs. No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities, or to any of our affiliates.
For the three months ended March 31, 2026, cash used in operating activities was $131,882. Net income of $1,034,133 was affected by interest earned on cash held in the Trust Account of $1,548,784 and net change in operating assets and liabilities of $382,769.
For the three months ended March 31, 2025, cash used in operating activities was $225,895. Net income of $1,447,897 was affected by interest earned on cash held in the Trust Account of $1,785,684, change in fair value of overallotment liability of $26,558, and net change in operating assets and liabilities of $138,450.
For the year ended December 31, 2025, cash used in operating activities was $903,130. Net income of $5,017,538 was affected by interest earned on cash held in the Trust Account of $7,188,186, change in fair value of overallotment liability of $26,558, and net change in operating assets and liabilities of $1,294,077.
For the period from June 19, 2024 (inception) through December 31, 2024, cash used in operating activities was $305,103. Net loss of $71,891 was affected by interest earned cash held in the Trust Account of $722,270, change in fair value of overallotment liability of $285,738, and net change in operating assets and liabilities of $774,796.
As of March 31, 2026, we had cash held in the Trust Account of $185,334,240. As of December 31, 2025, we had cash held in the Trust Account of $183,785,456. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of any franchise and income taxes payable and excluding deferred underwriting commissions), to complete our initial business combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2026, we had cash and cash equivalents of $412,909 in our operating bank account. As of December 31, 2025, we had cash of $544,791 in our operating bank account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, either of Sponsor HoldCo, the Sponsor, any of their respective affiliates or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that an initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment. Up to $2,000,000 of any such working capital loans for each such person may be convertible into a price of $10.00 per FACT Class A Share or FACT Unit, as applicable, at the option of such lender. Such FACT Class A Shares would be identical to the Private Placement Shares, and such units would be identical to the Private Placement Units.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need
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to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
Nonetheless, the mandatory liquidation date, should a Business Combination not occur by May 27, 2026, and the potential subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2026 and December 31, 2025. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters had a 45-day option from the date of our IPO to purchase up to an additional 2,625,000 FACT Units to cover over-allotments, if any. The over-allotment option expired unexercised on January 10, 2025 and Sponsor HoldCo forfeited 875,000 Founder Shares upon expiration of the over-allotment option on January 10, 2025.
The underwriters were entitled to a cash underwriting discount of $0.20 per Unit, or $3,500,000 in the aggregate, which was paid upon the closing of the IPO. In addition, the underwriters were entitled to a deferred fee of (i) $0.40 per Unit sold in the offering of the IPO, or $7,000,000 in the aggregate, payable based on the percentage of funds remaining in the Trust Account after redemptions of public shares, solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.
Critical Accounting Estimates
The preparation of unaudited condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and income and expenses during the periods reported. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could materially differ from those estimates. As of March 31, 2026, we did not have any critical accounting estimates to be disclosed.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
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INFORMATION ABOUT PAD
Unless otherwise indicated by the context, references to “PAD” refer to Precision Aerospace & Defense Group, Inc. solely, and references to the “Company,” “our,” “we,” “us” and similar terms refer to Precision Aerospace & Defense Group, Inc., together with its direct and indirect subsidiaries.
Overview
PAD implements a strategic acquisition and integration model focused on established businesses within the aerospace and defense industry. Serving as a central coordinating entity, PAD fosters a cohesive family of synergistic subsidiaries, enhancing value through the integration of complementary Tier 1, 2 and 3 suppliers. PAD operates through three principal subsidiaries, each of which functions as a separate division of the Company and is the holding company for the applicable operating subsidiaries in its division: PADG Engineering and Sustainment Group, LLC; PADG Precision Manufacturing Group, LLC; and PADG Non-Destructive Testing Group, LLC. These divisions encompass subsidiary operations with histories dating back to 1945.
PAD’s mission is to strategically target, unite and build multidisciplinary businesses that provide solutions that address a specific problem or issue directly to defense organizations, major OEMs, and Tier 1 suppliers. Through accretive acquisitions, organic growth and operating synergies, we seek to create a premier components manufacturer and services provider, delivering mission critical products and solutions with unsurpassed quality, customer service and lead times.
The Company is engaged in contract production of aircraft parts, equipment and sub-assemblies (a series of parts fitted together to form a complex structure), engineering (design, development, and maintenance of aircraft, and other related systems), specialized machining and manufacturing, and non-destructive testing (a set of testing and analysis processes that evaluate the quality and structural integrity of a manufactured product) primarily across the aerospace and defense industry but also in the space, power generation, automotive, and industrial sectors. Our customers include aerospace OEMs, federal defense contractors, major airlines, space pioneers and well-established commercial suppliers.
PAD seeks to continuously capitalize on opportunities to build out these current business segments through the pursuit of additional strategic acquisitions to expand our capabilities, expedite supply chains/lead times, diversify our customer base and expand into new markets.
On December 23, 2024, PAD acquired Aerodyn Engineering LLC (“Aerodyn”). In addition, we have entered into agreements to acquire the following companies:
• Western Professional, Inc. (“WestPro”), a non-destructive testing (“NDT”) lab specializing in aerospace suppliers, prime contractors, and strategic industries located in Salem, Oregon; and
• Southern Precision Machining LLC (“SPM”), an ISO 9001:2015 and AS 9100D certified machining services business for the aerospace and defense industry, offering complete engineering, machining and assembly services, located in Shelbyville, Tennessee.
Corporate History
PAD was originally organized on July 8, 2016 as a limited liability company in the State of Florida as Precision Aerospace Group, LLC. On November 6, 2023, PAD was converted to a Florida corporation and on April 16, 2025, PAD changed its name to Precision Aerospace & Defense Group, Inc. pursuant to Articles of Conversion filed with the Florida Secretary of State.
PAD has the following direct and indirect wholly-owned operating subsidiaries:
• PADG Engineering and Sustainment Group, LLC, a Florida limited liability company, and its wholly-owned subsidiaries Maney Aircraft, Inc. a California corporation and Aerodyn, a Delaware limited liability company;
• PADG Precision Manufacturing Group, LLC, a Florida limited liability company, and its wholly-owned subsidiary AOP Precision Products, LLC, doing business as V&M Precision Machining and Grinding, a Florida limited liability company; and
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• PADG Non-Destructive Testing Group, LLC, a Florida limited liability company, and its subsidiary Aerofab, a Washington limited liability company.
Effective January 1, 2026, PAD effected a 12.945% reverse stock split of the issued and outstanding PAD Shares (the “Reverse Split”) pursuant to a November 11, 2025, resolution of the PAD Board and subsequent approval by the PAD Stockholders as of January 6, 2026. The Reverse Split had no impact on the par value of the PAD Shares or the authorized number of PAD Shares. This proxy statement/prospectus gives effect to the Reverse Split. Except where otherwise indicated, all share and per share data in this proxy statement/prospectus have been retroactively restated to reflect the Reverse Split.
The Reverse Split was structured as an effective 12.945% reduction in shares outstanding. There were 14,230,945 PAD Shares outstanding prior to the Reverse Split and 12,388,291 PAD Shares outstanding after the Reverse Split. Pursuant to the PAD Board and PAD Stockholder resolutions, 26 PAD Stockholders were issued an aggregate of 2,427,299 PAD Shares to prevent the Reverse Split from affecting the number of PAD Shares that they owned. By way of example only, if one of these 26 PAD Stockholders held 1,000 PAD Shares prior to the Reverse Split, instead of owning 871 PAD Shares after the Reverse Split was effected (a reduction of approximately 12.945% with a fractional share being rounded up), PAD would issue this PAD Stockholder 129 PAD Shares so that they would hold the same amount of PAD Shares before and after the Reverse Split’s effectiveness. Essentially, this diluted all of the PAD Stockholders by 12.945%, except for those 26 PAD Stockholders who received the additional PAD Shares after the Reverse Split was effected.
PAD’s principal executive office is located at, and our mailing address is, 7500 College Blvd, 5th Floor, Overland Park, KS 66210, and our phone number is (305) 646-9600. Our website address is https://padgrp.com. The information contained in, or accessible through, our website does not constitute a part of this proxy statement/prospectus. We have included our website address in this proxy statement/prospectus solely as an inactive textual reference.
Below is the organizational chart depicting the structure of the Company.
Our Strategy
Our principal objective is to continue to increase our revenues and cash flows by building out our three divisions to further differentiate ourselves as a leading provider of aftermarket manufacturing, engineering and value-added services. In pursuing this objective, we intend to pursue the following strategies:
• Pursue operational excellence: We intend to bring a renewed focus on our operations from the ground up, focused on the successful adoption of new technologies, systems and processes in each of our facilities. Furthermore, our management team will continuously evaluate initiatives to increase operating efficiencies to optimize our capacity and workforce.
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• Pursue strategic acquisition opportunities: We intend to continuously evaluate and pursue acquisition opportunities of Tier 1, 2 and 3 business across the aerospace and defense industry. Our objective is to identify businesses with niche technologies that are compatible but do not compete with our current capabilities, bringing new customers, services, and product lines. Furthermore, we intend to pursue strategic acquisitions to vertically integrate our supply chain to minimize turnaround times and increase reliability and overall customer satisfaction.
• Pursue new business: We intend to build market share in our existing business segments and continuously explore and pursue additional revenue generating opportunities. We are seeking to pursue new business with OEMs by bidding on new contracts and leveraging relationships with OEMs and the DoW. In addition, we continue to explore opportunities in new sectors (for example, space and unmanned systems) to further diversify our customer base and position ourselves to capitalize on the future growth in these emerging markets.
Our Products and Services
Our principal operating subsidiaries and the products and services we offer through them are as follows:
Maney Aircraft, Inc.
Maney Aircraft, Inc. (“Maney”), part of PAD’s Engineering and Sustainment Group and based in Ontario, California, has been in continual operation since 1945. Maney specializes in supporting out-of-production aircraft and government contracts under license agreements with OEMs. Under such license agreements, Maney is authorized to use The Boeing Company (“Boeing”) proprietary data to manufacture and source parts in support of select aircraft models for the U.S. Government. Maney holds three confidential licensing agreements with Boeing that enable it to sell OEM equipment directly to the government. Under these agreements, Maney is required to provide to Boeing financial reports, proof of insurance, and performance reports on a quarterly basis and obtain audits of its annual financial statements. Additionally, Maney also specializes in the design, manufacturing and testing of ground support equipment, which is used to service aircraft between flights. Maney is licensed to provide all parts and support, including modifications, avionics upgrades, electrical wiring replacement, component overhaul, training, and technical assistance for various aircraft. Maney holds both ISO 9001 and AS 9100 certifications and sells direct to the United States Air Force and other agencies of the DoW.
Maney’s services include:
1. Service Life Extension Programs: Maney provides comprehensive service life extension programs aimed at prolonging the operational life of critical aircraft. These programs involve structural upgrades, component replacements, and system enhancements tailored to meet evolving mission requirements and safety standards. Maney’s service life extension program initiatives include, for example, structural reinforcements and avionics updates to extend operational service beyond original design expectations.
2. Specialized Maintenance, NDT, Fuel System Cleaning: Maney offers a wide range of specialized maintenance services to ensure the sustained health and performance of aircraft systems. This includes NDT to detect potential defects without damaging the aircraft structure and thorough fuel system cleaning to optimize fuel efficiency and reliability. These maintenance activities are conducted regularly as part of scheduled inspections and as needed during component overhaul processes.
3. Avionics and Engine Upgrades: Maney conducts avionics and engine upgrades under contract with U.S. military branches. Avionics upgrades involve integrating advanced navigation, communication, and mission systems to enhance situational awareness and operational effectiveness. Engine upgrades focus on improving performance metrics such as thrust, fuel efficiency, and reliability, ensuring aircraft readiness for current and future operational demands.
4. Ground Support Equipment: Maney is engaged in the design and manufacture of portable and stationary test equipment for servicing and testing fluid power systems and components. Its proprietary line includes hydraulic, pneumatic, and hydrostatic support equipment that can be customized to meet the customers’ requirements. With a mix of domestic and international customers, our standard and custom equipment can be found in most existing military and commercial hangars, food processing plants, and test labs.
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Most contracts that Maney bids on require specialized tooling, machines, training, and approval of a prototype, the delays and costs of which must be included in initial bids. These extra initial, or “First Article,” costs often add significant costs to any first-time bid in the aerospace industry, giving the existing contractor a substantial cost advantage that in many cases can be cost-prohibitive for competitors. First Article costs spread over small batches can also substantially impair, if not preclude, a competitor’s ability to match a bid. Most of Maney’s B-1B parts fall into this category, as Maney incurred the related First Article expenses long ago.
The bulk of recent purchase orders and contract awards that Maney has won have been for B-1B Lancer bomber components for the U.S. Air Force under license from Boeing’s military division. Maney produces OEM replacement and spare parts for out-of-production, long lead time, small batch, and difficult-to-source parts. Purchase orders are typically booked a year in advance for delivery the following year, with some contracts extending over three to five years or longer. The B-1B currently carries the largest inventory of both guided and unguided weapons in the U.S. Air Force fleet. Maney also provides the same services to a number of additional airframes, that is, the main structural components of aircraft, including the fuselage (body), wings, tail, and landing gear, but not the engines or instruments, for commercial and military use.
V&M Precision Machining and Grinding
AOP Precision Products, LLC doing business as V&M Precision Machining and Grinding (“V&M”), of PAD’s Precision Manufacturing Group, founded in 2016, operates under AS9100 and AS9110 certifications and ITAR registration in a facility located in Brea, California. The 30,000 square foot facility houses computer numerical control (“CNC”), that is, automated control of machine tools by a computer, turning and milling centers, comprehensive grinding, honing, and threading operations, and diverse machining capabilities that can service the aerospace, defense, and nuclear industries. V&M has active contracts and open orders on backlog with customers in the commercial and defense sectors.
V&M manufactures large landing gear and associated parts that are made of titanium and 300M, which are flexible and especially hard metals, respectively. Special tools, techniques, and training must be employed to cut and shape these materials. This enables V&M to submit competitive bids, as V&M has already incurred the First Article costs and need not incur them for re-orders. Operators of aircraft that are still in use but out of production are reliant on “after-market” manufacturers such as V&M to keep their aircraft operational. Currently, V&M is producing these parts for government and commercial aircraft.
Aerofab NDT, LLC
Aerofab NDT, LLC (“Aerofab”), of PAD’s Non-Destructive Testing Group, operates from a facility in Kent, Washington. Established in 2013, Aerofab specializes in made-to-order parts manufacturing, sourcing alternative solutions for obsolete NDT ultrasonic transducers and eddy current probes, and providing electrical discharge machining (“EDM”) services for developing NDT standards tailored to customer aircraft. EDM is a non-conventional machining technique based on the use of electrical discharges to shape metal parts. In the aerospace sector, EDM is used to manufacture a wide range of critical components due to its ability to handle hard metals, produce complex shapes and achieve extremely tight tolerances (tight tolerances refer to the extremely precise measurements and specifications that parts or components must meet during manufacturing or inspection).
Aerofab’s capabilities include:
• Reference standards;
• Eddy current probes;
• Ultrasonic transducers;
• Custom kit boxes; and
• Precision machining and tooling.
Aerofab’s core business is in commercial aerospace, which includes various aircraft models manufactured by Boeing, SpaceX, Blue Origin, Airbus, and United Airlines. In addition, Aerofab provides products and services in connection with an extensive range of aircraft models.
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We believe that Aerofab’s business has several competitive advantages as a result of its focus on specialized NDT and reference products. Aerofab’s tooling is integrated into the official NDT procedures of leading aircraft manufacturers, including Boeing, which drives consistent demand for Aerofab’s products and services as airlines and aircraft maintenance, repair, and overhaul services facilities, which perform required maintenance and inspection services for aircraft, rely on these procedures, which ensures that Aerofab’s products are routinely specified for standard maintenance processes. Aerofab maintains a broad and expanding catalog encompassing both OEM-standard and custom-designed parts that, coupled with its OEM procedure integration, fosters organic sales growth. Additionally, Aerofab’s skilled team is capable of delivering customized machining solutions, particularly for projects involving hard-to-find or obsolete parts, such as discontinued parts, specialized/custom parts, legacy system components, or components with extended delivery times.
Aerodyn Engineering LLC
Established in 2002, Aerodyn provides highly technical and specialized services to turbine OEMs for use in the development stage of a turbine’s lifecycle. These services include test instrument design and development, instrumentation fabrication, and testing services. Aerodyn serves OEMs and other companies involved in various aspects of turbine system development across multiple industries, including aerospace, power generation, automotive, marine, and industrial sectors. Aerodyn also offers catalog products that manufacturers use in the development stage of turbine production.
Aerodyn focuses particularly on serving OEMs of gas turbines, which are used in locomotives, jet engines, and power plants. We believe that Aerodyn is at the forefront of turbine technology, supported by a team of highly trained professionals, sophisticated equipment and facilities, and precise testing processes, and that this has enabled Aerodyn to gain a reputation for responsiveness, quality, and expertise. We believe that the continuous evolution and technological advancements in the turbine industry drive significant demand for Aerodyn’s services and products that are essential to the successful operations, safety, and functionality of aircraft, spacecraft, and defense systems.
Aerodyn’s customers include leading turbine OEMs. Unlike many competitors that focus solely on providing certain engineering or manufacturing services, Aerodyn offers a comprehensive “one-stop shop” for customers during the product development stage, providing mechanical design services and prototype and test component manufacturing, as well as instrumentation and testing services.
Aerodyn operates out of two locations: (i) its headquarters in Indianapolis, Indiana, serving as the hub for high precision manufacturing, development, production, instrumentation, design, application, data acquisition, flight and field test support, global support, engineering, design, analysis, and project management; and (ii) a testing facility in Whitestown, Indiana, focusing on gas stand testing, turbocharger performance, burst/containment, durability, vibration testing, multi-axis shaker, high-frequency testing, slip ring/telemetry/traverse, design, manufacturing, data system build and acquisition, and flow calibration.
Expected Impact of Pending Acquisitions on our Operations
As noted above, we have entered into agreements to acquire WestPro and SPM, which acquisitions will bolster the capabilities and capacity of our Non-Destructive Testing Group and our Precision Manufacturing Group, respectively.
With the anticipated addition of WestPro to our Non-Destructive Testing Group, we will expand into ultrasonic testing servicing capabilities. These services include phased array inspection, conventional ultrasonic inspections, and ultrasonic thickness testing, which uses state of the art equipment and sophisticated analysis software, enabling precise examinations of complex geometries. WestPro’s advanced ultrasonic testing equipment and experienced technicians provide accurate and reliable measurements that meet industry standards and customer specifications to ensure integrity of aerospace components. These capabilities have been instrumental in major aerospace and space programs, including collaborations with industry leading OEMs.
Complimentary to Aerofab, WestPro operates a specialized EDM department. This facility manufactures meticulous calibration standards, featuring microscopic notches and holes in various materials and configurations. We believe that this offers a rare opportunity for our group to expand capacity to meet the demand of our current EDM clients.
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With the anticipated addition of SPM to our Precision Manufacturing Group, we will acquire an ISO 9001:2015 and AS 9100D certified business with complex, tight tolerance, machining capabilities that include profiling, pocketing, drilling, boring, turning, and threading, coupled with large component assembly and reverse-engineering services. SPM’s competitive advantage comes from their wide-ranging machining and assembly capabilities at scale, from small to large part (up to 170 inches), enabling them to deepen relationships with OEM customers.
SPM will add to our current offerings certain technical capabilities including 3D modeling, digitizing, CNC programming, and reverse engineering. Further, SPM’s customer base includes many of the world’s largest aerospace OEMs, spanning both the defense and commercial sectors of the A&D industry, which will expand our potential customer base for our current products and services.
Raw Material Procurement and Supply Chain Management
PAD’s operating companies have varying degrees of exposure to raw material supply chain fluctuations. Maney and V&M, with their focus on legacy aircraft components, may be more susceptible to disruptions in specific materials such as titanium and brass. Aerodyn, while utilizing aerospace alloys as primary materials, benefits from a more diversified supplier base and the potential to pass along material cost increases to customers through contract terms.
In contrast, Aerofab, with its emphasis on services such as NDT, repair, and overhaul, has limited direct exposure to raw material price volatility due to a higher reliance on customer-supplied components.
Overall, we are mindful of the potential impact of raw material supply chain disruptions on our operations and financial performance. We continually monitor market conditions, maintain relationships with key suppliers, and implement strategies to mitigate risks associated with material availability and pricing. PAD will also seek opportunities to leverage economies of scale through organic growth and acquisitions to reduce raw material costs across its operating subsidiaries.
Effect of Existing or Probable Governmental Regulations on the Business and Need for Government Approval
The A&D industry is heavily influenced by government regulations, funding decisions, and evolving legislation, particularly by the DoW, the budget of which reached $870 billion in the fiscal year ended September 30, 2025. The national defense budget request for the year ended September 30, 2026 totaled $962 billion. With global defense spending projected to rise to $2.7 trillion by 2027, legislative measures like the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act are reshaping the A&D industry, driving modernization, manufacturing, and sustainable practices. Provisions in the fiscal year 2026 National Defense Authorization Act are ongoing, continuing to increase small business participation, strengthen subcontracting goals, and enforce domestic content requirements for defense acquisitions. For example, for the government’s fiscal year ending September 30, 2025, the DoW, in accordance with U.S. Small Business Administration guidelines, established a goal of having 23% of its prime contracts allocated to small businesses.
Despite this significant government influence, federal budget fluctuations have limited direct impacts on PAD and its subsidiaries due to their diversified customer base and revenue streams. In defense and space, government contracts often involve long-term, stable funding for critical programs insulated from short-term budget cuts. Commercial aerospace provides a counterbalance, driven by market demand for air travel and cargo, which is less tied to government budgets. The tiered customer structure (Tier 1, Tier 2, Tier 3) spreads risk across multiple layers of the supply chain, ensuring steady demand. Additionally, the Company’s involvement in high-priority sectors like defense and space, which are strategic for national security and exploration, typically receive consistent funding, mitigating the impact of budget volatility. For example, PAD’s subsidiaries provide support for legacy airframes that are contracted to remain in service for the foreseeable future. Purchase orders that PAD’s subsidiaries receive under existing contractual obligations in support of legacy airframes are service-driven needs, which are less contingent on the development and manufacturing of new aircraft.
For example, Maney specializes in supporting legacy aircraft that have been out of production for years but remain essential to U.S. military operations. As Maney’s services are focused on prolonging the life of existing airframes, its business is less susceptible to shifts in new government defense initiatives as such existing airframes are part of ongoing military operations and their maintenance is critical, ensuring steady demand alongside new, long term aircraft program development and procurement cycles.
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V&M similarly benefits from its specialized role in providing parts for aircraft landing gear made of titanium and other hard metals, an area governed by specific defense manufacturing standards. As a supplier to both government and commercial sectors, V&M’s focus on long-term contracts for existing platforms aligns with regulatory frameworks but also shields the business from sudden changes in government budgets aimed at new projects.
Aerofab’s position as a specialized NDT and reference product provider effectively shields it from the direct impact of government budget fluctuations. Unlike manufacturers reliant on government contracts for new aircraft programs, Aerofab’s service-based model is driven by the ongoing demand for aircraft maintenance and compliance with established regulatory standards. This alignment with regulatory requirements has historically insulated Aerofab from the volatility associated with shifts in government defense priorities and spending.
Finally, Aerodyn, though a first-tier supplier, manages the risks associated with government contracts by maintaining a diverse customer base, reducing its reliance on any single program. While changes in government budgets may lead to program adjustments, Aerodyn’s varied clientele and strict regulatory compliance has historically ensured its continued operation.
Recent and Pending Acquisitions
Aerodyn Transaction
On December 23, 2024, PAD acquired Aerodyn pursuant to the merger agreement, dated September 30, 2024, by and among PAD, Aerodyn Engineering Holdings, Inc., the holder of 100% of Aerodyn’s issued and outstanding limited liability company membership interests (“Aerodyn Holdings”), Precision Aerospace Merger Sub Inc., a wholly-owned subsidiary of PAD, and David Lawrence, the sole stockholder of Aerodyn Holdings, as subsequently amended and restated on December 23, 2024 and amended on March 27, 2025, July 31, 2025 and September 11, 2025 (as amended, the “Aerodyn Agreement”), with Aerodyn becoming an indirect, wholly-owned subsidiary of PAD.
Mr. Lawrence continues to be responsible for operating Aerodyn’s business, subject to PAD’s ultimate oversight and authority.
Pursuant to the Aerodyn Agreement and a letter agreement dated December 18, 2025, between PAD and Mr. Lawrence (the “December Aerodyn Letter”), PAD will pay the following consideration to Mr. Lawrence: on the Closing Date, PAD will (i) issue approximately 1,125,000 shares of New PAD Common Stock and (ii) pay $34,515,000 in cash (with such cash amount consisting of $33,750,000 owed pursuant to the Aerodyn Agreement, as amended, and $765,000 in interest owed pursuant to a previously issued promissory note amended as of December 2025), pursuant to a promissory note issued by PAD in favor or Mr. Lawrence upon the closing of the Aerodyn acquisition (the “Closing Note”). In addition, Mr. Lawrence will receive $3.0 million in four payments of $750,000 on the first, third, fourth, and fifth anniversaries of the Closing Date. Pursuant to the provisions of the December Aerodyn Letter, on December 29, 2025 and January 9, 2026, PAD paid Mr. Lawrence $50,000 and $100,000, respectively, of interest towards the total $915,000 owed to Aerodyn as of December 18, 2025.
Pursuant to the December Aerodyn Letter, the parties agreed that the event of default date referenced in the Closing Note of November 30, 2025 was replaced with a new event of default date of May 31, 2026.
The Closing Note provides that a failure to pay the obligations of the Closing Note in full by a certain date (formerly November 30, 2025 and now May 31, 2026), triggers an event of default. Upon an event of default, Mr. Lawrence, the former sole stockholder of Aerodyn and holder of the Closing Note, is entitled to receive a transfer of 100% of the outstanding equity of Aerodyn, together with all accrued and unpaid interest, resulting in the effective unwinding of the closed Aerodyn acquisition (the “Aerodyn Closing Note Remedy”). Upon such transfer, PAD’s obligations under the Closing Note are deemed satisfied in full.
The December Aerodyn Letter further provides that:
1. At the time the December Aerodyn Letter was entered into, Aerodyn was negotiating a government loan for the planned expansion of its business. As of May 18, 2026, Aerodyn has confirmed that it is qualified to apply for such government loan, and funding thereunder would be available upon approval of an application for such government loan at Aerodyn’s discretion; as Aerodyn has not determined to borrow any such funds to date, however, loan transaction documents have not been entered into and Aerodyn has not yet borrowed any money thereunder. Any proceeds of the government loan to improve, expand or construct buildings or facilities owned by Mr. Lawrence personally is not an obligation of PAD. Any other proceeds of such government loan will be an obligation of PAD. The loan is not expected to be entered into prior to the Closing.
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Aerodyn’s entrance into a government loan transaction is not a requirement of the December Aerodyn Letter. Rather, the December Aerodyn Letter imposes allocation conditions if the government loan transaction is entered into.
2. PAD and Aerodyn agreed that following the closing of the Merger, PAD will not have sole control of Aerodyn’s bank account. Rather, PAD, as the parent company, will have financial oversight and shared signature authority with regard to the bank account and PAD and Aerodyn shall jointly prepare a Aerodyn budget, including but not limited to the use of funds.
3. PAD and Aerodyn agreed that FACT is required to deliver upon consummation of the Business Combination $75.0 million of equity capital as a condition to Closing. Pursuant to the Business Combination Agreement, this dollar figure is equal to the Minimum FACT Cash Amount, which PAD expects will only be satisfied through a combination of (i) amounts released to us from the Trust Account and (b) the Financings (although no such financing has been obtained as of May 18, 2026).
4. PAD and Aerodyn agreed that if the loan transaction is entered into with BC Partners (“BCP”):
a. a maximum of $25 million will be drawn at the Closing and a further $50 million would not be borrowed by PAD without the express consent of Aerodyn Engineering Holdings, Inc.
b. BCP would purchase $5 million of New PAD Common Stock at a price of $10 per share.
For the avoidance of doubt, PAD’s entrance into a loan transaction is not a requirement of the December Aerodyn Letter. Rather, the December Aerodyn Letter imposes allocation conditions if the loan transaction is entered into.
5. PAD and SPM were to enter into a definitive purchase agreement by January 30, 2026. PAD has already complied with this provision.
If item (3) above has not taken place at or before the Closing, then Mr. Lawrence has the right to claim a default under the Closing Note and implement the Aerodyn Closing Note Remedy. We do not expect to complete the Business Combination if item (3) listed above is not completed at or before the Closing.
Following the repayment of the Closing Note on the Closing Date, the Aerodyn Closing Note Remedy will no longer be available to Mr. Lawrence and the unwinding of the transaction will no longer be possible.
Western Professional Transaction
Description of Transaction
Pursuant to a Stock Purchase Agreement, dated as of September 30, 2024, by and among PAD, WestPro and Bradley R. Bowder, the sole stockholder of WestPro, as amended pursuant to letter agreements among PAD, WestPro and Mr. Bowder dated April 28, 2025, August 28, 2025, December 24, 2025, and March 26, 2026 (the “WestPro Agreement”), PAD has agreed to purchase all of the issued and outstanding shares of common stock of WestPro, as a result of which WestPro will become a wholly-owned subsidiary of PAD, for aggregate consideration of $8,244,687 (representing five times its adjusted EBITDA for the year ended December 31, 2024), half of which will be paid in cash (decreased by the aggregate amount of WestPro’s accrued and unpaid payroll expense as of immediately prior to the closing and increased by $1,600,000) and half of which will be paid in shares of New PAD Common Stock at a price equal to $10.00 per share, subject to an adjustment based on WestPro’s working capital at closing. If WestPro’s working capital at closing exceeds $1,239,478, PAD will pay Mr. Bower cash in an amount equal to such excess amount. If its working capital at closing is below $1,239,478, the amount of such shortfall will be paid to PAD from an escrow account into which Mr. Bower will deposit $100,000 at closing to satisfy any working capital adjustments or indemnification claims by PAD.
Mr. Bowder is also entitled to additional performance-based payments, based on WestPro’s future EBITDA performance, as follows:
• If WestPro’s adjusted EBITDA exceeds $1,648,937 for the calendar year ending December 31, 2025, Mr. Bowder will receive a cash payment equal to 50% of the amount over such EBITDA threshold multiplied by 5.00, plus an equivalent amount in shares of New PAD Common Stock.
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• Mr. Bowder is entitled to receive similar performance-based payments for each of calendar year 2026, 2027 and 2028, in an amount equal to the increase in adjusted EBITDA compared to the prior year’s adjusted EBITDA (subject to the same 5.00 multiplier), with payments made 50% in cash and 50% in shares of New PAD Common Stock.
Each year’s adjusted EBITDA must exceed the highest adjusted EBITDA achieved in any previous year for Mr. Bowder to receive these additional payments. Further, if Mr. Bowder is terminated for cause, as defined in his employment agreement, he will not be eligible to receive any such performance-based payments for any period following the date of his termination.
Consummation of the WestPro acquisition is subject to the consummation of the Business Combination as well as customary closing conditions, including receipt of all necessary board, stockholder, and governmental approvals, the accuracy of each party’s representations and warranties, the performance of each party’s material obligations under the WestPro Agreement, absence of a Material Adverse Effect (as defined in the WestPro Agreement) with respect to the parties, delivery of closing certificates and other deliverables as set forth in the WestPro Agreement, and the absence of any law or order that would prohibit or otherwise make consummation of the WestPro acquisition illegal. In addition, PAD and Mr. Bowder may terminate the WestPro Agreement by mutual consent at any time, and either may terminate the agreement, and abandon the acquisition of WestPro by PAD, if there is a material breach thereof by the other or if the transaction has not closed by May 31, 2026.
We intend to close the WestPro acquisition immediately following the Effective Time.
Business and Post-Closing Operations
WestPro is an established independent NDT lab specializing in serving aerospace suppliers, prime contractors, and strategic industries. WestPro has decades of experience providing conventional ultrasonic inspections using computerized motion control systems tailored to meet diverse customer requirements. Its ultrasonic inspection services include immersion (submerging a component or material in liquid in order to detect internal flaws, ensure material quality, and prevent failures), contact (placing an ultrasonic transducer directly on the surface of a material, using a couplant (e.g. gel or oil) to ensure sound wave transmission), C-scan (which produces a two-dimensional, planar view (map) of a component by collecting and displaying data from ultrasonic scans), ultrasonic thickness testing (measures the thickness of a material by sending ultrasonic waves through it and calculating the time it takes for the waves to reflect back from the opposite surface), and contour-following inspections of tubing, plate, and billet products (contour-following technique is used to follow the surface contour of components to track the surface geometry of complex-shaped components). WestPro also provides calibration services and verification services to ensure that precisely calibrated materials, components, or artifacts with known properties used as benchmarks in NDT and other quality assurance processes meet applicable standards through its EDM department. Such calibration standards and reference standards, which are traceable to national measurement standards, incorporate precisely engineered artificial discontinuities, such as notches, holes, flat-bottom holes, or cracks, to ensure that the tools, sensors, and systems that WestPro’s customers or their service providers use produce reliable and repeatable results. Unlike real defects, these artificial ones are consistent, measurable, and reproducible, allowing for reliable testing without relying on unpredictable natural flaws. WestPro’s calibration services are all certified to National Institute of Standards and Technology traceable standards.
WestPro’s services include:
• Phased array ultrasonics, which is an advanced ultrasonic testing technique that uses multiple ultrasonic transducers (an array) to emit and receive sound waves at controlled angles and timings. This is used detect defects on parts with complex geometries due to the enhanced precision and accuracy resulting from the use of multiple ultrasonic transducers.
• Conventional ultrasonics, which uses a single ultrasonic transducer to send high-frequency sound waves into a material and measure the reflected signals to detect internal defects or measure thickness.
• Custom inspection systems, that is, specialized, often automated setups designed to meet individualized inspection requirements for specific components, materials, or industries.
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• EDM/dimensioning, which is a manufacturing process that uses electrical sparks to erode material from a workpiece, creating precise shapes or features, often used for producing complex aerospace components. In the context of dimensioning, EDM can create highly accurate reference features or notches in test samples to simulate defects for calibration or validation of inspection systems.
• Calibration standards, which consist of physical test pieces or instruments with precisely known properties (such as dimensions, electrical characteristics, or material properties) that are used by Tier 1, Tier 2 and Tier 3 suppliers to verify and adjust the accuracy of measurement or inspection equipment.
• Reference standards, which are test pieces and measurement protocols with known characteristics used to ensure that inspections and measurements are accurate. They help ensure that parts manufactured for OEMs or Tier 1, Tier 2, and Tier 3 suppliers in the commercial, defense, or space sectors meet strict quality and safety requirements.
Following our acquisition, WestPro will operate as a subsidiary of PAD. Mr. Bowder will be responsible for running WestPro’s business in accordance with his employment agreement with WestPro to be effective as of the closing date of the WestPro acquisition, subject to the ultimate oversight and authority of PAD.
Southern Precision Machining Transaction
Description of Transaction
On January 27, 2026, PAD entered into a membership interest purchase agreement, as amended and restated as of April 13, 2026 (the “SPM Agreement”) with Southern Precision Machining, LLC and Baljinder Sange Judge and Tejinder Singh Judge (“TJ Judge” and, together with Baljinder Singh Judge, the “SPM Sellers”). Pursuant to the SPM Agreement, PAD will purchase from the SPM Sellers all of the issued and outstanding limited liability company membership interests of SPM for $18,000,000 (the “SPM Purchase Price”).
Consideration
Pursuant to the SPM Agreement, at the closing of the SPM acquisition we will (i) pay the SPM Sellers $17,000,000 in cash and (ii) deposit $1,000,000 into an escrow account as security for certain working capital adjustments, as described below. The SPM Purchase Price is subject to an adjustment based on SPM’s working capital at closing, as determined thereafter in accordance with the procedures set forth in the SPM Agreement. If SPM’s working capital at closing is equal to or exceeds $6,818,222, PAD will pay the SPM Sellers cash in the amount of such excess (if any) and the entire $1,000,000 portion of the SPM Purchase Price held in escrow will be released to the SPM Sellers. If SPM’s working capital at closing is below $6,818,222, then PAD is entitled to cash from the escrowed amount of the SPM Purchase Price in an amount equal to such shortfall (up to the $1,000,000 escrowed amount), with the balance of the escrowed amount, if any, being released to the SPM Sellers.
