| Reverse Recapitalization |
3. Reverse Recapitalization As discussed in Note 1. Organization and Description of Business, Inflection Point, Merger Sub, and Legacy Merlin entered into the Business Combination Agreement on August 13, 2025. In connection with the entrance into the Business Combination and the anticipated Merger, the following transactions occurred prior to the Closing Date: | ● | In July and August 2025, Legacy Merlin and certain investors entered into the Pre-PIPE Bridge and Pre-Funded PIPE Agreements, pursuant to which Legacy Merlin issued the investors Pre-PIPE Bridge and Pre-Funded PIPE Notes and Warrants. The Pre-PIPE Bridge and Pre-Funded PIPE Notes and Warrants were funded and issued between July and November 2025. Refer to Note 8. Debt and Note 9. Warrants for further information. |
| ● | In November 2025, Inflection Point, Legacy Merlin, and certain investors entered into securities purchase agreements (“Series A SPAs”) pursuant to which, on the Closing Date, the Company would issue shares of its 12.0% Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”) and common stock purchase warrants (“PIPE Warrants”) in a private investment in public equity (“PIPE”) transaction for aggregate gross proceeds of $120,000 (the “Closing PIPE”). The Closing PIPE was funded, and the Series A Preferred Stock and PIPE Warrants were issued, at the Closing. Refer to Note 9. Warrants and Note 10. Mezzanine Equity and Stockholders’ Deficit for further information. | In connection with and in contemplation of the Merger, the following occurred immediately prior to the Closing: | (1) | Each convertible security of Legacy Merlin (other than the Pre-PIPE Bridge Notes and Pre-Funded PIPE Notes) automatically converted into full shares of redeemable convertible preferred stock or common stock, as applicable, of Legacy Merlin; |
| (2) | Each of Legacy Merlin’s outstanding and unexercised preferred stock warrant liabilities were automatically exercised on a cashless basis or were exchanged for securities issued in the Closing PIPE, based on the applicable terms thereof (refer to Note 9. Warrants); |
| (3) | After giving effect to the conversions and exercises described at (1) and (2) above, each issued and outstanding share of Legacy Merlin’s redeemable convertible preferred stock automatically converted into shares of Legacy Merlin common stock; and |
| (4) | Each of Legacy Merlin’s outstanding and unexercised common stock warrants (other than the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants) were automatically exercised on a cashless basis. |
At the effective time of the Merger, and pursuant to the terms of the Business Combination Agreement: | (1) | Each share of Legacy Merlin common stock held by Legacy Merlin, Merger Sub, or the Company was canceled without consideration exchanged therefor; |
| (2) | Each other issued and outstanding share of Legacy Merlin common stock was canceled and converted into the right to receive shares of the common stock at an exchange ratio of approximately 3.102; | | (3) | Each option to purchase equity securities of Legacy Merlin was converted into an option to acquire common stock at an exchange ratio of approximately 3.102; | | (4) | Each Pre-PIPE Bridge Note and Pre-Funded PIPE Note was converted into shares of Series A Preferred Stock, par value $0.0001 per share; and | | (5) | Each Pre-PIPE Bridge Warrant and Pre-Funded PIPE Warrant was converted into a PIPE Warrant. |
The following table summarizes the net proceeds from the Merger: | Sources | | Amount | | | Cash - Inflection Point trust account, net (1) | | | 2,644 | | | Cash - Inflection Point operating account | | | 426 | | | Total cash from Inflection Point | | | 3,070 | | | Cash - Closing PIPE | | | 120,000 | | | Total cash in Inflection Point going into the Merger | | $ | 123,070 | | | (1) | Amount reflects gross proceeds of $25,864 from the Inflection Point trust account less the payment of transaction costs of $(23,220) utilizing the proceeds released from the Inflection Point trust account. | | Uses | | Amount | | | Prepayment of 2024 LSA Loans | | $ | (28,334 | ) | | Total cash used immediately after the Merger | | $ | (28,334 | ) | | | | | | | | Net cash to Merlin | | $ | 94,736 | | The following table summarizes the impact of the Merger on the Company's common stock: | | | Common Stock | | | | | | | | Number of
Shares | | | Amount | | | Additional
Paid-In
Capital | | | Balances as of December 31, 2025 | | | 5,306,250 | | | $ | 1 | | | $ | 15,491 | | | Exercise of stock options prior to the Merger | | | 131,028 | | | | — | | | | 226 | | | Issuance of common stock upon exercise of warrants | | | 6,327 | | | | — | | | | — | | | Issuance of redeemable convertible preferred stock upon exercise of warrants | | | 226,113 | | | | — | | | | 6,859 | | | Conversion of redeemable convertible preferred stock to common stock | | | 17,154,902 | | | | 2 | | | | 461,962 | | | Balances immediately prior to the Merger | | | 22,824,620 | | | $ | 3 | | | $ | 484,538 | | | Application of the exchange ratio to Legacy Merlin stockholders | | | 47,966,076 | | | | 5 | | | | (5 | ) | | Issuance of common stock in connection with the Merger to Inflection Point stockholders and rightsholders | | | 13,750,282 | | | | 1 | | | | 17,265 | | | Balances immediately after the Merger | | | 84,540,978 | | | $ | 9 | | | $ | 501,798 | |
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