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Item 2. Management’s Discussion and Analysis

2026-08-11 compared with 2026-05-15 · 232 added, 118 removed, 3 unchanged (99% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

References in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to Cartesian Growth Corporation III.

References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to CGC III Sponsor LLC.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.

All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements.

Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available.

A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements.

For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of this Quarterly Report and the Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission (the “SEC”) on March 23, 2026 (the “2025 Annual Report”).

The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.

Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We are a blank check company incorporated on October 29, 2024 as a Cayman Islands exempted company and formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (“Business Combination”).

We intend to effectuate our initial Business Combination using cash derived from the proceeds of the Initial Public Offering and the Private Placement (as defined and described below), our shares, debt or a combination of cash, shares and debt.

While we may pursue our initial Business Combination in any business industry or sector, we are focused on seeking high-growth businesses with proven or potential transnational operations or outlooks in order to capitalize on the experience, reputation, and network of our management team.

Furthermore, we seek target businesses where we believe we will have an opportunity to drive ongoing value creation after our initial Business Combination is completed.

We expect to continue to incur significant costs in the pursuit of our acquisition plans.

We cannot assure you that our plans to complete our initial Business Combination will be successful.

Business Combination Agreement

On December 17, 2025, the Company, Fenway MS, Inc., a Delaware corporation (“Merger Sub”), and Factorial Inc., a Delaware corporation (“Factorial”), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”).

The Business Combination Agreement and the transactions contemplated thereby (the “Proposed Business Combination”) were unanimously approved by the boards of directors and special committees comprised of independent and disinterested members of the boards of directors of each of the Company and Factorial.

The Proposed Business Combination is expected to close in mid-2026, following the receipt of the requisite approvals of the Company’s shareholders and Factorial stockholders and the fulfillment of other customary closing conditions.

Amendment to Business Combination Agreement

On March 26, 2026, the Company, Merger Sub and Factorial entered into an Amendment to the Business Combination Agreement (the “BCA Amendment”).

The BCA Amendment, among other things, (A) amends the sixth paragraph of the Preamble and inserts a new clause (a) into Section 2.1 of the Business Combination Agreement to provide that the Shareholder Redemption shall occur at least one day prior to the Domestication, thereby clarifying the timing and sequencing of the “Shareholder Redemption relative to the Domestication;

(B) amends certain definitions, including the definition of “Ancillary Documents” to remove references to the “CGC Private Warrant Exchange Agreement,” the definition of “Company Convertible Notes” to mean any convertible note or other equity-linked debt instrument convertible into Equity Securities of the Company or any of its subsidiaries outstanding as of the Merger Effective Time;

(C) amends clause (b)(iii) of Section 5.8 of the Business Combination Agreement to bifurcate the previously singular “Nasdaq Proposal” into two distinct proposals to be submitted to the Company’s shareholders for approval:

(i) the adoption and approval of the issuance of shares in connection with the transactions contemplated by the Business Combination Agreement and (ii) the adoption and approval of the issuance of CGC Shares in connection with the PIPE Financing, and consequently update the definition of “Nasdaq Proposal” to read “Nasdaq Proposals;” and (D) amend and restate Sections 5.21 and 5.22 of the Business Combination Agreement to remove the provisions related to the Warrant Exchange.

The following discussion and analysis of the financial condition and results of operations of Factorial Energy Inc.

(“Factorial Energy,” “Factorial,” ”Company,” “we” “our” or “us”) should be read together with the audited annual financial statements of Factorial Inc.

(“Legacy Factorial”), our predecessor reporting entity, for the years ended December 31, 2025 and 2024 which are included in the proxy statement/prospectus dated as of, and filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) on, May 6, 2026 (the “Proxy Statement/Prospectus”) beginning on Page F-25, and Factorial Energy’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026 and 2025, and related notes included in this Quarterly Report on Form 10-Q (“Quarterly Report”).

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.

Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included in this Quarterly Report.

Factorial, a US-based leader in solid-state battery technology, develops next generation battery technology for planned use by drone, mobile robots, roadgoing vehicles, energy storage, and other demanding applications.

Our FEST ® cells are designed to meet the demands of the high-power market and, relative to conventional Li-ion batteries, deliver lighter weight, smaller size, longer life, and faster charging, in each case meeting or exceeding conventional batteries in each of these key parameters we believe are valued by end users.

In addition, for some of our customers whose applications do not need all of the benefits of our solid-state technology, we develop batteries that combine a lithium metal anode and a liquid electrolyte.