In addition, TJ Judge is entitled to additional performance-based payments of $1,000,000 for each of the fiscal years ending December 31, 2027, 2028, and 2029, for an aggregate of up to $3,000,000, if SPM’s EBITDA equals or exceeds target amounts set forth in the SPM Agreement. The target EBITDA amounts are $3,745,000 for 2027, $4,007,150 for 2028, and $4,287,650 for 2029. If TJ Judge’s employment with SPM is terminated, either by him or by SPM, however, then he will forfeit his right to receive any performance payment due with respect to any year ending on or after his termination date.
The SPM Sellers will also receive a payment of $1,000,000, for up to an aggregate of $2,000,000, with respect to SPM’s EBITDA for each of the years ending December 31, 2027 and December 31, 2028 if (i) SPM’s EBITDA for such year exceeds $3,500,000 and (ii) TJ Judge remains continuously employed by the Company through December 31, 2028.
Business and Post-Closing Operations
SPM is a precision aerospace components manufacturer providing high-quality machined parts and engineering services. SPM specializes in high-speed CNC machining and assembly of aerospace components, prioritizing on-time delivery at fair pricing, unwavering quality, and American-made production.
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SPM offers a wide range of advanced manufacturing services, including 3-, 4-, and 5-axis CNC machining, profiling, pocketing, drilling, boring, turning, threading, and assembly, with expertise in machining alloy steels, aluminum, stainless steel, and titanium. SPM uses in-house capabilities for greater efficiency and cost savings, ensuring consistency, reliability, traceability, and clear supply chain communication, while supporting production using high-speed machining.
Following our acquisition of SPM, SPM will operate as a subsidiary of PAD. Tejinder Singh Judge will be responsible for operating SPM’s business in accordance with his employment agreement with SPM to be entered into prior to the closing of the SPM acquisition, subject to the ultimate oversight and authority of PAD.
Closing Conditions; Termination
Consummation of the SPM acquisition is subject to customary closing conditions, including receipt of all necessary governmental approvals, the accuracy of each party’s representations and warranties, the performance of each party’s material obligations under the SPM Agreement, absence of a Material Adverse Effect (as defined in the SPM Agreement) with respect to the parties, delivery of closing certificates and other deliverables as set forth in the SPM Agreement, and the absence of any law or order that would prohibit or otherwise make illegal our acquisition of SPM. In addition, PAD and the SPM Sellers may terminate the SPM Agreement by mutual consent at any time, and either may terminate the agreement if there is a material breach thereof by the other or if the transaction has not closed by August 25, 2026. Further, PAD can terminate the SPM Agreement at any time on or before August 25, 2026, for any reason as a result of its ongoing due diligence review of SPM.
Consummation of the SPM acquisition is not conditioned on the consummation of the Business Combination or the timing thereof and PAD expects to close the SPM acquisition a number of weeks after the closing of the Business Combination.
Diagnostic Solutions International, LLC
On September 3, 2025, we entered into a non-binding letter of intent to acquire all of the equity interest in Diagnostic Solutions International, LLC (“DSI”), a provider of Honeywell Health and Usage Monitoring System equipment for helicopters and aircrafts and related vibration and balancing test services, headquartered in Wilmington, North Carolina. Note that as we have not entered into a definitive agreement with DSI, DSI’s financial information is not included in the unaudited pro forma condensed combined financial information presented elsewhere in this proxy statement/prospectus.
Compliance and Management Costs
Operating within the A&D industry, PAD is subject to government regulations and compliance with recognized industry standards. Compliance includes adhering to federal, state, and local environmental laws as well as regulations enforced by the FAA and ITAR and industry standard-setters. Compliance with these laws, regulations and standards requires ongoing capital and operating expenditures, which could potentially impact our financial and competitive position.
Key regulations and industry standards affecting the A&D industry include those related to FAA regulations covering airworthiness standards and procedures for maintenance, ITAR, EAR, NADCAP, and various quality management standards enforced through certifications. NADCAP is a global industry-managed program enforcing standards for processes like NDT, welding, and heat treating in the A&D industry and related industries. OEMs and government contracts often require compliance with NADCAP to ensure consistent quality across their supply chain. Compliance with AS9100 quality management system standards, specific to aerospace and recognized globally, is often mandated by government contracts and prime contractors, requiring companies to maintain rigorous quality controls, documentation, and traceability in manufacturing and testing (e.g., using reference standards for calibration).
PAD and its subsidiaries maintain management practices to ensure compliance with applicable regulations and industry standards. This includes routine inspections and assessments. The costs associated with maintaining compliance with applicable regulations and standards are generally in the range of 1-3% of annual revenue and we do not expect this to materially change going forward, subject to regulatory changes and revisions to applicable standards. While compliance with applicable regulations and industry standards require investment in resources and time, they generally do not significantly impact our business operations.
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Our Industry
The A&D industry encompasses a wide range of companies that develop spacecraft, military and commercial aircraft, tanks, missiles, and other weapon-related equipment. The industry also includes service providers who support these manufacturing activities across a multi-tiered supply chain. Due to this wide range of activity and the broad range of services and products required, the A&D industry is fragmented across various supply networks, providing essential equipment, materials, and services needed to produce end products. Some key themes across the A&D industry that have resulted from this fragmentation are:
• Supply Chain Complexity: resulting in long lead times, production delays, and increased pricing;
• Highly Fragmented Market Primed for Consolidation: we believe that the fragmented nature of A&D supply chains for military and commercial leaders in this area presents substantial consolidation and growth opportunities;
• High Barriers to Entry: due to the arduous industry requirements for necessary qualifications and certifications;
• Wave of Retirement: looming as aging baby boomers leave the workforce, seeking succession and exit strategies;
• Robust Spending: from commercial and defense sectors to meet consumer demand and accelerate technological innovation; and
• Economic Resilience: the defense portion of the business has grown to be largely insulated from general trends of the economic cycle as defense spending continues to surge. Furthermore, strong demand for new passenger aircraft continues to outpace production capacity.
A&D Landscape
The A&D industry is fragmented across various supply networks of different tiers, each providing key parts, systems, and materials needed to create the final products for U.S. and global defense organizations, as well as prime contractors and OEMs such as Boeing, Lockheed Martin, General Dynamics, Raytheon, and Airbus. The final product could be anything from commercial aircraft and military planes to missiles or spacecraft. The supply chain of even a single A&D product is highly complex and, therefore, the supply chain is categorized based on the suppliers/solution provider’s distance to the OEM at the top of the chain. The supply chain network is structured into three tiers: Tier 1, Tier 2, and Tier 3. The average OEM relies on roughly 200 first-tier suppliers, while the second and third tiers include an aggregate of more than 12,000 companies.
Tier 1 companies are those that manufacture major systems of critical finished products such as engines, control systems, braking systems, flight decks, landing gear, and components thereof that they provide directly to the OEMs.
Tier 2 companies are those that are responsible for the manufacture of components or subsystem assemblies used by Tier 1 companies. These companies are typically much smaller and less technically equipped than Tier 1 companies. They are responsible for keeping the supply chain moving from Tier 3 through their operations and ultimately to the Tier 1 manufacturers. Tier 2 companies provide components ranging from airfoils and tires to missile nose cones and airframe structures to transmissions and flight controls.
Tier 3 companies are specialized parts manufacturers that ship their products directly to Tier 2 suppliers for the creation of their critical parts and subassembly systems. Some examples of products that Tier 3 component manufacturers supply include hydraulic fittings, hoses, instrumentation fittings and tubing, high strength fasteners and pins.
PAD’s operations are based in all three tiers of the supply chain, shipping its products and providing services to OEMs and other Tier 1 and 2 suppliers for the manufacturing of critical parts, components, systems and subassembly systems. PAD specializes in niche precision manufacturing, engineering, and NDT services.
To give us an advantage in the fragmentated A&D industry, as discussed above, PAD continues to identify, acquire, and integrate companies that complement our current manufacturing, engineering, and NDT businesses. We believe that our strategic focus on becoming a comprehensive, one-stop-shop supplier for OEMs and the DoW through targeted acquisitions, expanded service offerings, and strengthened customer relationships is a competitive advantage
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in the fragmented A&D industry. We believe that by acquiring businesses with synergistic capabilities, we enhance our technological expertise, operational efficiencies, and market reach, enabling us to deliver integrated, end-to-end solutions — from design and manufacturing to testing and aftermarket support — that reduce supply chain complexity and provide greater value to our customers.
Simultaneously, we believe that we will continue to broaden our customer base by entering new markets through acquisitions while deepening existing relationships through our custom tailored manufacturing, engineering and testing solutions, and reliable performance. We believe that our ability to execute, underpinned by our commitment to quality, customer satisfaction, and efficient turnaround times positions us as a trusted partner capable of meeting the diverse and evolving needs of our clients and to drive sustainable growth and long-term success.
Our Market Opportunity
We believe that PAD has positioned itself to capitalize on the growth opportunities that lie within the fragmented A&D industry supported by strong underlying fundamentals and their long-term positive outlooks, as follows:
• The outlook for the global defense sector remains robust, with defense expenditures in the United States surpassing $900 billion in 2025, and a request of over $1 trillion for mandatory and discretionary spend for the fiscal year ending September 30, 2026;
• DoW continues to grow with bipartisan backing, supported by increased demand and budgetary spending resulting from ongoing geopolitical tensions. The proposed 2026 national defense budget is targeted to be $1.01 trillion, when combined with a $113.3 billion reconciliation bill;
• The complexities and costs of new product introductions resulting in the continual expansion of airframe utilization lifespans, increasing demand for after-market servicing, and enlarging the addressable market opportunities for Tier 2 and Tier 3 suppliers;
• Robust developments within space, unmanned aerial vehicles, and drone technologies serve as attractive opportunities for traditional A&D suppliers to diversify end-market and customer exposure;
• A&D companies are seeing continued fragility and disruptions in the supply chain, resulting in production delays, delivery delays, and increased pricing for raw materials and components;
• Workforce challenges due to changing employee expectations since the COVID-19 pandemic, accompanied by a looming wave of retirement as aging baby boomers leave the workforce seeking succession and exit strategies;
• Significant increase in commercial aviation orders and deliveries for both Boeing and Airbus in the last few years, resulting in surging demand for Tier 2 and Tier 3 outsourced production including vastly increasing maintenance and replacement needs that feed each of PAD’s business divisions; and
• Key merger and acquisition (“M&A”) trends that include acquisitions by commercial suppliers to diversify their end-markets, acquisitions of lower-tiered companies to strengthen and stabilize commercial suppliers’ supply base, and consolidation in the fragmented A&D industry.
These opportunities do not come without challenges. While strong demand and positive market outlooks are encouraging, our business is subject to challenges including supply chain fragmentation, talent shortages, regulations, and an increasingly splintered geographic environment. PAD’s unsystematic risks are related to management’s ability to execute on its growth strategy, as discussed above, which includes the ability to source and acquire strategic acquisitions, risks associated with competing in the bidding process for U.S. government contracts, and PAD’s ability to continuously grow its operations and productivity. Please see “Risk Factors” for a discussion of these risks.
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Growth Strategy
PAD has achieved steady growth through acquisitions as well as organic initiatives.
In addition, to capitalize on the opportunities discussed above under “— Our Market Opportunities,” PAD is pursuing acquisitions of specialized Tier 1, 2 and 3 providers in the A&D industry. By integrating these acquisitions into our existing framework, we aim to add depth to our current areas of expertise while expanding our servicing and technological capabilities to deliver more comprehensive, end-to-end solutions across the A&D supply chain.
Finally, PAD intends to continue to organically increase its market share and increase profitability by enhancing operational efficiencies through streamlined production processes, investing in advanced manufacturing technologies, and strengthening customer relationships through tailored service offerings and proactive engagement.
Our specific growth initiatives include:
Precision Machining Focused M&A
• Pursue additional strategic acquisitions to build out niche precision machining capabilities.
• Identify, acquire, and integrate companies that complement our current machining businesses, allowing us to expand our capabilities and further diversify our customer base and serviceable programs.
• Target companies with additional certifications and customer approvals.
Non-Destructive Testing Service Buildout
• Integrating AI, machine learning, and digital radiography technologies to enhance detection of defects, increase volume of inspections, and minimize downtime.
• Develop a radiography testing department, which is the largest proportion of the NDT market. We believe that developing a radiography department could significantly drive growth by tapping into the largest segment of the NDT market.
• Explore European market entry opportunities to capitalize on heightened NDT demand due to aging aircrafts fleets globally.
• Broaden NDT applications to support Unmanned Aerial Vehicles (“UAVs”), also known as drones, advanced materials UAVs, spacecraft, and systems of air transportation within cities. This expansion will require that we develop or acquire additional capabilities, including specialized testing for lightweight composites and 3D-printed parts.
Preserving Specialized Knowledge
In an industry where technological advancements and evolving regulations continually reshape the landscape, retaining and developing top talent is paramount. This is especially critical given the gradual disappearance of seasoned tradesmen with expertise in legacy systems. As a result, we continue to implement a comprehensive talent development and retention strategy to address this challenge and drive growth.
We offer competitive retention incentives, such as performance-based bonuses, equity based incentives, and career progression pathways, to retain skilled employees. By building a versatile, highly skilled workforce, we aim to enhance our capacity to deliver comprehensive solutions, capture larger contracts from OEMs and the DoW, and expand new sectors of the A&D industry as discussed above.
Government Contracting
We continue to leverage key relationships and government contracting bidding experience to win larger contracts and bid on new programs to expand defense work among all PAD divisions. Our leadership team and the PAD Board are comprised of seasoned professionals with extensive experience supporting government contracts who provide deep insights into DoW procurement processes and requirements. In addition, PAD’s subsidiaries have long-standing
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connections with prime contractors and government representatives, cultivated through years of successful project execution and compliance with standards like ITAR and AS9100. We believe that by leveraging this expertise and network, PAD strategically positions itself to secure high-value contracts and to pursue emerging programs in unmanned systems and hypersonic technologies. We believe that our experience and relationships enhance our ability to navigate complex bidding processes, align offerings with DoW priorities, and expand our footprint across A&D NDT services, driving growth across all divisions.
Organic Growth
• Implement operational practices and procedures that will enhance margins and improve productivity, including:
• Lean Manufacturing Implementation: Adopting lean principles to streamline production processes, reduce waste, and optimize resource utilization.
• Advanced Data Analytics and Predictive Maintenance: Leveraging data analytics to monitor equipment performance and predict maintenance needs before failures occur.
• Automation and Robotics Integration: Investing in automation technologies, such as robotic assembly lines and automated quality control systems, to increase production speed and consistency. Automation reduces labor costs, minimizes human error, and allows for scalable operations, leading to higher productivity and improved profit margins.
• Employee Training and Cross-Functional Teams: Developing a comprehensive training program to upskill employees on modern aerospace technologies and processes. Fostering cross-functional teams to encourage collaboration between engineering, manufacturing, and quality assurance departments.
• Supply Chain Optimization: Implementing a robust supply chain management system to improve supplier collaboration, reduce lead times, and negotiate better terms.
Related and Emerging Technologies and End-Markets
• We continue to expand and diversify into adjacent markets within our industry, such as space, unmanned aerial vehicles, and hypersonic technology. We are actively bidding on government contracts focusing on production of advanced technologies, using our established capabilities in precision engineering, advanced materials, and systems integration.
• To stay at the forefront of technological innovation, we are actively pursuing opportunities across our current subsidiaries or through acquisitions to adopt telemetry solutions, which are systems that automatically collect and transmit data from remote sources to a central location for analysis, monitoring and decision-making for use in real-time monitoring, security threat detection, and data-driven improvements, including sensor technologies, communication systems and data processing software, and advanced manufacturing processes, such as 3D printing, automation, and robotics.
Our Competitive Advantage
Favorable Industry Dynamics
We believe that demand for aircraft and A&D related servicing is strong due to (i) increasing military and related conflicts and escalating global tensions renewing a focus on defense spending and demand for innovation, (ii) surging commercial passenger demand causing extensive backlogs for the delivery of new commercial aircraft, and (iii) the emerging space sector presenting additional demand due to heightened demand for goods and services, overlapping technologies, and diversification potential.
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Resilient Services Mix with Growth Opportunities
We provide a diverse set of servicing capabilities ranging across the fragmented A&D industry with our three principal divisions. Across these divisions, we maintain a flexible contract profile, ranging from large long-term agreements with defense and commercial customers to niche shorter term requests for quote to direct purchase orders. We believe that this mix of both short-, medium- and long-term revenue streams and cash conversion cycles will continue to generate consistent cash flow, minimizing volatility and enabling us to plan our growth.
Attractive Market Position
Due to the limited financial and operational capabilities of small, independent suppliers and manufacturers, we believe that as we consolidate and grow, our ability to serve as the single source for our customers’ needs will improve, including for larger contracts, thereby simplifying the process for our customers and driving additional growth. Additionally, we believe that as a national stock exchange-listed company, we will be able to grow our business more quickly as a result of greater access to capital for organic growth as well as the ability to use our stock as consideration for acquisitions. We believe that greater scale will increase our contract bidding power and negotiating strength with both commercial and defense customers. We also believe that following the closing of the pending acquisitions, our increased scale will create a broader base for cost absorption, allow us to consolidate duplicative functions to maximize cost efficiencies, and facilitate more informed decision making and better financial management through access to greater resources, data, and expertise, including a result of the acquisitions allowing for centralized oversight hubs scaling the deployment of tools and resources, shared best practices to improve internal controls, increased bargaining power with suppliers, and access to specialized expertise via cross-functional teams.
Competitive Market Position
Competition for defense and commercial contracts is based primarily on service, quality, timing, pricing, and financial strength. We believe that our ability to provide high-quality labor, in-house labor management and a broad menu of services, along with our ability to maintain minimal lead times, are critical to our ability to obtain and retain customers.
Organizational Structure
We will continue to operate on a decentralized basis with an emphasis on regional and local market execution supported by corporate coordination. Local management will continue to operate and leverage relationships with customers and suppliers. Certain administrative functions may be centralized on a national basis following the consummation of the Business Combination, including but not limited to accounting support functions, corporate strategy and acquisitions, human resources, information technology, insurance, marketing, safety, systems support and transactional processing.
Our Clients
The Company maintains a diverse and significant client base, comprising approximately 25 significant clients, that includes divisions of the United States Armed Forces, prime military contractors, and commercial aerospace companies. Despite this diverse client base, we are dependent on several of our larger clients, as discussed further below.
A major portion of Maney’s revenue is dependent on Defense Logistics Agency Weapons Support (formerly DLA Aviation), which accounted for 79.1%, 36.1% and 64.0%, respectively, of Maney’s, and 9.7%, 4.7% and 22.5%, respectively, of the Company’s, revenue during the three months ended March 31, 2026 and the years ended December 31, 2025 and December 31, 2024. Other significant clients include Tinker Air Force Base and Robins Air Force Base.
V&M Precision’s revenue is heavily dependent on Boeing, which accounted for 52.4%, 68.7% and 99.1%, respectively, of V&M Precision’s, and 9.0%, 10.6% and 26.2%, respectively, of the Company’s, revenue during the three months ended March 31, 2026 and the years ended December 31, 2025 and the December 31, 2024, highlighting the importance of longstanding relationships with major aerospace manufacturers.
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Aerofab maintains a more diversified client base, with no single customer generally exceeding approximately 15% of its total revenue.
Aerodyn’s largest clients are Progress Rail locomotive Inc., General Electric (GE), and Pratt & Whitney, which were responsible for 25.2%, 16.0% and 13.0%, respectively, of its revenues during the three months ended March 31, 2026, and 21.3%, 17.5% and 13.3%, respectively, of its revenues during the year ended December 31, 2025.
Material Contracts
A material portion of our revenue is derived from government-related contracts and long-term license and/or service agreements with OEMs. During the three months ended March 31, 2026 and the years ended December 31, 2025 and December 31, 2024, 35.6%, 21.2% and 58.4%, respectively, of our revenue was derived from our government-related contracts and 63.7%, 46.5% and 8.7%, respectively, of our revenue was from our license and/or service agreements with OEMs.
Our contracts with the U.S. government or divisions thereof are subject to U.S. government contracting rules and regulations and therefore are subject to the business risks specific to the A&D industry, including the government’s ability to unilaterally: (i) suspend us from receiving new contracts; (ii) terminate existing contracts at its convenience and without significant notice; (iii) reduce the value of existing contracts; (iv) audit our contract-related costs and fees, including allocated indirect costs; and (v) revoke required security clearances. Further, violations of government procurement laws could result in civil or criminal penalties.
For larger OEM clients, Aerodyn has long-standing relationships designed to streamline purchase order management and ensure sufficient capacity to meet their needs as clients. Aerodyn and Caterpillar Inc., which manufactures construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives, entered into a Master Engineering Services Agreement in 2010 in connection with Aerodyn’s development and construction of a specialized testing facility in Whitestown, Indiana. This facility is designed to cater to Caterpillar’s need for customized testing of heavy-equipment engines, which are not fully met internally or through Caterpillar’s existing suppliers. Aerodyn continues to be Caterpillar’s testing services provider pursuant to the Master Services Agreement, a relationship now spanning well over a decade. Additionally, GE has been an Aerodyn customer since 2002, and Aerodyn currently provides design, fabrication, instrumentation, and testing services for three separate segments of GE across 12 different facilities. Each of Caterpillar and GE represent a significant percentage of Aerodyn’s annual revenues.
Intellectual Property
We do not have any patents, trade secrets, trademarks, copyrights, or other intellectual property in connection with the conduct of our business, although Aerodyn has applied to trademark its logo.
Employees
As of April 30, 2026, PAD had two full-time employees and our subsidiaries had 140 full-time employees and one part-time employee, for a total of 142 full-time employees and one part-time employee. PAD and its subsidiaries believe that our relationship with our employees is good.
Properties and Facilities
We maintain our executive office in Overland Park, Kansas. Maney leases a 15,542 square foot facility in Ontario, California at a rate of $23,313 per month pursuant to a lease expiring on April 30, 2033, at which it performs its assembly, testing and component machining, and overhaul services. V&M leases a 30,000 square foot manufacturing facility in Brea, California at a rate of $15,000 per month pursuant to a lease that expires on April 30, 2027. This facility is equipped with state-of-the-art machining capabilities and a fully equipped inspection department to meet complex aerospace requirements. Aerofab leases a 14,155 square foot manufacturing facility in Kent, Washington pursuant to a lease expiring on September 30, 2031, for $17,789 per month (with yearly increases as of July 1st each year), at which it conducts its fabrication, design, and testing services. Aerodyn leases a 45,894 square foot service facility in Indianapolis, Indiana at a rate of $24,248.60 per month pursuant to a lease that expires on December 31, 2034, and a 28,583 square foot testing facility in Whitestown, Indiana at a rate of $11,444 per month pursuant to a lease that expires on February 28, 2032.
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Legal Proceedings
We are not a party to any legal proceeding that we believe is likely to have a material adverse effect on our consolidated financial position or results of operations. From time to time, however, we may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.
PAD Recent Sales of Unregistered Securities
During the past three years, PAD issued securities that were not registered under the Securities Act as set forth below. The offers, sales, and issuances of the securities described below were exempt from registration under (i) Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder in that the transactions were between an issuer and sophisticated investors or members of its senior executive management and did not involve any public offering within the meaning of Section 4(a)(2), (ii) Regulation S promulgated under the Securities Act in that offers, sales, and issuances were not made to persons in the United States and no directed selling efforts were made in the United States, or (iii) Rule 701 promulgated under the Securities Act in that the transactions were under compensatory benefit plans or contracts relating to compensation.
Aerospace Opportunity Partners, LP (“AOP”) received 8,381,250 PAD Shares on November 10, 2023, upon the conversion of AOP’s membership interests of PAG LLC to PAD Shares in connection with PAD’s conversion from an LLC to a corporation. AOP initially received its membership interests in PAG LLC upon PAG’s acquisition of AOP.
Melinda Gerard Hornock, General Manager of Maney, received 558,750 PAD Shares on November 10, 2023, upon the conversion of her membership interests of PAG LLC to PAD Shares in connection with PAD’s conversion from an LLC to a corporation. Ms. Hornock originally received membership interests in PAG LLC in 2023 as compensation for services rendered.
PAD issued to Doug Melvin, the General Manager of Aerofab, 375,000 PAD Shares in December 2023 in connection with PAD’s acquisition of NDT Northwest, LLC and its majority owned subsidiary (80%), Aerofab, in December 2023.
PAD issued to Maynard Hellman 527,000 PAD Shares in November 2023 as compensation for his service as a member of the PAD Board and for fees in connection with PAD’s acquisition of NDT Northwest and Aerofab.
PAD issued to employees and principals of a consultant an aggregate of 1,578,000 PAD Shares in 2023 as compensation for services rendered and for fees in connection with PAD’s acquisition of NDT Northwest and Aerofab.
From September 2023 through December 2023, PAD sold in a private placement and issued to accredited investors 64,000 shares of PAD Series A Preferred Stock at a purchase price of $5.00 per share.
An affiliate of TAP owned 40% of NDT Northwest LLC (the entity that owned 80% of Aerofab prior to PAD acquiring NDT Northwest on December 31, 2023) and PAD issued such affiliate’s designees 105,000 PAD Shares when PAD acquired NDT Northwest. In addition, the TAP affiliate, in lieu of accepting an additional 20,000 PAD Shares as part of the consideration paid for the NDT Northwest acquisition, instructed PAD to issue such shares to Maynard Hellman for the legal services that Mr. Hellman provided to the TAP affiliate.
PAD issued to Jon Engman 92,200 PAD Shares in 2024 and an aggregate of 4,067 PAD Shares during May and June 2025 for his service as PAD’s Chief Operating Officer and Acting Chief Financial Officer.
From January 2024 through March 2024, PAD sold 203,000 shares of PAD Series A Preferred Stock to accredited investors at a purchase price of $5.00 per share.
From April 2024 through May 2024, PAD sold 133,000 shares of PAD Series A Preferred Stock to accredited investors at a purchase price of $5.00 per share.
From May through June 2024, PAD issued an aggregate of 23,050 PAD Shares to an employee.
PAD sold 293,000 shares of PAD Series B Preferred Stock to 18 accredited investors at a price of $5.00 per share from July 31, 2024 to November 26, 2024.
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From September 2024 to January 2025, PAD issued 100,000 PAD Shares to Ronald Buschur as compensation for his service as PAD’s Acting Chief Executive Officer.
On January 1, 2026, PAD issued an aggregate of 2,427,299 PAD Shares to 26 of its existing stockholders in connection with the Reverse Split, to prevent the Reverse Split from affecting the number of PAD Shares that each such PAD Stockholder owned.
PAD sold 550,000 shares of PAD Series C Preferred Stock to accredited investors at a price of $5.00 per share from January 13, 2025 to October 15, 2025.
PAD sold 368,000 shares of PAD Series D Preferred Stock to accredited investors at a price of $5.00 per share from July 9, 2025 to January 20, 2026.
On August 1, 2025, pursuant to a stock award agreement between PAD and Mr. Borden, PAD granted Mr. Borden under PAD’s 2024 Omnibus Securities and Incentive Plan, in respect of his services during the year ended December 31, 2025, 100,000 PAD Shares and 50,000 restricted stock units. 7,143 of such restricted stock units vested, and as a result PAD issued to Mr. Borden 7,143 PAD Shares, on each of October 1, 2025, January 1, 2026 and April 1, 2026.
On October 1, 2025, PAD issued 50,000 PAD Shares to Joseph Thiewes, its former Chief Financial Officer, for services provided during calendar year 2025.
On November 11, 2025, PAD issued (i) 292,857 PAD Shares to Mr. Borden, (ii) 90,000 PAD Shares to Mr. Thiewes, (iii) 105,000 PAD Shares to Mr. Buschur, a member of the PAD Board, (iv) 75,000 PAD Shares to Mr. Hellman, a member of the PAD Board, and (v) 20,000 PAD Shares to Larry Thompson, a member of the PAD Board, in respect of their services provided during calendar year 2025.
On December 31, 2025, PAD issued 125,000 PAD Shares to Mr. Buschur, a member of the PAD Board, in respect to his services provided during calendar year 2025.
In March 2026, PAD sold 47,500 shares of PAD Series E Preferred Stock to accredited investors at a price of $10.00 per share.
In April 2026, PAD sold 48,000 shares of PAD Series E Preferred Stock to accredited investors at a price of $10.00 per share.
In May 2026, PAD sold 2,500 shares of PAD Series E Preferred Stock to accredited investors at a price of $10.00 per share.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF PAD
The following discussion and analysis of PAD’s financial condition and results of operations of Precision Aerospace & Defense Group, Inc. (for purposes of this section, “PAD,” “we,” “us” and “our”) should be read in conjunction with the unaudited condensed consolidated financial statements of PAD as of and for the three months ended March 31, 2026 and March 31, 2025, and the audited financial statements of PAD as of and for the years December 31, 2025 and December 31, 2024, and the notes thereto, contained elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this proxy statement/prospectus.
In this discussion, intercompany balances and transactions between consolidated entities are eliminated.
Business Overview
PAD was founded to be a cohesive family of A&D parts manufacturers and service providers striving to continuously perfect and expand its capabilities and offer our clients a comprehensive and robust suite of service offerings. Our mission is to strategically target, unite and build multidisciplinary businesses that supply the major OEM companies. Through accretive acquisitions, organic growth and operating synergies, we seek to create an industry-leading supplier, offering a robust suite of service offerings with unsurpassed quality, customer service and lead times.
Through its subsidiaries, PAD is engaged in contract production of aircraft parts, equipment and sub-assemblies (a series of parts fitted together to form a complex structure), engineering (design, development, and maintenance of aircraft, and other related systems), specialized machining and manufacturing, and NDT primarily across the A&D industry but also in the space, power generation, automotive, marine, and industrial sectors. Our customers include aerospace OEMs, federal defense contractors, major airlines, space pioneers and well-established commercial suppliers.
Our Services
Maney Aircraft Inc.
Maney supports out-of-production aircraft and government contracts under license agreements with system and subsystem OEMs. Maney holds confidential licensing agreements with Boeing that enable Maney to sell OEM equipment directly to the government. Maney also specializes in the design, manufacturing and testing of ground support equipment. Maney is licensed to provide all parts and support, including modifications, avionics upgrades, electrical wiring replacement, component overhaul, training, and technical assistance for various aircraft.
V&M Precision Machining and Grinding
V&M specializes in the precision machining and grinding of large, complex structural components for the A&D industry. Its facility is equipped with multi-axis CNC milling and turning centers, precision grinding machines, and quality assurance systems that ensure compliance with stringent aerospace standards, including AS9100 and AS9110 certifications for quality management.
V&M primarily produces landing gear components, engine mounts, and related structural assemblies primarily from titanium and 300M, which are flexible and especially hard metals, respectively. V&M currently supplies components used on both commercial wide-body aircraft and U.S. military fixed-wing and rotary-wing platforms.
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Aerofab NDT, LLC
Aerofab specializes in made-to-order parts manufacturing, sourcing alternative solutions for obsolete NDT ultrasonic transducers and eddy current probes, and providing EDM services for developing NDT standards tailored to customer aircraft. EDM is a non-conventional machining technique based on the use of electrical discharges to shape metal parts. In the aerospace sector, EDM is used to manufacture a wide range of critical components due to its ability to handle difficult materials, produce complex shapes and achieve extremely tight tolerances.
Aerodyn Engineering LLC
Aerodyn is an engineering-intensive organization providing complete, turnkey solutions for product development projects in the A&D, locomotive, power generation, and space industries. As a single-source provider, Aerodyn delivers innovative, high-quality services from initial design through manufacturing, instrumentation, assembly, testing, and on-site support, emphasizing responsiveness, versatility, and close collaboration to exceed customer expectations and ensure on-time, on-budget execution.
Aerodyn’s core capabilities encompass engineering services including: project management, design, analysis, and flight test support; precision manufacturing with CNC turning and milling, EDM, welding, grinding, and fabrication of components from specialized materials such as nickel and cobalt alloys, titanium, stainless steels, and aluminum; instrumentation design, sensor fabrication, and installation for harsh environments; in-house testing in state-of-the-art facilities with certified engineers; and specialized offerings like high-speed slip rings for data transfer in rotating machinery, rig support for mechanical and aerothermal tests, and field services for data acquisition and reporting at remote sites. Serving leading OEMs and government programs, Aerodyn focuses on prototypes, low-volume production, and hardware for applications including airframe components, engine test rigs, turbocharger testing, pressure vessels, and rocket boosters, supported by a quality management system committed to continuous improvement.
Growth Strategy
PAD has achieved steady growth through acquisitions as well as organic initiatives. In addition, to capitalize on the opportunities discussed in the section of this proxy statement/prospectus entitled “Information About PAD — Our Market Opportunity,” PAD is pursuing acquisitions of specialized Tier 1, 2 and 3 providers in the A&D sectors. By integrating these acquisitions into our existing framework, we aim to add depth to our current areas of expertise while expanding our servicing and technological capabilities to deliver more comprehensive, end-to-end solutions across the A&D supply chain.
Finally, PAD intends to continue to organically increase its market share and increase profitability by enhancing operational efficiencies through streamlined production processes, investing in advanced manufacturing technologies, and strengthening customer relationships through tailored service offerings and proactive engagement.
Key Factors Impacting Our Performance
A portion of our revenue is derived from contracts and subcontracts with the DoW and other federal agencies, which exposes us to risks common in the A&D industry, including changes in government spending levels, shifts in national defense priorities, delays in funding or program approvals, and the potential termination, modification, or non-renewal of awarded contracts. As seen with many publicly traded aerospace and defense companies, material reductions in U.S. military budgets or reallocation of appropriations could adversely affect our future revenue, profitability, and cash flows.
Our financial performance is influenced by U.S. defense budgets, which are subject to congressional appropriations, geopolitical developments, and national security priorities. Reductions in funding, program cancellations, or shifts toward non-defense spending could materially impact our revenue and profitability. Competitive bidding processes and stringent regulatory requirements, such as compliance with the Federal Acquisition Regulation, further complicate securing and maintaining these contracts.
To address these risks, we diversify our contract portfolio across multiple DoW programs and invest in research and development to meet evolving military demands, such as next-generation unmanned systems. Supply chain disruptions, including raw material shortages driven by global demand, can increase costs and delay deliveries,
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potentially affecting contract performance. Changes in procurement policies, like those emphasizing domestic sourcing, may create opportunities but also introduce uncertainty. By closely monitoring legislative trends and aligning with strategic defense priorities, we aim to mitigate the impact of our dependence on U.S. military contracts.
Key Components of Results of Operations
We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources, and assess our performance. We believe that the following metrics and measures, which are discussed in additional detail in our Results of Operations discussion, are useful to facilitate period-to-period comparisons of our business and to facilitate comparisons of our performance to that of similar companies.
Revenue
Revenue consists of the revenues generated from the sale of our operating subsidiaries’ products and services, minus any discounts and allowances and after eliminating intercompany transactions.
Cost of Revenue
Cost of revenue consists primarily of the costs directly related to our operating subsidiaries’ delivery of their products and services, primarily the purchase of the materials such as aluminum, stainless steel, titanium, exotic alloys, and synthetics used in their precision machining and manufacturing of aerospace components, related overhead, including handling, purchasing, inspection and other inventory related costs, and equipment depreciation for our CNC turning and milling centers, material variance reflecting fluctuations in raw material costs and scrap rates due to the high-precision requirements of aerospace parts, direct labor costs including wages for skilled machinists, experienced technicians, and engineers involved in manufacturing, assembly of parts and systems and engineering, related overhead for employee benefits, training, and quality assurance processes, and labor variance arising from differences in actual versus planned labor hours due to production complexities or inefficiencies, costs for outside services encompassing specialized processes like non-destructive testing, hydraulic solutions, and subcontracted component overhauls that we cannot do in-house, and license payments for proprietary agreements with OEMs for the production and support of out-of-production aircraft parts and systems.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses consist of expenses that are not directly related to delivering our product and service offerings, and consist primarily of employee-related expenses including wages, insurance and benefits and payroll taxes, consulting fees primarily related to M&A activity, legal and accounting expenses, equipment lease and rent payments, stock compensation expense, maintenance expenses related to equipment, machinery and/or the facility, and travel expenses.