Such batteries provide some of the improved size, weight and duration of our solid-state battery technology at a lower cost and faster timeline to production.

Factorial is a development stage company with no revenue to date that has incurred a net loss of approximately $11.3 million and $19.9 million, with cash used in operations of $0.5 million and $11.4 million, for the three and six months ended June 30, 2026, respectively, and an accumulated deficit of approximately $275.5 million as of June 30, 2026.

The Business Combination

On December 17, 2025, Legacy Factorial entered into a definitive business combination agreement, as amended on March 26, 2026 and May 18, 2026 (as amended, the “BCA”), with Fenway MS, Inc., (“Merger Sub”), and Cartesian Growth Corporation III (“CGC”).

Pursuant to the BCA, and after CGC’s shareholders voted to approve it, Merger Sub, a newly formed subsidiary of CGC, merged with and into Legacy Factorial (the “Merger”).

On June 5, 2026 (the “Closing”), the separate corporate existence of Merger Sub ceased to exist, and Legacy Factorial survived and became a wholly-owned subsidiary of CGC.

In connection with the consummation of the Merger, CGC changed its corporate name to Factorial Energy Inc.

The Merger was accounted for as a reverse recapitalization.

Legacy Factorial was deemed the accounting acquirer and the combined entity is the successor SEC registrant, meaning that Legacy Factorial’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

Under this method of accounting, CGC was treated as the acquired company for financial statement reporting purposes.

As a result of the closing of the Merger, the most significant change in Legacy Factorial’s financial position and results is a $92.0 million net increase in cash and cash equivalents (as compared to Legacy Factorial’s consolidated balance sheet at March 31, 2026), which includes $112.1 million in gross proceeds from the sale of a private placement (the “PIPE Financing”) of Class A ordinary shares of CGC, par value $0.0001 per share (the “CGC Class A Shares”) (inclusive of the proceeds from the trust account resulting from an aggregate of 3,470,764 shares (the “NRA Shares”) of Class A ordinary shares of CGC, par value $0.0001 per share (the “CGC Class A Shares”) acquired by an affiliate of CGC III Sponsor LLC, a Cayman Islands limited liability company (the “Sponsor” and such affiliate, the “Sponsor Investor”) and a certain institutional investor (the “Institutional Investor,” and together with the Sponsor Investor, the “PIPE Investors” to satisfy their obligations under the applicable Investor Stock Purchase Agreement) that was received at the Closing offset by the transaction expenses.

Transaction expenses paid at the Closing for the Merger and PIPE Financing were approximately $20.1 million.

As a result of the Merger, Factorial became the successor to an SEC-registered and Nasdaq-listed company, which will require Factorial to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.

Factorial expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.

Basis of Presentation

Factorial currently conducts its business through one operating segment.

As a pre-revenue company with no commercial operations, Factorial’s activities to date have been limited and were conducted primarily in the United States and Korea and its historical results are reported under U.S.

GAAP and in U.S.

Factorial’s Korean subsidiary’s functional currency is the Korean Won.

Upon commencement of commercial operations, Factorial expects to expand its global operations substantially, including in the United States, Asia, and the European Union, and as a result Factorial expects its future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its historical financial statements.

As a result, Factorial expects that the financial results it reports for periods after it begins commercial operations will not be comparable to the financial results included in this Quarterly Report.

Components of Results of Operations

Factorial is a research and development stage company, and its historical results may not be indicative of its future results for reasons that may be difficult to anticipate.

Accordingly, the drivers of Factorial’s future financial results, as well as the components of such results, may not be comparable to Factorial’s historical or projected results of operations.

Research and Development Expense

To date, Factorial’s research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering facility in the United States and Cheonan, South Korea, including the material and supplies to support the product development and process engineering efforts.

As Factorial ramps up its engineering operations to complete the development of its solid-state, lithium-metal batteries and required process engineering to meet automotive cost targets, Factorial anticipates that research and development expenses will increase significantly for the foreseeable future as Factorial expands its hiring of scientists, engineers, and technicians and continues to invest in additional plant and equipment for product development (e.g.

multi-layer cell stacking, packaging and engineering), building prototypes, and testing of battery cells as the team works to meet the full set of Original Equipment Manufacturers (“OEMs”) product requirements.