Results of Operations
Recent Events Impacting Our Results of Operations
The Company completed its acquisition of Aerofab on December 30, 2023. On November 22, 2024, a portion of the Company’s ownership interest in Aerofab was unwound, resulting in the Company owning a minority stake in Aerofab until the majority interest was re-acquired on April 30, 2025; as a result, Aerofab’s and our operations were not consolidated during the three months ended March 31, 2025, but were consolidated during the three months ended March 31, 2026. The primary reason the unwinding of our majority interest in Aerofab was a restructuring of the ownership and governance framework applicable to that subsidiary. As discussed further below, this acquisition, and related M&A activity, did, however, cause significant increases in certain components of our revenue and selling, general, and administrative expenses, which expenses remained elevated during the three months ended March 31, 2026 and the year ended December 31, 2025. The acquisition of Aerofab contributed $1,525,289 and $4,065,532, respectfully, to revenue and $299,508 and $840,760, respectfully, to selling, general, and administrative expenses during the three months ended March 31, 2026, and the year ended December 31, 2025. Please see the section entitled “Information About PAD — Our Products and Services — Aerofab NDT, LLC” for details regarding the Aerofab acquisition.
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The Company completed its acquisition of Aerodyn on December 23, 2024. This acquisition expanded the Company’s capabilities in engineering services but did not materially affect our revenues or operating expenses for the year ended December 31, 2024, as the acquisition occurred late in the fiscal year and integration activities were minimal within the reporting period. As discussed further below, this acquisition, and related merger and acquisition activity, did, however, cause significant increases in certain components of our selling, general, and administrative expenses, in particular, legal and accounting expenses and consulting expenses, during the year ended December 31, 2024 and the three months ended March 31, 2025, which expenses remained elevated (though did not significantly increase) during the year ended December 31, 2025 and the three months ended March 31, 2026. Please see “Information About PAD — Our Products and Services — Aerodyn Engineering LLC” for details regarding the Aerodyn acquisition.
The Company continues to actively pursue growth through strategic acquisitions. As such, we expect legal and accounting expenses and consulting fees to remain at current elevated levels or, depending on the level of such activity, increase, for the foreseeable future. Acquisitions could also have a material favorable impact on net sales and revenues through expanded service offerings and market reach, but may also lead to unfavorable impacts on income from continuing operations due to ongoing integration costs, potential synergies not being realized as anticipated, or disruptions in operations. Further, uncertainties related to regulatory approvals and market conditions for future acquisitions could delay or increase the costs of such transactions, potentially affecting the relationship between costs and revenues.
In addition, we expect that the acquisition of each of WestPro and SPM will result in increased revenues, cost of revenues and other expenses subsequent to the closings of each of the WestPro and SPM acquisitions, each of which we expect will occur in the second half of 2026.
Results of operations for the three months ended March 31, 2026, compared to the three months ended March 31, 2025
The following table summarizes PAD’s consolidated results of operations for the three month periods ended March 31, 2026 and 2025:
|
Three Months Ended March 31 |
||||||||||||
|
2026 |
2025 |
$ Change |
% Change |
|||||||||
|
Revenue |
$ |
10,536,487 |
|
7,806,793 |
2,729,694 |
|
35.0 |
% |
||||
|
Cost of revenue |
|
6,355,700 |
|
4,635,544 |
1,720,156 |
|
37.1 |
% |
||||
|
Gross profit |
|
4,180,787 |
|
3,171,249 |
1,009,538 |
|
31.8 |
% |
||||
|
Selling, general & administrative expenses |
|
2,809,340 |
|
2,549,801 |
(259,539 |
) |
10.2 |
% |
||||
|
Operating income |
|
1,371,447 |
|
621,448 |
749,999 |
|
120.7 |
% |
||||
|
Other income (expenses) |
|
(418,426 |
) |
175,759 |
(459,166 |
) |
NM |
|
||||
|
Income tax expense |
|
301,912 |
|
78,928 |
222,984 |
|
282.5 |
% |
||||
|
Net income |
$ |
651,109 |
|
718,279 |
(67,170 |
) |
(9.4 |
)% |
||||
____________
“NM” = not meaningful
Revenue
Revenue increased $2.7 million, or 35.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, as a result of our reacquiring Aerofab on April 30, 2025 and increased revenues at Aerodyn and V&M, offset by decreased revenues at Maney. Aerofab generated revenue of $1.5 million during the three months ended March 31, 2026, accounting for 56% of the increase in revenue for the three months ended March 31, 2026. Aerodyn’s revenue increased $979,006, or 20.0%, to $5.9 million, primarily as a result of continued strong demand for fabrication and testing work from key customers including Pratt & Whitney, Rolls Royce, and Progress Rail Locomotive, and increased backlog under long-term contracts for GE. Revenue from V&M increased $327,128, or 21.7%, to $1.8 million during the three months ended March 31, 2026 from $1.5 million during the three months ended March 31, 2025, primarily as a result of higher shipment volume during the period, driven by a growing firm backlog, the addition of new customers, and the successful conversion of recently awarded multi-year approvals into production releases. Revenue from Maney decreased $101,749, or 7.2%, to $1.3 million during the three months ended March 31, 2026 from $1.4 million during the three months ended March 31, 2025, primarily as a result of scheduled shipments of backlogged orders being pushed into later delivery periods as production schedules changed.
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Cost of Revenue
The following table sets forth the components of our cost of revenue for each of the three months ended March 31, 2026 and 2025:
|
Three Months Ended March 31, |
|||||||||||||||
|
2026 |
2025 |
$ Change |
% Change |
||||||||||||
|
Direct labor |
$ |
2,157,691 |
|
$ |
1,353,195 |
|
$ |
804,495 |
|
59.5 |
% |
||||
|
Labor overhead |
|
347,303 |
|
|
285,615 |
|
|
61,688 |
|
21.6 |
% |
||||
|
Material |
|
1,984,135 |
|
|
901,122 |
|
|
1,083,012 |
|
120.2 |
% |
||||
|
Material overhead |
|
(219,820 |
) |
|
(195,659 |
) |
|
(24,161 |
) |
12.3 |
% |
||||
|
License payments |
|
94,383 |
|
|
125,495 |
|
|
(31,112 |
) |
(24.8 |
)% |
||||
|
Outside services |
|
63,324 |
|
|
84,421 |
|
|
(21,097 |
) |
(25.0 |
)% |
||||
|
Ending inventory adjustments |
|
1,143,366 |
|
|
1,410,966 |
|
|
(267,600 |
) |
(19.0 |
)% |
||||
|
Manufacturing indirect |
|
133,773 |
|
|
74,701 |
|
|
59,072 |
|
79.1 |
% |
||||
|
Repairs and warranty |
|
75,479 |
|
|
42,970 |
|
|
32,509 |
|
75.7 |
% |
||||
|
Indirects – depreciation & amortization |
|
297,649 |
|
|
302,018 |
|
|
(4,369 |
) |
(1.4 |
)% |
||||
|
Indirects – rent & utilities |
|
278,418 |
|
|
250,698 |
|
|
27,720 |
|
11.1 |
% |
||||
|
$ |
6,355,700 |
|
$ |
4,635,544 |
|
$ |
1,720,156 |
|
37.1 |
% |
|||||
Cost of revenue increased $1.7 million, or 37.1%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily as a result of our reacquiring Aerofab, which incurred $1.1 million, or 65.3% of the increase, in cost of revenue during the three months ended March 31, 2026. Specifically, compared to the three months ended March 31, 2025, direct labor costs increased $804,496, material costs increased $1.1 million, indirects — depreciation and amortization increased $1.1 million, indirects — rent and utilities increased $27,720, repairs and warranty costs increased $32,509, labor overhead increased $61,688 and manufacturing indirect increased $59,072 during the three months ended March 31, 2026, in each case, other than with respect to the material expense, primarily or exclusively as a result of our reacquisition of Aerofab. Offsetting these increases, material overhead decreased $24,161 year-over-year, ending inventory adjustment expense decreased $367,600, labor overhead decreased $4,369, and outside services costs decreased $21,097 during the three months ended March 31, 2026. Material overhead decreased as a result of improved procurement practices and more favorable absorption of indirect material costs over a larger production base; ending inventory adjustment expense decreased due to improved production planning, resulting in reduced cycle times and tighter inventory controls relative to the prior year period; labor overhead decreased as a result of better utilization of direct labor capacity; and outside services costs decreased as the Company had fewer programs during the period that required outsourced processing and third-party services relative to the prior year period.
Direct labor costs increased primarily as a result of our reacquisition of Aerofab, which incurred direct labor costs of $611,939, or 76.1% of the increase, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. In addition, direct labor costs increased $176,116, or 15.3%, at Aerodyn, $12,299, or 6.5%, at V&M and $4,141, or 26.1%, at Maney during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Direct labor costs attributable to Aerodyn increased to $1.3 million during the three months ended March 31, 2026, from $1.1 million during the same period last year, primarily as a result of the need for additional skilled labor to support increased production activity in line with increased demand for engineering and fabrication services across existing customer programs. Direct labor costs at V&M increased to $200,974 during the three months ended March 31, 2026, compared to $188,674 during the three months ended March 31, 2025, primarily as a result of increased production hours to support a larger backlog and the ramp-up of several new programs, driving higher labor absorption in advance of expected future shipments. Direct labor costs at Maney increased to $20,015 during the three months ended March 31, 2026 from $15,874 during the three months ended March 31, 2025, as a larger share of revenue during the three months ended March 31, 2026 came from a larger portion of shipments requiring additional assembly or integration labor, resulting in higher direct labor cost, compared to the same period last year.
Aerodyn and Aerofab have more direct labor costs than V&M and Maney because the type of work that Aerodyn and Aerofab perform for their customers requires extensive internal engineering and testing efforts and, as a result, more employees to perform this work. As a result, we expect direct labor costs to remain at an elevated level going
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forward, consistent with the increases during the three months ended March 31, 2026 and the year ended December 31, 2025, as discussed below. Further, to the extent that PAD acquires companies that perform similar services, direct labor costs will continue to increase both in dollar and percentage amounts and as a percent of revenue.
Material costs increased during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, as a result of our reacquisition of Aerofab, which incurred material costs of $372,464 during the three months ended March 31, 2026, and material costs increased at our other subsidiaries as a result of higher overall production rates on existing and new programs as well as higher raw material pricing during the period; however, the Company’s contracts and purchase orders generally provide for the pass-through of material costs to customers, and accordingly, the impact on gross margin was not significant. This required a corresponding increase in raw material procurement to fulfill a greater number of contracts and work orders across our operating subsidiaries, primarily at Aerodyn and Maney, as well as a shift in the type of services and solutions provided towards those requiring higher-cost materials. Material costs at Maney increased $321,099, or 93.5%, to $665,376 during the three months ended March 31, 2026 from $343,277 during the three months ended March 31, 2025 primarily as a result of a shift toward several high-cost material and modification programs toward work in 2026 that required proportionately more purchased material relative to revenue. Aerodyn incurred material costs of $676,886 during the three months ended March 31, 2026, compared to $383,050 during the three months ended March 31, 2025, an increase of $293,836, or 76.7%, primarily as a result of a shift in program mix toward contracts with a higher material content component, including several new programs requiring significant raw material and component procurement. Because substantially all direct material costs are passed through to customers, the increase in material costs was accompanied by a corresponding increase in material-related revenues. However, the shift in revenue composition toward a greater proportion of pass-through material content, which carries little to no incremental margin, resulted in a lower blended gross margin percentage relative to the prior year period despite growth in gross profit dollars on an absolute basis. Finally, material costs increased $94,612, or 54.1%, at V&M, to $269,408 during the three months ended March 31, 2026, compared to the same period last year. The increase at V&M is primarily as a result of higher consumption of high-value raw materials (titanium and nickel-alloy) during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Following the acquisition of Aerodyn on December 23, 2024, cost of goods sold and operating expenses include a number of new indirect labor and labor-related line items that were not present in prior periods. These additional cost categories primarily reflect (i) specialized engineering, instrumentation, fabrication, field testing, design, development, and turbomachinery test-cell labor charges that are directly attributable to Aerodyn’s customer projects and service offerings, and (ii) the related fringe-benefit and overhead allocations (including employer 401(k) contributions, payroll taxes, health savings account contributions, overtime premium, paid time off, holiday, medical, disability and life insurance benefits) for Aerodyn’s engineering, shop, laboratory, quality control, and design personnel, (iii) repairs and warranty costs incurred in connection with Aerodyn’s service and maintenance obligations, and (iv) indirect costs including depreciation and amortization of Aerodyn’s equipment and facilities and rent and utilities associated with Aerodyn’s operating locations. Because Aerodyn’s business model historically allocated the majority of its labor and labor-related costs to cost of goods sold rather than to operating expenses, these costs appear predominantly within cost of revenue in our consolidated financial statements. Indirect costs related to rent and utilities increased $27,720, or 11.1%, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily as a result of higher utility costs driven by increased production activity and facility utilization at Aerodyn.
Repairs and warranty costs increased approximately $32,508, or 75.7%, for the three months ended March 31, 2026 compared to the prior year period. The increase was primarily attributable to rework and correction activity on certain programs during the 2026 period primarily as a result of increased production and a consistent repair and warranty rate over a greater number of products. In addition, these programs involved a higher proportion of revenue derived from fabrication work relative to servicing or testing activity, resulting in elevated repairs and warranty costs associated these programs during the 2026 period. Further, the overall increase in production volume across the subsidiary’s program portfolio contributed to a higher absolute level of warranty-related activity consistent with the growth in revenues during the period. Management continues to monitor quality metrics across all active programs and has implemented enhanced inspection protocols and process controls designed to reduce rework rates as these programs mature. Repairs and warranty costs as a percentage of revenues during the 2026 period remained within historical ranges.
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Labor overhead costs increased $61,688 during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, almost entirely as a result of Aerodyn’s increased headcount and higher employee-related costs necessary to support the growth in our operations during the period. Aerodyn incurred $219,871 of such costs during the three months ended March 31, 2026, compared to $160,453 during the three months ended March 31, 2025.
Outside services costs decreased $21,098 during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, as a result of a $29,502, or 34.9%, decrease in outside service costs at Aerodyn, which incurred $54,919 of such costs during the three months ended March 31, 2026 compared to $84,421 during the three months ended March 31, 2025, partially offset by a $8,405 increase in such costs at Aerofab as a result of our reacquisition of Aerofab in April 2025. Outside service costs decreased at Aerodyn during the three months ended March 31, 2026 compared to the same period last year primarily as a result of a shift in customer programs supported toward contracts that require fewer specialized outside processing steps during the 2026 period.
Manufacturing indirect costs consists of all manufacturing-related overhead expenses that are not direct material or direct labor, including equipment depreciation, indirect supplies (cutting tools, coolant, perishable tooling, abrasives, and shop consumables), equipment repairs and maintenance not capitalized, and other general factory overhead expenses that support production. These costs increased $59,072 during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, as a result of our reacquisition of Aerofab, which incurred $29,880 of such costs during the three months ended March 31, 2026, and a $29,192, or 39.1%, increase in such costs at Aerodyn. Manufacturing indirect costs at Aerodyn increased to $103,893 during the three months ended March 31, 2026, from $74,701 during the same period last year, primarily due to increased production volumes across Aerodyn’s operations to support higher customer demand, resulting in greater consumption of indirect supplies, increased equipment utilization and associated depreciation, and higher repairs and maintenance activity.
Material overhead reflected a net favorable position of $(219,820) during the three months ended March 31, 2026 compared to a net favorable position of $(195,659) during the three months ended March 31, 2025. The decrease in the favorable position was primarily attributable to Aerodyn, which contributed $(441,804) to material overhead, compared to the net favorable position of $(336,252) during the three months ended March 31, 2025. The favorable material overhead position at Aerodyn was primarily driven by improved utilization of production capacity, as a greater proportion of labor hours were allocated to direct production activities relative to indirect costs. This was offset by material overhead costs of $121,287 and $100,698 from Maney and Aerofab, respectively during the three months ended March 31, 2026, compared to material overhead costs of $140,593 and $0 from Maney and Aerofab, respectively, during the three months ended March 31, 2025, as Aerofab’s operations were not consolidated with ours during the three months ended March 31, 2025.
Gross Profit
Gross profit was $4.2 million, or 39.7%, for the three months ended March 31, 2026, compared to $3.2 million, or 40.6%, for the three months ended March 31, 2025. The increase in the dollar amount of gross profit during the three months ended March 31, 2026 compared to the same period last year was due to the dollar amount of the increase in revenues during the 2026 period exceeding the increase in cost of revenues compared to the same period last year. The decrease in gross profit as a percentage of revenues was primarily attributable to the inclusion of Aerofab’s operations, which operate at gross margin levels below the Company’s historical consolidated average as a result of Aerofab’s business being weighted toward higher-volume, lower-complexity machined components and assemblies where competitive pricing dynamics and customer procurement practices common in the A&D supply chain result in comparatively lower per-unit margins, partially offset by higher production volumes.
Selling, General, and Administrative Expenses
For the three months ended March 31, 2026, selling, general, and administrative expenses were $2.8 million, an increase of $259,539, or 10.2%, from $2.5 million for the three months ended March 31, 2025. This was primarily due to increases of $265,845 in employee wages, insurance and benefits and employer payroll taxes, $59,892 in office supplies expense, $40,689 in computer expenses, $17,034 in business taxes, and $29,105 in liability insurance expenses during the three months ended March 31, 2026 compared to the same period of 2025, offset by decreases of $79,448 in legal and accounting fees, $21,752 in recruitment expenses and $42,809 in consulting fees during the
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three months ended March 31, 2026 compared to the same period of 2025. The reacquisition of Aerofab is the primary driver for the increase in selling, general, and administrative expenses, contributing $299,508, or 115.4%, of the increase during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Employee wages, insurance and benefits and employer payroll taxes increased $265,845, or 24.3%, to $1.4 million for the three months ended March 31, 2026 from $1.1 million for the three months ended March 31, 2025. The primary reason for this increase was our reacquisition of Aerofab, which incurred $202,228 of such employee-related expenses during the three months ended March 31, 2026, accounting for 76.1% of the increase in such expenses during the 2026 period. In addition, employee wages, insurance and benefits at Aerodyn increased $71,872, or 16.9%, to $497,791 during the three months ended March 31, 2026, primarily as a result of an increase in headcount from 62 employees at March 31, 2025 to 71 employees at March 31, 2026. The additional personnel were hired to support Aerodyn’s continued revenue growth and expanded production activity, and the corresponding increase in wages, payroll taxes, health insurance premiums, and other employee benefit costs was commensurate with the 14.5% increase in Aerodyn’s workforce. These increases were offset by a $19,138, or 10.9%, decrease in such expenses at PAD, to $156,733 during the three months ended March 31, 2026 from $175,871 during the three months ended March 31, 2025, primarily a result of the resignation of our Chief Financial Officer in the first quarter of 2026.
Office supplies expense totaled $79,024 during the three months ended March 31, 2026, an increase of $59,892, or 313.1%, compared to $19,132 during the same period of 2025. The increase was primarily attributable to the expansion of PAD’s corporate team and supporting resources at the PAD level to support the growth of the business and the increased operational and regulatory demands associated with operating as a public company, contributing 32,908, or 54.9%, of the increase during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. In addition, our reacquisition of Aerofab contributed $23,521, or 39.3%, of the increase during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This was further supplemented by overall growth in operational activity across Aerodyn, Many and V&M, including higher consumption of production-related documentation and general operating supplies necessary to support increased manufacturing throughput and administrative activity during the period.
Computer expenses totaled $73,007 during the three months ended March 31, 2026, an increase of $40,689, or 125.9%, compared to $32,318 during the same period of 2025. Aerodyn was the primary driver for the increase in computer expenses, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, contributing $38,716, or 95.2%, of the increase. The increase in computer expenses at Aerodyn was primarily driven by incremental software licensing costs, additional user seats for enterprise systems, and investments in information technology infrastructure to support growth.
Business taxes totaled $129,646 during the three months ended March 31, 2026, an increase of $17,034, or 15.1%, compared to $112,613 during the same period of 2025. The increase was primarily the result of our reacquisition of Aerofab was the primary driver for the increase in business taxes, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, contributing $16,248, or 95.4%, of the increase.
Liability insurance expenses totaled $89,214 during the three months ended March 31, 2026, an increase of $29,105, or 48.4%, compared to $60,109 during the same period of 2025. Aerodyn was the primary driver for the increase in computer expenses, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, contributing $24,532, or 84.3%, of the increase. The increase at Aerodyn was primarily due to higher premium costs associated with expanded general liability and professional liability coverage to reflect the Company’s increased revenue base, expanded operations, and the incremental insurable risk profile resulting from the growth of the Company’s consolidated subsidiary portfolio.
Legal and accounting fees decreased $79,448, or 22.6%, to $272,478 during the three months ended March 31, 2026, from $351,927 during the three months ended March 31, 2025, primarily as a result of the reduction in legal expenses related to M&A and legal expenses relating to obtaining an audit of our financial statements for inclusion therein.
Consulting fees decreased $42,809, or 11.4%, to $332,630 during the three months ended March 31, 2026 from $375,439 during the three months ended March 31, 2025, primarily as a result of certain non-recurring consulting fees incurred during the three months ended March 31, 2025 in connection with the pursuit of acquisition targets, which
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did not recur during the three months ended March 31, 2026.While not a primary contributor to the overall increase in selling, general, and administrative expenses, there were a number of components of such expenses that increased materially during the three months ended March 31, 2026 compared to the same period last year, as discussed below.
Stock compensation expense decreased $9,561, or 52.3%, to $8,734 during the three months ended March 31, 2026, from $18,295 during the three months ended March 31, 2025. Stock compensation expenses decreased for the three months ended March 31, 2026 primarily as a result of our issuance of fewer stock-based awards in connection with compensation associated with employment arrangements of management and directors, as well as services rendered by outside consultants, primarily as a result of these awards having been issued during the prior year period, such that there was no comparable expense recognized during the three months ended March 31, 2026, and the Company did not grant a similar volume of new awards during the 2026 period.
Maintenance costs increased $7,897, or 10.8%, to $80,921 for the three months ended March 31, 2026, from $73,024 the three months ended March 31, 2025. This increase was partially due to our reacquisition of Aerofab, which incurred $7,852 of, or 99.4% of the increase in, such expenses during the three months ended March 31, 2026. Maintenance costs also increased $51,713, or 417.5%, at V&M, offset by a $47,962, or 94.1%, decrease in such expenses at Aerodyn, in each case during the three months ended March 31, 2026 compared the same period of 2025. The increase in maintenance costs at V&M was primarily a result of higher-than-normal repair and refurbishment activity on large precision grinding machines and multi-axis CNC mills and turning centers. The decrease in maintenance costs at Aerodyn was primarily as a result of scheduled preventive maintenance and unplanned repairs on aging manual assembly fixtures and specialty tooling required to support its programs during the three months ended March 31, 2025, for which there was no similar expense during the same period of 2026.
Recruitment expenses decreased $21,752, or 52.3%, to $19,830 for the three months ended March 31, 2026, from $40,030 during the same period last year, almost entirely as a result of recruitment efforts at Aerodyn during the three months ended March 31, 2025, which incurred $43,784, or 87.1% of recruitment expenses during 2025, compared to $18,278 of such expenses for 2026. These expenses decreased at Aerodyn primarily as a result of Aerodyn incurring significant recruitment costs during the prior year period to scale its workforce to a level necessary to support growing customer demand and expanded production activity, which resulted in headcount growth from 62 to 71 over the period.
Telephone expenses increased $5,591, or 11.1%, to $55,838 for the three months ended March 31, 2026, from $50,247 for the three months ended March 31, 2025, primarily as a result of a $2,097, or 4.8%, increase in telephone expenses at Aerodyn during the three months ended March 31, 2026, compared to the same period last year, and our acquisition of Aerofab, which incurred $1,817 in telephone expenses during the three months ended March 31, 2026. Telephone expenses increased by $600, $677, and $400, respectively, at PAD, Maney, and VM. Telephone expenses increased during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to headcount growth across the Company’s operations, which required additional mobile devices and communication lines, as well as vendor price adjustments. The Company expects telephone expenses to remain at or near current levels in future periods, with modest incremental increases possible in connection with further headcount growth or periodic vendor pricing adjustments.
Finally, licenses and permits expenses increased from $6,019 to $13,626, respectively, and tech assistance expense increased from $0 to $8,587, respectively, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, in each case almost entirely as a result of our reacquisition of Aerofab, which incurred $8,587 and $10,401 respectively, of such expenses during the three months ended March 31, 2026. The licenses and permits expenses are attributable to regulatory and facility-related permits required to maintain Aerofab’s manufacturing and inspection operations, while the tech assistance expenses relate to third-party technical support services engaged in connection with the integration of Aerofab’s information technology systems and quality management infrastructure into our existing operational framework.
Other Income (Expenses)
We had other expenses of $418,426 during the three months ended March 31, 2026 compared to other income of $175,759 during the three months ended March 31, 2025. The primary reason for the increase in other expenses was the $710,251 decrease in the revaluation of contingent consideration period-over-period, resulting in a $82,502 loss during the three months ended March 31, 2026, compared to a $628,251 gain during the three months ended March 31, 2025, resulting from revaluation of contingent consideration, which consists of fair-value adjustments to
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performance-based earnout liabilities established as part of the Company’s completed acquisition of Aerodyn. These contingent obligations, tied to post-acquisition achievement of EBITDA targets over two- to three year measurement periods, resulted in slight upward revaluation charges in the prior-year period due to stronger-than-expected early performance. Offsetting this, interest expense decreased to $362,340 during the three months ended March 31, 2026 from $385,141 during the three months ended March 31, 2025. The decrease in interest expense was primarily the result of lower average borrowings under the V&M’s revolving line of credit and the restructuring of the December 2024 acquisition of Aerodyn as per the December Aerodyn Letter, terminating the interest accrual on the seller promissory notes issued in connection with our December 2024 acquisition of Aerodyn.
Net Income
We had net income of $646,714 for the three months ended March 31, 2026, compared to net income of $718,279 during the three months ended March 31, 2025, primarily as a result of the increases in selling, general and administrative expenses and other expenses and the $222,984 increase in income tax expense resulting from our increase in income before tax expense.
Results of operations for the year ended December 31, 2025, compared to the year ended December 31, 2024
The following table summarizes PAD’s consolidated results of operations for the years ended December 31, 2025 and 2024:
|
Year Ended December 31, |
|||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
||||||||||
|
Revenue |
$ |
36,226,790 |
|
12,950,695 |
|
23,276,095 |
|
179.7 |
% |
||||
|
Cost of revenue |
|
21,809,722 |
|
7,988,133 |
|
13,821,589 |
|
173.0 |
% |
||||
|
Gross profit |
|
14,417,068 |
|
4,962,562 |
|
9,454,506 |
|
190.5 |
% |
||||
|
Selling, general & administrative expenses |
|
(14,580,030 |
) |
(9,220,218 |
) |
5,359,812 |
|
58.1 |
% |
||||
|
Operating (loss) |
|
162,962 |
|
4,257,656 |
|
(4,094,694 |
) |
96.2 |
% |
||||
|
Other expenses |
|
2,309,446 |
|
1,513,416 |
|
796,030 |
|
52.6 |
% |
||||
|
Income tax expense (benefit) |
|
484,650 |
|
(1,152,735 |
) |
(1,637,385 |
) |
NM |
|
||||
|
Net (loss) |
$ |
(2,957,058 |
) |
(4,618,337 |
) |
(1,661,279 |
) |
(36.0 |
)% |
||||
____________
“NM” = not meaningful
Revenue
Revenue increased $23.3 million, or 179.7%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, almost entirely as a result of our acquisition of Aerodyn on December 23, 2024. Aerodyn generated revenue of $21.9 million during the year ended December 31, 2025, accounting for 91.1% of the increase in revenue for 2025. In addition, revenue from V&M increased $2.2 million, or 63.3%, to $5.6 million during the year ended December 31, 2025 from $3.4 million during the year ended December 31, 2024, primarily as a result of higher shipment volume in the first half of 2025, driven by a growing firm backlog, the addition of new customers, and the successful conversion of recently awarded multi-year approvals into production releases, and Maney’s revenue increased $210,514, or 4.6%, primarily as a result of continued strong demand and increased shipments under long-term assembly and integration contracts for legacy military platforms. These increases were offset by a decrease of $276,617, or 6.4%, in revenues from Aerofab for the year ended December 31, 2025 compared to the year ended December 31, 2024. Revenue from Aerofab decreased to $4.1 million during the year ended December 31, 2025 from $4.3 million during the year ended December 31, 2024, primarily as a result of our losing majority ownership of Aerofab, and therefore not consolidating its results with ours, from November 22, 2024 through April 30, 2025, resulting in Aerofab’s revenues being included in ours for the almost 11 months during 2024 but only for eight months during 2025.
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Cost of Revenue
The following table sets forth the components of our cost of revenue for each of the years ended December 31, 2025 and 2024:
|
Year Ended December 31, |
||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
|||||||||||
|
Direct labor |
$ |
8,423,899 |
$ |
2,629,250 |
|
$ |
5,794,649 |
|
220.4 |
% |
||||
|
Labor overhead |
|
1,058,619 |
|
491,713 |
|
|
566,906 |
|
115.3 |
% |
||||
|
Material |
|
6,075,541 |
|
3,791,061 |
|
|
2,284,480 |
|
60.3 |
% |
||||
|
Material overhead |
|
390,829 |
|
1,009,061 |
|
|
(619,362 |
) |
(61.3 |
)% |
||||
|
License payments |
|
377,380 |
|
377,786 |
|
|
(406 |
) |
(0.1 |
)% |
||||
|
Outside services |
|
547,141 |
|
127,172 |
|
|
419,969 |
|
330.2 |
% |
||||
|
Ending inventory adjustments |
|
1,910,179 |
|
(589,489 |
) |
|
2,499,668 |
|
NM |
|
||||
|
Manufacturing indirect |
|
374,807 |
|
82,265 |
|
|
292,542 |
|
355.6 |
% |
||||
|
Repairs and warranty |
|
372,535 |
|
5,489 |
|
|
367,046 |
|
6,686.9 |
% |
||||
|
Indirects – depreciation & amortization |
|
1,161,852 |
|
28,719 |
|
|
1,133,133 |
|
3,945.6 |
% |
||||
|
Indirects – rent & utilities |
|
1,117,302 |
|
34,338 |
|
|
1,082,964 |
|
3,153.8 |
% |
||||
|
$ |
21,809,722 |
$ |
7,988,133 |
|
$ |
13,821,589 |
|
173.0 |
% |
|||||
____________
“NM” = not meaningful
Cost of revenue increased $13.8 million, or 173.0%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of our acquisition of Aerodyn, which incurred $13.0 million, or 90.0% of the increase, in cost of revenue during the year ended December 31, 2025 compared to $469,908 during the year ended December 31, 2024. Specifically, compared to the year ended December 31, 2024, direct labor costs increased $5.8 million, ending inventory adjustment expense increased $2.5 million, material costs increased $2.3 million, indirects — depreciation and amortization increased $1.1 million, indirects — rent and utilities increased $1.1 million, labor overhead increased $566,906, outside services costs increased $419,969, repairs and warranty costs increased $367,046, and manufacturing indirect increased $292,542 during the year ended December 31, 2025, in each case, other than with respect to the ending inventory adjustment expense, primarily or exclusively as a result of our acquisition of Aerodyn. Material overhead, on the other hand, decreased $619,362 year-over-year.
Direct labor costs increased almost entirely as a result of our acquisition of Aerodyn, which incurred direct labor costs of $5.9 million during the year ended December 31, 2025, compared to $193,450 of direct labor costs during the year ended December 31, 2024, slightly offset by a $142,890 decrease in direct labor costs at Aerofab during the year ended December 31, 2025 compared to the year ended December 31, 2024. In addition, direct labor costs increased $210,120, or 35.6%, at V&M and decreased $142,890, or 8.1%, at Aerofab and $5,737, or 6.2%, at Maney during the year ended December 31, 2025 compared to the year ended December 31, 2024. Direct labor costs attributable to Aerofab decreased primarily as a result of the deconsolidation of Aerofab through April 30, 2025, as discussed above, but these costs would have increased if Aerofab’s operations were consolidated with PAD’s for the entire 12 months of 2025. Direct labor costs at V&M increased to $799,606 during the year ended December 31, 2025 compared to $589,486 during the year ended December 31, 2024, primarily as a result of increased production hours to support a larger backlog and the ramp-up of several new programs, driving higher labor absorption in advance of expected future shipments. Direct labor costs at Maney decreased to $87,005 during the year ended December 31, 2025 from $92,742 during the year ended December 31, 2024, as a larger share of revenue over 2025 came from shipping previously completed assemblies already absorbed into inventory as well as a portion of shipments requiring minimal additional assembly or integration labor, resulting in lower direct labor cost, compared to the prior year.
Material costs increased during the year ended December 31, 2025, compared to the year ended December 31, 2024, as a result of our acquisition of Aerodyn, which incurred material costs of $2.7 million during the year ended December 31, 2025, compared to $83,116 during the year ended December 31, 2024, offset by decreases of $160,389, or 12.2%, at V&M and $140,122, or 8.6%, at Maney. Material costs at V&M decreased to $1.2 million during the year ended December 31, 2025 from $1.3 million for the year ended December 31, 2024, primarily as a result of lower consumption of high-value raw materials (titanium and nickel-alloy) during the year ended December 31, 2025 compared to the year ended December 31, 2024, as well as increased shipments during the year ended December 31, 2025 of parts already in process with material previously purchased and absorbed into inventory. Material costs at
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Maney decreased to $1.5 million during 2025 from $1.6 million during 2024 primarily as a result of a favorable shift in program and customer mix away from several high-cost material and modification programs toward work in 2025 that required proportionately less purchased material relative to revenue.
As discussed above, following the acquisition of Aerodyn on December 23, 2024, cost of goods sold and operating expenses include a number of new indirect labor and labor-related line items that were not present in prior periods. Because Aerodyn’s business model historically allocated the majority of its labor and labor-related costs to cost of goods sold rather than to operating expenses, these costs appear predominantly within cost of revenue in our consolidated financial statements. As a result, the increases in repairs and warranty, indirects — depreciation & amortization, and indirects — rent & utilities, during the year ended December 31, 2025 compared to the prior year are entirely a result of our acquisition of Aerodyn and the inclusion of only one week of Aerodyn’s operations in our consolidated financial statements in 2024 but the full 12 months of 2025. On a go-forward basis, we expect these indirect labor and benefit costs to continue at levels generally consistent with Aerodyn’s revenue volume and project mix, with normal seasonal and operational fluctuations.
Labor overhead costs increased $566,906 during the year ended December 31, 2025, compared to the year ended December 31, 2024, almost entirely as a result of our acquisition of Aerodyn, which incurred $590,279 of such costs during the year ended December 31, 2025, compared to $38,661 during the year ended December 31, 2025.
Outside services costs increased $419,969 during the year ended December 31, 2025 compared to the year ended December 31, 2024, as a result of our acquisition of Aerodyn, which incurred $497,567 of such costs during the year ended December 31, 2025 compared to $6,249 during the year ended December 31, 2024, partially offset by a $69,363 decrease in such costs at Aerofab. The decrease at Aerofab reflects the fact that the Company held only a minority ownership interest in Aerofab from November 22, 2024 through April 30, 2025, during which period Aerofab was not consolidated in the Company’s financial statements, resulting in fewer months of consolidated outside services costs being captured during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Manufacturing indirect costs consists of all manufacturing-related overhead expenses that are not direct material or direct labor, including equipment depreciation, indirect supplies (cutting tools, coolant, perishable tooling, abrasives, and shop consumables), equipment repairs and maintenance not capitalized, and other general factory overhead expenses that support production. These costs increased $278,180 during the year ended December 31, 2025 compared to the year ended December 31, 2024, as a result of our acquisition of Aerodyn, which incurred $291,866 of such costs during 2025, compared to $13,686 in 2024, and a $14,362, or 20.9%, increase in such costs at Aerofab. Manufacturing indirect costs increased at Aerofab during 2025, despite the deconsolidation of Aerofab through April 30, 2025, primarily as a result of the addition of an Operations Manager at the beginning of 2025, which increased the portion of support labor allocated to manufacturing indirect costs under Aerofab’s headcount-based cost allocation methodology. We anticipate that these costs may increase during the year ending December 31, 2026, as Aerofab’s operations will be consolidated with PAD’s for the full year, continued growth at Aerodyn that may drive higher overhead absorption, and planned headcount additions across the organization that may further increase the portion of support labor allocated to manufacturing indirect costs.
Material overhead decreased to $390,467 during the year ended December 31, 2025 from $1.0 million during the year ended December 31, 2024, primarily as a result of our acquisition of Aerodyn, which had a net favorable material overhead position during the year ended December 31, 2025, driven by improved utilization of production capacity, as a greater proportion of labor hours were allocated to direct production activities relative to indirect costs, compared to $132,378 of such costs during the year ended December 31, 2024.
Gross Profit
Gross profit was $14.4 million, or 39.8%, for the year ended December 31, 2025, compared to $5.0 million, or 38.3%, for the year ended December 31, 2024. The increase in both the dollar amount of gross profit and gross profit as a percent of revenue for year ended December 31, 2025 was due to the dollar amount and percentage increase in revenues for 2025, each exceeding the respective increases in cost of revenues compared to 2024.
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Selling, General, and Administrative Expenses
For the year ended December 31, 2025, selling, general, and administrative expenses were $14.6 million, an increase of $5.4 million, or 58.1%, from $9.2 million for the year ended December 31, 2024. This increase was primarily due to increases of $1.9 million in employee wages, insurance and benefits and employer payroll taxes, $1.5 million in legal and accounting fees, $1.1 million in stock compensation expense, $331,589 in maintenance expenses, $303,209 in property taxes, $254,365 in recruitment expenses, and $153,123 in telephone expenses during 2025 compared to 2024, offset by an $864,467 decrease in consulting fees during 2025 compared to 2024.
Employee wages, insurance and benefits and employer payroll taxes increased $1.9 million, or 57.9%, to $5.3 million for the year ended December 31, 2025 from $3.3 million for the year ended December 31, 2024. The primary reason for this increase was our acquisition of Aerodyn, which incurred $1.7 million of such employee-related expenses during the year ended December 31, 2025, compared to $35,404 during the prior year, accounting for 86.6% of the increase in such expenses during 2025 as compared to the year ended December 31, 2024. In addition, employee wages, insurance and benefits at PAD increased $695,005, or 258.2%, to $964,214 during the year ended December 31, 2025 from $269,209 during the year ended December 31, 2024. The increase was primarily a result of our hiring of a full-time Chief Executive Officer and Chief Financial Officer in the first quarter of 2025. These increases were offset by a decrease of $295,736 in employee wages, insurance and benefits and employer taxes attributable to Maney, primarily as a result of a reduction in variable compensation during the year ended December 31, 2025, reflecting normal period-to-period variability in Maney’s incentive compensation program in support of the Company’s broader growth objectives, and a $184,160, or 24.8%, decrease in employee wages, insurance and benefits attributable to Aerofab as a result of the Company holding only a minority ownership interest in Aerofab from November 22, 2024 through April 30, 2025, during which period Aerofab was not consolidated in the Company’s financial statements. Had Aerofab been consolidated for the full 12 months of the year ended December 31, 2025, these expenses would have been higher than those reflected in the prior year.
Legal and accounting fees increased $1.5 million, or 120.8%, to $2.7 million during the year ended December 31, 2025, from $1.2 million during the year ended December 31, 2024, primarily as a result of legal expenses related to the negotiation and execution of the Business Combination Agreement, legal expenses related to the preparation of the Registration Statement on Form S-4 of which this proxy statement/prospectus is a part, and expenses relating to obtaining an audit of our financial statements for inclusion therein.
Stock compensation expense increased $1.1 million, or 1,576.9%, to $1.1 million during the year ended December 31, 2025, from $67,420 during the year ended December 31, 2024. Stock compensation expenses increased for 2025 primarily as a result of the issuance of stock-based awards in connection with compensation associated with employment arrangements of management and directors, as well as services rendered by outside consultants.
Maintenance costs increased $331,589, or 260.2%, to $459,032 for the year ended December 31, 2025, from $127,443 the year ended December 31, 2024. This increase was primarily due to our acquisition of Aerodyn, which incurred $295,126 of such expenses during 2025, compared to $177 during 2024, accounting for 89.0% of the increase in such expenses during 2025. Maintenance costs also increased $40,653, or 57.3%, at V&M and $12,457, or 66.3%, at Maney during 2025 compared 2024. The increase in maintenance costs at V&M was primarily a result of higher-than-normal repair and refurbishment activity on large precision grinding machines and multi-axis CNC mills and turning centers. The increase in maintenance costs at Maney was primarily as a result of scheduled preventive maintenance and unplanned repairs on aging manual assembly fixtures and specialty tooling required to support its programs.
Property taxes increased $303,209, or 238.0%, to $430,630 for the year ended December 31, 2025, from $127,421 for the year ended December 31, 2024, as a result of our acquisition of Aerodyn, which incurred property taxes of $336,946 during the year ended December 31, 2025, compared to $30,128 during the year ended December 31, 2024, offset by a property tax decrease of $18,098, or 23.5%, at Maney during 2025 compared to 2024.
Recruitment expenses increased $254,365, or 3,262.8%, to $262,161 for the year ended December 31, 2025, from $7,796 during the prior year, almost entirely as a result of our acquisition of Aerodyn, which incurred $256,003 of recruitment expenses during 2025, compared to $1,633 of such expenses for 2024.
Telephone expenses increased $153,123, or 468.8%, to $185,789 for the year ended December 31, 2025, from $32,666 for the year ended December 31, 2024, almost entirely as a result of our acquisition of Aerodyn, which incurred $143,672 in telephone expenses during 2025 compared to $1,385 during 2024, constituting 92.9% of the
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increase in telephone expenses year-over-year. Telephone and internet expenses are substantially higher at Aerodyn primarily because it is our largest operating subsidiary, employing significantly more personnel across two separate manufacturing and engineering facilities. The nature of Aerodyn’s business — providing complex engineering design, precision component manufacturing, instrumentation, and full-scale test services — requires extensive high-speed internet bandwidth, secure remote-access systems, and higher-volume telecommunication services to support daily collaboration among its larger technical staff and with customers worldwide. On a consolidated basis, Aerodyn represents the vast majority of PAD’s total telephone and data expense. Going forward, we expect this higher level of these expenses to continue.
Consulting fees decreased $864,467, or 26.3%, to $2.4 million during the year ended December 31, 2025 from $3.3 million during the year ended December 31, 2024, primarily as a result of certain non-recurring consulting fees incurred during the year ended December 31, 2024 in connection with the closing of the Aerodyn acquisition, which did not recur during the year ended December 31, 2025.
Finally, while not a primary contributor to the overall increase in selling, general, and administrative expenses, education and training expenses increased from $1,008 to $14,750 and computer expense increased from $49,047 to $123,132 during the year ended December 31, 2025, compared to the year ended December 31, 2024, in each case almost entirely as a result of our acquisition of Aerodyn, which incurred $14,065 and $78,421 respectively, of such expenses during the year ended December 31, 2025, compared to $0 and $2,444, respectively, of such expenses during the year ended December 31, 2024. These significantly higher amounts at Aerodyn reflect the scale and technical complexity of its operations, as discussed above. Computer expense is significantly higher at Aerodyn than at our other operating subsidiaries because Aerodyn is the largest and most engineering-intensive subsidiary, with additional headcount and two facilities staffed primarily by degreed engineers and test specialists. These employees require high-performance workstations and costly per-seat licenses for advanced software, plus extensive on-site servers and high-capacity storage to manage large test datasets — all of which drive materially higher IT hardware, software, and support costs compared to the CNC-focused machine-shop subsidiaries.
Other Expenses
We had other expenses of $2.3 million during the year ended December 31, 2025 compared to other expenses of $1.5 million during the year ended December 31, 2024. The primary reason for the increase in other expenses was the $1.2 million increase in interest expense year-over-year and a $1.7 million loss during 2025, compared to a $448,898 gain during 2024, resulting from revaluation of contingent consideration, which consists of fair-value adjustments to performance-based earnout liabilities established as part of the Company’s completed acquisition of Aerodyn. These contingent obligations, tied to post-acquisition achievement of EBITDA targets over two- to three year measurement periods, resulted in significant downward revaluation charges in the prior-year period due to weaker-than-expected early performance. The increase in interest expense was primarily the result of higher average borrowings under the V&M’s revolving line of credit and interest-bearing seller promissory notes issued in connection with the December 2024 acquisition of Aerodyn and the April 2025 step acquisition of the remaining interest in Aerofab. These increased expenses were offset by the $993,164 gain recorded upon the step acquisition of the additional interest in Aerofab on April 30, 2025, compared to a $1.6 million loss upon the deconsolidation of Aerofab in November 2024.
Net Loss
We had a net loss of $3.0 million for the year ended December 31, 2025, compared to a net loss of $4.6 million during the year ended December 31, 2024, primarily as a result of the $4.1 million decrease in operating loss during 2025 compared to 2024, offset by a $484,650 provision for income tax expense for 2025 compared to an income tax benefit of $1.2 million for 2024 and a $796,030 increase in other expenses year-over-year.
Liquidity and Capital Resources
For the three months ended March 31, 2026, our net income attributable to common stockholders was $585,108, and the accumulated deficit was $14.8 million. Net loss attributable to common stockholders was $2.5 million for the year ended December 31, 2025. Cash and cash equivalents were $2.6 million at March 31, 2026, $2.4 million at December 31, 2025, and $1.3 million at December 31, 2024. Working capital deficit was $38.8 million at March 31, 2026, $38.6 million at December 31, 2025 and $25.9 million at December 31, 2024.
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Our liquidity is influenced primarily by cash flows from operations, capital expenditures, the timing of customer collections, and the availability of external financing. The following table summarizes our cash flows from operating, investing, and financing activities for the periods indicated:
|
Three Months Ended |
||||||||
|
2026 |
2025 |
|||||||
|
Net cash provided by (used in) operating activities |
$ |
2,339,494 |
|
$ |
(851,733 |
) |
||
|
Net cash (used in) investing activities |
|
(1,624,275 |
) |
|
(154,382 |
) |
||
|
Net cash provided by (used in) financing activities |
$ |
(540,377 |
) |
$ |
1,489,009 |
|
||
|
Years Ended |
||||||||
|
2025 |
2024 |
|||||||
|
Net cash (used in) operating activities |
$ |
(1,129,756 |
) |
$ |
(3,145,100 |
) |
||
|
Net cash (used in) investing activities |
|
(2,977,929 |
) |
|
(528,861 |
) |
||
|
Net cash provided by financing activities |
$ |
5,270,195 |
|
$ |
3,470,433 |
|
||
Short-Term Liquidity (Next 12 Months)
Our primary short-term liquidity requirements consist of funding operating expenses, servicing scheduled debt payments, meeting lease obligations, and supporting working-capital needs. Although we generated positive net income for the three months ended March 31, 2026, the continuing working capital deficit reflects pressure on our short-term liquidity position.
Management expects that cash on hand, cash generated from operations, financing, and availability under our existing debt facility will be sufficient to meet our short-term cash requirements for at least the next 12 months. This conclusion is based on current operating plans, anticipated customer demand, and our historical ability to manage inventory and collect receivables.
Material short-term cash requirements include approximately $1,000,000 in scheduled principal and interest payments on long-term debt, capital lease payments of approximately $620,000, and anticipated capital expenditures of approximately $0 over the next 12 months. These obligations are expected to be funded through operating cash flows and, if needed, borrowings under our credit facility or equity financing.
Long-Term Liquidity (Beyond 12 Months)
Long-term liquidity needs include capital expenditures required to maintain and expand operations, potential investments in strategic initiatives, and repayment of long-term debt. Our ability to meet these needs will depend on the performance of our operations, continued access to our debt facility and, when appropriate, the availability of additional debt or equity capital.
While we currently believe our long-term liquidity requirements are manageable, ongoing working capital deficits or reductions in operating cash flows may require us to modify operating plans, reduce discretionary expenditures, or seek additional financing.
Cash Flow Analysis
Operating Activities — Cash provided by operating activities was $2,339,494 for the three months ended March 31, 2026, compared to cash used in operating activities of $851,733 for the three months ended March 31, 2025, primarily attributable to the increased net income period-over-period, non-cash adjustments of approximately $761,762, consisting primarily of depreciation and amortization of $365,684, amortization of right-of-use assets of $170,931, accrued interest expense of $93,818, a loss on revaluation of acquisition and contingent consideration liabilities of $82,502, deferred taxes of $40,094, and stock-based compensation of $8,733. Accounts receivable decreased by $844,236 period-over-period, reflecting improved collections activity and the timing of milestone billings during the 2026 period. Accounts payable and accrued expenses increased by $842,773 period-over-period, driven by the timing of vendor payments and accrued project costs. Accrued income taxes increased by $261,818, reflecting current period tax obligations. An increase in accrued payroll of $131,277 and $125,050. These sources of cash were
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partially offset by a $1,311,196 increase in inventory, reflecting material purchases to support the Company’s growing backlog and anticipated production requirements for programs scheduled for delivery over the next 12 months. The operating lease liability decreased by $151,817, corresponding to scheduled lease payments during the 2026 period.
Cash used in operating activities decreased to $1,129,756 for the year ended December 31, 2025 from $3,145,200 for the year ended December 31, 2024, primarily attributable to a lower net loss year-over-year, non-cash adjustments including approximately $1.4 million of depreciation and amortization, $1,658,070 in losses on revaluation of contingent consideration liabilities, $1,130,563 of stock-based compensation, and an increase in accounts payable and accrued expenses of $1,980,746, partially offset by increases in accounts receivable and inventory of $2,411,966 and $1,023,171, respectively, compared to the prior year cash used which was primarily driven by a net loss of $4,618,337, partially offset by a $1,561,981 non-cash loss on the deconsolidation of Aerofab, $1,114,046 of stock issuable for consulting services, and an increase in accounts payable and accrued expenses of $750,564.
Investing Activities — For the three months ended March 31, 2026, net cash used in investing activities was driven primarily by the purchase of property and equipment in the amount of $1.6 million, compared to $154,382 of such purchases during the three months ended March 31, 2025. The significant increase in capital expenditures period-over-period was primarily attributable to equipment purchases and facility buildout at Aerodyn to support its expanded workload, including increased program activity with GE, as well as the purchase of new equipment at V&M to support production capacity. Net cash used in investing activities in the three months ended March 31, 2025 was largely driven by purchases of property and equipment of approximately $66,132 and advances on related party note receivable of approximately $88,250.
For the year ended December 31, 2025, net cash used in investing activities was driven primarily by the purchase of property and equipment in the amount of $2.9 million, compared to $506,538 of such purchases during the year ended December 31, 2024. The significant increase in capital expenditures year-over-year was primarily attributable to equipment purchases and facility buildout at Aerodyn to support its expanded workload, including increased program activity with GE, as well as the purchase of new equipment at V&M to support production capacity. Net cash used in investing activities in 2024 was largely driven by purchases of property and equipment of approximately $506,000 and advances on related party note receivable of approximately $521,000, offset by the net cash acquired in the acquisition of Aerodyn, totaling $769,806.
Financing Activities — Net cash used in financing activities during the three months ended March 31, 2026 primarily consisted of repayments of long-term debt of $584,307, scheduled principal payments on finance lease obligations of $215,418, and borrowings under the Company’s revolving credit facility of $315,652, partially offset by proceeds of $540,377 from our sale of shares of PAD Preferred Stock. Net cash provided by financing activities during the three months ended March 31, 2025 consisted of $1.7 million of proceeds from our sale of shares of PAD Preferred Stock and proceeds from the Company’s revolving credit facility of $17,160, offset by repayments of long-term debt of $122,043, scheduled principal payments on finance lease obligations of $106,108.
Net cash provided by financing activities in the years ended December 31, 2025 and 2024 primarily consisted of the proceeds from the issuance of preferred stock of $4.5 million and $3.1 million, respectively.
Sources of Liquidity
Internal sources of liquidity include cash on hand and net cash generated from operating activities. External sources include our existing debt facility, which provides access to additional borrowings, and potential equity issuances. To the extent available, these external sources represent material unused liquidity that may be drawn upon to fund operations or capital needs.
We have historically been able to generate sufficient cash from operating activities to fund our core ongoing operations, and we expect to be able to fund our operations over the next 12 months in the same manner. To further support our growth strategy, including our acquisition activity and the costs associated with becoming a public company, we raised $1,840,000 through our Series D Preferred Stock offering during 2025 and 2026, $1,740,000 of which was raised as of December 31, 2025, and the PAD Board has authorized an offering of up to $2,000,000 of the PAD Series E Preferred Stock to support continued growth initiatives into 2026. PAD raised $980,000 through our Series E Preferred Stock offering during the 2026 calendar year, $475,000 of which was raised as of March 31,
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2026. We believe that cash flows from operations, together with proceeds from our ongoing equity offerings and the anticipated completion of the Business Combination, will be sufficient to fund our operations over the next 12 months, though no assurance can be given that such sources will be available on acceptable terms or in sufficient amounts.
Material Cash Requirements and Commitments
As of March 31, 2026, material contractual obligations include long-term debt payments, lease commitments, and planned capital expenditures, as described above. The general purpose of these requirements includes maintaining existing facilities, supporting production capacity, and funding working-capital needs. The Company expects to fund these obligations primarily through operating cash flows and available financing sources.
Trends, Events, and Uncertainties Affecting Liquidity
Liquidity may be favorably or unfavorably impacted by changes in customer demand, timing of collections, cost inflation, availability and cost of credit, and the level of required inventory purchases. A continuation of the working capital deficit, or unexpected increases in costs, could materially reduce liquidity. Conversely, improved gross margins and continued efficiencies in working-capital management could improve liquidity. Additionally, ongoing geopolitical instability, including the current armed conflict in the Middle East, could contribute to broader macroeconomic pressures such as elevated energy costs and supply chain disruptions that may indirectly affect the Company’s operating costs and liquidity position.
Management continues to monitor these factors closely and will consider further cost-reduction initiatives, capital-raising activities, or adjustments to capital-expenditure plans if necessary to support liquidity.
Critical Accounting Policies and Estimates
General and Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and have been consistently applied in the preparation of the consolidated financial statements. The consolidated financial statements include the accounts of its wholly and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although we believe that these estimates are reasonable, actual results could differ from those estimates given in conditions or assumptions that have been consistently applied.
Cash
Cash includes cash in banks. Currently, there are no money market funds or certificates of deposit.
Accounts Receivable
The Company does not currently maintain reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, client concentrations, client credit worthiness, current economic trends, and changes in client payment patterns to evaluate the adequacy of these reserves.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and impairment losses, if any. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of five to ten years, which includes warehouse equipment and furniture and fixtures.
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Revenue Recognition
The Company recognizes revenue from contracts with customers using the five-step model prescribed in ASC 606. The Company derives its revenue primarily from the sale of systems, parts, and components to the aerospace and defense industries. Revenues are recognized when control of these products is transferred to its customers upon receipt or shipment based on contract term, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and services. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expenses as incurred when the amortization period is less than a year.
Research and Development
The Company has not incurred any research and development expenditures to date.
Fair Value of Financial Instruments
We apply fair value accounting in accordance with “FASB” Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), which provides the framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would have been received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
|
Level 1 — |
Quoted prices in active markets for identical assets or liabilities. |
|||
|
Level 2 — |
Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable. |
|||
|
Level 3 — |
Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. |
As discussed above under “— Cash,” we currently do not hold any marketable securities or certificates of deposit, therefore no valuation techniques are used to measure the fair value of money market funds and certain marketable equity securities.
In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. We have not elected the fair value option as we have no eligible financial instruments.
Income Taxes
We provide for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Earnings Per Share of Common Stock
The Company reports net income per common share in accordance with FASB ASC 260, “Earnings per Share.” This statement requires a dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations.
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MANAGEMENT OF NEW PAD FOLLOWING THE BUSINESS COMBINATION
Unless the context otherwise requires, references in this subsection to “we,” “us” or “our” refer to the business of PAD prior to the consummation of the Business Combination, which will be the business of New PAD and its subsidiaries following the Business Combination.
The following table provides information regarding the expected executive officers of New PAD and the expected members of the New PAD Board:
|
Name |
Age |
Position |
||
|
Executive Officers |
||||
|
Brent Borden |
60 |
Chief Executive Officer |
||
|
Kevin Vermeulen II |
28 |
Chief Financial Officer |
||
|
Directors |
||||
|
Maynard Hellman |
81 |
Chairman of the Board |
||
|
Ronald Buschur |
62 |
Vice Chairman of the Board |
||
|
Glenn Argenbright |
60 |
Director |
||
|
Larry Thompson |
75 |
Director |
||
|
Dave Lawrence |
68 |
Director |
||
|
Adam Gishen |
51 |
Director |
||
|
[•] |
[•] |
Director |
Biographical information concerning New PAD’s anticipated executive officers and directors is set forth below.
Brent Borden joined PAD as its Chief Executive Officer in March 2025. He has over 20 years of experience in defense, aerospace and technology senior management following a 11-year career in the United States Army. From 1999 to 2003, he was the Global Account Manager for Powerwave Technologies, a telecommunications company specializing in providing wireless infrastructure and solutions. From 2003 to 2020, he was President and Owner of Aero Engineering, Inc., a company manufacturing defense, aerospace and space prototype and low-rate production projects on prime contracts. From 2015 through 2019, Mr. Borden was the General Partner for RITLA Capital, LLC, a search fund looking to acquire a lower middle market aerospace and defense company. From 2016 to 2018, Mr. Borden was also a Series 7/66 Registered Financial Advisor with Merrill Lynch, advising high net-worth clients. From 2018 to February 2025, he held a TS/SCI clearance and served as National Asset Sustainment Program Management Manager and Strategic Programs Development Leader in Global Security at the Kansas City National Security Campus, a government organization providing complex manufactured solutions for national security programs, from design and prototype to production and acceptance testing. From 2007 to 2009, Mr. Borden was a founding board member of Tactical Chaplain Services, a non-profit organization that provides Christian Chaplains for police, military and fire agencies. Mr. Borden has a B.S. degree in Engineering from the United States Military Academy at West Point and a dual M.A. in Business and Management from Webster University.
Kevin Vermeulen II joined PAD as its Chief Financial Officer on April 13, 2026. Prior to joining PAD, Mr. Vermeulen had been a Partner at TAP, a merchant banking and corporate advisory firm, since July 2020. In that capacity, Mr. Vermeulen advised clients across a broad spectrum of corporate finance matters, including public offerings, mergers and acquisitions, private placements of debt and equity, recapitalizations, and strategic advisory engagements. Mr. Vermeulen has developed a particular depth in public and private company transactions and capital markets execution, including the application of U.S. GAAP and SEC reporting requirements to transaction structuring and financial disclosure. In connection with these engagements, he has worked closely with management teams to develop strategy, execute growth initiatives, and develop the financial narrative presented to prospective public market investors. In his mergers and acquisitions experience, Mr. Vermeulen has led full-cycle transaction processes from initial origination through closing and post-closing integration. He has also advised early-stage and growth-stage companies on private capital formation, including the preparation of marketing materials and direct engagement with institutional and individual investors. Prior to joining TAP, Mr. Vermeulen served as an Associate in the Financial Markets Group of PricewaterhouseCoopers LLP, where he provided transaction advisory services and evaluated valuation methodologies and underwriting assumptions supporting securitized transactions. Mr. Vermeulen received a Bachelor of Science in Business Administration, with a major in Finance, from The Pennsylvania State University.
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Maynard J. Hellman has served as a Director and as Chairman of the Board of PAD since January 2024. Prior to that he had served as a Director of AOP Precision Products, LLC, which we acquired in January 2024 from January 2017 to January 2024. He also served as manager of PAD from July 27 through November 3, 2023, when PAD converted from a limited liability company to a corporation, and directed its operations until PAD’s hiring of a Chief Operating Officer in January 2024.
Mr. Hellman has practiced law for over 30 years, representing lenders and real estate developers in commercial transactions as well as corporate clients in various aspects of business transactions. From 2001 through 2012, Mr. Hellman was a founder, President, Board Chairman and General Counsel of Lakeview Health Systems, LLC, where he oversaw the company’s healthcare compliance, expansion and corporate governance. From 2013 to 2015, he was an investor, Director and General Counsel for Barnstar Opportunities Fund, overseeing compliance in the implementation of best practices. In 2017, Mr. Hellman, as counsel, guided PAD’s acquisition of V&M and became a member of its Board of Directors. During the last five years, he has continued consulting and rendering legal advice to business clients through his own firm, Law Office of Maynard Hellman. Mr. Hellman has an undergraduate degree in accounting and a Juris Doctor from the University of Miami.
Mr. Hellman also serves as Chair of the Audit Committee of the PAD Board.
PAD believes Mr. Hellman’s many years of working in the legal and financial realm qualifies him to serve as a Director of PAD and New PAD.
Ronald Buschur has served as a Director of PAD since January 2024 and as its Vice Chairman of the Board since March 2025. He also served as PAD’s Acting Chief Executive Officer from September 2024 to March 15, 2025. Mr. Buschur has over 30 years of experience in high-tech manufacturing senior management and had been involved in five companies in the fields of business intelligence, computer technology and business intelligence solutions. From 1994 through 2000, Mr. Buschur was the President and Chief Operating Officer of HMT Technology, a computer technology company. From 2000 to 2012, he was President and Chief Executive Officer of Powerwave Technologies, a company involved in global telecommunications. Since 2017 he has served as President and Chief Executive Officer of Advanced Medical Device Technologies, Inc., a medical device company that focuses on medical device technologies and designs. Mr. Buschur is also currently a director of PROPlus Technology, Inc., a provider of enterprise software solutions and cloud analytics specializing in in-store analytics and business intelligence. He has a certificate from University of Phoenix.
Mr. Buschur also serves as the Chair of the Compensation Committee of the PAD Board.
PAD believes that Mr. Buschur’s past experience as an executive officer of various other companies, including as President, Chief Executive Officer and Chief Operating Officer, qualifies him to serve as a Director of PAD and New PAD.
Glennon Argenbright has served as a Director of PAD since January 2024. He has worked at various companies in the technology industry, both public and private, holding positions including President, Chief Executive Officer and Chief Operating Officer. From 1997 through 1998, Mr. Argenbright was the President and Chief Executive Officer of Internet Extra Corporation/Mediaplex (Nasdaq — MPLX), a company in the field of online marketing and advertising. From 1998 to 1999, he was President of Intelligent Communications, a provider of two-way high-speed internet access over satellite. From 1999-2001, he was Chief Executive Officer of Jotter Technologies, a maker of adaptable plug-ins and integrated browser-based tools to assist users with online password management. Between 2001-2006, Mr. Argenbright was the Chief Executive Officer of Saflink Corporation (Nasdaq — SFLK), which provides enterprise solutions for use in large-scale credentialing, authentication and physical/logical access control environments. From 2006-2010, he was Chief Executive Officer of FLO Corp (Nasdaq — FLRP), a provider of biometric credentialing and authentication for airports and other large venues. During 2010-2012, he was an adviser to and Contract Chief Operating Officer for HealthNews, Inc., an online health portal and syndication platform. Between 2012-2015, Mr. Argenbright was an advisor to and Contract Chief Operating Officer of Catch5 / Cath5 Media, a company providing comprehensive online video advertising solutions. Since 2016, he has been the Founder and General Partner of Quake Capital Partners, a venture capital firm and startup accelerator. Mr. Argenbright is also currently a director of Strayos, an artificial intelligence company, SwineTech, Inc., an agritech enterprise software company, and Voiceitt Ltd., an AI-driven speech recognition technology company. He has an undergraduate degree from UC San Diego and a Juris Doctor from the University of San Diego School of Law.
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Mr. Argenbright also serves as the Chair of the Corporate Governance & Nominating Committee of the PAD Board.
PAD believes that Mr. Argenbright’s previous experience with having guided several companies through the process of going public and listing on a national securities exchange, as well as his experience as an executive of a public company, qualifies him to serve as a Director of PAD and New PAD.
Larry Thompson has been a member of the PAD Board since February 2024. He started his career in the private legal sector, before moving to The Depository Trust and Clearing Corporation (“DTCC”), where he held various positions from 1981 to 2019, including Associate Counsel from 1981 to 1991, Vice President and Deputy General Counsel from 1991 to 1993, Senior Vice President from 1993 to 1999 and General Counsel from 1999 to 2019. He served as Managing Director and First Deputy General Counsel at DTCC during 2005 and retired as General Counsel in 2005. Mr. Thompson is currently the Chairman of the Board of Directors of the Federal Home Loan Bank of New York, after serving as the Vice Chairman of the Board from 2021-2024. He has an undergraduate degree from Yale University and a Juris Doctor from the University of California, Berkeley — School of Law.
PAD believes that Mr. Thompson’s extensive career combining over 45 years of experience in corporate law, risk management, contracts and negotiation, regulatory affairs, litigation and human resources/labor matters in the financial and legal sectors as senior management, as well as his experience with DTCC and serving as the Chairman of the Federal Home Loan Bank of New York, qualifies him to serve as a Director of PAD and New PAD.
David Lawrence became a Director of PAD in January 2025. Mr. Lawrence founded and since 2002 has been the President of Aerodyn. Previously, he was involved in four companies in the technology and engineering sector. From 1984 to 1986, Mr. Lawrence was the Engineering Manager of Applied Sensor Technology, a manufacturer of various sensor types. From 1987 to 1993, he was President of Quality Aero Technology, a company specializing in logistics engineering. From 1994 to 1998, he was Senior Engineer of Rolls Royce, a multinational company that designs, manufactures and services power and propulsion systems for safety-critical applications. He has an undergraduate degree from the University of Michigan College of Engineering.
PAD believes that Mr. Lawrence’s broad knowledge and experience in the technology and engineering sector qualifies him to serve as a Director of PAD and New PAD.
Adam Gishen is FACT’s Chief Executive Officer and a director since July 2023. Mr. Gishen previously served as the Chief Executive Officer of Freedom Acquisition I Corp. from December 2020 to July 2023, prior to its business combination with Complete Solaria, Inc. (subsequently renamed SunPower Inc.) (Nasdaq: SPWR), a leading solar technology, services and installation company, and has since served as a director of SunPower Inc. Mr. Gishen has over 20 years of experience in financial services. Mr. Gishen served in several senior roles at Credit Suisse from 2015 to 2020, including Head of Investor Relations, Corporate Communications, Marketing and Branding from 2019 to 2020 and Head of Investor Relations and Corporate Communications from 2017 to 2019. Prior to 2015, Mr. Gishen was a Partner at Ondra Partners, a financial advisory firm, and prior to that, a Managing Director at Nomura in London and Lehman Brothers from 1999 to 2008 where he specialized in Equity Capital Markets. He graduated from University of Leeds. Given his extensive experience in leadership positions and prior work with a special purpose acquisition company, we believe Mr. Gishen will provide valuable perspectives and advice as we consider potential merger candidates.
PAD believes that Mr. Gishen’s previous financial services experience qualifies him to serve as a Director of New PAD.
Corporate Governance
Board Composition
The business and affairs of New PAD shall be managed by or under the direction of its Board of Directors. We anticipate that the New PAD Board will consist of seven members upon the Closing, with [•] serving as chairman. The primary responsibilities of the New PAD Board will be to provide oversight, strategic guidance, counseling and direction to the New PAD management. The New PAD Board will meet on a regular basis and additionally as required.
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In accordance with the terms of the New PAD Charter and the New PAD Bylaws, which will be effective upon the Closing, New PAD directors will be elected at each annual meeting of stockholders, and each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, disability, resignation, retirement, disqualification or removal.
Subject to the rights of holders of the Post-Closing Company preferred stock, any director may be removed from office only for cause and only by the affirmative vote of the holders of a majority of the total voting power of all then-outstanding shares of the Post-Closing Company entitled to vote in the election of directors, voting as a single class.
In accordance with the Business Combination Agreement, the Sponsor designated Adam Gishen to serve as a director of the New PAD Board.
Director Independence
We expect that the New PAD Board will determine that each of the directors on the New PAD Board, other than Dave Lawrence, will qualify as an independent director, as defined in NYSE’s rules, and that the New PAD Board will consist of a majority of “independent directors” as defined under the rules of the SEC and NYSE relating to director independence requirements. In addition, New PAD will be subject to the rules of the SEC and NYSE relating to the membership, qualifications, and operations of the Compensation Committee and the Audit Committee of the new PAD Board, as discussed below.
Family Relationships
There are no family relationships between or among any of New PAD’s anticipated executive officers or persons nominated to become directors of New PAD.
Board Committees
At the Effective Time, the New PAD Board will have an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will operate under a written charter to be effective following the Closing of the Business Combination that satisfies the applicable NYSE listing rules. In addition, from time to time, special committees may be established under the direction of the New PAD Board when necessary to address specific issues. Copies of each board committee’s charter will be posted on New PAD’s website. New PAD’s website and the information contained on, or that can be accessed through, such website are not deemed to be incorporated by reference in, and are not considered part of, this proxy statement/prospectus. The anticipated composition and responsibilities of each of the committees of the New PAD Board are described below. Members will serve on these committees until their resignation or until otherwise determined by the New PAD Board.
Audit Committee
The audit committee’s responsibilities will include:
• appointing, approving the compensation of, and assessing the independence of New PAD’s registered public accounting firm;
• overseeing the work of New PAD’s registered public accounting firm, including through the receipt and consideration of reports from such firm;
• reviewing and discussing with management and the registered public accounting firm New PAD’s annual and quarterly financial statements and related disclosures;
• coordinating the New PAD Board’s oversight of New PAD’s internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
• discussing New PAD’s risk management policies;
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• meeting independently with New PAD’s internal auditing staff, if any, registered public accounting firm and management;
• reviewing and discussing with management New PAD’s compliance with the FCPA;
• reviewing and approving or ratifying any related person transactions; and
• preparing the audit committee report required by the SEC rules.
We expect that the initial members of New PAD’s audit committee will be Maynard Hellman, Larry Thompson and Glenn Argenbright, each of whom meets the requirements for independence under the rules and regulations of the SEC and NYSE’s listing standards applicable to audit committee members. Each anticipated member of New PAD’s audit committee also meets the financial literacy requirements of NYSE’s listing rules. We expect that the New PAD Board will determine that each of Glenn Argenbright and Maynard Hellman is an audit committee financial expert as defined under the applicable rules of the SEC.
Compensation Committee
The compensation committee’s responsibilities will include:
• reviewing and approving, or recommending for approval by the New PAD Board, the compensation New PAD’s executive officers;
• overseeing and administering New PAD’s cash and the New PAD Incentive Plan;
• reviewing and making recommendations to the New PAD Board with respect to director compensation;
• reviewing and discussing annually with management New PAD’s “Compensation Discussion and Analysis,” to the extent required; and
• preparing the annual compensation committee report required by SEC rules, to the extent required.
We expect that the initial members of New PAD’s compensation committee will be Glenn Argenbright, Larry Thompson, and Ronald J. Buschur, each of whom meets the requirements for independence under the rules and regulations of the SEC and NYSE’s listing standards applicable to compensation committee members. Each member of the compensation committee will also be a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee’s responsibilities will include:
• identifying individuals qualified to become board members;
• recommending to the New PAD Board the persons to be nominated for election as directors and to each board committee;
• developing and recommending to the New PAD Board corporate governance guidelines, and reviewing and recommending to the New PAD Board proposed changes to our corporate governance guidelines from time to time;
• overseeing a periodic evaluation of the New PAD Board; and
• develop effective environmental, social and governance policies within the corporate governance guidelines to address social responsibility aimed at providing appropriate support to local communities within areas subject to hydrocarbon exploration operations, and environmental goals aimed at limiting the environmental footprint of operations, ameliorating any changes to the environment and targeting mechanisms to reduce or offset the carbon footprint of operations.
We expect that the initial members of New PAD’s nominating and corporate governance committee will be Glenn Argenbright, Ronald Buschur and Larry Thompson.
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Code of Business Conduct and Ethics
We expect the New PAD Board to adopt a Code of Business Conduct and Ethics in connection with the Business Combination. The Code of Business Conduct and Ethics will apply to all of New PAD’s employees, officers (including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), and directors, and will be available on New PAD’s website. New PAD’s intends to disclose future amendments to certain provisions of its Code of Business Conduct and Ethics on its website. The reference to New PAD’s website address in this proxy statement/prospectus does not include or incorporate by reference the information on New PAD’s website into this proxy statement/prospectus, and you should not consider that information a part of this proxy statement/prospectus.
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EXECUTIVE AND DIRECTOR COMPENSATION OF PAD
The following table sets forth the compensation awarded to, earned by, or paid to PAD’s named executive officers, as required by SEC regulations, during the fiscal years ended December 31, 2025 and December 31, 2024.