General and Administrative Expense

General and administrative expenses consist mainly of personnel-related expenses for Factorial’s executive, sales and marketing and other administrative functions and expenses for outside professional services, including legal, accounting and other advisory services.

Factorial is expanding its headcount in anticipation of planning for and ramping up commercial manufacturing operations and to meet public company financial and compliance requirements.

Accordingly, in addition to the non-recurring transaction costs discussed above, Factorial expects its general and administrative expenses to increase significantly in the near term and for the foreseeable future.

Upon commencement of commercial operations, Factorial also expects general and administrative expenses to include sales, marketing and advertising costs.

Financing Costs Related to Issuance of Convertible Promissory Notes – Related Parties

Financing costs related to issuance of convertible promissory notes to related parties represents the excess of the fair value of the convertible promissory notes over the proceeds received, if any, as well as direct financing costs paid in cash at issuance.

Financing Costs Related to Issuance of Convertible Promissory Notes

Financing costs related to issuance of convertible promissory notes represents the excess of the fair value of the convertible promissory notes over the proceeds received, if any, as well as direct financing costs paid in cash at issuance.

Change in Fair Value of Convertible Promissory Notes – Related Parties

Change in fair value of convertible promissory notes to related parties represents the fair value adjustment to mark the convertible promissory note liability to fair value.

Change in Fair Value of Convertible Promissory Notes

Change in fair value of convertible promissory notes represents the fair value adjustment to mark the convertible promissory note liability to fair value.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities represents the fair value adjustment to mark the warrant liabilities to fair value based on changes in the underlying equity valuation.

Other (Expenses) Income, Net

Factorial’s other income (expense) consists of interest income from interest-bearing accounts, interest expense, and the effects of foreign currency.

Provision for Income Taxes

Factorial’s income tax provision consists of an estimate for U.S.

federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law.

Factorial maintains a valuation allowance against the full value of its U.S.

and state net deferred tax assets because Factorial believes the recoverability of the tax assets is not more likely than not.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date.

Our only activities from October 29, 2024 (inception) through March 31, 2026 were organizational activities and those necessary to prepare for the Initial Public Offering, and subsequent to the Initial Public Offering, identifying a target company for our initial Business Combination.

We do not expect to generate any operating revenues until after the completion of our initial Business Combination.

Subsequent to the Initial Public Offering, we generate non-operating income in the form of interest income on marketable securities held in the trust account established for the benefit of our public shareholders (the “Trust Account”), with Continental Stock Transfer & Trust Company acting as trustee.

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 in connection with searching for, and completing, our initial Business Combination.

For the three months ended March 31, 2026, we had a net income of $1,680,417, which consisted of interest earned on investments held in the Trust Account of $2,491,718, offset by general and administrative costs of $811,301.

For the three months ended March 31, 2025, we had a net loss of $20,449, which consisted of general and administrative costs.

Liquidity and Capital Resources and Going Concern

Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class B ordinary shares, par value $0.0001 per share (“founder shares”), by the Sponsor and CGC III Sponsor DirectorCo LLC (“DirectorCo” and together with the Sponsor in such capacity, our “initial shareholders”), and a loan from the Sponsor pursuant to an unsecured promissory note (the “Sponsor Promissory Note”).

As of May 5, 2025, we had borrowed $250,000 under the Sponsor Promissory Note, which was repaid simultaneously with the closing of the Initial Public Offering.

On May 5, 2025, we consummated the Initial Public Offering of 27,600,000 units (the “Units”) at $10.00 per Unit, which included the full exercise by the underwriters of their over-allotment option of 3,600,000 Units.

Each Unit consists of one Class A ordinary share, par value $0.0001 per share (“Class A ordinary shares”), and one-half of one redeemable warrant.

Simultaneously with the closing of the Initial Public Offering, we consummated the sale of an aggregate of 6,800,000 private placement warrants (the “Private Placement Warrants”), at a price of $1.00 per warrant, in a private placement to the Sponsor and Cantor Fitzgerald & Co.

(“Cantor”), the representative of the underwriters of the Initial Public Offering, generating gross proceeds of $6,800,000 (the “Private Placement”).

Following the Initial Public Offering, including the full exercise of the over-allotment option, and the Private Placement, a total of $276,000,000 ($10.00 per Unit) was placed in the Trust Account.

We incurred $18,821,468 of transaction costs, consisting of $4,800,000 of cash underwriting commissions, $13,140,000 of deferred underwriting commissions, and $881,468 of other offering costs (including repayment of the Sponsor Promissory Note).