Summary Compensation Table
|
Name and Principal Position |
Year |
Salary |
Bonus |
Stock |
Option |
Total |
|||||||
|
Ronald Buschur,(2) Director and Former |
2025 |
180,500 |
|
— |
77,375 |
313 |
258,188 |
||||||
|
Acting Chief Executive Officer |
2024 |
94,750 |
(3) |
— |
38,230 |
31 |
133,011 |
||||||
|
Brent Borden(4) |
2025 |
249,375 |
|
125,568 |
218,484 |
— |
593,427 |
||||||
|
Chief Executive Officer |
2024 |
— |
|
— |
— |
— |
— |
||||||
|
Joseph Thiewes(5) |
2025 |
208,334 |
|
62,877 |
85,109 |
— |
356,320 |
||||||
|
Former Chief Financial Officer |
2024 |
— |
|
— |
— |
— |
— |
||||||
|
Jon Engman(6) |
2025 |
230,833 |
|
— |
4,067 |
— |
234,900 |
||||||
|
Former Chief Operating Officer |
2024 |
239,583 |
|
— |
16,268 |
— |
255,851 |
||||||
____________
(1) The aggregate grant date fair value of such awards was calculated in accordance with FASB ASC Topic 718. These amounts do not represent actual amounts paid or to be realized. Amounts shown are not necessarily indicative of values to be achieved, which may be more or less than the amounts shown as awards. For a discussion of the valuation assumptions with respect to such awards, see Note 12 to PAD’s consolidated financial statements that appear elsewhere in this proxy statement/prospectus.
(2) Ronald Buschur served as PAD’s Acting Chief Executive Officer from September 1, 2024 through March 15, 2025.
(3) Consists of (a) one-time payment by PAD of $20,000, (b) $56,000 for service as Acting Chief Executive Officer beginning September 1, 2024, and (c) fees earned in cash of $18,750 for his service as a Director of PAD.
(4) Brent Borden began his service as PAD’s Chief Executive Officer on March 16, 2025.
(5) Joseph Thiewes began his service as PAD’s Chief Financial Officer on March 1, 2025. Mr. Thiewes’ tenure as PAD’s Chief Financial Officer ended on March 16, 2026.
(6) Jon Engman served as PAD’s Chief Operating Officer from January 10, 2024 through February 1, 2025.
Employment Arrangements with Named Executive Officers
Brent Borden
Employment Agreement
PAD is party to an employment agreement with Brent Borden dated as of February 11, 2025, pursuant to which he is employed as PAD’s Chief Executive Officer. Mr. Borden’s employment agreement provides that it and Mr. Borden’s employment will terminate at the earliest of: (i) the end of the five-year term thereof as provided for therein; (ii) Mr. Borden’s death; (iii) Mr. Borden’s failure to be able to perform his duties for 60 days or 90 days in any 12-month period due to disability; (iv) PAD’s termination of Mr. Borden’s employment for Cause, as defined therein, or without Cause upon at least 30 days prior written notice; or (v) Mr. Borden’s termination of his employment for Good Reason, as defined therein, or without Good reason upon at least 60 days prior written notice. The agreement provides that PAD, at its option, can place Mr. Borden on “garden leave” during the period between notice of termination of employment and the effective date thereof, during which he will not perform work for PAD (unless asked to do so in writing) but will continue to receive his regular compensation.
Mr. Borden’s employment agreement provides that he receives an annual base salary of $315,000 and is entitled to 20 days of paid vacation annually and to participate in any and all group health, dental, disability, sick leave, life insurance, and other benefit plans or fringe benefits established by PAD for similarly-situated employees. The agreement also provides that Mr. Borden is entitled to an annual cash performance bonus of up to 50% of his base salary based on the achievement of individual and corporate performance targets established by the PAD Board or its compensation committee, as long as he is employed through the last day or the applicable fiscal year; no such performance targets, however, have been communicated to Mr. Borden to date. Finally, Mr. Borden is entitled to an annual equity grant up to an amount equal to 60% of his annual base salary during the first two fiscal years following March 16, 2025, 75% during the third and fourth fiscal years following March 16, 2025, and 100% during the fifth fiscal year, in an amount and with vesting and other terms as determined by the PAD Board or its compensation committee.
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If PAD terminates Mr. Borden’s employment for any reason other than Cause (other than by death or disability within 12 months after a Change in Control, as defined in his employment agreement) or Mr. Borden terminates his employment for Good Reason, then, assuming he executes and does not revoke a legal release in form and substance acceptable to PAD, Mr. Borden will be entitled to receive, in addition to any earned but unpaid compensation, (i) severance compensation consisting of his monthly base salary for six months, if terminated within 24 months after March 16, 2025, or 12 months if terminated thereafter, and (ii) should he so elect continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the full monthly premium for COBRA continuation coverage under PAD’s medical plan in effect on the date of his employment. In addition, all then-outstanding equity compensation awards shall remain outstanding, vest as stated in the original grant, and, if require exercise, remain exercisable for a period of 12 months.
The agreement also contains intellectual property, confidentiality, non-solicitation, non-disparagement and indemnification provisions.
Stock Award Agreement
On August 1, 2025, pursuant to a stock award agreement between PAD and Mr. Borden, PAD granted Mr. Borden under PAD’s 2024 Omnibus Securities and Incentive Plan, in respect of his services during the year ended December 31, 2025, 100,000 PAD Shares and 50,000 restricted stock units, the PAD Shares underlying which are issuable upon vesting. 7,143 of such restricted stock units vested, and as such 7,143 PAD Shares were issued to Mr. Borden, on each of October 1, 2025, January 1, 2026, and April 1, 2026. Assuming Mr. Borden is still employed with PAD and otherwise meets the vesting conditions on such date, 7,143 of such restricted stock units will vest on each of July 1, 2026, October 1, 2026, and January 1, 2027, and 7,142 of such restricted stock units will vest on April 1, 2027. If Mr. Borden’s employment is terminated as a result of his death, retirement, or disability, or if he is terminated without Cause, any remaining unvested restricted stock units will vest as of his date of termination; if his employment is terminated for any other reason, or he commits an Act of Misconduct, as defined in the stock award agreement, any unvested restricted stock units will be forfeited. Finally, any unvested restricted stock units will vest immediately upon a Change in Control (as defined in the stock award agreement) of PAD.
Joseph Thiewes
Employment Agreement
PAD was party to an employment agreement with Joseph Thiewes dated as of January 23, 2025, pursuant to which he was employed as PAD’s Chief Financial Officer. Mr. Thiewes’ employment agreement provided that it and Mr. Thiewes’ employment would terminate at the earliest of: (i) January 23, 2027, which is the end of the two-year term thereof as provided for therein; (ii) Mr. Thiewes’ death; (iii) Mr. Thiewes’ failure to be able to perform his duties for 60 days due to disability; (iv) PAD’s termination of Mr. Thiewes’ employment for Cause, as defined therein, or without Cause upon at least 30 days prior written notice; or (v) Mr. Thiewes’ termination of his employment for Good Reason, as defined therein, or without Good reason upon at least 60 days prior written notice. On January 15, 2026, Mr. Thiewes provided 60 days’ notice of his voluntary resignation (that is, without Good Reason) as Chief Executive Officer of PAD.
Mr. Thiewes’ employment agreement provided that he received an annual base salary of $250,000 and 20 days of paid vacation annually and was entitled to participate in any and all group health, dental, disability, sick leave, life insurance, and other benefit plans or fringe benefits established by PAD for similarly-situated employees. The agreement also provided that Mr. Thiewes is entitled to an annual cash performance bonus of up to 30% of his base salary based on the achievement of various levels of objectives, ranging from annually established performance objectives to milestones established by the PAD Board.
Jon Engman
On January 10, 2024, PAD entered into an employment agreement with Jon Engman, pursuant to which he served as PAD’s Chief Operating Officer and acting Chief Financial Officer. The agreement, which had a two-year term, provided that Mr. Engman received (i) an annual salary of $250,000, (ii) 1.0% of the PAD Shares outstanding as of January 15, 2024, subject to a 10-month vesting period (11,525 shares each month), and (iii) a discretionary bonus. Mr. Engman’s employment agreement provided that if PAD terminated the agreement without cause, PAD would pay Mr. Engman his base salary and benefits (including all insurance and paid time off) for six months. In connection with the termination of Mr. Engman’s employment effective as of February 1, 2025, PAD and Mr. Engman entered into an Employment Separation, Release and Waiver Agreement, effective as of February 1, 2025, pursuant to which
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PAD agreed to pay Mr. Engman (i) pursuant to the terms of his employment agreement, six months of his base salary plus insurance reimbursement in the amount then being spent by PAD for his insurance as of his termination date, or $499.40 per month, (ii) a performance bonus, paid time off and vacation benefits that accrued during his employment in an aggregate amount of $85,000, (iii) “piggy back” registration rights with respect to registering the resale of the PAD Shares that he received pursuant to his employment agreement, and (iv) reimbursement for his income tax liability with respect to such PAD Shares.
Ronald Buschur
As of September 1, 2024, the PAD Board appointed Ronald Buschur as PAD’s Acting Chief Executive Officer and resolved that he would receive as compensation therefor: (i) one-time payment of $20,000 as of September 1, 2024; (ii) $14,000 monthly; and (iii) 20,000 PAD Shares monthly, with a maximum of 100,000 shares. Mr. Buschur’s service as Acting Chief Executive Officer ended upon PAD’s hiring of Brent Borden as Chief Executive Officer on March 16, 2025.
Incentive Award Plans
On December 31, 2023, the PAD Board established the Precision Aerospace Group, Inc. 2024 Omnibus Securities and Incentive Plan (the “Plan”). The Plan was approved by the PAD Board as well as its shareholders on that date. The aggregate number of PAD Shares that may be issued under the Plan shall not exceed the sum of (i) 2,000,000 PAD Shares plus (ii) an annual increase on the first day of each calendar year beginning January 1, 2025 and ending on and including December 31, 2035 equal to the lesser of (A) 1,000,000 PAD Shares (for each of the first three consecutive years), (B) 10% of the PAD Shares outstanding on the final day of the immediately preceding calendar year, and (C) such smaller number of PAD Shares as determined by the PAD Board.
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding equity awards held by our named executive officers as of December 31, 2025:
|
Stock Awards |
|||||
|
Number of |
Market Value of |
||||
|
Brent Borden |
42,857 |
(1) |
12,801 |
||
____________
(1) 7,143 of the shares vested on each of January 1, 2026 and April 1, 2026, 7,143 of the shares will vest on each of July 1, 2026, October 1, 2026, and January 1, 2027, and 7,142 of the shares will vest on April 1, 2027.
Director Compensation
Ron Buschur is not listed in the Director Compensation Table as his compensation is reflected in the above Summary Compensation Table.
2025 Director Compensation Table
|
Name |
Fees Earned |
Stock |
Option |
All Other |
Total |
|||||||||||
|
Glenn Argenbright |
$ |
35,000 |
$ |
269,922 |
$ |
313 |
$ |
— |
|
$ |
305,325 |
|||||
|
Larry Thompson |
$ |
35,000 |
$ |
5,974 |
$ |
313 |
$ |
— |
|
$ |
41,287 |
|||||
|
Maynard Hellman |
$ |
47,500 |
$ |
22,402 |
$ |
313 |
$ |
— |
|
$ |
70,215 |
|||||
|
Dave Lawrence |
$ |
25,000 |
$ |
43,380 |
$ |
313 |
$ |
344,500 |
(3) |
$ |
413,193 |
|||||
____________
(1) The aggregate grant date fair value of such awards was calculated in accordance with FASB ASC Topic 718. These amounts do not represent actual amounts paid or to be realized. Amounts shown are not necessarily indicative of values to be achieved, which may be more or less than the amounts shown as awards. For a discussion of the valuation assumptions with respect to such awards, see Note 12 to PAD’s consolidated financial statements that appear elsewhere in this proxy statement/prospectus.
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(2) At December 31, 2025, each of Glenn Argenbright, Larry Thompson, Maynard Hellman and Ronald Buschur held outstanding options to purchase 23,958 PAD Shares and Dave Lawrence held outstanding options to purchase 12,500 PAD Shares.
(3) Represents compensation that Mr. Lawrence receives for his service as President of Aerodyn pursuant to his employment agreement with Aerodyn. Consists of salary and $9,100 of 401(k) contributions.
Pursuant to resolutions adopted by the PAD Board and letter agreements that PAD has entered into with each of its directors, PAD provides the following annual compensation to its non-employee directors, except for Mr. Buschur, for their service as directors: (i) a cash payment of $10,000 per quarter to the Chairman and $6,250 per quarter to each of the other directors; (ii) options to purchase 3,125 PAD Shares per quarter at an exercise price of $10.00; and (iii) for each Board committee meeting attended, a cash payment of $5,000 for the chairman of such committee and $2,500 for each other committee member. In addition, directors receive a grant of 20,000 PAD Shares upon joining the PAD Board.
During 2025, pursuant to a PAD Board resolution, PAD paid Mr. Bucher, for his service as Vice Chair of the Board, $14,000 per month from March 27, 2025 through December 31, 2025.
New PAD Executive Officer and Director Compensation
We expect that New PAD’s executive officers will enter into employment agreements with New PAD that will provide substantially similar compensation and other terms as their current employment agreements with PAD, and that the New PAD Board will establish a compensation plan for its non-employee directors that provides substantially similar terms as the compensation that PAD currently pays to its non-employee directors for their service on the PAD Board.
Other Employment Arrangements
PAD is party to an employment agreement with Kevin Vermeulen II dated as of April 13, 2026, pursuant to which he is employed as PAD’s Chief Financial Officer. Mr. Vermeulen’s employment agreement provides that it and Mr. Vermeulen’s employment will terminate at the earliest of: (i) April 13, 2028, which is the end of the two-year term thereof as provided for therein; (ii) Mr. Vermeulen’s’ death; (iii) Mr. Vermeulen’s failure to be able to perform his duties for 60 days due to disability; (iv) PAD’s termination of Mr. Vermeulen’s employment for Cause, as defined therein, or without Cause upon at least 30 days prior written notice; or (v) Mr. Vermeulen’s termination of his employment for Good Reason, as defined therein, or without Good reason upon at least 60 days prior written notice. The agreement provides that PAD, at its option, can place Mr. Vermeulen on “garden leave” during the period between notice of termination of employment and the effective date thereof, during which he will not perform work for PAD (unless asked to do so in writing) but will continue to receive his regular compensation.
Mr. Vermeulen’s employment agreement provides that he receives an annual base salary of $220,000 and is entitled to 15 days of paid vacation annually and to participate in any and all group health, dental, disability, sick leave, life insurance, and other benefit plans or fringe benefits established by PAD for similarly-situated employees. The agreement also provides that Mr. Vermeulen is entitled to an annual cash performance bonus of up to 30% of his base salary based on the achievement of various levels of objectives, ranging from annually established performance objectives to milestones established by the PAD Board. The agreement also provides that Mr. Vermeulen will be reviewed annually to determine his entitlement to a grant of PAD Shares or other form of equity grant up to an amount equal to 30% of his base salary.
If PAD terminates Mr. Vermeulen’s employment for any reason other than Cause or Mr. Vermeulen terminates his employment for Good Reason, then, assuming that he executes and does not revoke a legal release in form and substance acceptable to PAD, Mr. Vermeulen will be entitled to receive, in addition to any earned but unpaid compensation, three months of his base salary and health benefits for three months.
The agreement also contains intellectual property, confidentiality, non-competition, non-solicitation, and non-disparagement provisions.
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BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information regarding (i) the beneficial ownership of FACT Ordinary Shares as of March 31, 2026, which is prior to the consummation of the Business Combination, (ii) the beneficial ownership of PAD Shares, on an as-converted to common stock basis, as of March 31, 2026, which is prior to the consummation of the Business Combination, and (iii) the expected beneficial ownership of shares of New PAD Common Stock immediately following consummation of the Business Combination (under each of the three redemption scenarios) by:
• each of FACT’s current executive officers and directors;
• each of PAD’s current executive officers and directors;
• each person who will become an executive officer or director of New PAD post-Business Combination;
• all executive officers and directors of FACT as a group pre-Business Combination, all executive officers and directors of PAD as a group pre-Business Combination, and all executive officers and directors of New PAD as a group post-Business Combination; and
• each person who is expected to be the beneficial owner of more than 5% of New PAD Common Stock post-Business Combination.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options that are currently exercisable or exercisable within 60 days. In computing the number of shares beneficially owned by a person or entity and the percentage ownership of that person or entity in the table below, all shares subject to option held by such person or entity were deemed outstanding prior to the Business Combination if such securities are currently exercisable, or exercisable within 60 days of March 31, 2026 and were deemed outstanding post-Business Combination if such securities are exercisable within 60 days of the Closing. These shares were not deemed outstanding, however, for the purpose of computing the percentage ownership of any other person or entity.
The beneficial ownership of FACT Ordinary Shares pre-Business Combination is based on 24,321,458 Ordinary Shares issued and outstanding as of March 31, 2026, which includes 18,488,125 FACT Class A Shares and 5,833,333 FACT Class B Shares.
The beneficial ownership of PAD Shares pre-Business Combination is based on 12,402,577 shares issued and outstanding as of March 31, 2026, on an as-converted to PAD Shares basis.
The expected beneficial ownership of shares of New PAD Common Stock post-Business Combination assumes three scenarios:
• No Redemptions Scenario: This scenario assumes no redemption of the Public Shares, FACT Forfeited Shares of 1,878,333, 600,000 Sponsor Performance Bonus Shares and no forfeiture of Sponsor HoldCo Contributed Shares.
• 50% Redemptions Scenario: This scenario assumes that holders of 8,750,000 Public Shares, or approximately 50% of the Public Shares subject to redemption, will exercise their redemption rights for aggregate redemption proceeds of $92.7 million, FACT Forfeited Shares of 1,878,333, 600,000 Sponsor Performance Bonus Shares and no forfeiture of Sponsor HoldCo Contributed Shares.
• Full Redemptions Scenario: This scenario assumes that holders of 17,500,000 Public Shares, or 100% of the Public Shares subject to redemption, will exercise their redemption rights for aggregate redemption proceeds of $185.3 million, FACT Forfeited Shares of 1,878,333, no Sponsor Performance Bonus Shares and no forfeiture of Sponsor HoldCo Contributed Shares.
Each redemption scenario also assumes the sale of 7,500,000 shares at a $10.00 share price in the Financings.
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Based on the foregoing assumptions, we estimate that there would be 44,464,548 shares of New PAD Common Stock issued and outstanding immediately following the consummation of the Business Combination in the No Redemptions Scenario, 35,714,548 shares of New PAD Common Stock issued and outstanding immediately following the consummation of the Business Combination in the 50% Redemptions Scenario, and 26,364,548 shares of New PAD Common Stock issued and outstanding immediately following the consummation of the Business Combination in the Full Redemptions Scenario. If the actual facts are different from the foregoing assumptions, ownership in New PAD and the columns under Post-Business Combination in the table that follows will be different.
|
Pre-Business Combination |
Post-Business Combination |
||||||||||||||||||||||||
|
No Redemptions |
50% Redemptions |
Full Redemptions |
|||||||||||||||||||||||
|
Name and Address of Beneficial Owner(1) |
FACT |
% |
PAD |
% |
New PAD |
% |
New PAD |
% |
New PAD |
% |
|||||||||||||||
|
FACT Pre-Business Combination(3) |
|
|
|
|
|
||||||||||||||||||||
|
Adam Gishen(4) |
788,136 |
3.2 |
% |
|
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||||||||
|
Min Lee(4) |
788,136 |
3.2 |
% |
|
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||||||||
|
Richard Nespola, Jr.(4) |
788,136 |
3.2 |
% |
|
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||||||||
|
Joseph Wagman(4) |
788,136 |
3.2 |
% |
|
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||||||||
|
Robert Rackind(5) |
159,706 |
0.7 |
% |
|
148,128 |
0.3 |
% |
148,128 |
0.4 |
% |
145,324 |
0.6 |
% |
||||||||||||
|
Nell Cady-Kruse |
30,000 |
0.1 |
% |
|
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||||||||
|
James Rallo |
30,000 |
0.1 |
% |
|
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||||||||
|
Hella Alashkar |
30,000 |
0.1 |
% |
|
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
30,000 |
0.1 |
% |
||||||||||||
|
FACT II Acquisition LLC(4)(6) |
3,196,083 |
13.1 |
% |
|
1,958,116 |
4.4 |
% |
1,958,116 |
5.5 |
% |
1,658,408 |
6.3 |
% |
||||||||||||
|
Underwriters – CCM and Seaport(7) |
223,125 |
0.9 |
% |
|
223,125 |
0.5 |
% |
223,125 |
0.6 |
% |
223,125 |
0.8 |
% |
||||||||||||
|
All FACT directors and officers as a group (8 individuals) |
3,402,250 |
14.0 |
% |
|
2,161,884 |
4.9 |
% |
2,161,884 |
6.1 |
% |
1,861,592 |
7.1 |
% |
||||||||||||
|
PAD Directors and Executive Officers Pre-Business Combination |
|
|
|
|
|
||||||||||||||||||||
|
Maynard Hellman |
|
592,000 |
4.8 |
% |
592,000 |
1.3 |
% |
592,000 |
1.7 |
% |
592,000 |
2.2 |
% |
||||||||||||
|
Ronald Buschur |
|
350,000 |
2.8 |
% |
350,000 |
0.8 |
% |
350,000 |
1.0 |
% |
350,000 |
1.3 |
% |
||||||||||||
|
Glenn Argenbright |
|
180,000 |
1.5 |
% |
180,000 |
0.4 |
% |
180,000 |
0.5 |
% |
180,000 |
0.7 |
% |
||||||||||||
|
Larry Thompson |
|
40,000 |
0.3 |
% |
40,000 |
0.1 |
% |
40,000 |
0.1 |
% |
40,000 |
0.2 |
% |
||||||||||||
|
Dave Lawrence |
|
— |
0.0 |
% |
— |
— |
% |
— |
— |
% |
— |
— |
% |
||||||||||||
|
Brent Borden(8) |
|
414,286 |
3.3 |
% |
414,286 |
0.9 |
% |
414,286 |
1.2 |
% |
414,286 |
1.6 |
% |
||||||||||||
|
Kevin Vermeulen II |
|
436,000 |
3.5 |
% |
436,000 |
1.0 |
% |
436,000 |
1.2 |
% |
436,000 |
1.7 |
% |
||||||||||||
|
All PAD directors and officers as a group (7 individuals) |
|
2,012,286 |
16.2 |
% |
2,012,286 |
4.5 |
% |
2,012,286 |
5.6 |
% |
2,012,286 |
7.6 |
% |
||||||||||||
|
New PAD Directors and Executive Officers Post-Business Combination |
|
|
|
|
|
||||||||||||||||||||
|
Brent Borden(9) |
|
|
421,786 |
0.9 |
% |
421,786 |
1.2 |
% |
421,786 |
1.6 |
% |
||||||||||||||
|
Kevin Vermeulen II |
|
|
436,000 |
1.0 |
% |
436,000 |
1.2 |
% |
436,000 |
1.7 |
% |
||||||||||||||
|
Maynard Hellman(10) |
|
|
602,000 |
1.4 |
% |
602,000 |
1.7 |
% |
602,000 |
2.3 |
% |
||||||||||||||
|
Ronald Buschur |
|
|
350,000 |
0.8 |
% |
350,000 |
1.0 |
% |
350,000 |
1.3 |
% |
||||||||||||||
|
Glenn Argenbright(11) |
|
|
200,000 |
0.4 |
% |
200,000 |
0.6 |
% |
200,000 |
0.8 |
% |
||||||||||||||
|
Larry Thompson(12) |
|
|
72,000 |
0.2 |
% |
72,000 |
0.2 |
% |
72,000 |
0.3 |
% |
||||||||||||||
|
Dave Lawrence |
|
|
1,125,000 |
2.5 |
% |
1,125,000 |
3.1 |
% |
1,125,000 |
4.3 |
% |
||||||||||||||
|
Adam Gishen |
|
|
480,939 |
1.1 |
% |
480,939 |
1.3 |
% |
406,567 |
1.5 |
% |
||||||||||||||
|
All New PAD directors and executive officers as a group (8 individuals) |
|
|
3,687,725 |
8.3 |
% |
3,687,725 |
10.3 |
% |
3,613,353 |
13.7 |
% |
||||||||||||||
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|
Pre-Business Combination |
Post-Business Combination |
||||||||||||||||||||||||
|
No Redemptions |
50% Redemptions |
Full Redemptions |
|||||||||||||||||||||||
|
Name and Address of Beneficial Owner(1) |
FACT |
% |
PAD |
% |
New PAD |
% |
New PAD |
% |
New PAD |
% |
|||||||||||||||
|
5% Holders in PAD Pre-Business Combination |
|
|
|
|
|
||||||||||||||||||||
|
Ali Razavi(13) |
|
749,840 |
6.0 |
% |
759,840 |
1.7 |
% |
759,840 |
2.1 |
% |
759,840 |
2.9 |
% |
||||||||||||
|
Alyce Schrieber |
|
692,397 |
5.6 |
% |
692,397 |
1.6 |
% |
692,397 |
1.9 |
% |
692,397 |
2.6 |
% |
||||||||||||
|
AOP GP – Luxemborg(14) |
|
687,020 |
5.5 |
% |
687,020 |
1.5 |
% |
687,020 |
1.9 |
% |
687,020 |
2.6 |
% |
||||||||||||
|
William Arthur Fickling III |
|
915,537 |
7.4 |
% |
915,537 |
2.1 |
% |
915,537 |
2.6 |
% |
915,537 |
3.5 |
% |
||||||||||||
|
All 5% Holders in PAD Pre-Business Combination |
|
3,044,794 |
24.5 |
% |
3,054,794 |
6.9 |
% |
3,054,794 |
8.6 |
% |
3,054,794 |
11.6 |
% |
||||||||||||
|
5% Holders in FACT Pre-Business Combination(14) |
|
|
|
|
|
||||||||||||||||||||
|
Entities affiliated with AQR Capital Management, LLC(15) |
1,277,639 |
5.3 |
% |
|
1,277,639 |
2.9 |
% |
638,820 |
1.8 |
% |
— |
— |
% |
||||||||||||
|
Picton Mahoney Asset Management(16) |
1,250,000 |
5.1 |
% |
|
1,250,000 |
2.8 |
% |
625,000 |
1.7 |
% |
— |
— |
% |
||||||||||||
|
Barclays PLC(17) |
1,328,519 |
5.5 |
% |
|
1,328,519 |
3.0 |
% |
664,260 |
1.9 |
% |
— |
— |
% |
||||||||||||
|
All 5% Holders in FACT Pre-Business Combination |
3,856,158 |
15.9 |
% |
|
3,856,158 |
8.7 |
% |
1,928,079 |
5.4 |
% |
— |
— |
% |
||||||||||||
____________
(1) Unless otherwise noted, the business address of each FACT director and executive officer is 14 Wall Street, 20th Floor, New York, New York 10005, and the business address of each PAD director and executive officer and each New PAD director and executive officer is 7500 College Blvd, 5th Floor, Overland Park, KS 66210.
(2) FACT Ordinary Shares include 17,500 Units held at the Sponsor, 5,613,333 Class B Shares, 422,500 Private Placement Units, 325,000 restricted FACT Class A Shares (which shares would vest only upon the consummation of our initial business combination) held at the Sponsor HoldCo, 220,000 shares held by four members of the FACT Board, and 223,125 shares are held by CCM and Seaport.
(3) Interests shown consist solely of FACT Class B Shares. Such shares will convert into FACT Class A Shares on a one-for-one basis, subject to adjustment, at the time of the Business Combination or earlier at the option of the holder.
(4) Sponsor HoldCo is the record holder of 5,613,333 Founder Shares (includes 20,000 shares of New PAD Common Stock to be transferred to the Senior Advisor post-Closing). The Sponsor is the managing member of Sponsor HoldCo. Investment and voting decisions are made by 51% or more of the voting power held by the managing member of Sponsor HoldCo. By virtue of having a greater than 51% interest in the voting power in Sponsor HoldCo, the Sponsor may be deemed to beneficially own the founder shares held by Sponsor HoldCo. The members of the Sponsor are Adam Gishen, Min Lee, Richard Nespola, Jr. and Joseph Wagman, who by virtue of their control of the Sponsor may be deemed to share beneficial ownership of the Founder Shares held by Sponsor HoldCo. Each member holds an equal 25% interest in the Sponsor. Each of Messrs. Gishen, Lee, Nespola and Wagman disclaims beneficial ownership of the Founder Shares held by Sponsor HoldCo.
(5) Interest shown is related to Robert Rackind’s service as FACT’s Executive Chairman. Separately, Mr. Rackind holds Class B membership units in Sponsor HoldCo as a non-managing Sponsor HoldCo investor.
(6) Certain non-managing Sponsor HoldCo investors have (A) purchased approximately $88 million of the FACT Units in the IPO at the offering price and (B) purchased, indirectly through the purchase of non-managing Sponsor HoldCo membership interests, (i) an aggregate of 260,000 Private Placement Units at a price of $10.00 per unit and (ii) 162,500 Private Placement Units and 325,000 restricted FACT Class A Shares, which shares would vest only upon the consummation of the initial business combination, at a combined price of $10.00 per Private Placement Security ($4,225,000 in the aggregate), reflecting the issuance of restricted FACT Class A Shares at no additional price; subject to each non-managing Sponsor HoldCo investor purchasing, indirectly through Sponsor HoldCo, the Private Placement Units or Private Placement Securities, as applicable, allocated to it, Sponsor HoldCo issued membership interests at a nominal purchase price to the non-managing Sponsor HoldCo investors at the closing of the IPO reflecting interests in an aggregate of 5,593,333 Founder Shares (of which 3,135,044 Founder Shares are indirectly held by the Sponsor through Sponsor HoldCo) and 325,000 restricted FACT Class A Shares, as applicable, held by Sponsor HoldCo. Sponsor HoldCo has agreed to reserve 20,000 Founder Shares to sell and transfer to a senior advisor of FACT, following the consummation of an initial business combination, in consideration for advisory services to be provided by such senior advisor to FACT in connection with the initial business combination; the aforementioned 5,593,333 Founder Shares excludes such reserved 20,000 Founder Shares. The non-managing Sponsor HoldCo investors are not granted any shareholder or other rights in addition to those afforded to the other Public Shareholders, and will only be issued membership interests in Sponsor HoldCo, with no right to control Sponsor HoldCo or vote or dispose of any securities held by Sponsor HoldCo, including the Founder Shares held by Sponsor HoldCo.
(7) Represents Private Placement Units held by CCM and Seaport, and an aggregate of 28,687 Private Placement Units transferred thereby.
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Table of Contents
(8) Includes 7,500 PAD Shares issuable upon conversion of 10,000 shares of PAD Series D Preferred Stock held by Mr. Borden. Shares of PAD Series D Preferred Stock were issued at a price of $5.00 per share and are convertible into PAD Shares at a ratio of 1.5 PAD Shares for each share of PAD Series D Preferred Stock.
(9) Includes 10,000 PAD Shares issuable upon conversion of 20,000 shares of PAD Series C Preferred Stock held by Mr. Hellman. Shares of PAD Series C Preferred Stock were issued at a price of $5.00 per share and are convertible into PAD Shares on a dollar-for-dollar basis at a conversion price of $10.00 per share, resulting in a conversion rate of 0.5 PAD Shares for each share of PAD Series C Preferred Stock.
(10) Includes 20,000 PAD Shares issuable upon conversion of 40,000 shares of PAD Series C Preferred Stock held by Mr. Argenbright. Shares of PAD Series C Preferred Stock were issued at a price of $5.00 per share and are convertible into PAD Shares on a dollar-for-dollar basis at a conversion price of $10.00 per share, resulting in a conversion rate of 0.5 PAD Shares for each share of PAD Series C Preferred Stock.
(11) Includes 29,000 PAD Shares issuable upon conversion of the following shares of PAD Preferred Stock held by Mr. Thompson: (i) 10,000 shares of PAD Series A Preferred Stock, convertible on a dollar-for-dollar basis at a conversion price of $10.00 per share into 5,000 PAD Shares; (ii) 30,000 shares of PAD Series C Preferred Stock, convertible on a dollar-for-dollar basis at a conversion price of $10.00 per share into 15,000 PAD Shares; and (iii) 6,000 shares of PAD Series D Preferred Stock, convertible at a ratio of 1.5 PAD Shares for each share of PAD Series D Preferred Stock into 9,000 PAD Shares.
(12) Includes 10,000 shares of Common Stock issuable upon conversion of 20,000 shares of Series C Preferred Stock held by Mr. Razavi. Shares of Series C Preferred Stock were issued at a price of $5.00 per share and are convertible into shares of Common Stock on a dollar-for-dollar basis at a conversion price of $10.00 per share, resulting in a conversion rate of 0.5 shares of Common Stock for each share of Series C Preferred Stock.
(13) See Note 5 for the details regarding Sponsor HoldCo’s beneficial ownership.
(14) Dominick Brookman holds voting and investment power over, and is therefore the beneficial owner of, the shares held by AOP GP — Luxemborg.
(15) Based solely on information contained in a Schedule 13G filed on May 14, 2025, by or on behalf of AQR Capital Management, LLC (“AQR”), AQR Capital Management Holdings, LLC (“AQR Holdings”) and AQR Arbitrage, LLC (“AQR Arbitrage”), each of which share voting and dispositive power with respect to the reported securities. The address of the business office of each of AQR, AQR Holdings and AQR Arbitrage is One Greenwich Plaza, Suite 130, Greenwich, CT 06830.
(16) Based solely on information contained in a Schedule 13G filed on May 13, 2025, by Picton Mahoney Asset Management. The address of the business office of Picton Mahoney Asset Management is 33 Yonge Street, #320, Toronto, ON M5E 1G4 Canada.
(17) Based solely on information contained in a Schedule 13G filed on May 13, 2025, by Barclays PLC. The address of the business office of Barclays PLC is 1 Churchill Place, London — E14 5HP.
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Table of Contents
CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS
PAD
Issuance of PAD Shares in Connection with Reverse Stock Split
As previously discussed, effective January 1, 2026, PAD effected a 12.945% reverse stock split of the issued and outstanding PAD Shares, structured as an effective 12.945% reduction in shares outstanding, and 26 PAD Stockholders were issued an aggregate of 2,427,299 PAD Shares to prevent the Reverse Split from affecting the number of PAD Shares that these PAD Stockholders owned; this will result in those 26 PAD Stockholders receiving a larger percentage of the Merger Consideration than they would have received absent the issuance of these additional PAD Shares to them. These 26 PAD Stockholders included PAD’s executive officers, the members of the PAD Board, and firms that are providing or have provided professional services to PAD, including employees and affiliates of TAP, as set forth below:
|
Name |
Position or Relationship with PAD |
Number of |
Number of |
|||
|
Ali Razavi |
Greater than 5% stockholder of PAD |
224,980 |
224,980 |
|||
|
Alyce Schrieber |
Partner of TAP; Greater than 5% stockholder of PAD |
207,745 |
207,745 |
|||
|
AOP GP – Luxemborg |
Greater than 5% stockholder of PAD |
206,131 |
206,131 |
|||
|
Brent Borden |
Chief Executive Officer |
120,015 |
120,015 |
|||
|
Dominic Brookman |
Holds voting and investment power over, and is therefore the beneficial owner of, the shares held by AOP GP – Luxemborg |
6,001 |
6,001 |
|||
|
Doug Melvin |
General Manager of Aerofab |
112,514 |
112,514 |
|||
|
Glenn Argenbright |
Director of PAD; director nominee of New PAD |
54,007 |
54,007 |
|||
|
Joseph Thiewes |
Former Chief Financial Officer |
42,005 |
42,005 |
|||
|
Kevin Vermeulen |
Partner of TAP (on effective date of the Reverse Split); currently Chief Financial Officer of PAD |
130,816 |
130,816 |
|||
|
Larry Thompson |
Director of PAD; director nominee of New PAD |
12,001 |
12,001 |
|||
|
Lucosky Brookman LLP |
Outside counsel |
15,002 |
15,002 |
|||
|
Maynard Hellman |
Chairman of the Board; director nominee of New PAD |
177,622 |
177,622 |
|||
|
Nelson Lamis |
Secretary of TAP |
15,002 |
15,002 |
|||
|
Ronald Buschur |
Director of PAD; director nominee of New PAD |
105,013 |
105,013 |
|||
|
William Arthur Fickling III |
Greater than 5% stockholder of PAD |
274,695 |
274,695 |
Aerodyn
PAD’s Aerodyn subsidiary leases two properties, including its principal executive office, from real estate companies wholly owned by David Lawrence, one of its directors. For its Indianapolis, Indiana facility, Aerodyn currently pays a monthly rent of $24,248.60 with 2.0% bi-annual increases, for a term of 186 months expiring on December 31, 2034. For its Whitestown, Indiana facility, Aerodyn pays a monthly rent of $11,000 with 2.0% bi-annual increases, for a term of 120 months expiring on February 28, 2032. PAD paid these companies an aggregate of approximately $101,550 and $408,486, respectively, during the three months ended March 31, 2026 and the year ended December 31, 2025, in connection with its leasing of these properties.