For the three months ended March 31, 2026, cash used in operating activities was $227,953.

Net income of $1,680,417 was affected by interest earned on investments held in the Trust Account of $2,491,718.

Changes in operating assets and liabilities provided $583,348 of cash for operating activities.

For the three months ended March 31, 2025, cash used in operating activities was $0.

Net loss of $20,449 was affected by payment of expenses through promissory note – related party of $20,449.

As of March 31, 2026, we had marketable securities held in the Trust Account of $285,868,994 (including approximately $9,868,994 of interest income) consisting of mutual funds primarily invested in U.S.

Treasury Bills with a maturity of 185 days or less.

We may withdraw interest from the Trust Account to pay taxes, if any.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (excluding deferred underwriting commissions and less taxes payable, if any), net of redemptions, 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 of $396,210.

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, structure, negotiate and complete an initial Business Combination, and to pay for directors and officers liability insurance premiums.

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”).

If we complete our initial Business Combination, we would repay such loaned amounts.

In the event that our initial Business Combination does not close, we may use a portion of the funds 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 $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant at the option of the lender.

Such warrants would be identical to the Private Placement Warrants.

As of March 31, 2026 and December 31, 2025, no such Working Capital Loans were outstanding.

In connection with our assessment of going concern considerations in accordance with Accounting Standards Codification (“ASC”) 205-40, “Presentation of Financial Statements - Going Concern,” management has determined that our liquidity condition raises 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 Completion Window.

We believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial Business Combination.

Moreover, we may need 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 consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such initial Business Combination.

Comparison of the Three and Six Months Ended June 30, 2026 to the Three and Six Months Ended June 30, 2025

The following tables set forth Factorial’s historical operating results for the periods indicated:

Three Months Ended June 30,

Operating expenses:

Research and development

$ (6,582) $ (6,745)

Selling, general and administrative (6,379) (4,657)

Loss from operations (12,961) (11,402)

Other income (expense), net:

Change in fair value of convertible promissory notes – related parties (2,384) —

Change in fair value of convertible promissory notes (964) —

Change in fair value of warrant liabilities for Series B-1 and Series D redeemable convertible preferred stock (293) —

Change in fair value of warrant liability for Series A Common Stock 4,738 —

Other income, net 523 833

Total other income (expenses), net 1,620 833

Loss before income taxes $ (11,341) $ (10,569)

Income tax expense — —

Net loss $ (11,341) $ (10,569)

Six Months Ended June 30,

Operating expenses:

Research and development

$ (8,524) $ (13,499)

Selling, general and administrative (10,928) (11,025)

Loss from operations (19,452) (24,524)

Other income (expense), net:

Financing costs related to issuance of convertible promissory notes – related parties (37) —

Change in fair value of convertible promissory notes – related parties (3,791) —

Change in fair value of convertible promissory notes (1,264) —

Change in fair value of warrant liabilities for Series B-1 and Series D redeemable convertible preferred stock (399) —

Change in fair value of warrant liability for Series A Common Stock 4,738 —

Other income, net 289 1,085

Total other income (expenses), net (464) 1,085

Loss before income taxes $ (19,916) $ (23,439)

Income tax expense — —

Net loss $ (19,916) $ (23,439)

Research and Development

Research and development expenses decreased by $0.2 million, or 2.4%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily the result of lower facility costs from the closing of our Methuen facility in October 2025 offset by increased research and development activities and engineering services.

Research and development expenses decreased by $5.0 million, or 36.9%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

The decline primarily resulted from the recognition of $3.6 million of expense reimbursements from joint development partners for the six months ended June 30, 2026, compared to $0.2 million for the six months ended June 30, 2025.

The decrease is also attributed to lower facility costs from the closing of our Methuen facility.

General and Administrative

General and administrative expenses increased by $1.7 million, or 37.0%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by:

• an increase in professional fees, including legal, audit, and advisory services;

• an increase in marketing expenses.

General and administrative expenses decreased by $0.1 million, or 0.9%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

This was primarily due to a decrease in stock-based compensation expense.

This was offset by:

• an increase in professional fees, including legal, audit, and advisory services;

• an increase in marketing expenses.

Financing Costs Related to Issuance of Convertible Promissory Notes

In January 2026, we issued convertible promissory notes under which we could receive aggregate proceeds of up to $5.4 million.

During the three and six months ended June 30, 2026, we received proceeds of $1.0 million and $5.3 million, respectively.

Change in Fair Value of Convertible Promissory Notes - Related Parties

The fair value of our convertible promissory notes to related parties increased by $2.4 million and $3.8 million for the three and six months ended June 30, 2026, respectively.

These notes were issued in August 2025.

Changes in fair value of convertible promissory notes to related parties are non-cash and are included in net loss.

Upon the consummation of the Merger, all principal and accrued interest for the convertible promissory notes to related parties were converted into shares of Series A Common Stock.

Change in Fair Value of Convertible Promissory Notes

The fair value of our convertible promissory notes to related parties increased by $1.0 million and $1.3 million for the three and six months ended June 30, 2026, respectively.

These notes were issued in January 2026.

Changes in fair value of convertible promissory notes to related parties are non-cash and are included in net loss.

Upon the consummation of the Merger, all principal and accrued interest for the convertible promissory notes were converted into shares of Series A Common Stock.

Change in Fair Value of Series B-1 and Series D Warrant Liability

The change in fair value of our Series B-1 and Series D warrant liabilities increased by $0.3 million and $0.4 million for the three and six months ended June 30, 2026, respectively.

There was no change in fair value of our warrant liabilities for the three and six months ended June 30, 2025.

Changes in fair value of warrant liabilities are non-cash and are included in net loss.

Upon the consummation of the Merger, the Series B-1 and Series D warrants were exercised cashless for shares of Series A Common Stock.

Change in Fair Value of Warrant Liability for Series A Common Stock

The change in fair value of our warrant liability for Series A Common Stock decreased by $4.7 million for the three and six months ended June 30, 2026, respectively.

These warrants were reclassified from equity to liability as a result for the de-SPAC transaction.

No warrant liability was present in 2025.

Other Income, Net

Other income, net decreased by $0.3 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to fluctuations in the effects of foreign exchange.

Other income, net decreased by $0.8 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, due to fluctuations in the effects of foreign exchange offset by a reduction of interest income.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily from the sales of preferred and convertible preferred stock, equity-linked securities, and capital raised through our de-SPAC Transaction and PIPE Financing.

As of June 30, 2026, our principal sources of liquidity were our cash and cash equivalents in the amount of $112.8 million.

Our cash equivalents are invested primarily in U.S.

Treasury money market funds.

As of the date of this filing, Factorial has yet to generate any revenue from its business operations.

To date, Factorial has funded its capital expenditure and working capital requirements primarily through equity as further discussed below.

Factorial’s ability to successfully develop its products, commence commercial operations and expand its business will depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.

As of June 30, 2026, Factorial’s cash and cash equivalents amounted to $112.8 million.

Factorial received net proceeds of approximately $92.0 million in connection with the Merger.

In connection with the Merger, the holders of 23,051,313 CGC Class A Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.42 per share, for an aggregate redemption amount of approximately $240.1 million.

Factorial expects its capital expenditures and working capital requirements to increase materially in the near future, as it seeks to accelerate its research and development efforts and scale up the production operations with its OEM partners.

Factorial expects to satisfy early demand for its solid-state battery products by expanding its existing fabrication line operations in South Korea and the United States, to support initial commercial production.

During the six months ended June 30, 2026, Factorial paid capital expenditures for such expansion of approximately $0.6 million and expects to incur capital expenditures of approximately $12.0 million during the remainder of 2026.

The expansion is expected to be completed by the end of 2027.

Beyond the initial investment to expand our existing fabrication line operations in South Korea and the United States, we do not plan to build or acquire additional manufacturing facilities or incur substantial capital expenditures for the expansion of our existing facilities.

Instead, as demand grows, including incremental high spec applications and gigawatt-scale ramp-up in the automotive market, we expect to scale primarily through a partner manufacturing approach.

Factorial believes that its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this filing and sufficient to fund its operations until it commences commercial production of the Factorial solid-state battery, assuming Factorial is able to do so as currently contemplated.

Factorial may, however, need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply

chain challenges, competitive pressures, and regulatory or permitting developments, among other developments.

To the extent that Factorial’s current resources are insufficient to satisfy its cash requirements, Factorial may need to seek additional equity or debt financing.

If the financing is not available, or if the terms of financing are less desirable than Factorial expects, Factorial may be forced to decrease its level of investment in product development or scale back its operations, which could have an adverse impact on its business and financial prospects.