In addition, Aerodyn had a note payable with one of these entities, Aerodyn Real Estate II, LLC, which bears interest at an annual rate of 8% and was due on September 12, 2025. As of March 31, 2026 and December 31, 2025, there are no amounts remaining outstanding on the note.
Further, Aerodyn was a guarantor of term debt issued to the real estate companies owned by Mr. Lawrence. The term debt has an aggregate outstanding principal balance of approximately $2,650,000 at March 31, 2026 and $2,680,000 at December 31, 2025. The facility notes mature on September 12, 2026 through October 1, 2042. The estimated maximum potential amount of undiscounted future payments that the Company could be required to make in the event of nonperformance by the real estate companies, assuming that the payments were allowed to continue as
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Table of Contents
provided in the related master loan agreement, aggregate approximately $3,770,000 on March 31, 2026 and $3,840,000 on December 31, 2025. There are no recourse provisions for PAD to recover any payment that it might be required to make under these guarantees, and it does not hold any collateral for its guarantees.
Finally, Mr. Lawrence and his daughter, Nicole Abernathy, are employees of Aerodyn. Mr. Lawrence serves as Chief Technology Officer of Aerodyn at an annual base salary of $338,000 and Ms. Abernathy serves as Vice President of Aerodyn at an annual base salary of $165,000.
TAP Financial Partners, Ltd.
On January 1, 2024, PAD entered into a consulting agreement with TAP providing that TAP will provide to PAD comprehensive advisory services, including business model evaluation, acquisition support, and financing assistance. With respect to acquisitions, the agreement provides that TAP will provide the following services to PAD: (i) assemble the acquisition strategy; (ii) perform the due diligence process on behalf of PAD; (iii) assist with the pricing and negotiations as to structure of the acquisitions; (iv) address any short term or long-term capital requirements as needed for the acquisitions; (v) assist with the legal framework of each acquisition including purchase documentation, contracts and other material agreements; and (vi) work with PAD to ensure smooth post-closing transitions of the acquisitions. In this regard, PAD has provided the following services with respect to PAD’s M&A Activity:
• Strategy & Targeting: TAP works with PAD management to define acquisition criteria aligned with PAD’s strategic plan, whether that’s expanding into adjacent verticals, adding skilled personnel, or building scale for prime contractor eligibility thresholds. From there, TAP builds a target universe, screens it against financial and operational filters (revenue mix, contract backlog, margin profile, customer concentration), and prioritizes outreach.
• Outreach & Preliminary Evaluation: TAP manages confidential outreach to targets, negotiates NDAs, and coordinates the exchange of preliminary information. For each viable target, TAP prepares a preliminary assessment based on the preliminary diligence.
• Letter of Intent / Indicative Offer: TAP works with management to structure and draft the indicative offer or letter of intent, advising on purchase price range, consideration mix (cash, stock, earnouts, and contingent consideration), and key deal terms, working capital targets and employment arrangements.
• Due Diligence Management: TAP coordinates the full diligence workstream across legal, financial, tax, cyber/IT, and operational tracks. TAP manages the virtual data room, tracks open items, and synthesizes findings into a diligence summary that feeds the final valuation. Upon completion of diligence, TAP prepares a due diligence report consolidating findings across all workstreams into a deliverable. The report includes an executive summary of the target business and an assessment of risks and mitigants identified during diligence (with particular emphasis on backlog durability, customer concentration, contract exposure, and key-person dependencies).
• Negotiation and Definitive Agreement: TAP leads or co-leads negotiations on the purchase agreement alongside counsel, focusing on purchase price, representations and warranties (particularly around government contract compliance, intellectual property ownership, and cybersecurity), indemnification provisions, interim operating covenants, and closing conditions.
The consulting agreement provides that PAD will pay TAP a monthly retainer of $25,000, increasing by $5,000 on each 12-month anniversary of the agreement as well as additional increases upon PAD consummating an initial public offering whereby the retainer shall be increased to $30,000 or 0.75% of the gross trailing quarterly revenue, whichever is higher, but not to exceed $50,000 per month. Fees in excess of the monthly retainer are for additional resources required by PAD for accounting, administrative, and non-M&A related advisory services. Additional fees are also payable for financing M&A transactions facilitated by TAP, with other growth-driven payments potentially included. Pursuant to the agreement, PAD is required to reimburse TAP for reasonable out-of-pocket expenses related to their services. In addition, the agreement provides that a portion of the M&A transaction fees, which are equal to 2.5% of the acquired entity’s value, is payable in PAD Shares in an amount equal to the amount of the related fee divided by the offering price of the PAD Shares in PAD’s initial public offering.
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Pursuant to the agreement, PAD incurred total consulting and other fees of $1,500,000 during the year ended December 31, 2025 and $276,128 from January 1, 2026 through May 18, 2026. As of May 18, 2026, approximately $2,516,035 was due to TAP, which includes approximately $1,371,120 of stock payable, representing fees for services rendered under the agreement that are due upon closing of pending acquisitions.
In accordance with the consulting agreement, during the year ended December 31, 2025 and from January 1, 2026 through May 18, 2026, PAD issued TAP options to purchase 160,000 and 40,000, respectively, PAD Shares with an aggregate grant date fair value of approximately $7,529 and $0, respectively, which are exercisable for a period of four years from the date of closing of the Merger.
William Arthur Fickling III, who owns in excess of 5.0% of the outstanding PAD Shares, owns greater than 10% of TAP. See “Beneficial Ownership of Securities.” In November 2023, PAD issued to certain designees of TAP a total of 1,473,000 shares of PAD Common Stock that had a value, at the issuance date, of $316,695. See “— Lock-Up Agreements.”
Aerospace Opportunity Partners, LP
PAD and its subsidiaries previously loaned funds to AOP, for which AOP issued various promissory notes. AOP owned a majority of PAD’s membership interests through November 3, 2023 and, following PAD’s conversion to a corporation, owned a majority of the PAD Shares through July 10, 2024. On July 11, 2024, AOP distributed its PAD Shares to its limited partners and, as of such date, AOP no longer owns any PAD Shares. On December 31, 2022, AOP issued a promissory note to Maney in the principal amount of approximately $317,579, the proceeds of which AOP used for its operating expenses. The note matured on December 31, 2025, and accrued interest at 3% per annum. On December 31, 2023, AOP issued three promissory notes: (a) one to PAD in the principal amount of $399,000 (the proceeds of which AOP used for operating expenses); (b) one to V&M in the principal amount of $327,000 (the proceeds of which AOP used to repay portions of its acquisition promissory note and a prior note it had issued to V&M); and (c) one to Maney in the principal amount of $264,504 (the proceeds of which AOP used to repay portions of its acquisition promissory note and the prior V&M note). Each of the foregoing notes matured on December 31, 2026, and accrued interest at 3% per annum. On December 31, 2024, AOP received a distribution from PAD in the amount of $1,356,852, representing the outstanding balance and accrued interest of the above promissory notes and resulting in a reduction of the outstanding balance of various promissory notes to zero as of December 31, 2024. AOP used the proceeds of this promissory note for its operating expenses.
During 2024 and 2023, PAD incurred expenses on behalf of AOP. The outstanding balance due from AOP as of December 31, 2023 was $39,606. As of December 31, 2024, the Company declared a distribution in the amount of $379,026, representing the outstanding balance of the expenses incurred on the behalf of AOP resulting in a reduction of the outstanding balance owed from AOP as of December 31, 2024 to zero.
From January 1, 2025 through December 31, 2025, PAD incurred expenses on behalf of AOP and advanced it funds totaling $355,048. During the year ended December 31, 2025, PAD declared a distribution to AOP in the amount of $355,812, resulting in a reduction of the outstanding balance owed from AOP as of December 31, 2025 to $0.
Maynard J. Hellman, a Director of PAD, has been a director of AOP GP, Ltd. (“AOP GP”), the general partner of AOP, since October 2023. A designee of AOP GP holds 692,397 PAD Shares over which AOP GP exercises voting and investment control.
PAD Support Agreements
Pursuant to the Business Combination Agreement, PAD, us and each of the PAD Supporting Stockholders entered into a PAD Support Agreement. Pursuant to the PAD Support Agreements, each PAD Supporting Stockholder has agreed to vote: (i) in favor of each of the Business Combination Agreement and the Business Combination and any other matters necessary or reasonably requested by PAD for consummation of the Merger or any other transactions contemplated by the Business Combination Agreement and the approval of the Business Combination; (ii) against any proposal relating to an Alternative Transaction; and (iii) against any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or us of, prevent or nullify any provision of the Business Combination Agreement.
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Table of Contents
The PAD Support Agreements also prohibit the PAD Supporting Stockholders from, among other things, selling, assigning or transferring any capital stock of PAD held by them, other than pursuant to the terms of the Sponsor Support Agreement or as expressly contemplated by the Business Combination Agreement, until the earlier of (i) the Closing and (ii) the valid termination Business Combination Agreement.
The PAD Supporting Stockholders beneficially own a sufficient number of PAD Shares to provide the required stockholder approval of the Business Combination Agreement, other than with respect to the separate vote of the holders of the PAD Series D Preferred Stock and the PAD Series E Preferred Stock.
FACT
Founder Shares
On July 12, 2024, Sponsor HoldCo paid $25,000, or approximately $0.0037 per share, to cover certain of our offering and formation costs in exchange for an aggregate of 6,708,333 Founder Shares. Prior to this initial investment in us by Sponsor HoldCo, we had no assets, tangible or intangible. On August 6, 2024, Sponsor HoldCo transferred 30,000 Founder Shares to each of our independent directors and 130,000 Founder Shares to our Executive Chairman (an aggregate of 220,000 Founder Shares), in each case at their original purchase price. The Sponsor holds Founder Shares through Sponsor HoldCo, which purchased Private Placement Units and private placement securities simultaneously with the closing of our IPO. Sponsor HoldCo has issued membership interests at a nominal purchase price to the non-managing Sponsor HoldCo investors reflecting interests in an aggregate of 5,593,333 Founder Shares (of which 3,135,044 Founder Shares are indirectly held by the Sponsor through Sponsor HoldCo) held by Sponsor HoldCo. Sponsor HoldCo has agreed to reserve 20,000 Founder Shares to transfer and sell to the Senior Advisor, following the consummation of an initial business combination, in consideration for advisory services to be provided by the Senior Advisor in connection with the initial business combination; the aforementioned 5,593,333 Founder Shares excludes such reserved 20,000 Founder Shares. Effective January 10, 2025, upon expiry of the underwriters’ over-allotment option, 875,000 Founder Shares were forfeited by Sponsor HoldCo.
Private Placements
Simultaneously with the consummation of the IPO and the issuance and sale of the FACT Units, FACT consummated the private placement of an aggregate of 500,625 Private Placement Units at a price of $10.00 per Private Placement Unit and 162,500 Private Placement Securities at a price of $10.00 per Private Placement Security (as defined below), generating gross proceeds of $6,631,250, as follows: (i) 17,500 Private Placement Units ($175,000 in the aggregate) with the Sponsor; (ii) (A) 260,000 Private Placement Units and (B) 162,500 Private Placement Securities ($4,225,000 in the aggregate) with Sponsor HoldCo; (iii) 178,500 Private Placement Units ($1,785,000 in the aggregate) with CCM; and (iv) 44,625 Private Placement Units with Seaport ($446,250 in the aggregate). Certain non-managing Sponsor HoldCo investors have (i) purchased approximately $88 million of the FACT Units in the IPO at the offering price and (ii) purchased, indirectly through the purchase of non-managing Sponsor HoldCo membership interests, (A) an aggregate of 260,000 Private Placement Units at a price of $10.00 per unit and (B) 162,500 Private Placement Securities ($4,225,000 in the aggregate), reflecting the issuance of restricted FACT Class A Shares at no additional price, in each case in the Private Placement; of such aggregate amount, purchases, indirectly through the purchase of non-managing Sponsor HoldCo membership interests, of 260,000 Private Placement Units (at an aggregate price of $2,600,000) were from investors identified by, and from among the extensive professional network of, our leadership team and the team members of the Sponsor.
On April 30, 2026, CCM transferred 22,950 Private Placement Units pursuant to a waiver of transfer restrictions on the Private Placement Units by FACT. The transferee of the Private Placement Units is subject to the same transfer restrictions as CCM with respect to the transferred Private Placement Units.
On April 30, 2026, Seaport transferred 5,737 Private Placement Units pursuant to a waiver of transfer restrictions on the Private Placement Units by FACT. The transferee of the Private Placement Units is subject to the same transfer restrictions as Seaport with respect to the transferred Private Placement Units.
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Promissory Note
On October 14, 2024, the Borrower, issued the Note in the principal amount of up to £200,000 to Robert Rackind, our Executive Chairman, who is the Borrower’s father-in-law. Pursuant to the Note, Mr. Rackind agreed to lend to the Borrower (i) an aggregate of £40,000, which Mr. Rackind disbursed to the Borrower in two disbursements of £20,000 each on July 1, 2024 and August 5, 2024, respectively, and (ii) £160,000 upon the consummation of our initial public offering. For purposes of the Cash Method only, the Note bears interest on the principal amount outstanding thereunder at a rate of eight percent per annum, and the Note is due and payable in full upon the consummation of the initial business combination either, at the payment method election and in the sole discretion of the Borrower, (i) on the date the Business Combination is consummated in cash in an amount equal to the sum of (A) the aggregate principal amount outstanding under the Note and (B) accrued interest, which amount shall not be greater than the sum of £200,000 and accrued interest, or (ii) in kind by selling (in one or multiple transactions) all of the FACT Class B Shares (including such other securities that the Founder Shares are convertible into upon consummation of the Business Combination) to which Borrower is indirectly entitled pursuant to his membership interests of the Sponsor and remitting to Mr. Rackind or his designee, promptly upon receipt, 25% of the aggregate amount of the proceeds actually received by Borrower from such sale, commencing upon expiry of any contractual or regulatory lock-up restrictions existing on the Founder Shares. The Borrower shall remain the sole owner of any such FACT Class B Shares (including such other securities that the Founder Shares are convertible into upon consummation of the Business Combination) held by him until he sells such FACT Class B Shares, and Mr. Rackind shall have no right to direct or control the timing, price, method or quantity of any sale by the Borrower of such FACT Class B Shares, nor shall Mr. Rackind have any security interest in any such FACT Class B Shares held by the Borrower. In the event that we liquidate and dissolve without having consummated an initial business combination, the Borrower shall have no obligation to repay the principal amount outstanding under the Note or any accrued interest. The Note contains certain customary events of default and related remedies and acceleration provisions.
Class B Membership Units in Sponsor HoldCo
Mr. Rackind purchased, from Sponsor Holdco, Class B membership units in Sponsor HoldCo for an aggregate principal amount of $50,000, and is a non-managing Sponsor HoldCo investor.
Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, either Sponsor HoldCo, the Sponsor, any of their respective affiliates or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $2,000,000 of such loans may be convertible into FACT Class A Shares or units upon the consummation of our initial business combination at a price of $10.00 per FACT Class A Share or unit, as applicable, at the option of the lender. Such FACT Class A Shares would be identical to the Private Placement Shares in the Private Placements, and such units would be identical to the Private Placement Units. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than Sponsor HoldCo, the Sponsor or an affiliate of either of Sponsor HoldCo or the Sponsor, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account.
New PAD Management Team Payments
After the Closing, our directors or members of our management team who remain with us may be paid consulting or management fees from New PAD. We have not established any limit on the amount of such fees that may be paid by New PAD to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the Business Combination because the New PAD Board will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to our board for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board.
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Sponsor Support Agreement
In connection with the execution of the Business Combination Agreement, on November 26, 2025, Sponsor HoldCo entered into the Sponsor Support Agreement with us and PAD. Under the Sponsor Support Agreement, among other things, Sponsor HoldCo agreed to vote, at any meeting of the FACT Shareholders, and in any action by written consent of the FACT Shareholders, all of its FACT Class A Shares and FACT Class B Shares (i) in favor of each of the Business Combination Agreement, any ancillary document required by the Business Combination Agreement, the Domestication and the Business Combination, including the Merger, and any other matters necessary or appropriate for consummation of the Business Combination and (ii) against any proposal relating to an Alternative Transaction or any proposal that would be reasonably likely to materially impede, interfere with, delay or attempt to discourage, frustrate the purposes of, result in a breach by PAD or us of, prevent or nullify any provision of the Business Combination Agreement. In addition, the Sponsor Support Agreement prohibits Sponsor HoldCo from, among other things, selling, assigning or transferring any FACT Class A Shares or FACT Class B Shares held by it, other than pursuant to the terms of the Sponsor Support Agreement or as expressly contemplated by the Business Combination Agreement, until the earlier of (a) the Closing and (b) the valid termination of the Business Combination Agreement.
Lock-Up Agreements
In connection with the Closing, (i) we, PAD, Sponsor HoldCo and certain holders of our equity interests will each enter into a Sponsor Lock-Up Agreement, and (ii) we, PAD and certain holders of PAD’s equity interests will each enter into a PAD Shareholder Lock-Up Agreement.
Pursuant to the Lock-Up Agreements, Sponsor HoldCo, the holders of our equity interests thereto, including the Sponsor, signatory thereto, and the holders of PAD’s equity interests signatory thereto, as applicable, will agree not to transfer (except for certain permitted transfers): (i) any shares of New PAD Common Stock issued upon the conversion of PAD equity interests (except for shares of New PAD Common Stock into which 770,000 PAD Shares will convert, which shall be exempt from the transfer restrictions set forth in the PAD Shareholder Lock-Up Agreement),the Founder Shares and or any FACT Class A Shares (other than the restricted FACT Class A Shares), in each case held by such holders after the Closing, until 180 days after the Closing Date; and (ii) any shares of New PAD Common Stock issued upon the conversion of the restricted FACT Class A Shares and held by such holders after the Closing until 90 days after the Closing Date.
Advisory Agreement
On November 26, 2025, we entered into the Advisory Agreement with the Sponsor pursuant to which the Sponsor will provide certain services to us including, without limitation, in each case relating to the Business Combination, assisting us in preparing presentations, introducing us to potential investors, assisting us in arranging meetings with stockholders of PAD to the extent applicable, and assisting us with the preparation of any press releases and filings. The Advisory Agreement provides for us to pay to the Sponsor a fee of up to $240,000 (which, in our sole discretion, may be payable in up to 12 monthly installments). The Advisory Agreement was reviewed and approved by the FACT Board and our Audit Committee.
Senior Advisor Services Agreement
In connection with the transactions contemplated by the Business Combination Agreement, on December 1, 2025, we entered into a senior advisor services agreement (the “Services Agreement”) with Annie Gishen pursuant to which Ms. Gishen will provide certain services to us including, without limitation, providing support to our Chief Executive Officer, the FACT Board, and the partners of the Sponsor, undertaking special tasks or project work delegated by the senior management team and providing such other services as we reasonably request. Ms. Gishen is the daughter of Adam Gishen, our Chief Executive Officer. The Services Agreement provides that we pay Ms. Gishen a monthly fee of $4,000. The Services Agreement was ratified by our Audit Committee.
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COMPARISON OF CORPORATE GOVERNANCE AND SHAREHOLDER RIGHTS
This section of the proxy statement/prospectus describes the material differences between the rights of FACT Shareholders and the rights of New PAD stockholders upon completion of the Business Combination.
FACT is an exempted company incorporated under the Cayman Companies Act. The rights of FACT Shareholders are currently governed by the Cayman Companies Act, Cayman Islands law generally and the FACT Articles. Upon completion of the Business Combination, the rights of FACT Shareholders who become shareholders of domesticated New PAD will be governed by the DGCL and the New PAD Charter and the New PAD Bylaws, as they will be in effect as of the Closing. The Cayman Companies Act and Cayman Islands law generally differ in some material respects from laws generally applicable to United States corporations and their stockholders. In addition, the FACT Articles differ in certain material respects from the New PAD Charter and the New PAD Bylaws. As a result, when you become a stockholder of New PAD, your rights will differ in some regards as compared to when you were a FACT Shareholder.
Below are summary charts outlining important similarities and differences in the corporate governance and shareholder/stockholder rights associated with each of FACT and New PAD according to applicable law and the organizational documents of FACT and New PAD. This section does not include a complete description of all differences between the rights of FACT Shareholders and New PAD stockholders following completion of the Business Combination, nor does it include a complete description of the specific rights of these shareholders. Furthermore, the identification of some of the differences in the rights of these shareholders as material is not intended to indicate that other differences do not exist.
You are urged to read carefully the relevant provisions of the Cayman Companies Act and the DGCL and the Organizational Documents of each company. This summary is qualified in its entirety by reference to the full text of FACT Articles and the New PAD Charter, attached to this proxy statement/prospectus as Annex H, and the New PAD Bylaws, attached to this proxy statement/prospectus as Annex I, as well as the Delaware corporate law and corporate laws of the Cayman Islands, including the Cayman Companies Act, to understand how these laws apply to FACT and New PAD.
Comparison of Shareholder Rights Under Applicable Corporate Law
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Delaware |
Cayman Islands |
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Applicable legislation |
General Corporation Law of the State of Delaware. |
Companies Act of the Cayman Islands (As Revised). |
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Stockholder/Shareholder Approval of Business Combinations |
Mergers that require a vote of stockholders require approval by a majority of all outstanding shares entitled to vote on the matter. Mergers in which the corporation’s certificate of incorporation is not amended, the corporation’s stock remains outstanding as an identical share of the surviving corporation, and any new securities issued in the merger do not exceed 20% of shares outstanding before the merger do not require approval of stockholders. Mergers that contemplate a qualifying holding company reorganization do not require approval of stockholders of the corporation that is the parent prior to the merger. Mergers in which the target is widely traded, the acquirer consummates a qualifying tender offer, and a sufficient number of target stockholders tender do not require approval of target |
Under the Cayman Companies Act, certain fundamental changes such as a merger or consolidation is required to be approved by a special resolution, and any other authorization as may be specified in the relevant articles of association. In respect of a merger, parties holding certain security interests in the constituent companies must also consent. All mergers (other than parent/subsidiary mergers) require shareholder approval — there is no exception for smaller mergers. Where a bidder has acquired 90% or more of the shares in a Cayman Islands company, it can compel the acquisition of the shares of the remaining shareholders and thereby become the sole shareholder. |
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Delaware |
Cayman Islands |
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stockholders. Mergers in which one corporation owns 90% or more of a second corporation may be completed without the vote of the second corporation’s board of directors or stockholders. |
A Cayman Islands company may also be acquired through a “scheme of arrangement” sanctioned by a Cayman Islands court and approved by 50%+1 in number and 75% in value of shareholders in attendance and voting at a shareholders’ meeting. |
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Stockholder/Shareholder Votes for Routine Matters |
Approval of routine corporate matters other than director elections that are put to a stockholder vote require the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter. Director elections require a plurality vote. |
Under Cayman Islands law and the FACT Articles, routine corporate matters may be approved by an ordinary resolution (being a resolution passed by a simple majority of such holders of FACT Ordinary Shares, who, being present in person or, where proxies are allowed, by proxy, and entitled to vote thereon at a general meeting, vote at the general meeting). |
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Appraisal Rights and Dissenters’ Rights |
A stockholder of a publicly traded corporation has appraisal rights in connection with a merger unless the merger consideration is all stock in another publicly traded corporation or another exception applies. |
Under certain circumstances, shareholders may dissent to a merger of a Cayman Islands company by following the procedure set out in the Cayman Companies Act. Shareholders that dissent from a Cayman Islands statutory merger are entitled to be paid the fair value of their shares, which, if necessary, may ultimately be determined by the court. |
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Inspection of Books and Records |
Any stockholder, upon written demand stating the purpose thereof, inspect the corporation’s stock ledger and other books and records for a proper purpose during the usual hours for business. |
Shareholders generally do not have any rights to inspect or obtain copies of the register of shareholders or other corporate records of a company. The directors may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of FACT or any of them will be open to the inspection of shareholders not being directors, and no shareholder (not being a director) will have any right of inspecting any account or book or document of FACT except as conferred by law or authorized by the directors or by FACT in general meeting. |
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Delaware |
Cayman Islands |
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Stockholder/Shareholder Lawsuits |
A stockholder may bring a derivative suit by or in the right of the corporation subject to statutory pleading requirements. |
FACT’s Cayman Islands counsel is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, the company will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) FACT management usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which: • a company is acting, or proposing to act, illegally or beyond the scope of its authority; |
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• the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or • those who control the company are perpetrating a “fraud on the minority.” A shareholder may have a direct right of action against FACT where the individual rights of that shareholder have been infringed or are about to be infringed. |
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Delaware |
Cayman Islands |
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Fiduciary Duties of Directors |
Directors owe fiduciary duties of care and loyalty to the company and its stockholders. |
Under Cayman Islands law, a director owes fiduciary duties to a company, including to exercise powers for the purposes conferred, exercise independent judgment, not make secret profits, avoid conflicts of interest and act in good faith in the best interests of the company as a whole. In addition to fiduciary duties, directors owe a duty of care, diligence and skill. Such duties are owed to the company but may be owed directly to creditors or shareholders in certain limited circumstances. |
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Indemnification of Directors and Officers |
A corporation is generally permitted to indemnify its directors and officers acting in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation. |
A Cayman Islands company generally may indemnify its directors or officers except with regard to fraud, willful neglect or willful default. Under the FACT Articles, every director and officer of FACT, together with every former director and former officer (each an “Indemnified Person”) shall be indemnified out of the assets of FACT against any liability, action, proceeding, claim, demand, costs, damages or expenses, including legal expenses, whatsoever which they or any of them may incur as a result of any act or failure to act in carrying out their functions other than such liability (if any) that they may incur by reason of their own actual fraud, willful neglect or willful default. No Indemnified Person shall be liable to FACT for any loss or damage incurred by FACT as a result (whether direct or indirect) of the carrying out of their functions unless that liability arises through the actual fraud, willful neglect or willful default of such Indemnified Person. No person shall be found to have committed actual fraud, willful neglect or willful default under the articles unless or until a court of competent jurisdiction shall have made a finding to that effect. |
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Delaware |
Cayman Islands |
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Limited Liability of Directors |
Permits limiting or eliminating the monetary liability of a director to a corporation or its stockholders, except with regard to breaches of duty of loyalty, intentional misconduct, unlawful repurchases or dividends or improper personal benefit. |
No directors will be liable to FACT for any loss or damage incurred by FACT as a result (whether direct or indirect) of the carrying out of their functions unless that liability arises through the actual fraud, willful default or willful neglect of such director, as determined by a court of competent jurisdiction. |
Comparison of Shareholder Rights Under the Applicable Organizational Documents
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Existing FACT Articles |
New PAD Charter and |
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Authorized Shares |
The FACT Articles authorize 221,000,000 shares, consisting of 200,000,000 FACT Class A Shares, 20,000,000 FACT Class B Shares and 1,000,000 preference shares. |
The New PAD Charter authorizes the issuance of is 110,000,000 shares, consisting of 100,000,000 shares of New PAD Common Stock and 10,000,000 shares of preferred stock. See Article FOURTH, paragraph A, of the New PAD Charter. |
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Voting |
The FACT Articles provide that holders of FACT Class A Shares and FACT Class B Shares will vote together as a single class on all matters submitted to the shareholders for their vote or approval, except as required by applicable law or provided by the FACT Articles, and that shareholders are entitled to one vote per share on all matters submitted to the shareholders for their vote or approval, except in respect of a special resolution in respect of a proposal to register FACT by way of continuation as a body corporate under the laws of a jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands, in which case, a holder of FACT Class B Shares shall have ten votes for every FACT Class B Share held and a holder of FACT Class A Shares shall have one vote for each FACT Class A Share held. |
The New PAD Charter provides that holders of New PAD Common Stock and of any one or more series of preferred stock entitled to vote together with the holders of New PAD Common Stock vote together as a single class on all matters submitted to a vote of the stockholders except as provided in the New PAD Charter or applicable law, and that each holder of outstanding shares of New PAD Common Stock is entitled to one vote for each outstanding share of New PAD Common Stock. See Article FOURTH, paragraph B.1, of the New PAD Charter. |
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Existing FACT Articles |
New PAD Charter and |
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Authorize the Company to Make Issuances of Preferred Stock Without Stockholder Consent |
The FACT Articles authorize the issuance of 1,000,000 preference shares with such designations, rights and preferences as may be determined from time to time by our board of directors. Accordingly, the FACT Board is empowered under the existing FACT Articles, without shareholder approval, to issue preference shares with dividend, liquidation, redemption, voting or other rights that could adversely affect the voting power or other rights of the holders of Ordinary Shares. |
The New PAD Charter authorizes the issuance of 10,000,000 shares of preferred stock with such powers, preferences, rights, qualifications, limitations and restrictions, as determined from time to time by the New PAD Board. Accordingly, the New PAD Board will be empowered, without stockholder approval, to issue preferred shares with dividend, liquidation, redemption, voting or other rights that could adversely affect the voting power or other rights of the holders of shares of New PAD Common Stock. See Article FOURTH, paragraph C, of the New PAD Charter. |
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Shareholder/Stockholder Written Consent in Lieu of a Meeting |
The FACT Articles provide that shareholder resolutions may be passed by unanimous written resolution. |
The New PAD Charter provides that, except as otherwise provided therein, stockholders may not act by written consent in lieu of taking action at a meeting of stockholders. |
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Classified Board |
The existing FACT Articles provide that the FACT Board will be divided into three classes with only one class of directors being elected in each year and each class serving for a three-year term. |
The New PAD Charter does not provide that the New PAD Board will be divided into classes, and the New PAD Bylaws provide that members of the New PAD Board are elected at the annual stockholders’ meeting unless otherwise provided by the New PAD Charter or the New PAD Bylaws. See Article III, Section 3.01(b) of the New PAD Bylaws. |
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Perpetual Existence |
The existing FACT Articles provide that if FACT does not consummate a business combination (as defined in the FACT Articles) within 18 months from the consummation of its IPO (or the date that is 24 months after the closing date of our IPO if FACT has executed, within 18 months after the closing date of the IPO, a definitive agreement for a Business Combination) FACT shall cease all operations except for the purposes of winding up and shall redeem the shares issued in the IPO and liquidate the Trust Account. |
The New PAD Charter does not limit its existence and therefore New PAD has the default of perpetual existence under the DGCL. |
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Provisions Related to Status as Blank Check Company |
The existing FACT Articles set forth various provisions related to our status as a blank check company prior to the consummation of a business combination. |
Not applicable. |
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SHARES ELIGIBLE FOR FUTURE SALES
Based on the unaudited pro forma condensed combined financial information and the assumptions set out therein and elsewhere in this proxy statement/prospectus, immediately following the consummation of the Business Combination, New PAD will have (i) up to 44,464,548 shares of New PAD Common Stock issued and outstanding, assuming the No Redemptions Scenario, the forfeiture by Sponsor HoldCo of 1,878,333 FACT Forfeited Shares and no forfeiture of Sponsor HoldCo Contributed Shares pending issuance of 3,772,738 Acquisition Shares, and that no FACT Shareholders exercise dissenters’ rights pursuant to the Cayman Companies Act, or (ii) up to 35,714,548 shares of New PAD Common Stock outstanding, assuming the 50% Redemptions Scenario, the forfeiture by the Sponsor and Sponsor HoldCo of 1,878,333 FACT Forfeited Shares and no forfeiture of Sponsor HoldCo Contributed Shares and pending issuance of 3,772,738 Acquisition Shares. Except pursuant to the Lock-Up Agreements and the lock-up provisions in the New PAD Bylaws, and except with respect to the shares of New PAD Common Stock to be issued to the PAD Supporting Stockholders, all of the New PAD Common Stock issued in connection with the Business Combination will be freely transferable by persons other than by New PAD’s “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of shares of New PAD Common Stock in the public market could adversely affect prevailing market prices of New PAD Common Stock. Prior to the Business Combination, there has been no public market for New PAD Common Stock. FACT will apply for listing of the New PAD Common Stock on NYSE. New PAD, PAD, and FACT believe that New PAD will satisfy the applicable NYSE initial listing requirements at the Closing, but there can be no assurance such listing will occur. Additionally, New PAD cannot assure you that a regular trading market will develop in the New PAD Common Stock.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of the PAD employees, consultants or advisors who purchases New PAD Common Stock in connection with a compensatory stock plan or other written agreement executed prior to the completion of the Business Combination is eligible to resell those equity shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
Registration Rights and Resale Registration Statement
At the Closing, New PAD, the Sponsor, Sponsor HoldCo, certain FACT Insiders and certain former PAD Stockholders will enter into the Registration Rights Agreement, pursuant to which, upon completion of the Business Combination, the New PAD Common Stock held by the parties thereto will bear customary demand, piggy-back and shelf registration rights.
Pursuant to the Registration Rights Agreement, New PAD will agree to use its commercially reasonable efforts to file a resale registration statement under the Securities Act, not later than 30 days following the consummation of the Business Combination to register certain registrable securities held by the other parties thereto. We estimate that an aggregate of approximately [•] million shares of New PAD Common Stock will be subject to registration rights immediately following Closing pursuant to the Registration Rights Agreement, representing approximately [•]% of the total issued and outstanding shares of New PAD Common Stock following the Business Combination, assuming the 50% Redemptions Scenario, the forfeiture of [•] FACT Forfeited Shares and no forfeiture of Sponsor HoldCo Contributed Shares by Sponsor HoldCo. For more information, see “Proposal No. 1 — The Business Combination Proposal — Ancillary Agreements — Registration Rights Agreement.”
Sales of a large number of shares of New PAD Common Stock could cause the prevailing market price of New PAD Common Stock to decline. See “Risk Factors — Future sales, or the perception of future sales, by New PAD or its stockholders in the public market could cause the market price for New PAD’s securities to decline.”
Securities Act Restrictions on Resale of New PAD Securities
Pursuant to Rule 144 under the Securities Act (“Rule 144”), a person who has beneficially owned restricted shares of New PAD Common Stock for at least six months would be entitled to sell their shares provided that (i) such person is not deemed to have been an affiliate of New PAD at the time of, or at any time during the three months preceding, a sale and (ii) New PAD is subject to the Exchange Act periodic reporting requirements for at least three months before
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the sale, has filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as New PAD was required to file reports) preceding the sale, and has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of the Securities Act during the 12 months (or such shorter period as New PAD was required to file reports) preceding the sale.
Persons who have beneficially owned restricted shares of New PAD Common Stock for at least six months but who are affiliates of New PAD at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
• 1% of the total number of shares of New PAD Common Stock then outstanding; or
• the average weekly reported trading volume of New PAD Common Stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Sales by affiliates of New PAD under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about New PAD.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business-combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
• the issuer of the securities that was formerly a shell company has ceased to be a shell company;
• the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
• the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials) other than Form 8-K reports; and
• at least one year has elapsed from the time that the issuer filed Form 10 Information (as defined in Rule 144(i)(3) of the Securities Act) with the SEC reflecting its status as an entity that is not a shell company.
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DESCRIPTION OF NEW PAD SECURITIES
As a result of the Business Combination, FACT Shareholders who receive shares of New PAD Common Stock in connection with the Business Combination, and PAD Stockholders, will become stockholders of New PAD. Your rights as New PAD stockholders will be governed by Delaware law and the New PAD Charter and the New PAD Bylaws. The following summary of the material terms of New PAD’s securities is not intended to be a complete summary of the rights and preferences of such securities. We urge you to review the applicable provisions of Delaware law and the New PAD Charter and the New PAD Bylaws carefully and in their entirety because they describe your rights as a holder of shares of New PAD Common Stock.