Based on its current operating plan, the Company estimates that its cash and cash equivalents as of the date of this filing will be sufficient to fund its operating expenses and capital expenditure requirements into the first quarter of 2028.

The Company has based this estimate on assumptions that may prove to be wrong and could deplete its liquid resources sooner than it currently expects.

The following table provides a summary of Factorial’s cash flow data for the periods indicated:

Six Months Ended June 30,

Amount in thousands

Net cash used in operating activities $ (11,391) $ (13,088)

Net cash used in investing activities (578) (185)

Net cash provided by (used in) financing activities 96,091 (408)

Cash Flows from Operating Activities

Factorial’s cash flows used in operating activities to date have been primarily comprised of payroll, material and supplies, facilities expense, and professional services related to research and development and general and administrative activities.

As Factorial continues to ramp up hiring for technical headcounts to accelerate its developmental efforts, Factorial expects its cash used in operating activities to increase significantly before it starts to generate any material cash flows from its business.

Net cash used in operating activities for the six months ended June 30, 2026 was $11.4 million, and was driven primarily by the net loss of $19.9 million.

This was offset by:

• a $2.9 million increase in accrued expenses;

• a $1.0 million decrease in receivables under collaboration agreements;

• non-cash expenses of $6.3 million, which primarily consisted of:

◦ changes in fair value of our promissory notes (including related parties) of $5.1 million;

◦ stock-based compensation of $2.6 million;

◦ depreciation and amortization of non-cash lease expense of $2.4 million.

◦ This was offset by the change in fair value of our warrant liability for Series A Common Stock of $4.7 million.

Net cash used in operating activities for the six months ended June 30, 2025 was $13.1 million, and was driven primarily by the net loss of $23.4 million and offset by non-cash expenses of $10.0 million, which primarily consisted of stock-based compensation of $5.6 million and depreciation expense of $4.4 million.

Cash Flows from Investing Activities

Factorial’s cash flows used in investing activities, to date, have been comprised of purchases of property and equipment and purchases and disposals of equipment.

Factorial expects the costs to acquire property and equipment to increase in the near future as it builds pilot and sample production lines for its FEST Silicon and Solstice programs.

Net cash used in investing activities was $0.6 million for the six months ended June 30, 2026, was primarily the result of purchases of property and equipment.

Net cash used in investing activities was $0.2 million for the six months ended June 30, 2025, was primarily the result of purchases of property and equipment.

Cash Flows from Financing Activities

Through June 30, 2026, Factorial has financed its operations primarily through the sale of equity and equity-linked securities.

Net cash provided by financing activities was $96.1 million for the six months ended June 30, 2026 was primarily driven by:

• Net proceeds received from the reverse recapitalization and PIPE Financing of $92.0 million ;

• Issuance of convertible promissory notes of $5.3 million.

Offset by the payment of deferred financing costs of $1.3 million.

Net cash used in financing activities was $0.4 million for the six months ended June 30, 2025 was primarily driven by the principal paid on the Methuen lease that terminated in October 2025.

Contractual Obligations and Commitments

Factorial leases its headquarters space in Billerica, Massachusetts (the “Billerica Sublease”) under a single sublease classified as an operating lease expiring on October 30, 2032.

The Billerica Sublease does not contain any provision for an extension.

Factorial also leased laboratory and office space in Tallahassee, Florida (the “Tallahassee Lease”) under a single lease classified as an operating lease that expired at the end of its term on February 28, 2025.

Additionally, Factorial leases laboratory and storage space, which includes offices, in Woburn, Massachusetts (the “Woburn Lease”) under a single lease classified as an operating lease expiring on April 30, 2028.

The Woburn Lease does not contain any provision for extension.

Finally, Factorial leased laboratory and manufacturing space, which included offices, in Methuen, Massachusetts (the “Methuen Lease”) under a single lease classified as a financing lease.

The Methuen Lease was terminated on October 18, 2025.

Factorial has not commenced negotiations with respect to extending the Billerica Sublease or the related lease between the applicable sublessor from whom the Company subleases such property and the ultimate lessor, but intends to do so prior to the expiration thereof.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2026.

Contractual Obligations

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities, other than an agreement to pay the Sponsor an aggregate of $10,000 per month for office space, utilities and secretarial and administrative support.

We began incurring these fees on May 1, 2025 and will continue to incur these fees monthly until the earlier of the completion of our initial Business Combination and our liquidation.