Authorized and Outstanding Capital Stock
The New PAD Charter authorizes the issuance of up to 110,000,000 shares of New PAD capital stock, consisting of (i) 100,000,000 shares of New PAD Common Stock, and (ii) 10,000,000 shares of preferred stock, $0.00001 par value per share (the “New PAD Preferred Stock”). The shares of New PAD Common Stock issued in connection with the Business Combination will be duly authorized, validly issued, fully paid and non-assessable.
New PAD Common Stock
The New PAD Charter provides the following with respect to the rights, powers, preferences and privileges of the New PAD Common Stock.
Voting Power
Except as otherwise required by law, the rules and regulations of any applicable stock exchange, or the New PAD Charter (which would include the certificate of designation for any series of New PAD Preferred Stock), the holders of shares of New PAD Common Stock possess all voting power with respect to New PAD. Holders of shares of New PAD Common Stock are entitled to one vote for each share of New PAD Common Stock held on all matters on which New PAD stockholders generally are entitled to vote, including the election or removal of directors.
Dividends and Distributions
Subject to applicable law and the rights, if any, of the holders of any outstanding series of New PAD Preferred Stock, holders of New PAD Common Stock will be entitled to receive dividends and distributions out of any funds of New PAD legally available therefor when, as and if declared thereon by the New PAD Board.
Liquidation, Dissolution and Winding Up
Subject to applicable law and the rights, if any, of holders of any outstanding series of New PAD Preferred Stock, upon the dissolution, liquidation or winding up of New PAD, whether voluntary or involuntary, after payment or provision for payment of its debts and other liabilities and amounts payable upon shares of New PAD Preferred Stock ranking senior to the shares of New PAD Common Stock upon such dissolution, liquidation or winding up, if any, New PAD’s remaining assets will be distributed to the holders of New PAD Common Stock and the holders of any other class or series of capital stock ranking equally with the New PAD Common Stock ratably in proportion to the number of shares of New PAD Common Stock held by them.
Preemptive or Other Rights
New PAD stockholders will have no preemptive or other subscription rights. No sinking fund provisions will be applicable to New PAD Common Stock.
Preferred Stock
The New PAD Board has the authority to issue shares of New PAD Preferred Stock from time to time in one or more series. The New PAD Board will be authorized to fix the number of shares constituting any such series of New PAD Preferred Stock and the designation of such series, the powers (including voting powers), if any, preferences, and relative, participating, optional, special or other rights, if any, and the qualifications, limitations or restrictions, if any, of the shares of each such series. The New PAD Board will be able, without stockholder approval, to issue shares of
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New PAD Preferred Stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the New PAD Common Stock and could have anti-takeover effects. The ability of the New PAD Board to issue shares of New PAD Preferred Stock without stockholder approval and/or the issuance thereof could have the effect of decreasing the trading price of the New PAD Common Stock, restricting dividends on the capital stock of New PAD, diluting the voting power of the New PAD Common Stock, impairing the liquidation rights of the capital stock of New PAD, or delaying, deferring or preventing a change in control of New PAD or the removal of existing management.
Warrants (FACT Warrants)
Each whole public warrant entitles the registered holder to purchase one New PAD Common Stock at a price of $11.50 per share, subject to adjustment as discussed below. The warrants will become exercisable on the later of 30 days after the Closing and will expire five years after the Closing at 5:00 p.m., New York City Time or earlier upon redemption or liquidation.
Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, the number of warrants issuable upon separation of the units will be rounded down to the nearest whole number of warrants. Upon the Closing, New PAD will separate the units into shares of New PAD Common Stock and public warrants, and the FACT Units will stop trading and will be delisted from Nasdaq.
The private warrants are identical to the public warrants except that: (i) they are not redeemable by New PAD; (ii) they (including the New PAD Common Stock issuable upon exercise of such warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 180 days after the completion of the Business Combination; (iii) they may be exercised by the holders on a cashless basis and (iv) they (including the New PAD Common Stock issuable upon exercise of such warrants) are entitled to registration rights. With respect to any Private Placement Units held by CCM, Seaport and/or their designees, such Private Placement Units are subject to the lock-up and registration rights limitations imposed by FINRA Rule 5110 and the private warrants underlying such Private Placement Units are not exercisable more than five years from the commencement of sales in our initial public offering in accordance with FINRA Rule 5110(g)(8). Notwithstanding the foregoing, CCM or Seaport may not exercise their demand and “piggy-back” registration rights after five and seven years after the commencement of sales of our initial public offering and may not exercise their demand rights on more than one occasion.
Once the public warrants become exercisable, New PAD may redeem the public warrants:
• in whole and not in part;
• at a price of $0.01 per public warrant;
• upon not less than 30 days’ prior written notice of redemption to each public warrant holder; and
• if, and only if, the closing price of the New PAD Common Stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the public warrant holders.
New PAD will not redeem the warrants for cash unless a registration statement under the Securities Act covering the issuance of the shares of New PAD Common Stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those New PAD Common Stock is available throughout the 30-day redemption period, unless the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by New PAD, New PAD may exercise its redemption right even if New PAD is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If New PAD calls the warrants for redemption as described in this paragraph, its management will have the option to require any holder that wishes to exercise his, her or its warrant following the notice of redemption to do so on a cashless basis. In the case of such a cashless exercise, each holder would pay the exercise price by surrendering the public warrants for that number of New PAD Common Stock equal to the quotient obtained by dividing (x) the product of the number of New PAD Common Stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) less the exercise price of the warrants by (y) the fair market value. The “fair market
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value” as used in the preceding sentence shall mean the volume-weighted average price of the New PAD Common Stock for the 10 trading day period ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
In addition, if (x) FACT issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with Closing at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the FACT Board and, in the case of any such issuance to either of Sponsor HoldCo or its affiliates, without taking into account any founder shares held by Sponsor HoldCo or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Business Combination on the date of the completion of the Business Combination (net of redemptions), and (z) the volume weighted average trading price of FACT Class A Shares during the 20 trading day period starting on the trading day prior to the day on which we consummate the Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the public warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and, in the case of the public warrants only, the $18.00 per share redemption trigger prices described below under “Redemption of public warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Registration Rights
Concurrently with the Closing, New PAD, Sponsor Holdco, and certain former PAD Stockholders will enter into a new Registration Rights Agreement, pursuant to which, among other things, such former PAD Stockholders and Sponsor Holdco will be granted certain registration rights with respect to certain New PAD securities held by them following the Business Combination.
Election of Directors and Vacancies
Subject to the rights of the holders, if any, of any one or more series of New PAD Preferred Stock to elect directors, the number of directors of the New PAD Board shall be fixed solely by the New PAD Board but may consist of no less than one nor more than nine directors, and shall initially consist of seven directors. Pursuant to the New PAD Bylaws, directors are elected at the annual stockholders’ meeting unless otherwise provided by the New PAD Charter or the New PAD Bylaws.
Pursuant to the New PAD Bylaws, directors are elected by a plurality of the votes cast at a meeting of stockholders by the holders of shares entitled to vote in the election. Stockholders do not have cumulative voting rights.
Subject to the rights, if any, of the holders of any series of New PAD Preferred Stock, newly created directorships and any vacancies on the New PAD Board, including unfilled vacancies resulting from the death, disability, resignation, retirement, disqualification or removal of any director, may be filled only by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. All directors will hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified (or until their earlier death, resignation, disqualification or removal). A director elected to fill a vacancy not resulting from an increase in the number of directors will serve for the remaining term of his or her predecessor and until his or her successor shall have been elected and qualified, or until such director’s earlier death, disability, resignation, retirement, disqualification or removal.
Any director or the entire Board may be removed, but only for cause, by the affirmative vote of the holders of at least a majority of the voting power of the capital stock of New PAD entitled to vote thereon, voting as a single class.
Quorum; Voting
The holders of a majority of the shares entitled to vote thereat, represented in person or by proxy, will constitute a quorum at a meeting of the New PAD stockholders. Except as required by the DGCL, the applicable stock exchange rules, or by the New PAD Charter or the New PAD Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, if a quorum is present, in all matters other than the election of directors, the affirmative vote of a majority of the shares present in person or represented by proxy at a meeting of stockholders and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by a class or classes or series is required, except where otherwise provided by statute or by the New PAD Charter or the New PAD Bylaws or any
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applicable stock exchange rules, the holders of a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the New PAD Charter or the New PAD Bylaws or any applicable stock exchange rules, the affirmative vote of the holders of a majority (plurality, in the case of the election of directors) of the shares of such class or classes or series present in person or represented by proxy at the meeting shall be the act of such class or classes or series.
Anti-takeover Effects of the New PAD Charter
The New PAD Charter contains provisions that may delay, defer or discourage another party from acquiring control of New PAD. We expect that these provisions, which are summarized above, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of New PAD to first negotiate with the New PAD Board, which we believe may result in an improvement of the terms of any such acquisition in favor of New PAD’s stockholders. However, they also give the New PAD Board the power to discourage acquisitions that some stockholders may favor. See “Risk Factors — Anti-takeover provisions in the New PAD Charter and the New PAD Bylaws that will be in effect following the Business Combination and Delaware law might discourage, delay or prevent a change in control of PAD or changes in PAD’s management and, therefore, depress the market price of New PAD Common Stock” for more information regarding certain anti-takeover provisions.
Authorized but Unissued Capital Stock
The DGCL does not require stockholder approval for any issuance of authorized shares. However, NYSE listing requirements, which would apply if, and so long as, New PAD Common Stock (or warrants) remains listed on NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of New PAD Common Stock. Additional shares that may be issued in the future may be used for a variety of corporate purposes, including to acquire other companies and to raise additional capital.
One of the effects of the existence of unissued and unreserved shares of New PAD Common Stock may be to enable the New PAD Board to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of New PAD by means of a merger, tender offer, proxy contest or otherwise and thereby protect the continuity of management and possibly deprive stockholders of opportunities to sell their shares of New PAD Common Stock at prices higher than prevailing market prices.
Stockholder Meetings, Action by Written Consent and Advance Notice Requirements for Stockholder Proposals
Annual meetings of New PAD’s stockholders will be held at a date and time selected by the New PAD Board.
Except as otherwise provided by or pursuant to the provisions of the New PAD Charter or the New PAD Bylaws, special meetings of the stockholders of New PAD for any purpose or purposes may be called only by (i) the Chairperson of the New PAD Board, (ii) New PAD’s Chief Executive Officer, (iii) the President of New PAD, (iv) the New PAD Board, and (v) the New PAD Board upon the written request of holders of not less than a majority of the voting power of the then outstanding shares of New PAD capital stock generally entitled to vote on the nomination, question or business for which such special meeting is requested.
The New PAD Bylaws provide that meetings of New PAD stockholders will be held at a place or, in accordance with the DGCL, solely by means of remote communication, as determined by the New PAD Board and, absent any such determination, will be held at New PAD’s principal executive office.
The New PAD Charter provides that except as otherwise provided for therein, no action required or permitted to be taken by the stockholders of New PAD at any annual or special meeting of stockholders may be effected by consent of stockholders in lieu of a meeting of stockholders.
The New PAD Bylaws set forth advance notice procedures that stockholders must comply with in order to nominate candidates to the New PAD Board or to propose matters to be acted upon at a stockholders’ meeting.
These provisions could have the effect of delaying until the next stockholder meeting any stockholder actions, even if they are favored by the holders of a majority of New PAD’s outstanding voting securities.
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Amendment to Certificate of Incorporation and Bylaws
The DGCL provides generally that the affirmative vote of a majority of the outstanding stock and the outstanding stock of each class entitled to vote on amendments to a corporation’s certificate of incorporation is required to approve such amendment, unless a corporation’s certificate of incorporation requires a greater percentage.
Under the DGCL, the power to adopt, amend or repeal bylaws is vested in the stockholders entitled to vote by a majority of the shares present in person or represented by proxy at a meeting and entitled to vote thereon, but a corporation may, in its certificate of incorporation, provide its directors with the power to adopt, amend or repeal bylaws.
The New PAD Charter does not alter the DGCL provisions with respect to amendments thereof, and expressly authorizes the New PAD Board to adopt, amend or repeal the bylaws of New PAD.
Limitations on Liability and Indemnification of Officers and Directors
The New PAD Charter limits the liability of the directors and officers of New PAD to the fullest extent permitted by law, and the New PAD Bylaws provide that it will indemnify them to the fullest extent permitted by such law. Ace Green has entered into indemnification agreements its directors and executive officers, and we expect that New PAD will enter into agreements to indemnify its directors and executive officers.
Exclusive Forum of Certain Actions
Under the New PAD Charter, unless New PAD consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall be the sole and exclusive forum for the following claims or causes of action under Delaware statutory or common law: (i) any derivative action, suit or proceeding brought on behalf of New PAD; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of New PAD to New PAD or its stockholders; (iii) any civil action to interpret, apply or enforce any provision of the DGCL; (iv) any civil action to interpret, apply, enforce or determine the validity of the provisions of the New PAD Charter or New PAD Bylaws; of (v) any action asserting a claim governed by the internal affairs doctrine; provided, however, that this provision shall not apply to the resolution of any complaint asserting a cause of action arising under the Securities Act or the Exchange Act for which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for any such cause of action. Unless New PAD consents in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in any shares of stock of New PAD shall be deemed to have notice of and consented to these provisions of the New PAD Charter; provided, however, that stockholders cannot and will not be deemed to have waived New PAD’s compliance with the federal securities laws and the rules and regulations thereunder.
Transfer Agent and Warrant Agent
The transfer agent for the New PAD Common Stock will be Odyssey Transfer and Trust Company.
Listing
In connection with the Business Combination, FACT will apply to list the shares of New PAD Common Stock on NYSE under the symbol “PAD.”
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APPRAISAL RIGHTS AND DISSENTERS’ RIGHTS
The FACT Shareholders do not have appraisal rights in connection with the Business Combination or the Domestication under the DGCL. The FACT Shareholders do not have dissenters’ rights in connection with the Business Combination or the Domestication under Cayman Islands law.
SHAREHOLDER COMMUNICATIONS
Shareholders and interested parties may communicate with the FACT Board, any committee chairperson or the non-management directors as a group by writing to the FACT Board or committee chairperson in care of FACT II Acquisition Corp., 14 Wall Street, 20th Floor, New York, New York 10005. Following the Closing, such communications should be sent to Precision Aerospace & Defense Group, Inc. 7500 College Blvd, 5th Floor, Overland Park, KS 66210. Each communication will be forwarded, depending on the subject matter, to the New PAD Board, the appropriate committee chairperson or the New PAD Secretary.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS
Pursuant to the rules of the SEC, FACT and the services that it employs to deliver communications to its shareholders are permitted to deliver to two or more shareholders sharing the same address a single copy of each of FACT’s annual report to shareholders and FACT’s proxy statement. Upon written or oral request, FACT will deliver a separate copy of the annual report to shareholders and/or proxy statement to any shareholder at a shared address to which a single copy of each document was delivered and who wishes to receive separate copies of such documents. Shareholders receiving multiple copies of such documents may likewise request that FACT deliver single copies of such documents in the future. Shareholders may notify FACT of their requests by calling or writing to FACT at its principal executive offices at 14 Wall Street, 20th Floor, New York, New York 10005.
LEGAL MATTERS
Paul Hastings LLP will pass upon the validity of the securities of FACT to be issued in connection with the Business Combination.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the FACT Board does not know of any matters that will be presented for consideration at the EGM other than as described in this proxy statement/prospectus. If any other matters properly come before the EGM, or any adjournment or postponement thereof, and are voted upon, the enclosed proxy will be deemed to confer discretionary authority on the individuals that it names as proxies to vote the shares represented by the proxy as to any of these matters.
EXPERTS
The financial statements of FACT as of December 31, 2025 and 2024 and for the year ended December 31, 2025 and the period from June 19, 2024 (inception) through December 31, 2024 have been audited by WithumSmith+Brown, PC, an independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere in this proxy statement/prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial statements of PAD as of December 31, 2025 and 2024 and for each of the two years in the period ended December 31, 2025, included in this proxy statement/prospectus, have been audited by Kreit & Chiu CPA LLP, an independent registered public accounting firm, as stated in their report. Such financial statements are included in reliance upon the report of such firm given their authority as experts in accounting and auditing.
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FUTURE STOCKHOLDER PROPOSALS
Assuming that New PAD holds its 2026 annual meeting of stockholders after the Closing Date, then in order to be included in the proxy materials for such annual meeting of stockholders, stockholder proposals submitted to New PAD in compliance with Rule 14a-8 under the Exchange Act (which concerns stockholder proposals that are requested to be included in New PAD’s proxy statement with respect to such meeting) must be received in written form at New PAD’s executive offices a reasonable time before New PAD begins to print and send its proxy materials.
Pursuant to the New PAD Bylaws, notice of any stockholder proposal or nomination for director to be submitted outside of the Rule 14a-8 process for consideration at New PAD’s 2026 annual meeting of stockholders must be received in writing by New PAD’s Secretary by not earlier than the close of business on the 120th day before the 2026 annual meeting and not later than the later of (i) the close of business on the 90th day before the 2026 annual meeting or (ii) the close of business on the 10th day following the first day on which New PAD publicly announces the date of the 2026 annual meeting, and must otherwise comply with applicable SEC rules and the advance notice provisions of the New PAD Bylaws, to be considered for inclusion in the proxy materials relating to New PAD’s 2026 annual meeting.
Please refer to Section 2.05 of the New PAD Bylaws with respect to the requirements for making stockholder proposals and nominating director candidates.
HOUSEHOLDING INFORMATION
Unless FACT has received contrary instructions, FACT may send a single copy of this proxy statement/prospectus to any household at which two or more shareholders reside if FACT believes the shareholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce FACT’s expenses. However, if shareholders prefer to receive multiple sets of FACT’s disclosure documents at the same address this year or in future years, the shareholders should follow the instructions described below. Similarly, if an address is shared with another shareholder and together both of the shareholders would like to receive only a single set of FACT’s disclosure documents, the shareholders should follow these instructions:
• if the shares are registered in the name of the shareholder, the shareholder should contact FACT at the following address:
FACT II Acquisition Corp.
14 Wall Street, 20th Floor
New York, NY 10005
Tel: (212) 618-1798
• if a broker, bank or nominee holds the shares, the shareholder should contact the broker, bank or nominee directly.
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WHERE YOU CAN FIND MORE INFORMATION
FACT has filed a registration statement on Form S-4 to register the issuance of securities described elsewhere in this proxy statement/prospectus. This proxy statement/prospectus is a part of that registration statement.
FACT files reports, proxy statements and other information with the SEC as required by the Exchange Act. You may access information on FACT at the SEC website containing reports, proxy statements and other information at: http://www.sec.gov.
Information and statements contained in this proxy statement/prospectus or any annex to this proxy statement/prospectus are qualified in all respects by reference to the copy of the relevant contract or other annex filed as an exhibit to the registration statement of which this proxy statement/prospectus forms a part, which includes exhibits incorporated by reference from other filings made with the SEC.
All information contained in this proxy statement/prospectus relating to FACT has been supplied by FACT, and all such information relating to PAD has been supplied by PAD. Information provided by one another does not constitute any representation, estimate or projection of the other.
(1) This document is a (i) prospectus of FACT with respect to the New PAD Common Stock to be issued to FACT Shareholders and PAD equityholders if the Business Combination described herein is consummated, and (ii) a proxy statement of FACT for the EGM. FACT and PAD have not authorized anyone to give any information or make any representation about the Business Combination, FACT or PAD that is different from, or in addition to, that contained in this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement/prospectus speaks only as of the date of this proxy statement/prospectus unless the information specifically indicates that another date applies.
(2) If you would like additional copies of this proxy statement/prospectus, or if you have questions about the Business Combination, you should contact FACT in writing at the following address and telephone number:
FACT II Acquisition Corp.
14 Wall Street, 20th Floor
New York, NY 10005
Tel: (212) 618-1798
You may also obtain these documents by requesting them in writing or by telephone from FACT’s proxy solicitation agent at the following address and telephone number:
Sodali & Co.
333 Ludlow Street, 5th Floor, South Tower
Stamford, CT 06902
Tel: (800) 662-5200 (toll-free) or
(203) 658-9400 (banks and brokers can call collect)
Email: [_]
If you are a FACT Shareholder and would like to request documents, please do so no later than 7 business days before the EGM in order to receive them before the EGM. If you request any documents from FACT, FACT will mail them to you by first class mail, or another equally prompt means. Information and statements contained in this proxy statement/prospectus or any annex to this proxy statement/prospectus are qualified in all respects by reference to the copy of the relevant contract or other annex filed as an exhibit to the registration statement of which this proxy statement/prospectus forms a part, which includes exhibits incorporated by reference from other documents that are not included with this proxy statement/prospectus.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are registered under the laws of the Cayman Islands as an exempted company. We are registered in the Cayman Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services. However, the Cayman Islands have a less prescriptive body of securities laws as compared to the United States and some U.S. states, such as Delaware, have more fulsome and judicially interpreted bodies of corporate law than the Cayman Islands.
We have been advised by Conyers, Dill & Pearman LLP, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. The Cayman Islands courts will not enforce criminal fines and tax judgments and judgments that are contrary to Cayman Islands public policy. However, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Substantially all of our assets are located outside the United States. In addition, all or a substantial portion of the assets of the members of our board of directors and of our officers are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
Notwithstanding the foregoing, we cannot assure you that confirmation of any judgment will be obtained, or that the process described above can be conducted in a timely manner.
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INDEX TO FINANCIAL STATEMENTS
FACT II ACQUISITION CORP.
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Page |
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Condensed Consolidated Balance Sheets as of March 31, 2026 (Unaudited) and December 31, |
F-2 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
F-3 |
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Condensed Consolidated Statements of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
F-4 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
F-5 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
F-6 |
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Page |
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Report of Independent Registered Public Accounting Firm |
F-20 |
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Financial Statements: |
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Consolidated Balance Sheets as of December 31, 2025 and 2024 |
F-21 |
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Consolidated Statements of Operations for the Year Ended December 31, 2025 and for the period from June 19, 2024 (inception) through December 31, 2024 |
F-22 |
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Consolidated Statements of Changes in Shareholders’ Deficit for the Year Ended December 31, 2025 and for the period from June 19, 2024 (inception) through December 31, 2024 |
F-23 |
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Consolidated Statements of Cash Flows for the Year Ended December 31, 2025 and for the period from June 19, 2024 (inception) through December 31, 2024 |
F-24 |
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Notes to Consolidated Financial Statements |
F-25 |
Precision Aerospace & Defense Group, Inc.
(F/K/A Precision Aerospace Group, Inc.)
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Page |
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Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025 |
F-40 |
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Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 (unaudited) |
F-42 |
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Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Deficit for the three months ended March 31, 2026 and 2025 (unaudited) |
F-43 |
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Condensed Consolidated Statements of Cash Flows for three months ended March 31, 2026 and |
F-44 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
F-45 |
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Page |
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Financial Statements: |
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Report of Independent Registered Public Accounting Firm (PCAOB ID: 6651) |
F-63 |
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Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024 |
F-64 |
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Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 |
F-66 |
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Consolidated Statements of Mezzanine Equity and Stockholders’ Equity (Deficit) for the years ended December 31, 2025 and 2024 |
F-67 |
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Consolidated Statements of Cash Flows for years ended December 31, 2025 and 2024 |
F-68 |
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Notes to Consolidated Financial Statements |
F-70 |
F-1
Table of Contents
FACT II ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, |
December 31, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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Prepaid expenses |
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Total current assets |
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Cash held in Trust Account |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
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Current liabilities |
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Accrued expenses |
$ |
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$ |
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Total current liabilities |
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Deferred legal fees |
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Deferred underwriting fee payable |
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TOTAL LIABILITIES |
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COMMITMENTS AND CONTINGENCIES (Note 6) |
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| Class A ordinary shares subject to possible redemption, |
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SHAREHOLDERS’ DEFICIT |
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| Preference shares, $ |
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| Class A ordinary shares, $ |
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| Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
) |
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TOTAL SHAREHOLDERS’ DEFICIT |
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( |
) |
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( |
) |
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TOTAL LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
Table of Contents
FACT II ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the |
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2026 |
2025 |
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General and administrative expenses |
$ |
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$ |
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Loss from operations |
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( |
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( |
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Other income: |
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Change in fair value of over-allotment liability |
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Interest earned on bank account |
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Interest earned on cash held in Trust Account |
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Total other income |
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NET INCOME |
$ |
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$ |
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Weighted average shares outstanding of Class A ordinary shares |
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Basic and diluted net income per ordinary share, Class A ordinary shares |
$ |
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$ |
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Weighted average shares outstanding, Class B ordinary shares |
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Basic and diluted net income per ordinary share, Class B ordinary shares |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
Table of Contents
FACT II ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2026
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Class A |
Class B |
Additional |
Accumulated |
Total |
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Shares |
Amount |
Shares |
Amount |
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Balance – December 31, 2025 |
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$ |
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$ |
$( |
) |
$( |
) |
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Accretion for common stock to redemption amount |
— |
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— |
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( |
) |
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( |
) |
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Net income |
— |
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— |
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Balance – March 31, 2026 (unaudited) |
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$ |
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$ |
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$ |
$ |
( |
) |
$ |
( |
) |
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FOR THE THREE MONTHS ENDED MARCH 31, 2025
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Class A |
Class B |
Additional |
Accumulated |
Total |
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Shares |
Amount |
Shares |
Amount |
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Balance – December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
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Forfeiture of Founder Shares |
— |
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( |
) |
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( |
) |
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Accretion for common stock to redemption amount |
— |
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— |
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|
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( |
) |
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( |
) |
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( |
) |
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Net income |
— |
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— |
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Balance – March 31, 2025 (unaudited) |
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$ |
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$ |
|
|
$ |
|
$ |
( |
) |
$ |
( |
) |
||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
Table of Contents
FACT II ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
For the |
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2026 |
2025 |
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Cash Flows from Operating Activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Change in fair value of over-allotment liability |
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( |
) |
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Interest earned on cash held in Trust Account |
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( |
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( |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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( |
) |
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Prepaid insurance |
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Accrued expenses |
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Deferred legal fees |
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Net cash used in operating activities |
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( |
) |
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( |
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Net Change in Cash and Cash Equivalents |
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( |
) |
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( |
) |
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Cash and Cash Equivalents – Beginning of period |
|
|
|
|
|
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||
|
Cash and Cash Equivalents – End of period |
$ |
|
|
$ |
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
FACT II Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on June 19, 2024. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of completing a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2026, the Company had not commenced any operations. There was no activity for the period from June 19, 2024 (inception) through March 31, 2026 besides the Company’s formation, initial public offering (the “IPO”), and searching for a Business Combination opportunity, which are described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
On June 19, 2024, FACT II Acquisition Parent LLC, a Cayman Islands limited liability company (which is referred to as the “Sponsor”), formed FACT II Acquisition LLC, a Cayman Islands limited liability company (which is referred to as “Sponsor HoldCo”), through which the Sponsor (i) holds its founder shares (as defined below) and (ii) purchased Private Placement Securities (as defined below) at the date of the IPO.
The registration statement for the Company’s IPO was declared effective on November 25, 2024. On November 27, 2024, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the Company consummated the sale of
Transaction costs amounted to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination. The Company must complete its initial Business Combination with one or more target businesses that together have a fair market value equal to at least
F-6
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
the post-Business Combination company owns or acquires
Following the closing of the IPO, on November 27, 2024, an amount of $
The Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The shareholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $
If the Company seeks shareholder approval in connection with a Business Combination, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who vote at a general meeting of the Company. If a shareholder vote is not required under applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, Sponsor HoldCo has agreed to vote its founder shares (as defined in Note 5) and any Public Shares purchased in or after the IPO in favor of approving a Business Combination and to waive its redemption rights with respect to any such shares in connection with a shareholder vote to approve a Business Combination. Additionally, each public shareholder may elect to redeem its Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
F-7
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Sponsor HoldCo has agreed (a) to waive its redemption rights with respect to any founder shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation to redeem
The Company will have until
Sponsor HoldCo has agreed to waive its liquidation rights with respect to the founder shares if the Company fails to complete a Business Combination within the Extension Period. However, if Sponsor HoldCo acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Extension Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Extension Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the initial amount held in the Trust Account ($
Sponsor HoldCo has agreed that it will be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $
F-8
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Risks and Uncertainties
The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from global conflicts, including from the ongoing Russia-Ukraine and Israel-Hamas conflicts, the war in Iran, and recent developments to trade and tariff policies of the United States and other countries. In response to the ongoing Russia-Ukraine conflict, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union, and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine and to Israel, increasing geopolitical tensions among a number of nations. The invasion of Ukraine by Russia, the escalation of the Israel-Hamas conflict, the war in Iran and the resulting measures that have been taken, and could be taken in the future by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts, as well as changes in global trade and tariff policies, are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyberattacks against U.S. companies. Additionally, any resulting sanctions or tariffs, as applicable, could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.
Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, the Israel-Hamas conflict, the war in Iran and subsequent sanctions or related actions or the ongoing trade and tariff policy changes by the United States or other countries, could adversely affect the Company’s ability to consummate an initial business combination or search for any target business with which the Company may ultimately consummate an initial Business Combination.
Proposed Business Combination with Precision Aerospace & Defense Group, Inc.
On November 26, 2025, the Company entered into a business combination agreement (the “Business Combination Agreement” and the transactions contemplated thereby, including the Domestication and the Merger, each as defined below, the “PAD Business Combination”) by and among the Company, Sponsor HoldCo, Patriot Merger Subsidiary, Inc. (“Merger Sub”), and Precision Aerospace & Defense Group, Inc., a Florida corporation (“PAD”). The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) the Company will domesticate as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law and Part XII of the Companies Act (As Revised) of the Cayman Islands (the “Domestication”); and (ii) following the Domestication, Merger Sub will merge with and into PAD with PAD surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”), in accordance with the Business Combination Agreement and the Florida Business Corporation Act. Consummation of the transactions contemplated by the Business Combination Agreement are subject to customary conditions of the respective parties, including the approval of the Business Combination Agreement, the PAD Business Combination and certain other actions related thereto by the Company’s shareholders. For more information, see Note 6.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.
F-9
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 13, 2026. The interim results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any future periods.
Principles of Consolidation
The Company has one wholly-owned subsidiary, Patriot Merger Subsidiary, Inc., which was incorporated in Florida. The subsidiary was formed for purposes of consummating the PAD Business Combination and was formed on November 7, 2025.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and Merger Sub. All significant intercompany balances and transactions have been eliminated in consolidation.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Subtopic 205-40, “Presentation of Financial Statements — Going Concern,” management has determined that the Company’s liquidity condition and the liquidation date raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Extension Period.
As of March 31, 2026, the Company had $
Until the consummation of a Business Combination or the Company’s liquidation, the Company will use the funds held outside the Trust Account primarily to complete the initial Business Combination, or in the event that the Company is unable to complete the initial Business Combination, to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination, and to pay for directors and officers’ liability insurance premiums.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
F-10
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Cash Held in Trust Account
As of March 31, 2026 and December 31, 2025, all of the assets held in the Trust Account were held in a demand deposit account.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times may exceed the Federal Deposit Insurance Corporation limit of $
Offering Costs
The Company complies with the requirements of FASB ASC 340-10-S99 and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering.” Offering costs consist principally of professional and registration fees that are directly related to the IPO. FASB ASC 470-20, “Debt with Conversion and Other Options,” addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating IPO proceeds first to assigned value of the warrants and then to the Class A ordinary shares. Offering costs allocated to the Public Shares were charged to temporary equity, and offering costs allocated to the warrants sold as part of the Units in our IPO (“Public Warrants”) and Private Placement Units were charged to shareholders’ deficit as the Public Warrants and warrants sold as part of the Private Placement Units (“Private Placement Warrants”), after management’s evaluation, were accounted for under equity treatment.
F-11
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term nature.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s unaudited condensed consolidated financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2026 and December 31, 2025. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has been subject to income tax examinations by major taxing authorities since inception.
The Company is considered an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether or not net cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The underwriters’ over-allotment option is deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and was accounted for as a liability pursuant to ASC 480 as the option was not fully exercised at the time of the IPO.
Warrant Instruments
The Company accounted for the Public Warrants and Private Placement Warrants issued in connection with the IPO and the Private Placement in accordance with guidance contained in FASB ASC Topic 815, “Derivatives and Hedging.” Accordingly, the Company evaluated and classified the warrant instruments as equity at their assigned values.
F-12
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Net Income per Ordinary Share
Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of
The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of ordinary shares:
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For the Three Months Ended |
For the Three Months Ended |
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Class A |
Class B |
Class A |
Class B |
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Numerator: |
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Allocation of net income basic and diluted |
$ |
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$ |
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$ |
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$ |
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Denominator: |
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Basic and diluted weighted average ordinary shares outstanding |
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Basic and diluted net income per ordinary share |
$ |
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$ |
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$ |
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$ |
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Class A Ordinary Shares Subject to Possible Redemption
The Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, or if there is a shareholder vote or tender offer in connection with the Company’s initial Business Combination. In accordance with ASC 480-10-S99, the Company classifies Public Shares subject to possible redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Company recognizes changes in redemption value immediately as it occurs and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital (to the extent available) and accumulated deficit. Accordingly, as of March 31, 2026 and December 31, 2025, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed consolidated balance sheets.
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Class A ordinary shares subject to possible redemption, December 31, 2024 |
$ |
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Plus: |
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Accretion for common stock to redemption amount |
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Class A ordinary shares subject to possible redemption, December 31, 2025 |
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Plus: |
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Accretion for common stock to redemption amount |
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Class A ordinary shares subject to possible redemption, March 31, 2026 |
$ |
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Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
F-13
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the IPO on November 27, 2024, the Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Company consummated the sale of
The Private Placement Units, which were purchased by the Sponsor, Sponsor HoldCo, CCM and Seaport, are identical to the Units, except that, they (including the underlying securities) are (i) subject to certain limited exceptions, will be subject to transfer restrictions until
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On July 12, 2024, Sponsor HoldCo made a capital contribution of $
The holders of founder shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, either of Sponsor HoldCo, the Sponsor, any of their respective affiliates or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the Class A ordinary share or unit upon the consummation of the initial Business Combination at lender’s discretion, up to $
F-14
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS (cont.)
ordinary shares sold as part of the Private Placement Units (“Private Placement Shares”), and such Units would be identical to the Private Placement Units. As of March 31, 2026 and December 31, 2025, there were Working Capital Loans outstanding.
Advisory Agreement
In connection with the transactions contemplated by the Business Combination Agreement, on November 26, 2025, the Company and Sponsor entered into an advisory agreement (the “Advisory Agreement”) pursuant to which the Sponsor will provide certain services to the Company including, without limitation, in each case relating to the Business Combination, assisting the Company in preparing presentations, introducing the Company to potential investors, assisting the Company in arranging meetings with stockholders of PAD to the extent applicable, and assisting the Company with the preparation of any press releases and filings. The Advisory Agreement provides for the Company to pay to the Sponsor a fee of up to $
Senior Advisor Services Agreement
In connection with the transactions contemplated by the Business Combination Agreement, on December 1, 2025, the Company and Annie Gishen entered into a senior advisor services agreement (the “Services Agreement”) pursuant to which Ms. Gishen will provide certain services to the Company including, without limitation, providing support to our Chief Executive Officer, the board of directors, and the partners of the Sponsor, undertaking special tasks or project work delegated by the senior management team and providing such other services as the Company reasonably requests. Ms. Gishen is the daughter of Adam Gishen, our Chief Executive Officer. The Services Agreement provides for the Company to pay Ms. Gishen a monthly fee of $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Business Combination Agreement
On November 26, 2025, the Company entered into the Business Combination Agreement by and among the Company, Sponsor HoldCo, Merger Sub and PAD. The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) the Company will domesticate as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law and Part XII of the Companies Act (As Revised) of the Cayman Islands (the “Domestication”); and (ii) following the Domestication, Merger Sub will merge with and into PAD with PAD surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”), in accordance with the Business Combination Agreement and the Florida Business Corporation Act.
Registration Rights
The holders of the (i) founder shares, (ii) Private Placement Units, Private Placement Shares underlying the Private Placement Units, Private Placement Warrants underlying the Private Placement Units and the Class A ordinary shares underlying such Private Placement Warrants, (iii) restricted Class A ordinary shares, and (iv) any Private Placement Units that may be issued upon conversion of Working Capital Loans will be entitled to registration rights pursuant to a registration rights agreement signed on November 25, 2024, requiring the Company to register its securities held by them for resale (in the case of the founder shares, only after conversion to Class A ordinary shares, and in the case of the restricted Class A ordinary shares, upon vesting after the consummation of the initial Business Combination). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain piggyback registration rights with respect to registration statements filed subsequent to the Company’s completion of its initial Business Combination
F-15
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 6. COMMITMENTS AND CONTINGENCIES (cont.)
and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement provides that the Company will use commercially reasonable efforts to effect the registration of the applicable securities after the completion of the initial Business Combination and prior to the expiration of the applicable lock-up period. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters of its IPO a
The underwriters were entitled to a cash underwriting discount of $
Warrants
As of March 31, 2026 and December 31, 2025, there were
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating thereto is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A ordinary shares are, at the time of any exercise of a warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
F-16
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 6. COMMITMENTS AND CONTINGENCIES (cont.)
Redemption of Public Warrants — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
• in whole and not in part;
• at a price of $
• upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
• if, and only if, the closing price of the Class A ordinary shares equals or exceeds $
The Company will not redeem the warrants for cash unless a registration statement under the Securities Act covering the issuance of the shares of Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the
If the Company calls the warrants for redemption as described in this paragraph, its management will have the option to require any holder that wishes to exercise his, her or its warrant following the notice of redemption to do so on a cashless basis. In the case of such a cashless exercise, each holder would pay the exercise price by surrendering the Public Warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” (defined below) less the exercise price of the warrants by (y) the fair market value. The “fair market value” as used in the preceding sentence shall mean the volume-weighted average price of the Class A ordinary shares for the
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants sold as part of the Private Placement Units will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable.
F-17
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue
Class A Ordinary Shares — The Company is authorized to issue
Class B Ordinary Shares — The Company is authorized to issue
Only holders of Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of the Company’s shareholders except as otherwise required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the IPO and related to the closing of a Business Combination, the ratio at which the Class B ordinary shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis,
NOTE 8. SEGMENT INFORMATION
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”), or group, in deciding how to allocate resources and assess performance.
F-18
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Unaudited)
NOTE 8. SEGMENT INFORMATION (cont.)
The CODM assesses performance for the single segment and decides how to allocate resources based on net income that also is reported on the unaudited condensed consolidated statements of operations as net income. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.
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March 31, |
December 31, |
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Cash and cash equivalents |
$ |
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$ |
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Cash held in Trust Account |
$ |
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$ |
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For the Three Months Ended |
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2026 |
2025 |
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General and administrative expenses |
$ |
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$ |
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Interest earned on cash held in Trust Account |
$ |
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$ |
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The CODM reviews interest earned on cash held in Trust Account to measure and monitor shareholder value and determine the most effective strategy of investment with the Trust Account funds while maintaining compliance with the Investment Management Trust Agreement, dated November 25, 2024, between the Company and Odyssey Transfer and Trust Company.
General and administrative costs are reviewed and monitored by the CODM to manage and forecast cash to ensure enough capital is available to complete a Business Combination or similar transaction within the Extension Period. The CODM also reviews general and administrative costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget. General and administrative expenses, as reported on the unaudited condensed consolidated statements of operations, are the significant segment expenses provided to the CODM on a regular basis.
All other segment items included in net income are reported on the unaudited condensed consolidated statements of operations and described within their respective disclosures.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed consolidated balance sheet date up to the date that the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
F-19
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
FACT II Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of FACT II Acquisition Corp. as of December 31, 2025 and 2024, the related statements of operations, changes in shareholders’ deficit and cash flows for the year ended December 31, 2025 and for the period from June 19, 2024 (inception) through December 31, 2024 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024 and the results of its operations and its cash flows for the year ended December 31, 2025 and for the period from June 19, 2024 (inception) through December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business combination by May 27, 2026, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to FACT II Acquisition Corp. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. FACT II Acquisition Corp. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as FACT II Acquisition Corp.’s auditor since 2024.
New York, New York
March 13, 2026
PCAOB ID Number 100
F-20
Table of Contents
FACT II ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
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December 31, |
December 31, |
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ASSETS |
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Current assets |
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Cash |
$ |
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$ |
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Prepaid expenses |
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Total current assets |
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Prepaid insurance |
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Cash held in Trust Account |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
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Current liabilities |
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Accrued expenses |
$ |
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$ |
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Over-allotment option liability |
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Total current liabilities |
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Deferred legal fees |
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Deferred underwriting fee payable |
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TOTAL LIABILITIES |
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COMMITMENTS AND CONTINGENCIES (Note 6) |
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| Class A ordinary shares subject to possible redemption, |
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SHAREHOLDERS’ DEFICIT |
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| Preference shares, $ |
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| Class A ordinary shares, $ |
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| Class B ordinary shares, $ |
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(1) |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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TOTAL SHAREHOLDERS’ DEFICIT |
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( |
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( |
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TOTAL LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
$ |
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$ |
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____________
(1)
The accompanying notes are an integral part of this consolidated financial statement.
F-21
Table of Contents
FACT II ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
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For the |
For the |
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General and administrative expenses |
$ |
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$ |
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Loss from operations |
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( |
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( |
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Other income: |
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Change in fair value of over-allotment liability |
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Interest earned on bank account |
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Interest earned on cash held in Trust Account |
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Total other income |
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NET INCOME (LOSS) |
$ |
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$ |
( |
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Weighted average shares outstanding of Class A ordinary shares |
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Basic and diluted net income (loss) per ordinary share, Class A ordinary shares |
$ |
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$ |
( |
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Weighted average shares outstanding, Class B ordinary shares(1) |
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Basic and diluted net income (loss) per ordinary share, Class B ordinary shares |
$ |
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$ |
( |
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____________
(1)
The accompanying notes are an integral part of this consolidated financial statement.
F-22
Table of Contents
FACT II ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2025 AND
FOR THE PERIOD FROM JUNE 19, 2024 (INCEPTION) THROUGH DECEMBER 31, 2024
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Class A |
Class B |
Additional |
Accumulated |
Total |
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Shares |
Amount |
Shares |
Amount |
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Balance – June 19, 2024 (inception) |
$ |
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$ |
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$ |
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$ |
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$ |
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Class B ordinary shares issued to Sponsor(1) |
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Sale of Private Placement Warrants |
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Fair value of Public Warrants at issuance |
— |
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— |
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Sale of Restricted Shares |
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Allocated value of transaction costs to Class A ordinary shares |
— |
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— |
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( |
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( |
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Accretion of Class A ordinary shares subject to redemption to redemption amount |
— |
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— |
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( |
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( |
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( |
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Net loss |
— |
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— |
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( |
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( |
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Balance – December 31, 2024 |
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$ |
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( |
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( |
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Forfeiture of Founder Shares |
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( |
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( |
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Accretion of Class A ordinary shares subject to redemption to redemption amount |
— |
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— |
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( |
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( |
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( |
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Net income |
— |
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— |
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Balance – December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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____________
(1)
The accompanying notes are an integral part of this consolidated financial statement.
F-23
Table of Contents
FACT II ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Year Ended |
For the |
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Cash Flows from Operating Activities: |
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Net income (loss) |
$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Change in fair value of over-allotment liability |
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( |
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( |
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Interest earned on cash held in Trust Account |
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( |
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( |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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( |
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Prepaid insurance |
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( |
) |
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|
Accrued expenses |
|
( |
) |
|
|
|
||
|
Deferred legal fees |
|
|
|
|
|
|
||
|
Net cash used in operating activities |
|
( |
) |
|
( |
) |
||
|
|
|
|
|
|||||
|
Cash Flows from Investing Activities: |
|
|
|
|
||||
|
Investment of cash into Trust Account |
|
|
|
( |
) |
|||
|
Net cash used in investing activities |
|
|
|
( |
) |
|||
|
|
|
|
|
|||||
|
Cash Flows from Financing Activities: |
|
— |
|
|
|
|||
|
Proceeds from issuance of Class B ordinary shares to Sponsor |
|
|
|
|
|
|||
|
Proceeds from sale of Units, net of underwriting discounts paid |
|
|
|
|
|
|||
|
Proceeds from sale of Private Placement Warrants |
|
|
|
|
|
|||
|
Proceeds from advances from Sponsor |
|
|
|
|
|
|||
|
Repayment of advances from Sponsor through the private placement proceeds |
|
|
|
( |
) |
|||
|
Payment of offering costs |
|
|
|
( |
) |
|||
|
Net cash provided by financing activities |
|
|
|
|
|
|||
|
|
|
|
|
|||||
|
Net Change in Cash |
|
( |
) |
|
|
|
||
|
Cash – Beginning of period |
|
|
|
|
|
|||
|
Cash – End of period |
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|||||
|
Non-Cash investing and financing activities: |
|
|
|
|
||||
|
Deferred underwriting fee payable |
$ |
|
$ |
|
|
|||
The accompanying notes are an integral part of this consolidated financial statement.
F-24
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
FACT II Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on June 19, 2024. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of completing a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2025, the Company had not commenced any operations. There was no activity for the period from June 19, 2024 (inception) through December 31, 2025 besides the Company’s formation, initial public offering (the “IPO”), and searching for a Business Combination opportunity, which are described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
On June 19, 2024, FACT II Acquisition Parent LLC, a Cayman Islands limited liability company (which is referred to as the “Sponsor”), formed FACT II Acquisition LLC, a Cayman Islands limited liability company (which is referred to as “Sponsor HoldCo”), through which the Sponsor (i) holds its founder shares (as defined below) and (ii) purchased Private Placement Securities at the date of the IPO.
The registration statement for the Company’s IPO was declared effective on November 25, 2024. On November 27, 2024, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the Company consummated the sale of
Transaction costs amounted to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination. The Company must complete its initial Business Combination with one or more target businesses that together have a fair market value equal to at least
F-25
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect a Business Combination.
Following the closing of the IPO, on November 27, 2024, an amount of $
The Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The shareholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $
If the Company seeks shareholder approval in connection with a Business Combination, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who vote at a general meeting of the Company. If a shareholder vote is not required under applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, Sponsor HoldCo has agreed to vote its founder shares (as defined in Note 5) and any Public Shares purchased in or after the IPO in favor of approving a Business Combination and to waive its redemption rights with respect to any such shares in connection with a shareholder vote to approve a Business Combination. Additionally, each public shareholder may elect to redeem its Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
Sponsor HoldCo has agreed (a) to waive its redemption rights with respect to any founder shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the
F-26
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Company’s obligation to redeem
The Company will have until
Sponsor HoldCo has agreed to waive its liquidation rights with respect to the founder shares if the Company fails to complete a Business Combination within the Extension Period. However, if Sponsor HoldCo acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Extension Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Extension Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the initial amount held in the Trust Account ($
Sponsor HoldCo has agreed that it will be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $
Risks and Uncertainties
The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting global conflicts, including from the ongoing Russia-Ukraine and Israel-Hamas conflicts, as well as recent developments to trade and tariff policies of the United States and other countries. In response to the ongoing
F-27
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Russia-Ukraine conflict, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine and to Israel, increasing geopolitical tensions among a number of nations. The invasion of Ukraine by Russia and the escalation of the Israel-Hamas conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts, as well as changes in global trade and tariff policies, are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyberattacks against U.S. companies. Additionally, any resulting sanctions or tariffs, as applicable, could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.
Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, the Israel-Hamas conflict and subsequent sanctions or related actions or the ongoing trade and tariff policy changes by the United States or other countries, could adversely affect the Company’s search for an initial business combination and any target business with which the Company may ultimately consummate an initial business combination.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”).
Principles of Consolidation
The Company has one wholly-owned subsidiary, Patriot Merger Subsidiary, Inc., which was incorporated in Florida.
The accompanying consolidated financial statements include the accounts of the Company and Patriot Merger Subsidiary, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-40, “Presentation of Financial Statements — Going Concern,” management has determined that the Company’s liquidity condition and the liquidation date raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Combination Period.
As of December 31, 2025, the Company had $
Until the consummation of a Business Combination or the Company’s liquidation, the Company will use the funds held outside the Trust Account primarily to complete the initial business combination, or in the event that the Company is unable to complete the initial business combination, to identify and evaluate target businesses, perform
F-28
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
business due diligence on prospective target businesses, travel to and from offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination, and to pay for directors and officers’ liability insurance premiums.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Cash Held in Trust Account
As of December 31, 2025 and 2024, all of the assets held in the Trust Account were held in a demand deposit account.
F-29
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times may exceed the Federal Deposit Insurance Corporation limit of $
Offering Costs
The Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99 and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering.” Offering costs consist principally of professional and registration fees that are directly related to the IPO. FASB ASC 470-20, “Debt with Conversion and Other Options,” addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating IPO proceeds first to assigned value of the warrants and then to the Class A ordinary shares. Offering costs allocated to the Public Shares were charged to temporary equity, and offering costs allocated to the Public Warrants and Private Placement Units were charged to shareholders’ deficit as the Public and Private Placement Warrants, after management’s evaluation, were accounted for under equity treatment.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2025 and 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has been subject to income tax examinations by major taxing authorities since inception.
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its
F-30
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheets as current or non-current based on whether or not net cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The underwriters’ over-allotment option is deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and was accounted for as a liability pursuant to ASC 480 as the option was not fully exercised at the time of the IPO.
Warrant Instruments
The Company accounted for the Public Warrants and Private Placement Warrants issued in connection with the IPO and the private placement in accordance with guidance contained in FASB ASC Topic 815, “Derivatives and Hedging.” Accordingly, the Company evaluated and classified the warrant instruments as equity at their assigned values.
Net Income (Loss) per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of
The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares:
|
For the Year Ended |
For the period from |
|||||||||||||
|
Class A |
Class B |
Class A |
Class B |
|||||||||||
|
Basic net income (loss) per share: |
|
|
|
|
|
|
||||||||
|
Numerator: |
|
|
|
|
|
|
||||||||
|
Allocation of net income (loss) basic |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
||||
|
Denominator: |
|
|
|
|
|
|
||||||||
|
Basic and diluted weighted average ordinary shares outstanding |
|
|
|
|
|
|
|
|
|
|
||||
|
Basic and diluted net income (loss) per ordinary share |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
||||
Class A Ordinary Shares Subject to Possible Redemption
The public shares contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, or if there is a shareholder vote or tender offer in connection with the Company’s initial Business Combination. In accordance with ASC 480-10-S99, the Company classifies public shares subject to possible redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Company recognizes changes in redemption value immediately as it occurs and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital (to the extent available) and accumulated deficit. Accordingly, as of December 31, 2025 and 2024, Class A
F-31
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets.
|
Gross proceeds |
$ |
|
|
|
|
Less: |
|
|
||
|
Proceeds allocated to Public Warrants |
|
( |
) |
|
|
Proceeds allocated to over-allotment option |
|
( |
) |
|
|
Class A ordinary shares issuance costs |
|
( |
) |
|
|
Plus: |
|
|
||
|
Remeasurement of carrying value to redemption value |
|
|
|
|
|
Class A ordinary shares subject to possible redemption, December 31, 2024 |
$ |
|
|
|
|
Plus: |
|
|
||
|
Accretion for common stock to redemption amount |
|
|
|
|
|
Class A ordinary shares subject to possible redemption, December 31, 2025 |
$ |
|
|
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the IPO on November 27, 2024, the Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Company consummated the sale of
The Private Placement Units, which were purchased by the Sponsor, Sponsor HoldCo, CCM and Seaport, are identical to the Units, except that, they (including the underlying securities) are (i) subject to certain limited exceptions, will be subject to transfer restrictions until
F-32
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On July 12, 2024, Sponsor HoldCo made a capital contribution of $
The holders of founder shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, either of Sponsor HoldCo, the Sponsor, any of their respective affiliates or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the Class A ordinary share or unit upon the consummation of the initial Business Combination at lender’s discretion, up to $
Advisory Agreement
In connection with the transactions contemplated by the Business Combination Agreement, on November 26, 2025, the Company and Sponsor entered into an advisory agreement (the “Advisory Agreement”) pursuant to which the Sponsor will provide certain services to the Company including, without limitation, in each case relating to the Business Combination, assisting the Company in preparing presentations, introducing the Company to potential investors, assisting the Company in arranging meetings with stockholders of PAD to the extent applicable, and assisting the Company with the preparation of any press releases and filings. The Advisory Agreement provides for the Company to pay to the Sponsor a fee of up to $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Business Combination Agreement
On November 26, 2025, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among the Company, FACT II Acquisition LLC, a Cayman Islands limited liability company (“Sponsor HoldCo”), Patriot Merger Subsidiary, Inc., a Florida corporation and a direct, wholly-owned subsidiary of FACT (“Merger Sub”) and Precision Aerospace & Defense Group, Inc. (“PAD”), a Florida corporation. The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) the Company will domesticate as a Delaware corporation in accordance with Section 388 of
F-33
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 6. COMMITMENTS AND CONTINGENCIES (cont.)
the Delaware General Corporation Law and Part XII of the Companies Act (As Revised) of the Cayman Islands (the “Domestication”); and (ii) following the Domestication, Merger Sub will merge with and into PAD with PAD surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”), in accordance with the Business Combination Agreement and the Florida Business Corporation Act.
Registration Rights
The holders of the (i) founder shares, (ii) Private Placement Units, Class A ordinary shares underlying the Private Placement Units, Private Placement Warrants underlying the Private Placement Units and the Class A ordinary shares underlying such Private Placement Warrants, (iii) restricted Class A ordinary shares, and (iv) any Private Placement Units that may be issued upon conversion of Working Capital Loans will be entitled to registration rights pursuant to a registration rights agreement signed prior to the date of the IPO requiring the Company to register its securities held by them for resale (in the case of the founder shares, only after conversion to Class A ordinary shares, and in the case of the restricted Class A ordinary shares, until the lock-up period expires 90 days after the completion of our initial business combination and which shares would vest only upon the consummation of the initial Business Combination). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain piggyback registration rights with respect to registration statements filed subsequent to the Company’s completion of its initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement provides that the Company will use commercially reasonable efforts to effect the registration of the applicable securities after the completion of the initial Business Combination and prior to the expiration of the applicable lock-up period. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
The underwriters were entitled to a cash underwriting discount of $
Warrants — As of December 31, 2025 and 2024, there were
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating thereto is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
F-34
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 6. COMMITMENTS AND CONTINGENCIES (cont.)
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A ordinary shares are, at the time of any exercise of a warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Public Warrants — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
• in whole and not in part;
• at a price of $
• upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
• if, and only if, the closing price of the Class A ordinary shares equals or exceeds $
The Company will not redeem the warrants for cash unless a registration statement under the Securities Act covering the issuance of the shares of Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period, unless the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the warrants for redemption as described in this paragraph, its management will have the option to require any holder that wishes to exercise his, her or its warrant following the notice of redemption to do so on a cashless basis. In the case of such a cashless exercise, each holder would pay the exercise price by surrendering the public warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” (defined below) less the exercise price of the warrants by (y) the fair market value. The “fair market value” as used in the preceding sentence shall mean the volume-weighted average price of the Class A ordinary shares for the 10 trading day period ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $
F-35
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 6. COMMITMENTS AND CONTINGENCIES (cont.)
of Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $
The Private Placement Warrants sold as part of the Private Placement Units will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable.
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue
Class A Ordinary Shares — The Company is authorized to issue
Class B Ordinary Shares — The Company is authorized to issue
Only holders of Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of the Company’s shareholders except as otherwise required by law.
F-36
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 8. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
|||
|
Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
|||
|
Level 3: |
Unobservable inputs based on assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value as of December 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
Level |
December 31, |
||||
|
Liabilities: |
|
||||
|
Over-allotment option liability |
3 |
$ |
|
||
The over-allotment option was accounted for as a liability in accordance with ASC 815-40 and was presented within liabilities on the balance sheet. The over-allotment option liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of over-allotment liability in the statement of operations.
The Company used a Black-Scholes model to value the over-allotment option. The over-allotment option liability was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the option. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the option. The expected life of the option is assumed to be equivalent to their remaining contractual term.
The key inputs into the Black-Scholes model were as follows at December 31, 2024 and the at initial measurement date of the over-allotment option:
|
Inputs |
December 31, |
|||
|
Risk-free interest rate |
|
|
% |
|
|
Expected term (years) |
|
|
|
|
|
Expected volatility |
|
|
% |
|
|
Exercise price |
$ |
|
|
|
F-37
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 8. FAIR VALUE MEASUREMENTS (cont.)
|
Inputs |
November 27, |
|||
|
Risk-free interest rate |
|
|
% |
|
|
Expected term (years) |
|
|
|
|
|
Expected volatility |
|
|
% |
|
|
Exercise price |
$ |
|
|
|
The fair value of the Public Warrants as of November 27, 2024, the date of the IPO was $
|
November 27, |
||||
|
Estimated share price |
$ |
|
|
|
|
Exercise price |
$ |
|
|
|
|
Term (years) |
|
|
|
|
|
Risk-free rate |
|
|
% |
|
|
Selected volatility |
|
|
% |
|
On January 10, 2025, the underwriters’ election to exercise their over-allotment option expired unexercised, resulting in the forfeiture of
Public Warrants are not remeasured subsequent to the date of the IPO.
NOTE 9. SEGMENT INFORMATION
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”), or group, in deciding how to allocate resources and assess performance.
The CODM assesses performance for the single segment and decides how to allocate resources based on net income that also is reported on the statements of operations as net income.
|
December 31, |
December 31, |
|||||
|
Trust Account |
$ |
|
$ |
|
||
|
Cash |
$ |
|
$ |
|
||
F-38
Table of Contents
FACT II ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
NOTE 9. SEGMENT INFORMATION (cont.)
|
For the |
For the |
|||||
|
General and administrative expenses |
$ |
|
$ |
|
||
|
Interest earned on cash held in Trust Account |
$ |
|
$ |
|
||
The CODM reviews interest earned on cash held in Trust Account to measure and monitor shareholder value and determine the most effective strategy of investment with the Trust Account funds while maintaining compliance with the Trust Agreement.
General and administrative costs are reviewed and monitored by the CODM to manage and forecast cash to ensure enough capital is available to complete a business combination or similar transaction within the Extension Period. The CODM also reviews general and administrative costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget. General and administrative expenses, as reported on the statements of operations, are the significant segment expenses provided to the CODM on a regular basis.
All other segment items included in net income are reported on the statements of operations and described within their respective disclosures.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Based upon this review and other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
F-39
Table of Contents
PRECISION AEROSPACE & DEFENSE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(Unaudited) |
December 31, |
|||||
|
Assets |
|
|
||||
|
Current assets: |
|
|
||||
|
Cash and cash equivalents |
$ |
2,612,508 |
$ |
2,437,666 |
||
|
Accounts receivable, net |
|
5,462,124 |
|
6,306,360 |
||
|
Related party receivable, current |
|
410,126 |
|
409,000 |
||
|
Inventory, net |
|
12,073,509 |
|
10,762,313 |
||
|
Prepaid and other current assets |
|
429,879 |
|
364,959 |
||
|
Total current assets |
|
20,988,146 |
|
20,280,298 |
||
|
Non-current assets: |
|
|
||||
|
Property and equipment, net |
|
7,277,759 |
|
6,079,110 |
||
|
Right of use assets |
|
6,690,638 |
|
6,861,569 |
||
|
Goodwill |
|
43,535,539 |
|
43,535,539 |
||
|
Other assets |
|
1,022,656 |
|
1,102,126 |
||
|
Total non-current assets |
|
58,526,592 |
|
57,578,344 |
||
|
Total assets |
$ |
79,514,738 |
$ |
77,858,642 |
||
|
Liabilities, Mezzanine Equity, and Stockholders’ Deficit |
|
|
||||
|
Current liabilities: |
|
|
||||
|
Accounts payable and accrued expenses |
$ |
5,679,648 |
$ |
4,836,875 |
||
|
Accrued payroll expenses |
|
1,159,703 |
|
1,028,426 |
||
|
Related party payable |
|
1,963,441 |
|
1,838,391 |
||
|
Income tax payable |
|
279,220 |
|
17,402 |
||
|
Operating lease liability, current |
|
650,235 |
|
634,742 |
||
|
Finance lease liability, current |
|
378,714 |
|
433,036 |
||
|
Line of credit |
|
475,991 |
|
791,643 |
||
|
Notes payable, current |
|
47,741,346 |
|
47,980,433 |
||
|
Contract liabilities |
|
693,918 |
|
642,821 |
||
|
Contingent consideration, current |
|
87,348 |
|
— |
||
|
Redeemable preferred stock liability, current |
|
828,106 |
|
662,901 |
||
|
Total current liabilities |
|
59,937,670 |
|
58,866,670 |
||
|
Non-current liabilities: |
|
|
||||
|
Operating lease liability, non-current |
|
6,397,775 |
|
6,565,085 |
||
|
Finance lease liability, non-current |
|
821,886 |
|
982,982 |
||
|
Notes payable, non-current |
|
6,985,862 |
|
7,167,450 |
||
|
Contingent consideration, non-current |
|
— |
|
4,846 |
||
|
Redeemable preferred stock liability, non-current |
|
1,400,000 |
|
1,500,000 |
||
|
Deferred tax liability |
|
286,488 |
|
246,394 |
||
|
Total non-current liabilities |
|
15,892,011 |
|
16,466,757 |
||
|
Total liabilities |
|
75,829,681 |
|
75,333,427 |
||
|
Commitments and contingencies |
|
— |
|
— |
||
F-40
Table of Contents
PRECISION AEROSPACE & DEFENSE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
|
(Unaudited) |
December 31, |
|||||||
|
Mezzanine equity |
|
|
|
|
||||
|
Preferred stock, Series A, $0.001 par value: 400,000 shares authorized at March 31, 2026 and December 31, 2025; 400,000 shares issued and outstanding at December 31, 2025 and 2024. |
|
— |
|
|
— |
|
||
|
Preferred stock, Series B, $0.001 par value: 400,000 shares authorized at March 31, 2026 and December 31, 2025; 293,000 shares issued and outstanding at March 31, 2026 and December 31, 2025. |
|
1,547,616 |
|
|
1,511,493 |
|
||
|
Preferred stock, Series C, $0.001 par value: 550,000 shares authorized at March 31, 2026 and December 31, 2025; 550,000 shares issued and outstanding at March 31, 2026 and December 31, 2025. |
|
2,775,483 |
|
|
2,750,000 |
|
||
|
Preferred stock, Series D, $0.001 par value: 400,000 shares authorized at March 31, 2026 and December 31, 2025; 368,000 and 348,000 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively. |
|
1,840,000 |
|
|
1,740,000 |
|
||
|
Preferred stock, Series E, $0.001 par value: 200,000 and 0 shares authorized at March 31, 2026 and December 31, 2025, respectively; 47,500 and 0 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively. |
|
475,000 |
|
|
— |
|
||
|
Total mezzanine equity |
|
6,638,099 |
|
|
6,001,493 |
|
||
|
Stockholders’ deficit: |
|
|
|
|
||||
|
Common stock, $0.001 par value: 100,000,000 shares authorized at March 31, 2026 and December 31, 2025; 12,395,434 and 12,388,291 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively. |
|
12,395 |
|
|
12,388 |
|
||
|
Additional paid-in capital |
|
11,621,707 |
|
|
11,674,587 |
|
||
|
Accumulated deficit |
|
(14,762,746 |
) |
|
(15,334,460 |
) |
||
|
Non-controlling interest |
|
175,602 |
|
|
171,207 |
|
||
|
Total stockholders’ deficit: |
|
(2,953,042 |
) |
|
(3,476,278 |
) |
||
|
Total liabilities, mezzanine equity, and stockholders’ deficit: |
$ |
79,514,738 |
|
$ |
77,858,642 |
|
||
See accompanying Notes to Condensed Consolidated Financial Statements
F-41
Table of Contents
PRECISION AEROSPACE & DEFENSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
Three Months Ended |
||||||||
|
March 31, |
March 31, |
|||||||
|
Revenue |
$ |
10,536,487 |
|
$ |
7,806,793 |
|
||
|
|
|
|
|
|||||
|
Cost of revenue |
|
6,355,700 |
|
|
4,635,544 |
|
||
|
Gross profit |
|
4,180,787 |
|
|
3,171,249 |
|
||
|
|
|
|
|
|||||
|
Operating expenses: |
|
|
|
|
||||
|
Selling, general, and administrative |
|
2,809,340 |
|
|
2,549,801 |
|
||
|
Total operating expenses |
|
2,809,340 |
|
|
2,549,801 |
|
||
|
|
|
|
|
|||||
|
Operating income (loss) |
|
1,371,447 |
|
|
621,448 |
|
||
|
|
|
|
|
|||||
|
Other income (expenses): |
|
|
|
|
||||
|
Interest expense |
|
(362,340 |
) |
|
(385,141 |
) |
||
|
Revaluation of contingent consideration |
|
(82,502 |
) |
|
628,251 |
|
||
|
Loss from equity method investment |
|
— |
|
|
(67,844 |
) |
||
|
Other income |
|
26,416 |
|
|
493 |
|
||
|
Total other income (expenses) |
|
(418,426 |
) |
|
175,759 |
|
||
|
|
|
|
|
|||||
|
Net income (loss) before income taxes |
|
953,021 |
|
|
797,207 |
|
||
|
|
|
|
|
|||||
|
Provision for income tax expense (benefit) |
|
301,912 |
|
|
78,928 |
|
||
|
Net income (loss) |
|
651,109 |
|
|
718,279 |
|
||
|
Net income (loss) attributable to non-controlling interest |
|
4,395 |
|
|
— |
|
||
|
Net income (loss) attributable to Precision Aerospace & Defense Group, Inc. |
$ |
646,714 |
|
$ |
718,279 |
|
||
|
|
|
|
|
|||||
|
Preferred stock accrued undeclared dividends |
|
61,606 |
|
|
— |
|
||
|
Net income (loss) attributable to common stockholders |
$ |
585,108 |
|
$ |
718,279 |
|
||
|
|
|
|
|
|||||
|
Basic earnings (loss) per share attributable to common stockholders: |
$ |
0.05 |
|
$ |
0.07 |
|
||
|
Diluted earnings (loss) per share attributable to common stockholders: |
$ |
0.05 |
|
$ |
0.07 |
|
||
|
Weighted average shares outstanding basic |
|
12,394,244 |
|
|
9,885,689 |
|
||
|
Weighted average shares outstanding diluted |
|
12,394,244 |
|
|
9,885,689 |
|
||
See accompanying Notes to Condensed Consolidated Financial Statements
F-42
Table of Contents
PRECISION AEROSPACE & DEFENSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT
(Unaudited)
|
Three Months Ended |
||||||||
|
March 31, |
March 31, |
|||||||
|
Total mezzanine equity, beginning balance |
$ |
6,001,493 |
|
$ |
3,465,000 |
|
||
|
Issuance of preferred stock, Series C |
|
— |
|
|
1,700,000 |
|
||
|
Issuance of preferred stock, Series D |
|
100,000 |
|
|
— |
|
||
|
Issuance of preferred stock, Series E |
|
475,000 |
|
|
— |
|
||
|
Undeclared dividends accrued for preferred stock |
|
61,606 |
|
|
— |
|
||
|
Total mezzanine equity, ending balance |
$ |
6,638,099 |
|
$ |
5,165,000 |
|
||
|
|
|
|
|
|||||
|
Total stockholders’ deficit, beginning balance |
$ |
(3,476,278 |
) |
$ |
(1,305,009 |
) |
||
|
|
|
|
|
|||||
|
Common stock and additional paid-in capital: |
|
|
|
|
||||
|
Beginning balances |
|
11,686,975 |
|
|
10,699,505 |
|
||
|
Issuance of common stock for services |
|
8,733 |
|
|
12,742 |
|
||
|
Stock-based compensation |
|
— |
|
|
5,553 |
|
||
|
Undeclared dividends accrued for preferred stock |
|
(61,606 |
) |
|
— |
|
||
|
Ending balances |
|
11,634,102 |
|
|
10,717,800 |
|
||
|
|
|
|
|
|||||
|
Accumulated deficit: |
|
|
|
|
||||
|
Beginning balances |
|
(15,334,460 |
) |
|
(12,004,514 |
) |
||
|
Net income attributable to Precision Aerospace & Defense Group, Inc. |
|
646,714 |
|
|
718,279 |
|
||
|
Distribution |
|
(75,000 |
) |
|
(88,250 |
) |
||
|
Ending balances |
|
(14,762,746 |
) |
|
(11,374,485 |
) |
||
|
|
|
|
|
|||||
|
Non-controlling interest: |
|
|
|
|
||||
|
Beginning balances |
|
171,207 |
|
|
— |
|
||
|
Net income attributable to non-controlling interest |
|
4,395 |
|
|
— |
|
||
|
Ending balances |
|
175,602 |
|
|
— |
|
||
|
Total stockholders’ deficit, ending balance |
$ |
(2,953,042 |
) |
$ |
(656,685 |
) |
||
See accompanying Notes to Condensed Consolidated Financial Statements
F-43
Table of Contents
PRECISION AEROSPACE & DEFENSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Three Months Ended |
||||||||
|
March 31, |
March 31, |
|||||||
|
Cash Flows From Operating Activities: |
|
|
|
|
||||
|
Net income (loss) |
$ |
651,109 |
|
$ |
718,279 |
|
||
|
Adjustments to reconcile net income (loss) to net cash from operating activities: |
|
|
|
|
||||
|
Depreciation and amortization |
|
365,684 |
|
|
327,827 |
|
||
|
Deferred taxes |
|
40,094 |
|
|
— |
|
||
|
Loss (gain) on revaluation of acquisition and contingent consideration liabilities |
|
82,502 |
|
|
(628,251 |
) |
||
|
Amortization of note payable discount and loan fees |
|
— |
|
|
62,941 |
|
||
|
Accrued interest income |
|
(1,126 |
) |
|
— |
|
||
|
Accrued interest expense |
|
228,837 |
|
|
211,264 |
|
||
|
Amortization of right-of-use asset |
|
170,931 |
|
|
161,240 |
|
||
|
Loss on equity-method investment |
|
— |
|
|
67,844 |
|
||
|
Stock based compensation |
|
8,733 |
|
|
18,295 |
|
||
|
Changes in operating assets and liabilities: |
|
|
|
|
||||
|
Accounts receivable |
|
844,236 |
|
|
(266,422 |
) |
||
|
Inventory |
|
(1,311,196 |
) |
|
(442,879 |
) |
||
|
Prepaid and other current assets |
|
— |
|
|
1,719 |
|
||
|
Other assets |
|
(508 |
) |
|
(42,144 |
) |
||
|
Accounts payable and accrued expenses |
|
842,773 |
|
|
(226,280 |
) |
||
|
Accrued payroll |
|
131,277 |
|
|
(159,216 |
) |
||
|
Related party payable |
|
125,050 |
|
|
(597,483 |
) |
||
|
Accrued income taxes |
|
261,818 |
|
|
66,794 |
|
||
|
Contract liabilities |
|
51,097 |
|
|
(24,456 |
) |
||
|
Operating lease liability |
|
(151,817 |
) |
|
(92,554 |
) |
||
|
Other liabilities |
|
— |
|
|
(8,251 |
) |
||
|
Net cash provided by (used in) operating activities |
|
2,339,494 |
|
|
(851,733 |
) |
||
|
Cash Flows From Investing Activities: |
|
|
|
|
||||
|
Purchases of property and equipment |
|
(1,549,275 |
) |
|
(66,132 |
) |
||
|
Advances on related party receivables |
|
(75,000 |
) |
|
(88,250 |
) |
||
|
Net cash used in investing activities |
|
(1,624,275 |
) |
|
(154,382 |
) |
||
|
Cash Flows From Financing Activities: |
|
|
|
|
||||
|
Proceeds from line of credit, net |
|
(315,652 |
) |
|
17,160 |
|
||
|
Repayment of long-term debt |
|
(584,307 |
) |
|
(122,043 |
) |
||
|
Repayment of finance leases |
|
(215,418 |
) |
|
(106,108 |
) |
||
|
Proceeds from issuance of preferred shares |
|
575,000 |
|
|
1,700,000 |
|
||
|
Net cash provided by financing activities |
|
(540,377 |
) |
|
1,489,009 |
|
||
|
Net increase (decrease) in cash and cash equivalents |
|
174,842 |
|
|
482,894 |
|
||
|
Cash and cash equivalents, beginning of period |
|
2,437,666 |
|
|
1,275,156 |
|
||
|
Cash and cash equivalents, end of period |
$ |
2,612,508 |
|
$ |
1,758,050 |
|
||
|
|
|
|
|
|||||
|
Supplemental Cash Flows Disclosure: |
|
|
|
|
||||
|
Income taxes paid (net of refunds) |
$ |
|||||||