We granted the underwriters of the Initial Public Offering a 45-day option from May 1, 2025, the effective date of the registration statements for the Initial Public Offering, to purchase up to an additional 3,600,000 Units to cover over-allotments, if any, at the Initial Public Offering price less underwriting discounts and commissions.

On May 2, 2025, the underwriters fully exercised their over-allotment option, closing on the 3,600,000 additional Units simultaneously with the Initial Public Offering.

The underwriters of the Initial Public Offering are entitled to a deferred underwriting discount of 4.50% of the gross proceeds of the Initial Public Offering held in the Trust Account, other than the gross proceeds from Units sold pursuant to the underwriters’ over-

allotment option, and 6.50% of the gross proceeds from Units sold pursuant to the underwriters’ over-allotment option, or $13,140,000 in the aggregate.

Subject to the terms of the underwriting agreement for the Initial Public Offering, the deferred underwriting discount (i) will become payable to such underwriters from the amounts held in the Trust Account solely in the event that we complete our initial Business Combination and (ii) will be waived by such underwriters in the event that we do not complete our initial Business Combination.

On December 17, 2025, we entered into a Fee Modification Agreement with Cantor in connection with its contemplated business combination with Factorial Inc., pursuant to which Cantor agreed to modify the previously agreed $13,140,000 deferred underwriting commission.

If the business combination with Factorial Inc.

is consummated, we (or the target or successor) will pay Cantor a non-refundable modified deferred fee payable at closing equal to $3.75 million plus amounts based on the value of public shares not redeemed in the transaction, subject to an aggregate cap of $13.0 million.

The holders of the founder shares (and the Class A ordinary shares issuable upon conversion of the founder shares), Private Placement Warrants (and the Class A ordinary shares underlying such Private Placement Warrants), and private placement equivalent-warrants that may be issued upon conversion of the Working Capital Loans have registration rights to require us to register a sale of any of our securities held by them and any other securities of the Company acquired by them prior to the consummation of our initial Business Combination pursuant to a registration rights agreement signed on May 1, 2025, the effective date of the registration statements for the Initial Public Offering.

The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities.

In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of our initial Business Combination.

Notwithstanding anything to the contrary, Cantor may only make a demand on one occasion and only during the five-year period beginning from the commencement of sales in the Initial Public Offering.

In addition, Cantor may participate in a “piggy-back” registration only during the seven-year period beginning from the commencement of sales in the Initial Public Offering.

We will bear the expenses incurred in connection with the filing of any such registration statements.

Critical Accounting Estimates and Accounting Policies

The preparation of the unaudited condensed financial statements in conformity with GAAP requires our 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 financial statements and the reported amounts of revenues and 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 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.

We have identified the following critical accounting estimates and accounting policies:

Warrant Instruments

We accounted for the public warrants and Private Placement Warrants issued in connection with the Initial Public Offering and the private placement in accordance with the guidance contained in FASB ASC Topic 815, “Derivatives and Hedging”.

Accordingly, the Company evaluated and classified the warrant instruments under equity treatment at their assigned values.

The public warrants have been classified within shareholders’ deficit and will not require remeasurement after issuance.

The fair value of the public warrants at issuance was determined using a Monte Carlo simulation model.

The valuation required the use of significant assumptions, including expected share price volatility, risk-free interest rate, market-implied probability of completing a business combination, our share price, and the expected remaining term of the warrants.

Changes in these assumptions could have a material impact on the estimated fair value of the warrants.

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 our liquidation, or if there is a shareholder vote or tender offer in connection with our initial Business Combination.

In accordance with ASC 480-10-S99, we classify public shares subject to redemption outside of permanent equity as the redemption provisions are not solely within our control.

We recognize changes in redemption value immediately as they occur 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 Initial Public Offering, we recognized the accretion from initial book value to redemption value.

The change in the carrying value of redeemable shares will result

in charges against additional paid-in capital (to the extent available) and then to 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 our condensed balance sheets.

Net Income (Loss) Per Ordinary Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of shares of ordinary shares outstanding for the period.

We have two classes of ordinary shares, which are referred to as redeemable Class A ordinary shares and non-redeemable Class A and Class B ordinary shares.

Remeasurement associated with the redeemable shares of Class A ordinary shares is excluded from income (loss) per ordinary share as the redemption value approximates fair value.

The calculation of diluted income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement Warrants since the exercise of the warrants is contingent upon the occurrence of future events.

The warrants are exercisable to purchase 20,600,000 Class A ordinary shares in the aggregate.

As of March 31, 2026 and December 31, 2025, we did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares that then share in our earnings.

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 our unaudited condensed financial statements.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Factorial is not a party to any off-balance sheet arrangements, as defined under SEC rules.

Critical Accounting Policies

Factorial’s financial statements have been prepared in accordance with GAAP.

In the preparation of these financial statements, Factorial is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

Except for the addition of the critical accounting policy for Private Placement Warrants and critical accounting estimate related to the valuation of our warrant liability for the 6,800,000 redeemable private placement warrants for Series A Common Stock (the “Private Warrants”) described below, there have been no significant changes to our critical accounting policies in the preparation of our condensed consolidated financial statements during the three and six months ended June 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus.

Private Warrants

The Company evaluated the Private Warrants under ASC 815-40 and concluded that the Private Warrants do not meet the criteria for equity classification because certain settlement provisions differ depending on whether the warrants are held by the Sponsor or its permitted transferees.

Because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares, the Private Warrants are not indexed to the Company’s own stock.

Accordingly, the Private Warrants are classified as liabilities and measured at fair value at each reporting date, with changes in fair value recognized in other income (expense), net.

Critical Accounting Estimates

Except for the addition of the critical accounting estimate related to the valuation of our warrant liability for Private Warrants described below, there have been no significant changes to our critical accounting estimates in the preparation of our condensed consolidated financial statements during the three and six months ended June 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus.

Our warrant liability for Series A Common Stock was recorded in connection with the Merger and did not exist as of December 31, 2025;

accordingly, it was not identified as a critical accounting estimate in the Proxy Statement/Prospectus.

Private Warrant Liability

In connection with the Merger, we assumed 6,800,000 Private Warrants that are classified as liabilities and remeasured at fair value each reporting period, with changes recognized in change in fair value of warrant liabilities within other income (expense), net.

The liability was $45 million as of June 30, 2026, and we recognized a gain of $4.7 million on remeasurement for the period then ended.

We estimate the fair value of the Private Warrants using a Black-Scholes model.

The exercise price and contractual term are fixed by the warrant agreement, the risk-free interest rate is observable, and we assume no dividend yield.

Expected volatility is the only significant unobservable input to the model, and it is a management estimate.

Accordingly, the Private Warrants are classified within Level 3 of the fair value hierarchy.

We estimate expected volatility based on the historical volatility of a group of comparable publicly traded companies, measured over a period commensurate with the expected remaining term of the warrants, because the Company’s common stock had limited trading history as of the valuation dates, expected volatility was estimated using the historical volatility of selected comparable publicly traded companies over a period commensurate with the remaining contractual term of the Private Warrants.

Management also considered whether implied volatility could be derived from the 13,800,000 redeemable public warrants for Series A Common Stock (the “Public Warrants).

The calculation produced a result outside the range we consider reasonable for a company at our stage of development and we concluded it was not a reliable input.

Identifying the comparable companies and selecting the measurement period each require judgment, and a different but supportable selection could produce a different volatility assumption and a materially different fair value.

Expected volatility was 68.5% at initial measurement and 68.7% as of June 30, 2026.

Significant increases or decreases in expected volatility, in isolation, would result in significantly higher or lower fair value measurements, respectively.

Holding all other inputs constant, an increase by 10% in the volatility input to 78.7% as of June 30, 2026 would increase the fair value of the Private Warrants by approximately $4.4 million and a decrease of 10% to 58.7% as of June 30, 2026 would decrease the fair value of the Private Warrants by approximately $4.7 million, in each case with a corresponding effect on other income (expense), net.

Emerging Growth Company Statu s

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 are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

Factorial is an “emerging growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

This may make it difficult or impossible to compare Factorial’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

Factorial may continue to qualify as an “emerging growth company” after the Merger until the earliest of (i) such time as of which it is a “large accelerated filer”, (ii) its annual gross revenues exceed $1.235 billion, (iii) it issues more than $1 billion of non-convertible debt securities during a three-year period or (iv) the end of the fifth fiscal year after CGC’s initial public offering (“IPO”), which occurred in 2025.

Recent Accounting Pronouncements

See Note 2 to the audited consolidated financial statements included elsewhere in the Proxy Statement/Prospectus for more information about recent accounting pronouncements, the timing of their adoption, and Factorial’s assessment, to the extent it has made one, of their potential impact on Factorial’s financial condition and its results of operations and cash flows.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis