Inflection Point (NASDAQ: BACQ) details Merlin Labs SPAC merger, 163.6M-share S-4
Rhea-AI Filing Summary
Inflection Point Acquisition Corp. IV filed a Form S-4 to register 163,582,614 shares of New Merlin Common Stock and related preferred stock, warrants, rights and units for its proposed business combination with Merlin Labs, Inc., after domestication to Delaware as “Merlin, Inc.”
The proxy statement/prospectus also covers up to 10,288,021 shares of 12.0% Series A Cumulative Convertible Preferred Stock, New Merlin Series A Warrants initially exercisable for up to 10,103,376 shares of common stock, 25,425,000 Post-Domestication Rights and 653,821 Post-Domestication Units. The merger consideration is based on an $800,000,000 Purchase Price, delivered in New Merlin equity, with additional capital from approximately $87.3 million of pre-funded convertible notes and $120 million of Series A Preferred PIPE investments.
Inflection Point shareholders will vote at an extraordinary general meeting on the business combination, domestication, new charter and bylaws, equity plans, director elections and share issuance approvals, and Public Shareholders may elect to redeem their Public Shares for cash. The Sponsor and Inflection Point Fund, which together hold a significant stake and will receive substantial New Merlin equity and Series A Preferred Stock upon closing, have agreed to vote in favor of all proposals, creating potential conflicts of interest and dilution for non-redeeming Public Shareholders.
Positive
- Large committed capital package around the merger including approximately
$87.3 million of Pre-Funded Convertible Notes and$120 million of Series A Preferred PIPE investments, which, if the Business Combination closes, provide substantial funding to New Merlin alongside the$800,000,000 equity Purchase Price structure.
Negative
- Significant potential dilution and sponsor concentration as the S-4 registers 163,582,614 shares of New Merlin Common Stock plus preferred stock and warrants, while the Sponsor and Inflection Point Fund receive large blocks of New Merlin equity and Series A Preferred Stock, which the filing states may result in material dilution of non-redeeming Public Shareholders’ ownership.
Insights
S-4 details a de-SPAC merger and sizable equity issuances, but economics depend on redemptions and closing.
The filing outlines Inflection Point’s planned domestication to Delaware and merger with Merlin Labs, Inc., creating “Merlin, Inc.” with an equity Purchase Price of
Financing is supported by a layered capital stack. Merlin has already raised approximately
The transaction is contingent on multiple approvals and conditions, including shareholder votes on nine proposals, effectiveness of the registration statement, HSR Act clearance, completion of the Domestication and conditional Nasdaq listing of New Merlin Common Stock under the proposed symbol “MRLN”. There is explicit disclosure that Nasdaq listing might not be confirmed by the meeting date and could be waived, meaning the deal could close without a national exchange listing. Sponsor economics are meaningful: millions of Founder Shares and Private Placement Units convert into New Merlin Common Stock, and Inflection Point Fund also receives Series A Preferred Stock and warrants, which the document notes may materially dilute non-redeeming Public Shareholders.
As filed with the Securities and Exchange Commission on January 14, 2026.
File No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________________________
(Exact name of registrant as specified in its charter)
__________________________________________
For Co-Registrants, see “Table of Co-Registrants” on the following page.
| | 6770 | N/A | ||
| (State or Other Jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer |
1345 Avenue of the Americas, Fl 47
New York, NY 10105
212-984-3835
(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)
__________________________________________
Michael Blitzer
Chief Executive Officer
1345 Avenue of the Americas, Fl 47
New York, NY 10105
212-984-3835
(Name, address, including zip code and telephone number, including area code, of agent for service)
__________________________________________
Copies to:
|
Joel L. Rubinstein |
Stephen W. Ranere |
__________________________________________
Approximate date of commencement of proposed sale to the public: As soon as practicable after (i) this registration statement is declared effective and (ii) upon completion of the applicable transactions described in the enclosed proxy statement/prospectus.
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, or a smaller reporting company, or 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 herein, the Registrant intends to effect a deregistration under Section 206 of the Companies Act (Revised) of the Cayman Islands and a domestication under Section 388 of the Delaware General Corporation Law, pursuant to which the Registrant’s jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware. All securities being registered will be issued by Inflection Point Acquisition Corp. IV (after its domestication as a corporation incorporated in the State of Delaware), the continuing entity following the Domestication, which will be renamed “Merlin, 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 Securities and Exchange Commission, 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 |
|||
|
Merlin Labs, Inc. |
Delaware |
3721 |
____________
(1) The Co-Registrant has the following principal executive office:
Merlin Labs, Inc.
129 South Street
Boston, MA 02111
(2) The agent for service for the Co-Registrant is:
Corporation Service Company
251 Little Falls Drive
Wilmington, New Castle County, DE 19808-1674
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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 prospectus 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 PROXY STATEMENT — SUBJECT TO COMPLETION DATED JANUARY 14, 2026
PROXY STATEMENT FOR EXTRAORDINARY GENERAL MEETING OF
INFLECTION POINT ACQUISITION CORP. IV
(A CAYMAN ISLANDS EXEMPTED COMPANY)
PROSPECTUS FOR UP TO 163,582,614 SHARES OF COMMON STOCK,
10,288,021 SHARES OF SERIES A PREFERRED STOCK,
SERIES A PREFERRED INVESTOR WARRANTS TO PURCHASE
UP TO 24,248,102 SHARES OF COMMON STOCK, 25,425,000 RIGHTS
TO RECEIVE ONE TENTH OF ONE SHARE OF COMMON STOCK AND 653,821 UNITS
OF
INFLECTION POINT ACQUISITION CORP. IV
(TO BE RENAMED “MERLIN, INC.” IN CONNECTION WITH THE DOMESTICATION IN THE STATE OF DELAWARE AND THE BUSINESS COMBINATION DESCRIBED HEREIN)
On August 13, 2025, the board of directors (the “Inflection Point Board”) and the special committee of the Inflection Point Board (the “Special Committee”) of Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Acquisition Corp. I), a Cayman Islands exempted company (“Inflection Point”), unanimously approved the Business Combination Agreement, dated as of August 13, 2025, by and among Inflection Point, IPDX Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of Inflection Point (“Merger Sub”) and Merlin Labs, Inc., a Delaware corporation (referred to herein prior to the Business Combination, as “Merlin” and subsequent to the Business Combination, as “Merlin OpCo”) (as it may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “Business Combination Agreement”), pursuant to which, among other things and subject to the terms and conditions therein: (1) Inflection Point will change its jurisdiction of incorporation by deregistering from the Register of Companies in the Cayman Islands as a Cayman Islands exempted company by way of continuation out of the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”, and Inflection Point after the Domestication, “Post-Domestication Inflection Point”), (2) following the Domestication, Merger Sub will merge with and into Merlin, with Merlin surviving the merger as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin OpCo will become a wholly-owned subsidiary of Inflection Point, and substantially all of the assets and the business of the combined company will be held and operated by Merlin OpCo and its subsidiaries (the “Merger”) and (3) the other transactions contemplated by the Business Combination Agreement and documents related thereto will be consummated (such transactions, together with the Merger and the Domestication, the “Business Combination” and the closing of the Business Combination, the “Closing”). In connection with the Business Combination, Inflection Point will change its name to “Merlin, Inc.” (such company after the closing of the Business Combination, “New Merlin”). A copy of the Business Combination Agreement is attached to the accompanying proxy statement/prospectus as Annex A.
Subject to the satisfaction or waiver of the conditions of the Business Combination Agreement, including approval of Inflection Point’s shareholders, (a) immediately prior to the Domestication, pursuant to that certain Sponsor Support Agreement, dated as of August 13, 2025 (the “Sponsor Support Agreement”), by and among Inflection Point, Merlin, Bleichroeder Sponsor 1 LLC, a Delaware limited liability company (the “Sponsor”), and Inflection Point Fund I, LP, a Delaware limited partnership (“Inflection Point Fund”), the holders of the Class B ordinary shares of Inflection Point, par value $0.0001 per share (each, a “Founder Share” or “Inflection Point Class B Share”, and the holders, the “Inflection Point Class B Shareholders”), will elect to convert each Founder Share, on a one-for-one basis, into a Class A ordinary share of Inflection Point, par value $0.0001 per share (each, an “Inflection Point Class A Share” and together with the Founder Shares, the “Inflection Point Ordinary Shares”) (the “Sponsor Share Conversion”); (b) in connection with the Domestication, (i) each of the then issued and outstanding Inflection Point Class A Shares will convert automatically, on a one-for-one basis, into a share of common stock, par value $0.0001 per share, of Post-Domestication Inflection Point (the “New Merlin Common Stock”); (ii) each of the then issued and outstanding rights to receive one-tenth (1/10) of one Inflection Point Class A Share upon consummation of an initial business combination of Inflection Point (“Inflection Point Rights”) will convert automatically into a right of Post-Domestication Inflection Point (each
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right, a “Post-Domestication Right”); and (iii) each of the then issued and outstanding units of Inflection Point containing one Inflection Point Class A Share and one Inflection Point Right (the “Inflection Point Units”) will convert automatically into a unit of Post-Domestication Inflection Point, consisting of one share of New Merlin Common Stock and one Post-Domestication Right.
Upon the terms and subject to the satisfaction or waiver of the conditions of the Business Combination Agreement, immediately prior to the effective time of the Merger (the “Effective Time”):
(1) each convertible security of Merlin (other than the Pre-Funded Convertible Notes (as defined below)) that is outstanding immediately prior to the Effective Time, to the extent applicable, will automatically convert in full into shares of preferred stock or common stock of Merlin (“Merlin Common Stock”), in accordance with the terms thereof;
(2) each warrant of Merlin exercisable for the preferred stock of Merlin that is outstanding and unexercised immediately prior to the Effective Time will automatically be exercised on a cashless basis in full in accordance with its terms or otherwise exercised in full;
(3) immediately after giving effect to the conversions and exercises set forth in clauses (1) and (2) above, each issued and outstanding share of preferred stock of Merlin (including each share of preferred stock issued upon the conversions and exercises described in clauses (1) and (2) above) will automatically convert into such number of shares of Merlin Common Stock into which such shares of preferred stock of Merlin, as applicable, are convertible in connection with the Merger pursuant to the organizational documents of Merlin; and
(4) each warrant of Merlin (other than the Pre-Funded Warrants (as defined below)) exercisable for Merlin Common Stock that is outstanding and unexercised immediately prior to the Effective Time shall automatically be exercised on a cashless basis in full in accordance with its terms or otherwise exercised in full.
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into certain convertible note purchase agreements (the “Pre-Funded NPAs”) and securities purchase agreement (the “Signing Pre-Funded SPA” and together with the Pre-Funded NPAs, the “Signing Pre-Funded PIPE Agreements”), respectively, with certain accredited investors named therein (collectively, the “Pre-Funded Investors”). Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of convertible promissory notes (the “Pre-Funded Convertible Notes”) and warrants to purchase a number of shares of Merlin Common Stock at a purchase price of $12.00 per share (the “Pre-Funded Warrants”), substantially concurrently with the execution and delivery of the Business Combination Agreement.
On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into an additional securities purchase agreement (“Post-Signing Pre-Funded SPA,” collectively with the Signing Pre-Funded SPAs, the “Pre-Funded SPAs”), pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA (such investments contemplated by the Signing Pre-Funded PIPE Agreements and the Post-Signing Pre-Funded SPA, the “Pre-Funded Note Investment”).
Pursuant to the Business Combination Agreement, the aggregate consideration (the “Aggregate Consideration”) to be paid to the holders of securities of Merlin (the “Merlin Equity Holders”) (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) in, or in connection with, the Merger shall be the number of shares of New Merlin Common Stock equal to the quotient of: (a) $800,000,000 (the “Purchase Price”), divided by (b) the price at which each Inflection Point Class A Share included in the Inflection Point Units initially issued in Inflection Point’s initial public offering (the “IPO”, and the shares included in the Inflection Point Units issued thereby, the “Public Shares”) may be redeemed in connection with the extraordinary general meeting (as defined below).
The consideration to be paid in, or in connection with, the Merger to each holder of a Pre-Funded Convertible Note (the “Convertible Note Consideration”) shall be a number of shares of New Merlin’s 12.0% Series A Cumulative Convertible Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”) equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal and accrued and unpaid interest on each Pre-Funded Convertible Note as of one day prior to the Closing, divided by (ii) $10.20 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded NPAs), as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Notes, or $12.00 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded SPAs).
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The consideration to be paid in, or in connection with, the Merger to each holder of a Pre-Funded Warrant (the “Pre-Funded Warrant Consideration”) shall be one or more warrants to purchase a number of shares of New Merlin Common Stock (“New Merlin Series A Warrants”) equal to the quotient of (i) the aggregate exercise price of such Pre-Funded Warrant immediately prior to the Effective Time, divided by (ii) $12.00.
Upon the terms and subject to the satisfaction or waiver of the conditions of the Business Combination Agreement, at the Effective Time:
(1) each share of Merlin Common Stock that is owned by Inflection Point, Merger Sub, or Merlin immediately prior to the Effective Time (each, an “Excluded Share”) will be canceled and shall cease to exist and no consideration will be delivered in exchange therefor;
(2) each share of Merlin Common Stock that is issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) will be canceled and converted into the right to receive a number of shares of New Merlin Common Stock equal to the Aggregate Consideration divided by the fully diluted capital of Merlin, which is the sum (without duplication) of the aggregate number of shares of Merlin Common Stock that are (i) issued and outstanding immediately prior to the Effective Time (including those issued upon conversion of all issued and outstanding preferred stock of Merlin, as applicable, and excluding securities underlying the Pre-Funded Convertible Notes or Pre-Funded Warrants), (ii) issuable upon full exercise of all issued and outstanding options of Merlin, and (iii) issuable upon full settlement of all issued and outstanding Merlin RSUs (as defined below) (such conversion ratio, the “Exchange Ratio”);
(3) each option to purchase equity securities of Merlin (“Merlin Option”) will automatically cease to represent an option to purchase Merlin Common Stock and be assumed and converted on the same terms and conditions as were applicable as of the Effective Time, into an option to acquire that number of shares of New Merlin Common Stock (rounded down to the nearest whole share) equal to the product of (A) the number of shares of Merlin Common Stock subject to such Merlin Option and (B) the Exchange Ratio, at an exercise price per share of Merlin Common Stock (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (x) the exercise price per share of Merlin Common Stock of such Merlin Option by (y) the Exchange Ratio;
(4) each restricted stock unit in respect of equity securities of Merlin, granted pursuant to the 2018 Equity Incentive Plan of Merlin after the date of the Business Combination Agreement and prior to the Effective Time (each, a “Merlin RSU”), will cease to represent a right to acquire shares of Merlin Common Stock and be assumed and converted on the same terms and conditions as were applicable as of the Effective Time, into a restricted stock unit representing the right to acquire that number of shares of New Merlin Common Stock (rounded down to the nearest whole share) equal to the product of (A) the number of shares of Merlin Common Stock subject to such Merlin RSU and (B) the Exchange Ratio;
(5) each Pre-Funded Convertible Note that is outstanding immediately prior to the Effective Time will automatically be canceled and converted into the right to receive the Convertible Note Consideration;
(6) each Pre-Funded Warrant that is outstanding and unexercised immediately prior to the Effective Time will automatically be canceled and converted into the right to receive the Pre-Funded Warrant Consideration; and
(7) (x) each then issued and outstanding Post-Domestication Right shall convert automatically into one-tenth of one share of New Merlin Common Stock, pursuant to that certain Rights Agreement, dated as of October 31, 2024, by and between Inflection Point and the right agent, with any fractional shares of New Merlin Common Stock to be issued in connection with such conversion rounded down to the nearest whole share; and (y) each then issued and outstanding Post-Domestication Unit shall be canceled and will thereafter entitle the holder thereof to one and one-tenth (1.1) shares of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share.
This proxy statement/prospectus covers (A) 163,582,614 shares of New Merlin Common Stock that are to be issued or may be issuable (including (i) up to 36,300,832 shares of New Merlin Common Stock upon the conversion of Inflection Point Ordinary Shares and Inflection Point Rights into New Merlin Common Stock, (ii) up to 78,342,430 shares of New Merlin Common Stock as consideration in the Merger, (iii) up to 24,691,250 shares of New Merlin Common Stock issuable upon the conversion of shares of Series A Preferred Stock issued as consideration in the Merger to the holders of Pre-Funded Convertible Notes (assuming, solely for this purpose, a $5.00 conversion price and taking into account accrued interest through March 31, 2026), which amount represents a good-faith estimate of the maximum amount of shares of New Merlin Common Stock that may become issuable upon conversion of such shares of Series A
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Preferred Stock) and (iv) up to 24,248,102 shares of New Merlin Common Stock issuable upon the exercise of New Merlin Series A Warrants issued as consideration in the Merger to the holders of Pre-Funded Warrants (assuming, solely for this purpose, a $5.00 exercise price), which amount represents a good-faith estimate of the maximum amount of shares of New Merlin Common Stock that may become issuable upon exercise of such New Merlin Series A Warrants, (B) up to 10,288,021 shares of Series A Preferred Stock to be issued as consideration in the Merger to the holders of Pre-Funded Convertible Notes (taking into account accrued interest through March 31, 2026), (C) New Merlin Series A Warrants initially exercisable for up to 10,103,376 shares of New Merlin Common Stock to be issued as consideration in the Merger to the holders of Pre-Funded Warrants, (D) 25,425,000 Post-Domestication Rights upon the conversion of Inflection Point Rights, and (E) 653,821 Post-Domestication Units upon conversion of Inflection Point Units.
The obligations of Inflection Point and Merlin to consummate the Business Combination are subject to the satisfaction or waiver of other customary closing conditions, including without limitation: (i) the adoption and/or approval, as applicable, by Inflection Point’s shareholders (the “Inflection Point Shareholder Approval”) of (A) the Business Combination Agreement and Business Combination in accordance with applicable law and exchange rules and regulations, (B) the Domestication, (C) the proposed charter and the bylaws of New Merlin upon Domestication, including any separate or unbundled advisory proposals as are required to implement the foregoing, (D) the issuance of shares of New Merlin Common Stock, Series A Preferred Stock and New Merlin Series A Warrants, as required by Nasdaq Listing Rule 5635, (E) the equity incentive plan and employee stock purchase plan of New Merlin as described in the Business Combination Agreement, (F) the appointment of director nominees in accordance with the terms in the Business Combination Agreement, (G) any other proposals as the SEC (or staff member thereof) may indicate are necessary in its comments to this proxy statement/prospectus, and (H) any other proposals as reasonably agreed to by the parties to the Business Combination Agreement to be necessary or appropriate in connection with the Business Combination (such proposals in (A) through (H), together, the “Transaction Proposals”), (ii) the approval of the Business Combination Agreement and the Business Combination (including the Merger) by the affirmative vote or written consent of the stockholders of Merlin, pursuant to the terms and in accordance with satisfaction of the conditions of the organizational documents of Merlin and applicable law, (iii) no adverse law or order, (iv) the Registration Statement of which this proxy statement/prospectus forms a part becoming effective, (v) approval of the listing of the New Merlin Common Stock on Nasdaq (as defined below), subject to satisfaction of the round lot holders requirement for initial listing, (vi) the accuracy of the representations and warranties and the performance of the covenants and agreements of each of the parties to the Business Combination Agreement, in each case subject to certain qualifiers, (vii) the expiration of all waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act (the “HSR Act”) with respect to the Business Combination, (viii) the completion of the Domestication, and (ix) duly executed pay-off letters certifying certain indebtedness of Merlin and its subsidiaries, as specified in the Business Combination Agreement, shall have been paid off, to the extent it is paid off pursuant to the Business Combination Agreement.
The Inflection Point Units, Public Shares and Inflection Point Rights (collectively, the “Public Securities”) are currently listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “BACQU,” “BACQ” and “BACQR,” respectively. Pursuant to the terms of the Business Combination Agreement, as a closing condition, the New Merlin Common Stock issued as merger consideration must be conditionally approved for listing on Nasdaq subject to any requirement to have a sufficient number of round lot holders of the New Merlin Common Stock, but there can be no assurance that such listing condition will be met. If such listing condition is not met, the Business Combination will not be consummated unless the listing condition is waived by the parties to the Business Combination Agreement. Following the Closing, the New Merlin Common Stock is intended to be listed, subject to Nasdaq approval, under the proposed symbol “MRLN”. It is important for you to know that, at the time of Inflection Point’s extraordinary general meeting, the parties may not have received from Nasdaq either confirmation of the listing of the New Merlin Common Stock or that approval will be obtained prior to the consummation of the Business Combination, and it is possible that the listing condition to the consummation of the Business Combination may be waived by the parties to the Business Combination Agreement. 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 such confirmation, and, further, it is possible that such confirmation may never be received and the Business Combination could still be consummated if such condition is waived or is subject to an exception and therefore the New Merlin Common Stock would not be listed on any nationally recognized securities exchange.
In connection with Inflection Point’s initial public offering consummated on October 31, 2024 (the “IPO”), the Sponsor, and Inflection Point’s directors and executive officers entered into letter agreements to vote their Inflection Point Ordinary Shares in favor of the Business Combination Proposal (as defined herein). Further, concurrently with the execution of the Business Combination Agreement, the Sponsor and Inflection Point Fund entered into the Sponsor
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Support Agreement, pursuant to which the Sponsor and Inflection Point Fund agreed to vote their shares in favor of all proposals being presented at the extraordinary general meeting. As of the Record Date, the Sponsor owned approximately 25.9% of the total outstanding Inflection Point Ordinary Shares.
There are no agreements, arrangements, or understandings between the Sponsor and Inflection Point, its officers, directors, or affiliates with respect to determining whether to proceed with the Business Combination or any other initial business combination.
Material Financing Transactions
Simultaneously with the consummation of the IPO, the Sponsor purchased 425,000 Inflection Point Units (the “Private Placement Units”) in a private placement, at a price of $10.00 per unit, generating total proceeds of $4,250,000.
Since the IPO, there has not been any material financing of Inflection Point. However, if necessary in order to fund working capital deficiencies or finance transaction costs in connection with the Business Combination, the Sponsor, or certain of Inflection Point’s officers and directors or their affiliates, may, but are not obligated to, loan funds to Inflection Point as may be required. If Inflection Point completes the Business Combination or another initial business combination, it would repay such loaned amounts. In the event that the Business Combination or another initial business combination does not close, Inflection Point 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 $2,500,000 of such working capital loans may be convertible into additional Private Placement Units at a price of $10.00 per unit at the option of the lender, including up to $750,000 in working capital loans which may be made by Inflection Point Fund. As of January 14, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus, no working capital loans have been made to Inflection Point.
As described above, in connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements with the Pre-Funded Investors, pursuant to which Merlin issued and sold, an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants in the Pre-Funded Note Investment. On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into a Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA.
Additionally, on November 17, 2025, Inflection Point and Merlin also entered into Securities Purchase Agreements (the “Additional Series A SPAs,” collectively with the Initial Series A SPA, the “Series A SPAs”), with certain accredited investors as signatories thereto
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Compensation of the Sponsor and its Affiliates
In connection with the Business Combination, the Sponsor will receive (i)
Inflection Point Fund will receive (i) a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (a) the total outstanding principal and outstanding accrued and unpaid interest on its Pre-Funded Convertible Note as of one day prior to Closing, divided by (b) $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date), and (ii) a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock. Through its membership in the Sponsor, Inflection Point Fund also has an indirect interest in (i) 5,266,667 New Merlin Common Stock in exchange for 5,266,667, or approximately 60.1%, of the Founder Shares held by the Sponsor and (ii) 467,500 shares of New Merlin Common Stock, in exchange for 425,000, or 100%, of the Private Placement Units held by the Sponsor. See “Questions and Answers — What is the effective purchase price attributed to the New Merlin Common Stock to be received by the Public Shareholders, the Sponsor, and the Merlin stockholders at Closing?”
As of the date of this proxy statement/prospectus, no compensation of any kind, including finder’s and consulting fees, have been paid to the Sponsor, Inflection Point Fund, members of our management team, or any of their affiliates, for services rendered prior to or in connection with the completion of the Business Combination. However, Inflection Point may pay consulting, success or finder fees to these entities or individuals, or their respective affiliates in connection with the consummation of the Business Combination, and Inflection Point may engage the Sponsor or an affiliate of the Sponsor as an advisor or otherwise in connection with the Business Combination and certain other transactions and pay such person or entity a salary or fee in an amount that constitutes a market standard for comparable transactions. Except as set out in the immediately preceding sentence, as of the date of this proxy statement/prospectus, no terms for any such arrangements have been determined and no written agreements exist with respect to such arrangements. Additionally, these entities or individuals may be reimbursed for 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 of the date of this proxy statement/prospectus, there are no out-of-pocket expenses to be reimbursed. The reimbursement of expenses and advances and the securities issued to the Sponsor and Inflection Point Fund may result in a material dilution of the equity interests of non-redeeming Public Shareholders. See “Summary of the Proxy Statement/Prospectus — Dilution”, “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” and “Information About Inflection Point — Executive and Director Compensation”.
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, Inflection Point Fund, Inflection Point’s officers and directors, Merlin’s officers and directors and (ii) unaffiliated security holders of Inflection Point. Such conflicts of interest may include a material conflict of interest arising in determining whether to proceed with the Business Combination, the compensation of Inflection Point’s directors and officers and the compensation of the Sponsor and Inflection Point in connection with the Business Combination. See the section entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”. Merlin’s directors and executive officers have interests in the Business Combination that are different from, or in addition to, those of the Inflection Point shareholders and rights holders generally. See the section entitled “The Business Combination Proposal — Interests of Merlin’s Directors and Executive Officers”.
Extraordinary General Meeting
Inflection Point will hold an extraordinary general meeting (the “extraordinary general meeting”) to consider matters relating to the Business Combination and vote on the Transaction Proposals at [•], Eastern Time, on [•]. For the purposes of the Cayman Constitutional Documents, the physical location of the extraordinary general meeting will be at the offices of White & Case LLP at 1221 Avenue of the Americas, New York, New York 10020. You or your proxyholder will be able to attend and vote at the extraordinary general meeting online by visiting [•] and using
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a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the extraordinary general meeting, registered shareholders and beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the accompanying proxy statement/prospectus.
After careful consideration, the Inflection Point Board and Special Committee have each unanimously approved the Business Combination Agreement and the proposals described in this proxy statement/prospectus. The Inflection Point Board and Special Committee have also each determined that it is in the best interests of Inflection Point to complete the Business Combination. The Inflection Point Board and Special Committee took into account the oral opinion of Newbridge Securities Corporation (“Newbridge”) (subsequently confirmed in writing), rendered on August 8, 2025, to the effect that, as of such date and based on and subject to various assumptions and limitations described in its written opinion, that (i) the Total Pre-Money Consideration (as defined herein) to be paid by Inflection Point pursuant to the Business Combination is fair, from a financial point of view as of such date, to the Inflection Point Unaffiliated Shareholders (defined as Inflection Point shareholders other than (a) the Sponsor, (b) Inflection Point Fund, (c) officers, directors or affiliates of Inflection Point, the Sponsor or Inflection Point Fund, and (d) Public Shareholders who elect to redeem their shares prior to or in connection with the Business Combination), and (ii) the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement. For more information, see “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination”, and “Proposal No. 1 — The Business Combination Proposal — Opinion of Newbridge Securities.” The Inflection Point Board recommends that you vote “FOR” each proposal described in this proxy statement/prospectus.
If you have any questions or need assistance voting your Inflection Point Ordinary Shares, please contact [•], our proxy solicitor, by calling [•], or banks and brokers can call collect at [•], or by emailing [•]. The notice of the extraordinary general meeting and the proxy statement/prospectus relating to the Business Combination will be available at [•].
This proxy statement/prospectus provides shareholders of Inflection Point with detailed information about the Business Combination and other matters to be considered at the extraordinary general meeting of Inflection Point. We encourage you to read this entire document, including the Annexes and other documents referred to herein, carefully and in their entirety. It also contains or references information about Inflection Point, Merlin and New Merlin and certain related matters. You are encouraged to read this proxy statement/prospectus carefully. In particular, when you consider the recommendation regarding these proposals by Inflection Point Board, you should keep in mind that the Sponsor, Inflection Point Fund and Inflection Point’s directors and officers have interests in the Business Combination that are different from or in addition to, or may conflict with, your interests as a shareholder. For instance, the Sponsor, the Inflection Point Fund and Inflection Point’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 Inflection Point. See the section entitled “The Business Combination Proposal — Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination” for a further discussion of these considerations. You should also carefully consider the risk factors described under the heading “Risk Factors” beginning on page 35 of the accompanying proxy statement/prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
The accompanying proxy statement/prospectus is dated [•] and is first being mailed to Inflection Point’s shareholders on or about [•].
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PRELIMINARY PROXY STATEMENT/PROSPECTUS
SUBJECT TO COMPLETION, DATED JANUARY 14, 2026
INFLECTION POINT ACQUISITION CORP. IV
A Cayman Islands Exempted Company
(Company No. 411283)
1345 Avenue of the Americas, Fl 47
New York, NY 10105
NOTICE OF EXTRAORDINARY GENERAL MEETING TO BE HELD ON [•]
TO THE SHAREHOLDERS OF INFLECTION POINT ACQUISITION CORP. IV:
You are cordially invited to attend the extraordinary general meeting of Inflection Point Acquisition Corp. IV, a Cayman Islands exempted company (f/k/a Bleichroeder Acquisition Corp. I) (“Inflection Point”), to be held at [•], Eastern Time, on [•] at the offices of White & Case LLP located at 1221 Avenue of the Americas, New York, NY 10020, and virtually via live webcast at [•]. The extraordinary general meeting will be held for the following purposes:
Proposal No. 1 — The Business Combination Proposal — To consider and vote upon a proposal to approve, by ordinary resolution, the Business Combination Agreement, dated as of August 13, 2025, by and among Inflection Point, IPDX Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of Inflection Point (“Merger Sub”), and Merlin Labs, Inc., a Delaware corporation (referred to herein prior to the Business Combination, as “Merlin” and subsequent to the Business Combination, as “Merlin OpCo”) (as it may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “Business Combination Agreement,” and the transactions contemplated thereby, the “Business Combination”), pursuant to which, among other things and subject to the terms and conditions therein, Merger Sub will merge with and into Merlin, with Merlin surviving as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin OpCo will become a wholly-owned subsidiary of Inflection Point, and substantially all of the assets and the business of the combined company will be held and operated by Merlin OpCo and its subsidiaries. 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.
Proposal No. 2 — The Domestication Proposal — To consider and vote upon a proposal to approve, by special resolution, of holders of Class B ordinary shares, par value $0.0001 per share, by Inflection Point (the “Inflection Point Class B Shares,” and the holders of such shares, the “Inflection Point Class B Shareholders”), the domestication of Inflection Point as a Delaware corporation (the “Domestication”), which will be accomplished by de-registering Inflection Point from the Register of Companies in the Cayman Islands and transferring by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate and domesticate as a Delaware corporation in accordance with the amended and restated memorandum and articles of association of Inflection Point (as may be amended from time to time, the “Cayman Constitutional Documents”), Section 388 of the Delaware General Corporation Law (the “DGCL”) and Part XII of the Companies Act (Revised) of the Cayman Islands (the “Companies Act”). The Domestication will be effected at least one day prior to the Closing by Inflection Point filing (a) all applicable documents required to be filed and paying all applicable fees required to paid, and causing the satisfaction of all other conditions to deregistration required to be satisfied, in each case, under Section 206 of the Companies Act, and (b) a certificate of corporate domestication and the proposed new certificate of incorporation of New Merlin (the “Proposed Charter”) with the Delaware Secretary of State. Upon the effectiveness of the Domestication, Inflection Point will re-domicile as and become a Delaware corporation and all outstanding securities of Inflection Point will convert to outstanding securities of New Merlin, as described in more detail in the accompanying proxy statement/prospectus. We refer to this proposal as the “Domestication Proposal”.
Proposal No. 3 — The Stock Issuance Proposal — To consider and vote upon a proposal 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 Series A Preferred Stock and New Merlin Series A Warrants, (ii) shares of the New Merlin Common Stock to be issued to the Merlin Stockholders, (iii) shares of New Merlin Common Stock issuable upon the conversion of exercise of the shares of Series A Preferred Stock and New
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Merlin Series A Warrants (each as defined below) and (iv) any other issuances of common stock and securities convertible into or exercisable for common stock pursuant to subscription, purchase or similar agreements Inflection Point has entered, or may enter, into prior to Closing. We refer to this proposal as the “Stock Issuance Proposal”.
Proposal No. 4 — Organizational Documents Proposal — To consider and vote upon a proposal to approve, by special resolution, the Proposed Charter and the proposed new by-laws (the “Proposed Bylaws” and, together with the Proposed Charter, the “Proposed Organizational Documents”) of New Merlin in connection with the Domestication. We refer to this proposal as the “Organizational Documents Proposal”. The form of each of the Proposed Charter and the Proposed Bylaws is attached to the accompanying proxy statement/prospectus as Annex B and Annex C, respectively.
Proposal No. 5 — The Advisory Organizational Documents Proposals — To consider and vote upon the following six separate proposals (collectively, the “Advisory Organizational Documents Proposals”) to approve on an advisory, non-binding basis by special resolution the following material differences between the Cayman Constitutional Documents and the Proposed Organizational Documents:
Advisory Organizational Documents Proposal 5A — Under the Proposed Organizational Documents, New Merlin would be authorized to issue (A) [•] shares of New Merlin Common Stock and (B) [•] shares of New Merlin Preferred Stock.
Advisory Organizational Documents Proposal 5B — The Proposed Organizational Documents would adopt (a) Delaware as the exclusive forum for certain stockholder litigation and (b) the federal district courts of the United States of America as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Advisory Organizational Documents Proposal 5C — The Proposed Charter would require the affirmative vote of at least two-thirds of the total voting power of all then-outstanding shares of New Merlin to amend, alter, repeal or rescind certain provisions of the Proposed Charter.
Advisory Organizational Documents Proposal 5D — The Proposed Charter would require the affirmative vote of at least two-thirds of the outstanding shares entitled to vote at an election of directors, voting together as a single class, to remove a director only for cause.
Advisory Organizational Documents Proposal 5E — The Proposed Charter would prohibit stockholder action by written consent in lieu of a meeting and require stockholders to take action at an annual or special meeting.
Advisory Organizational Documents Proposal 5F — The Proposed Charter would (1) change the corporate name from “Inflection Point Acquisition Corp. IV” to “Merlin, Inc.”, (2) make New Merlin’s corporate existence perpetual and (3) remove certain provisions related to Inflection Point’s status as a blank check company that will no longer be applicable upon consummation of the Business Combination.
Proposal No. 6 — The Director Election Proposal — To consider and vote upon a proposal to approve, by ordinary resolution, the election of seven (7) directors to serve on the New Merlin board of directors until the first annual meeting of stockholders of New Merlin to be held following the date of Closing and until any such director’s successor is elected and qualified, subject to such director’s earlier death, disqualification, resignation, or removal. We refer to this proposal as the “Director Election Proposal”.
Proposal No. 7 — New Merlin Incentive Plan Proposal — To consider and vote upon a proposal, by ordinary resolution, that the New Merlin Incentive Plan, a copy of which is attached to the proxy statement/prospectus as Annex G, be adopted and approved. We refer to this proposal as the “New Merlin Incentive Plan Proposal”.
Proposal No. 8 — New Merlin Employee Stock Purchase Plan Proposal — To consider and vote upon a proposal, by ordinary resolution, that the Merlin, Inc. 2026 Employee Stock Purchase Plan, a copy of which is attached to the proxy statement/prospectus as Annex H, be adopted and approved. We refer to this proposal as the “New Merlin Employee Stock Purchase Plan Proposal” and collectively with the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal and the Organizational Documents Proposal, the Director Election Proposal and the New Merlin Incentive Plan Proposal, the “Condition Precedent Proposals”.
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Proposal No. 9 — The Adjournment Proposal — To consider and vote upon a proposal to approve, by ordinary resolution, the adjournment of the extraordinary general meeting to a later date or dates, if necessary or convenient, (i) to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with the approval of one or more proposals at the extraordinary general meeting, (ii) if Inflection Point determines that one or more of the conditions to Closing is not or will not be satisfied or waived or (iii) to facilitate the Domestication, the Merger or any other transaction contemplated by the Business Combination Agreement or the related agreements. We refer to this proposal as the “Adjournment Proposal”.
These items of business are described in the accompanying proxy statement/prospectus, which we encourage you to read carefully and in its entirety before voting.
Only holders of record of Class A ordinary shares, par value $0.0001 per share, of Inflection Point (the “Inflection Point Class A Shares”) and the Inflection Point Class B Shares (together with the Inflection Point Class A Shares, the “Inflection Point Ordinary Shares”) at the close of business on [•] (the “Record Date”) are entitled to notice of and to have their votes counted at the extraordinary general meeting and any adjournment of the extraordinary general meeting. Pursuant to the Cayman Constitutional Documents, the approval of the Domestication Proposal requires a special resolution of the Inflection Point Class B Shareholders, being the affirmative vote of holders of at least two-thirds of the Inflection Point Class B Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The Inflection Point Class A Shareholders will have no right to vote on the Domestication Proposal, in accordance with Article 48.2 of the Cayman Constitutional Documents.
The approval of each of the Organizational Documents Proposal and the Advisory Organizational Documents Proposals requires a special resolution, being the affirmative vote of holders of a majority of at least two-thirds of the Inflection Point Ordinary Shares, who being present in person or by proxy and entitled to vote at an extraordinary general meeting, vote at the extraordinary general meeting.
The approval of each of the Business Combination Proposal, the Stock Issuance Proposal, the Director Election Proposal, the New Merlin Incentive Plan Proposal, the New Merlin Employee Stock Purchase Plan Proposal and the Adjournment Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at an extraordinary general meeting, vote at the extraordinary general meeting. The Business Combination was not structured to require the approval of at least a majority of Inflection Point’s unaffiliated shareholders because such a vote is not required under Cayman Islands law.
The accompanying proxy statement/prospectus and proxy card are being provided to Inflection Point’s shareholders in connection with the solicitation of proxies to be voted at the extraordinary general meeting and at any adjournment of the extraordinary general meeting. Whether or not you plan to attend the extraordinary general meeting, all of Inflection Point’s shareholders are urged to read the accompanying 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 35 of the accompanying proxy statement/prospectus.
After careful consideration, the board of directors of Inflection Point (the “Inflection Point Board”) has unanimously approved and determined to be in the best interests of Inflection Point and its shareholders the Business Combination and unanimously recommends that shareholders vote “FOR” the Business Combination Proposal and “FOR” all other proposals presented to Inflection Point’s shareholders in the accompanying proxy statement/prospectus. When you consider the recommendation of these proposals by the Inflection Point Board, you should keep in mind that the Sponsor, Inflection Point Fund I LP (“Inflection Point Fund”) and Inflection Point’s directors and officers, and/or their affiliates, have interests in the Business Combination that may conflict with your interests as a shareholder. For instance, the Sponsor, Inflection Point Fund and Inflection Point’s officers and directors, and/or their affiliates, 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 Inflection Point. See the section of the accompanying proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for a further discussion of these considerations.
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In connection with the Business Combination, certain related agreements have been or will be entered into on or prior to the closing of the Business Combination, including the Registration Rights Agreement, the Sponsor Support Agreement, Pre-Funded NPAs, Pre-Funded SPA, Pre-Funded Warrants, the Series A SPA, the New Merlin Series A Warrants, the Upsized New Merlin Series A Warrants, the Additional Series A SPAs (each as defined below), the Sponsor Lock-Up Agreement and the Merlin Lock-Up Agreement (each as defined in the accompanying proxy statement/prospectus). See “Proposal No.1 — Business Combination Proposal — Related Agreements” and “Certain Relationships and Related Person Transactions” in the accompanying proxy statement/prospectus for more information.
Pursuant to the Cayman Constitutional Documents, a holder of Inflection Point Class A Shares sold as part of the units offered by Inflection Point in its initial public offering (the “IPO,” and the Inflection Point Class A Shares offered therein, the “Public Shares,” and holders of such shares, the “Public Shareholders”) may request to redeem all or a portion of such holder’s Public Shares for cash if the Business Combination is consummated. As a Public Shareholder, you will be entitled to receive cash for any Public Shares to be redeemed only if you:
(i) (a) hold Public Shares or (b) hold Public Shares through the units offered by Inflection Point in the IPO (the “Inflection Point Units”) and elect to separate your Inflection Point Units into the underlying Public Shares and rights to receive one-tenth (1/10) of one Inflection Point Class A Share upon consummation of the Business Combination offered as part of the Inflection Point Units in the IPO (the “Public Rights”) prior to exercising your redemption rights with respect to the Public Shares;
(ii) submit a written request to Continental Stock Transfer & Trust Company (“Continental”), Inflection Point’s transfer agent, including the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that Inflection Point redeem all or a portion of your Public Shares for cash; and
(iii) deliver your share certificates for Public Shares (if any) along with other applicable redemption forms to Continental, physically or electronically through The Depository Trust Company.
Public Shareholders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days prior to the initially scheduled date of the extraordinary general meeting) in order for their Public Shares to be redeemed.
Public Shareholders may elect to redeem Public Shares regardless of if or how they vote in respect of the Business Combination Proposal, and regardless of whether they hold Public Shares on the Record Date. If the Business Combination is not consummated, the Public Shares will be returned to the respective holder, broker or bank.
If a Public Shareholder properly exercises its right to redeem all or a portion of the Public Shares that it holds and timely delivers its share certificates (if any) and other redemption forms (as applicable) to Continental, and Inflection Point initiates the redemption of Public Shares in connection with the Business Combination (the “Redemption”) pursuant to the Cayman Constitutional Documents, Inflection Point will redeem such Public Shares for a per-share redemption price, payable in cash, equal to a per-share redemption price, payable in cash, equal to the aggregate amount then deposited in the trust account established at the consummation of the IPO (the “Trust Account”), calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the Trust Account (which interest shall be net of taxes payable) divided by the number of then issued Public Shares (the “Redemption Price”). For illustrative purposes, as of the Record Date, this would have amounted to approximately $[•] per Public Share. Prior to exercising redemption rights, Public Shareholders should verify the market price of the Inflection Point 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. Inflection Point 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 our securities when our shareholders wish to sell their shares. If a Public Shareholder exercises its redemption rights in full, then it will be electing to exchange its Public Shares for cash and will no longer own Public Shares. Any request to redeem Public Shares, once made, may be withdrawn, only with Inflection Point’s consent, until the Redemption. If a Public Shareholder delivers its shares in connection with an election to redeem and subsequently decides prior to the deadline for submitting redemption requests not to elect to exercise such rights, it may request that Inflection Point instruct Continental to return the shares (physically or electronically). The holder can make such request by contacting Continental, at the address or email address listed in the accompanying proxy statement/prospectus. See “Extraordinary General Meeting of Inflection Point — Redemption Rights” of the accompanying proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your Public Shares for cash.
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Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of such Public Shareholder or any other person with whom such Public Shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its Public Shares with respect to more than an aggregate of 15% of the Public Shares. Accordingly, if a Public Shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the Public Shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
The Sponsor, Inflection Point Fund and each director and officer of Inflection Point have agreed to, among other things, vote in favor of the Business Combination, and to waive their redemption rights in connection with the consummation of the Business Combination with respect to any Inflection Point Ordinary Shares held by them. None of Inflection Point’s Sponsor, directors or officers received separate consideration for their waiver of redemption rights. The Founder Shares and Private Placement Shares (each as defined in the accompanying proxy statement/prospectus) held by the Sponsor will be excluded from the pro rata calculation used to determine the per-share Redemption Price. As of the Record Date, the Sponsor owned approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares.
The Business Combination Agreement is subject to the satisfaction or waiver of certain customary closing conditions, including without limitation: (i) approval of the Condition Precedent Proposals by Inflection Point’s Shareholders, (ii) the approval of the Business Combination Agreement and the Business Combination (including the Merger) by the affirmative vote or written consent of the stockholders of Merlin, pursuant to the terms and in accordance with satisfaction of the conditions of the organizational documents of Merlin and applicable law, (iii) no adverse law or order, (iv) the Registration Statement becoming effective, (v) approval of the listing of the New Merlin Common Stock on Nasdaq, subject to satisfaction of the round lot holders requirement for initial listing, (vi) the accuracy of the representations and warranties of each party to the Business Combination Agreement and the performance of the covenants and agreements of the parties, in each case subject to certain qualifiers, (vii) the expiration of all waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) with respect to the Business Combination, (viii) the completion of the Domestication, and (ix) duly executed pay-off letters certifying certain indebtedness of Merlin and its subsidiaries, as specified in the Business Combination Agreement, shall have been paid off, to the extent it is paid off pursuant to the Business Combination Agreement. We cannot assure you as to whether these conditions will be satisfied or waived.
The Inflection Point Units, Inflection Point Class A Shares and Inflection Point Rights are currently listed on Nasdaq under the symbols “BACQU”, “BACQ” and “BACQR”, respectively. Pursuant to the terms of the Business Combination Agreement, as a closing condition, the New Merlin Common Stock issued as merger consideration must be conditionally approved for listing on Nasdaq subject to any requirement to have a sufficient number of round lot holders of the New Merlin Common Stock, but there can be no assurance that such listing condition will be met. If such listing condition is not met, the Business Combination will not be consummated unless the listing condition is waived by the parties to the Business Combination Agreement. Following the Closing, the New Merlin Common Stock is intended to be listed, subject to Nasdaq approval, under the proposed symbol “MRLN”. It is important for you to know that, at the time of Inflection Point’s extraordinary general meeting, the parties may not have received from Nasdaq either confirmation of the listing of the New Merlin Common Stock or that approval will be obtained prior to the consummation of the Business Combination, and it is possible that the listing condition to the consummation of the Business Combination may be waived by the parties to the Business Combination Agreement. 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 such confirmation, and, further, it is possible that such confirmation may never be received and the Business Combination could still be consummated if such condition is waived or is subject to an exception and therefore the New Merlin Common Stock would not be listed on any nationally recognized securities exchange.
Material Financing Transactions
Simultaneously with the consummation of Inflection Point’s IPO, the Sponsor purchased 425,000 Private Placement Units in a private placement, at a price of $10.00 per unit, generating total proceeds of $4,250,000.
Since Inflection Point’s IPO, there has not been any material financing of Inflection Point. However, if necessary in order to fund working capital deficiencies or finance transaction costs in connection with the Business Combination, the Sponsor, or certain of Inflection Point’s officers and directors or their affiliates may, but are not obligated to, loan funds to Inflection Point as may be required. If Inflection Point completes the Business Combination or another initial business combination, it would repay such loaned amounts. In the event that the Business Combination or another initial business combination does not close, Inflection Point 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
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$2,500,000 of such working capital loans may be convertible into additional Private Placement Units at a price of $10.00 per unit at the option of the lender, including up to $750,000 in working capital loans which may be made by Inflection Point Fund. As of January 14, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus, no working capital loans have been made to Inflection Point.
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into certain convertible note purchase agreements (the “Pre-Funded NPAs”) and securities purchase agreement (the “Signing Pre-Funded SPA” and together with the Signing Pre-Funded NPAs, the “Signing Pre-Funded PIPE Agreements”), respectively, with certain accredited investors named therein (collectively, the “Pre-Funded Investors”). Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of convertible promissory notes (the “Pre-Funded Convertible Notes”) and warrants to purchase a number of shares of Merlin Common Stock at a purchase price of $12.00 per share (the “Pre-Funded Warrants”), substantially concurrently with the execution and delivery of the Business Combination Agreement.
On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into an additional securities purchase agreement (“Post-Signing Pre-Funded SPA,” collectively with the Signing Pre-Funded SPA, the “Pre-Funded SPAs”), pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA (such investment contemplated by the Signing Pre-Funded PIPE Agreements and the Post-Signing Pre-Funded SPA, the “Pre-Funded Note Investment”).
In connection with the transactions contemplated by the Business Combination Agreement, on August 13, 2025, Inflection Point, Merlin and the accredited investor named therein (the “Closing PIPE Investor”) entered into a Securities Purchase Agreement (the “Initial Series A SPA”). Pursuant to the Series A SPA, the Closing PIPE Investor has agreed, among other things, to purchase, at Closing, 4,901,961 shares of Series A Preferred Stock, having the rights, preferences and privileges set forth in the Certificate of Designation of Preferences, Rights and Limitations of 12.0% Series A Cumulative Convertible Preferred Stock (the “Certificate of Designation”) and a New Merlin Series A Warrant, for an aggregate purchase price of $50 million. Each share of Merlin Series A Preferred Stock will have a stated value of $12.00 (the “Stated Value”). On November 17, 2025, Inflection Point and Merlin entered into an amendment to the Initial Series A SPA with the Closing PIPE Investor (“Amendment No. 1 to the Initial Series A SPA”), pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of shares into which such shares of Series A Preferred Stock are initially convertible (the “Initial Closing PIPE Investment”).
On November 17, 2025, Inflection Point and Merlin also entered into Securities Purchase Agreements (the “Additional Series A SPAs,” collectively with the Initial Series A SPA, the “Series A SPAs”), with certain accredited investors as signatories thereto (the “Additional Closing PIPE Investors”), pursuant to which, among other things, the Additional Closing PIPE Investors agreed to purchase, and Inflection Point agreed to sell, an aggregate of 1,666,668 shares of Series A Preferred Stock and warrants to purchase a number of shares of New Merlin Common Stock that is equal to 75% of the number of shares into which such shares of New Merlin Preferred Stock are initially convertible (each, an “Upsized New Merlin Series A Warrant”), in a private placement, on substantially the same terms as the Closing PIPE Subscription Agreement, for an aggregate purchase price of $20 million (the “Additional Closing PIPE Investments,” together with the Signing PIPE Investment, the “Closing PIPE Investments”).
Compensation of the Sponsor and its Affiliates
In connection with the Business Combination, the Sponsor will receive (i) 8,333,333 shares of New Merlin Common Stock upon the conversion of 8,333,333 Founder Shares, which were initially purchased in a private placement that closed prior to the IPO for $0.004 per share, (ii) 467,500 shares of New Merlin Common Stock upon the exchange of 425,000 Private Placement Units, which were initially purchased in a private placement that closed concurrently with the IPO for $10.00 per unit.
Inflection Point Fund will receive (i) a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (a) the total outstanding principal and outstanding accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by (b) $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A
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Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date), and (ii) a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock. Through its membership in the Sponsor, Inflection Point Fund also has an indirect interest in (i) 5,266,667 New Merlin Common Stock in exchange for 5,266,667, or approximately 60.1%, of the Founder Shares held by the Sponsor and (ii) 467,500 shares of New Merlin Common Stock, in exchange for 425,000, or 100%, of the Private Placement Units held by the Sponsor. See “Questions and Answers — What is the effective purchase price attributed to the New Merlin Common Stock to be received by the Public Shareholders, the Sponsor, and the Merlin stockholders at Closing?”
As of the date of this proxy statement/prospectus, no compensation of any kind, including finder’s and consulting fees, have been paid or will be paid to the Sponsor, Inflection Point Fund, members of our management team, or any of their affiliates, for services rendered prior to or in connection with the completion of the Business Combination. However, Inflection Point may pay consulting, success or finder fees to these entities or individuals, or their respective affiliates in connection with the consummation of the Business Combination, and Inflection Point may engage the Sponsor or an affiliate of the Sponsor as an advisor or otherwise in connection with the Business Combination and certain other transactions and pay such person or entity a salary or fee in an amount that constitutes a market standard for comparable transactions. Except as set out in the immediately preceding sentence, as of the date of this proxy statement/prospectus, no terms for any such arrangements have been determined and no written agreements exist with respect to such arrangements. Additionally, these entities or individuals may be reimbursed for 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 of the date of this proxy statement/prospectus, there are no out-of-pocket expenses to be reimbursed. The reimbursement of expenses and advances and the securities issued to the Sponsor and Inflection Point Fund may result in a material dilution of the equity interests of non-redeeming Public Shareholders. See “Summary of the Proxy Statement/Prospectus — Dilution”, “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” and “Information About Inflection Point — Executive and Director Compensation”.
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, Inflection Point Fund, Inflection Point’s officers and directors, Merlin’s officers and directors and (ii) unaffiliated security holders of Inflection Point. Such conflicts of interest may include a material conflict of interest arising in determining whether to proceed with the Business Combination, the compensation of Inflection Point’s directors and officers and the compensation of the Sponsor and Inflection Point in connection with the Business Combination. See the section entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”. Merlin’s directors and executive officers have interests in the Business Combination that are different from, or in addition to, those of the Inflection Point shareholders and rights holders generally. See the section entitled “The Business Combination Proposal — Interests of Merlin’s Directors and Executive Officers”.
For terms used in this notice but not otherwise defined herein, please refer to the Frequently Used Terms section of the accompanying proxy statement/prospectus.
Your vote is very important. Whether or not you plan to attend the extraordinary general meeting, please 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 extraordinary general meeting. 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 extraordinary general meeting or any adjournment thereof. The transactions contemplated by the Business Combination Agreement will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting, 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 Organizational Documents Proposals and the Adjournment Proposal are not conditioned upon the approval of any other proposal set forth in the accompanying proxy statement/prospectus.
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If you are a shareholder entitled to attend and vote at this extraordinary general meeting, you may appoint a proxy or proxies to vote on your behalf. A proxy need not be a shareholder of Inflection Point.
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 described in this notice, and in accordance with the judgment of the persons named as proxies on any other matters that may properly come before the extraordinary general meeting. 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 extraordinary general meeting 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 extraordinary general meeting and will not be voted. If you are a shareholder of record and you attend the extraordinary general meeting and wish to vote in person, you may withdraw your proxy and vote in person.
TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST SUBMIT A WRITTEN REQUEST, INCLUDING THE LEGAL NAME, PHONE NUMBER AND ADDRESS OF THE BENEFICIAL OWNER OF THE SHARES FOR WHICH REDEMPTION IS REQUESTED, TO CONTINENTAL THAT YOUR PUBLIC SHARES BE REDEEMED FOR CASH AND DELIVER YOUR PUBLIC SHARES TO CONTINENTAL, 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 ABANDONED, 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.
On behalf of the Inflection Point Board, I would like to thank you for your support and look forward to the successful completion of the Business Combination.
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Sincerely, |
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Name: |
Michael Blitzer |
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Title: |
President, Chief Executive Officer and Director |
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
The accompanying proxy statement/prospectus is dated [•] and is first being mailed to shareholders on or about [•].
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TABLE OF CONTENTS
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REFERENCES TO ADDITIONAL INFORMATION |
iii |
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FREQUENTLY USED TERMS |
iv |
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MARKET AND INDUSTRY DATA |
ix |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
x |
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QUESTIONS AND ANSWERS FOR SHAREHOLDERS |
xii |
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS |
1 |
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RISK FACTORS |
35 |
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EXTRAORDINARY GENERAL MEETING OF INFLECTION POINT |
82 |
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PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL |
90 |
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PROPOSAL NO. 2 — THE DOMESTICATION PROPOSAL |
138 |
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PROPOSAL NO. 3 — THE STOCK ISSUANCE PROPOSAL |
146 |
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PROPOSAL NO. 4 — THE ORGANIZATIONAL DOCUMENTS PROPOSAL |
148 |
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PROPOSAL NO. 5 — THE ADVISORY ORGANIZATIONAL DOCUMENTS PROPOSALS |
150 |
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PROPOSAL NO. 6 — THE DIRECTOR ELECTION PROPOSAL |
154 |
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PROPOSAL NO. 7 — THE NEW MERLIN INCENTIVE PLAN PROPOSAL |
157 |
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PROPOSAL NO. 8 — THE NEW MERLIN LABS EMPLOYEE STOCK PURCHASE PLAN PROPOSAL |
163 |
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PROPOSAL NO. 9 — THE ADJOURNMENT PROPOSAL |
168 |
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U.S. FEDERAL INCOME TAX CONSIDERATIONS |
169 |
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
185 |
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INFORMATION ABOUT INFLECTION POINT |
202 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INFLECTION POINT |
217 |
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DESCRIPTION OF NEW MERLIN SECURITIES |
222 |
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MARKET PRICE AND DIVIDENDS OF SECURITIES |
227 |
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BENEFICIAL OWNERSHIP OF SECURITIES |
229 |
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS |
232 |
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INFORMATION ABOUT MERLIN LABS |
237 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MERLIN |
245 |
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EXECUTIVE AND DIRECTOR COMPENSATION OF MERLIN LABS |
262 |
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INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE BUSINESS COMBINATION |
266 |
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MANAGEMENT OF THE COMPANY FOLLOWING THE BUSINESS COMBINATION |
267 |
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SECURITIES ACT RESTRICTIONS ON RESALE OF THE COMPANY’S SECURITIES |
271 |
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SHAREHOLDER PROPOSALS AND NOMINATIONS |
272 |
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SHAREHOLDER COMMUNICATIONS |
273 |
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LEGAL MATTERS |
274 |
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OTHER MATTERS |
274 |
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EXPERTS |
274 |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
274 |
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DELIVERY OF DOCUMENTS TO SHAREHOLDERS |
275 |
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ENFORCEABILITY OF CIVIL LIABILITY |
275 |
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WHERE YOU CAN FIND MORE INFORMATION |
276 |
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INDEX TO FINANCIAL STATEMENTS |
F-1 |
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SIGNATURES |
II-5 |
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Annex A Business Combination Agreement |
A-1 |
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Annex B Proposed Charter |
B-1 |
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Annex C Proposed Bylaws |
C-1 |
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Annex D Sponsor Support Agreement |
D-1 |
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Annex E Stockholder Voting and Support Agreement |
E-1 |
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Annex F Opinion of Newbridge Securities Corporation |
F-1 |
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Annex G New Merlin Incentive Plan |
G-1 |
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Annex H Merlin, Inc. 2026 Employee Stock Purchase Plan |
H-1 |
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Annex I Form of Certificate of Designation |
I-1 |
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Annex J Preliminary Proxy Card |
J-1 |
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REFERENCES TO ADDITIONAL INFORMATION
The accompanying proxy statement/prospectus incorporates important information that is not included in or delivered with the accompanying proxy statement/prospectus. This information is available for you to review through the SEC’s website at www.sec.gov.
You may request copies of the accompanying proxy statement/prospectus or other information concerning Inflection Point, without charge, by written request [•]; or [•], our proxy solicitor, by calling [•], or banks and brokers can call collect at [•], or by emailing [•], or from the SEC through the SEC website at the address provided above.
In order for you to receive timely delivery of the documents in advance of the extraordinary general meeting of Inflection Point to be held on [•], you must request the information no later than five business days prior to the date of the extraordinary general meeting, by [•].
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FREQUENTLY USED TERMS
Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” and “Inflection Point” refer to Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Acquisition Corp. I). Prior to the Domestication, Inflection Point is an exempted company incorporated under the laws of the Cayman Islands. Following the Domestication, subject to shareholder approval, Inflection Point will be a corporation incorporated under the laws of the State of Delaware and will be renamed “Merlin, Inc.” Inflection Point, following the Domestication, is referred to in this document as Post-Domestication Inflection Point, and, following the Closing, is referred to in this document as New Merlin.
In this document:
“50% Redemption Scenario” means the hypothetical scenario in which 12,500,000 Public Shares (which represents 50% of the total Public Shares outstanding) are redeemed, resulting in an aggregate cash payment of approximately $129,900,000 out of the Trust Account based on an assumed redemption price of $10.39 per share.
“Additional Closing PIPE Investments” means the investments contemplated under the Additional Series A SPAs.
“Additional Closing PIPE Investors” means the certain accredited investors signatory to the Additional Series A SPAs.
“Additional Series A SPAs” means the Securities Purchase Agreements, dated November 17, 2025, by and among Inflection Point, Merlin and the Additional Closing PIPE Investors.
“Advisory Organizational Documents Proposals” means the six separate proposals in connection with the replacement of the Cayman Constitutional Documents that Inflection Point’s shareholders are asked to consider and vote upon and approve on a non-binding advisory basis by special resolution.
“AFSOC” means Air Force Special Operations Command.
“Aggregate Consideration” means the number of shares equal to the quotient of: (a) the Purchase Price, divided by (b) the price at which each Public Share may be redeemed in connection with the extraordinary general meeting, to be paid to Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities).
“Amendment No. 1 to the Initial Series A SPA” means the amendment to the Initial Series A SPA, dated November 17, 2025, by and among Inflection Point, Merlin and the Closing PIPE Investor.
“Antitrust Division” means the Antitrust Division of the Department of Justice.
“Business Combination Agreement” means that certain Business Combination Agreement, attached to this proxy statement/prospectus as Annex A, dated as of August 13, 2025, by and among Inflection Point, Merger Sub and Merlin.
“Business Combination” means the transactions contemplated by the Business Combination Agreement.
“Cayman Constitutional Documents” means the existing amended and restated memorandum and articles of association of Inflection Point, as it may be amended, restated, supplemented or otherwise modified from time to time, under the Companies Act.
“Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of 12.0% Series A Cumulative Convertible Preferred Stock of New Merlin.
“CFIUS” means the Committee on Foreign Investment in the United States.
“Closing” means the closing of the Business Combination.
“Closing Date” means the day of the Closing.
“Closing PIPE Investments” means the Signing PIPE Investment and the Additional Closing PIPE Investments.
“Closing PIPE Investor” means the accredited investor party to the Series A SPA, and together with the Additional Closing PIPE Investors, the “Closing PIPE Investors.”
“CMMC” means Cybersecurity Maturity Model Certification.
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“DGCL” means the Delaware General Corporation Law.
“Disclosure Schedules” means the disclosure schedules to the Business Combination Agreement.
“DoD” means the United States Department of Defense.
“Domestication” means the deregistering of Inflection Point from the Register of Companies in the Cayman Islands by way of continuation out of the Cayman Islands and into the State of Delaware and domesticating as a Delaware corporation under the applicable provisions of the Companies Act and the DGCL and all matters necessary or ancillary thereto.
“Effective Time” means the time at which Merger Sub and Merlin shall consummate the Merger.
“ESPP” means the Merlin, Inc. 2026 Employee Stock Purchase Plan.
“Exchange Ratio” means the Aggregate Consideration divided by the sum of the aggregate number of shares of Merlin labs Common Stock (i) issued and outstanding immediately prior to the Effective Time (including those shares issued upon conversion of all issued and outstanding preferred stock of Merlin, as applicable, and excluding securities underlying the Pre-Funded Convertible Notes or Pre-Funded Warrant), (ii) issuable upon full exercise of all issued and outstanding Merlin Options (calculated on a net exercise basis), and (iii) issuable upon full settlement of all issued and outstanding Merlin RSUs.
“Excluded Share” means a share of Merlin Common Stock that is owned by Inflection Point, Merger Sub, or Merlin immediately prior to the Effective Time.
“extraordinary general meeting” means that certain extraordinary general meeting to be held by Inflection Point to consider matters relating to the Business Combination at [•], Eastern Time, on [•].
“Founder Shares” means the Inflection Point Class B Shares.
“FTC” means the Federal Trade Commission.
“HSR Act” means the Hart-Scott Rodino Act of 1976.
“IDIQ” means Indefinite Delivery, Indefinite Quantity.
“Inflection Point” means Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Acquisition Corp. I), a Cayman Islands exempted company.
“Inflection Point Class A Shares” means the Class A ordinary shares, par value $0.001 per share, of Inflection Point.
“Inflection Point Class B Shares” means the Class B ordinary shares, par value $0.0001 per share, of Inflection Point.
“Inflection Point Fund” means Inflection Point Fund I, LP.
“Inflection Point Ordinary Shares” means the Inflection Point Class A Shares and Inflection Point Class B Shares.
“Inflection Point Rights” means the rights to receive one-tenth (1/10) of one Inflection Point Class A Share upon consummation of the Business Combination.
“Inflection Point Unaffiliated Shareholders” means the Inflection Point shareholders other than (a) the Sponsor, (b) Inflection Point Fund, (c) officers, directors or affiliates of Inflection Point, the Sponsor or Inflection Point Fund, and (d) Public Shareholders who elect to redeem their shares prior to or in connection with the Business Combination.
“Inflection Point Units” means a unit of Inflection Point, each consisting of one Inflection Point Class A Share and one Inflection Point Right.
“Initial Closing Series A SPA” means the Securities Purchase Agreement, dated August 13, 2025, by and among Inflection Point, Merlin, and the Closing PIPE Investor.
“IPO” means the initial public offering of Inflection Point.
“IT Systems” means the hardware, network infrastructure, the internet and Merlin’s information systems (both internal and provided by third parties).
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“Letter Agreement” means the Letter Agreement, dated October 31, 2024, by and among Bleichroeder Acquisition Corp. I, the Sponsor, and current and former officers and directors of Inflection Point.
“malware” means computer viruses or malicious code.
“Maximum Redemption Scenario” means the hypothetical scenario in which all 25,000,000 Public Shares (which represents the total number of Public Shares outstanding) are redeemed, resulting in an aggregate cash payment of approximately $259.7 million out of the Trust Account based on an assumed redemption price of $10.39 per share.
“Merger” means the merger of Merger Sub with and into Merlin, with Merlin surviving the merger as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin OpCo will become a wholly-owned subsidiary of Inflection Point, and substantially all of the assets and the business of the combined company will be held and operated by Merlin OpCo and its subsidiaries.
“Merger Sub” means IPDX Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Inflection Point.
“Merlin” means Merlin Labs, Inc., a Delaware corporation.
“Merlin Common Stock” means the common stock of Merlin.
“Merlin Equity Holders” means the holders of equity securities of Merlin.
“Merlin Lock-Up Agreement” means the Lock-Up Agreement to be entered into by and among New Merlin and the Lock-Up Holders at the Closing.
“Merlin Option” means an option to purchase equity securities of Merlin, granted pursuant to the 2018 Equity Incentive Plan of Merlin.
“Merlin RSU” means a restricted stock unit in respect of equity securities of Merlin, granted pursuant to the 2018 Equity Incentive Plan of Merlin.
“Merlin Stockholders” means the stockholders of Merlin.
“Nasdaq” means the Nasdaq Stock Market LLC.
“New Merlin” means Inflection Point following the Domestication and the Closing.
“New Merlin Common Stock” means the common stock of New Merlin, par value $0.0001 per share.
“New Merlin Incentive Plan” means the Merlin, Inc. 2026 Incentive Plan.
“New Merlin Series A Warrant” means a warrant to purchase a number of shares of New Merlin Common Stock initially issued in exchange for a Pre-Funded Warrant or pursuant to the Initial Series A SPA.
“Newbridge” means Newbridge Securities Corporation.
“No Redemption Scenario” means the hypothetical scenario in which no Public Holders exercise their right to have their Public Shares redeemed for their pro rata share of the Trust Account.
“Note Investors” means the certain accredited investors named in the Pre-Funded PIPE Agreements.
“Latham” means Latham & Watkins LLP, counsel to Merlin.
“Lock-Up Holders” means the certain equity holders of Merlin who will enter into the Merlin Lock-Up Agreement.
“Lock-Up Shares” means the shares of New Merlin Common Stock subject to lock-up pursuant to the Merlin Lock-Up Agreement.
“Organizational Documents Proposal” means the proposal before Inflection Point’s shareholders to adopt the Proposed Organizational Documents.
“Post-Domestication Class A Share” means a share of Class A common stock of Inflection Point, par value $0.001 per share.
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“Post-Domestication Inflection Point” means Inflection Point after the Domestication.
“Post-Domestication Right” means a right of Post-Domestication Inflection Point.
“Post-Domestication Unit” means a unit of Post-Domestication Inflection Point, each consisting of Post-Domestication Class A Share and one Post-Domestication Right.
“Pre-Funded Investors” means the certain accredited investors party to the Signing Pre-Funded PIPE Agreements.
“Pre-Funded Note Investment” means the investments contemplated under the Signing Pre-Funded PIPE Agreements and the Post-Signing Pre-Funded PIPE SPA.
“Pre-Funded NPAs” means the Note Purchase Agreement, dated as of July 2, 2025, by and among Merlin and certain of the Pre-Funded Investors.
“Pre-Funded SPAs” means the Signing Pre-Funded SPAs and the Post-Signing Pre-Funded SPA.
“Proposed Bylaws” means the proposed new bylaws of New Merlin pursuant to the DGCL, attached to this proxy statement/prospectus as Annex C.
“Proposed Charter” means the proposed new certificate of incorporation of New Merlin pursuant to the DGCL, attached to this proxy statement/prospectus as Annex B.
“Proposed Organizational Documents” means the Proposed Bylaws and Proposed Charter, together.
“Public Rights” means the Inflection Point Rights sold as part of the Inflection Point Units in Inflection Point’s IPO.
“Public Shareholders” means the holders of Public Shares of Inflection Point.
“Public Shares” means the Inflection Point Class A Shares initially sold in Inflection Point’s initial public offering.
“Purchase Price” means $800,000,000.
“R&D” means research and development.
“Record Date” means .
“Registration Rights Agreement” means the amended and restated registration rights agreement to be entered into by and among New Merlin, the Sponsor, Merlin Stockholders, Pre-Funded PIPE Investors and the Closing PIPE Investors at the Closing.
“Rule 144” means Rule 144 under the Securities Act.
“Series A Preferred Stock” means the 12.0% Series A Cumulative Convertible Preferred Stock, par value $0.0001 per share, of New Merlin.
“Series A SPAs” means collectively, the Initial Series A SPA and the Additional Series A SPAs.
“Initial Closing PIPE Investment” means the purchase of 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant by the Closing PIPE Investor for an aggregate purchase price of $100,000,000 pursuant to the Initial Closing Series A SPA.
“Signing Pre-Funded PIPE Agreements” means the Pre-Funded NPAs and Pre-Funded SPA.
“Signing Pre-Funded SPA” means the securities purchase agreement, dated as of August 13, 2025, by and among Merlin and certain of the PIPE investors.
“Sponsor” means Bleichroeder Sponsor 1 LLC, a Delaware limited liability company.
“Sponsor Lock-Up Agreement” means the Lock-Up Agreement to be entered into by and between the Sponsor and New Merlin at the Closing.
“Sponsor Lock-Up Founder Shares” means the Founder Shares of the Sponsor subject to lock-up pursuant to the Sponsor Lock-Up Agreement.
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“Sponsor Lock-Up Shares” means the Sponsor Lock-Up Founder Shares and Sponsor Lock-Up Unit Shares.
“Sponsor Lock-Up Units Shares” means any shares of New Merlin Common Stock to be issued to the Sponsor upon cancellation of the Post-Domestication Units.
“Sponsor Share Conversion” means the conversion of Founder Shares into Inflection Point Class A Shares immediately prior to the Domestication, in accordance with the Sponsor Support Agreement.
“Sponsor Support Agreement” means that certain Sponsor Support Agreement, dated as of August 13, 2025, by and between Sponsor, Merlin, Inflection Point and the other parties thereto, and attached here to as Annex F.
“Trust Account” means the trust account of Inflection Point that holds the proceeds from the IPO and certain of the proceeds from the sale of the Private Placement Units.
“Upsized New Merlin Series A Warrant” means a warrant to purchase a number of shares of New Merlin Common Stock that is initially issued pursuant to an Additional Series A SPA.
“White & Case” means White & Case LLP, counsel to Inflection Point.
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MARKET AND INDUSTRY DATA
Information contained in this proxy statement/prospectus concerning the market and the industry in which Merlin competes, including its market position, general expectations of market opportunity, size and growth rates, is based on information from various third-party sources, on assumptions made by Merlin based on such sources and Merlin’s knowledge of the markets for its services and solutions. This information and any estimates provided herein involve numerous assumptions and limitations, and you are cautioned not to give undue weight to such information. Third-party sources generally state that the information contained in such source has been obtained from sources believed to be reliable but that there can be no assurance as to the accuracy or completeness of such information. We have not independently verified this third-party information. The industry in which Merlin operates is subject to a high degree of uncertainty and risk. As a result, the estimates and market and industry information provided in this proxy statement/prospectus are subject to change based on various factors, including those described in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors — Risks Related to Inflection Point’s Business” beginning on page 35 of this proxy statement/prospectus and elsewhere in this proxy statement/prospectus.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements. These forward-looking statements include, without limitation, statements relating to expectations for future financial performance, business strategies or expectations for Inflection Point’s, Merlin’s and New Merlin’s respective business, and the timing for and ability of Merlin and Inflection Point to complete the Business Combination. These statements are based on the beliefs and assumptions of the management of Merlin and Inflection Point. Although Merlin and Inflection Point believe that their respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither Merlin nor Inflection Point can assure you that either will achieve or realize these plans, intentions or expectations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this proxy statement/prospectus, words such as “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “seek”, “should”, “strive”, “target”, “will”, “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
WithumSmith+Brown PC, Inflection Point’s independent auditor, has not examined, compiled or otherwise applied procedures with respect to the accompanying forward-looking financial information presented herein and, accordingly, expresses no opinion or any other form of assurance on it.
Forward-looking statements in this proxy statement/prospectus and in any document incorporated by reference in this proxy statement/prospectus may include, for example, statements about Merlin and Inflection Point prior to the Business Combination and the Company following the Business Combination, including:
• the ability to satisfy the closing conditions to the Business Combination, including approval by shareholders of Merlin;
• the ability to realize the benefits expected from the Business Combination;
• the ability to consummate the Business Combination;
• the ability to obtain and/or maintain the listing of the New Merlin Common Stock on Nasdaq following the Business Combination;
• the ability to raise financing in the future and to comply with restrictive covenants related to long-term indebtedness;
• the future financial performance of New Merlin and Merlin OpCo following the Business Combination;
• New Merlin’s and Merlin OpCo’s ability to retain or recruit, or to effect changes required in, their officers, key employees or directors following the Business Combination;
• New Merlin’s and Merlin OpCo’s ability to comply with laws and regulations applicable to their business; and
• expansion plans and opportunities.
These forward-looking statements are based on information available as of the date of this proxy statement/prospectus and Merlin’s and Inflection Point’s management teams’ current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside the control of Merlin, Inflection Point and their respective directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing Merlin views as of any subsequent date. Inflection Point and Merlin do not undertake any obligation to update, add or to otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.
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You should not place undue reliance on these forward-looking statements. Should one or more of a number of known and unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:
• the occurrence of any event, change or other circumstances that could delay the Business Combination or give rise to the termination of the Business Combination Agreement;
• the outcome of any legal proceedings that may be instituted against Merlin or Inflection Point following announcement of the Business Combination and transactions contemplated thereby;
• the inability to complete the Business Combination due to the failure to obtain approval of Merlin’s stockholders or Inflection Point’s shareholders, the inability to complete the Closing PIPE Investments or the failure to meet other conditions to closing in the Business Combination Agreement;
• the inability to obtain or maintain the listing of the New Merlin Common Stock on Nasdaq following the Business Combination;
• changes to the proposed structure of the Business Combination that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining regulatory approval of the Business Combination;
• changes in applicable laws or regulations;
• the risk that the Business Combination disrupts current plans and operations;
• the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, and the ability of the Company to grow and manage growth profitably;
• the financial and business performance of Merlin, including Merlin’s anticipated results from operations in future periods;
• the amount of redemptions by Public Shareholders being greater than expected, which may reduce the cash in the Trust Account available to New Merlin upon the consummation of the Business Combination;
• costs related to the Business Combination;
• the need to obtain and sustain governmental permits and approvals;
• failure to comply with applicable anti-corruption, anti-bribery, anti-money laundering and similar laws and regulations;
• possible litigation risks, including permit disputes (including in respect of access and/or validity of tenure), environmental claims, occupational health and safety claims and employee claims;
• any infringement of the intellectual property rights of third parties;
• failure to adequately protect intellectual property rights;
• issue with information technology systems, including cyber threats, disruption, damage and failure;
• use of resources and management attention related to the requirements of being a public company in the United States; and
• other risks and uncertainties indicated in this proxy statement/prospectus, including those set forth under the section entitled “Risk Factors” beginning on page 35 of this proxy statement/prospectus.
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QUESTIONS AND ANSWERS FOR SHAREHOLDERS
The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the extraordinary general meeting, including with respect to the Business Combination. The following questions and answers do not include all the information that is important to Inflection Point’s shareholders. Inflection Point urges shareholders to read this proxy statement/prospectus, including the Annexes and the other documents referred to herein, carefully and in their entirety to fully understand the Business Combination and the voting procedures for the extraordinary general meeting, which will be held at [•] a.m., Eastern Time, on [•], at the offices of White & Case LLP located at 1221 Avenue of the Americas, New York, NY 10020, and virtually via live webcast. To participate in the extraordinary general meeting online, visit [•] and enter the 12 digit control number included on your proxy card. If you hold your shares through a bank, broker or other nominee, you will need to take additional steps to participate in the extraordinary general meeting, as described in this proxy statement/prospectus.
Q. Why am I receiving this proxy statement/prospectus?
A. Inflection Point shareholders are being asked to consider and vote upon, among other proposals, a proposal to approve the Business Combination Agreement and approve the Business Combination. The Business Combination Agreement provides that, among other things, following the Domestication of Inflection Point to Delaware as described below, Merger Sub will merge with and into Merlin, with Merlin surviving as a wholly-owned subsidiary of Inflection Point and substantially all of the assets in the business of the combined company will be held by Merlin OpCo and its subsidiaries, in accordance with the terms and subject to the conditions of the Business Combination Agreement as more fully described elsewhere in this proxy statement/prospectus. See the section of this proxy statement/prospectus entitled “Proposal No. 1 — The Business Combination Proposal” for more detail.
A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A, which is incorporated by reference into this proxy statement/prospectus, and you are encouraged to read it in its entirety.
In connection with the completion of the Business Combination, Inflection Point will provide its Public Shareholders the opportunity to redeem their Public Shares on the terms and conditions set forth in the Business Combination Agreement and Inflection Point’s governing documents. Inflection Point will complete the Redemption of properly tendered Public Shares at least one day prior to the Domestication. As a condition to, and at least one day prior to the Closing, Inflection Point will change its jurisdiction of incorporation by deregistering from the Register of Companies in the Cayman Islands as a Cayman Islands exempted company by way of continuation out of the Cayman Islands under Section 206 of the Companies Act and domesticating as a corporation under Section 388 of the DGCL, pursuant to which Inflection Point’s jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware. Immediately prior to the Domestication, pursuant to the Cayman Constitutional Documents and the Sponsor Support Agreement, the Inflection Point Class B Shareholders will elect to convert each Inflection Point Class B Share, on a one-for-one basis, into an Inflection Point Class A Share. Immediately following such conversion, in connection with the Domestication, (i) each of the then issued and outstanding Inflection Point Class A Shares will convert automatically, on a one-for-one basis, into a share of New Merlin Common Stock; (ii) each of the then issued and outstanding Inflection Point Rights will automatically become a Post-Domestication Right; and (iii) each Inflection Point Unit issued and outstanding as of immediately prior to the Domestication will automatically be canceled and each holder will receive one Post-Domestication Unit, consisting of one share of New Merlin Common Stock and one Post-Domestication Right, per Inflection Point Unit held immediately prior to the Domestication. See the section of this proxy statement/prospectus entitled “The Domestication Proposal” for additional information.
THE VOTE OF INFLECTION POINT’S SHAREHOLDERS IS IMPORTANT. SHAREHOLDERS ARE ENCOURAGED TO VOTE AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS, INCLUDING THE ANNEXES AND THE ACCOMPANYING FINANCIAL STATEMENTS OF INFLECTION POINT AND MERLIN LABS, CAREFULLY AND IN ITS ENTIRETY.
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Q. What proposals are shareholders of Inflection Point being asked to vote upon?
A. At the extraordinary general meeting, Inflection Point is asking holders of Inflection Point Ordinary Shares to consider and vote upon:
• The Business Combination Proposal;
• The Domestication Proposal;
• The Stock Issuance Proposal;
• The Organizational Documents Proposal;
• The Advisory Organizational Documents Proposals;
• The Director Election Proposal;
• The New Merlin Incentive Plan Proposal;
• The New Merlin Employee Stock Purchase Plan Proposal; and
• The Adjournment Proposal, if presented.
If Inflection Point’s 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”, “Proposal No. 4 — The Organizational Documents Proposal”, “Proposal No. 6 — The Director Election Proposal”, “Proposal No. 7 — The New Merlin Incentive Plan Proposal” and “Proposal No. 8 — The New Merlin Employee Stock Purchase Plan Proposal”.
Inflection Point will hold the extraordinary general meeting 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 extraordinary general meeting. Shareholders of Inflection Point should read it carefully.
After careful consideration, the Inflection Point Board has determined that each of (a) the Business Combination Proposal, (b) the Domestication Proposal, (c) the Stock Issuance Proposal, (d) the Organizational Documents Proposal, (e) the Advisory Organizational Documents Proposals, (f) the Director Election Proposal, (g) the New Merlin Incentive Plan Proposal, (h) the New Merlin Employee Stock Purchase Plan Proposal and (i) the Adjournment Proposal, if presented, are in the best interests of Inflection Point 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 Inflection Point’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 Inflection Point 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, Inflection Point’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 Certain Inflection Point Persons 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 extraordinary general meeting. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other Condition Precedent Proposal. The Advisory Organizational Documents Proposals and the Adjournment Proposal are not conditioned upon the approval of any other proposal.
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Q. Why is Inflection Point proposing the Business Combination?
A. Inflection Point was incorporated to effect a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination, with one or more businesses or entities.
Merlin Labs, Inc. is a Delaware corporation formed on March 10, 2022. Merlin is a leader in developing aircraft-agnostic autonomy for national security applications, with a dual-track civil certification program that has the company on pace to be the first to certify an AI skill on an aircraft. Based on Inflection Point’s due diligence investigations of Merlin and the industry in which it operates, including the financial and other information provided by Merlin in the course of Inflection Point’s due diligence investigations, the Inflection Point Board believes that the Business Combination with Merlin is in the best interests of Inflection Point and its shareholders. However, there is no assurance of this. See “The Business Combination Proposal — The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination” of this proxy statement/prospectus for additional information.
Although the Inflection Point Board believes that the Business Combination with Merlin presents a unique business combination opportunity and is in the best interests of Inflection Point and its shareholders, the Inflection Point Board did consider certain potentially material negative factors in arriving at that conclusion. These factors are discussed in greater detail in the section entitled “The Business Combination Proposal — The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination”, of this proxy statement/prospectus as well as in the section of this proxy statement/prospectus entitled “Risk Factors — Risks Related to Our Business and Industry”.
Q: What will happen in the Domestication?
A: Inflection Point will, subject to obtaining the required shareholder approvals and at least one business day prior to the date of Closing, change its jurisdiction of incorporation by deregistering from the Register of Companies in the Cayman Islands as a Cayman Islands exempted company by way of continuation out of the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware.
Subject to the satisfaction or waiver of the conditions of the Business Combination Agreement, including approval of Inflection Point’s shareholders, (a) immediately prior to the Domestication, pursuant to the Sponsor Support Agreement, the Inflection Point Class B Shareholders, will elect to convert each Founder Share, on a one-for-one basis, into Inflection Point Class A Share; (b) in connection with the Domestication, (i) each of the then issued and outstanding Inflection Point Class A Shares will convert automatically, on a one-for-one basis, into a share of New Merlin Common Stock; (ii) each of the then issued and outstanding Inflection Point Rights will convert automatically into a Post-Domestication Right; and (iii) each of the then issued and outstanding Inflection Point Units will convert automatically into a unit of Post-Domestication Inflection Point, consisting of one share of New Merlin Common Stock and one Post-Domestication Right. See the section of this proxy statement/prospectus entitled “Proposal No. 2 — The Domestication Proposal”.
Q: What will securityholders of Merlin receive in connection with the Business Combination?
A: Upon the terms and subject to the satisfaction or waiver of the conditions of the Business Combination Agreement, immediately prior to the Effective Time:
(1) each convertible security of Merlin (other than the Pre-Funded Convertible Notes) that is outstanding immediately prior to the Effective Time, to the extent applicable, will automatically convert in full into shares of preferred stock or common stock of Merlin, in accordance with the terms thereof;
(2) each warrant of Merlin exercisable for the preferred stock of Merlin that is outstanding and unexercised immediately prior to the Effective Time will automatically be exercised on a cashless basis in full in accordance with its terms or otherwise exercised in full;
(3) immediately after giving effect to the conversions and exercises set forth in clauses (1) and (2) above, each issued and outstanding share of preferred stock of Merlin (including each share of preferred stock issued upon the conversions and exercises described in clauses (1) and (2) above) will automatically convert into such number of shares of Merlin Common Stock into which such shares of preferred stock of Merlin, as applicable, are convertible in connection with the Merger pursuant to the organizational documents of Merlin; and
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(4) each warrant of Merlin (other than the Pre-Funded Warrants) exercisable for Merlin Common Stock that is outstanding and unexercised immediately prior to the Effective Time shall automatically be exercised on a cashless basis in full in accordance with its terms or otherwise exercised in full.
Pursuant to the Business Combination Agreement, the Aggregate Consideration to be paid to the Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) in, or in connection with, the Merger shall be the number of shares of New Merlin Common Stock equal to the quotient of: (a) $800,000,000, divided by (b) the Redemption Price. The Convertible Note Consideration shall be a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal and accrued and unpaid interest on each Pre-Funded Convertible Note as of one day prior to the Closing, divided by (ii) $10.20 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded NPAs), as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Notes, or $12.00 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded SPAs). The Pre-Funded Warrant Consideration shall be one or more New Merlin Series A Warrants equal to the quotient of (i) the aggregate exercise price of such Pre-Funded Warrant immediately prior to the Effective Time, divided by (ii) $12.00. The Exchange Ratio will be equal to Aggregate Consideration divided by the fully diluted capital of Merlin, which is the sum (without duplication) of the aggregate number of shares of Merlin Common Stock that are (i) issued and outstanding immediately prior to the Effective Time (including those issued upon conversion of all issued and outstanding preferred stock of Merlin, as applicable, and excluding securities underlying the Pre-Funded Convertible Notes or Pre-Funded Warrant), (ii) issuable upon full exercise of all issued and outstanding Merlin Options, and (iii) issuable upon full settlement of all issued and outstanding Merlin RSUs.
In particular, at the Effective Time:
(1) the Excluded Shares will be canceled and shall cease to exist and no consideration will be delivered in exchange therefor;
(2) each share of Merlin Common Stock that is issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) will be canceled and converted into the right to receive a number of New Merlin Common Stock equal to the Exchange Ratio;
(3) each Merlin Option will automatically cease to represent an option to purchase Merlin Common Stock and be assumed and converted on the same terms and conditions as were applicable as of the Effective Time, into an option to acquire that number of New Merlin Common Stock equal to the product of (A) the number of shares of Merlin Common Stock subject to such Merlin Option and (B) the Exchange Ratio, at an exercise price per share of Merlin Common Stock equal to the quotient obtained by dividing (x) the exercise price per share of Merlin Common Stock of such Merlin Option by (y) the Exchange Ratio;
(4) each Merlin RSU will cease to represent a right to acquire shares of Merlin Common Stock and be assumed and converted on the same terms and conditions as were applicable as of the Effective Time, into a restricted stock unit representing the right to acquire that number of New Merlin Common Stock equal to the product of (A) the number of shares of Merlin Common Stock subject to such Merlin RSU and (B) the Exchange Ratio;
(5) each Pre-Funded Convertible Note that is outstanding immediately prior to the Effective Time will automatically be canceled and converted into the right to receive the Convertible Note Consideration (as defined in the Business Combination Agreement);
(6) each Pre-Funded Warrant that is outstanding and unexercised immediately prior to the Effective Time will automatically be canceled and converted into the right to receive the Pre-Funded Warrant Consideration (as defined in the Business Combination Agreement); and
(7) (x) each then issued and outstanding Post-Domestication Right shall convert automatically into one-tenth of one share of New Merlin Common Stock, pursuant to that certain Rights Agreement, dated as of October 31, 2024, by and between Inflection Point and the right agent; and (y) each then issued and outstanding Post-Domestication Unit shall be canceled and will thereafter entitle the holder thereof to one and one-tenth (1.1) shares of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share.
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Q: What are the reasons for the structure and timing of the Business Combination?
A: Inflection Point was incorporated for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses or entities. Following the combination of Inflection Point’s IPO, the Sponsor and management team consisting of Andrew Gundlach and Michel Combes evaluated numerous opportunities across industries and verticals, predominately focused on businesses in the technology, media and telecommunications (“TMT”) sector, as well as sectors that are being transformed via technology adoption, and entered into confidentiality agreements with multiple targets to facilitate due diligence. Following the transition of leadership to Inflection Point’s Mr. Blitzer and Mr. Shannon, the team conducted an expansive search process informed by the investing, operating, and transaction experience of the Inflection Point platform. From the time of Inflection Point’s IPO, through June 10, 2025, when Inflection Point entered into a letter of intent with Merlin, the team reviewed more than 70 acquisition opportunities, executed approximately 30 non-disclosure agreements, and delivered seven initial draft letters of intent, including the proposal to Merlin. Inflection Point ultimately determined not to proceed with the other potential acquisition opportunities based on, among other factors, the fact that Inflection Point could not come to an agreement with the other counterparties on the economic terms for a potential transaction. Following extensive due diligence conducted by Inflection Point’s management and its advisors, and following detailed discussions with Merlin, Inflection point concluded that Merlin represented a uniquely compelling opportunity for Inflection Point and its shareholders.
Inflection Point and Merlin pursued the Pre-Funded PIPE Investment, Signing PIPE Investment and the Additional Closing PIPE Investments in order to provide additional capital to fund Merlin’s operations, research and development, and administration before and after the Business Combination.
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements with Pre-Funded Investors. Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants, substantially concurrently with the execution and delivery of the Business Combination Agreement. On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into a Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA.
Also on August 13, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into the Initial Series A SPA. Pursuant to the Initial Series A SPA, the Closing PIPE Investor has agreed, among other things, to purchase, at Closing, 4,901,961 shares of Series A Preferred Stock and a New Merlin Series A Warrant, for an aggregate purchase price of $50,000,000. On November 17, 2025, Inflection Point, Merlin, and the Closing PIPE Investor entered into Amendment No. 1 to the Initial Series A SPA, pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible.
Also on November 17, 2025, Inflection Point and Merlin also entered into Additional Series A SPAs with the Additional Closing PIPE Investors, pursuant to which, among other things, the Additional Closing PIPE Investors agreed to purchase, and Inflection Point agreed to sell, an aggregate of 1,666,668 shares of Series A Preferred Stock and Upsized New Merlin Series A Warrants to purchase a number of shares of New Merlin Common Stock equal to 75% of the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible for $20 million.
As contemplated by the Business Combination Agreement, the structure and timing of the Business Combination, Pre-Funded Note Investment and Series A Preferred Stock Investment are 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, Pre-Funded Convertible Note Purchase Agreement and Series A SPA, 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.
For more information, see “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination”.
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Q. What equity stake will current Inflection Point securityholders and Merlin Equity Holders hold in New Merlin immediately after the consummation of the Business Combination?
The following summarizes the pro forma shares outstanding of New Merlin Common Stock and Series A Preferred Stock (on an as-converted to common stock basis as of the Closing Date) under the three redemption scenarios, on an as-converted basis, excluding the potential dilutive effect of warrants to purchase shares of New Merlin Common Stock and the New Merlin Options:
|
No |
50% |
Maximum |
|||||||||||||
|
Shares |
% |
Shares |
% |
Shares |
% |
||||||||||
|
Public Shareholders |
25,000,000 |
19.4 |
% |
12,500,000 |
10.7 |
% |
0 |
0.0 |
% |
||||||
|
Public Rightsholders* |
2,499,999 |
1.9 |
% |
2,499,999 |
2.1 |
% |
2,499,999 |
2.4 |
% |
||||||
|
Sponsor(4) |
8,800,833 |
6.8 |
% |
8,800,833 |
7.6 |
% |
8,800,833 |
8.5 |
% |
||||||
|
Series A Holders(5) |
21,633,896 |
16.8 |
% |
21,633,896 |
18.6 |
% |
21,633,896 |
20.8 |
% |
||||||
|
Merlin Stockholders(6) |
71,124,082 |
55.1 |
% |
71,124,082 |
61.0 |
% |
71,124,082 |
68.3 |
% |
||||||
|
Total |
129,058,810 |
100.0 |
% |
116,558,810 |
100.0 |
% |
104,058,810 |
100.0 |
% |
||||||
|
Potential sources of dilution |
|
|
|
||||||||||||
|
New Merlin Series A Warrants(7) |
21,157,300 |
16.4 |
% |
21,157,300 |
18.2 |
% |
21,157,300 |
20.33 |
% |
||||||
|
New Merlin Options(8) |
7,218,348 |
5.6 |
% |
7,218,348 |
6.2 |
% |
7,218,348 |
6.9 |
% |
||||||
____________
* Rounded to account for units held in multiples of less than ten.
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of (i) 8,333,333 shares of New Merlin Common Stock issued upon conversion of Founder Shares, (ii) 425,000 shares of New Merlin Common Stock issued upon conversion of Inflection Class A Shares not subject to redemption, and (iii) 42,500 shares of New Merlin Common Stock, in exchange for 425,000 Private Placement Units.
(5) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment, (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of securities issued to WTI FUND X, LLC in exchange for the 2024 LSA Warrants and the 2024 LSA Amendment Warrants, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs.
(6) Based on the Purchase Price, $800 million, divided by the estimated per-share Redemption Price of approximately $10.39 per share from the Trust Account based on funds in the Trust Account as of September 30, 2025. The Redemption Price is expected to continue to increase prior to Closing, which will result in the Aggregate Consideration being a reduced number of shares of New Merlin Common Stock. Excludes shares of New Merlin Common Stock that would be issuable upon exercise of the New Merlin Options that will be outstanding as a result of New Merlin’s assumption of the outstanding Merlin Options.
(7) Consists of (i) New Merlin Series A Warrants exercisable for an aggregate of 10,103,376 shares of New Merlin Common Stock issuable in exchange for Pre-Funded Warrants exercisable for 10,103,376 shares of Merlin Common Stock, (ii) New Merlin Series A Warrants exercisable for 11,053,924 shares of New Merlin Common Stock to be issued pursuant to the Series A SPA.
(8) Consists of options to purchase 7,218,348 shares of New Merlin Common Stock to be issued in exchange for 2,356,737 options to purchase Merlin Common Stock (“Merlin Options”), based on an expected Exchange Ratio of 3.0629. The New Merlin Options have a weighted-average exercise price of $[1.83], based on the weighted-average exercise price of Merlin Options divided by an expected Exchange Ratio of 3.0629. The vesting requirements of the New Merlin Options are identical to those of the exchanged Merlin Options (i.e., generally vest over a four year period and expire not more than 10 years from grant). Includes [6,011,838] New Merlin Options exercisable as of September 30, 2025, with a weighted-average exercise price of $[1.50], based on the weighted-average exercise price of Merlin Options divided by an expected Exchange Ratio of 3.0629.
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The following summarizes the pro forma shares outstanding of Merlin Common Stock on a fully diluted basis, assuming the exercise of all New Merlin Series A Warrants to purchase shares of New Merlin Common Stock and the vesting and exercise of all New Merlin Options:
|
No |
50% |
Maximum |
|||||||||||||
|
Shares |
% |
Shares |
% |
Shares |
% |
||||||||||
|
Public Shareholders |
25,000,000 |
15.9 |
% |
12,500,000 |
8.6 |
% |
— |
0.0 |
% |
||||||
|
Public Rightsholders* |
2,499,999 |
1.6 |
% |
2,499,999 |
1.7 |
% |
2,499,999 |
1.9 |
% |
||||||
|
Sponsor(4) |
8,800,833 |
5.6 |
% |
8,800,833 |
6.1 |
% |
8,800,833 |
6.6 |
% |
||||||
|
Series A Holders(5) |
42,791,196 |
27.2 |
% |
42,791,196 |
29.5 |
% |
42,791,196 |
32.3 |
% |
||||||
|
Merlin Equityholders(6) |
71,124,082 |
45.2 |
% |
71,124,082 |
49.1 |
% |
71,124,082 |
53.7 |
% |
||||||
|
Merlin Optionholders(7) |
7,218,348 |
4.6 |
% |
7,218,348 |
5.0 |
% |
7,218,348 |
5.5 |
% |
||||||
|
Total |
157,434,458 |
100.0 |
% |
144,934,458 |
100.0 |
% |
132,434,458 |
100.0 |
% |
||||||
____________
* Rounded to account for units held in multiples of less than ten.
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of (i) 8,333,333 shares of New Merlin Common Stock issued upon conversion of Founder Shares, (ii) 425,000 shares of New Merlin Common Stock issued upon conversion of Inflection Class A Shares not subject to redemption, and (iii) 42,500 shares of New Merlin Common Stock, in exchange for 425,000 Private Placement Units.
(5) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (A) (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of securities issued to WTI FUND X, LLC in exchange for the 2024 LSA Warrants and 2024 LSA Amendment Warrants, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs, plus (B) (i) New Merlin Series A Warrants exercisable for an aggregate of 10,103,376 shares of New Merlin Common Stock issuable in exchange for Pre-Funded Warrants exercisable for 10,103,376 shares of Merlin Common Stock, and (ii) New Merlin Series A Warrants exercisable for 11,053,924 shares of New Merlin Common Stock to be issued pursuant to the Series A SPAs.
(6) Based on the Purchase Price, $800 million, divided by the estimated per-share Redemption Price of approximately $10.39 per share from the Trust Account based on funds in the Trust Account as of December 31, 2024. The Redemption Price is expected to continue to increase prior to Closing, which will result in the Aggregate Consideration being a reduced number of shares of New Merlin Common Stock. Excludes shares of New Merlin Common Stock that would be issuable upon exercise of the New Merlin Options that will be outstanding as a result of New Merlin’s assumption of the outstanding Merlin Options.
(7) Consists of options to purchase 7,218,348 shares of New Merlin Common Stock to be issued in exchange for 2,356,737 Merlin Options, based on an expected Exchange Ratio of 3.0629.
Q: What is the effective purchase price attributed to the New Merlin Common Stock to be received by the Public Shareholders, the Sponsor, and the Merlin 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 Merlin Common Stock for each Public Share held by them immediately prior to the Domestication. While Inflection Point 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 Inflection Point Units sold in Inflection Point’s IPO, the effective purchase price paid per share of New Merlin Common Stock issued to each Public Shareholder at Closing would be $10.00. In connection with Inflection Point’s IPO, the Sponsor paid an aggregate of $25,000 for the Founder Shares, or approximately $0.004 per share. In connection with the Business Combination, an aggregate of 8,333,333 Founder Shares held by the Sponsor will be voluntarily converted on a one-for-one basis into Inflection Point Class A Shares immediately prior to the Domestication, which will then automatically convert at the effective time of the Domestication into
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an equal number of shares of New Merlin Common Stock, valued at approximately $11.55 per share based on the closing price per Inflection Point Class A Share on January 8, 2026. The Sponsor also purchased 425,000 Private Placement Units at a price of $10.00 per unit in a private placement that occurred simultaneously with the closing of the Inflection Point IPO; such underlying Inflection Point Class A Shares will automatically convert at the effective time of the Domestication into an equal number of shares of New Merlin Common Stock, which is the assumed per share price used in the Business Combination pursuant to the Business Combination Agreement. As a result of the low price the Sponsor paid for the Founder Shares, the Sponsor may realize a positive rate of return on its investment in the Founder Shares even if the market price per share of New Merlin 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. Based on the closing price of $11.55 per Inflection Point Class A Share on January 8, 2026, the Sponsor may receive potential profits of approximately $11.55 per Founder Share, and accordingly may make a substantial profit on its investment in the Founder Shares at a time when shares of New Merlin Common Stock may have lost significant value. On the other hand, if Inflection Point liquidates without completing a business combination during the completion window, the Sponsor will lose its investment in Inflection Point.
For information about conflicts of interest with respect to the Sponsor, see “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”. For information about the compensation of the Sponsor and our officers and directors, see “Information About Inflection Point — Executive and Director Compensation”. For information about the securities owned by the Sponsor, see “Beneficial Ownership of Securities” and “Certain Relationships and Related Persons Transactions”.
Q. Who is the Sponsor?
A. Bleichroeder Sponsor 1 LLC, a Delaware limited liability company, which we refer to in this proxy statement/prospectus as the “Sponsor”, was formed prior to the IPO for the purpose of acting as the sponsor of Inflection Point. Other than its investment in Inflection Point and its work on behalf of Inflection Point, the Sponsor is not engaged in any business. The Sponsor made an initial investment of $25,000 on June 25, 2024, to cover certain pre-IPO expenses, in exchange for the issuance of 7,187,500 Founder Shares, or approximately $0.004 per share. On October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited, resulting in the Sponsor holding 8,333,333 Founder Shares. The Sponsor also holds 425,000 Private Placement Units. The Sponsor is controlled by Andrew Gundlach, Inflection Point’s Chairman, and Michel Combes. Inflection Point Fund has an economic interest in (i) 5,266,667, or approximately 60.1%, of the Founder Shares held by the Sponsor and (ii) 425,000, or 100%, of the Private Placement Units held by the Sponsor. In July 2025, Michael Blitzer, Robert Folio and Kevin Shannon were appointed as President and Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, respectively, of Inflection Point. Mr. Blitzer was also appointed to the Board. Mr. Blitzer and Mr. Shannon are affiliates of Inflection Point Fund, a member of the Sponsor. Each other director and officer of Inflection Point have economic interests in the Founder Shares and/or Private Placement Units held by the Sponsor. No other person has a direct or indirect material interest in the Sponsor.
Mr. Combes acted as a Sponsor Principal and Mr. Gundlach acted as an Independent Non-Executive Director for Odyssey Acquisition S.A. (“Odyssey”), which raised €300 million on the Euronext Amsterdam N.V. market in July 2021. In April 2022, Odyssey completed its business combination with BenevolentAI including €136 million of PIPE financing and €40 million of backstop financing. Founded in 2013, BenevolentAI is a UK-headquartered company focused on the development and application of artificial intelligence (AI) for scientific innovation in drug discovery. Mr. Combes also served as the President of LDH Growth Corp I (“LDH Growth”), which was a SoftBank-sponsored SPAC focused on Latin America that raised $230 million in March 2021. Mr. Combes resigned from the Board in May 2022 and as President in October 2022 alongside his departure from SoftBank Group International. LDH Growth ultimately redeemed its shares in March 2023.
In January 2021, members of Inflection Point’s management team founded Inflection Point Acquisition Corp. (“IPAX”), a special purpose acquisition company formed for substantially similar purposes as Inflection Point. IPAX completed its initial public offering in September 2021, in which it sold 32,975,000 units, each consisting of one share of IPAX common stock and one-half of one warrant to purchase one share of IPAX common stock, for an offering price of $10.00 per unit, generating aggregate proceeds of $329,750,000. On September 16, 2022, IPAX announced its business combination with Intuitive Machines (“LUNR”), a diversified space exploration,
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infrastructure, and services company with marquee contracts supporting NASA’s $93 billion Artemis program. Prior to the extraordinary general meeting of IPAX shareholders to approve the business combination with LUNR, holders of 27,481,818 of IPAX Class A ordinary shares, or 83.34% of the outstanding IPAX Class A ordinary shares and 89.37% of the outstanding IPAX Class A ordinary shares not held by affiliates of IPAX, exercised their right to redeem those shares for cash at a price of approximately $10.1843 per share, for an aggregate of $279,884,313.81. The transaction with LUNR closed on February 13, 2023, and began trading on Nasdaq on February 14, 2023 under the ticker “LUNR”. Mr. Blitzer and Mr. Shannon believe LUNR represented a high-quality, public-ready company with a history of significant revenue growth and believes the deal’s valuation was attractive and the significant $50 million capital commitment from the sponsor supporting the transaction was a main differentiator. IPAX supported the transaction with extensive due diligence, significant investor outreach, and comprehensive planning, including a detailed media plan and retaining due diligence and capital markets advisors.
LUNR’s shares of Class A common stock and its warrants are listed on Nasdaq under the symbols “LUNR” and “LUNRW”, respectively. On December 15, 2025, the closing sale price of shares of the Class A common stock of LUNR was $11.12. Under the terms of the warrant agreement governing LUNR’s warrants, LUNR had the right to redeem all outstanding warrants if the last sales price of the Class A common stock was at least $18.00 per share for any 20 trading days within any 30-day trading period ending on the third business day prior to the date on which a notice of redemption is given. The last sales price of the Class A common stock was at least $18.00 per share on each of 20 trading days within the 30-day trading period ending on January 30, 2025. Accordingly, LUNR redeemed the warrants effective as of March 6, 2025.
In March 2023, Mr. Blitzer and Mr. Shannon founded Inflection Point Acquisition Corp. II (“IPXX”), a special purpose acquisition company formed for substantially similar purposes as Inflection Point. IPXX completed its initial public offering in May 2023, in which it sold 25,000,000 units, each consisting of one Class A ordinary share of IPXX and one-half of one warrant to purchase one share of IPXX common stock, for an offering price of $10.00 per unit, generating aggregate proceeds of $250,000,000. On August 21, 2024, IPXX entered into a business combination with USA Rare Earth, LLC (“USARE”), a company whose mission is to establish a vertically integrated, domestic rare earth magnet supply chain that supports the future state of energy, mobility, and national security in the United States. USARE is developing a NdFeB magnet manufacturing plant in the United States, and establishing domestic rare earth and critical minerals supply, extraction, and processing capabilities to supply its magnet manufacturing plant and market surplus materials to third-parties. IPXX held a vote on November 18, 2024 to extend the date by which IPXX must complete an initial business combination from November 30, 2024 to August 21, 2025. In connection with such extension, holders of 22,794,651 Class A ordinary shares of IPXX, or 91.18% of the outstanding IPXX public shares, exercised their right to redeem those shares for cash at a price of approximately $10.83 per share, for an aggregate of $246.9 million. Prior to the extraordinary general meeting of IPXX shareholders to approve the business combination with USARE, holders of 128,140 IPXX Class A ordinary shares, or 5.8% of the outstanding IPAX Class A ordinary shares, exercised their right to redeem those shares for cash at a price of approximately $11.00 per share, for an aggregate of $1,409,139.27. The transaction with USARE closed on March 13, 2025 and began trading on March 14, 2025 under the ticker “USAR.” Mr. Blitzer and Mr. Shannon believe USARE represented a promising opportunity in an industry with significant tailwinds and believed the deal’s valuation was attractive and the significant $31.7 million capital commitment from affiliates of the sponsor and their network of investors supporting the transaction was a main differentiator.
USARE’s common stock is listed on Nasdaq under the symbol “USAR”. On January 8, 2026, the closing sale price of shares of the common stock of USARE was $16.73.
In January 2024, Mr. Blitzer and Mr. Shannon founded Inflection Point Acquisition Corp. III (“IPCX”), a blank check company formed for substantially similar purposes as our company. IPCX completed its initial public offering in April 2025, in which it sold 25,300,000 units, each consisting of one Class A ordinary share of IPCX and one right to receive one-tenth of one Class A ordinary share, for an offering price of $10.00 per unit, generating aggregate proceeds of $253,000,000. On August 25, 2025, IPCX announced its business combination with A1R WATER, a global leader in atmospheric water generation. The transaction is expected to close in the first quarter of 2026.
IPCX’s units, Class A ordinary shares and warrants are listed on Nasdaq under the symbols “IPCXU”, “IPCX” and “IPCXR”, respectively. On January 8, 2026, the closing sale list prices of its units, Class A ordinary shares and rights were $10.51, $10.17 and $0.34, respectively.
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In May 2024, a separate management team formed a special purpose acquisition company, Maywood Acquisition Corp. (“IPEX”) for substantially similar purposes as our company. IPEX completed its initial public offering in February 2025, in which it sold 8,625,000 units, each consisting of one IPEX Class A ordinary share and one right to receive one-fifth of one IPEX Class A ordinary share upon consummation of IPEX’s initial business combination, for an offering price of $10.00 per unit, generating aggregate gross proceeds of $250,000,000. In September 2025, IPF acquired control of IPEX, as well as approximately 33% of the founder shares of IPEX. In connection with such acquisition, Messrs. Blitzer and Shannon were appointed as Chairman and Chief Executive Officer, and Chief Operating Officer, respectively, of IPEX. Mr. Blitzer was also appointed to the board of directors. On October 14, 2025, IPEX announced a business combination agreement with GOWell Technology Limited, a leading global innovator in well logging technologies. The transaction is expected to close in the first half of 2026.
IPEX’s units, Class A ordinary shares and rights are listed on Nasdaq under the symbols “IPEXU”, “IPEX” and “IPEXR”, respectively. On January 8, 2026, the closing prices of its units, Class A ordinary shares and rights were $11.30, $10.27 and $0.79, respectively.
Past performance by our management team, including with respect to Odyssey, IPAX, IPXX, IPCX and IPEX is not a guarantee of success with respect to the Business Combination with Merlin. You should not rely on the historical record of the performance of our management team or businesses associated with them, including Odyssey, IPAX, IPXX, IPCX and IPEX as indicative of our future performance of an investment in Inflection Point or New Merlin or the returns we will, or are likely to, generate going forward.
For information about conflicts of interest with respect to the Sponsor, see “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”. For information about the compensation of the Sponsor and our officers and directors, see “Information About Inflection Point — Executive and Director Compensation”. For information about the securities owned by the Sponsor, including transfer restrictions and required forfeitures, see “Beneficial Ownership of Securities” and “Certain Relationships and Related Person Transactions”.
Q: Why was the Special Committee formed?
A: Effective July 2025, Michael Blitzer, Robert Folio and Kevin Shannon were appointed as President and Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, respectively, of Inflection Point, and a new management team with members who are affiliated with Inflection Point Asset Management LLC, Inflection Point Fund and Inflection Point GP I LLC (collectively, “IPAM”) was appointed. To provide independent oversight in connection with the transition of leadership to individuals affiliated with IPAM and pursuit of the Business Combination, the special committee of the Inflection Point Board (the “Special Committee”) was formed. The Special Committee was empowered to, among other things, act as a disinterested body of the Inflection Point Board as appropriate for the purpose of exploring and evaluating the Business Combination; to engage and oversee one or more financial advisors, investment banking firms and accounting firms in connection with the Business Combination as the Special Committee deemed necessary or advisable in connection with fulfilling its responsibilities and to perform such other services and deliver such opinions as the Special Committee in its discretion requests, including providing an opinion, all at the expense of Inflection Point; consult with, advise, and oversee management, on behalf of the Inflection Point Board, in connection with due diligence activities relating to Merlin, the evaluation of the Business Combination, and discussions and/or negotiations concerning potential terms and conditions of the Business Combination; engage and oversee separate legal counsel if the Special Committee determined it was necessary or advisable to do so; and review the Business Combination and, if the Special Committee determined it is advisable and in the interests of Inflection Point and its Public Shareholders, recommend to the Inflection Point Board that the Inflection Point Board approve the Business Combination. The Special Committee engaged Newbridge Securities Corporation (“Newbridge”) to provide an opinion to the Special Committee as to (i) the fairness, from a financial point of view, to the Inflection Point Unaffiliated Shareholders of the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement, and (ii) whether the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement, a copy of which is attached hereto as Annex F.
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Q: Did the Inflection Point Board or Special Committee obtain a third-party opinion in determining whether or not to proceed with the Business Combination?
A: Yes. On August 8, 2025, the Special Committee received an opinion from Newbridge as to (i) the fairness, as of such date, from a financial point of view, to the Inflection Point Unaffiliated Shareholders of the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement, and (ii) whether the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of 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 Newbridge, as set forth in such opinion, as more fully described in the subsection “The Business Combination — Opinion of Newbridge Securities Corporation”. A copy of Newbridge’s opinion is attached hereto as Annex F.
Q. How has the announcement of the Business Combination affected the trading price of the Inflection Point Class A Shares?
A. On August 12, 2025, the last trading date prior to the public announcement of the Business Combination, Inflection Point Units, Inflection Point Class A Shares and Inflection Point Rights closed at $10.59, $10.30 and $0.31, respectively. As of January 8, 2026, the last practicable trading day immediately prior to the filing date of this proxy statement/prospectus, the closing price for each Inflection Point Unit, Inflection Point Class A Shares and Inflection Point Rights was $11.55, $10.84 and $0.82 respectively.
Q: Are there material differences between my rights as an Inflection Point shareholder and my rights as a New Merlin stockholder?
A: Yes, there are certain material differences between your rights as an Inflection Point shareholder and your rights as a New Merlin stockholder. Please read the sections entitled “Description of New Merlin Securities” and “Comparison of Shareholder Rights under Applicable Corporate Law Before and After Domestication.”
Q. Will Inflection Point obtain new financing in connection with the Business Combination?
A. Yes. The Closing PIPE Investor agreed to purchase (i) 4,901,961 shares of Series A Preferred Stock and (ii) the New Merlin Series A Warrants for an aggregate purchase price of $50.0 million, pursuant to the Series A SPA. On November 17, 2025, Inflection Point, Merlin, and the Closing PIPE Investor entered into Amendment No. 1 to the Initial Series A SPA, pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible.
The Additional Closing PIPE Investors agreed to purchase (i) 1,666,668 shares of Series A Preferred Stock and Upsized New Merlin Series A Warrants to purchase a number of shares of New Merlin Common Stock equal to 75% of the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible for an aggregate purchase price of $20 million, pursuant to the Additional Series A SPAs.
See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Related Agreements — Signing Pre-Funded PIPE Agreements and Series A SPA”.
Q. Will Merlin obtain new financing in connection with the Business Combination?
A. Yes. The Note Investors purchased the Pre-Funded Convertible Notes for an aggregate purchase price of approximately $87.3 million, pursuant to the Signing Pre-Funded PIPE Agreements.
See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Related Agreements — Pre-Funded PIPE Agreements and Series A SPA”.
Q. Why is Inflection Point proposing the Domestication?
A. The Inflection Point Board believes that there are significant advantages to New Merlin that will arise as a result of a change of Inflection Point’s domicile to the State of Delaware, including (a) the prominence, predictability and flexibility of the DGCL, (b) Delaware’s well-established principles of corporate governance and (c) the increased
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ability for Delaware corporations to attract and retain qualified directors. Further, the Inflection Point Board believes that any direct benefit that the DGCL provides to a corporation also indirectly benefits its stockholders, who are the owners of the corporation. Each of the foregoing are discussed in greater detail in the section of this proxy statement/prospectus entitled “The Domestication Proposal — Reasons for the Domestication”.
To effect the Domestication, Inflection Point will (a) file all applicable notices, declarations, affidavits, statements of assets and liabilities, shareholder approvals, undertakings and other documents required to be filed, pay all applicable fees required to paid, and cause the satisfaction of all other conditions to deregistration required to be satisfied, in each case, under Section 206 of the Companies Act and in accordance therewith, and (b) file the Proposed Charter and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which Inflection Point will be domesticated and continue as a Delaware corporation.
The approval of the Domestication Proposal is a condition to closing the Business Combination under the Business Combination Agreement. The approval of the Domestication Proposal requires a special resolution of the Inflection Point Class B Shareholders, being the affirmative vote of holders of at least two-thirds of the Inflection Point Class B Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The holders of Inflection Point Class A Shares will have no right to vote on the Domestication Proposal, in accordance with Article 48.2 of the Cayman Constitutional Documents. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
Q. What amendments will be made to the Cayman Constitutional Documents?
A. The consummation of the Business Combination is conditioned, among other things, on the Domestication. Accordingly, in addition to voting on the Business Combination, Inflection Point’s shareholders are also being asked to consider and vote upon a proposal to approve the Domestication and replace the Cayman Constitutional Documents, in each case, under the Companies Act, with the Proposed Charter and the Proposed Bylaws, in each case, under the DGCL, which differ materially from the Cayman Constitutional Documents. These differences are discussed in greater detail in the section of this proxy statement/prospectus entitled “The Domestication Proposal”, “The Organizational Documents Proposal” and “The Advisory Organizational Documents Proposals”.
Q. How will the Domestication affect my Inflection Point Class A Shares, Inflection Point Rights and Inflection Point Units?
A. Immediately prior to the Domestication, pursuant to the Cayman Constitutional Documents and the Sponsor Support Agreement, the Inflection Point Class B Shareholders will elect to convert each Inflection Point Class B Share issued and outstanding into one Inflection Point Class A Share. Immediately following such conversion, in connection with the Domestication, (a) each Inflection Point Class A Share issued and outstanding immediately prior to the Domestication will automatically convert into one share of New Merlin Common Stock, (b) each Inflection Point Right will be automatically converted into a Post-Domestication Right on substantially the same terms as the Inflection Point Rights, (c) each Inflection Point Unit issued and outstanding as of immediately prior to the Domestication will automatically be converted into one Post-Domestication Unit. At Closing, (a) each Post-Domestication Right will be converted into one-tenth of a share of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share and (b) each Post-Domestication Unit will be canceled and will thereafter entitle the holder thereof to one and one-tenth (1.1) shares of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share.
Q. What are the material U.S. federal income tax considerations of the Domestication?
A. As discussed more fully under “U.S. Federal Income Tax Considerations” of this proxy statement/prospectus, whether the Domestication will qualify as an F Reorganization is not free from doubt due to the absence of direct guidance on the application of Section 368(a)(1)(F) of the Code to an entity that holds only investment-type assets. Inflection Point will receive an opinion of counsel, to be filed by amendment as Exhibit 8.1 to the registration statement of which this proxy statement/prospectus forms a part, that the Domestication should qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Code (an “F Reorganization”). Assuming that the Domestication so qualifies, and subject to the “passive foreign investment company” (“PFIC”) rules
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discussed below and under “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders — A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations”, U.S. Holders (as defined in “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders”) of Inflection Point Class A Shares will be subject to Section 367(b) of the Code in connection with the Domestication and, as a result:
• a U.S. Holder who beneficially owns (directly, indirectly or constructively) 10% or more of the total combined voting power of all classes of Inflection Point shares entitled to vote or 10% or more of the total value of all classes of Inflection Point shares (a “10% U.S. Shareholder”) on the date of the Domestication generally will be required to include in income as a deemed dividend deemed paid by Inflection Point the “all earnings and profits amount” (as defined in the Treasury Regulations under Section 367 of the Code) attributable to the Inflection Point Class A Shares held directly by such U.S. Holder;
• a U.S. Holder who, on the date of the Domestication, is not a 10% U.S. Shareholder and whose Inflection Point Class A Shares have a fair market value of $50,000 or more on the date of the Domestication generally will recognize gain (but not loss) with respect to its Inflection Point Class A Shares as if such U.S. Holder exchanged its Inflection Point Class A Shares for New Merlin Common Stock in a taxable transaction unless such U.S. Holder elects in accordance with applicable Treasury Regulations to include in income as a deemed dividend deemed paid by Inflection Point the “all earnings and profits” amount attributable to such U.S. Holder’s Inflection Point Class A Shares; and
• a U.S. Holder who, on the date of the Domestication, is not a 10% U.S. Shareholder and whose Inflection Point Class A Shares have a fair market value of less than $50,000 on the date of the Domestication generally will not recognize any gain or loss or include any part of the “all earnings and profits amount” in income under Section 367 of the Code in connection with the Domestication.
Inflection Point does not expect to have significant cumulative earnings and profits, if any, on the date of the Domestication.
The application of the rules under Section 367 of the Code to the Inflection Point Rights is uncertain and all U.S. Holders are urged to consult their tax advisors with respect to the particular tax consequences applicable to them of the attribution rules and application of the rules to the Inflection Point Rights.
As discussed more fully under “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders — A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations”, Inflection Point believes that it is likely classified as a PFIC for U.S. federal income tax purposes. If Inflection Point were classified as a PFIC for U.S. federal income tax purposes, then notwithstanding the U.S. federal income tax consequences of the Domestication discussed in the foregoing, proposed Treasury Regulations under Section 1291(f) of the Code and certain other PFIC rules (which have retroactive effective dates), if finalized in their current form, generally would require a U.S. Holder to recognize gain (but not loss) on the exchange of Inflection Point Class A Shares or Inflection Point Rights for New Merlin Common Stock or rights to receive one-tenth of one share of New Merlin Common Stock (“Post-Domestication Rights”) pursuant to the Domestication. Any such gain would be taxable income with no corresponding receipt of cash in the Domestication. The tax on any such gain would be imposed at the rate applicable to ordinary income and an interest charge would apply based on a complex set of rules. In addition, the proposed Treasury Regulations provide coordinating rules with other sections of the Code, including Section 367(b), which affect the manner in which the rules under such other sections apply to transfers of PFIC stock. However, it is difficult to predict whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code and such other PFIC rules may be adopted and how any such Treasury Regulations would apply. Importantly, however, U.S. Holders that make or have made certain elections discussed further under “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders — A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations — d. QEF Election and Mark-to-Market Election” with respect to their Inflection Point Class A Shares are generally not subject to the same gain recognition rules under the currently proposed Treasury Regulations under Section 1291(f) of the Code. Under current law, no such elections may be made with respect to an option (and the Inflection Point Rights may be considered an option for such purposes). For a more complete discussion of the potential application of the PFIC rules to U.S. Holders as a result of the Domestication, see “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders”.
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Each U.S. Holder is urged to consult its own tax advisor concerning the application of the PFIC rules, including the proposed Treasury Regulations, to the exchange of Inflection Point Class A Shares and Inflection Point Rights for New Merlin Common Stock and Post-Domestication Rights pursuant to the Domestication.
Additionally, the Domestication may cause Non-U.S. Holders (as defined in “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — III. Non-U.S. Holders”) to become subject to U.S. federal income withholding taxes on any amounts treated as dividends paid in respect of such Non-U.S. Holder’s New Merlin Common Stock after the Domestication.
Although the redemptions of holders that exercise redemption rights with respect to Inflection Point Class A Shares will occur prior to the Domestication, it is possible that the IRS could assert that for U.S. federal income tax purposes such redemptions should be treated as occurring after the Domestication. If such redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication, holders exercising redemption rights would still be subject to the potential tax consequences of the Domestication, and for U.S. Holders, the determination of whether a U.S. Holder is a 10% U.S. Shareholder or is otherwise subject to Section 367 of the Code would be determined as if the redemptions had not yet occurred at the time of the Domestication. Holders should consult their tax advisors regarding the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication.
The tax consequences of the Domestication are complex and will depend on a holder’s particular circumstances. All holders are urged to consult their tax advisor regarding the tax consequences to them of the Domestication, including the applicability and effect of U.S. federal, state and local and non-U.S. tax laws. For a more complete discussion of the U.S. federal income tax considerations of the Domestication, see “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities”.
Q. What are the material U.S. federal income tax considerations of the Merger?
A. Inflection Point, holders of Inflection Point Class A Shares and Inflection Point Rights will not be subject to any material U.S. federal income tax consequences solely as a result of the Merger. Inflection Point and Merlin intend for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Latham & Watkins LLP intends to deliver an opinion, on the basis of facts, representations and assumptions and subject to the limitations and qualifications set forth or referred to in such opinion regarding the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code. The obligations of each of Inflection Point and Merlin to complete the Merger, however, are not conditioned on the receipt of any such opinion. If the Merger qualifies as a reorganization, then Merlin stockholders generally are not expected to recognize taxable gain or loss as a result of the receipt of New Merlin securities in exchange for Merlin securities pursuant to the Merger. For a more complete discussion of the U.S. federal income tax considerations of the Merger, see “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities”.
Q. Do I have redemption rights?
A. If you are a Public Shareholder, you have the right to request that we redeem all or a portion of your Public Shares for cash provided that you follow the procedures and deadlines described elsewhere in this proxy statement/prospectus. Public Shareholders may elect to redeem all or a portion of the Public Shares held by them regardless of if or how they vote in respect of the Business Combination Proposal and regardless of whether they hold Public Shares on the Record Date. If you wish to exercise your redemption rights, please see the answer to the next question: “How do I exercise my redemption rights?”.
Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of such Public Shareholder or any other Person with whom such Public Shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its Public Shares with respect to more than an aggregate of 15% of the Public Shares. Accordingly, if a Public Shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the Public Shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
The Sponsor has agreed to waive its redemption rights with respect to all of the Founder Shares in connection with the consummation of the Business Combination. The Founder Shares will be excluded from the pro rata calculation used to determine the Redemption Price.
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Q. How do I exercise my redemption rights?
A. If you are a Public Shareholder and wish to exercise your right to redeem the Public Shares, you must:
(a) (i) hold Public Shares or (ii) hold Public Shares through Inflection Point Units and elect to separate your Inflection Point Units into the underlying Public Shares and Public Rights prior to exercising your redemption rights with respect to the Public Shares;
(b) submit a written request to Continental, including the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that Inflection Point redeem all or a portion of your Public Shares for cash; and
(c) deliver your share certificates for Public Shares (if any) along with the redemption forms to Continental, physically or electronically through DTC.
Public Shareholders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days before the initial scheduled date of the extraordinary general meeting), in order for their Public Shares to be redeemed.
The address of Continental is listed under the question “Who can help answer my questions?” of this proxy statement/prospectus.
Public Shareholders will be entitled to request that their Public Shares be redeemed for the Redemption Price. For illustrative purposes, as of the Record Date, this would have amounted to approximately $[•] per issued and outstanding Public Share. However, the proceeds deposited in the Trust Account could become subject to the claims of Inflection Point’s creditors, if any, which could have priority over the claims of the Public Shareholders. Therefore, the per share distribution from the Trust Account in such a situation may be less than originally expected due to such claims. Whether you vote, and if you do vote, how you vote, on any proposal, including the Business Combination Proposal, will have no impact on the amount you will receive upon exercise of your redemption rights. It is expected that the funds to be distributed to Public Shareholders electing to redeem their Public Shares will be distributed promptly after the consummation of the Business Combination.
Any request for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Inflection Point’s consent, until the Redemption, which will take effect at least one business day prior to the Domestication. Furthermore, if a holder of a Public Share delivers its share certificates (if any) along with the redemption forms in connection with an election of its redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that Inflection Point permit the withdrawal of the request for redemption and instruct Continental, to return the share certificates (physically or electronically). The holder can make such request by contacting Continental, at the address or email address listed in this proxy statement/prospectus.
Any corrected or changed written exercise of redemption rights must be received by Continental at least two business days prior to the initial scheduled date of the extraordinary general meeting. No request for redemption will be honored unless the holder’s certificates for Public Shares (if any) along with the redemption forms have been delivered (either physically or electronically) to Continental, at least two business days prior to the initial scheduled date of the extraordinary general meeting.
If a Public Shareholder properly makes a request for redemption and the certificates for Public Shares (if any) along with the redemption forms are delivered as described above, then, if the Business Combination is consummated, Inflection Point will redeem the Public Shares for a per-share redemption price, payable in cash, equal to the aggregate amount then deposited in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the Trust Account (which interest shall be net of taxes payable) divided by the number of then issued Public Shares. If the Business Combination is abandoned, the Public Shares will be returned to the respective holder, broker or bank.
If you are a Public Shareholder and you exercise your redemption rights, such exercise will not result in the loss of any Public Rights that you may hold.
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Q. If I am a Public Rights Holder, can I exercise redemption rights with respect to my Public Rights?
A. No. The Public Rights holders have no redemption rights with respect to such securities.
Assuming that no more than 12,500,000 Public Shares, representing 50% of the outstanding Public Shares issued in connection with the IPO, are redeemed for an aggregate payment of approximately $[•] million from the Trust Account (based on the approximate balance of the Trust Account as of the Record Date) in connection with the Business Combination, which is a potential amount of redemptions, and assuming that each redeeming Public Shareholder holds one Right for one tenth of each Public Share being redeemed and using the closing right price on Nasdaq of $0.31 as of August 12, 2025 (the last trading day before the announcement of the Business Combination Agreement), the aggregate fair value of Public Rights that can be retained by redeeming Public Shareholders is approximately $387,500. Assuming the Maximum Redemption Scenario, resulting in 25,000,000 Public Shares redeemed for an aggregate payment of approximately $[•] million from the Trust Account in connection with the Business Combination, and assuming that each redeeming Public Shareholder holds one Right for one-tenth of each Public Share being redeemed and using the closing Right price on Nasdaq of $0.31 as of August 12, 2025 (the last trading day before the announcement of the Business Combination Agreement), the aggregate fair value of Public Rights that can be retained by redeeming Public Rights holders is approximately $775,000. The actual market price of the Public Rights may be higher or lower on the date that Public Rights holders seek to sell such Public Rights. Additionally, Inflection Point cannot assure the Public Rights holders that they will be able to sell their Public Rights in the open market as there may not be sufficient liquidity in such securities when Public Rights holders wish to sell their Public Rights.
Q. How do the Inflection Point Units offered in Inflection Point’s IPO differ from the Private Placement Units, and what are the related risks for any holders of Inflection Point Units after the Business Combination?
A. The Private Placement Units are identical to the units sold in Inflection Point’s IPO in material terms and provisions, except that so long as they are held by the Sponsor or its permitted transferees, the Private Placement Units (including their component securities) (i) may not (including the Inflection Point Class A Shares issuable upon conversion of the underlying Inflection Point Rights): may not be transferred, assigned or sold by the holders until 30 days after the Closing and (ii) are entitled to registration rights.
Q. What are the U.S. federal income tax consequences of exercising my redemption rights?
A. The U.S. federal income tax consequences of exercising your redemption rights with respect to your Public Shares depend on your particular facts and circumstances. It is possible that you may be treated as selling your Public Shares and, as a result, recognize capital gain or capital loss. It is also possible that the Redemption may be treated as a distribution for U.S. federal income tax purposes. Whether a redemption of your Public Shares qualifies for sale treatment will depend largely on the total number of shares of Inflection Point stock you are treated as owning before and after the redemption (including any shares that you constructively own as a result of owning Public Rights and any shares that you directly or indirectly acquire pursuant to the Business Combination) relative to all of the shares of Inflection Point stock outstanding both before and after the redemption. Redeeming U.S. Holders generally will be subject to the PFIC rules with respect to any gain or loss recognized by the U.S. Holder on its deemed sale of its Inflection Point Class A Shares (if the redemption were treated as a sale of shares) or any corporate distributions deemed received on its Inflection Point Class A Shares (if the redemption were treated as a corporate distribution). For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities”.
All Public Shareholders considering exercising redemption rights are urged to consult their tax advisor on the tax consequences to them of an exercise of redemption rights, including the applicability and effect of U.S. federal, state and local and non-U.S. tax laws.
Q. What happens to the funds deposited in the Trust Account after consummation of the Business Combination?
A. Following the closing of the IPO, an amount equal to $250,000,000 ($10.00 per Inflection Point Unit) of the net proceeds from the IPO and the sale of the Private Placement Units was placed in the Trust Account. As of the Record Date, funds in the Trust Account totaled $[•] and were comprised entirely of U.S. government treasury obligations with a maturity of 185 days or less or of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations. These funds will remain in the Trust Account,
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except for the withdrawal of interest to pay taxes, if any, until the earliest of (a) the completion of a business combination (including the Closing), (b) the redemption of all of the Public Shares if Inflection Point is unable to complete a business combination by November 4, 2026 (or such later date as Inflection Point’s shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law) and (c) the redemption of any Public Shares properly tendered in connection with a shareholder vote to amend the Cayman Constitutional Documents (A) to modify the substance or timing of Inflection Point’s obligation to redeem 100% of the Public Shares in connection with its initial business combination or if it does not complete a business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law) or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity, subject to applicable law.
In connection with the Business Combination, the funds deposited in the Trust Account will be released to pay holders of Public Shares who properly exercise their redemption rights; to pay transaction fees and expenses associated with the Business Combination; and for working capital and general corporate purposes of New Merlin following the Business Combination. See the section of this proxy statement/prospectus entitled “Summary of the Proxy Statement/Prospectus — Sources and Uses of Funds for the Business Combination”.
Q. What happens if a substantial number of the Public Shareholders vote in favor of the Business Combination Proposal and exercise their redemption rights?
A. Our Public Shareholders are not required to vote in respect of the Business Combination 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 Inflection Point Public Shareholders, the trading market for New Merlin Common Stock may be less liquid than the market for Inflection Point Class A Shares was prior to the Business Combination, and New Merlin may not be able to meet the listing standards for Nasdaq or another national securities exchange.
In addition, with fewer funds available from the Trust Account, the capital infusion from the Trust Account into New Merlin’s business will be reduced and New Merlin may not be able to achieve its business plans.
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 underwriting commission of $0.35 per Public Share that is not redeemed. As the deferred underwriting commission is only payable on Public Shares that are not redeemed, the trust proceeds per Public Share does not vary based on redemption levels.
|
As of |
|||
|
Trust Account Value |
$ |
259,730,180 |
|
|
Total Public Shares |
|
25,000,000 |
|
|
Trust Account Value per Public Share |
$ |
10.39 |
|
|
No |
50% |
Maximum |
|||||||
|
Redemptions ($) |
$ |
— |
$ |
129,865,090 |
$ |
259,730,180 |
|||
|
Redemptions (Shares) |
|
— |
|
12,500,000 |
|
25,000,000 |
|||
|
Deferred Underwriting Commissions |
$ |
8,750,000 |
$ |
4,375,000 |
$ |
— |
|||
|
Cash left in the Trust Account post redemptions less deferred underwriting commission |
$ |
250,980,180 |
$ |
125,490,090 |
$ |
— |
|||
|
Public Shares post redemptions |
|
25,000,000 |
|
12,500,000 |
|
— |
|||
|
Remaining Trust Proceeds Per Public Share |
$ |
10.04 |
|
10.04 |
|
N/A |
|||
____________
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
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(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
Furthermore, to the extent that Public Shareholders redeem their Public Shares in connection with the Business Combination, their Public Rights will remain issued and outstanding notwithstanding the redemption of their Public Shares. The Sponsor holds an aggregate of 420,500 Rights underlying the Private Placement Units. Following the consummation of the Business Combination, all of the Inflection Point Rights will become Post-Domestication Rights. Each of the Post-Domestication Rights then issued and outstanding will be converted into one-tenth of one share of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share.
For information on the relative ownership levels of holders of New Merlin equity securities following the Business Combination under varying redemption scenarios and the fully diluted relative ownership levels of holders of New Merlin equity securities following the Business Combination under varying redemption scenarios, see the question entitled “What equity stake will current Inflection Point shareholders and Merlin Members hold in New Merlin immediately after the consummation of the Business Combination?”
Q. What underwriting fees are payable in connection with the Business Combination?
A. Pursuant to that certain Underwriting Agreement between Inflection Point and Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC (“CCM”), as Representative of the several underwriters, dated October 31, 2024 (as it may be amended from time to time, the “Underwriting Agreement”), Inflection Point previously agreed to pay to CCM an aggregate cash amount of $8,750,000 as “deferred underwriting commissions” (the “Deferred Underwriting Fee”) on amounts remaining in the Trust Account after all redemptions by Public Shareholders have been satisfied upon the consummation of an initial business combination.
Q. What conditions must be satisfied to complete the Business Combination?
A. The Business Combination Agreement is subject to the satisfaction or waiver of certain customary closing conditions, including without limitation: (i) Inflection Point Shareholder Approval of the Condition Precedent Proposals, (ii) the approval of the Business Combination Agreement and the Business Combination (including the Merger) by the affirmative vote or written consent of the stockholders of Merlin, pursuant to the terms and in accordance with satisfaction of the conditions of the organizational documents of Merlin and applicable law, (iii) no adverse law or order, (iv) the Registration Statement becoming effective, (v) approval of the listing of the New Merlin Common Stock on Nasdaq, subject to satisfaction of the round lot holders requirement for initial listing, (vi) the accuracy of the representations and warranties of each party to the Business Combination and the performance of the covenants and agreements of the parties, in each case subject to certain qualifiers, (vii) the expiration of all waiting periods (and any extensions thereof) under the HSR Act with respect to the Business Combination, (viii) the completion of the Domestication, and (ix) duly executed pay-off letters certifying certain indebtedness of Merlin and its subsidiaries, as specified in the Business Combination Agreement, shall have been paid off, to the extent it is paid off pursuant to the Business Combination Agreement.
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 first quarter of 2026. This date depends, among other things, on the approval of the proposals to be put to Inflection Point shareholders at the extraordinary general meeting. However, such meeting could be adjourned if the Adjournment Proposal is approved by Inflection Point’s shareholders at the extraordinary general meeting and the chairman of the Inflection Point Board elects to adjourn the extraordinary general meeting to a later date or dates, if necessary or convenient, (i) to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with the approval of one or more proposals at the extraordinary general meeting, (ii) if Inflection Point determines that one or more of the conditions to Closing is not or will not be satisfied
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or waived or (iii) to facilitate the Domestication, the Merger or any other Transaction. For a description of the conditions for the completion of the Business Combination, see “The Business Combination Proposal — Business Combination Agreement” of this proxy statement/prospectus.
Q. What happens if the Business Combination is not consummated?
A. Inflection Point will not complete the Domestication to the State of Delaware unless all other conditions to the consummation of the Business Combination have been satisfied or waived by the parties in accordance with the terms of the Business Combination Agreement (or by their nature are to be satisfied at Closing). If Inflection Point is not able to complete the Business Combination with Merlin by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law) and is not able to complete another business combination by such date (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law), Inflection Point will cease all operations except for the purpose of winding up, as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds, 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 Trust Account (which interest shall be net of taxes payable and less up to $100,000 of interest to pay dissolution expenses) divided by the number of Public Shares then in issue, which redemption will complete extinguish Public Shareholders’ rights as members (including the right to receive further liquidation distributions, if any) subject to applicable law, and as promptly as reasonably possible following such redemption, subject to the approval of Inflection Point’s remaining shareholders and the Inflection Point Board, liquidate and dissolve, subject to our obligations under Cayman Islands law to provide for claims of creditors and in all cases the requirements of applicable law. In such event, the Inflection Point Rights may be worthless.
Q: What interests do the Sponsor, Inflection Point Fund, and Inflection Point’s directors and officers have in the Business Combination?
A: The Sponsor, Inflection Point Fund and Inflection Point’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 Inflection Point Unaffiliated Shareholders. Further, Inflection Point’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 Related to Inflection Point — 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 Inflection Point Board and the Special Committee were 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 extraordinary general meeting, including the Business Combination Proposal. Inflection Point’s shareholders should take these interests into account in deciding whether to approve the proposals presented at the extraordinary general meeting, including the Business Combination Proposal. These interests include, among other things:
• Our Sponsor purchased 7,187,500 Founder Shares for $25,000, or approximately $0.004 per share, in a private placement prior to the consummation of the IPO. On October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited, resulting in the Sponsor holding 8,333,333 Founder Shares. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 5,266,667 Founder Shares, or approximately 60.1%, of the Founder Shares held by the Sponsor. Michael Blitzer, our President, Chief Executive Officer and director, and Kevin Shannon, our Chief Operating Officer, are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Each director and officer of Inflection Point has economic interests in the Founder Shares held by the Sponsor. No other person has a direct or indirect material interest in the Sponsor. Such 8,333,333 shares of New Merlin Common Stock that the Sponsor and its permitted transferees will receive upon conversion of such Founder Shares in the Business Combination, if unrestricted and freely tradable, would have had an aggregate market value of approximately $96.2 million based on the closing price
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of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Our Sponsor purchased 425,000 Private Placement Units for $4,250,000, or $10.00 per Private Placement Unit, in a private placement that closed simultaneously with the IPO. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 425,000, or 100% of the Private Placement Units held by the Sponsor. Mr. Blitzer and Mr. Shannon are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Following the Business Combination, the 467,500 shares of New Merlin Common Stock that the Sponsor will receive upon conversion of such Private Placement Units, if unrestricted and freely tradable, would have had an aggregate market value of approximately $5.4 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Given the differential in the purchase price that the Sponsor paid for the Founder Shares as compared to the price of the Inflection Point Class A Shares included in the Inflection Point Units sold in the IPO, the Sponsor may earn a positive rate of return on its investment even if the shares of New Merlin Common Stock trade below $10.00 per share and the Public Shareholders experience a negative rate of return following the Closing. Accordingly, the economic interests of the Sponsor diverge from the economic interests of Public Shareholders because the Sponsor 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.
• Our Sponsor, and therefore Inflection Point Fund, will lose its entire investment in us if we do not complete a business combination by November 4, 2026 (or if such date is extended at a duly called meeting of the Inflection Point shareholders, such later date). If we do not consummate a business combination by such date, as promptly as reasonably possible but not more than ten business days thereafter, we will 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 the claims of creditors and the requirements of other applicable law. In such event, the Inflection Point Rights may be worthless. In such event, the 8,758,333 Inflection Point Ordinary Shares owned by our Sponsor would be worthless because following the redemption of Public Shares, we would likely have few, if any, net assets and because the Sponsor has agreed to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete a business combination within the required period. Additionally, in such event, the 425,000 Inflection Point Rights underlying the Private Placement Units that the Sponsor paid $4,250,000 to purchase will expire and become worthless.
• Inflection Point Fund, an accredited investor that is an affiliate of Inflection Point, has an economic interest in 5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. In exchange for the Pre-Funded Convertible Note and Pre-Funded Warrant it purchased for $15.0 million, Inflection Point Fund will also receive at the Closing, (i) a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (a) the total outstanding principal and outstanding accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by (b) $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date) and (ii) a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock.
• Inflection Point’s Sponsor, officers and directors, and Inflection Point Fund, have agreed not to redeem any of the Founder Shares or Inflection Point Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination.
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• If the Trust Account is liquidated, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Share, or such lesser amount per Public Share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account.
• Inflection Point’s existing officers and directors will be eligible for continued indemnification and continued coverage under a directors’ and officers’ liability insurance policy for a period of six (6) years after the Business Combination.
• The Sponsor and its members (present and former), managers and affiliates and their respective present and former officers and directors (each, a “Sponsor Indemnitee”) will be eligible for continued indemnification for any Sponsor Indemnitee’s activities in connection with the affairs of Inflection Point.
• The continuation of [•], and [•], as directors of the New Merlin Board following the Closing. As such, in the future they may receive any cash fees, stock options or stock awards that the New Merlin Board determines to pay to its directors.
• In connection with the Closing, our Sponsor, officers and directors would be entitled to the repayment of any outstanding working capital loan and advances that have been made to Inflection Point. In order to finance transaction costs in connection with a business combination, the Sponsor or Inflection Point Fund or certain of Inflection Point’s officers or directors may, but are not obligated to, loan Inflection Point funds as may be required (the “Working Capital Loans”). In the event that a business combination does not close, Inflection Point may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $2,500,000 of such Working Capital Loans may be convertible into private placement units at $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. As of the date of this proxy statement/prospectus, no such Working Capital Loans are outstanding.
• Upon the Closing, subject to the terms and conditions of the Business Combination Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Inflection Point from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. As of the date of this proxy statement/prospectus, there are no out-of-pocket expenses to be reimbursed.
• Pursuant to the Registration Rights Agreement, Inflection Point’s officers and directors, and the Sponsor and its members will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the New Merlin Common Stock held by such parties following the consummation of 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 which were not presented to Inflection Point, 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 Inflection Point — Conflicts of Interest.”
The Inflection Point Bord formed the Special Committee, comprised of three independent and disinterested members of the Inflection Point Board, Kathy Savitt, Antoine Theysett and Joseph Samuels. The Special Committee was empowered to, among other things, act as a disinterested body of the Inflection Point Board as appropriate for the purpose of exploring and evaluating the Business Combination; to engage and oversee one or more financial advisors, investment banking firms and accounting firms in connection with the Business Combination as the Special Committee deemed necessary or advisable in connection with fulfilling its responsibilities and to perform such other
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services and deliver such opinions as the Special Committee in its discretion requests, including providing an opinion, all at the expense of Inflection Point; consult with, advise, and oversee management, on behalf of the Inflection Point Board, in connection with due diligence activities relating to Merlin, the evaluation of the Business Combination, and discussions and/or negotiations concerning potential terms and conditions of the Business Combination; engage and oversee separate legal counsel if the Special Committee determines it is necessary or advisable to do so; and review the Business Combination and, if the Special Committee determines it is advisable and in the interests of Inflection Point and its Public Shareholders, recommend to the Inflection Point Board that the Inflection Point Board approve the Business Combination. The Special Committee engaged Newbridge to provide an opinion to the Special Committee as to (i) the fairness, from a financial point of view, to the unaffiliated shareholders of Inflection Point of the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement, and (ii) whether the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement, a copy of which is attached hereto as Annex F.
Q. Following the Business Combination, will New Merlin’s securities trade on a stock exchange?
A. Yes. Inflection Point intends to apply to list the New Merlin Common Stock on Nasdaq under the proposed symbol “MRLN” upon the Closing. Pursuant to the terms of the Business Combination Agreement, as a closing condition, the New Merlin Common Stock issued as merger consideration must be conditionally approved for listing on Nasdaq subject to any requirement to have a sufficient number of round lot holders of the New Merlin Common Stock, but there can be no assurance that such listing condition will be met. If such listing condition is not met, the Business Combination will not be consummated unless the listing condition is waived by the parties to the Business Combination Agreement. Following the Closing, the New Merlin Common Stock is intended to be listed, subject to Nasdaq approval, under the proposed symbol “MRLN”. It is important for you to know that, at the time of Inflection Point’s extraordinary general meeting, the parties may not have received from Nasdaq either confirmation of the listing of the New Merlin Common Stock or that approval will be obtained prior to the consummation of the Business Combination, and it is possible that the listing condition to the consummation of the Business Combination may be waived by the parties to the Business Combination Agreement. 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 such confirmation, and, further, it is possible that such confirmation may never be received and the Business Combination could still be consummated if such condition is waived or is subject to an exception and therefore the New Merlin Common Stock would not be listed on any nationally recognized securities exchange.
The Inflection Point Units will no longer trade as separate securities following the Closing. The Series A Preferred Stock and the New Merlin Series A Warrants will not be publicly traded.
Q. Do I have appraisal rights in connection with the Business Combination?
A. Neither Inflection Point’s shareholders nor Inflection Point’s rightsholders have appraisal rights in connection with the Business Combination or the Domestication under Cayman Islands law or under the DGCL.
Q. What do I need to do now?
A. Inflection Point urges you to read this proxy statement/prospectus, including the Annexes and the documents referred to herein, carefully and in their entirety and to consider how the Business Combination will affect you as a shareholder or rights holder. Inflection Point’s 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. How do I vote?
A. If you are a holder of record of Inflection Point Ordinary Shares on the Record Date for the extraordinary general meeting, you may vote in person (including virtually) at the extraordinary general meeting or by submitting a proxy for the extraordinary general meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage-paid envelope not less than 48 hours prior to the start of the extraordinary general meeting. If you hold your shares in “street name”, which means your shares are held of record by a broker, bank or nominee, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the extraordinary general meeting and vote in person, obtain a valid proxy from your broker, bank or nominee.
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Q. If my shares are held in “street name”, will my broker, bank or nominee automatically vote my shares for me?
A. No. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name”. If this is the case, this proxy statement/prospectus may have been forwarded to you by your brokerage firm, bank or other nominee, or its agent, and you may need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or nominee as to how to vote your shares. 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. We believe all the proposals presented to the shareholders will be considered non-discretionary and therefore your broker, bank, or nominee cannot vote your shares without your instruction. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. As the beneficial holder, you have the right to direct your broker, bank or other nominee as to how to vote your shares and you should instruct your broker to vote your shares in accordance with directions you provide. If you do not provide voting instructions to your broker on a particular proposal on which your broker does not have discretionary authority to vote, your shares will not be voted on that proposal. This is called a “broker non-vote”. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
Q. When and where will the extraordinary general meeting be held?
A. The extraordinary general meeting will be held at [•], New York City time, on [•] at the offices of White & Case LLP located at 1221 Avenue of the Americas, New York, NY 10020, and virtually via live webcast at [•].
Q. Who is entitled to vote at the extraordinary general meeting?
A. Inflection Point has fixed [•], as the Record Date for the extraordinary general meeting. If you were a shareholder of Inflection Point at the close of business on the Record Date, you are entitled to vote on matters that come before the extraordinary general meeting. However, a shareholder may only vote his or her shares if he or she is present in person (including virtually) or is represented by proxy at the extraordinary general meeting.
Q. How many votes do I have?
A. Inflection Point shareholders are entitled to one vote at the extraordinary general meeting for each Inflection Point Ordinary Share held of record as of the Record Date. As of the close of business on the Record Date for the extraordinary general meeting, there were 33,758,333 Inflection Point Ordinary Shares issued and outstanding, of which 25,000,000 were issued and outstanding Public Shares.
Q. What constitutes a quorum?
A. A quorum of Inflection Point shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting if the holders of at least one-third of the issued and outstanding Inflection Point Ordinary Shares entitled to vote at the extraordinary general meeting are represented in person or by proxy. As of the Record Date for the extraordinary general meeting, 11,252,779 Inflection Point Ordinary Shares would be required to achieve a quorum.
Q. What vote is required to approve each proposal at the extraordinary general meeting?
A. Business Combination Proposal — The approval of the Business Combination Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
Domestication Proposal — The approval of the Domestication Proposal requires a special resolution of the Inflection Point Class B Shareholders, being the affirmative vote of holders of at least two-thirds of the Inflection Point Class B Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The holders of Inflection Point Class A Shares will have no right to vote on the Domestication Proposal, in accordance with Article 48.2 of the Cayman Constitutional Documents.
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Stock Issuance Proposal — The approval of the Stock Issuance Proposal requires an ordinary resolution, being the affirmative vote of holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
Organizational Documents Proposal — The approval of the Organizational Documents Proposal requires a special resolution, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares, who being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
Advisory Organizational Documents Proposals — The separate approval of each of the Advisory Organizational Documents Proposals, each of which is a non-binding vote, requires a special resolution, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares, who being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
Director Election Proposal — The approval of the Director Election Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
New Merlin Incentive Plan Proposal — The approval of the New Merlin Incentive Plan Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
New Merlin Employee Stock Purchase Plan Proposal — The approval of the New Merlin Employee Stock Purchase Plan Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
Adjournment Proposal — The approval of the Adjournment Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
The Sponsor and Inflection Point Fund have agreed to vote all the Founder Shares and any Public Shares they may hold in favor of all the proposals being presented at the extraordinary general meeting. As of the Record Date, the Sponsor owned approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares. See the section of this proxy statement/prospectus entitled “Questions and Answers for Shareholders of Inflection Point — How does the Sponsor intend to vote their Inflection Point Ordinary Shares?”.
The Business Combination was not structured to require the approval of at least a majority of Inflection Point’s unaffiliated shareholders because such a vote is not required under Cayman Islands law.
Q. What are the recommendations of the Inflection Point Board?
A. The Inflection Point Board believes that the Business Combination Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Inflection Point’s shareholders and unanimously recommends that its 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 Organizational Documents Proposal, “FOR” the approval, on an advisory basis, of each of the separate Advisory Organizational Documents Proposals, “FOR” the approval of the Director Election Proposal, “FOR” the approval of the New Merlin Incentive Plan Proposal, “FOR” the approval of the New Merlin Employee Stock Purchase Plan Proposal and “FOR” the approval of the Adjournment Proposal, if presented to the extraordinary general meeting.
The Inflection Point Board, after careful consideration, determined that the Business Combination is in the best interests of Inflection Point and its shareholders, and approved, among other things, the Business Combination Agreement, the Business Combination and the other agreements and transactions contemplated thereby. See the subsection entitled “The Extraordinary General Meeting — Recommendation of the Board” for more information.
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For a description of the Special Committee’s and the Inflection Point Board’s reasons for the approval of the Business Combination and the unanimous recommendation of the Inflection Point Board, see the subsection entitled “The Business Combination Proposal — The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination”.
When you consider the recommendation of the Inflection Point Board in favor of approval of these proposals, you should keep in mind that the Sponsor, Inflection Point Fund and Inflection Point’s directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of unaffiliated Inflection Point shareholders. Please see the subsection entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”.
Q. How do the Sponsor and Inflection Point Fund intend to vote their Inflection Point Ordinary Shares?
A. The Sponsor and Inflection Point Fund have agreed to vote all the Founder Shares and any Public Shares it may hold in favor of all the proposals being presented at the extraordinary general meeting. As of the Record Date, the Sponsor owned 8,333,333 Founder Shares and 425,000 Inflection Point Class A Shares underlying the Private Placement Units, representing approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares. As a result, we would need 8,120,835, or 32.5% of the 25,000,000 Public Shares outstanding to be voted in favor of the Business Combination in order to approve the Business Combination Proposal. The Business Combination was not structured to require the approval of at least a majority of Inflection Point’s unaffiliated shareholders because such a vote is not required under Cayman Islands law. To the extent that the Sponsor or our executive officers 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.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point’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 “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”.
Q. Do the Sponsor, Inflection Point Fund, and Inflection Point’s directors and officers have interests in the Business Combination that differ from or are in addition to the interests of Inflection Point’s shareholders generally?
A. Yes. The Sponsor, Inflection Point Fund and Inflection Point’s officers and directors have interests in the Business Combination that are different from, or in addition to, the interests of Inflection Point’s shareholders generally. The Inflection Point Board and the Special Committee was aware of and considered these interests, among other matters, in approving the Business Combination Agreement and the Business Combination, and in determining to recommend that Inflection Point’s shareholders vote in favor of the Business Combination Agreement and the Business Combination. See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for more information.
Q. What happens if I sell my Inflection Point Ordinary Shares before the extraordinary general meeting?
A. The Record Date for the extraordinary general meeting is earlier than the date of the extraordinary general meeting and earlier than the date that the Business Combination is expected to be completed. If you transfer your Public Shares after the Record Date, but before the extraordinary general meeting, unless you grant a proxy to the transferee, you will retain your right to vote at the extraordinary general meeting but the transferee, and not you, will have the ability to redeem such shares, so long as such transferee takes the required steps to elect to redeem such shares at least two business days prior to scheduled date of the extraordinary general meeting.
Q. How can I vote my shares without attending the extraordinary general meeting?
A. If you are a shareholder of record of our Inflection Point Ordinary Shares as of the close of business on the Record Date, you can vote by proxy by mail by following the instructions provided in the enclosed proxy card or at the extraordinary general meeting. Please note that if you are a beneficial owner of Inflection Point Ordinary
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Shares, you may vote by submitting voting instructions to your broker, bank or nominee, or otherwise by following instructions provided by your broker, bank or nominee. Telephone and internet voting will be available to beneficial owners. Please refer to the vote instruction form provided by your broker, bank or nominee.
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 Inflection Point’s Chief Executive Officer at Inflection Point’s address set forth below so that it is received by Inflection Point’s Chief Executive Officer prior to the vote at the extraordinary general meeting (which is scheduled to take place on [•]) or attend the extraordinary general meeting in person and vote. Shareholders also may revoke their proxy by sending a notice of revocation to Inflection Point’s Chief Executive Officer, which must be received by Inflection Point’s Chief Executive Officer prior to the vote at the extraordinary general meeting. 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 extraordinary general meeting?
A. If you fail to take any action with respect to the extraordinary general meeting and the Business Combination is approved by shareholders and the Business Combination is consummated, you will become a stockholder and/or warrant holder of New Merlin. If you fail to take any action with respect to the extraordinary general meeting and the Business Combination is not approved, you will remain a shareholder and/or warrant holder of Inflection Point. However, if you fail to vote with respect to the extraordinary general meeting, you will nonetheless be able to elect to redeem your Public Shares in connection with the Business Combination, so long as you take the required steps to elect to redeem your shares at least two business days prior to the initially scheduled date of the extraordinary general meeting pursuant to the procedures described in this proxy statement/prospectus.
Q. What happens if I vote against the Business Combination Proposal?
A. If you vote against the Business Combination Proposal but the Business Combination Proposal still obtains the requisite shareholder approval described in this proxy statement/prospectus, then the Business Combination Proposal will be approved and, assuming the approval of the other Condition Precedent Proposals and the satisfaction or waiver of the other conditions to the closing of the Business Combination, the Business Combination will be consummated in accordance with the terms of the Business Combination Agreement.
If you vote against the Business Combination Proposal and the Business Combination Proposal does not obtain the requisite vote at the extraordinary general meeting, then the Business Combination Proposal will fail and we will not consummate the Business Combination. If we do not consummate the Business Combination Proposal, we may continue to try to complete a business combination with a different target business until November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law). If we fail to complete an initial business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law), then we will be required to liquidate the Trust Account by returning then-remaining funds in the Trust Account to the Public Shareholders.
Q. What should I do with my share certificates, rights certificates or unit certificates?
A. Public Shareholders must complete the procedures for electing to redeem their Public Shares, including the delivery of their Public Shares, in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days before the initial scheduled date of the extraordinary general meeting), in order for their Public Shares to be redeemed.
Our rights holders should not submit the certificates relating to their Rights. Public Shareholders who do not elect to have their Public Shares redeemed for the pro rata share of the Trust Account should not submit the certificates relating to their Public Shares.
Upon the Domestication, holders of Inflection Point Units, Inflection Point Class A Shares (including Inflection Point Class B Shareholders that elect to convert their Inflection Point Class B Shares into Inflection Point Class A Shares pursuant to the Cayman Constitutional Documents and the Sponsor Support Agreement immediately prior to the Domestication) and Inflection Point Rights will receive Post-Domestication Units, shares of New Merlin
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Common Stock and Post-Domestication Rights, as the case may be, without needing to take any action and, accordingly, such holders should not submit any certificates relating to their Inflection Point Units, Inflection Point Class A Shares (unless such holder elects to redeem the Public Shares in accordance with the procedures set forth above), or Inflection Point Rights.
At Closing, (a) each Post-Domestication Right will be converted into one-tenth of a share of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share and (b) each Post-Domestication Unit will be canceled and will thereafter entitle the holder thereof to one and one-tenth (1.1) shares of New Merlin Common Stock, with any fractional shares of New Merlin Common Stock to be issued in connection with such separation rounded down to the nearest whole share.
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 not less than 48 hours prior to the start of the extraordinary general meeting in order to cast a vote with respect to all of your Inflection Point Ordinary Shares.
Q: Do the Sponsor, Inflection Point Fund, and Inflection Point’s officers and directors expect to purchase Public Shares from Public Shareholders or take other actions to incentivize non-redemption?
A: The Sponsor, Inflection Point Fund and Inflection Point’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 extraordinary general meeting, during a period when they are not then aware of any material nonpublic information regarding Inflection Point or its securities, the Sponsor, Inflection Point Fund, and Inflection Point’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 Inflection Point’s shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights.
In the event that the Sponsor, Inflection Point Fund, and Inflection Point’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. Inflection Point 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 Inflection Point Class A Shares and the number of beneficial holders of Inflection Point Class A Shares may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of Inflection Point’s securities on Nasdaq.
In the event the Sponsor, Inflection Point Fund, and Inflection Point’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, Inflection Point Fund, and Inflection Point’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 “Business Combination — Potential Purchases of Public Shares” for more information.
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Q. Who will solicit and pay the cost of soliciting proxies for the extraordinary general meeting?
A. Inflection Point will pay the cost of soliciting proxies for the extraordinary general meeting. Inflection Point has engaged [•] to assist in the solicitation of proxies for the extraordinary general meeting. Inflection Point has agreed to pay [•] a fee of $[•], plus disbursements. Inflection Point will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of Inflection Point Class A Shares for their expenses in forwarding soliciting materials to beneficial owners of Inflection Point Class A Shares. Inflection Point’s directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q. Where can I find the voting results of the extraordinary general meeting?
A. The preliminary voting results are expected to be announced at the extraordinary general meeting. Inflection Point will publish final voting results of the extraordinary general meeting in a Current Report on Form 8-K within four business days after the extraordinary general meeting.
Q. Who can help answer my questions?
A. If you have questions about the Business Combination or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card, you should contact:
[•]
You also may obtain additional information about Inflection Point from documents filed with the SEC by following the instructions in the section of this proxy statement/prospectus entitled “Where You Can Find More Information”. If you are a Public Shareholder and you intend to seek redemption, you will need to deliver the certificates for your Public Shares (if any) along with the redemption forms (either physically or electronically) to Continental, at the address below prior to the extraordinary general meeting. Public Shareholders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days prior to the initially scheduled date of the extraordinary general meeting), in order for their Public Shares to be redeemed. If you have questions regarding the certification of your position or delivery of your share certificates (if any) along with the redemption forms, please contact:
Continental Stock Transfer & Trust Company
1 State Street, 30 Floor
New York, New York 10004
Attention: [•]
Email: [•]@continentalstock.com
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus, but does not contain all of the information that may be important to you. To better understand the Proposals to be considered at the extraordinary general meeting, including the Business Combination Proposal, whether or not you plan to attend such meetings, we urge you to read this proxy statement/prospectus (including the Annexes) carefully, including the section entitled “Risk Factors” beginning on page 35 of this proxy statement/prospectus. See also the section entitled “Where You Can Find More Information”.
Parties to the Business Combination
Inflection Point
Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Acquisition Corp. I) is a special purpose company whose business purpose is to effect a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses or entities.
On November 4, 2024, Inflection Point consummated its IPO of 25,000,000 Inflection Point Units. Each Inflection Point Unit was sold at a price of $10.00 per Inflection Point Unit, generating gross proceeds of $250,000,000. Each Unit consists of one Inflection Point Class A Share and one Inflection Point Right, with each Right entitling the holder thereof to purchase one-tenth of one Inflection Point Class A Share. Simultaneously with the sale of the 25,000,000 Inflection Point Units in the IPO, Inflection Point completed the private sale of an aggregate of 425,000 Private Placement Units to the Sponsor at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds of $4,250,000.
Inflection Point’s prospectus for its IPO and the Cayman Constitutional Documents provide that it has until November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law), to complete an initial business combination.
On October 21, 2025, Inflection Point held an extraordinary general meeting to consider and vote on (A) a proposal to change the name of the company from Bleichroeder Acquisition Corp. I to Inflection Point Acquisition Corp. IV and (B) a proposal to approve an amendment to the Cayman Constitutional Documents permitting Inflection Point to consummate the redemptions of Public Shares in connection with the commencement of the procedures to consummate a proposed business combination (as opposed to the completion of a proposed business combination) if the Inflection Point Board determines it is desirable to facilitate the consummation of such business combination. The shareholders of Inflection Point approved both proposals, and an amendment to the amended and restated memorandum and articles of association of Inflection Point reflecting the changes approved by shareholders were filed with the Cayman Registrar of Companies.
As of the date of this proxy statement/prospectus, Inflection Point had an aggregate of 25,425,000 Inflection Point Class A Shares and 8,333,333 Inflection Point Class B Shares issued and outstanding.
Inflection Point’s securities are traded on Nasdaq under the symbols “BACQ”, “BACQU” and “BACQR”. Inflection Point’s principal executive offices are located at 1345 Avenue of the Americas, Floor 47, New York, NY 10105, and its phone number is (212) 984-3835.
Merger Sub
IPDX Merger Sub, Inc. is a Delaware corporation and direct, wholly-owned subsidiary of Inflection Point incorporated on August 8, 2025. Pursuant to the Merger, Merger Sub will merge with and into Merlin, with Merlin surviving as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin OpCo will become a wholly-owned subsidiary of Inflection Point, and substantially all of the assets and the business of the combined company will be held and operated by Merlin OpCo and its subsidiaries.
Merger Sub’s principal executive offices are located at 1345 Avenue of the Americas, Floor 47, New York, NY 10105, and its phone number is (212) 984-3835.
Merlin
Merlin Labs, Inc. is a Delaware corporation formed on March 10, 2022. Merlin is a leader in developing aircraft-agnostic autonomy for national security applications, with a dual-track civil certification program that has the company on pace to be the first to certify an AI skill on an aircraft. Pursuant to the Merger, Merger Sub will merge with and into Merger Sub with Merlin being the surviving corporation and becoming a wholly owned subsidiary of Inflection Point.
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Merlin’s principal executive offices are located at 129 South Street, Boston, MA 02111 and its phone number is (857) 201-3979.
The Proposals to be Submitted at the Extraordinary General Meeting
The Business Combination Proposal
As discussed in this proxy statement/prospectus, Inflection Point is asking its shareholders to approve by ordinary resolution the Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A. The Business Combination Agreement provides for, among other things, following the Domestication of Inflection Point to Delaware as described below, the merger of Merger Sub with and into Merlin, with Merlin surviving as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin OpCo will become a wholly-owned subsidiary of Inflection Point, and substantially all of the assets and the business of the combined company will be held and operated by Merlin OpCo and its subsidiaries, in accordance with the terms and subject to the conditions of the Business Combination Agreement as more fully described elsewhere in this proxy statement/prospectus. After consideration of the factors identified and discussed in the section entitled “Proposal No. 1 — The Business Combination Proposal — The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination”, the Inflection Point Board concluded that the Business Combination met the requirements disclosed in the prospectus for the IPO.
Organizational Structure
In connection with the completion of the Business Combination, Inflection Point will provide its Public Shareholders the opportunity to redeem their Public Shares on the terms and conditions set forth in the Business Combination Agreement and the Cayman Constitutional Documents. Inflection Point will complete the Redemption of properly tendered Public Shares at least one day prior to the Domestication.
Prior to and as a condition of the Closing, pursuant to the Domestication, Inflection Point will change its jurisdiction of incorporation by migrating to and domesticating as a Delaware corporation in accordance with Section 388 of the DGCL, as amended, and the Companies Act. For more information, see the section of this proxy statement/prospectus entitled “Proposal No. 2 — The Domestication Proposal”.
The following diagrams illustrate in simplified terms the current structure of Inflection Point and Merlin and the expected structure of New Merlin immediately following the Closing.
Simplified Pre-Combination Structure
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The Merger
Simplified Post-Combination Structure
Merger Consideration
The Aggregate Consideration to be paid to the Merlin Equity Holders will be the number of shares of New Merlin Common Stock equal to the quotient of: (a) the Purchase Price, $800,000,000, divided by (b) the Redemption Price.
The Convertible Note Consideration to be paid in, or in connection with, the Merger to each holder of a Pre-Funded Convertible Note shall be a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal and accrued and unpaid interest on each Pre-Funded Convertible Note as of one day prior to the Closing, divided by (ii) $12.00 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded SPA), as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Notes, or $10.20 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded NPA).
The Pre-Funded Warrant Consideration to be paid in, or in connection with, the Merger to a holder in respect of each Pre-Funded Warrant shall be one or more New Merlin Series A Warrants to purchase a number of shares of New Merlin Common Stock (on otherwise the same terms as applicable to the New Merlin Labs Series A Warrants issued to the Closing PIPE Investor in the Series A Preferred Stock Investment) equal to the quotient of (i) the aggregate exercise price of such Pre-Funded Warrant immediately prior to the Effective Time, divided by (ii) $12.00.
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Closing Conditions
The Business Combination is subject to the satisfaction or waiver of certain customary closing conditions, including, among others, approval of the Business Combination and related agreements and transactions by the respective shareholders of Inflection Point and Merlin, the completion of the Domestication, and the performance of Inflection Point and Merlin in all material respects all of their respective obligations and covenants under the Business Combination Agreement.
For further details, see “Proposal No. 1 — The Business Combination Proposal — Business Combination Agreement — Closing Conditions”.
Related Agreements
This section describes certain additional agreements entered into or to be entered into pursuant to the Business Combination Agreement. For additional information, see “Proposal No. 1 — Business Combination Proposal — Related Agreements”.
Registration Rights Agreement
At the Closing, New Merlin, the Sponsor, certain stockholders of Merlin (“Merlin Stockholders”), the Closing PIPE Investors and other parties thereto will enter into an amended and restated registration rights agreement (the “Registration Rights Agreement”), pursuant to which, among other things, the Sponsor, the Merlin Stockholders, the Closing PIPE Investors and other parties thereto will be granted certain customary registration rights, on the terms and subject to the conditions therein, with respect to securities of New Merlin that they will hold following the Business Combination.
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, Inflection Point entered into the Sponsor Support Agreement with Merlin, the Sponsor and Inflection Point Fund (each, a “Restricted Holder” and together, the “Restricted Holders”), pursuant to which each Restricted Holder agreed to, among other things, (i) vote in favor of adoption of the Transaction Proposals, (ii) vote against any Alternative Transaction (as defined in the Business Combination Agreement) and any merger agreement or merger other than the Transaction Proposals, the Business Combination Agreement and the Business Combination; (iii) vote against any change in the business, management, or board of directors of Inflection Point (other than in connection with the Transaction Proposals or pursuant to the Business Combination Agreement or ancillary agreements) and (iv) vote against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Sponsor Support Agreement, the Business Combination Agreement or the Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of the Inflection Point under the Business Combination Agreement, (C) result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such Restricted Holder contained in the Sponsor Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Inflection Point. Certain current and former officers and directors of Inflection Point previously entered into a letter agreement with Inflection Point in connection with Inflection Point’s IPO, pursuant to which they agreed to vote any Inflection Point Ordinary Shares held by them in favor of the Business Combination.
Stockholder Voting and Support Agreement
Concurrently with the execution of the Business Combination Agreement, Merlin Stockholders and Merlin entered into the Voting and Support Agreement (the “Stockholder Voting and Support Agreement”), pursuant to which Merlin Stockholders have agreed to, among other things, vote (or act by written consent) (a) to approve the Business Combination Agreement and the consummation of the Business Combination; (b) against any Alternative Transaction or any proposal relating to an Alternative Transaction; (c) against any merger agreement or merger (other than the Business Combination Agreement and the Business Combination), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by Merlin; (d) against any change in the business or board of directors of Merlin (other than pursuant to the Business Combination Agreement or the Ancillary Documents (as defined in the Business Combination Agreement)); (e) against any proposal, action or
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agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Stockholder Voting and Support Agreement, the Business Combination Agreement or the Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of Merlin under the Business Combination Agreement, (C) result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such member contained in the Stockholder Voting and Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Merlin and (f) to convert all outstanding shares of preferred stock of Merlin into Merlin Common Stock as of immediately prior to the Effective Time, conditioned upon and subject to the closing of the Business Combination, in accordance with the organizational documents of Merlin.
Sponsor Lock-Up Agreement
At the Closing, the Sponsor and New Merlin will enter into a Lock-Up Agreement (the “Sponsor Lock-Up Agreement”), pursuant to which the Sponsor and its permitted assigns will agree, (x) with respect to any shares of New Merlin Common Stock the Sponsor received upon conversion of its Inflection Point Class B Shares in connection with the Domestication (the “Sponsor Lock-Up Founder Shares”), prior to the date that is six months after the Closing Date, or (y) with respect to any shares of New Merlin Common Stock issued upon cancellation of the New Merlin Units (the “Sponsor Lock-Up Unit Shares” and together with the Sponsor Lock-Up Founder Shares, the “Sponsor Lock-Up Shares”), prior to the date that is 90 days after the Closing Date, not to, without the prior written consent of the New Merlin Board, (i) sell, pledge, grant any option to purchase or otherwise dispose of (a), (ii) enter into any swap or other transfer arrangement in respect of the Sponsor Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Sponsor Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
Merlin Lock-Up Agreement
At the Closing, New Merlin, certain equity holders of Merlin (the “Lock-Up Holders”) will enter into a Lock-Up Agreement (the “Merlin Lock-Up Agreement”), pursuant to which the Lock-Up Holders will agree not to, without the prior written consent of the New Merlin Board, prior to the date that is six months after the Closing (i) sell, pledge, grant any option to purchase or otherwise dispose of (a) any shares of New Merlin Common Stock held immediately after the consummation of the Business Combination, (b) any shares of New Merlin Common Stock issuable upon exercise of such options to purchase shares of New Merlin Common Stock held immediately after the consummation of the Business Combination, or (c) any securities convertible into, or exercisable, redeemable or exchangeable for, New Merlin Common Stock held by such holder immediately after the consummation of the Business Combination (the shares of New Merlin Class A Common Stock and securities specified in clauses (a) through (c), collectively, the “Lock-up Shares”), (ii) enter into any swap or other transfer arrangement in respect of any Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Merlin Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
Pre-Funded PIPE Agreements and Amendment No. 1 to the Signing Pre-Funded SPA
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Pre-Funded PIPE Agreements with Pre-Funded Investors. Pursuant to the Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants, substantially concurrently with the execution and delivery of the Business Combination Agreement. On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into the Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million, an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA.
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Series A SPA
In connection with the transactions contemplated by the Business Combination Agreement, on August 13, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into the Series A SPA. Pursuant to the Series A SPA, the Closing PIPE Investor has agreed, among other things, to purchase, at Closing, 4,901,961 shares of Series A Preferred Stock, having the rights, preferences and privileges set forth in the Certificate of Designation and a New Merlin Series A Warrant, for an aggregate purchase price of $50,000,000. Each share of Merlin Series A Preferred Stock will have the Stated Value. On November 17, 2025, Inflection Point and Merlin entered into Amendment No. 1 to the Series A SPA, pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible.
Additional Series A SPAs
Also on November 17, 2025, Inflection Point and Merlin also entered into Additional Series A SPAs with the Additional Closing PIPE Investors, pursuant to which, among other things, the Additional Closing PIPE Investors agreed to purchase, and Inflection Point agreed to sell, an aggregate of 1,666,668 shares of Series A Preferred Stock and Upsized New Merlin Series A Preferred Warrants to purchase a number of shares of New Merlin Common Stock equal to 75% of the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible for $20 million.
The Domestication Proposal
As a condition to the consummation of the Business Combination pursuant to the terms of the Business Combination Agreement, Inflection Point must complete the Domestication. The Domestication Proposal, if approved by the Inflection Point Class B Shareholders, will authorize a change of Inflection Point’s jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Accordingly, while Inflection Point is currently governed by the Companies Act, upon the Domestication, Inflection Point will be governed by the DGCL. There are differences between Cayman Islands corporate law and Delaware corporate law as well as between the Cayman Constitutional Documents and the Proposed Organizational Documents. Accordingly, Inflection Point encourages shareholders to carefully review the information in “Proposal No. 2 — The Domestication Proposal — Comparison of Shareholder Rights under Applicable Corporate Law Before and After Domestication”.
Immediately prior to the Domestication, pursuant to the Cayman Constitutional Documents and the Sponsor Support Agreement, the Inflection Point Class B Shareholders will elect to convert each of the then issued and outstanding Inflection Point Class B Shares, on a one-for-one basis, into Inflection Point Class A Shares. At the effective time of the Domestication, (a) each of the then issued and outstanding Inflection Point Class A Shares will convert automatically, on a one-for-one basis, into shares of New Merlin Common Stock; (b) each of the then issued and outstanding Inflection Point Rights will convert automatically into a Post-Domestication Right; and (c) each of the then issued and outstanding Inflection Point Units will convert automatically into a Post-Domestication Unit, consisting of one share of New Merlin Common Stock and one Post-Domestication Right.
The Inflection Point Board has unanimously approved the Domestication Proposal. For additional information, see the section entitled “Proposal No. 2 — The Domestication Proposal” of this proxy statement/prospectus.
The Stock Issuance Proposal
Inflection Point will ask its shareholders to approve, by ordinary resolution, the Stock Issuance Proposal for purposes of complying with Nasdaq Listing Rules, including 5635(a), (b) and (d).
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 such securities are not issued in a public offering for cash and (A) 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 (B) 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.
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Under Nasdaq Listing Rule 5635(b), shareholder approval is required when any issuance or potential issuance will result in a “change of control” of the issuer.
Under Nasdaq Listing Rule 5635(d), shareholder approval is required prior to the issuance of securities in certain circumstances, including if the number of securities to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance.
The Organizational Documents Proposal
If each of the Business Combination Proposal, the Domestication Proposal and the Stock Issuance Proposal are approved, Inflection Point will ask its shareholders to approve the Organizational Documents Proposal in connection with the replacement of the Cayman Constitutional Documents, with the Proposed Organizational Documents, under the DGCL. The Inflection Point Board has unanimously approved the Organizational Documents Proposal and believes such proposal is necessary to adequately address the needs of Inflection Point following the Closing. Approval of the Organizational Documents Proposal is a condition to the consummation of the Business Combination.
The Advisory Organizational Documents Proposals
Inflection Point will ask its shareholders to approve on a non-binding advisory basis six separate Advisory Organizational Documents Proposals in connection with the replacement of the Cayman Constitutional Documents, compliant with the Companies Act, with the Proposed Organizational Documents, under the DGCL. The Inflection Point Board has unanimously approved the Advisory Organizational Documents Proposals and believes such proposals are necessary to adequately address the needs of Merlin after the Business Combination. Approval of the Advisory Organizational Documents Proposals is not a condition to the consummation of the Business Combination.
A brief summary of each of the Advisory Organizational Documents Proposals is set forth below. These summaries are qualified in their entirety by reference to the complete text of the Proposed Organizational Documents.
Proposal No. 5 — The Advisory Organizational Documents Proposals — To consider and vote upon the following three Advisory Organizational Documents Proposals to approve on an advisory, non-binding basis by special resolution the following material differences between the Cayman Constitutional Documents and the Proposed Organizational Documents:
Advisory Organizational Documents Proposal 5A — Under the Proposed Organizational Documents, New Merlin would be authorized to issue (A) [•] shares of New Merlin Common Stock and (B) [•] shares of New Merlin Preferred Stock.
Advisory Organizational Documents Proposal 5B — The Proposed Organizational Documents would adopt (a) Delaware as the exclusive forum for certain stockholder litigation and (b) the federal district courts of the United States of America as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the Exchange Act.
Advisory Organizational Documents Proposal 5C — The Proposed Charter would require the affirmative vote of at least two-thirds of the total voting power of all then-outstanding shares of New Merlin to amend, alter, repeal or rescind certain provisions of the Proposed Charter.
Advisory Organizational Documents Proposal 5D — The Proposed Charter would require the affirmative vote of at least two-thirds of the outstanding shares entitled to vote at an election of directors, voting together as a single class, to remove a director only for cause.
Advisory Organizational Documents Proposal 5E — The Proposed Charter would prohibit stockholder action by written consent in lieu of a meeting and require stockholders to take action at an annual or special meeting.
Advisory Organizational Documents Proposal 5F — The Proposed Charter would (1) change the corporate name from “Inflection Point Acquisition Corp. IV” to “Merlin, Inc.”, (2) make New Merlin’s corporate existence perpetual and (3) remove certain provisions related to Inflection Point’s status as a blank check company that will no longer be applicable upon consummation of the Business Combination.
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The Director Election Proposal
Inflection Point is proposing that its shareholders approve, effective upon the Closing of the Business Combination, the election of seven directors to serve on the New Merlin Board until the first annual meeting of stockholders of New Merlin to be held following the date of Closing, and until their respective successors are duly elected and qualified.
For additional information, see the section of this proxy statement/prospectus entitled “The Director Election Proposal”.
New Merlin Incentive Plan Proposal
Inflection Point is asking its shareholders to approve the New Merlin Incentive Plan and the material terms thereunder. The initial aggregate number of shares of New Merlin Labs Common Stock that will be available for issuance under the New Merlin Incentive Plan will be equal to [__]% of the number of [fully-diluted, as-converted] shares of New Merlin Labs Common Stock outstanding as of immediately following the closing of the Business Combination. The full text of the New Merlin Incentive Plan is attached hereto as Annex G.
For additional information, see the section of this proxy statement/prospectus entitled “New Merlin Incentive Plan Proposal”.
New Merlin Employee Stock Purchase Plan Proposal
Inflection Point is asking its stockholders to approve the ESPP and the material terms thereunder. The initial aggregate number of shares of New Merlin Labs Common Stock that will be available for issuance under the ESPP will be equal to [__]% of the [fully-diluted, as-converted] shares of New Merlin Labs Common Stock outstanding as immediately following the closing of the Business Combination. The full text of the ESPP is attached hereto as Annex H.
For additional information, see the section of this proxy statement/prospectus entitled “New Merlin Employee Stock Purchase Plan Proposal”.
The Adjournment Proposal
If, based on the tabulated vote, there are not sufficient votes at the time of the extraordinary general meeting to authorize Inflection Point to consummate the Business Combination (because any of the Condition Precedent Proposals have not been approved (including as a result of the failure of any other cross-conditioned Condition Precedent Proposals to be approved)), the chairman of the Inflection Point Board may submit a proposal to adjourn the extraordinary general meeting to a later date or dates, if necessary, (i) to permit further solicitation and vote of proxies in the event, (ii) if Inflection Point determines that one or more of the conditions to Closing is not or will not be satisfied or waived or (iii) to facilitate the Domestication, the Merger or any other transaction contemplated by the Business Combination Agreement or the related agreements.
For additional information, see the section of this proxy statement/prospectus entitled “The Adjournment Proposal”.
Transfer Restrictions
The Business Combination Agreement contemplates that, at the Closing, New Merlin and the Sponsor will enter into a Sponsor Lock-Up Agreement, and New Merlin and the Lock-Up Holders will enter into the Merlin Lock-Up Agreement (together with the Sponsor Lock-Up Agreement, the “Lock-Up Agreements”), pursuant to which the parties thereto will agree to restrictions on transfer with respect to their shares of New Merlin Common Stock. The Lock-Up Agreements will supersede the lock-up provisions set forth in the Letter Agreement, which provisions will be of no further force or effect as of the Closing.
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The transfer restrictions contained in the Lock-Up Agreements are summarized in the table below:
|
Subject Securities |
Natural |
Lock-Up Period |
Exceptions to |
|||
|
8,333,333 shares of New Merlin Common Stock, to be issued to the Sponsor upon conversion of 8,333,333 Inflection Point Class A Shares the Sponsor received upon conversion of 8,333,333 Founder Shares in connection with the Closing. |
Sponsor |
Six months after the consummation of the Business Combination. |
Transfers to Permitted Transferees(1) |
|||
|
467,500 shares of New Merlin Common Stock, to be issued to the Sponsor upon the conversion of securities underlying the 425,000 Private Placement Units the Sponsor held. |
Sponsor |
90 days after the consummation of the Business Combination. |
Transfers to Permitted Transferees(1) |
|||
|
New Merlin Common Stock held immediately after the Closing (other than shares acquired in the public market after the Closing). |
Lock-Up Holders |
Six months after the consummation of the Business Combination. |
Transfers to Permitted Transferees(2) |
__________
(1) The lock-up restrictions will not apply to: (a) transfers of any securities other than the Sponsor Lock-Up Shares or any other equity security of New Merlin issued or issuable with respect to the Sponsor Lock-Up Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, spin-off, reorganization or similar transaction; (b) transfers to New Merlin’s officers or directors, any affiliate (as defined therein) or family member of any of New Merlin’s officers or directors, any members or partners of the Sponsor or their affiliates, any affiliates of the Sponsor, or any employees of such affiliates; (c) in the case of an individual, transfers to any affiliates or family members of the holder of Sponsor Lock-Up Shares; (d) transfers to any investment funds or vehicles controlled or managed by the holder of Sponsor Lock-Up Shares or any of its affiliates; (e) transfers by gift to a trust, the beneficiary of which is a person to whom a transfer would be permitted under (c), or to a charitable organization; (f) in the case of an individual, transfers by virtue of laws of descent and distribution upon death of such individual; (g) in the case of an individual, transfers pursuant to a qualified domestic relations order; (h) in the case of an individual, transfers to a partnership, limited liability company or other entity of which the holder of the Sponsor Lock-Up Shares and/or the affiliates or family members of the holder of Sponsor Lock-Up Shares are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (i) transfers to a nominee or custodian of a person to whom a transfer would be permitted under (c); (j) by private sales or transfers made in connection with any forward purchase agreement or similar arrangement at prices no greater than the price at which the Sponsor Lock-Up Shares were originally purchased; (k) transfers in connection with any legal, regulatory or other order; (l) in the case of an entity that is a trust, transfers to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; (m) in the case of an entity, transfers as part of a distribution to members, partners, shareholders or equityholders of the holder of the Lock-Up Shares; (n) in the case of an entity, transfers by virtue of the laws of the state of the entity’s organization and the entity’s organizational documents upon dissolution of the entity; (o) the exercise of stock options to purchase shares of New Merlin Common Stock or the vesting of stock awards relating to shares of New Merlin Common Stock and any related transfer of shares of New Merlin Common Stock in connection therewith (x) deemed to occur upon the “cashless” or “net” exercise of such options or (y) for the purpose of paying the exercise price of such options or for paying taxes due as a result of the exercise of such options, the vesting of such options or stock awards, or as a result of the vesting of such shares of New Merlin Common Stock, it being understood that all shares of New Merlin Common Stock received upon such exercise, vesting or transfer will remain subject to the restrictions of the Sponsor Lock-Up Agreement during the applicable lock-up period; (p) transfers to New Merlin pursuant to any contractual arrangement in effect upon the consummation of the Business Combination that provides for the repurchase by New Merlin or forfeiture of New Merlin Common Stock or other securities convertible into, or exercisable, redeemable or exchangeable for, New Merlin Common Stock in connection with the termination of the holder of the Sponsor Lock-Up Shares’ service to New Merlin; (q) the entry, by holder of the Sponsor Lock-Up Shares, at any time after the consummation of the Business Combination, of any trading plan providing for the sale of shares of New Merlin Common Stock by the holder of the Lock-Up Shares, which trading plan meets the requirements of Rule 10b5-1(c) under the Exchange Act; provided, however, that such plan does not provide for, or permit, the sale of any shares of New Merlin Common Stock during the applicable lock-up period and no public announcement or filing is voluntarily made or required regarding such plan during the applicable lock-up period; (r) transfers in the event of the completion of a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the New Merlin securityholders having the right to exchange their shares of New Merlin Common Stock for cash, securities or other property; and (s) transfers to satisfy any U.S. federal, state, or local income tax obligations
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of a holder of Lock-Up Shares (or its direct or indirect owners) arising from a change in the Code, or the U.S. Treasury Regulations promulgated thereunder (the “Regulations”) after the date on which the Business Combination Agreement was executed by the parties, and such change prevents the Business Combination from qualifying as a “reorganization” pursuant to Section 368 of the Code (and the Business Combination does not qualify for similar tax-free treatment pursuant to any successor or other provision of the Code or Regulations taking into account such changes), in each case solely and to the extent necessary to cover any tax liability as a direct result of the transaction.
(2) The lock-up restrictions will not apply to: (a) transfers of any securities other than (a) the Lock-Up Shares and (b) any other equity security of New Merlin issued or issuable with respect to the Lock-Up Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, spin-off, reorganization or similar transaction; (b) in the case of an individual, transfers to any affiliates (as defined therein) or family members of the holder of Lock-Up Shares; (c) transfers to any investment funds or vehicles controlled or managed by the holder of Lock-Up Shares or any of its affiliates; (d) transfers by gift to a trust, the beneficiary of which is a person to whom a transfer would be permitted under (a), or to a charitable organization; (e) in the case of an individual, transfers by virtue of laws of descent and distribution upon death of such individual; (f) in the case of an individual, transfers pursuant to a qualified domestic relations order; (g) in the case of an individual, transfers to a partnership, limited liability company or other entity of which the holder of Lock-Up Shares and/or the affiliates or family members of the holder of Lock-Up Shares are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (h) transfers to a nominee or custodian of a person to whom a transfer would be permitted under (a); (i) transfers in connection with any legal, regulatory or other order; (j) in the case of an entity that is a trust, transfers to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; (k) in the case of an entity, transfers as part of a distribution to members, partners, shareholders or equityholders of the holder of Lock-Up Shares; (l) in the case of an entity, transfers by virtue of the laws of the state of the entity’s organization and the entity’s organizational documents upon dissolution of the entity; (m) the exercise of stock options or warrants to purchase shares of New Merlin Common Stock or the vesting of stock awards relating to shares of New Merlin Common Stock and any related transfer of shares of New Merlin Common Stock in connection therewith (x) deemed to occur upon the “cashless” or “net” exercise of such options or warrants or (y) for the purpose of paying the exercise price of such options or warrants or for paying taxes due as a result of the exercise of such options or warrants, the vesting of such options or stock awards, or as a result of the vesting of such shares of New Merlin Common Stock, it being understood that all shares of New Merlin Common Stock received upon such exercise, vesting or transfer will remain subject to the restrictions of the Merlin Lock-Up Agreement during the lock-up period; (n) transfers to the Company pursuant to any contractual arrangement in effect upon the consummation of the Business Combination that provides for the repurchase by New Merlin or forfeiture of New Merlin Common Stock or other securities convertible into, or exercisable, redeemable or exchangeable for, New Merlin Common Stock in connection with the termination of the holder of Lock-Up Shares’ service to the Company; (o) the entry, by the holder of Lock-Up Shares, at any time after the consummation of the Business Combination, of any trading plan providing for the sale of shares of New Merlin Common Stock by the holder of Lock-Up Shares, which trading plan meets the requirements of Rule 10b5-1(c) under the Exchange Act; provided, however, that such plan does not provide for, or permit, the sale of any shares of New Merlin Common Stock during the lock-up period and no public announcement or filing is voluntarily made or required regarding such plan during the lock-up period; (p) transfers in the event of the completion of a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of New Merlin’s securityholders having the right to exchange their shares of Common Stock for cash, securities or other property; and (q) transfers to satisfy any U.S. federal, state, or local income tax obligations of a holder of Lock-Up Shares (or its direct or indirect owners) arising from such holder of Lock-Up Shares’ ownership (including prior to and after the Business Combination) of the Lock-Up Shares or any interests in Merlin, in each case solely and to the extent necessary to cover any tax liability as a direct result of such ownership of the Lock-Up Shares or any interests in Merlin.
Date, Time and Place of the Extraordinary General Meeting
The extraordinary general meeting will be held at [•] a.m. Eastern Time, on [•]. The extraordinary general meeting will be held virtually via live webcast at [•]. For the purposes of Cayman Islands law and the Cayman Constitutional Documents, the physical location of the extraordinary general meeting will be at the offices of White & Case LLP, 1221 Avenue of the Americas, New York, NY 10020.
Registering for the Extraordinary General Meeting
Any shareholder wishing to attend the extraordinary general meeting virtually should register for the extraordinary general meeting by [•] at [•] a.m. To register for the extraordinary general meeting, please follow these instructions as applicable to the nature of your ownership of Inflection Point Ordinary Shares:
• If your shares are registered in your name with the Transfer Agent and you wish to attend the online-only meeting, go to [•], enter the 12-digit control number included on your proxy card or notice of the extraordinary general meeting and click on the “Click here to preregister for the online meeting” link at
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the top of the page. Just prior to the start of the extraordinary general meeting 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.
• Beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other nominee) who wish to attend the extraordinary general meeting 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 proxy@continentalstock.com. 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 extraordinary general meeting. After contacting the Transfer Agent, a beneficial holder will receive an e-mail prior to the extraordinary general meeting with a link and instructions for entering the extraordinary general meeting online. Beneficial shareholders should contact Continental Stock Transfer & Trust Company at least five business days prior to the extraordinary general meeting date in order to ensure access.
Voting Power; Record Date
Inflection Point’s shareholders will be entitled to vote or direct votes to be cast at the extraordinary general meeting if they owned Inflection Point Ordinary Shares at the close of business on [•], which is the record date for the extraordinary general meeting (the “Record Date”). Shareholders will have one vote for each Inflection Point Share owned at the close of business on the Record Date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. Inflection Point Rights do not have voting rights. At the close of business on the Record Date, there were 33,758,333 Inflection Point Ordinary Shares outstanding, of which 25,000,000 were Public Shares, with the rest being held by Inflection Point’s initial shareholders.
Quorum and Vote of Inflection Point Shareholders
A quorum of Inflection Point shareholders is necessary to hold a valid meeting. A quorum will be present at the Inflection Point extraordinary general meeting if the holders of at least one-third of the issued and outstanding shares entitled to vote at the extraordinary general meeting are represented in person or by proxy (which would include presence at the extraordinary general meeting). Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as a vote cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal.
As of the Record Date for the extraordinary general meeting, 11,252,779 Inflection Point Ordinary Shares would be required to achieve a quorum.
The Sponsor and Inflection Point Fund have agreed to vote all the Founder Shares and any Public Shares they may hold in favor of all the proposals being presented at the extraordinary general meeting. As of the date of this proxy statement/prospectus, the Sponsor and certain members of the Inflection Point Board own 25.9% of the issued and outstanding Inflection Point Ordinary Shares. As a result, Inflection Point would need only 8,120,135, or approximately 32.5%, of the Public Shares not held by affiliates, to be voted in favor of the Business Combination in order to approve the Business Combination Proposal (assuming all outstanding shares are voted); or no Public Shares not held by affiliates (assuming only the minimum number of shares representing a quorum are voted).
The proposals presented at the extraordinary general meeting require the following votes:
• Business Combination Proposal — The approval of the Business Combination Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• Domestication Proposal — The approval of the Domestication Proposal requires a special resolution of the Inflection Point Class B Shareholders, being the affirmative vote of holders of at least two-thirds of the Inflection Point Class B Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The holders of Inflection Point Class A Shares will have no right to vote on the Domestication Proposal, in accordance with Article 48.2 of the Cayman Constitutional Documents.
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• Stock Issuance Proposal — The approval of the Stock Issuance Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• Organizational Documents Proposal — The approval of the Organizational Documents Proposal requires a special resolution, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares who, being in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• Advisory Organizational Documents Proposals — The separate approval of each of the Advisory Organizational Documents Proposals, each of which is a non-binding vote, requires a special resolution, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares who, being in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• Director Election Proposal — The approval of the Director Election Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• New Merlin Incentive Plan Proposal — The approval of the New Merlin Incentive Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• New Merlin Employee Stock Purchase Plan Proposal — The approval of the New Merlin Employee Stock Purchase Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
• Adjournment Proposal — The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting.
Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as a vote cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal.
Redemption Rights
Pursuant to the Cayman Constitutional Documents,
(a) (i) hold Public Shares or (ii) hold Public Shares through Inflection Point Units and elect to separate your Inflection Point Units into the underlying Public Shares and Inflection Point Rights prior to exercising your redemption rights with respect to the Public Shares;
(b) submit a written request to Continental, including the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that Inflection Point redeem all or a portion of your Public Shares for cash; and
(c) deliver your share certificates for Public Shares (if any) along with the redemption forms to Continental, physically or electronically through DTC.
Public Shareholders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days before the initial scheduled date of the extraordinary general meeting) in order for their Public Shares to be redeemed.
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Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of such Public Shareholder or any other Person with whom such Public Shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its Public Shares with respect to more than an aggregate of 15% of the Public Shares. Accordingly, if a Public Shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the Public Shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
The Sponsor has agreed to, among other things, vote in favor of all proposals being presented at the extraordinary general meeting, regardless of how the Public Shareholders vote. As of the Record Date, the Sponsor owned approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares.
Holders of the Inflection Point Rights will not have redemption rights with respect to the Inflection Point Rights.
Appraisal Rights
Proxy Solicitation
Proxies may be solicited by mail, telephone or in person. Inflection Point has engaged [•] to assist in the solicitation of proxies.
If a shareholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the extraordinary general meeting. A shareholder also may change its vote by submitting a later-dated proxy as described in the section entitled “Extraordinary General Meeting of Inflection Point — Revoking Your Proxy”.
Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination
When you consider the recommendation of the Inflection Point Board in favor of approval of the Business Combination Proposal and the other proposals included herein, you should keep in mind that the Sponsor, Inflection Point Fund, and Inflection Point’s directors and officers have interests in such Transaction Proposals that are different from, or in addition to, those of Inflection Point’s shareholders generally. Further, Inflection Point’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 Inflection Point — 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 Inflection Point Board and the Special Committee were 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 extraordinary general meeting, including the Business Combination Proposal. Inflection Point shareholders should take these interests into account in deciding whether to approve the proposals to be presented at the extraordinary general meeting, including the Business Combination Proposal. These interests include, among other things:
• Our Sponsor purchased 7,187,500 Founder Shares for $25,000, or approximately $0.004 per share, in a private placement prior to the consummation of the IPO. On October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an
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additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited, resulting in the Sponsor holding 8,333,333 Founder Shares. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 5,266,667 Founder Shares, or approximately 60.1%, of the Founder Shares held by the Sponsor. Michael Blitzer, our President, Chief Executive Officer and director, and Kevin Shannon, our Chief Operating Officer, are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Each director and officer of Inflection Point has economic interests in the Founder Shares held by the Sponsor. No other person has a direct or indirect material interest in the Sponsor. Such 8,333,333 shares of New Merlin Common Stock that the Sponsor and its permitted transferees will receive upon conversion of such Founder Shares in the Business Combination, if unrestricted and freely tradable, would have had an aggregate market value of approximately $96.2 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Our Sponsor purchased 425,000 Private Placement Units for $4,250,000, or $10.00 per Private Placement Unit, in a private placement that closed simultaneously with the IPO. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 425,000, or 100% of the Private Placement Units held by the Sponsor. Mr. Blitzer and Mr. Shannon are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Following the Business Combination, the 467,500 shares of New Merlin Common Stock that the Sponsor will receive upon conversion of such Private Placement Units, if unrestricted and freely tradable, would have had an aggregate market value of approximately $5.4 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Given the differential in the purchase price that the Sponsor paid for the Founder Shares as compared to the price of the Inflection Point Class A Shares included in the Inflection Point Units sold in the IPO, the Sponsor may earn a positive rate of return on its investment even if the shares of New Merlin Common Stock trade below $10.00 per share and the Public Shareholders experience a negative rate of return following the Closing. Accordingly, the economic interests of the Sponsor diverge from the economic interests of Public Shareholders because the Sponsor 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.
• Our Sponsor, and therefore Inflection Point Fund, will lose its entire investment in us if we do not complete a business combination by November 4, 2026 (or if such date is extended at a duly called meeting of the Inflection Point shareholders, such later date). If we do not consummate a business combination by such date, as promptly as reasonably possible but not more than ten business days thereafter, we will 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 the claims of creditors and the requirements of other applicable law. In such event, the Inflection Point Rights may be worthless. In such event, the 8,758,333 Inflection Point Ordinary Shares owned by our Sponsor would be worthless because following the redemption of Public Shares, we would likely have few, if any, net assets and because the Sponsor has agreed to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete a business combination within the required period. Additionally, in such event, the 425,000 Inflection Point Rights underlying the Private Placement Units that the Sponsor paid $4,250,000 to purchase will expire and become worthless.
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• Inflection Point Fund, an accredited investor that is an affiliate of Inflection Point, has an economic interest in 5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. In exchange for the Pre-Funded Convertible Note and Pre-Funded Convertible Warrant it purchased for $15.0 million, Inflection Point Fund will also receive at the Closing, (i) a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (a) the total outstanding principal and outstanding accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by (b) $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest) and (ii) a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock.
• Inflection Point’s Sponsor, officers and directors, and Inflection Point Fund, have agreed not to redeem any of the Founder Shares or Inflection Point Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination.
• If the Trust Account is liquidated, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Share, or such lesser amount per Public Share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account.
• Inflection Point’s existing officers and directors will be eligible for continued indemnification and continued coverage under a directors’ and officers’ liability insurance policy for a period of six (6) years after the Business Combination.
• The Sponsor and its members (present and former), managers and affiliates and their respective present and former officers and directors (each, a “Sponsor Indemnitee”) will be eligible for continued indemnification for any Sponsor Indemnitee’s activities in connection with the affairs of Inflection Point.
• The continuation of [•], and [•], as directors of the New Merlin Board following the Closing. As such, in the future they may receive any cash fees, stock options or stock awards that the New Merlin Board determines to pay to its directors.
• In connection with the Closing, our Sponsor, officers and directors would be entitled to the repayment of any outstanding working capital loan and advances that have been made to Inflection Point. In order to finance transaction costs in connection with a business combination, the Sponsor or Inflection Point Fund or certain of Inflection Point’s officers or directors may, but are not obligated to, loan Inflection Point Working Capital Loans. In the event that a business combination does not close, Inflection Point may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $2,500,000 of such Working Capital Loans may be convertible into private placement units at $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. As of the date of this proxy statement/prospectus, no such Working Capital Loans are outstanding.
• Upon the Closing, subject to the terms and conditions of the Business Combination Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Inflection Point from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. As of the date of this proxy statement/prospectus, there are no out-of-pocket expenses to be reimbursed.
• Pursuant to the Registration Rights Agreement, Inflection Point’s officers and directors, and the Sponsor and its members will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the New Merlin Common Stock held by such parties following the consummation of 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 which were not presented to Inflection Point, 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 Inflection Point — Conflicts of Interest.”
The Inflection Point Bord formed the Special Committee, comprised of three independent and disinterested members of the Inflection Point Board, Kathy Savitt, Antoine Theysett and Joseph Samuels. The Special Committee was empowered to, among other things, act as a disinterested body of the Inflection Point Board as appropriate for the purpose of exploring and evaluating the Business Combination; to engage and oversee one or more financial advisors, investment banking firms and accounting firms in connection with the Business Combination as the Special Committee deemed necessary or advisable in connection with fulfilling its responsibilities and to perform such other services and deliver such opinions as the Special Committee in its discretion requests, including providing an opinion, all at the expense of Inflection Point; consult with, advise, and oversee management, on behalf of the Inflection Point Board, in connection with due diligence activities relating to Merlin, the evaluation of the Business Combination, and discussions and/or negotiations concerning potential terms and conditions of the Business Combination; engage and oversee separate legal counsel if the Special Committee determines it is necessary or advisable to do so; and review the Business Combination and, if the Special Committee determines it is advisable and in the interests of Inflection Point and its Public Shareholders, recommend to the Inflection Point Board that the Inflection Point Board approve the Business Combination. The Special Committee engaged Newbridge to provide an opinion to the Special Committee as to (i) the fairness, from a financial point of view, to the Inflection Point Unaffiliated Shareholders of the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement, and (ii) whether the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement, a copy of which is attached hereto as Annex F.
For additional information, see the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” and “The Business Combination Proposal — Interests of the Merlin Directors and Executive Officers”.
Compensation Received by the Sponsor, its Affiliates and Inflection Point Directors and Executive Officers
Set forth below is a summary of the amount of compensation and securities received, to be received or that may be received by the Sponsor, its affiliates and Inflection Point’s directors, officers and their affiliates in connection with the Business Combination and related transactions.
|
Entity/Individual |
Amount of Compensation Received or |
Consideration |
||
|
Sponsor |
8,333,333 shares of New Merlin Common Stock upon conversion of 8,333,333 Inflection Point Class A Shares. |
$25,000. |
||
|
467,500 shares of New Merlin Common Stock upon the conversion of the Inflection Point Class A Shares and the Inflection Point Rights underlying the 425,000 Private Placement Units. |
$4,250,000. |
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|
Entity/Individual |
Amount of Compensation Received or |
Consideration |
||
|
Inflection Point Fund |
Number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share of (i) the total outstanding principal and accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date), and a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock. |
Exchange of Pre-Funded Convertible Note and a Pre-Funded Warrant, which Pre-Funded Convertible Note and Pre-Funded Warrant were acquired for an aggregate purchase price of $15 million. |
||
|
5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. |
$4,250,000. |
|||
|
Sponsor, Officers and Directors |
Consulting, success or finder fees in connection with the consummation of our initial business combination. |
Services in connection with identifying, investigating and completing an initial business combination. |
||
|
Salary or fee in an amount that constitutes a market standard for comparable transactions in connection with our initial business combination. |
Services in connection with identifying, investigating and completing an initial business combination. |
Ownership of New Merlin
The following summarizes the pro forma shares outstanding of New Merlin Common Stock and Series A Preferred Stock (on an as-converted to common stock basis as of the Closing Date) under the three redemption scenarios, on an as-converted basis, excluding the potential dilutive effect of warrants to purchase shares of New Merlin Common Stock and the New Merlin Options:
|
No |
50% |
Maximum |
|||||||||||||
|
Shares |
% |
Shares |
% |
Shares |
% |
||||||||||
|
Public Shareholders |
25,000,000 |
19.4 |
% |
12,500,000 |
10.7 |
% |
0 |
0.0 |
% |
||||||
|
Public Rightsholders* |
2,499,999 |
1.9 |
% |
2,499,999 |
2.1 |
% |
2,499,999 |
2.4 |
% |
||||||
|
Sponsor(4) |
8,800,833 |
6.8 |
% |
8,800,833 |
7.6 |
% |
8,800,833 |
8.5 |
% |
||||||
|
Series A Holders(5) |
21,633,896 |
16.8 |
% |
21,633,896 |
18.6 |
% |
21,633,896 |
20.8 |
% |
||||||
|
Merlin Stockholders(6) |
71,124,082 |
55.1 |
% |
71,124,082 |
61.0 |
% |
71,124,082 |
68.3 |
% |
||||||
|
Total |
129,058,810 |
100.0 |
% |
116,558,810 |
100.0 |
% |
104,058,810 |
100.0 |
% |
||||||
|
Potential sources of dilution |
|
|
|
||||||||||||
|
New Merlin Warrants(7) |
21,157,300 |
16.4 |
% |
21,157,300 |
18.2 |
% |
21,157,300 |
20.33 |
% |
||||||
|
New Merlin Options(7) |
7,218,348 |
5.6 |
% |
7,218,348 |
6.2 |
% |
7,218,348 |
6.9 |
% |
||||||
____________
* Rounded to account for units held in multiples of less than ten.
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
17
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(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of (i) 8,333,333 shares of New Merlin Common Stock issued upon conversion of Founder Shares, (ii) 425,000 shares of New Merlin Common Stock issued upon conversion of Inflection Class A Shares not subject to redemption, and (iii) 42,500 shares of New Merlin Common Stock, in exchange for 425,000 Private Placement Units.
(5) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment, (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of securities issued to WTI FUND X, LLC in exchange for the 2024 LSA Warrants and the 2024 LSA Amendment Warrants, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs.
(6) Based on the Purchase Price, $800 million, divided by the estimated per-share Redemption Price of approximately $10.39 per share from the Trust Account based on funds in the Trust Account as of September 30, 2025. The Redemption Price is expected to continue to increase prior to Closing, which will result in the Aggregate Consideration being a reduced number of shares of New Merlin Common Stock. Excludes shares of New Merlin Common Stock that would be issuable upon exercise of the New Merlin Options that will be outstanding as a result of New Merlin’s assumption of the outstanding Merlin Options.
(7) Consists of (i) New Merlin Series A Warrants exercisable for an aggregate of 10,103,376 shares of New Merlin Common Stock issuable in exchange for Pre-Funded Warrants exercisable for 10,103,376 shares of Merlin Common Stock, (ii) New Merlin Series A Warrants exercisable for 11,053,924 shares of New Merlin Common Stock to be issued pursuant to the Series A SPA.
(8) Consists of options to purchase 7,218,348 shares of New Merlin Common Stock to be issued in exchange for 2,356,737 options to purchase Merlin Common Stock (“Merlin Options”), based on an expected Exchange Ratio of 3.0629. The New Merlin Options have a weighted-average exercise price of $[1.83], based on the weighted-average exercise price of Merlin Options divided by an expected Exchange Ratio of 3.0629. The vesting requirements of the New Merlin Options are identical to those of the exchanged Merlin Options (i.e., generally vest over a four year period and expire not more than 10 years from grant). Includes [6,011,838] New Merlin Options exercisable as of September 30, 2025, with a weighted-average exercise price of $[1.50], based on the weighted-average exercise price of Merlin Options divided by an expected Exchange Ratio of 3.0629.
The following summarizes the pro forma shares outstanding of Merlin Common Stock on a fully diluted basis, assuming the exercise of all new Merlin Series A Warrants to purchase shares of New Merlin Common Stock and the vesting and exercise of all New Merlin Options:
|
No |
50% |
Maximum |
|||||||||||||
|
Shares |
% |
Shares |
% |
Shares |
% |
||||||||||
|
Public Shareholders |
25,000,000 |
15.9 |
% |
12,500,000 |
8.6 |
% |
— |
0.0 |
% |
||||||
|
Public Rightsholders* |
2,499,999 |
1.6 |
% |
2,499,999 |
1.7 |
% |
2,499,999 |
1.9 |
% |
||||||
|
Sponsor(4) |
8,800,833 |
5.6 |
% |
8,800,833 |
6.1 |
% |
8,800,833 |
6.6 |
% |
||||||
|
Series A Holders(5) |
42,791,196 |
27.2 |
% |
42,791,196 |
29.5 |
% |
42,791,196 |
32.3 |
% |
||||||
|
Merlin Equityholders(6) |
71,124,082 |
45.2 |
% |
71,124,082 |
49.1 |
% |
71,124,082 |
53.7 |
% |
||||||
|
Merlin Optionholders(7) |
7,218,348 |
4.6 |
% |
7,218,348 |
5.0 |
% |
7,218,348 |
5.5 |
% |
||||||
|
Total |
157,434,458 |
100.0 |
% |
144,934,458 |
100.0 |
% |
132,434,458 |
100.0 |
% |
||||||
____________
* Rounded to account for units held in multiples of less than ten.
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
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(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.38 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of (i) 8,333,333 shares of New Merlin Common Stock issued upon conversion of Founder Shares, (ii) 425,000 shares of New Merlin Common Stock issued upon conversion of Inflection Class A Shares not subject to redemption, and (iii) 42,500 shares of New Merlin Common Stock, in exchange for 425,000 Private Placement Units.
(5) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (A) (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of securities issued to WTI FUND X, LLC in exchange for the 2024 LSA Warrants and 2024 LSA Amendment Warrants, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs, plus (B) (i) New Merlin Series A Warrants exercisable for an aggregate of 10,103,376 shares of New Merlin Common Stock issuable in exchange for Pre-Funded Warrants exercisable for 10,103,376 shares of Merlin Common Stock, and (ii) New Merlin Series A Warrants exercisable for 11,053,924 shares of New Merlin Common Stock to be issued pursuant to the Series A SPAs.
(6) Based on the Purchase Price, $800 million, divided by the estimated per-share Redemption Price of approximately $10.39 per share from the Trust Account based on funds in the Trust Account as of December 31, 2024. The Redemption Price is expected to continue to increase prior to Closing, which will result in the Aggregate Consideration being a reduced number of shares of New Merlin Common Stock. Excludes shares of New Merlin Common Stock that would be issuable upon exercise of the New Merlin Options that will be outstanding as a result of New Merlin’s assumption of the outstanding Merlin Options.
(7) Consists of options to purchase 7,218,348 shares of New Merlin Common Stock to be issued in exchange for 2,356,737 Merlin Options, based on an expected Exchange Ratio of 3.0629.
Dilution
The following table presents the net tangible book value per share under each of (i) the No Redemption Scenario, (ii) the 50% Redemption Scenario and (iii) the Maximum Redemption Scenario assuming various sources of material probable dilution (but excluding the effects of the Business Combination transaction itself).
| (in thousands, except share and per share amounts) | No | 50% | Maximum | ||||||
| IPO offering price per share | $ | | $ | | $ | | |||
| Net Tangible Book Value as of September 30, 2025, as adjusted(4) | $ | | $ | | $ | | |||
| As adjusted shares(5) |
| |
| |
| | |||
| Net tangible book value per share | $ | | $ | | $ | | |||
| Dilution per share to Public Shareholders | $ | | $ | | $ | | |||
____________
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) See table below for reconciliation of net tangible book value, as adjusted.
(5) See table below for reconciliation of as adjusted shares.
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Table of Contents
The following table illustrates the as adjusted net tangible book value to the Inflection Point Ordinary Shareholders and net increase in net tangible book value to the Inflection Point Ordinary Shareholders as a result of transaction costs, funds released from the Trust Account at the Closing, the Signing PIPE Investment and the Additional Closing PIPE Investments, and reflects the issuance of shares of New Merlin Common Stock to holders of Inflection Point Rights.
| (in thousands, except share and per share amounts) | No | 50% | Maximum | |||||||||
| Numerator adjustments |
|
|
|
|
|
| ||||||
| Net Tangible Book Value | $ | |
| $ | |
| $ | |
| |||
| Anticipated transaction expenses | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Closing PIPE Investment proceeds | $ | 120,000 |
| $ | |
| $ | |
| |||
| Redemptions from Trust Account | $ |
|
| $ | ( | ) | $ | ( | ) | |||
| Net Tangible Book Value as of September 30, 2025, as adjusted | $ | |
| $ | |
| $ | |
| |||
| Denominator adjustments |
|
|
|
|
|
| ||||||
| Inflection Point Public Shareholders |
| |
|
| |
|
| |
| |||
| Sponsor |
| |
|
| |
|
| |
| |||
| PIPE Investors(4) |
| |
|
| |
|
| |
| |||
| As adjusted Inflection Point shares outstanding |
| |
|
| |
|
| |
| |||
____________
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs.
New Merlin is expected to have a maximum of 129,058,810 shares of New Merlin Common Stock outstanding or issuable immediately following the Closing (excluding shares of New Merlin Common Stock issuable upon exercise of New Merlin Options or New Merlin Series A Warrants) after giving effect to the Business Combination under the No Redemptions Scenario. Where there are no redemptions, the valuation of Inflection Point is based on the offering price each Public Share of $10.00 (for this purpose ascribing no value to the Inflection Point Right included in each Inflection Point Unit) and is therefore calculated as: $10.00 (Per share price at IPO) times 129,058,810 shares, or $1,290,588,100. The following table illustrates the valuation based on the offering price of the securities at the IPO price of $10.00 per share under each redemption scenario:
|
No |
50% |
Maximum |
|||||||
|
Valuation of shares issued to Public Shareholders |
$ |
250,000,000 |
$ |
125,000,000 |
|
— |
|||
|
Shares of New Merlin Common Stock issued in exchange for Public Shares |
|
25,000,000 |
|
12,500,000 |
|
— |
|||
|
Valuation of shares issued to Public Rightsholders |
$ |
24,999,990 |
$ |
24,999,990 |
$ |
24,999,990 |
|||
|
Shares of New Merlin Common Stock issued in exchange for Inflection Point Rights included in Inflection Point Units sold in the IPO |
|
2,499,999 |
|
2,499,999 |
|
2,499,999 |
|||
|
Valuation of shares held by Sponsor |
$ |
88,008,330 |
$ |
88,008,330 |
$ |
88,008,330 |
|||
|
Shares of New Merlin Common Stock issued in exchange for securities held by Sponsor |
|
8,800,833 |
|
8,800,833 |
|
8,800,833 |
|||
20
Table of Contents
|
No |
50% |
Maximum |
|||||||
|
Valuation of shares issued to Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) |
$ |
711,240,820 |
$ |
711,240,820 |
$ |
711,240,820 |
|||
|
Shares of New Merlin Common Stock issued in exchange for Merlin securities (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) in the Business Combination |
|
71,124,082 |
|
71,124,082 |
|
71,124,082 |
|||
|
Valuation of shares underlying Series A Preferred Stock issued to holders of Pre-Funded Convertible Notes, the 2024 LSA Warrants and the 2024 LSA Amendment Warrants |
$ |
216,338,960 |
$ |
216,338,960 |
$ |
216,338,960 |
|||
|
Shares of New Merlin Common Stock underlying Series A Preferred Stock issued in exchange for Pre-Funded Convertible Notes, the 2024 LSA Warrants and the 2024 LSA Amendment Warrants(4) |
|
21,633,896 |
|
21,633,896 |
|
21,633,896 |
|||
|
Total valuation |
$ |
1,290,588,100 |
$ |
1,165,588,100 |
$ |
1,040,588,100 |
|||
|
Total shares of New Merlin Common Stock outstanding or issuable without further consideration at Closing |
|
129,058,810 |
|
116,558,810 |
|
104,058,810 |
|||
____________
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, will exercise their redemption rights for an aggregate payment of approximately $129.9 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, will exercise their redemption rights for an aggregate payment of approximately $259.7 million (based on the estimated per-share redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment, (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of securities issued to WTI FUND X, LLC in exchange for the 2024 LSA Warrants and the 2024 LSA Amendment Warrants, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs.
Regulatory Matters
Neither Inflection Point nor Merlin are aware of any material regulatory approvals or actions that are required for completion of the Business Combination, other than the regulatory notices and approvals discussed in “Proposal No. 1 — The Business Combination Proposal — Business Combination Agreement — Closing Conditions — Conditions to the Obligations of Each Party”. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the FTC (the “Antitrust Agencies”) and certain waiting period requirements have been satisfied. The Business Combination is subject to the HSR Act and cannot be completed until the expiration of a 30-day waiting period following the two filings of the required Notification and Report Forms with the Antitrust Division and the FTC. On September 30, 2025, Inflection Point and Merlin filed the required forms under the HSR Act with respect to the Business Combination with the Antitrust Agencies. On October 30, 2025, the applicable 30-day waiting period under the HSR Act relating to the Business Combination expired.
21
Table of Contents
Recommendation to Shareholders of Inflection Point
The Inflection Point Board believes that the Business Combination Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Inflection Point’s shareholders and unanimously recommends that its 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 Organizational Documents Proposal, “FOR” the approval, on an advisory basis, of each of the separate Advisory Organizational Documents Proposals, “FOR” the approval of the Director Election Proposal, “FOR” the approval of the New Merlin Incentive Plan Proposal, “FOR” the approval of the New Merlin Employee Stock Purchase Plan Proposal and “FOR” the approval of the Adjournment Proposal, if presented to the extraordinary general meeting.
Background and Material Terms of the Business Combination
Inflection Point is a special purpose acquisition company that was incorporated on June 24, 2024, as a Cayman Islands exempted company 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. Starting November 2024, Inflection Point’s management surveyed the landscape of potential acquisition opportunities for acquisition targets. From the time of Inflection Point’s IPO to June 2025 when Inflection Point entered into a letter of intent with Merlin, Inflection Point reviewed more than 70 acquisition opportunities, executed approximately 30 non-disclosure agreements and delivered seven initial draft letters of intent. Inflection Point management ultimately decided not to pursue such alternate targets, and instead focus its efforts on Merlin. The terms of the Business Combination Agreement are the result of negotiations between the representatives of Inflection Points and Merlin, which occurred between May and August 2025. For more information, see “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination”.
The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination
Before reaching their respective unanimous decisions on August 8, 2025, the Special Committee and the Inflection Point Board consulted with its management team, legal counsel and other advisors. The Special Committee and the Inflection Point Board considered a variety of factors in connection with its evaluation of the Business Combination in approving and recommending the transaction to the Inflection Point shareholders. In light of the complexity of those factors, the Special Committee and the Inflection Point Board, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Different individual members of the Special Committee and the Inflection Point Board may have given different weight to different factors in their evaluation of the Business Combination.
Further, the prospectus for the IPO identified the general criteria and guidelines that Inflection Point believed would be important in evaluating prospective target businesses, although Inflection Point also indicated it may enter into a business combination with a target business that does not meet these criteria or guidelines. The Special Committee and the Inflection Point Board considered these criteria in their evaluation of Merlin, which include (i) Merlin’s management team, (ii) Merlin’s business, (iii) Merlin’s valuation and projected financial performance, (iv) review of other business combination opportunities reasonably available to Inflection Point, (v) the investment in Merlin pursuant to the Signing Pre-Funded SPA, (vi) Merlin Stockholders’ retained interest, (vii) review of selected public companies and (viii) review of the USSOCOM (as defined below) contract preliminary economic assessment. The Special Committee and the Inflection Point Board determined that the Business Combination presents an attractive business opportunity in light of a variety of factors, including its strong and experienced management team, defensible market position, unique product offering and valuation. The Special Committee and the Inflection Point Board also reviewed the financial analysis and opinion of Newbridge to the effect that, as of August 8, 2025, and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Newbridge as set forth in its written opinion, (i) the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement was fair, from a financial point of view, to the Inflection Point Unaffiliated Shareholders and (ii) whether the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement. The Special Committee and the Inflection Point Board also considered the potential detriments of the Business Combination to Merlin, including Merlin’s limited operating history, regulatory risks, the uncertainty of the potential benefits of the Business Combination
22
Table of Contents
being achieved, macroeconomic risks, the absence of possible structural protections for minority shareholders, and the risks and costs to Inflection Point if the Business Combination is not achieved, including the risk that it may result in Inflection Point being unable to complete a business combination and force Inflection Point to liquidate.
For a description of the Special Committee’s and the Inflection Point Board’s reasons for the approval of the Business Combination and the unanimous recommendation of the Inflection Point Board, see the subsection entitled “Proposal No. 1 — The Business Combination Proposal — The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination”.
Sources and Uses of Funds for the Business Combination
The following tables summarize the sources and uses for funding the Business Combination.
Estimated Sources and Uses (No Redemptions)
|
Sources |
Uses |
|||||||
|
($ in millions) |
($ in millions) |
|||||||
|
Merlin Equity Rollover |
$ |
800.0 |
Merlin Equity Rollover |
$ |
800.0 |
|||
|
Cash in Trust Account(1) |
$ |
259.7 |
Cash to Balance Sheet(1)(2)(3)(4) |
$ |
411.9 |
|||
|
Total PIPE Investment |
$ |
207.7 |
Paydown of Existing Debt(3) |
$ |
35.5 |
|||
|
|
Estimated Transaction Expenses |
$ |
20.0 |
|||||
|
Total sources |
$ |
1,267.4 |
Total uses |
$ |
1,267.4 |
|||
Estimated Sources and Uses (Maximum Redemptions)
|
Sources |
Uses |
|||||||
|
($ in millions) |
($ in millions) |
|||||||
|
Merlin Equity Rollover |
$ |
800.0 |
Merlin Equity Rollover |
$ |
800.0 |
|||
|
Total PIPE Investment |
$ |
207.7 |
Cash to Balance Sheet(1)(2)(3)(4) |
$ |
152.2 |
|||
|
|
Paydown of Existing Debt(3) |
$ |
35.5 |
|||||
|
|
Estimated Transaction Expenses |
$ |
20.0 |
|||||
|
Total sources |
$ |
1,007.7 |
Total uses |
$ |
1,007.7 |
|||
____________
(1) Based on the amount in the Trust Account as of September 30, 2025.
(2) Assumes $207.7 million in PIPE Investments from new and existing investors, up to $257,000,000 in cash held in the Trust Account, paydown of $36,000,000 in outstanding debt and $20,00,000 of transaction expenses.
(3) As of August 1, 2025, Merlin had approximately $36,000,000 of outstanding debt.
(4) Assumes $207.7 million in PIPE Investments from new and existing investors, paydown of $36,000,000 in outstanding debt and $20,00,000 of transaction expenses.
U.S. Federal Income Tax Considerations
For a discussion summarizing material U.S. federal income tax considerations of the Domestication and an exercise of Redemption Rights in connection with the Business Combination, please see “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 Merlin has been determined to be the accounting acquirer under all redemption scenarios presented. Under this method of accounting, Inflection Point, the legal acquirer, will be treated as the accounting acquiree for financial reporting purposes, and Merlin, the legal acquiree, will be treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities, and results of operations of Merlin will become the historical financial statements of New Merlin, and Inflection Point’s assets, liabilities, and results operations will be consolidated with Merlin starting from the Closing Date. For accounting purposes, the financial statements of New Merlin will represent a continuation of the financial statements of Merlin, with the Business Combination being treated as the equivalent of Merlin issuing stock for the net assets of Inflection Point, accompanied by a recapitalization. The net assets of Inflection Point will be stated at historical carrying values, and no goodwill or other intangible assets will be recorded. Operations prior
23
Table of Contents
to the Business Combination will be presented as those of Merlin in future final reporting of New Merlin. 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 Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS 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 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. Inflection Point has not elected, and New Merlin 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 Merlin will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of Inflection Point’s IPO registration statement, (b) in which New Merlin has total annual revenue of at least $1.235 billion, or (c) in which New Merlin 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 (2) the date on which New Merlin has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
Smaller Reporting Company
Inflection Point 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 Merlin 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 Merlin 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 Merlin’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 Merlin 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 Merlin will remain a smaller reporting company after the Closing. To the extent that New Merlin 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.
24
Table of Contents
Risk Factors
In evaluating the proposals to be presented at the extraordinary general meeting, shareholders should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page 35 of this proxy statement/prospectus. In particular, such risks include, but are not limited to, the following:
• Merlin is an early-stage company with a history of losses. Merlin has not been profitable historically and may not achieve or maintain profitability in the future.
• A limited number of customers account for a substantial portion of Merlin’s revenue. If existing customers do not make subsequent purchases from Merlin or renew their contracts with Merlin, or if Merlin’s relationships with its largest customers are impaired or terminated, Merlin’s revenue could decline, and Merlin’s result of operations would be adversely impacted.
• A significant portion of Merlin’s business depends on sales to the public sector, and Merlin’s failure to receive and maintain government contracts or changes in the government’s contracting or fiscal policies of the public sector could adversely affect Merlin’s business, results of operations, financial condition, and growth prospects.
• A decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards have affected and may continue to significantly and adversely affect Merlin’s future revenue and limit Merlin’s growth prospects.
• The U.S. government may modify, curtail or terminate one or more of Merlin’s contracts, and failure to comply with contract terms or applicable laws and regulations in relation to Merlin’s U.S. government contracts could expose us to penalties or other adverse consequences.
• Crashes, accidents or incidents of aircraft could have a material adverse effect on our business, financial condition, and results of operations.
• Merlin is reliant on aviation regulations and certification from regulatory authorities such as the Federal Aviation Authority (FAA) and/or New Zealand Civil Aviation Authority (CAA) and Military Airworthiness authorities to certify Merlin’s technology on aircraft.
• Regulation by United States and foreign government agencies, including the FAA and CAA, which regulates the civil aviation manufacturing and repair industries in the United States and New Zealand, may increase Merlin’s costs of providing service or require us to change our services.
• Merlin’s use of open-source software could limit Merlin’s ability to commercialize Merlin’s technology, and subject Merlin to possible claims or proceedings.
• Merlin’s customers may experience service failures or interruptions due to defects in the software, infrastructure, components or engineering systems that compromise Merlin’s services, or due to errors in product installation, any of which could harm Merlin’s business.
• The centrality of artificial intelligence technology to Merlin’s services and business exposes us to risks innate to the development of artificial intelligence models and securing intellectual property rights in those models.
• We have identified material weaknesses in our internal control over financial reporting. If not remediated, or if New Merlin experiences additional material weaknesses in the future or otherwise fails to maintain effective internal controls in the future, New Merlin may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect investor confidence in New Merlin and, as a result, the value of New Merlin Common Stock.
• Merlin or Merlin’s suppliers may not be able to procure or repair critical hardware components that are required in Merlin’s operations.
25
Table of Contents
• Merlin depends upon third parties to manufacture equipment components, provide services and install and maintain Merlin’s equipment. If these third parties are unable to manufacture Merlin’s equipment components or provide the applicable services, in each case either temporarily or permanently, such disruptions may have a material adverse effect on Merlin’s business, revenue, financial results and prospects.
• Merlin or Merlin’s technology suppliers may be unable to continue to innovate and provide services and software that are useful to Merlin’s customers.
• Competition could result in price reductions, reduced revenue and loss of market position and could harm our results of operations.
• If Merlin fails to obtain licenses or comply with Merlin’s obligations in these agreements under which Merlin license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, Merlin could lose license rights that are important to Merlin’s business.
• We are currently in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by a new 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.
• Directors and officers of Inflection Point, the Sponsor 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 Inflection Point shareholders generally.
• Inflection Point’s shareholders will experience dilution due to the issuance of shares of New Merlin Common Stock and securities convertible into the shares of New Merlin Common Stock to the Merlin Members as consideration in the Business Combination and the issuance of securities in the Series A Preferred Investment.
• Inflection Point 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.
• Past performance by Inflection Point’s management team, advisors and their respective affiliates, including investments and transactions in which they have participated and businesses with which they have been associated, may not be indicative of future performance of an investment in New Merlin.
• New Merlin’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 completion of the Business Combination is subject to certain closing conditions, including satisfaction of all closing conditions in the Business Combination Agreement, and any such conditions may not be satisfied on a timely basis, if at all.
Market Price, Ticker Symbol and Dividends
Inflection Point
Trading Market of Inflection Point’s Securities
Inflection Point’s Units, Public Shares and Rights are currently listed on Nasdaq under the symbols “BACQU”, “BACQ” and “BACQR” respectively. Inflection Point’s securities commenced trading on Nasdaq on November 4, 2024.
The closing price of the Inflection Point Units, Public Shares and Rights on August 12, 2025, the last trading day before announcement of the execution of the Business Combination Agreement, was $10.59, $10.30 and $0.31, respectively. As of January 8, 2026, the closing price of each of the Inflection Point Units, Public Shares and Rights was $11.55, $10.84 and $0.82. Inflection Point’s securityholders should obtain current market quotations for the securities. The
26
Table of Contents
market price of Inflection Point’s securities could vary at any time prior to the Closing. Market price information regarding the Inflection Point Class B Shares is not provided here because there is no established public trading market for the Inflection Point Class B Shares.
Holders
As of [•], the Record Date, there were [•] record holders of the Inflection Point Class A Shares and [•] record holders of the Inflection Point Class B Shares. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Inflection Point Class A Shares are held of record by banks, brokers and other financial institutions.
Dividends
Inflection Point 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.
Merlin
Trading Market of Merlin’s Securities
Historical market price information regarding Merlin is not provided because there is no public market for its securities.
27
Table of Contents
SUMMARY HISTORICAL FINANCIAL INFORMATION OF MERLIN
The following table shows the selected historical financial information of Merlin for the periods and as of the dates indicated.
The summary of historical financial information for Merlin presented below for the nine months ended September 30, 2025 and 2024, and the summary balance sheets as of September 30, 2025 and December 31, 2024 have been derived from Merlin’s unaudited consolidated financial statements included elsewhere in this proxy statement/prospectus. The summary information in the following tables should be read in conjunction with the sections entitled “Risk Factors — Risks Related to Our Business and Industry” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Merlin” and Merlin’s consolidated financial statements and related notes thereto included elsewhere in this proxy statement/prospectus. The selected historical financial information in this section is not intended to replace Merlin’s consolidated financial statements and related notes. Merlin’s historical results are not necessarily indicative of Merlin’s future results.
As explained elsewhere in this proxy statement/prospectus, the financial information contained in this section relates to Merlin, prior to and without giving pro forma effect of the impact of the Business Combination and, as a result, the results in this section may not be indicative of the results of the New Merlin going forward.
|
(in thousands, except share and per share amounts) |
Nine Months Ended |
|||||||
|
2025 |
2024 |
|||||||
|
Revenue |
$ |
5,899 |
|
$ |
367 |
|
||
|
Cost of revenue |
|
7,725 |
|
|
6,690 |
|
||
|
Gross loss |
|
(1,826 |
) |
|
(6,323 |
) |
||
|
Operating expenses: |
|
|
|
|
||||
|
Research and development |
|
21,699 |
|
|
20,904 |
|
||
|
General and administrative |
|
14,467 |
|
|
13,158 |
|
||
|
Selling and marketing |
|
1,029 |
|
|
1,328 |
|
||
|
Total operating expenses |
|
37,195 |
|
|
35,390 |
|
||
|
Loss from operations |
|
(39,021 |
) |
|
(41,713 |
) |
||
|
Other (expense) income: |
|
|
|
|
||||
|
Interest income |
|
862 |
|
|
1,547 |
|
||
|
Interest expense |
|
(2,956 |
) |
|
(1,197 |
) |
||
|
Other expense |
|
(193 |
) |
|
(136 |
) |
||
|
Change in fair value of warrant liabilities |
|
(4,562 |
) |
|
(314 |
) |
||
|
Change in fair value of convertible promissory notes |
|
(3,118 |
) |
|
— |
|
||
|
Loss on exchange of warrant liabilities |
|
(3,320 |
) |
|
— |
|
||
|
Loss on issuance of financial instruments |
|
(585 |
) |
|
— |
|
||
|
Loss on extinguishment of long-term debt |
|
(2,157 |
) |
|
— |
|
||
|
Change in fair value of long-term debt |
|
(672 |
) |
|
— |
|
||
|
Total other expense |
|
(16,701 |
) |
|
(100 |
) |
||
|
Loss before provision for income taxes |
|
(55,722 |
) |
|
(41,813 |
) |
||
|
Provision for income taxes |
|
3 |
|
|
13 |
|
||
|
Net loss |
|
(55,725 |
) |
|
(41,826 |
) |
||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
|
(345,717 |
) |
|
— |
|
||
|
Net loss attributable to common stockholders |
$ |
(401,442 |
) |
$ |
(41,826 |
) |
||
|
Net loss per share: |
|
|
|
|
||||
|
Basic and diluted |
$ |
(77.33 |
) |
$ |
(8.20 |
) |
||
|
Weighted-average shares outstanding: |
|
|
|
|
||||
|
Basic and diluted |
|
5,191,045 |
|
|
5,103,003 |
|
||
|
As of |
As of |
|||||||
|
(in thousands, except share and per share amounts) |
||||||||
|
Total Assets |
$ |
87,813 |
|
$ |
49,194 |
|
||
|
Total Liabilities |
$ |
142,894 |
|
$ |
50,100 |
|
||
|
Total Redeemable Convertible Preferred Stock |
$ |
476,333 |
|
$ |
130,616 |
|
||
|
Total Stockholder’s Deficit |
$ |
(531,414 |
) |
$ |
(131,522 |
) |
||
28
Table of Contents
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following summary unaudited pro forma condensed combined financial data (the “summary pro forma data”) gives effect to the transactions described in the section entitled Unaudited Pro Forma Condensed Combined Financial Information. The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S GAAP. Under this method of accounting, Inflection Point, the legal acquirer, will be treated as the accounting acquiree for financial reporting purposes, and Merlin, the legal acquiree, will be treated as the accounting acquirer. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Merlin issuing stock for the net assets of Inflection Point, accompanied by a recapitalization. Upon the completion of the Business Combination, substantially all of the assets and business of the combined company will be held and operated by New Merlin.
The summary unaudited pro forma condensed combined balance sheet data as of September 30, 2025 gives pro forma effect to the transaction as if it had occurred on September 30, 2025. The summary unaudited pro forma condensed combined statements of operations data for the nine months ended September 30, 2025 and the twelve months ended December 31, 2024 gives pro forma effect to the transaction as if it had been consummated on January 1, 2024.
The summary pro forma data has been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information of the combined company appearing elsewhere in this proxy statement/prospectus and the accompanying notes. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical financial statements of Merlin and related notes and the historical financial statements of Inflection Point and related notes included in this proxy statement/prospectus. The summary pro forma data have been presented for information purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the transaction been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of the combined company.
The summary unaudited pro forma condensed combined financial information has been prepared assuming three redemption scenarios after giving effect to the Business Combination, as follows:
• No Redemption Scenario — This scenario assumes that none of the Public Shares are redeemed.
• Maximum Redemption Scenario — This scenario assumes that 25,000,000 Public Shares (which represents the total number of Public Shares outstanding) are redeemed for an aggregate payment of approximately $259.7 million (based on the estimated per share redemption price of approximately $10.39 per share as of September 30, 2025) from the Trust Account. Cash available for maximum redemptions is calculated as the cash in trust less remaining transaction costs to be paid in cash reflected in the unaudited pro forma condensed balance sheet.
• 50% Redemption Scenario — This scenario assumes that 12,500,000 shares Public Shares (which represents 50% of the total Public Shares outstanding) are redeemed for an aggregate payment of approximately $129.9 million (based on the estimated per share redemption price of approximately $10.39 per share as of September 30, 2025) from the Trust Account.
29
Table of Contents
If the actual facts are different from these assumptions, including as to the amount of Inflection Point’s cash and net debt, then the maximum number of redemptions and the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different.
|
Pro Forma Combined |
||||||||||||
|
No |
Maximum |
50% |
||||||||||
|
Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data for the Nine Months Ended September 30, 2025 |
|
|
|
|
|
|
||||||
|
Revenue |
$ |
5,899 |
|
$ |
5,899 |
|
$ |
5,899 |
|
|||
|
Net loss attributable to common shareholders |
$ |
(65,608 |
) |
$ |
(65,608 |
) |
$ |
(65,608 |
) |
|||
|
Not loss per share – basic and diluted |
$ |
(0.60 |
) |
$ |
(0.77 |
) |
$ |
(0.67 |
) |
|||
|
Weighted average common shares outstanding – basic and diluted |
|
110,002,698 |
|
|
85,002,698 |
|
|
97,502,698 |
|
|||
|
Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data for the Year Ended December 31, 2024 |
|
|
|
|
|
|
||||||
|
Revenue |
$ |
1,229 |
|
$ |
1,229 |
|
$ |
1,229 |
|
|||
|
Net loss attributable to common shareholders |
$ |
(90,021 |
) |
$ |
(90,021 |
) |
$ |
(90,021 |
) |
|||
|
Not loss per share – basic and diluted |
$ |
(0.82 |
) |
$ |
(1.06 |
) |
$ |
(0.92 |
) |
|||
|
Weighted average common shares outstanding – basic and diluted |
|
110,002,698 |
|
|
85,002,698 |
|
|
97,502,698 |
|
|||
30
Table of Contents
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE INFORMATION OF Inflection Point AND MERLIN LABS
The following table sets forth selected historical comparative share information for Merlin and Inflection Point, and unaudited pro forma condensed combined per share information of the combined company after giving effect to the Business Combination, assuming three redemption scenarios as follows:
• Assuming No Redemption Scenario — This scenario assumes that none of the Public Shares are redeemed.
• Assuming Maximum Redemption Scenario — This scenario assumes that 25,000,000 Public Shares (which represents the total number of Public Shares outstanding) are redeemed for an aggregate payment of approximately $259.7 million (based on the estimated per share redemption price of approximately $10.39 per share) from the Trust Account. Cash available for maximum redemptions is calculated as the cash in trust less remaining transaction costs to be paid in cash reflected in the unaudited pro forma condensed balance sheet.
• Assuming 50% Redemption Scenario — This scenario assumes that 12,500,000 Public Shares (which represents half of the total number of Public Shares outstanding) are redeemed for an aggregate payment of approximately $129.9 million (based on the estimated per share redemption price of approximately $10.39 per share) from the Trust Account.
The pro forma stockholders’ equity information reflects the Business Combination as if it had occurred on September 30, 2025. The weighted average shares outstanding and net loss per share information for the nine months ended September 30, 2025 and for the twelve months ended December 31, 2024, gives pro forma effect to the Business combination as if it had occurred on January 1, 2024, the beginning of the earliest period presented.
If the actual facts are different than these assumptions, including as to the amount of Inflection Point’s cash and net debt, then the maximum number of redemptions and the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different.
This information is only a summary and should be read together with the historical financial information included elsewhere in this proxy statement/prospectus, and the historical financial statements of Merlin and related notes and historical financial statements of Inflection Point and related notes that are included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined per share information of Merlin and Inflection Point are derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/prospectus.
31
Table of Contents
The unaudited pro forma combined loss per share information below does not purport to represent the loss per share which would have occurred had the companies been combined during the periods presented, nor loss per share of any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Merlin and Inflection Point would have been had the companies been combined during the periods presented.
|
As of and for the nine months ended |
||||||||||||||||||||
|
Merlin Labs |
Inflection |
Combined Pro Forma |
||||||||||||||||||
|
No |
50% |
Maximum |
||||||||||||||||||
|
Stockholders’ equity (deficit) |
$ |
(531,414 |
) |
$ |
(10,530 |
) |
$ |
182,161 |
|
$ |
52,296 |
|
$ |
(77,569 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net income (loss) |
$ |
(55,725 |
) |
$ |
4,809 |
|
$ |
(45,111 |
) |
$ |
(45,111 |
) |
$ |
(45,111 |
) |
|||||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
|
(345,717 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||
|
Cumulative Series A Preferred Stock dividends |
|
— |
|
|
— |
|
|
(20,497 |
) |
|
(20,497 |
) |
|
(20,497 |
) |
|||||
|
Net income (loss) attributable to common stockholders |
$ |
(401,442 |
) |
$ |
4,809 |
|
$ |
(65,608 |
) |
$ |
(65,608 |
) |
$ |
(65,608 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Common shares outstanding as of September 30, 2025 – basic and diluted(1) |
|
5,230,523 |
|
|
33,758,333 |
|
|
110,002,698 |
|
|
97,502,698 |
|
|
85,002,698 |
|
|||||
|
Weighted average common shares outstanding – basic and diluted(1) |
|
5,191,045 |
|
|
33,333,333 |
|
|
110,002,698 |
|
|
97,502,698 |
|
|
85,002,698 |
|
|||||
|
Stockholders’ equity (deficit) per share – basic and diluted(1) |
$ |
(101.60 |
) |
$ |
(0.31 |
) |
$ |
1.66 |
|
$ |
0.54 |
|
$ |
(0.91 |
) |
|||||
|
Net income (loss) per share attributable to common stockholders – basic and diluted(1) |
$ |
(77.33 |
) |
$ |
0.14 |
|
$ |
(0.60 |
) |
$ |
(0.67 |
) |
$ |
(0.77 |
) |
|||||
____________
(1) Inflection Point historical share counts include common shares subject to possible redemption.
(2) Merlin used the two-class method to calculate basic and diluted net loss per share. Unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends during the vesting term. As of periods beginning after March 31, 2024, the Company no longer had participating securities other than common stock, as all outstanding restricted stock had fully vested. For these periods, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders of the Company by the weighted average number of shares of common stock outstanding during the period. The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share for the nine months ended September 30, 2025, due to their anti-dilutive effect:
|
Nine Months |
||
|
Redeemable convertible preferred stock |
17,696,748 |
|
|
Stock options |
2,518,101 |
|
|
Common stock warrants |
8,119 |
|
|
2019 LSA Warrants |
144,926 |
|
|
2021 LSA Warrants |
81,188 |
|
|
2024 LSA Conversion Feature |
214,010 |
|
|
Pre-PIPE Bridge Notes |
1,127,531 |
|
|
Pre-Funded PIPE Notes |
2,645,082 |
|
|
Purchaser Right Notes |
1,202,310 |
|
|
Total |
25,638,015 |
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(3) Inflection Point has two classes of shares, Inflection Point Class A Shares and Inflection Point Class B Shares. Inflection Point complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from income per ordinary share as the redemption value approximates fair value. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted income per ordinary share does not consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 20,150,000 Inflection Point Class A Shares in the aggregate. At September 30, 2025, Inflection Point did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of Inflection Point. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the nine months ended September 30, 2025. For the nine months ended September 30, 2025, (i) Inflection Point allocated net income of $3,607 and $1,202 to the Inflection Point Class A Shares and Inflection Point Class B Shares, respectively, (ii) there were 25,000,000 Inflection Point Class A Shares and 8,333,333 Inflection Point Class B Shares weighted-average outstanding (basic and diluted), and (iii) basic and diluted net income was $0.14 per Inflection Point Class A Share and $0.14 per Inflection Point Class B Share.
|
For the year ended December 31, 2024 |
|||||||||||||||||||
|
Merlin Labs |
Inflection |
Combined Pro Forma |
|||||||||||||||||
|
No |
50% |
Maximum |
|||||||||||||||||
|
Net income (loss) |
$ |
(55,253 |
) |
$ |
1,520 |
$ |
(58,964 |
) |
$ |
(58,964 |
) |
$ |
(58,964 |
) |
|||||
|
Cumulative Series A Preferred Stock dividends |
|
— |
|
|
— |
|
(31,057 |
) |
|
(31,057 |
) |
|
(31,057 |
) |
|||||
|
Net income (loss) attributable to common stockholders |
$ |
(55,253 |
) |
$ |
1,520 |
$ |
(90,021 |
) |
$ |
(90,021 |
) |
$ |
(90,021 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Weighted average common shares outstanding – basic and diluted(1) |
|
5,118,223 |
|
|
15,789,473 |
|
110,002,698 |
|
|
97,502,698 |
|
|
85,002,698 |
|
|||||
|
Net income (loss) per share attributable to common stockholders – basic and diluted(1) |
$ |
(10.80 |
) |
$ |
0.10 |
$ |
(0.82 |
) |
$ |
(0.92 |
) |
$ |
(1.06 |
) |
|||||
____________
(1) Inflection Point historical share counts include common shares subject to possible redemption.
(2) Merlin uses the two-class method to calculate basic and diluted net loss per share. Unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends during the vesting term. Under the two-class method, earnings of Merlin are allocated between common stockholders and these participating securities based on the weighted-average number of shares of common stock and participating securities outstanding during the relevant period. The participating securities do not have a contractual obligation to share in the losses of Merlin. Therefore, net loss is fully attributable to Merlin’s common stockholders for the year ended December 31, 2024. The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share for the year ended December 31, 2024, due to their anti-dilutive effect:
|
Year Ended |
||
|
Redeemable convertible preferred stock |
17,696,748 |
|
|
Stock options |
2,904,261 |
|
|
Common stock warrants |
7,104 |
|
|
2019 LSA Warrants |
144,926 |
|
|
2021 LSA Warrants |
81,188 |
|
|
2024 LSA Warrants |
224,710 |
|
|
2024 LSA Conversion Feature |
214,010 |
|
|
Total |
21,272,947 |
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(3) Inflection Point has two classes of shares, Inflection Point Class A Shares and Inflection Point Class B Shares. Inflection Point complies with accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share”. Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from income per ordinary share as the redemption value approximates fair value. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted income per ordinary share does not consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 20,150,000 Inflection Point Class A Shares in the aggregate. At December 31, 2024, Inflection Point did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of Inflection Point. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the year ended December 31, 2024. For the year ended December 31, 2024, (i) Inflection Point allocated net income of $722 and $798 to the Inflection Point Class A Shares and Inflection Point Class B Shares, respectively, (ii) there were 7,500,000 Inflection Point Class A Shares and 8,289,473 Inflection Point Class B Shares weighted-average outstanding (basic and diluted), and (iii) basic and diluted net income was $0.10 per Inflection Point Class A Share and $0.10 per Inflection Point Class B Share.
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RISK FACTORS
You should carefully consider all the following risk factors, together with all of the other information in this proxy statement/prospectus, including the financial information, before deciding how to vote or instruct your vote to be cast to approve the Transaction Proposals described in this proxy statement/prospectus.
The value of your investment following the completion of the Business Combination will be subject to significant risks affecting, among other things, Merlin’s business, financial condition and results of operations. If any of the events described below occur, the New Merlin’s post-Business Combination business and financial results could be adversely affected in material respects. This could result in a decline, which may be significant, in the trading price of New Merlin’s securities and you therefore may lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to the businesses of Inflection Point and Merlin.
Risks Related to Inflection Point
Directors and officers of Inflection Point, the Sponsor 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 Inflection Point shareholders generally.
When you consider the recommendation of the Inflection Point Board in favor of approval of the Business Combination Proposal and the other Shareholder Proposals included herein, you should keep in mind that the Sponsor and Inflection Point’s directors and officers have interests in such proposals that are different from, in addition to and/or in conflict with, those of the Inflection Point Shareholders generally. These interests include, among other things:
• Our Sponsor purchased 7,187,500 Founder Shares for $25,000, or approximately $0.004 per share, in a private placement prior to the consummation of the IPO. On October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited, resulting in the Sponsor holding 8,333,333 Founder Shares. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 5,266,667 Founder Shares, or approximately 60.1%, of the Founder Shares held by the Sponsor. Michael Blitzer, our President, Chief Executive Officer and director, and Kevin Shannon, our Chief Operating Officer, are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Each director and officer of Inflection Point has economic interests in the Founder Shares held by the Sponsor. No other person has a direct or indirect material interest in the Sponsor. Such 8,333,333 shares of New Merlin Common Stock that the Sponsor and its permitted transferees will receive upon conversion of such Founder Shares in the Business Combination, if unrestricted and freely tradable, would have had an aggregate market value of approximately $96.2 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Our Sponsor purchased 425,000 Private Placement Units for $4,250,000, or $10.00 per Private Placement Unit, in a private placement that closed simultaneously with the IPO. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 425,000, or 100% of the Private Placement Units held by the Sponsor. Mr. Blitzer and Mr. Shannon are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Following the Business Combination, the 467,500 shares of New Merlin Common Stock that the Sponsor will receive upon conversion of such Private Placement Units, if unrestricted and freely tradable, would have had an aggregate market value
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of approximately $5.4 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Given the differential in the purchase price that the Sponsor paid for the Founder Shares as compared to the price of the Inflection Point Class A Shares included in the Inflection Point Units sold in the IPO, the Sponsor may earn a positive rate of return on its investment even if the shares of New Merlin Common Stock trade below $10.00 per share and the Public Shareholders experience a negative rate of return following the Closing. Accordingly, the economic interests of the Sponsor diverge from the economic interests of Public Shareholders because the Sponsor 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.
• Our Sponsor, and therefore Inflection Point Fund, will lose its entire investment in us if we do not complete a business combination by November 4, 2026 (or if such date is extended at a duly called meeting of the Inflection Point shareholders, such later date). If we do not consummate a business combination by such date, as promptly as reasonably possible but not more than ten business days thereafter, we will 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 the claims of creditors and the requirements of other applicable law. In such event, the Inflection Point Rights may be worthless. In such event, the 8,758,333 Inflection Point Ordinary Shares owned by our Sponsor would be worthless because following the redemption of Public Shares, we would likely have few, if any, net assets and because the Sponsor has agreed to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete a business combination within the required period. Additionally, in such event, the 425,000 Inflection Point Rights underlying the Private Placement Units that the Sponsor paid $4,250,000 to purchase will expire and become worthless.
• Inflection Point Fund, an accredited investor that is an affiliate of Inflection Point, has an economic interest in 5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. In exchange for the Pre-Funded Convertible Note and Pre-Funded Warrant it purchased for $15.0 million, Inflection Point Fund will also receive at the Closing, (i) a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (a) the total outstanding principal and outstanding accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by (b) $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date) and (ii) a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock.
• Inflection Point’s Sponsor, officers and directors, and Inflection Point Fund, have agreed not to redeem any of the Founder Shares or Inflection Point Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination.
• If the Trust Account is liquidated, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Share, or such lesser amount per Public Share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account.
• Inflection Point’s existing officers and directors will be eligible for continued indemnification and continued coverage under a directors’ and officers’ liability insurance policy for a period of six (6) years after the Business Combination.
• The Sponsor and its members (present and former), managers and affiliates and their respective present and former officers and directors (each, a “Sponsor Indemnitee”) will be eligible for continued indemnification for any Sponsor Indemnitee’s activities in connection with the affairs of Inflection Point.
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• The continuation of [•], and [•], as directors of the New Merlin Board following the Closing. As such, in the future they may receive any cash fees, stock options or stock awards that the New Merlin Board determines to pay to its directors.
• In connection with the Closing, our Sponsor, officers and directors would be entitled to the repayment of any outstanding working capital loan and advances that have been made to Inflection Point. In order to finance transaction costs in connection with a business combination, the Sponsor or Inflection Point Fund or certain of Inflection Point’s officers or directors may, but are not obligated to, loan Inflection Point Working Capital Loans. In the event that a business combination does not close, Inflection Point may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $2,500,000 of such Working Capital Loans may be convertible into private placement units at $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. As of the date of this proxy statement/prospectus, no such Working Capital Loans are outstanding.
• Upon the Closing, subject to the terms and conditions of the Business Combination Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Inflection Point from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. As of the date of this proxy statement/prospectus, there are no out-of-pocket expenses to be reimbursed.
• Pursuant to the Registration Rights Agreement, Inflection Point’s officers and directors, and the Sponsor and its members will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the New Merlin Common Stock held by such parties following the consummation of 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 which were not presented to Inflection Point, 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 Inflection Point — Conflicts of Interest.”
The Sponsor and Inflection Point’s directors and officers have agreed to vote in favor of the Business Combination, regardless of how our Public Shareholders vote.
The Sponsor and Inflection Point Fund have agreed to vote all the Founder Shares and any Public Shares they may hold in favor of all the proposals being presented at the extraordinary general meeting. As of the Record Date, the Sponsor owned 8,333,333 Founder Shares and 425,000 Inflection Point Class A Shares underlying the Private Placement Units, representing approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares. As a result, we would only need 8,120,835, or 32.5% of the 25,000,000 Public Shares outstanding to be voted in favor of the Business Combination in order to approve the Business Combination Proposal.
The ability of our Public Shareholders to exercise redemption rights with respect to a large number of our Public Shares could increase the probability that the Business Combination will be unsuccessful and that you would have to wait for liquidation in order to redeem your Public Shares.
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, we may need to arrange for additional debt or equity financing to provide working capital to New Merlin following the Closing. There can be no assurance that such debt or equity financing will be available to us if we need it or, if available, the terms will be satisfactory to us. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels and may increase the probability that the Business Combination will be unsuccessful. If the Business Combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until we complete an alternate initial business combination or if we are unable to complete an initial business combination within the time
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period provided by the Cayman Constitutional Documents. If you are in need of immediate liquidity, you could attempt to sell your Public Shares in the open market; however, at such time our Public Shares may trade at a discount to the Redemption Price. 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 Public Shares in the open market.
The Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates may elect to purchase Public Shares or Rights, which may influence a vote on the Business Combination and reduce the public “float” of the Public Shares or Rights.
At any time prior to the extraordinary general meeting, during a period when they are not then aware of any material nonpublic information regarding Inflection Point or its securities, the Sponsor, Inflection Point Fund, and Inflection Point’s officers and directors or their affiliates may purchase Public Shares or Rights 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 or Rights in such transactions.
The purpose of any such transactions could be to (1) increase the likelihood of obtaining Inflection Point Shareholder Approval of the Business Combination, (2) reduce the number of Public Rights outstanding and/or increase the likelihood of approval on any matters submitted to the Public Rights holders for approval in connection with our initial business combination or (3) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our securities may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
The Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates anticipate that they may identify the shareholders with whom the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates may pursue privately negotiated transactions by either the shareholders contacting us directly or by our receipt of redemption requests submitted by shareholders (in the case of Inflection Point Class A Shares) following our mailing of proxy materials in connection with our initial business combination. To the extent that the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates enter into a private transaction, they would identify and contact only potential selling or redeeming shareholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against our initial business combination, whether or not such shareholder has already submitted a proxy with respect to our initial business combination but only if such shares have not already been voted at the general meeting related to our initial business combination. The Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates will select which shareholders to purchase shares from based on the negotiated price and number of shares and any other factors that they may deem relevant, and will be restricted from purchasing shares if such purchases do not comply with Regulation M under the Exchange Act and the other federal securities laws.
The Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will be restricted from making purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. 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 Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates were to purchase Public Shares or warrants, 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:
• this proxy statement/prospectus discloses the possibility that the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates may purchase Public Shares or warrants from Public Shareholders outside the redemption process, along with the purpose of such purchases;
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• if the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates were to purchase Public Shares from Public Shareholders, they would do so at a price no higher than the Redemption Price;
• this proxy statement/prospectus includes a representation that any of our securities purchased by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will not be voted in favor of approving the Business Combination;
• the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will not possess any redemption rights with respect to our securities or, if they do acquire and possess redemption rights, they would waive such rights; and
• we will disclose in a Form 8-K, before the extraordinary general meeting, the following material items:
• the amount of securities purchased outside of the redemption offer by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates, along with the purchase price;
• the purpose of the purchases by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates;
• the impact, if any, of the purchases by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates on the likelihood that the Business Combination will be approved;
• the identities of the security holders who sold to the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and 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 Sponsor, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates; and
• the number of Public Shares for which Inflection Point has received redemption requests pursuant to its redemption offer.
Entering into any such arrangements may have a depressive effect on the price of the New Merlin Common Stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than the market price and may therefore be more likely to sell the shares he owns, either prior to or immediately after the extraordinary general meeting. In addition, the public “float” of our Public Shares and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.
Past performance by our management team, our advisors and their respective affiliates, including investments and transactions in which they have participated and businesses with which they have been associated, may not be indicative of future performance of an investment in New Merlin.
Information regarding our management team, our advisors and their respective affiliates, including investments and transactions in which they have participated and businesses with which they have been associated, is presented for informational purposes only. Any past experience and performance by our management team, our advisors and their respective affiliates and the businesses with which they have been associated, is not a guarantee that we will be able to successfully identify a suitable candidate for our initial business combination, that we will be able to provide positive returns to our shareholders, or of any results with respect to any initial business combination we may consummate. You should not rely on the historical experiences of our management team, our advisors and their respective affiliates, including investments and transactions in which they have participated and businesses with which they have been associated, as indicative of the future performance of an investment in us or as indicative of every prior investment by each of the members of our management team, our advisors or their respective affiliates. The market price of our securities may be influenced by numerous factors, many of which are beyond our control, and our shareholders may experience losses on their investment in our securities.
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Inflection Point cannot assure you that its diligence review has identified all material risks associated with the Business Combination, and you may be less protected as an investor from any material issues with respect to Merlin’s business, including any material omissions or misstatements contained in the Registration Statement or this proxy statement/prospectus relating to the Business Combination, than an investor in an underwritten initial public offering.
Even though Inflection Point conducted due diligence on Merlin, this diligence may not have surfaced all material issues with Merlin, it may not be possible to uncover all material issues through a customary amount of due diligence, and factors outside of Merlin’s and outside of Inflection Point’s or New Merlin’s control may later arise.
Additionally, the scope of due diligence conducted in conjunction with the Business Combination may be different than would typically be conducted in the event Merlin pursued an underwritten initial public offering. In a typical initial public offering, the underwriters of the offering conduct due diligence on the company to be taken public, and following the offering, the underwriters are subject to liability to investors for any material misstatement or omissions in the registration statement. While potential investors in an initial public offering typically have a private right of action against the underwriters of the offering for any of these material misstatements or omissions, there are no underwriters of the New Merlin Common Stock that will be issued pursuant to the Business Combination and thus no corresponding right of action is available to investors in the Business Combination for any material misstatement or omissions in the Registration Statement or this proxy statement/prospectus. Therefore, as an investor in the Business Combination, you may be exposed to future losses, impairment charges, write-downs, write-offs or other charges, as described above, that could have a significant negative effect on New Merlin’s financial condition, results of operations and the share price of New Merlin Common Stock, which could cause you to lose some or all of your investment without certain recourse against any underwriter that may be available in an underwritten public offering.
Inflection Point (or New Merlin) will not have any right to make damage claims against Merlin for the breach of any representation, warranty or covenant made by Merlin 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. As a result, Inflection Point (or New Merlin) 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 Merlin at the time of the Business Combination.
Inflection Point’s shareholders will experience dilution due to the issuance of shares of New Merlin Common Stock and securities convertible into the shares of New Merlin Common Stock to the Merlin Members as consideration in the Business Combination and the issuance of securities in the Series A Preferred Investment.
Inflection Point’s shareholders will experience immediate dilution as a consequence of the issuance of shares of New Merlin Common Stock to the Merlin Stockholders as consideration in the Business Combination. Currently, Inflection Point’s Public Shareholders and the Sponsor own 74.1% and 25.9% of the issued and outstanding Inflection Point Ordinary Shares, respectively. Based on Merlin’s and Inflection Point’s current capitalization, (i) under the Maximum Redemption Scenario, it is expected that immediately after the consummation of the Business Combination, (A) Inflection Point’s Public Shareholders will hold 2,499,999 shares of New Merlin Common Stock, representing 2.4% of the New Merlin Common Stock, and (B) the Sponsor will hold 8,800,833 shares of New Merlin Common Stock, representing 8.5% of the New Merlin Common Stock, while (C) the former Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities and excluding the holders of New Merlin Options) will hold 71,124,082 shares of New Merlin Common Stock (assuming the Redemption Price is $10.39), representing 68.3% of the New Merlin Common Stock, and (D) holders of Series A Preferred Stock will hold 21,633,896 shares of New Merlin Common Stock, representing 20.8% of the New Merlin Common Stock (assuming for this purpose that the shares of Series A Preferred Stock are converted into shares of New Merlin Common Stock at the initial conversion price and taking into account accrued and unpaid payment-in-kind interest on the Pre-Funded Convertible Notes through January 31, 2026; such amount of shares of Series A Preferred Stock may increase prior to Closing due to additional interest accrued on the Pre-Funded Convertible Notes), and (ii) under the No Redemption Scenario, it is expected that immediately after the consummation of the Business Combination, (A) Inflection Point’s Public Shareholders (including holders of Public Rights) will hold 27,499,999 shares of New Merlin Common Stock, representing approximately 21.3% of the New Merlin Common
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Stock and (B) the Sponsor will hold 8,800,833 shares of New Merlin Common Stock, representing approximately 6.8% of the New Merlin Common Stock, while (C) the former Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) will hold 71,124,082 shares of New Merlin Common Stock ((assuming the Redemption Price is $10.39), representing approximately 55.1% of the New Merlin Common Stock, and (D) holders of Series A Preferred Stock will hold 21,633,896 shares of New Merlin Common Stock, representing approximately 16.8% of the New Merlin Common Stock (assuming for this purpose that the shares of Series A Preferred Stock are converted into shares of New Merlin Common Stock at the initial conversion price and taking into account accrued and unpaid payment-in-kind interest on the Pre-Funded Convertible Notes through January 31, 2026; such amount of shares of Series A Preferred Stock will increase prior to Closing due to additional interest accrued on the Pre-Funded Convertible Notes).
Subsequent to the consummation of the Business Combination, New Merlin may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on New Merlin’s financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
Although Inflection Point has conducted due diligence on Merlin, Inflection Point cannot assure you that this diligence revealed all material issues that may be present in Merlin, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Inflection Point’s or New Merlin’s control will not later arise. As a result, New Merlin 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 Inflection Point’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 Merlin reports charges of this nature could contribute to negative market perceptions about New Merlin or its securities. In addition, charges of this nature may cause New Merlin to violate net worth or other covenants to which it may be subject. Accordingly, any Inflection Point Shareholder who chooses to remain a stockholder of New Merlin 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 Inflection Point’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.
New Merlin’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 Merlin’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 Merlin. See “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
The projections and forecasts presented in this proxy statement/prospectus may not be an indication of the actual results of the transaction or New Merlin’s future results.
This proxy statement/prospectus contains projections and forecasts prepared by Merlin. None of the projections and forecasts included in this proxy statement/prospectus have been prepared with a view toward public disclosure other than to certain parties involved in the Business Combination or toward complying with SEC guidelines. The projections and forecasts were prepared based on numerous variables and assumptions which are inherently uncertain and may be beyond the control of Merlin and Inflection Point and exclude, among other things, transaction-related expenses. Important factors that may affect actual results and results of New Merlin’s operations following the Business Combination, or could lead to such projections and forecasts not being achieved include, but are not limited to: changing content consumption patterns, an evolving competitive landscape, successful management and retention of key personnel and artistic talent, unexpected expenses and general economic conditions. As such, these projections and forecasts may be inaccurate and should not be relied upon as an indicator of actual past or future results.
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There can be no assurance that the New Merlin Common Stock issued in connection with the Business Combination will be approved for listing on Nasdaq following the Closing.
Inflection Point intends to apply to list the New Merlin Common Stock on Nasdaq under the proposed symbol “MRLN” upon the Closing. Pursuant to the terms of the Business Combination Agreement, as a closing condition, the New Merlin Common Stock issued as merger consideration must be conditionally approved for listing on Nasdaq subject to any requirement to have a sufficient number of round lot holders of the New Merlin Common Stock, but there can be no assurance that such listing condition will be met. If such listing condition is not met, the Business Combination will not be consummated unless the listing condition is waived by the parties to the Business Combination Agreement. Following the Closing, the New Merlin Common Stock is intended to be listed, subject to Nasdaq approval, under the proposed symbol “MRLN”. It is important for you to know that, at the time of Inflection Point’s extraordinary general meeting, the parties may not have received from Nasdaq either confirmation of the listing of the New Merlin Common Stock or that approval will be obtained prior to the consummation of the Business Combination, and it is possible that the listing condition to the consummation of the Business Combination may be waived by the parties to the Business Combination Agreement. 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 such confirmation, and, further, it is possible that such confirmation may never be received and the Business Combination could still be consummated if such condition is waived or is subject to an exception and therefore the New Merlin Common Stock would not be listed on any nationally recognized securities exchange.
If third parties bring claims against Inflection Point, 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.
Inflection Point’s placing of funds in the Trust Account may not protect those funds from third party claims against Inflection Point. Although Inflection Point seeks to have all vendors, service providers, prospective target businesses and other entities with which it does business execute agreements 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 Inflection Point’s 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, Inflection Point’s management will consider whether competitive alternatives are reasonably available to it 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 Inflection Point under the circumstances. WithumSmith+Brown PC, Inflection Point’s independent registered public accounting firm, and the underwriters of the IPO will not execute agreements with Inflection Point waiving such claims to the monies held in the Trust Account.
Examples of possible instances where Inflection Point 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 Inflection Point 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 or another initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Business Combination or another initial business combination, Inflection Point will be required to provide for payment of claims of creditors that were not waived that may be brought against Inflection Point 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, the Sponsor has agreed that it will be liable to Inflection Point if and to the extent any claims by a third party for services rendered or products sold to Inflection Point (except for its 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 the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target
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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 Inflection Point’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, Inflection Point has not asked the Sponsor to reserve for such indemnification obligations, nor has it independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and Inflection Point believes that the Sponsor’s only assets are securities of Inflection Point. Therefore, Inflection Point cannot assure you that the Sponsor 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 or another initial business combination and redemptions could be reduced to less than $10.00 per Public Share. In such event, Inflection Point may not be able to complete the Business Combination or another initial business combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of Inflection Point’s officers or directors will indemnify it for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Inflection Point’s directors may decide not to enforce the indemnification obligations of the Sponsor, 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 share due to reductions in the value of the trust assets, in each case less taxes payable, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, Inflection Point’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While Inflection Point currently expects that its independent directors would take legal action on its behalf against the Sponsor to enforce the Sponsor’s indemnification obligations to Inflection Point, it is possible that Inflection Point’s 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 Inflection Point’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to Inflection Point’s Public Shareholders may be reduced below $10.00 per share.
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 an initial 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 we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
If, before distributing the proceeds in the Trust Account to our 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, Inflection Point files a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in Inflection Point’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Inflection Point’s shareholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by Inflection Point’s shareholders in connection with our liquidation may be reduced.
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If, after Inflection Point distributes the proceeds in the Trust Account to its Public Shareholders, it files a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against it that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of the Inflection Point Board may be viewed as having breached their fiduciary duties to Inflection Point’s creditors, thereby exposing the members of the Inflection Point Board and Inflection Point to claims of punitive damages.
If, after Inflection Point distributes the proceeds in the Trust Account to its Public Shareholders, it files a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against it 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 Inflection Point’s shareholders. In addition, the Inflection Point Board may be viewed as having breached its fiduciary duty to Inflection Point’s creditors and/or having acted in bad faith, thereby exposing itself and Inflection Point to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors.
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 or another initial business combination or force us to abandon our efforts to complete an initial 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, or any other initial 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 that we are not subject to.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our 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 an initial business combination, such as the 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.
In 2024, the SEC 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. When applying these factors to us we do not believe that our principal activities will subject us to the Investment Company Act. To this end, Inflection Point was formed for the purpose of completing an initial business combination with one or more businesses or entities, such as the Business Combination with Merlin. Since our inception, our business has been and will continue to be focused on identifying and completing the Business Combination with Merlin, or another 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 which invest only in direct U.S. government treasury obligations. By restricting
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the investment of the proceeds 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 Cayman Constitutional Documents (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 our 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 our Public Shareholders as part of our redemption of the Public Shares subject to applicable law and the Cayman Constitutional Documents. 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 the Investment Company Act and 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 or any other initial business combination. We may also be forced to abandon our efforts to complete an initial business combination and instead be required to liquidate the Trust Account. In which case, our investors would not be able to realize the potential benefits of owning shares in a successor operating business, including the potential appreciation in the value of our securities following such a transaction, and our Rights would expire worthless. For illustrative purposes, in connection with the liquidation of our Trust Account, our Public Shareholders may receive only approximately $[•] per Public Share, which is based on estimates as of the Record Date, or less in certain circumstances, and our Rights may expire and become worthless. Further, under the subjective test of a “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.
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 our Public Shareholders would receive upon any redemption or liquidation of Inflection Point.
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 the SEC identified as relevant to the determination of whether a SPAC which 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 Continental, 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 liquidation of Inflection Point. 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 our Public Shareholders would receive upon any redemption or liquidation of Inflection Point.
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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.
We may not be able to complete the Business Combination, or another initial business combination, since such initial business combination may be subject to regulatory review and approval requirements, 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.
The Business Combination or another initial 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. businesses. Among other things, CFIUS is empowered to require parties to certain transactions subject to CFIUS jurisdiction to make mandatory filings, to charge filing fees related to CFIUS filings (voluntary or mandatory), and to self-initiate national security reviews of foreign direct and indirect investments in U.S. businesses if the parties to the transaction choose not to file voluntarily. In the case that CFIUS determines an investment to present risks to U.S. national security, CFIUS has the power to require mitigation measures with respect to the transaction or recommend that the President of the United States block the transaction if the parties do not voluntarily abandon it. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on — among other factors — the nature and structure of the transaction, including 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”. Our Sponsor is a Delaware-organized entity and the majority of its economic interests are owned by U.S. citizens. Our Sponsor is exclusively controlled by Mr. Gundlach and Mr. Combes, who are U.S. and French citizens, respectively, and the Sponsor’s managing members. While our Sponsor may be considered a “foreign person” as defined in the CFIUS regulations, we do not believe that our Sponsor will acquire “control” or any of the rights defined at 31 C.F.R. §800.211(b) of the CFIUS regulations that could afford CFIUS jurisdiction over the Business Combination. It is possible that other 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 PIPE investors), which may increase the risk that our initial business combination becomes subject to regulatory review, including review by CFIUS. For example, a portion of the equity of Merlin is beneficially owned by citizens of jurisdictions other than the United States, such as citizens of South Korea or Australia. As such, an initial business combination with a U.S. business or foreign business with U.S. subsidiaries that we may wish to pursue may be subject to CFIUS review. If a particular proposed initial business combination with a U.S. business falls within CFIUS’s jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit to CFIUS review on a voluntary basis, or to proceed with the transaction without submitting to CFIUS and risk CFIUS intervention, before or after closing the transaction. CFIUS may decide to block or delay our proposed initial business combination, require mitigation measures with respect to such initial business combination or request the President
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of the United States to order us to divest all or a portion of the U.S. target business of our initial business combination that we acquired without first obtaining CFIUS approval. This may limit the attractiveness of, delay or prevent us from pursuing certain target companies that we believe would otherwise be beneficial to us and our shareholders. As a result, the pool of potential targets with which we could complete an initial business combination may be limited and we may be adversely affected in terms of competing with other special purpose acquisition companies which do not have any foreign ownership issues. In addition, certain businesses may be subject to rules or regulations that limit or impose additional requirements with respect to foreign ownership.
The process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial business combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we are unable to consummate our initial business combination within the applicable time period required under our amended and restated memorandum and articles of association, including as a result of extended regulatory review of a potential initial business combination, we will, as promptly as reasonably possible but not more than ten 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. 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 Inflection Point Rights may be worthless.
Inflection Point’s shareholders may be held liable for claims by third parties against Inflection Point to the extent of distributions received by them upon redemption of their shares.
If Inflection Point is forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it were proved that immediately following the date on which the distribution was made, Inflection Point was unable to pay its 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 Inflection Point’s shareholders. Furthermore, Inflection Point’s directors may be viewed as having breached their fiduciary duties to Inflection Point or its creditors and/or may have acted in bad faith, thereby exposing themselves and Inflection Point to claims, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. Inflection Point cannot assure you that claims will not be brought against it for these reasons. Inflection Point and its directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of Inflection Point’s share premium account while it was unable to pay its debts as they fall due in the ordinary course of business would be guilty of an offense and may be liable to a fine of $18,293 and to imprisonment for five years in the Cayman Islands.
Inflection Point’s Letter Agreement with the Sponsor and Inflection Point’s officers and directors may be amended without shareholder approval.
Inflection Point’s Letter Agreement with the Sponsor and Inflection Point’s officers and directors contains provisions relating to transfer restrictions of the Founder Shares and Private Placement Units, indemnification of the Trust Account, waiver of redemption rights and participation in liquidating distributions from the Trust Account. The Letter Agreement may be amended without shareholder approval. While Inflection Point does not expect the Inflection Point Board to approve any amendments to the Letter Agreement prior to Inflection Point’s initial business combination, it may be possible that the Inflection Point Board, in exercising its business judgment and subject to its fiduciary duties, chooses to approve one or more amendments to the Letter Agreement. Any such amendments to the Letter Agreement would not require approval from Inflection Point’s shareholders and may have an adverse effect on the value of an investment in Inflection Point’s securities. Concurrently with the execution of the Business Combination Agreement, Inflection Point entered into the Sponsor Support Agreement with the Sponsor, Inflection Point Fund and Merlin, pursuant to which the Sponsor agreed to vote its shares in favor of all proposals being presented at the extraordinary general meeting. Amendment of the Sponsor Support Agreement would require approval from Inflection Point, Merlin, the Sponsor and Inflection Point Fund, but would not require approval from Inflection Point’s shareholders.
If you or a “group” of shareholders are deemed to hold in excess of 15% of the Public Shares, you may lose the ability to redeem all such shares in excess of 15% of our Public Shares.
The Cayman Constitutional Documents provide 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 Exchange Act), will be restricted from redeeming its Public Shares with respect to more than an
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aggregate of 15% of the Public Shares, which we refer to as the “Excess Shares”, without our prior consent. However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial 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. And as a result, you will continue to hold that number of Public Shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market transactions, potentially at a loss.
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 or Public Rights, potentially at a loss.
Our 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 Public 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 our Cayman Constitutional Documents (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 our Public Shares if we do not complete our initial business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law) or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity; and (iii) the redemption of our Public Shares if we are unable to complete an initial business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents), subject to applicable law and as further described herein. In no other circumstances will Public Shareholders have any right or interest of any kind in the Trust Account. Holders of Public Rights will not have any right to the proceeds held in the Trust Account with respect to the Public Rights. Accordingly, to liquidate your investment, you may be forced to sell your Public Shares or Public Rights, potentially at a loss.
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 stockholder may be able to sell its shares of New Merlin Common Stock in the future following the completion of the Business Combination (or shares received or retained in connection with any alternative 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 Merlin’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 Merlin Common Stock after the consummation of the Business Combination, and a stockholder may not be able to sell its New Merlin 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.
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.
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 (for this purpose ascribing no value to the Inflection Point Right included in each Inflection Point Unit) sold in the IPO and the net tangible book value per share at the time of the Business Combination. As of September 30, 2025, Inflection Point’s net tangible book value was $249.2 million, calculated as total assets of $261.1 million less total liabilities of $11.9 million. The number of Inflection Point Ordinary Shares outstanding as of September 30, 2025, was 33,758,333, which includes 25,000,000 Public Shares, 425,000 Private Placement Shares and 8,333,333 Inflection Point Class B Shares. In connection with the consummation of the Business Combination, after giving effect to funds released from the Trust Account at Closing across various redemption levels, transaction costs expected to be incurred by Inflection Point, the issuance of shares of New Merlin Common Stock to holders of Inflection Point Rights, the Pre-Funded PIPE Investment, Signing PIPE
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Investment and the Additional Closing PIPE Investments, but excluding the effects of the Business Combination transaction itself (that is, excluding the issuance of shares of New Merlin Common Stock to the Merlin Equity holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities), Merlin’s transaction expenses, and any options or other grants that may be issued pursuant to the New Merlin Incentive Plan or the ESPP), net tangible book value, as adjusted, will be $434.5 million in the No Redemptions Scenario, $304.6 million in the 50% Redemptions Scenario, and $174.8 million in the Maximum Redemptions Scenario. Total shares outstanding in each such redemptions scenario (excluding the effect of the Business Combination itself) will be 57,934,228, 45,434,728, and 32,934,728, respectively. Accordingly, the net tangible book value per share, as adjusted, will be $7.50 in the No Redemptions Scenario, $6.70 in the 50% Redemptions Scenario, and $5.31 in the Maximum Redemptions Scenario.
The net tangible book value per share, as adjusted, is materially less than the $10.00 per share price of the IPO, materially less than the assumed $10.39 per share price ascribed to such shares in the Business Combination Agreement, and materially less than the amount per share that Public Shareholders would be entitled to receive upon exercise of their Redemption Rights (which, for illustrative purposes, was approximately $[•] per share as of the Record Date). Accordingly, Public Shareholders will experience material dilution. For additional information, including calculations of the net tangible book value per share, as adjusted, see the section of this proxy statement/prospectus entitled “Summary of the Proxy Statement/Prospectus — Dilution”.
The Inflection Point 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 August 8, 2025, Newbridge delivered its oral opinion, which it subsequently confirmed in writing, to the Special Committee that, as of that date and based on and subject to the assumptions and other matters described in the written opinion, (i) the Aggregate Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement was fair, from a financial point of view, to the unaffiliated shareholders of Inflection Point, and (ii) the Business Combination had an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement. Inflection Point does not intend to obtain an updated opinion from its financial advisor prior to the consummation of the Business Combination. Changes in the proposed operations and prospects of Merlin, general market and economic conditions and other factors that may be beyond the control of Inflection Point or Merlin may alter the value of Inflection Point or Merlin or the price of Inflection Point’s shares by the time the Business Combination is completed. Newbridge’s opinion speaks as of the date it was rendered, and does not speak as of any other date, and as such, Newbridge’s opinion does not address the fairness of the Aggregate 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 — Business Combination Proposal — Opinion of Newbridge Securities Corporation.” A copy of Newbridge’s opinion, which sets forth the assumptions made, procedures followed, matters considered, and qualifications and limitations on and scope of the review undertaken by Newbridge, is attached hereto as Annex F.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete the Business Combination, subject to Merlin’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 Merlin’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;
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• 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.
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 Inflection Point Articles or governing instruments in a manner that will make it easier for us to complete the Business Combination that 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, increased redemption thresholds and extended the time to consummate an initial business combination. Amending the Inflection Point Articles requires a special resolution under Cayman Islands law, which requires the affirmative 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 Inflection Point, and vote at the general meeting. In addition, the Inflection Point Articles requires us to provide our Public Shareholders with the opportunity to redeem their Public Shares for cash if we propose an amendment to the Inflection Point 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 our Public Shares if we do not complete an 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. To the extent any of such amendments would be deemed to fundamentally change the nature of the securities offered through this registration statement, 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 Inflection Point Articles or extend the time to consummate an initial business combination in order to effectuate our initial business combination.
Inflection Point and Merlin will incur significant transaction and transition costs in connection with the Business Combination.
Inflection Point and Merlin have incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination, and New Merlin will experience recurring costs related to operating as a public company following the consummation of the Business Combination. New Merlin 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.
Inflection Point’s officers and directors may negotiate employment and consulting agreements with Merlin, and the Business Combination may be conditioned on the retention or resignation of such key personnel. 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.
Inflection Point’s officers and directors may be able to remain with New Merlin after the completion of the Business Combination only if they are able to negotiate employment or consulting agreements with Merlin in connection with the Business Combination. New Merlin and Merlin have no commitments as of the date of this proxy statement/prospectus to enter into employment or consulting agreements with Inflection Point’s officers and directors, such negotiations could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the Business Combination. 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.
If a Public 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 Public Shares, such Public Shares may not be redeemed.
Pursuant to the Cayman Constitutional Documents, a Public Shareholder may request to redeem all or a portion of its Public Shares for cash in connection with the completion of the Business Combination. Public Shareholders may demand. As a Public Shareholder, you will be entitled to receive cash for any Public Shares to be redeemed only if you:
(a) (i) hold Public Shares or (ii) hold Public Shares through Inflection Point Units and elect to separate your Inflection Point Units into the underlying Public Shares and Public Rights prior to exercising your redemption rights with respect to the Public Shares;
(b) submit a written request to Continental, including the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that Inflection Point redeem all or a portion of your Public Shares for cash; and
(c) deliver your share certificates for Public Shares (if any) along with the redemption forms to Continental, physically or electronically through DTC.
Public Shareholders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days before the initial scheduled date of the extraordinary general meeting) in order for their Public Shares to be redeemed. Any Public Shareholders who fails to properly elect to redeem their Public Shares and deliver their Public Shares in the manner described above will not be entitled to have her or his shares redeemed. See the section entitled “Extraordinary General Meeting of Inflection Point — Redemption Rights” for the procedures to be followed if you wish to have your Public Shares redeemed for cash.
If we are unable to consummate the Business Combination or another initial business combination by the date required in the Cayman Constitutional Documents, the Public Shareholders may be forced to wait beyond such date before redemption from our Trust Account.
If we are unable to consummate the Business Combination or another initial business combination by the date required in the Cayman Constitutional Documents, the proceeds then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (which interest shall be less taxes payable and up to $100,000 to pay dissolution expenses), will be used to fund the redemption of our Public Shares, as further described herein. Any
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redemption of Public Shareholders from the Trust Account will be effected automatically by function of the Cayman Constitutional Documents 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 our Public Shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the Companies Act. In that case, investors may be forced to wait beyond the end of the completion window before the redemption proceeds of our Trust Account become available to them, and they receive the return of their pro rata portion of the proceeds from our 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 or another initial business combination prior thereto and only then in cases where investors have properly sought to redeem their Public Shareholders. Only upon our redemption or any liquidation will Public Shareholders be entitled to distributions if we are unable to complete the Business Combination or another initial business combination.
The completion of the Business Combination is subject to certain closing conditions, including satisfaction of all closing conditions in 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 included in the Business Combination Agreement. The timing and completion of the Business Combination is not assured and is subject to risks, including the risk that approval of the Business Combination by Inflection Point’s shareholders is not obtained and failure to obtain approval for listing of New Merlin Common Stock on Nasdaq, 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.
If Inflection Point does not complete the Business Combination, Inflection Point could be subject to various risks, including:
• the parties may be liable for damages to one another under certain circumstances pursuant to the terms and conditions of the Business Combination Agreement;
• negative reactions from the financial markets, including declines in the price of the Inflection Point Class A Shares due to the fact that current prices may reflect a market assumption that the Business Combination will be completed; and
• the attention of Inflection Point management will have been diverted to the Business Combination rather than the pursuit of other opportunities in respect of an initial business combination.
The exercise of Inflection Point’s 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 Inflection Point shareholders’ best interest.
In the period leading up to the Closing, events may occur that may require Inflection Point to agree to amend the Business Combination Agreement, to consent to certain actions taken by Merlin, or to waive rights that Inflection Point is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of Merlin’s business, a request by Merlin 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 Merlin’s business. In any of such circumstances, it would be at Inflection Point’s discretion, acting through the Inflection Point 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 Inflection Point and Inflection Point’s 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, Inflection Point does not believe there will be any changes or waivers that Inflection Point management would be likely to make after shareholder approval has been obtained. While certain changes could be made without further approval of Inflection Point’s shareholders, Inflection Point will circulate a new or amended proxy statement/prospectus and re-solicit its shareholders if changes to the terms of the transaction that would have a material impact on Inflection Point’s shareholders are required prior to the vote on the Business Combination Proposal.
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Inflection Point 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 Inflection Point’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 timeframe, which may adversely affect Inflection Point’s and Merlin’s respective businesses, financial condition and results of operation.
There is a risk that the 1% U.S. federal excise tax may be imposed on us in connection with redemptions of Public Shares.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, generally imposes a 1% U.S. federal excise tax (the “Excise Tax”) on certain repurchases of stock by “covered corporations” (which include publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign (i.e., non-U.S.) corporations) occurring on or after January 1, 2023. The Excise Tax is imposed on the repurchasing corporation itself, not its stockholders from which the stock is repurchased. The amount of the Excise Tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. 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”). In addition, certain exceptions apply to the Excise Tax. The U.S. Department of the Treasury (the “Treasury”) has authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of the Excise Tax. On April 12, 2024, the Treasury published proposed Treasury 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 a reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended, the corporation is not treated as a U.S. corporation until the day after the reorganization. The interpretation and operation of certain other aspects of the Excise Tax remain unclear. Although these proposed Treasury Regulations are not final, taxpayers generally may rely on them until final Treasury regulations are issued. However, there can be no assurance that final Treasury Regulations will not adversely affect the accuracy of the below description of the Excise Tax considerations that may be applicable.
Based on the expected structure of the Business Combination with Merlin, we expect to redeem the Public Shares prior to the time we are treated as a U.S. corporation for purposes of the Excise Tax under current proposed Treasury Regulations, and thus we currently do not expect that we would be a covered corporation subject to the Excise Tax with respect to any redemptions of Public Shares in connection with the Business Combination that are treated as repurchases for this purpose. It is possible, however, that final Treasury Regulations or other forthcoming guidance is issued that would nevertheless treat us as a covered corporation or otherwise impose the Excise Tax on us with respect to redemptions of our stock in connection with the Business Combination with Merlin. In addition, if the redemptions were to be treated as occurring for U.S. federal income tax purposes after we are treated as a U.S. corporation for purposes of the Excise Tax, absent guidance to the contrary, we currently expect that we would be subject to the Excise Tax with respect to any such redemptions that are treated as repurchases for this purpose (although in such case the netting rule generally is expected to be available with respect to such redemptions of our stock and our issuance of stock in connection with the Business Combination to reduce the amount of Excise Tax imposed on us, if any).
If we were to be treated as a covered corporation for purposes of the redemption of Public Shares in connection with the Business Combination or otherwise, whether and to what extent we would be subject to the Excise Tax on a redemption of Public Shares would depend on a number of factors, including (i) whether the redemption is treated as a repurchase of stock for purposes of the Excise Tax, (ii) the fair market value of the redemption treated as a repurchase of stock, (iii) the nature and amount of stock to be issued in connection with the Business Combination and the nature and amount of the Closing PIPE Investments or any other equity issuances (whether in connection with the Business Combination or otherwise) issued within the same taxable year of a redemption treated as a repurchase of stock, and (iv) the content of forthcoming final and additional proposed Treasury Regulations and other guidance from the Treasury.
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As noted above, the Excise Tax would be payable by the repurchasing corporation, and not by the redeeming holder. If we were to be treated as a covered corporation for purposes of the redemption of Public Shares in connection with the Business Combination or otherwise, the per-share redemption amount payable from the Trust Account (including any interest earned on the funds held in the Trust Account) to Public Shareholders in connection with a redemption of Public Shares is not expected to be reduced by any Excise Tax imposed on us. The imposition of the Excise Tax on us could, however, cause a reduction in the cash available on hand to complete the Business Combination and may affect our ability to complete any business combination or fund future operations.
Nasdaq may delist our Inflection Point 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.
Our Inflection Point Class A Shares are listed on Nasdaq. We cannot assure you that our Inflection Point 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 Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, unless we decide to list on a different Nasdaq tier such as the Nasdaq Capital Market which has different initial listing requirements, 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 our Inflection Point Class A Shares from trading on its exchange and we are not able to list our Inflection Point Class A Shares on another national securities exchange, we expect our Inflection Point 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 our Inflection Point Class A Shares;
• reduced liquidity for our Inflection Point Class A Shares;
• a determination that our Inflection Point Class A Shares are a “penny stock” which will require brokers trading in our Inflection Point 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 our Inflection Point 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 our Inflection Point Class A Shares are listed on Nasdaq, our Inflection Point Class A Shares will qualify as covered securities under the statute. Although the states are preempted from regulating the sale of our Inflection Point Class A Shares, the federal statute does allow the states 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.
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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 the Business Combination Proposal, the chairman of the Inflection Point Board will not have the ability to adjourn the extraordinary general meeting to a later date in circumstances where such adjournment is necessary to permit the Business Combination to be approved.
If, at the extraordinary general meeting, the chairman of the Inflection Point Board determines that it would be in the best interests of Inflection Point to adjourn the extraordinary general meeting to give Inflection Point more time to consummate the Business Combination for whatever reason (such as if the Business Combination Proposal is not approved, or if additional time is needed to fulfill other closing conditions), the chairman of the Inflection Point Board will seek approval to adjourn the extraordinary general meeting to a later date or dates. If the Adjournment Proposal is not approved, and a quorum is present but an insufficient number of votes have been obtained to approve the Business Combination Proposal, the chairman of the Inflection Point Board will not have the ability to adjourn the extraordinary general meeting 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. In such event, the Business Combination would not be completed.
Risks Related to the Domestication and the Business Combination
The Domestication may result in adverse tax consequences for holders of Inflection Point Class A Shares and Inflection Point Rights.
The Domestication should qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Code, i.e., an F Reorganization. If the Domestication fails to qualify as an F Reorganization, a U.S. Holder (as defined in “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders”) of Inflection Point Securities generally would recognize gain or loss with respect to its Inflection Point Class A Shares or Inflection Point Rights in an amount equal to the difference, if any, between the fair market value of the corresponding New Merlin Common Stock received in the Domestication and the U.S. Holder’s adjusted tax basis in its Inflection Point Class A Shares or Inflection Point Rights surrendered. Additionally, Non-U.S. Holders (as defined in “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — III. Non-U.S. Holders”) may become subject to withholding tax on any amounts treated as dividends paid on New Merlin Common Stock after the Domestication.
Assuming that the Domestication qualifies as an F Reorganization, subject to the PFIC rules discussed below, U.S. Holders of Inflection Point Class A Shares generally will be subject to Section 367(b) of the Code in connection with the Domestication, and, as a result:
• a U.S. Holder who is a 10% U.S. Shareholder on the date of the Domestication generally will be required to include in income as a deemed dividend deemed paid by Inflection Point the “all earnings and profits amount” (as defined in the Treasury Regulations under Section 367 of the Code) attributable to the Inflection Point Class A Shares held directly by such U.S. Holder;
• a U.S. Holder whose Inflection Point 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, is not a 10% U.S. Shareholder generally will recognize gain (but not loss) with respect to its Inflection Point Class A Shares as if such U.S. Holder exchanged its Inflection Point Class A Shares for New Merlin Common Stock in a taxable transaction, unless such U.S. Holder elects in accordance with applicable Treasury Regulations to include in income as a deemed dividend deemed paid by Inflection Point the “all earnings and profits” amount (as defined in the Treasury Regulations under Section 367 of the Code) attributable to such U.S. Holder’s Inflection Point Class A Shares; and
• a U.S. Holder whose Inflection Point 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, is not a 10% U.S. Shareholder, generally will not recognize any gain or loss or include any part of Inflection Point’s earnings and profits in income under Section 367 of the Code in connection with the Domestication.
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The application of the rules under Section 367 of the Code to the Inflection Point Rights is uncertain and all U.S. Holders are urged to consult their tax advisors with respect to the particular tax consequences applicable to them of the attribution rules and application of the rules to the Inflection Point Rights.
Additionally, even if the Domestication qualifies as an F Reorganization, proposed Treasury Regulations promulgated under Section 1291(f) of the Code and certain other PFIC rules (which have retroactive effective dates) generally require that a U.S. person who disposes of stock of a PFIC (including for this purpose an Inflection Point Right, which may be characterized as stock itself or may be treated as stock under a proposed Treasury Regulation that generally treats an “option” to acquire the stock of a PFIC as stock of the PFIC) must recognize gain equal to the excess of the fair market value of such PFIC stock over its adjusted tax basis, notwithstanding any other provision of the Code. Inflection Point believes that it likely has been a PFIC since its first taxable year and will likely be considered a PFIC for the taxable year which ends as a result of the Domestication. As a result, these proposed Treasury Regulations, if finalized in their current form, would generally require a U.S. Holder of Inflection Point Class A Shares or Inflection Point Rights to recognize gain under the PFIC rules on the exchange of Inflection Point Class A Shares and Inflection Point Rights for New Merlin Common Stock and Post-Domestication Rights pursuant to the Domestication unless such U.S. Holder has made certain tax elections with respect to such U.S. Holder’s Inflection Point Class A Shares or Inflection Point Rights. In addition, the proposed Treasury Regulations provide coordinating rules with other sections of the Code, including Section 367(b), which affect the manner in which the rules under such other sections apply to transfers of PFIC stock. Any gain recognized from the application of the PFIC rules described above would be taxable income with no corresponding receipt of cash. The tax on any such gain 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 Inflection Point. 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 may be adopted or how any such Treasury Regulations would apply. For a more complete discussion of the potential application of the PFIC rules to U.S. Holders as a result of the Domestication, see “U.S. Federal Income Tax Considerations for Holders of Inflection Point Securities and New Merlin Securities — II. U.S. Holders — A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations”.
Although the redemptions of U.S. Holders that exercise redemption rights with respect to Inflection Point Class A Shares will occur prior to the Domestication, it is possible that the IRS could assert that for U.S. federal income tax purposes such redemptions should be treated as occurring after the Domestication. If such redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication, U.S. Holders exercising redemption rights would be subject to the potential tax consequences of the Domestication, and the determination of whether a U.S. Holder is a 10% U.S. Shareholder or is otherwise subject to Section 367 of the Code would be determined as if the redemptions had not yet occurred at the time of the Domestication. U.S. Holders should consult their tax advisors regarding the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication.
Upon consummation of the Business Combination, the rights and obligations of a New Merlin stockholder will be governed by Delaware law and may differ from the rights and obligations of Inflection Point Shareholders under Cayman Islands law.
Following the Domestication, domesticated Inflection Point, which we refer to herein as “New Merlin”, will be a Delaware corporation. Accordingly, its corporate structure as well as the rights and obligations of the holders of New Merlin Common Stock may be less favorable to the rights of holders of Inflection Point Class A Shares arising under Cayman Islands law and the Inflection Point Articles. For a more detailed description of the rights of holders of New Merlin Common Stock and how they may differ from the rights of holders of Inflection Point Class A Shares, please see the section entitled “Comparison of Shareholder Rights under Applicable Corporate Law Before and After Domestication.” The forms of the Proposed Organizational Documents are attached as Annex B and Annex C to this proxy statement/prospectus, and you are urged to read them.
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Anti-takeover provisions in the Proposed Charter and Proposed Bylaws that will be in effect following the Business Combination and Delaware law might discourage, delay or prevent a change in control of New Merlin or changes in Merlin’s management and, therefore, depress the market price of New Merlin Common Stock.
The Proposed Charter and Proposed Bylaws that will be in effect following the Business Combination contain provisions that could depress the market price of New Merlin Common Stock by acting to discourage, delay or prevent a change in control of New Merlin or changes in New Merlin’s management that the stockholders of New Merlin may deem advantageous. These provisions, among other things, include:
• a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;
• a prohibition on stockholder actions through written consent, which requires that all stockholder actions be taken at a meeting of New Merlin stockholders;
• a requirement that special meetings of stockholders be called only by New Merlin’s board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office;
• advance notice requirements for stockholder proposals and nominations for election to New Merlin’s board of directors;
• a requirement that no member of the New Merlin Board may be removed from office by New Merlin’s stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of New Merlin’s voting stock then entitled to vote in the election of directors;
• a requirement of approval of not less than two-thirds of all outstanding shares of New Merlin’s voting stock to amend any bylaws by stockholder action; and
• the authority of the board of directors of Merlin to issue preferred stock on terms determined by New Merlin’s board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of 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 which together with its affiliates owns, or within the last three years has owned, 15% of New Merlin’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 Proposed Charter, Proposed Bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for New Merlin’s stockholders to receive a premium for their shares of New Merlin capital stock and could also affect the price that some investors are willing to pay for New Merlin Common Stock.
The Proposed Bylaws 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 Merlin’s stockholders, which could limit New Merlin’s stockholders’ ability to obtain a favorable judicial forum for disputes with New Merlin or New Merlin’s directors, officers, or employees.
The Proposed Bylaws that will be in effect following the Business Combination will provide that, unless New Merlin 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 Merlin’s behalf, (ii) any action asserting a claim of breach of, or a claim based on, fiduciary duty owed by any of New Merlin’s current or former directors, officers, and employees to New Merlin or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or the Proposed 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 Proposed Bylaws further provide that, unless New Merlin 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
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complaint asserting a cause or causes of action arising under the Securities Act (the “Federal Forum Provision”). In addition, the Proposed Bylaws will provide that any person or entity purchasing or otherwise acquiring any interest in shares of New Merlin 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 Merlin’s compliance with the federal securities laws and the rules and regulations thereunder.
The Delaware Forum Provision and the Federal Forum Provision that will be in the Proposed Bylaws may impose additional litigation costs on stockholders in pursuing any such claims. Additionally, the forum selection clauses that will be in the Proposed Bylaws may limit New Merlin’s stockholders’ ability to bring a claim in a forum that they find favorable for disputes with New Merlin or New Merlin’s directors, officers or employees, which may discourage such lawsuits against New Merlin and its directors, officers and employees even though an action, if successful, might benefit New Merlin’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 New Merlin’s Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, New Merlin may incur additional costs associated with resolving such matters. The Federal Forum 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 Merlin than New Merlin’s stockholders.
Risks Related to Merlin’s Business and Industry
We are an early-stage company with a history of losses. We have not been profitable historically and may not achieve or maintain profitability in the future.
We experienced net losses in each year from our inception, including net losses of $53.1 million and $41.8 million for the nine months ended September 30, 2025 and 2024, respectively. We believe we will continue to incur operating losses and negative cash flow in the near-term as we continue to invest significantly in our business, particularly in our R&D efforts as well as sales and marketing programs. These investments may not result in increased revenue or growth in our business.
In addition, following the Business Combination, as a public company, we will incur significant additional legal, accounting and other expenses that we did not incur as a private company. These increased expenditures may make it harder for us to achieve and maintain future profitability. Revenue growth and growth in our customer base may not be sustainable, and we may not achieve sufficient revenue to achieve or maintain profitability. While we have generated revenue in the past, we have only recently begun to expand our product and service offerings, some of which are expected to generate a substantial portion of our revenue going forward, and it is difficult for us to predict our future operating results. We may incur significant losses in the future for a number of reasons, including due to the other risks described in this proxy statement/prospectus, and we may encounter unforeseen expenses, difficulties, complications and delays and other unknown events. As a result, our losses may be larger than anticipated, we may incur significant losses for the foreseeable future, and we may not achieve profitability when expected, or at all, and even if we do, we may not be able to maintain or increase profitability. Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring customers or expanding our operations, this could make it difficult for you to evaluate our current business and our future prospects and have a material adverse effect on our business, financial condition and results of operations.
Our limited operating history and rapid growth make evaluating our current business and future prospects difficult and may increase the risk of your investment.
We are a development stage company with limited commercial operations to date. As such, our business model is dependent on our commencing and expanding commercial operations. We currently anticipate satisfying certain customer milestones in 2025 pursuant to an Indefinite Delivery/Indefinite Quantity contract. Failure to test and finalize the Merlin Pilot in a timely manner could result in us being unable to commercialize our technology on our anticipated timeframe. We currently depend on the U.S. government for funding given that they are our largest customer. To the
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extent the U.S. government stops supporting the initial development of our technology for military aircraft, our ability to commence and expand commercial operations, including across the civilian sector, will be significantly impaired. Delays in achieving technical milestones or customer acceptance may defer or reduce payments and revenue recognition. Our expected per-aircraft fees and adoption assumptions may not materialize, compressing margins and growth.
Much of our growth has occurred in recent periods. Our limited operating history may make it difficult for you to evaluate our current business and our future prospects, as we continue to grow our business. Our ability to forecast our future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving industries as we continue to grow our business. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our business could suffer, and the trading price of our securities may decline. In addition to our revenue model based on product sales, Merlin intends to employ an annual recurring subscription transaction model. There are no assurances that we will be able to secure future business with customers or that our recurring revenue subscription model will be successful on our planned timelines or at all.
It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. If actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.
A limited number of customers account for a substantial portion of our revenue. If existing customers do not make subsequent purchases from us or renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted.
We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy. To the extent the U.S. government stops supporting the initial development of our technology for military aircraft, our ability to commence and expand commercial operations, including across the civilian sector, will be significantly impaired.
Revenue for the years ended December 31, 2024 and 2023 was generated with a concentration of a small number of customers, primarily with the U.S. government. Our customers have no obligation to renew, upgrade, or expand their agreements with us after the terms of their existing agreements expire. In addition, many of our customer contracts permit the customer to terminate their contracts with us with notice periods of varying lengths. If one or more of our customers terminate their contracts with us, whether for convenience, for default in the event of a breach by us, or for other reasons specified in our contracts, as applicable; if our customers elect not to renew their contracts with us; if our customers renew their contractual arrangements with us for shorter contract lengths or for a reduced scope; or if our customers otherwise seek to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations could be adversely affected. This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations.
Our ability to renew or expand our customer relationships may decrease or vary as a result of a number of factors, including our customers’ satisfaction or dissatisfaction with our platforms and services, our platforms’ reliability, our pricing, the effects of general economic conditions, competitive offerings or alternatives, or reductions in our customers’ spending levels. If our customers do not renew or expand their agreements with us or if they renew their contracts for shorter lengths or on other terms less favorable to us, our revenue may grow more slowly than expected or decline, and our business could suffer. Our business, financial condition, and results of operations would also be adversely affected if we face difficulty collecting our accounts receivable from our customers or if we are required to refund customer deposits.
Achieving renewal or expansion of deployments may require us to increasingly engage in sophisticated and costly sales efforts that may not result in additional sales. In addition, our customers’ decisions to expand the deployment of our platforms depend on a number of factors, including general economic conditions, the functioning of our platforms, the ability of our employees to assist our customers in identifying new use cases, modernizing their data architectures, achieving success with data-driven initiatives, and our customers’ satisfaction with our services. If our efforts to expand within our existing customer base are not successful, our business may suffer.
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We have identified material weaknesses in our internal control over financial reporting. If not remediated, or if New Merlin experiences additional material weaknesses in the future or otherwise fails to maintain effective internal controls in the future, New Merlin may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect investor confidence in New Merlin and, as a result, the value of New Merlin Common Stock.
In the course of preparing the consolidated financial statements as of December 31, 2024 and 2023 and for the nine months ended September 30, 2025 that are included elsewhere in this proxy statement/prospectus, our management determined that we have material weaknesses and significant deficiencies in our internal controls over financial reporting. These material weaknesses primarily relate to matters that are relevant to the preparation of our consolidated financial statements, evaluation of the accounting implications of complex transactions as well as the related valuation of financial instrument implications.
These deficiencies could result in a misstatement of one or more account balances or disclosures potentially leading to a material misstatement to the annual or interim consolidated financial statements which may not be prevented or timely detected and, accordingly, management determined that these control deficiencies constitute material weaknesses.
In order to remediate these material weaknesses, we have taken and plan to take the following actions:
• Continuing to hire personnel with public company experience and providing additional training for our personnel on internal controls as our company continues to grow;
• Implementing additional controls and processes that operate at a sufficient level of precision and frequency or that evidence the performance of the control, particularly associated with accounting and reporting of revenue and non-routine, unusual or complex transactions;
• Implementing processes and controls to better identify and manage segregation of duties;
• Considering system enhancements to reduce reliance on manual processes; and
• Engaging an external advisor to assist with evaluating and documenting the design and operating effectiveness of internal controls and assisting with the remediation of deficiencies, as necessary.
We will not be able to fully remediate these material weaknesses until these steps have been completed, have been operating effectively for a sufficient period of time and management has concluded, through testing, that these controls are effective. We and our independent registered public accounting firm were not required to, and did not, perform an evaluation of our internal control over financial reporting as of December 31, 2024 or any period in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act in 2028 for the full fiscal year 2026.
If not remediated, these material weaknesses could result in material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future after the completion of this Business Combination, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources.
We depend on third parties to provide services and to perform our contractual obligations.
When we act as a prime contractor, we rely on third parties to provide major components and to perform certain services required by our contracts. Disruptions and performance problems caused by our suppliers and subcontractors, or a misalignment between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, could have an adverse effect on our ability to meet our commitments to customers. Our ability to perform our obligations on a timely basis could be adversely affected if one or more of our suppliers or subcontractors
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are unable to provide the agreed-upon products or materials, perform the agreed-upon services in a timely, compliant and cost-effective manner or otherwise fail to satisfy contractual requirements. The inability of our suppliers or subcontractors to perform could also result in the need to transition to alternate suppliers or subcontractors, which could result in significant incremental cost and delay, or the need for us to provide other supplemental means to support our existing suppliers and subcontractors.
We depend upon subcontractors for a variety of reasons, including: (i) to perform work we would otherwise perform with our employees but are unable to do so as a result of scheduling demands; (ii) to supervise and/or perform certain aspects of the contract more efficiently considering the conditions of the contract; and (iii) to perform certain services that we are unable to do or which we believe can be performed at a lower cost by subcontractors.
We work closely with these subcontractors to monitor progress and address our customer requirements. However, the inability of our subcontractors to perform under the terms of their contracts could cause us to incur additional costs that reduce profitability or result in losses on projects.
Similarly, when we participate as a subcontractor, we are at risk if the prime contractor does not perform its contract.
A significant portion of our business depends on sales to the public sector, and our failure to receive and maintain government contracts or changes in the government’s contracting or fiscal policies of the public sector could adversely affect our business, results of operations, financial condition, and growth prospects.
We derive a significant portion of our revenue from contracts with the U.S. federal government, and we believe that the success and growth of our business will continue to depend on our successful procurement of government contracts. For example, we have historically derived, and expect to continue to derive, a significant portion of our revenue from sales to agencies of the U.S. federal government. Our perceived relationship with the U.S. government could adversely affect our future business prospects in certain non-U.S. geographies or with certain non-U.S. governments.
Sales to such government agencies are subject to a number of challenges and risks. Selling to government agencies can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers with rights, many of which are not typically found in commercial contracts.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to:
• changes in fiscal or contracting policies or decreases in available government funding;
• changes in government programs or applicable requirements;
• restrictions in the grant of personnel security clearances to our employees;
• ability to maintain facility clearances required to perform on classified contracts for U.S. federal government and foreign government agencies;
• changes in the political environment, including before or after a change to the leadership within the government administration, or due to ongoing conflicts such as the Russia-Ukraine conflict and related economic sanctions or the conflict resulting from Hamas’ attack on Israel, and regional instability, and any resulting uncertainty or changes in policy or priorities and resultant funding;
• changes in the government’s attitude towards the capabilities that we offer;
• changes in the government’s attitude towards us as a company or our platforms as viable or acceptable solutions;
• appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government;
• the adoption of new laws or regulations or changes to existing laws or regulations, including as may relate to the implementation of AI by federal agencies;
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• budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies, for example in connection with an extended federal government shutdown;
• influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers;
• potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns or epidemics, such as the COVID-19 pandemic;
• increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors;
• increased or unexpected costs or unanticipated delays due to performance failures by prime contractors on contracts where we are subcontractors; and
• inability to come to terms with third parties to integrate the Merlin Pilot onto military and commercial aircraft, which may lead to unanticipated delays and costs.
Such events or activities, among others, have caused and could continue to cause governments and governmental agencies to delay or refrain from purchasing our platforms and services in the future, reduce the size or payment amounts of purchases from existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.
A decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards have affected and may continue to significantly and adversely affect our future revenue and limit our growth prospects.
Because we generate a substantial portion of our revenue from contracts with governments and government agencies, and in particular from contracts with the U.S. government and government agencies, our results of operations could be adversely affected by government spending caps or changes in government budgetary priorities, as well as by delays in the government budget process, program starts, or the award of contracts or orders under existing contract vehicles, including as a result of a new U.S. administration. U.S. government spending levels for defense-related and other programs are uncertain and may not be sustained at the levels associated with government fiscal year 2024. In addition, the current administration has stated its intent to evaluate overall government spending, which could impact our business, results of operations, financial condition, and growth prospects. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts. Such changes in spending authorizations and budgetary priorities may occur as a result of shifts in spending priorities from defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts or other factors. In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation, and the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only enough funds for U.S. government agencies to continue operating at prior-year levels. Our business, program performance, and results of operations have been and could be impacted by the resulting disruptions to federal government offices, workers, and operations, including risks relating to the funding of certain programs, stop work orders, as well as delays in contract awards, new program starts, payments for work performed, and other actions. We also may experience similar impacts in the event of an extended period of continuing resolutions. Generally, the significance of these impacts will primarily be based on the length of the continuing resolution or shutdown.
The U.S. government also conducts periodic reviews of U.S. defense strategies and priorities which may shift Department of Defense (“DoD”) budgetary priorities, reduce overall spending, or delay contract or task order awards for defense-related programs from which we would otherwise expect to derive a significant portion of our future revenue. A significant decline in overall U.S. government spending, a significant shift in spending priorities, the substantial reduction or elimination of particular defense-related programs, or significant budget-related delays in contract or task order awards for large programs have affected and could continue to adversely affect our future revenue and limit our growth prospects.
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U.S. government contracts are subject to a competitive bidding process, are generally not fully funded at inception, and contain certain terms that may be unfavorable to us, which could result in contracts and opportunities consuming significant resources without generating revenue or profit.
U.S. government contracts typically involve long lead times for design and development and are subject to significant changes in scheduling. Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The termination or reduction of funding for a government program would result in a loss of anticipated future revenue attributable to that program. In addition, U.S. government contracts generally contain provisions permitting termination, in whole or in part, at the government’s convenience. Because a substantial majority of our revenue is dependent on the procurement, performance and payment under our U.S. government contracts, the termination of one or more critical government contracts could have a negative impact on our results of operations and financial condition.
The U.S. government may modify, curtail or terminate one or more of our contracts, and failure to comply with contract terms or applicable laws and regulations in relation to our U.S. government contracts could expose us to penalties or other adverse consequences.
The U.S. government contracting party may modify, curtail or terminate its contracts with us, without prior notice and either at its convenience or for default based on performance. In addition, funding pursuant to our U.S. government contracts may be reduced or withheld as part of the U.S. Congressional appropriations process. Any loss or anticipated loss or reduction of expected funding and/or modification, curtailment, or termination of one or more of our U.S. government contracts could have a material adverse effect on our earnings, cash flow and/or financial position, as well as our access to government testing facilities and/or our ability to secure pre-certification operating experience and/or revenues.
The U.S. government may also audit and investigate contractors and subcontractors; claim rights, including intellectual property rights, in products and data developed under certain contracts; suspend or debar contractors from doing business with the government or a specific government agency; impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under such agreements; and control or prohibit the export of products.
If the government discovers improper or illegal activities or contractual non-compliance (including improper billing), we may be subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the government. Also, the qui tam provisions of the federal and various state civil False Claims Acts authorize a private person to file civil actions on behalf of the federal and state governments and retain a share of any recovery which can include treble damages and civil penalties. Further, the negative publicity that could arise from any such penalties, sanctions or findings could have an adverse effect on our reputation and reduce our ability to compete for new contracts with both government and commercial clients.
Crashes, accidents or incidents of aircraft could have a material adverse effect on our business, financial condition, and results of operations.
Test flying autonomous aircraft is inherently risky, and crashes, accidents or incidents involving our aircraft or an aircraft flown by the Merlin Pilot system are possible. Operating aircraft is subject to various risks, and we expect demand for our autonomous flight services to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft or an aircraft flown by the Merlin Pilot system. Such accidents or incidents could also have a material impact on our ability to obtain or maintain FAA, CAA, or other regulatory authorities’ certification of our technology and could impact confidence in Merlin Pilot or the autonomous flight industry as a whole, particularly if such accidents were due to a safety issue. Failure to achieve certification for Merlin Pilot could delay or block commercialization. We believe that regulators and the general public are still forming their opinions about the safety and utility of advanced flight control software capabilities. An accident or incident involving either our aircraft, an aircraft flown by the Merlin Pilot system or a competitor’s aircraft while these opinions are being formed could have a disproportionate impact on the longer-term view of the emerging autonomous flight market. Opposition from pilot unions, public stakeholders, or communities could delay approvals and adoption.
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Additionally, adverse publicity stemming from actual or alleged behavior of any of our employees or third-party contractors could expose us to significant reputational harm and potential legal liability. A single accident could result in significant liability. The insurance we carry may be inapplicable or inadequate to cover any such matter, in which case we may be forced to bear substantial losses. Any such incident, even if unrelated to the safety of our aircraft or our Merlin Pilot system, could result in passengers being reluctant to use our services, which could adversely impact our business, results of operations, financial conditions and prospects.
Our customers may experience service failures or interruptions due to defects in the software, infrastructure, components or engineering systems that compromise our services, or due to errors in product installation, any of which could harm our business.
Our services may contain undetected defects in the software, infrastructure, components or engineering system. Sophisticated software and applications, such as those adopted and offered by us in connection with or as a part of Merlin Pilot, may contain “bugs” that can unexpectedly interfere with the software and applications’ intended operations. Our communication services may experience outages, service slowdowns or errors from time-to-time. Defects may also occur in components or processes used for our services.
There can be no assurance that we will be able to detect and fix all defects in the hardware, software and services we offer. Failure to do so could result in decreases in sales of our services and software, lost revenues, significant warranty and other expenses, decreases in customer confidence and loyalty, losing market share to our competitors, and reputational harm.
We or our suppliers may not be able to procure or repair critical hardware components that are required in our operations.
Geopolitical events in recent times have caused multiple supply chain disruptions for companies globally. Our business relies on certain critical hardware components such as servos. If we are unable to procure such equipment, or replacement parts (at commercial prices or at all), or they are delayed, our operations may be adversely affected which would likely have a material adverse effect on our business, financial condition, results of operations and prospects. If the manufacturers of such hardware are unable to obtain materials or components themselves, they may experience manufacturing delays or have to cease manufacturing altogether. Supply chain disruptions may also occur from time to time due to a range of factors beyond our control, including, but not limited to, increased costs of labor, freight costs and raw material prices along with a shortage of qualified workers.
The trade policies of the U.S., on one hand, and foreign countries on the other hand, are dynamic at the moment, and trade policies such as export/import restrictions, quotas, or tariffs, changing with either of these countries, or others, may reduce the ability of our suppliers to supply us with the equipment we need, or create a shortage or lack of components necessary for their manufacture.
Uncertainties due to evolving laws and regulations could also impede the ability of a foreign-based company to obtain or maintain permits or licenses required to conduct business in various markets. Changes in any of these policies, laws and regulations, or the interpretations thereof, could have a negative impact on our business.
Such supply chain disruptions have the potential to cause material impacts to our operating performance and financial position if the delivery of equipment for use in our Merlin Pilot systems is delayed.
We may have future capital needs and may not be able to obtain additional financing to fund our capital needs on acceptable terms, or at all.
We expect to continue to incur operating losses for the foreseeable future as we continue to expand and develop, and we may need to raise additional capital within the next twelve to twenty-four months. If we are unable to raise additional capital, we may have to significantly delay, scale back or discontinue one or more of our research and development programs. We have evaluated from time to time, and we continue to evaluate, our potential capital needs in light of increasing demand for our services and generally evolving technology in our industry. We may utilize one or more types of capital raising in order to fund any initiative in this regard, including the issuance of new equity securities and new debt securities, including debt securities convertible into our common stock. Our ability to generate positive cash flows from operating activities and the extent and timing of certain capital and other necessary expenditures are subject to numerous variables, such as costs related to execution of our current Technology Roadmap, including
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continuing development and deployment of the Merlin Pilot and other future technologies. The market conditions and the macroeconomic conditions that affect the markets in which we operate could have a material adverse effect on our ability to secure financing on acceptable terms, if at all. We may be unable to secure additional financing on favorable terms or at all or our operating cash flows may be insufficient to satisfy our financial obligations under any of the Credit Facilities and other indebtedness outstanding from time to time.
Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes may be limited by future credit facilities. In the future, if we are not in compliance with covenants set forth in our credit facilities, we may incur additional indebtedness. Events beyond our control can affect our ability to comply with these requirements.
The terms of any additional financing may limit our financial and operating flexibility. Our ability to satisfy our financial obligations will depend upon our future operating performance, the availability of credit generally, economic conditions and financial, business and other factors, many of which are beyond our control. Furthermore, if financing is not available when needed, or is not available on acceptable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which may have a material adverse effect on our business, financial condition and results of operations. Even if we are able to obtain additional financing, we may be required to use the proceeds from any such financing to repay a portion of our outstanding debt.
If we raise additional funds or seek to reduce our levels of indebtedness through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company. In addition, any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock, and we may grant holders of such securities rights with respect to the governance and operations of our business. If we are unable to obtain adequate financing or financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited. The Business Combination Agreement further limits our ability to raise additional funds through additional indebtedness or further issuances of equity, convertible debt securities or other securities convertible into equity, which could further impact our ability to grow or support our business and to respond to business challenges prior to the Closing.
Competition could result in price reductions, reduced revenue and loss of market position and could harm our results of operations.
Our services and software are sold in competitive markets. Some of our current or potential future competitors are, or could potentially be, larger, more diversified corporations and have greater financial, marketing, production and research and development resources. As a result, they may be better able to withstand pricing pressures and the effects of periodic economic downturns. Some of our current or future competitors may offer a broader product line or broader geographic coverage to customers. Our business and results of operations may be materially adversely affected if our competitors:
• develop services and software that are superior to our services and software;
• develop services and software that are priced more competitively than our services and software;
• develop methods of more efficiently and effectively providing services; or
• adapt more quickly than we do to new technologies or evolving customer requirements.
We believe that the principal points of competition in our business are technological capabilities, geographic coverage, price, customer service, product development, conformity to customer specifications, compliance with regulatory certification requirements, quality of support after the sale and timeliness of delivery and installation. Maintaining and improving our competitive position will require continued investment in technology, manufacturing, engineering, quality standards, marketing and customer service and support. If we do not maintain sufficient resources to make these investments or are not successful in maintaining our competitive position, our operations and financial performance will suffer. We may not have the financial resources, technical expertise or support capabilities to continue to compete successfully. Due to our successful entry into autonomous flight services, other competitors could be prompted to enter this business.
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We depend upon third parties to manufacture equipment components, provide services and install and maintain our equipment. If these third parties are unable to manufacture our equipment components or provide the applicable services, in each case either temporarily or permanently, such disruptions may have a material adverse effect on our business, revenue, financial results and prospects.
We rely on strategic partners for the integration of our software. If we are required for any reason (including expiration of the contract, termination by one party for material breach or other termination events) to find one or more alternative suppliers, we estimate that the replacement process could cause significantly delays to our programs depending upon the component or service, and we may not be able to contract with such alternative suppliers on a timely basis, on commercially reasonable terms, or at all. Finding and contracting with suppliers of some components may be delayed or made more difficult by current suppliers’ ownership of key intellectual property that requires alternative suppliers to either obtain rights to such intellectual property or develop new designs that do not infringe on such intellectual property. In addition, many of our components are highly integrated with other system components, which may further lengthen the time required for an alternative supplier to deliver a component or service that meets our system requirements. If we are not able to continue to engage suppliers with the capabilities or capacities required by our business, or if such suppliers fail to deliver quality products, parts, equipment and services in sufficient quantities or on a timely basis consistent with our inventory needs and production schedule, our business, financial condition and results of operations may be materially adversely affected.
The supply of third-party components and services could be interrupted or halted by a termination of our relationships, a failure of quality control or other operational problems at such suppliers or a significant decline in their financial condition. If we are not able to continue to engage suppliers with the capabilities or capacities required by our business, or if such suppliers fail to deliver quality products, parts, equipment and services on a timely basis consistent with our schedule, our business, financial condition and results of operations may be materially adversely affected.
We may fail to recruit, train and retain the highly skilled employees that are necessary to remain competitive and execute our growth strategy.
Competition for key technical personnel in high-technology industries such as ours is intense. We believe that our future success depends in large part on our continued ability to hire, train, retain, and leverage the skills of qualified engineers and other highly skilled personnel needed to continue to develop our artificial intelligence, autonomous flight, and related technologies. We may not be as successful as our competitors at recruiting, training, retaining, and utilizing these highly skilled personnel. Any failure to recruit, train, and retain highly skilled employees may have a material adverse effect on our business.
We depend on the continued service and performance of our key personnel, including Matt George, our CEO. Such individuals have acquired specialized knowledge and skills with respect to Merlin and its operations. As a result, if any of our key personnel were to leave Merlin we could face substantial difficulty in hiring qualified successors and could experience a loss of productivity while any such successor obtains the necessary training and expertise. We do not maintain key man insurance on any of our officers or key employees. In addition, much of our key technology and systems is custom-made for our business by our personnel. The loss of key personnel, including key members of our management team, could disrupt our operations and may have a material adverse effect on our business.
Adverse economic conditions, including economic slowdowns, may have a material adverse effect on our business.
We cannot predict the nature, extent, timing or likelihood of any economic slowdown or the strength or sustainability of any economic recovery, worldwide, in the United States or in the aviation industry. Negative conditions in the general economy both in the United States and globally, including conditions resulting from changes in gross domestic product growth, declines in consumer confidence, tariffs, labor shortages, inflationary pressures, rising interest rates, and financial and credit market fluctuations could cause a decrease in business investments, including spending on air travel and otherwise, and could materially and adversely affect the growth of our business.
In addition, geopolitical risks, including those arising from political turmoil, trade tension and/or the imposition of trade tariffs, terrorist activity and acts of civil or international hostility, are increasing. For instance, the ongoing military conflict between Russia and Ukraine and the Israel-Hamas conflict in the Middle East have had negative impacts on the global economy and created uncertainty in the global capital markets and are expected to have further global economic consequences, including disruptions of energy markets. Further, other events outside of our control,
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including natural disasters, climate change-related events and regional or global outbreaks of contagious diseases, may arise from time to time and be accompanied by governmental actions that may increase international tension. Any such events and responses, including regulatory developments, may cause significant volatility and declines in the global markets, disproportionate impacts to certain industries or sectors, disruptions to commerce (including to economic activity, travel and supply chains), loss of life and property damage, and may materially and adversely affect the global economy or capital markets, as well as our business and results of operations. If conditions of the general economy or markets in which we operate worsen from present levels, it could lead to a decrease in air travel and cause owners and operators of business aircraft to cut costs by reducing their purchases or use of private aircraft. Should an economic slowdown occur in the U.S. or globally, our business and results of operations may be materially adversely affected.
We may be unsuccessful at evaluating or pursuing strategic opportunities, which could adversely affect our revenue, financial condition and results of operation.
Our management continuously assesses whether shareholder value would be increased by engaging in strategic and/or financial relationships, transactions or other opportunities, including those that are suggested to us by third parties. There can be no assurance that we will pursue any strategic or financial relationship, transaction or other opportunity, the outcome of which is inherently uncertain. Further, the process of evaluating and pursuing any such relationship, transaction or other opportunity will involve the dedication of significant resources and the incurrence of significant costs and expenses. If we are unable to mitigate these or other potential risks relating to assessing and undertaking strategic opportunities, it may disrupt our business or adversely impact our revenue, financial condition and results of operation.
Risks Related to Our Technology and Intellectual Property
Our business, financial condition, and reputation could be adversely affected if we or any subcontractors, third party suppliers or service providers suffer service interruptions or delays, technology failures, data security incidents, compromises to controlled or sensitive information, damage to equipment or system disruptions or other failures arising from, among other things, force majeure events, cyber-attacks or other malicious activities.
To conduct our business, we rely heavily on the integrity and performance of hardware, network infrastructure, the internet and our information systems (both internal and provided by third parties) (collectively, “IT Systems”). We and certain of our third-party service providers collect, maintain and process data about employees, business partners and others, including information about individuals, as well as proprietary information belonging to our business (collectively “Confidential Information”). If we experience frequent IT System failures that affect our operations, then our reputation, brand and customer retention could be harmed, and such failures could be material breaches of our customer contracts or regulatory requirements resulting in termination rights, penalties or claims for damages.
Our operations and services depend upon the extent to which our and our subcontractors’, suppliers’ or service providers’ IT Systems are protected against compromise, damage or interruption from a disaster. A natural catastrophe, epidemic, pandemic, industrial accident, blackout, telecommunication failure, terrorist attack, or war, or unanticipated problems with our or a critical third party’s disaster recovery systems, could cause IT Systems to be inaccessible to our employees or customers or destroy valuable data. In addition, in the event that a significant number of our managers were unavailable following a disaster, our ability to effectively conduct business could be severely compromised. These interruptions also may interfere with our suppliers’ ability to provide goods and services and our employees’ ability to perform their job responsibilities. Unanticipated problems with, or failures of, our disaster recovery systems or business continuity plans could have a material impact on IT Systems or ability to conduct business and on our results of operations and financial condition.
Despite security measures, our IT Systems may be vulnerable to attacks by external parties or may be compromised due to employee error, malfeasance, hardware or software defects or other disruptions. We may in the future experience service interruptions, service delays or technology or systems failures, which may be due to factors beyond our control. Additionally, we and many of our critical third-party service providers, like other commercial entities, have been, and will likely continue to be, subject to a variety of forms of cyberattacks on our IT Systems, attempts to gain unauthorized access to data and disruptions to our operations. These include, but are not limited to, cyberattacks, social-engineering (e.g., phishing) attacks, credential stuffing and account takeover, malware, ransomware or other extortion tactics, denial of service attacks, and other IT System-related penetrations. Hardware, software or applications developed by
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us or received from third parties may contain exploitable vulnerabilities, bugs, or defects in design, maintenance or manufacture or other issues that could compromise information or IT Systems. These attacks can originate from a wide variety of sources/malicious actors, including, but not limited to, persons who constitute an insider threat, who are involved with organized crime, or who may be linked to terrorist organizations or hostile foreign governments. Those and other parties may also attempt to fraudulently induce employees, customers, or other users of our systems to disclose sensitive information in order to gain access to our data or IT Systems or that of our customers or clients through social engineering, phishing, mobile phone malware, and other methods.
There is no assurance that administrative, physical, and technical controls and other preventive actions taken to reduce the risk of cyberattacks or other security incidents will completely or sufficiently protect our IT Systems and data. Cyberattacks are expected to accelerate on a global basis with threat actors becoming increasingly sophisticated in using techniques, including artificial intelligence, that are able to circumvent security controls, evade detection, and even remove forensic evidence. As a result, we may be unable to anticipate, prevent, detect, investigate, contain or recover from future attacks and incidents in a timely or effective manner. If we or critical third parties fail to prevent, detect, address and mitigate such attacks and incidents, it may impede or interrupt our business operations and could adversely affect our business, reputation, financial condition and results of operations.
Regulators, customers, or others may take action against us for any cybersecurity failures. Our continuous technological evaluations and enhancements, including changes designed to update our protective measures, may increase our risk of a breach or gap in our security. Regulators’ and others’ scrutiny of cybersecurity compliance, including in connection with new and developing laws and regulations, is increasing. This, in turn, could increase our compliance costs and operational burdens, especially as regulatory and legislative focus on cybersecurity matters intensifies. For example, as a contractor to the DoD, we are subject to the National Institute of Standards and Technology Special Publication 800-171 and other DoD cybersecurity requirements. In addition, we are subject to the Cybersecurity Maturity Model Certification (“CMMC”) requirement, which requires all contractors to, depending on the level of security required, perform a self-assessment or receive specific third-party cybersecurity certifications to be eligible for contract awards. Any failure to comply with these requirements could restrict or eliminate our ability to bid for, be awarded and perform on DoD contracts. The DoD expects that all new contracts will be required to comply with the CMMC by 2026, and initial requests for information and for proposals have already begun. We are in the process of evaluating our readiness and preparing for the CMMC. We will also be required to go through a CMMC recertification or new self-assessment process periodically, depending on the level of security required. In addition, any obligations that may be imposed on us under the CMMC may be different from, or in addition to, those otherwise required by applicable laws and regulations, which may cause additional expense for compliance. To the extent we, or our subcontractors or other third parties on whom we rely are unable to achieve certification in advance of contract awards that specify the requirement, we may be unable to bid on contract awards or follow-on awards for existing work with the DoD, which could materially and adversely affect our results of operations, financial condition, business and prospects. Failure to comply with these requirements may also subject us to bid protest challenges for the award of new contracts or False Claims Act allegations claiming damages to the government based on such non-compliance.
As our business grows, we may also be subject to certain laws, regulations and other requirements under state, federal and international laws relating to the privacy, security and handling of personal information. The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment. In some cases, these requirements may be either unclear in their interpretation and application, or they may have inconsistent or conflicting requirements with each other. Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security, including in relation to cybersecurity incidents. It is possible that new laws, regulations and other requirements, or amendments to or changes in interpretations of existing laws, regulations and other requirements, may require us to incur significant costs, implement new processes or change our handling of Confidential Information and business operations. In addition, any failure or perceived failure by us to comply with laws, regulations and other requirements could result in legal claims or proceedings (including class actions), regulatory investigations, enforcement actions or fines and penalties. If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.
We or our technology suppliers may be unable to continue to innovate and provide services and software that are useful to our customers.
The market for our services is characterized by evolving technology, changes in customer needs and performance expectations, and frequent new service and product introductions. Our success will depend, in part, on our and our suppliers’ ability to continue to enhance existing technology and services or develop new technology and services on
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a timely and cost-effective basis. If we or our suppliers fail to adapt quickly enough to changing technology, customer requirements and/or regulatory requirements, our business and results of operations may be materially adversely affected. We expect to have to invest significant capital to keep pace with innovation and changing technology, and if the amount of such investment exceeds our plans or the amount of investment permitted under any future credit arrangements, it may have a material adverse effect on our results of operations.
As is common in industries like ours, changing technology may result in obsolescence as we implement new technologies and retire old technologies. As we encounter such obsolescence, we must ensure that we have a sufficient supply of parts and equipment compatible with our existing technology, as well as access to maintenance, repair and other critical support services, until the transition is completed. Certain suppliers may determine to stop manufacturing and supplying end-of-life parts, products and equipment, or may stop providing related services, prior to completion of our transition. In the event that we are unable to obtain sufficient inventory from our existing suppliers, we would be required to engage new suppliers who have access to the intellectual property required to manufacture and support components that meet our specifications, and we may be unable to contract with such suppliers on commercially reasonable terms, or at all. We have implemented policies and procedures intended to ensure that we timely anticipate technology and product transitions and have access to sufficient inventory and services, but if such policies prove ineffective and we are unable to continue to engage suppliers with the capabilities or capacities required by our business to effect a transition, or if such suppliers fail to deliver quality products, parts, equipment and services in sufficient quantities or on a timely basis consistent with our schedule, our business, financial condition and results of operations may be materially adversely affected. In addition, following our retirement of end-of-life technologies, we may find that we have either obsolete or excess inventory on hand and might have to write off unusable inventory, which could have a material adverse effect on our results of operations.
If we fail to obtain licenses or comply with our obligations in these agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We are party to intellectual property license agreements that are important to our business and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various obligations on us.
We may need to obtain licenses from third parties to advance our research or allow commercialization of our services and software, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our services or software, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our future services and software, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
If we are unable to maintain, protect or enforce our intellectual property rights, it may have a material adverse effect on our business, revenue, financial results and prospects.
We rely on trademark, copyright, patent and trade secret law, and contracts (such as confidentiality agreements with our employees, vendors, customers and others) to establish and protect our intellectual property rights. The laws underlying the protections secured through such intellectual property rights are subject to change at any time, and certain agreements may not be fully enforceable, which could restrict our ability to protect our intellectual property rights.
We rely on our trademarks to distinguish our services from those of our competitors and have registered, applied to register, or anticipate registering many of these trademarks, including “MERLIN” and the Merlin Bird Logo. Third parties may oppose our applications or otherwise challenge our use of our registered and unregistered trademarks. If our trademarks are successfully challenged and we lose the right to use those trademarks, we could be forced to rebrand our services, which could result in loss of brand recognition and require us to devote resources to developing new brands. Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademark rights if they are infringed or otherwise violated.
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We also rely on trade secret protection for our unpatented proprietary technology to preserve our position in the market. To protect our trade secrets and other proprietary information, we typically require employees, consultants and others to whom we grant access to the information to enter into confidentiality agreements. However, we cannot assure you that we have entered into these agreements with everyone who has access to our proprietary information, that the agreements will provide meaningful protection in the event of any unauthorized use, misappropriation or disclosure of our proprietary information, and that the agreements will not be breached. If we are unable to maintain the proprietary nature of our technologies, our prospects, financial condition, and results of operations could be harmed. Also, trade secret laws do not generally prevent others from independently developing the same or similar technology to ours without improperly accessing or using our proprietary information.
We have applied for and obtained patent protection relating to certain of our proprietary technologies, and we expect to continue to apply for additional patent protection. However, we cannot assure you that our patent applications will be issued as patents, or that any of our issued patents will be of sufficient scope or strength to provide us with meaningful protection or commercial advantage. Further, our issued patents could be challenged, invalidated, rendered unenforceable or circumvented by others. If we fail to obtain issuance of patents, or our patent claims or other intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, the patent protections afforded our proprietary technologies could be impaired. Such impairment could harm our ability to market our services and software, negatively affect our competitive position and harm our business and operating results, including by requiring us to re-design our affected technologies. Competitors may develop and obtain patent protection for more effective designs, methods, processes or other technologies. Also, patent applications in the U.S. typically are not published for a period of time after they are filed, and since publication of discoveries in the scientific or patent literature tends to lag behind the discoveries, we cannot be certain that we will be the first to file patent applications on inventions that we conceive, or that the inventions have not been conceived by others without our knowledge. We cannot assure you that we will learn of all instances of infringement, and even if we become aware of infringement, we cannot assure you that we will have adequate resources to enforce our patents.
Despite our efforts to protect our intellectual property, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that our intellectual property is invalid or unenforceable, or that they do not infringe upon our intellectual property. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or may take in the future in an effort to prevent infringement, misappropriation or other violations may be unsuccessful. Litigation is costly and uncertain and diverts management attention and other resources.
Patent, trademark, trade secret and other intellectual property laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as they are protected in the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States. Failure to adequately protect or enforce our intellectual property rights, which on a global scale may be prohibitively expensive, could result in our competitors offering similar services, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, financial condition, results of operations, cash flow and prospects.
In order to commercialize certain of our services, we may also license patents, as well as unpatented technology, owned by third parties in exchange for royalty payments and our performance of other obligations. Our breach of any of these licenses may expose us to termination of the license, financial liability or legal claims, and the termination of any of the licenses could require us to cease making, using or selling services that exploit the patented technology. In the future, we may not be able to secure rights, on reasonable terms, or at all, to any improvements to the patented inventions that we license. Any of the foregoing may result in a loss of competitive advantage, decrease in our revenue, or increase in our operating expenses, or otherwise adversely affect our prospects, financial condition, and results of operations.
We may be subject to claims that we infringe third party intellectual property rights, which could result in significant costs and materially adversely affect our business and results of operations.
In recent years, there has been substantial intellectual property litigation in the autonomous navigation and related industries. We may in the future face claims that we are violating third-party intellectual property rights, particularly as we expand our business and the services that we offer. As our public profile increases, the possibility of third parties asserting their intellectual property rights against us grows. Our competitors and others may now and in the future have significantly larger patent portfolios than us.
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While we try to avoid infringing the intellectual property rights of others, we may unknowingly do so. Any claims of patent or other intellectual property infringement, even those without merit, could be expensive and time consuming to defend, cause us to cease making, using or selling services that incorporate or otherwise use the asserted intellectual property, require us to redesign, reengineer, or rebrand our services if feasible, and impair our ability to retain customers or attract prospects. Third parties may assert their intellectual property rights against our customers, which could cause us financial and reputational harm, and cause us to lose customers and prospects. Claims of intellectual property infringement, misappropriation or other violation brought against us or our customers may require us to license third-party intellectual property. Any licensing agreements, if required, may not be available to us on acceptable terms, if at all. A successful claim of infringement against us, or the settlement of an infringement claim, could result in us being required to pay significant damages, enter into costly license agreements, or cease making, using, or selling certain services. Any of these events could materially adversely affect our business, financial condition, and results of operations.
Certain of our suppliers do not indemnify us for third-party claims that our use of the supplier’s technology infringes or otherwise violates third-party intellectual property rights, and we may be liable for such claims. Performance of our intellectual property indemnification obligations and our lack of protection from our suppliers for third-party infringement claims against us may have a material adverse effect on our business and financial condition.
Our use of open-source software could limit our ability to commercialize our technology, and subject us to possible claims or proceedings.
Open-source software is software made available to the public under the terms of an open-source software license, and typically in source code form. Some open-source licenses require as a condition of their distribution that software that is combined with the open-source software and distributed or made available to third parties must be distributed or offered in source code form under the terms of the applicable open-source license. We use open-source software and may not have identified all such open-source software and cannot guarantee that we are in full compliance with the terms of the applicable open-source software licenses. Depending on how we use open-source software and the licenses applicable to it, we could be required to distribute or offer the source code of portions of our proprietary software to recipients of our services for no cost and/or allow the recipients to create derivative works, and the recipients could further license those portions to others, including to competitors. If a licensor of open-source software that we use alleges that we have not complied with the terms and conditions of the applicable license, we may be required to defend the allegations, pay significant damages, cease distributing or making available the software that uses the open-source software, obtain a proprietary or commercial license agreement from the licensor, re-engineer our software, or comply with the terms and conditions of the applicable license. Any of these events could have a material adverse effect on our business.
Material defects or errors in our software, firmware or hardware may damage our reputation, result in claims against us, and impair our ability to sell our services.
Our services rely on complex systems and components that could contain errors or defects. We rely on independent contractors, software vendors, manufacturers and other suppliers to develop, manufacture and supply software, firmware and hardware for these systems and components, any of which may exhibit errors, misconfiguration, bugs, or other design or manufacturing defects. Although we typically have support agreements and other protections in our agreements with these vendors and suppliers, our recourse under the agreements may be insufficient to compensate us for damage or liability that we suffer in the event that the components are faulty or failure to perform in accordance with the expectations of our users and customers. Moreover, maintenance and upgrade of our technologies may be labor and cost-intensive, including due to the geographic coverage of our network, the complexity of the technologies involved, and the need to test them extensively prior to operation. Moreover, aircraft operators use our Merlin Pilot service to autonomously aviate, navigate and communicate with air traffic control and aircraft and other activities that may be mission or safety critical. If errors or defects in our technology impairs the operation of an aircraft or results in damage to an aircraft, loss of or damage to property, serious injury or death could result. Any of these events could expose us to claims and significant liability, result in revocation of regulatory approvals, adversely affect our financial condition and results of operations, and imperil the ongoing operation of our business.
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The centrality of artificial intelligence technology to our services and business exposes us to risks innate to the development of artificial intelligence models and securing intellectual property rights in those models.
We use artificial intelligence (“AI”), machine learning, and automated decision-making technologies, including proprietary AI and machine learning algorithms and models (collectively, “AI Technologies”), throughout our business, and we are making significant investments in this area. For example, AI Technologies form the core of our autonomous flight and related technologies.
We expect that increased investment will be required in the future to continuously improve our proprietary AI Technologies and the use thereof. As with many technological innovations, there are significant risks involved in developing, maintaining and deploying these technologies and there can be no assurance that the usage of our investments in such technologies will always enhance our services or be beneficial to our business, including our efficiency or profitability.
In particular, if the models underlying our proprietary AI Technologies are: incorrectly designed or implemented; trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data, or on data to which we do not have sufficient rights or in relation to which we or the providers of such data have not implemented sufficient legal compliance measures; used without sufficient oversight and governance to ensure their responsible use; or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats or material performance issues, then the performance of our services, software and business, as well as our reputation, could suffer or we could incur liability resulting from the violation of laws or contracts to which we are a party or civil claims.
With respect to our services and software that incorporate our proprietary AI Technologies, the market for such services and software is rapidly evolving and unproven in many industries, including our own, and important assumptions about the characteristics of targeted markets, pricing, sales cycles, cost, performance, and perceived value associated with our services and software may be inaccurate. We cannot be sure that the market will continue to grow or that it will grow in ways we anticipate. In addition, market acceptance and consumer perceptions of services and software that incorporate our proprietary AI Technologies are uncertain. Our failure to successfully develop and commercialize our services and software involving our proprietary AI Technologies could depress the market price of our stock and impair our ability to: raise capital; expand our business; provide, improve and diversify our product offerings; continue our operations and efficiently manage our operating expenses; and respond effectively to competitive developments.
In addition to our proprietary AI Technologies, we use AI Technologies licensed from third parties in our technologies and our ability to continue to use such technologies at the scale we need may be dependent on access to specific third-party software and infrastructure. We cannot control the availability or pricing of such third-party AI Technologies, especially in a highly competitive environment, and we may be unable to negotiate favorable economic terms with the applicable providers. If any such third-party AI Technologies become incompatible with our solutions or unavailable for use, or if the providers of such models unfavorably change the terms on which their AI Technologies are offered or terminate their relationship with us, our solutions may become less appealing to our customers, and our business will be harmed. In addition, to the extent any third party AI Technologies are used as a hosted service, any disruption, outage, or loss of information through such hosted services could disrupt our operations or solutions, damage our reputation, cause a loss of confidence in our solutions, or result in legal claims or proceedings, for which we may be unable to recover damages from the affected provider.
We are in varying stages of development in relation to our proprietary AI Technologies. The continuous development, maintenance and operation of our proprietary AI Technologies is expensive and complex, and may involve unforeseen difficulties including material performance problems, undetected defects or errors. For instance, the models underlying our proprietary AI Technologies can experience decay (also known as “model drift”) in which its performance and accuracy decrease over time without further human intervention to correct such decay.
We may not be successful in our ongoing development and maintenance of these technologies in the face of novel and evolving technical, reputational and market factors. Our efforts to develop proprietary AI models could increase our operating costs. Our ability to develop proprietary AI models may be limited by our access to processing infrastructure or training data, and we may be dependent on third-party providers for such resources.
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Certain of the data that we use in developing our proprietary AI Technologies may be (or in the future may need to be) licensed from third parties, and we are dependent upon our ability to obtain necessary data licenses within appropriate time frames and on commercially reasonable terms, and such third parties’ assurances that such data was obtained and provided to us lawfully. Our data suppliers may withhold their data from us in certain circumstances, for example: if there is a competitive reason to do so; if we breach our contract with a supplier; if they are acquired by one of our competitors; or if new laws or case law restrict the use or dissemination of the data they provide. Additionally, we could terminate relationships with our data suppliers if they fail to adhere to our data quality, vendor or other standards. If a substantial number of data suppliers were to withdraw or withhold their data from us, or if we sever ties with our data suppliers based on their inability to meet our standards, our ability to provide services and software to our customers, and our revenue prospects, could be materially adversely impacted.
A number of aspects of intellectual property protection in the field of AI and machine learning are currently under development, and there is uncertainty and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted for AI and machine learning systems and relevant system input and outputs. If we fail to obtain protection for the intellectual property rights concerning our AI Technologies or later have our intellectual property rights invalidated or otherwise diminished, our competitors may be able to take advantage of our research and development efforts to develop competing products which could adversely affect our business, reputation and financial condition.
Given the long history of development of AI Technologies, other parties may have (or in the future may obtain) patents or other proprietary rights that would prevent, limit, or interfere with our ability to make, use, or sell our own AI Technologies.
We may use AI Technologies, including tools provided by third parties, to develop or assist in the development of our own software code. While use of such tools makes our development process more efficient, AI Technologies have sometimes generated content that is “substantially similar” to proprietary or open-source code on which the AI tool was trained. If the AI Technologies we use generate code that is too similar to other proprietary code, or to software processes that are protected by patent, we could be subject to intellectual property infringement claims. We may also not be able to anticipate and detect security vulnerabilities in such AI generated software code. If our tools generate code that is too similar to open-source code, we risk losing protection of our own proprietary code that is commingled with such code. Finally, to the extent we use third-party AI Technologies to develop software code, the terms of use of these tools may state that the third-party provider retains rights in the generated code.
Risks Related to Litigation and Regulation
We are reliant on aviation regulations and certification from regulatory authorities such as the Federal Aviation Authority (FAA) and/or New Zealand Civil Aviation Authority (CAA) and Military Airworthiness authorities to certify our technology on aircraft.
We may experience delays and additional costs to receive one or more of these certifications in order for us to operate aircraft using our technology We may be unable to obtain or maintain relevant regulatory approvals for the commercialization or operation of our aircraft technologies or services, either in the United States or in foreign markets.
The commercialization of new aircraft and the operation of autonomous flight services require certain regulatory authorizations and certifications, including Type Certification, Production Certification and an air carrier certificate issued by the FAA under Part 119 with Part 135 operations specifications. While we have received our Part 135 Air Carrier Certificate and anticipate being able to obtain the remaining required authorizations and certifications, we may be unable to do so on the timeline we project, or at all. Circumstances outside of our control could delay the receipt of our required certifications. For example, FAA staffing depends, in large part, on the annual appropriations process and the agency’s ability to retain and recruit sufficient resources with relevant experience and expertise. Failure to pass an annual appropriation bill has in the past resulted in temporary government shutdowns. A future shutdown, or a failure by Congress to pass an FAA reauthorization bill (or extension) could delay the rulemaking and certification process. Additionally, recent focus on reducing the size of the federal workforce could negatively impact the availability of resources within the FAA which could delay our progress towards certification.
We are also pursuing certification of our aircraft and approval to operate our services in other countries. While many of these countries have established processes for validating a type certificate issued by the FAA, others, such as the UAE, are developing new processes to leverage our work with the FAA and provide a path for approval of initial operations that could precede type certification in the United States. The regulatory agencies charged with granting
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approval for our aircraft and our services in other countries may be subject to many of the same funding and staffing risks that exist in the United States. Additionally, pursuing certification and operations outside the United States is subject to additional risks, including regulatory regimes that may be less familiar to us or may have less experience in certifying and approving new and novel aircraft. If we fail to obtain any of the required authorizations or certificates, or do so in a timely manner, or any of these authorizations or certificates are modified, suspended or revoked after we obtain them, we may be unable to launch our commercial service or do so on the timelines we project and may have an adverse impact on our business, financial condition and results of operations.
Regulation by United States and foreign government agencies, including the FAA and CAA, which regulates the civil aviation manufacturing and repair industries in the United States and New Zealand, may increase our costs of providing service or require us to change our services.
Any inability to obtain, delay in obtaining (including as a result of a government shutdown or funding shortages), or change in, needed FAA certifications, authorizations, or approvals, could have an adverse effect on our ability to meet our research & development, installation commitments, manufacture and sell parts for installation on aircraft, or expand our business. Following installation of our equipment, if we were to discover that our equipment or components of our equipment were not in compliance with the FAA’s requirements, or if the FAA’s requirements changed, our non-compliance could result in our incurring material costs to inspect and modify or replace such equipment, and could result in our system being turned off or installed aircraft being grounded. If we fail to comply with the FAA’s many regulations and standards that apply to our activities, we could lose the FAA certifications, authorizations, or other approvals on which our research & development, manufacturing, installation, maintenance, preventive maintenance and alteration capabilities are based. In addition, from time to time, the FAA or comparable foreign agencies adopt new regulations or amend existing regulations. The FAA could also change its policies regarding the delegation of inspection and certification responsibilities to private companies, which could adversely affect our business. To the extent that any such new regulations or amendments to existing regulations or policies apply to our activities, our compliance costs would likely increase. Software updates and feature changes may trigger re-certification, delaying deployment and increasing costs.
Adverse decisions or regulations of these U.S. and foreign regulatory bodies may have a material adverse effect on our business and results of operations. We are unable to predict the impact of regulations and other policy changes that could be adopted by the various governmental entities that oversee portions of our business.
A shifting regulatory framework governing use of AI in the United States and abroad may hinder our ability to develop, maintain, or deploy the technologies at the core of our business.
The regulatory framework for AI Technologies is rapidly evolving as many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. Additionally, existing laws and regulations may be interpreted in ways that would affect the operation of our AI Technologies or could be rescinded or amended as new administrations take differing approaches to evolving AI Technologies. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet completely determine the impact future laws, regulations, standards, or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations.
Already, certain existing legal regimes (e.g., relating to data privacy) regulate certain aspects of AI Technologies, and new laws regulating AI Technologies have either entered into force in the United States and the EU in 2024 or are expected to enter into force in 2025.
It is also possible that further new laws and regulations will be adopted in the United States and in other non-U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI Technologies for our business, or require us to change the way we use AI Technologies in a manner that negatively affects the performance of our services, software and business and the way in which we use AI Technologies. Further, the cost to comply with such laws, regulations, and decisions could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI Technologies). Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could adversely affect our business, financial condition and results of operations.
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Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.
We are subject to the FCPA, the Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions around the world. The FCPA, the Bribery Act and similar applicable laws generally prohibit companies, their officers, directors, employees and third-party intermediaries, business partners and agents from making improper payments or providing other improper things of value to government officials or other persons. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and other third parties where we may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, resellers and agents, even if we do not explicitly authorize such activities. While we have policies and procedures and internal controls to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. To the extent that we learn that any of our employees, third-party intermediaries, agents, or business partners do not adhere to our policies, procedures, or internal controls, we are committed to taking appropriate remedial action. In the event that we believe or have reason to believe that our directors, officers, employees, third-party intermediaries, agents, or business partners have or may have violated such laws, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances. Detecting, investigating and resolving actual or alleged violations can be extensive and require a significant diversion of time, resources and attention from senior management. Any violation of the FCPA, the Bribery Act, or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, fines and penalties, all of which may have a material adverse effect on our business, financial condition and results of operations.
Expenses, liabilities or business disruptions resulting from litigation could adversely affect our results of operations and financial condition.
Our operations are characterized by the use of new technologies and services across multiple jurisdictions that implicate various statutes and a range of rules and regulations that may be subject to broad or creative interpretation. This may result in litigation, including class action lawsuits, the outcome of which may be difficult to assess or quantify due to the potential ambiguity inherent in these regulatory schemes and/or the nascence of our technologies and services. Plaintiffs may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. Any such claims or litigation may be time-consuming and costly, divert management resources, require us to change our services and software, or require us to pay significant monetary damages, which may have a material adverse effect on our results of operations. From time to time, we may also be subject to other claims or litigation in the ordinary course of our business, including, for example, claims related to employment matters.
In addition, costly and time-consuming litigation could be necessary to enforce our existing contracts and, even if successful, may have a material adverse effect on our business. In addition, litigation by or against any customer or supplier could have the effect of negatively impacting our reputation and goodwill with existing and potential customers and suppliers.
Risks Related to New Merlin’s Securities Following the Business Combination
There may not be an active trading market for New Merlin Common Stock, which may make it difficult to sell shares of New Merlin Common Stock.
An active trading market for New Merlin Common Stock may not develop or be sustained following the closing of the Business Combination. If an active trading market for New Merlin Common Stock does not develop or is not sustained, you may not be able to sell your shares at an attractive price or at all. Furthermore, an inactive market may also impair New Merlin’s ability to raise capital by selling shares of New Merlin Common Stock in the future, and may impair New Merlin’s ability to enter into strategic collaborations or acquire companies or products by using shares of New Merlin Common Stock as consideration.
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The requirements of being a public company in the U.S., if the Business Combination is completed, may strain the Company’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses that will result from being a public company in the U.S. may be greater than we anticipate.
Requirements associated with being a public company in the United States will require significant resources and management attention. After the completion of this offering, we will become subject to certain reporting requirements of the Exchange Act, and the other rules and regulations of the SEC, and Nasdaq. We will also be subject to various other regulatory requirements, including the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal, accounting and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs. In addition, complying with rules and regulations and the increasingly complex laws pertaining to public companies will require substantial attention from our senior management, which could divert their attention away from the day-to-day management of our business. These cost increases and the diversion of management’s attention could materially and adversely affect our business, results of operations and financial condition. We will also need to hire additional personnel to support our financial reporting function and may face challenges in doing so.
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of New Merlin’s securities may decline.
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of New Merlin’s securities 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 Inflection Point’s shareholders vote on the Business Combination. Because the number of shares to be issued pursuant to the Business Combination Agreement is based on the per share value of the amount in the Trust Account and will not be adjusted to reflect any changes in the market price of Inflection Point Class A Ordinary Shares, the market value of shares of New Merlin Common Stock and securities convertible into or exercisable for shares of New Merlin Common Stock issued in the Business Combination may be higher or lower than the values of these securities on earlier dates.
In addition, following the Business Combination, shares of New Merlin Common Stock will not have any redemption rights like the Public Shares had and fluctuations in the price of shares of New Merlin Common Stock could contribute to the loss of all or part of your investment. The trading price of shares of New Merlin Common Stock following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond Inflection Point’s, Merlin Lab OpCo’s or New Merlin’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 shares of New Merlin Common Stock. Additionally, any of the risk factors discussed in this proxy statement/prospectus could have a material adverse effect on your investment and shares of New Merlin Common Stock may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of shares of New Merlin Common Stock may not recover and may experience a further decline.
Broad market and industry factors may materially harm the market price of shares of New Merlin Common Stock irrespective of New Merlin’s operating performance. The stock market in general, and Nasdaq specifically, 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 they were acquired. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to New Merlin could depress New Merlin’s share price regardless of New Merlin’s business, prospects, financial conditions or results of operations. A decline in the market price of New Merlin’s securities also could adversely affect New Merlin’s ability to issue additional securities and New Merlin’s ability to obtain additional financing in the future.
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If the Merger does not qualify as a reorganization under Section 368(a) of the Code, Holders of Merlin’s securities may be required to pay substantial U.S. federal income taxes.
Inflection Point and Merlin intend for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Latham & Watkins LLP intends to deliver an opinion on the basis of facts, representations and assumptions and subject to the limitations and qualifications set forth or referred to in such opinion regarding the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code. The obligations of each of Inflection Point and Merlin to complete the Merger, however, are not conditioned on the receipt of any such opinion. Such opinion of counsel will be based on customary assumptions and certain representations, warranties, and covenants of Inflection Point, Merlin, and Merger Sub. If any of these assumptions, representations, warranties, or covenants is or becomes incorrect, incomplete, or inaccurate, or is violated, or if there is a change in U.S. federal income tax law after the date of such opinion of counsel, the validity of such opinion of counsel may be adversely affected. In addition, such opinion of counsel is not free from doubt because there is no authority directly addressing the treatment of all of the particular facts of the Merger for U.S. federal income tax purposes. Any opinion of counsel represents a counsel’s legal judgment but is not binding on the IRS or any court. Neither Inflection Point nor Merlin intends to request a ruling from the IRS with respect to the tax treatment of the Merger, and as a result, no assurance can be given that the IRS will not challenge the treatment of the Merger described below or that a court would not sustain such a challenge. If the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then a Holder (as defined in “U.S. Federal Income Tax Considerations of the Merger to Holders of Merlin Securities and Merlin — I. U.S. Holder”) that exchanges Merlin securities for New Merlin securities in the Merger may recognize taxable gain in connection with such exchange and could be subject to substantial U.S. federal income taxes. For more information on the material U.S. federal income tax consequences of the Merger to Holders of Merlin securities, see “— Tax Consequences of the Merger to U.S. Holders of Merlin Common Stock” and “— Tax Consequences of the Merger to Non-U.S. Holders of Merlin Common Stock”.
The Proposed Charter will provide, subject to limited exceptions, that the courts of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
The Proposed Charter will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought in the Court of Chancery of the State of Delaware or, if that court does not have jurisdiction, a state court located within the State of Delaware or the federal district court for the District of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in the Proposed Charter. In addition, the Proposed Charter will provide that this choice of forum does not apply to any complaint asserting a cause of action under the Securities Act and the Exchange Act. Finally, the Proposed Charter will provide that federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act or the Exchange Act.
While the Delaware Supreme Court has upheld provisions of the certificates of incorporation of other Delaware corporations that are similar to the exclusive forum provision in the proposed Ne Proposed Charter, a court of a state other than the State of Delaware could decide that such provisions are not enforceable under the laws of that state.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in the Proposed Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
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General Risk Factors
We are currently in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by a new 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 Merlin’s business. Trade disputes could also adversely impact supply chains which could now or in the future increase costs for Merlin 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. Merlin and Inflection Point are continuing to monitor the trade disputes, inflation, interest rates and the military conflicts and the impacts to global capital markets, to Merlin’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.
On August 16, 2022, the Inflation Reduction Act of 2022 became law, which, 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 applies only to stock repurchases occurring in 2023 and beyond. 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.
On December 27, 2022, the U.S. Department of the Treasury published Notice 2023-2, which provided 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 Inflection Point 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 discussed more fully in “Material U.S. Federal Income Tax Considerations”), 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 Inflection Point 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 Inflection Point 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 Inflection Point Class A 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 the excise tax applies, issuances of stock in connection
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with the Business Combination, issuances of securities in connection with the Closing PIPE Investments at the time of 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.
Inflection Point is, and we expect that New Merlin 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.
Inflection Point is, and we expect that New Merlin will be, an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS 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 controls 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 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 our Inflection Point 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 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 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 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.
Additionally, Inflection Point 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 Merlin 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 Merlin 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 Merlin’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 Merlin 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 Merlin will remain a smaller reporting company after the Closing. To the extent that New Merlin 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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Because 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 Cayman Constitutional Documents, the 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 shareholder’s derivative action in a federal court of the United States.
We have been advised by Ogier (Cayman) 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 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, 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 Public Shareholders of a U.S. company.
The Cayman Constitutional Documents 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 Cayman Constitutional Documents 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 Cayman Constitutional Documents 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 Companies Act or the Cayman Constitutional Documents; or (iv) any action asserting a claim against us governed by the internal affairs doctrine (as such concept 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 Cayman Constitutional Documents 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.
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The Cayman Constitutional Documents 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 Inflection Point 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.
Recent increases in inflation in the United States and elsewhere could make it more difficult for us to complete the Business Combination.
Recent increases in inflation in the United States and elsewhere may lead to increased price volatility for publicly traded securities, including ours, or other national, regional or international economic disruptions, any of which could make it more difficult for us to complete the Business Combination.
We employ a mail forwarding service, which may delay or disrupt our ability to receive mail in a timely manner.
Mail addressed to Inflection Point and received at its registered office will be forwarded unopened to the forwarding address supplied by Inflection Point to be dealt with. None of Inflection Point, 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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EXTRAORDINARY GENERAL MEETING OF INFLECTION POINT
general
Inflection Point is furnishing this proxy statement/prospectus to its shareholders as part of the solicitation of proxies by the Inflection Point Board for use at the extraordinary general meeting and at any adjournment or postponement thereof. This proxy statement/prospectus provides Inflection Point shareholders with information they need to know to be able to vote or direct their vote to be cast at the extraordinary general meeting.
Date, Time and Place of the Extraordinary General Meeting
The extraordinary general meeting will be held at [•], New York City time, on [•], at the offices of White & Case LLP located at 1221 Avenue of the Americas, New York, NY 10020, and virtually via live webcast at [•].
Purpose of the Extraordinary General Meeting
At the extraordinary general meeting, Inflection Point is asking holders of Inflection Point Ordinary Shares to consider and vote upon:
• 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 Proposed Charter is attached to this proxy statement/prospectus as Annex B;
• the Stock Issuance Proposal;
• the Organizational Documents Proposal. The Proposed Charter and the Proposed Bylaws are attached to this proxy statement/prospectus as Annex B and Annex C, respectively;
• the Advisory Organizational Documents Proposals;
• the Director Election Proposal;
• the New Merlin Incentive Plan Proposal;
• the New Merlin Employee Stock Purchase Plan Proposal (collectively with the Business Combination Proposal, the Domestication Proposal, the Stock Issuance Proposal, the Organizational Documents Proposal, the Director Election Proposal and the New Merlin Incentive Plan Proposal, the “Condition Precedent Proposals”); and
• the Adjournment Proposal.
Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other. The Advisory Organizational Documents Proposal and the Adjournment Proposal are not conditioned upon the approval of any other proposal set forth in this proxy statement/prospectus.
Recommendation of the Inflection Point Board
The Inflection Point Board believes that the Business Combination Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Inflection Point’s shareholders and unanimously recommends that its 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 Organizational Documents Proposal, “FOR” the approval, on an advisory basis, of each of the separate Advisory Organizational Documents Proposals, FOR” the approval of the Director Election Proposal, “FOR” the approval of the New Merlin Incentive Plan Proposal, “FOR” the approval of the New Merlin Employee Stock Purchase Plan Proposal and “FOR” the approval of the Adjournment Proposal, if presented to the extraordinary general meeting.
For a description of the Special Committee’s and the Inflection Point Board’s reasons for the approval of the Business Combination and the unanimous recommendation of the Inflection Point Board, see the subsection entitled “Proposal No. 1 — The Business Combination Proposal — The Special Committee’s and the Inflection Point Board’s Reasons for the Approval of the Business Combination”.
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When you consider the recommendation of the Inflection Point Board in favor of approval of these proposals, you should keep in mind that, aside from their interests as shareholders, the Sponsor, Inflection Point Fund and Inflection Point’s directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of unaffiliated Inflection Point shareholders. Please see the subsection entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”.
Record Date; Who is Entitled to Vote
Inflection Point shareholders will be entitled to vote or direct votes to be cast at the extraordinary general meeting if they owned Inflection Point Ordinary Shares at the close of business on [•], which is the “Record Date” for the extraordinary general meeting. Shareholders will have one vote for each Inflection Point Ordinary Share owned at the close of business on the Record Date on each Transaction Proposal on which such Inflection Point Ordinary Share is entitled to vote. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. Inflection Point Rights do not have voting rights. As of the close of business on the Record Date for the extraordinary general meeting, there were [•] Inflection Point Ordinary Shares issued and outstanding, of which [•] were issued and outstanding Public Shares.
The Sponsor, Inflection Point Fund and each director and each officer of Inflection Point have agreed to, among other things, vote in favor of the Business Combination, and to waive their redemption rights in connection with the consummation of the Business Combination with respect to any Inflection Point Ordinary Shares held by them. None of our Sponsor, directors or officers received separate consideration for their waiver of redemption rights. The Founder Shares held by the Sponsor will be excluded from the pro rata calculation used to determine the per-share Redemption Price. As of the Record Date, the Sponsor owned approximately [•]% of the issued and outstanding Inflection Point Ordinary Shares.
Abstentions and Broker Non-Votes
Proxies that are marked “abstain” will be treated as shares present for purposes of determining the presence of a quorum on all matters, but they will not be treated as shares voted on the matter. 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. Inflection Point believes all the proposals presented to the shareholders 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 Inflection Point but marked by brokers as “not voted” are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
Quorum and Vote of Inflection Point Shareholders
A quorum of Inflection Point shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting if the holders of one-third of the issued and outstanding shares entitled to vote at the extraordinary general meeting are represented in person or by proxy (which would include presence at the extraordinary general meeting). Abstentions, while considered present for the purposes of establishing a quorum, will not count as a vote cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
As of the Record Date for the extraordinary general meeting, 11,252,779 Inflection Point Ordinary Shares would be required to achieve a quorum.
The Sponsor and Inflection Point Fund have agreed to vote all the Founder Shares and any Public Shares they may hold in favor of all the proposals being presented at the extraordinary general meeting. As of the Record Date, the Sponsor owned approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares. The approval of the Business Combination Proposal requires an ordinary resolution, being the affirmative vote of the holders of a majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the
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extraordinary general meeting, vote at the extraordinary general meeting. As a result, only 8,120,835 additional shares would need to be voted in favor of the Business Combination in order to approve the Business Combination Proposal. The Business Combination was not structured to require the approval of at least a majority of Inflection Point’s unaffiliated shareholders because such a vote is not required under Cayman Islands law.
The Business Combination Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the Business Combination Proposal will have no effect, even if approved by holders of the Inflection Point Ordinary Shares.
The approval of the Domestication Proposal requires a special resolution of the Inflection Point Class B Shareholders, being the affirmative vote of holders of at least two-thirds of the Inflection Point Class B Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The holders of Inflection Point Class A Shares will have no right to vote on the Domestication Proposal, in accordance with Article 48.2 of the Cayman Constitutional Documents. The Domestication Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the Domestication Proposal will have no effect, even if approved by holders of the Inflection Point Class B Shares.
The approval of the Stock Issuance Proposal requires an ordinary resolution, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The Stock Issuance Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of the Inflection Point Ordinary Shares.
The approval of the Organizational Documents Proposal requires a special resolution, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares who, being in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The Organizational Documents Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the Organizational Documents Proposal will have no effect, even if approved by holders of the Inflection Point Ordinary Shares.
The separate approval of each of the Advisory Organizational Documents Proposals, each of which is a non-binding vote, requires a special resolution, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares who, being in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The Advisory Organizational Documents Proposals are not conditioned upon any other proposal.
The approval of the Director Election Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The Director Election Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the Director Election Proposal will have no effect, even if approved by holders of the Inflection Point Ordinary Shares.
The approval of the New Merlin Incentive Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The New Merlin Incentive Plan Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the New Merlin Incentive Plan Proposal will have no effect, even if approved by holders of the Inflection Point Ordinary Shares.
The approval of the New Merlin Employee Stock Purchase Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The New Merlin Employee Stock Purchase Plan Proposal is conditioned on the approval of the other Condition Precedent Proposals. Therefore, if the other Condition Precedent Proposals are not approved, the New Merlin Employee Stock Purchase Plan Proposal will have no effect, even if approved by holders of the Inflection Point Ordinary Shares.
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The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. The Adjournment Proposal is not conditioned upon any other proposal.
Voting Your Shares
Each Inflection Point Class A Share and each Inflection Point Class B Share that you own in your name entitles you to one vote on each Shareholder Proposal on which such Inflection Point Ordinary Share is entitled to vote. Your proxy card shows the number of Inflection Point Ordinary Shares that you own.
If you are a record owner of your shares, there are two ways to vote your Inflection Point Ordinary Shares at the extraordinary general meeting:
You Can Vote By Signing and Returning the Enclosed Proxy Card. If you vote by proxy card, your “proxy”, whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. 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 Inflection Point Board “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 Organizational Documents Proposal, “FOR” the approval, on an advisory basis, of each of the separate Advisory Organizational Documents Proposals, “FOR” the approval of the Director Election Proposal, “FOR” the approval of the New Merlin Incentive Plan Proposal, “FOR” the approval of the New Merlin Employee Stock Purchase Plan Proposal and “FOR” the approval of the Adjournment Proposal, in each case, if presented to the extraordinary general meeting. Proxy cards received less than 48 hours prior to the start of the extraordinary general meeting will not be counted.
You Can Attend the Extraordinary General Meeting and Vote During the Meeting.
• You can attend the extraordinary general meeting and vote in person even if you have previously voted by submitting a proxy pursuant to any of the methods noted above.
• If your shares are registered in your name with Continental and you wish to attend the extraordinary general meeting virtually, go to [•], enter the 12-digit control number included on your proxy card or notice of the extraordinary general meeting 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 extraordinary general meeting 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 holder of record) who wish to attend the extraordinary general meeting 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 proxy@continentalstock.com. 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 extraordinary general meeting. After contacting Continental, a beneficial holder will receive an e-mail prior to the extraordinary general meeting with a link and instructions for entering the extraordinary general meeting. Beneficial shareholders should contact Continental at least five (5) business days prior to the extraordinary general meeting date in order to ensure access.
If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. If you wish to attend the meeting and vote in person or online and your shares are held in “street name”, you must obtain a legal proxy from your broker, bank or nominee. That is the only way Inflection Point can be sure that the broker, bank or nominee has not already voted your shares.
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Revoking Your Proxy
If you are an Inflection Point shareholder and you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:
• sending another proxy card with a later date;
• notifying Michael Blitzer, President and Chief Executive Officer of Inflection Point, in writing before the extraordinary general meeting that you have revoked your proxy; or
• attending the extraordinary general meeting in person (including virtually), revoking your proxy, and voting as described above.
If your shares are held in “street name” or are in a margin or similar account, you should contact your broker for information on how to change or revoke your voting instructions.
Who Can Answer Your Questions about Voting Your Shares
If you are a shareholder and have any questions about how to vote or direct a vote in respect of your Inflection Point Ordinary Shares, you may call [•], our proxy solicitor, by calling [•], or banks and brokers can call collect at [•], or by emailing [•].
Redemption Rights
Pursuant to the Cayman Constitutional Documents, a Public Shareholder may request to redeem all or a portion of its Public Shares for cash in connection with the completion of the Business Combination. As a Public Shareholder, you will be entitled to receive cash for any Public Shares to be redeemed only if you:
(d) (i) hold Public Shares or (ii) hold Public Shares through Inflection Point Units and elect to separate your Inflection Point Units into the underlying Public Shares and Inflection Point Rights prior to exercising your redemption rights with respect to the Public Shares;
(e) submit a written request to Continental, including the legal name, phone number and address of the beneficial owner of the Public Shares for which redemption is requested, that Inflection Point redeem all or a portion of your Public Shares for cash; and
(f) deliver your share certificates for Public Shares (if any) along with the redemption forms to Continental, physically or electronically through DTC.
Public Shareholders must complete the procedures for electing to redeem their Public Shares in the manner described above prior to 5:00 p.m., Eastern Time, on [•] (two business days before the initial scheduled date of the extraordinary general meeting) in order for their Public Shares to be redeemed.
Public Shareholders may elect to redeem all or a portion of the Public Shares held by them regardless of if or how they vote in respect of the Business Combination Proposal. If the Business Combination is abandoned, the Public Shares will be returned to the respective holder, broker or bank. If the Redemption is consummated, and if a Public Shareholder properly exercises its right to redeem all or a portion of the Public Shares that it holds and timely delivers the certificates for its shares (if any) along with the redemption forms to Continental, Inflection Point will redeem such Public Shares at the Redemption Price. For illustrative purposes, as of the Record Date, this would have amounted to approximately $[•] per issued and outstanding Public Share. If a Public Shareholder exercises its redemption rights in full, then it will be electing to exchange its Public Shares for cash and will no longer own Public Shares.
If you hold the shares in “street name”, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Shares that have not been tendered (either physically or electronically) in accordance with these procedures will not be redeemed for cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through DTC’s deposit withdrawal at custodian (“DWAC”) system. Continental will typically charge the tendering broker $100 and it would be up to the broker to decide whether to pass this cost on to the redeeming shareholder. In the event the Business Combination is not consummated this may result in an additional cost to shareholders for the return of their Public Shares.
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Any request for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Inflection Point’s consent, until the Redemption. Furthermore, if a holder of a Public Share delivers its share certificates (if any) along with the redemption forms in connection with an election of its redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that Inflection Point permit the withdrawal of the redemption request and instruct Continental to return the certificate (physically or electronically). The holder can make such request by contacting Continental at the address or email address listed in this proxy statement/prospectus.
Any corrected or changed written exercise of redemption rights must be received by Continental prior to the vote taken on the Business Combination Proposal at the extraordinary general meeting. No request for redemption will be honored unless the holder’s Public Shares have been delivered (either physically or electronically) to Continental at least two business days prior to the initial scheduled date of the extraordinary general meeting.
Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of such Public Shareholder or any other person with whom such Public Shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its Public Shares with respect to more than an aggregate of 15% of the Public Shares. Accordingly, if a Public Shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the Public Shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
Our Sponsor, officers and directors have agreed to, among other things, vote in favor of the Business Combination and waive their redemption rights in connection with the consummation of the Business Combination with respect to any Inflection Point Ordinary Shares held by them. None of our Sponsor, directors or officers received separate consideration for their waiver of redemption rights. The Founder Shares held by our Sponsor, officers and directors will be excluded from the pro rata calculation used to determine the per-share Redemption Price. As of the Record Date, the Sponsor owned approximately 25.9% of the issued and outstanding Inflection Point Ordinary Shares.
Holders of the Inflection Point Rights will not have redemption rights with respect to the Inflection Point Rights.
The closing price of Public Shares on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus, was $11.55. As of the Record Date, funds in the Trust Account totaled $ and were comprised entirely of U.S. government treasury obligations with a maturity of 185 days or less or of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations, or approximately $ per issued and outstanding Public Share.
Prior to exercising redemption rights, Public Shareholders should verify the market price of the Public 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. Inflection Point cannot assure its 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 its securities when its shareholders wish to sell their Public Shares.
Appraisal Rights
Neither Inflection Point’s shareholders nor the holders of Inflection Point Rights have appraisal rights in connection with the Business Combination or the Domestication under Cayman Islands law or under the DGCL.
Proxy Solicitation
Inflection Point is soliciting proxies on behalf of the Inflection Point Board. This solicitation is being made by mail but also may be made by telephone or in person. Inflection Point and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Inflection Point will file with the SEC all scripts and other electronic communications as proxy soliciting materials. Inflection Point will bear the cost of the solicitation.
Inflection Point has engaged [•] to assist in the solicitation process and will pay [•] a fee of $[•], plus disbursements.
Inflection Point will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Inflection Point will reimburse them for their reasonable expenses.
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Inflection Point Shareholders
As of the Record Date, there were [•] Inflection Point Ordinary Shares issued and outstanding, which include the [•] Founder Shares held by the Sponsor, the [•] shares included in the Private Placement Units held by the Sponsor, and [•] Public Shares. As of the Record Date, there was outstanding an aggregate of [•] Inflection Point Rights, which include the [•] Inflection Point Rights included in the Private Placement Units held by the Sponsor, and [•] Inflection Point Rights sold as part of the Inflection Point Units in Inflection Point’s IPO.
Potential Purchases of Public Securities
At any time at or prior to our initial business combination, subject to applicable securities laws (including with respect to material nonpublic information), the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and 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 our initial business combination or not redeem their Public Shares. In addition, at any time at or prior to the extraordinary general meeting, subject to applicable securities laws (including with respect to material nonpublic information), the Sponsor, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Securities, vote their Public Shares in favor of the Condition Precedent Proposals or not redeem their Public Shares. However, 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, or Public Rights in such transactions.
The purpose of any such transactions could be to (1) increase the likelihood of obtaining Inflection Point Shareholder Approval of the Business Combination, (2) reduce the number of Public Rights outstanding and/or increase the likelihood of approval on any matters submitted to the Public Rights holders for approval in connection with our initial business combination or (3) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our securities may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
The Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates anticipate that they may identify the shareholders with whom the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates may pursue privately negotiated transactions by either the shareholders contacting us directly or by our receipt of redemption requests submitted by shareholders (in the case of Inflection Point Class A Shares) following our mailing of proxy materials in connection with our initial business combination. To the extent that the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates enter into a private transaction, they would identify and contact only potential selling or redeeming shareholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against our initial business combination, whether or not such shareholder has already submitted a proxy with respect to our initial business combination but only if such shares have not already been voted at the general meeting related to our initial business combination. The Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates will select which shareholders to purchase shares from based on the negotiated price and number of shares and any other factors that they may deem relevant, and will be restricted from purchasing shares if such purchases do not comply with Regulation M under the Exchange Act and the other federal securities laws.
The Sponsor, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will be restricted from making purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. 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 Sponsor, Inflection Point’s or
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Merlin’s directors, managers, officers, advisors and their affiliates were to purchase Public Shares or warrants, 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:
• this proxy statement/prospectus discloses the possibility that the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates may purchase Public Shares or warrants from Public Shareholders outside the redemption process, along with the purpose of such purchases;
• if the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates were to purchase Public Shares from Public Shareholders, they would do so at a price no higher than the Redemption Price;
• this proxy statement/prospectus includes a representation that any of our securities purchased by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will not be voted in favor of approving the Business Combination;
• the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will not possess any redemption rights with respect to our securities or, if they do acquire and possess redemption rights, they would waive such rights; and
• we will disclose in a Form 8-K, before the extraordinary general meeting, the following material items:
• the amount of securities purchased outside of the redemption offer by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates, along with the purchase price;
• the purpose of the purchases by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates;
• the impact, if any, of the purchases by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates on the likelihood that the Business Combination will be approved;
• the identities of the security holders who sold to the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and 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 Sponsor, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates; and
• the number of Public Shares for which Inflection Point has received redemption requests pursuant to its redemption offer.
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PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL
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. You are urged to read the Business Combination Agreement in its entirety because it is the primary legal document that governs the Merger. Capitalized terms under this section not otherwise defined in this proxy statement/prospectus have the respective meanings ascribed to them in the Business Combination Agreement.
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 (the “Disclosure Schedules”), which are not filed publicly and which 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 Inflection Point, Merger Sub, Merlin, or any other matter.
Structure of the Business Combination
On August 13, 2025, Inflection Point entered into the Business Combination Agreement with Merlin and Merger Sub, pursuant to which, among other things, subject to shareholder approval, following the Domestication, Merger Sub will merge with and into Merlin, with Merlin surviving as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin OpCo will become a wholly-owned subsidiary of Inflection Point, and substantially all of the assets and the business of the combined company will be held and operated by Merlin OpCo and its subsidiaries.
Prior to and as a condition of the Closing, pursuant to the Domestication, Inflection Point will change its jurisdiction of incorporation by transferring out of the Cayman Islands and domesticating as a Delaware corporation in accordance with Section 388 of the DGCL and the Companies Act. For more information, see the section of this proxy statement/prospectus entitled “The Domestication Proposal”.
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The following diagrams illustrate in simplified terms the current structure of Inflection Point and Merlin and the expected structure of New Merlin immediately following the Closing.
Simplified Pre-Combination Structure
The Merger
Simplified Post-Combination Structure
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Representations and Warranties
The Business Combination Agreement contains representations and warranties of Inflection Point and Merlin, 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 Inflection Point are also qualified by information included in Inflection Point’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 Merlin
The Business Combination Agreement contains representations and warranties of Merlin relating to, among other things, proper organization and standing, authorization, binding agreement, capitalization, subsidiaries, no conflict, governmental consents and filings, financial statements, undisclosed liabilities, absence of certain changes, compliance with laws, government contracts, permits, litigation, material contracts, intellectual property, taxes and tax returns, real property, personal property, employee matters, benefit plans, environmental matters, transactions with related persons, insurance, top customers and suppliers, certain business practices, the Investment Company Act, finders and brokers, independent investigation and information supplied, and that there are no additional representations or warranties.
Representations and Warranties of Inflection Point
The Business Combination Agreement contains representations and warranties of Inflection Point relating to, among other things, proper organization and standing, authorization, binding agreement, government approvals, non-contravention, capitalization, SEC filings and financial statements, absence of certain changes, undisclosed liabilities, compliance with laws, legal proceedings, orders, permits, taxes and tax returns, properties, the Investment Company Act, the Trust Account, finders and brokers, certain business practices, insurance, information supplied, independent investigation, and that there are no additional representations and warranties.
Merlin Material Adverse Effect
Under the Business Combination Agreement, certain of the representations and warranties of Merlin 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, “Company Material Adverse Effect” means any event, state of facts, condition, change, development, circumstance, occurrence or effect (collectively, “Events”), that (i) has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, assets, results of operations or financial condition of Merlin and its direct and indirect subsidiaries (collectively, the “Target Companies”), taken as a whole, or (ii) does or would reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the ability of the Target Companies to consummate the Business Combination; provided, however, that in no event would any of the following, alone or in combination, be deemed to constitute, or be taken into account in determining whether there has been or will be, a Company Material Adverse Effect:
(a) any change in applicable laws or U.S. GAAP or any interpretation thereof following the date of the Business Combination Agreement,
(b) any change in interest rates or economic, political, business or financial market conditions generally,
(c) the taking of any action required by the Business Combination Agreement,
(d) any natural disaster (including hurricanes, storms, tornados, flooding, earthquakes, volcanic eruptions or similar occurrences), pandemic (including COVID-19, or any COVID-19 measures or any change in such COVID-19 Measures or interpretations following the date of this Agreement) or change in climate,
(e) any acts of terrorism or war, the outbreak or escalation of hostilities, geopolitical conditions, local, national or international political conditions,
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(f) any failure of the Target Companies to meet any projections or forecasts (provided that this clause shall not prevent a determination that any Event not otherwise excluded from this definition of Company Material Adverse Effect underlying such failure to meet projections or forecasts has resulted in a Company Material Adverse Effect),
(g) any Events generally applicable to the industries or markets in which Merlin and its subsidiaries operate (including increases in the cost of products, supplies, materials or other goods purchased from third party suppliers),
(h) the announcement of the Business Combination Agreement and consummation of the transactions contemplated thereby, including any termination of, reduction in or similar adverse impact (but in each case only to the extent attributable to such announcement or consummation) on relationships, contractual or otherwise, with any landlords, customers, suppliers, distributors, partners or employees of the Target Companies,
(i) any matter set forth on the Disclosure Letter of Merlin, or
(j) any action taken by, or at the request of, Inflection Point.
Any event referred to in clauses (a), (b), (d), (e) or (g) above may be taken into account in determining if a Company Material Adverse Effect has occurred to the extent it has a disproportionate and adverse effect on the business, assets, results of operations or condition (financial or otherwise) of the Target Companies, taken as a whole, relative to similarly situated companies in the industry in which the Target Companies conduct their respective operations, but only to the extent of the incremental disproportionate effect on the Target Companies, taken as a whole, relative to similarly situated companies in the industry in which the Target Companies conduct their respective operations.
Inflection Point Material Adverse Effect
Under the Business Combination Agreement, certain representations and warranties of Inflection Point are qualified in whole or in part by a material adverse effect standard on the ability of Inflection Point to consummate the Business Combination for purposes of determining whether a breach of such representations and warranties has occurred. Pursuant to the Business Combination Agreement, “Purchaser Material Adverse Effect” means any change, event, or occurrence, that, individually or when aggregated with other changes, events, or occurrences has had a materially adverse effect on the business, assets, financial condition or results of operations of Inflection Point; provided, however, that no change or effect related to any of the following, alone or in combination, will be taken into account in determining whether a Purchaser Material Adverse Effect has occurred: (i) the announcement of the Business Combination Agreement and consummation of the transactions contemplated thereby; (ii) the taking of any action required by the Business Combination Agreement or any ancillary document to the Business Combination Agreement; (iii) any natural disaster (including hurricanes, storms, tornados, flooding, earthquakes, volcanic eruptions or similar occurrences), pandemic or change in climate, (iv) any acts of terrorism or war, the outbreak or escalation of hostilities, geopolitical conditions, local, national or international political conditions; (v) the Redemption; (vi) any breach of any covenants, agreements or obligations of any Pre-Funded Investor, Inflection Point Fund or investor in any PIPE Investment, in each case who is not Inflection Point Asset Management LLC or an affiliate of Inflection Point Asset Management LLC, under any Pre-Funded NPA, Pre-Funded SPA, Series A SPA, and Additional Series A SPA or other similar agreement related to financing Merlin or Inflection Point (including any breach of such Person’s obligations to fund any amounts thereunder when required); (vii) changes or proposed changes in applicable law, regulations or interpretations thereof or decisions by courts or any governmental authority after the date of the Business Combination Agreement; (viii) changes or proposed changes in U.S. GAAP (or any interpretation thereof) after the date of this Agreement; or (ix) any downturn in general economic conditions, including changes in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets), in each case, in the United States or anywhere else in the world.
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 and 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
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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
Merlin has made covenants relating to, among other things, conduct of business, annual and interim financial statements, no trading, and notification of certain matters.
Inflection Point has made covenants relating to, among other things, conduct of business, Inflection Point public filings, the Trust Account, Inflection Point Shareholder Approval, employee matters, and the Domestication.
Conduct of Business of Merlin
Merlin 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, and will cause its subsidiaries to, subject to certain specified exceptions, including as set forth on the Disclosure Letter delivered by Merlin pursuant to the Business Combination Agreement, as consented to by Inflection Point in writing (which consent will not be unreasonably withheld, conditioned or delayed) or as required by applicable law (including COVID-19 measures), use commercially reasonable efforts to, and will use commercially reasonable efforts to cause its subsidiaries to:
• conduct its and their respective businesses, in all material respects, in the ordinary course of business;
• comply in all material respects with all laws applicable to the Target Companies and their respective businesses, assets and employees; and
• take commercially reasonable measures necessary or appropriate to preserve intact, in all material respects, their respective business organizations.
During the Interim Period, Merlin also agreed not to, and to cause its subsidiaries not to, subject to certain specified exceptions, including as set forth on the Disclosure Letter delivered by Merlin as consented to by Inflection Point in writing (which consent will not be unreasonably withheld, conditioned or delayed) or as required by applicable law (including COVID-19, or any COVID-19 measures):
• amend, waive or otherwise change, in any respect, its organizational documents, except for as required by applicable law;
• 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 person with respect to such securities, except as required by existing Merlin benefits plans or any contract (including any warrant or option award) outstanding as of the date hereof which has been disclosed in writing to Inflection Point;
• split, combine, recapitalize or 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;
• allow the aggregate indebtedness of the Target Companies to exceed an amount equal to the sum of $1,000,000 plus the aggregate amount of Indebtedness of the Target Companies as reflected on the most recent Audited Financial Statements;
• except as otherwise required by law or Merlin’s benefit plans in effect as of the date of the Business Combination Agreement, (A) grant any severance, retention, change in control or termination or similar pay, (B) terminate, adopt, enter into or materially amend or grant any new awards (including, for the
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avoidance of doubt, any equity or equity-based awards) under any Merlin benefit plan or any plan, policy, practice, program, agreement or other arrangement that would be deemed a Merlin benefit plan if in effect as of the date hereof, (C) increase the cash compensation or bonus opportunity of any employee, officer, director or other individual service provider, except for such increases to any such individuals who are not directors or officers of the Target Companies made in the ordinary course of business consistent with past practice, (D) take any action to amend or waive any performance or vesting criteria or to accelerate the time of payment or vesting of any compensation or benefit payable by Merlin or any of its subsidiaries, (E) hire or engage any new employee or independent contractor if such new employee or independent contractor will receive annual base compensation in excess of $250,000, other than in the ordinary course of business consistent with past practice, (F) terminate the employment or engagement, other than for cause, death or disability, of any employee or independent contractor with an annual base compensation in excess of $250,000 or (G) waive any restrictive covenants applying to any current or former employee or individual independent contractor or (H) plan, announce, implement or effect the reduction in force, lay-off, furloughs, early-retirement program, severance program or other program or effort concerning the termination of a group of employees of the Target Companies (other than individual employee terminations permitted under prong (F));
• enter into or extend any collective bargaining agreement or similar labor agreement, other than as required by applicable law, or recognize or certify any labor union, labor organization, or group of employees of any Target Company as the bargaining representative for any employees of any Target Company;
• (A) make, change or rescind any material election relating to taxes, (B) settle any claim, suit, litigation, proceeding, arbitration, investigation, audit, controversy or other Legal Proceeding relating to material taxes, (C) file any amended income tax or other material tax return, (D) surrender or allow to expire any right to claim a refund of material amounts of taxes, (E) change (or request to change) any method of accounting for tax purposes, (F) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of income taxes or other material taxes may be issued or in respect of any income tax or other material tax attribute that would give rise to any claim or assessment of taxes of or with respect to the Target Companies, (G) enter into any “closing agreement” as described in Section 7121 of the Code or any other agreement or arrangement with any governmental authority, or (H) enter into any tax indemnity agreement, tax sharing agreement or tax allocation agreement or similar agreement or arrangement(excluding customary commercial contracts the primary purpose of which is not the sharing of taxes) with respect to taxes,;
• knowingly take or agree to take any action, or knowingly fail to take or agree to fail to take any action, where such action or failure to act would reasonably be expected to prevent or impede the relevant portions of the transactions from qualifying for their respective intended tax treatments;
• transfer, sell, assign, license, sublicense, covenant not to assert, subject to a lien (other than a permitted lien), abandon, allow to lapse, transfer or otherwise dispose of, any right, title or interest of the Target Company in or to any intellectual property owned by the Target Company that is material to any of the businesses of the Target Company (other than non-exclusive licenses of owned intellectual property granted in the ordinary course of business or abandoning, allowing to lapse or otherwise disposing of owned intellectual property registrations or applications that the Target Company, in the exercise of its good faith business judgment, has determined to abandon, allow to lapse or otherwise dispose of), or otherwise materially amend or modify, permit to lapse or fail to preserve any material Merlin registered intellectual property (excluding non-exclusive licenses of Merlin intellectual property granted to Target Company customers, resellers, vendors or service providers in the ordinary course of business consistent with past practice), or disclose, divulge, furnish to or make accessible to any person who has not entered into a confidentiality agreement sufficiently protecting the confidentiality thereof any material trade secrets constituting intellectual property owned by the Target Companies, or include, incorporate or embed in, link to, combine, make available or distribute with, or use in the development, operation, delivery or provision of any software any open source software in a manner that requires any Target Company to take a Copyleft Action;
• fail to maintain its books, accounts and records in all material respects in the ordinary course of business consistent with past practice;
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• terminate or assign any Merlin material contract or enter into any contract that would be a Merlin material contract, in any case outside of the ordinary course of business consistent with past practice or novations of government contracts that are required in connection with the transactions contemplated by the Business Combination Agreement;
• establish any subsidiary or enter into any new line of business;
• 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 substantially similar to that which is currently in effect, or terminate without replacement or amend in a manner materially detrimental to the Target Companies, taken as a whole, any material insurance policy insuring the Target Companies;
• make any material change in accounting methods, principles or practices, except to the extent required to comply with U.S. GAAP or changes that are made in accordance with Public Accounting Oversight Board (United States) (“PCAOB”) standards;
• waive, release, assign, settle or compromise any claim, action or proceeding (including any suit, action, claim, proceeding or investigation relating to the Business Combination Agreement or the transactions contemplated hereby), 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, a Target Company or its affiliates) not in excess of $500,000 (individually or in the aggregate);
• effect any layoff or other personnel reduction at any of its facilities resulting in a layoff or reduction of twenty percent (20%) or more of the Target Company’s personnel;
• 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 material amount of assets, in each case, outside the ordinary course of business consistent with past practice, except pursuant to any contract in existence as of the date hereof which has been disclosed in writing to Inflection Point;
• make capital expenditures outside of the ordinary course of business consistent with past practice in excess of $500,000 (individually for any project) or $2,500,000 in the aggregate;
• adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring or other reorganization;
• voluntarily incur liabilities or obligations (whether absolute, accrued, contingent or otherwise) in excess of $1,000,000 in the aggregate other than pursuant to the terms of a Merlin material contract or Merlin benefit plan, in any case, outside of the ordinary course of business, taking into account the anticipated growth in the Target Companies’ businesses;
• sell, lease, license, transfer, exchange or swap, mortgage or otherwise pledge or encumber (including securitizations), or otherwise dispose of any material portion of its tangible properties, assets or rights;
• enter into any written agreement, understanding or arrangement with respect to the voting of equity securities of Merlin, other than the Seller Voting and Support Agreements;
• 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 that would impede the transactions contemplated by the Business Combination Agreement;
• enter into, amend, waive or terminate (other than terminations in accordance with their terms) any transaction with any related person (other than compensation and benefits and advancement of expenses, in each case, provided in the ordinary course of business consistent with past practice;
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• (A) limit the right of any Target Company to engage in any line of business or in any geographic area, to develop, market or sell products or services, or to compete with any person or (B) grant any exclusive or similar rights to any person, in each case, except where such limitation or grant does not, and would not be reasonably likely to, individually or in the aggregate, materially and adversely affect, or materially disrupt, the ordinary course operation of the business of the Target Companies; or
• authorize or agree to do any of the foregoing actions.
Conduct of Business of Inflection Point
Inflection Point has agreed that during the Interim Period, subject to certain specified exceptions, including as set forth on the Disclosure Letter delivered by Inflection Point pursuant to the Business Combination Agreement, as consented to by Merlin in writing (which consent will not be unreasonably withheld, conditioned or delayed) or as is required by applicable law, it will:
• conduct its business, in all material respects, in the ordinary course of business,
• comply in all material respects with all laws applicable to Inflection Point and its business, assets and employees, and
• take commercially reasonable measures necessary or appropriate to preserve intact, in all material respects, its business organizations.
• During the Interim Period, Inflection Point also agreed not to, and to cause its subsidiaries not to, subject to certain specified exceptions, including as set forth on the Disclosure Letter delivered by Inflection Point, as consented to by Merlin in writing (which consent will not be unreasonably withheld, conditioned or delayed) or as required by applicable law:
• amend, waive or otherwise change, in any respect, its organizational documents, except as required by applicable law (other than in relation to an extension as described in Section 6.03(a) of the Business Combination Agreement;
• 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 equity securities or other security interests of any class and any other equity-based awards, or engage in any hedging transaction with a third person with respect to such securities;
• split, combine, recapitalize or 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 shares or other equity interests, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its securities other than the Redemption or a conversion of the Purchaser Class B Ordinary Shares in accordance with Inflection Point’s Organizational Documents;
• incur, create, assume, prepay or otherwise become liable for any indebtedness (directly, contingently or otherwise) in excess of $200,000 individually or $500,000 in the aggregate, make a loan or advance to or investment in any third party, or guarantee or endorse any indebtedness, liability or obligation of any person (provided that the foregoing will not prevent Inflection Point from borrowing funds necessary to finance its ordinary course administrative costs and expenses and expenses incurred in connection with the consummation of the transactions contemplated by the Business Combination Agreement (including the Closing PIPE Investments and the costs and expenses necessary for an extension, up to aggregate additional indebtedness during the Interim Period of $1,000,000));
• (A) make, change or rescind any material election relating to taxes, (B) settle any claim, suit, litigation, proceeding, arbitration, investigation, audit, controversy or other legal proceeding relating to material taxes, (C) file any amended income tax or other material tax return, (D) surrender or allow to expire any right to claim a refund of material amounts of taxes, (E) change (or request to change) any method of
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accounting for tax purposes, (F) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of material taxes may be issued or in respect of any material tax attribute that would give rise to any claim or assessment of taxes of or with respect to Inflection Point, (G) enter into any “closing agreement” as described in Section 7121 of the Code or any other agreement or arrangement with any governmental authority, in each case except as required by applicable law, or (H) enter into any tax indemnity agreement, tax sharing agreement or tax allocation agreement or similar agreement or arrangement (excluding customary commercial Contracts the primary purpose of which is not the sharing of taxes) with respect to taxes;
• knowingly take or agree to take any action, or knowingly fail to take or agree to fail to take any action, where such action or failure to act could reasonably be expected to prevent or impede the relevant portions of the transactions contemplated by the Business Combination Agreement from qualifying for their respective intended tax treatments;
• amend, waive or otherwise change the Trust Agreement in any manner adverse to Inflection Point;
• terminate, waive or assign any material right under any material contract of Inflection Point;
• fail to maintain its books, accounts and records in all material respects in the ordinary course of business consistent with past practice;
• establish any subsidiary or enter into any new line of business;
• 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 substantially similar to that which is currently in effect;
• make any material change in accounting methods, principles or practices, except to the extent required to comply with U.S. GAAP or PCAOB standards;
• waive, release, assign, settle or compromise any claim, action or proceeding (including any suit, action, claim, proceeding or investigation 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 the imposition of equitable relief on, or the admission of wrongdoing by, Inflection Point or its subsidiaries) not in excess of $500,000 (individually or in the aggregate);
• 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 material amount of assets outside the ordinary course of business;
• make capital expenditures in excess of $200,000 individually for any project (or set of related projects) or $500,000 in the aggregate (excluding the, incurrence of any expenses);
• adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;
• voluntarily incur any liability or obligation (whether absolute, accrued, contingent or otherwise) in excess of $500,000 individually or $1,000,000 in the aggregate (excluding the incurrence of any expenses)) other than pursuant to the terms of a contract in existence as of the Business Combination Agreement or entered into in the ordinary course of business or in accordance with the terms of the Business Combination Agreement during the Interim Period;
• sell, lease, license, transfer, exchange or swap, mortgage or otherwise pledge or encumber (including securitizations), or otherwise dispose of any material portion of its tangible properties, assets or rights;
• 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;
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• grant or establish any form of compensation or benefits to any current or former employee, officer, director, individual independent contractor or other individual service provider of Inflection Point; or
• authorize or agree to do any of the foregoing actions.
Covenants of Merlin
Pursuant to the Business Combination Agreement, Merlin has agreed, among other things, that:
• as soon as reasonably practicable following the date of the Business Combination Agreement, but in no event later than October 15, 2025, it will deliver to Inflection Point audited consolidated balance sheets and statements of operations, comprehensive loss, stockholders’ equity and cash flows of the Target Companies as of and for the year ended December 31, 2024, and December 31, 2023, together with the auditor’s reports thereon, audited by a PCAOB qualified auditor in accordance with U.S. GAAP and PCAOB standards and which comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant (collectively, the “Audited Financial Statements”).
• (a) as soon as reasonably practicable following the date of the Business Combination Agreement, it will deliver to Inflection Point unaudited reviewed consolidated balance sheets and statements of operations, comprehensive loss, stockholders’ equity and cash flows of the Target Companies as of and for the six-month periods ending June 30, 2025 and 2024, which comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant (the “Updated 1H Financial Statements”) and (b) as soon as reasonably practicable, it will deliver to Inflection Point any other audited or unaudited financial statements of the Target Companies that are required by applicable law to be included in the proxy statement/prospectus;
• while it is in possession of material nonpublic information, it will not purchase or sell any securities of Inflection Point (unless otherwise explicitly contemplated in the Business Combination Agreement), communicate such information to any third party, take any other action with respect to Inflection Point in violation of such laws, or cause or encourage any third party to do any of the foregoing;
• except as set forth on the Company Disclosure Letter, all agreements with Related Persons shall be terminated or settled at or prior to the Closing without further liability to Inflection Point or the Target Companies, in each case;
• Merlin shall deliver to Inflection Point on the Closing Date or as soon as reasonably practicable following the Closing Date confirmation of (A) the necessary updates having been made to the company register of Merlin Labs NZ Limited on the New Zealand Companies Office reflecting that the Closing has occurred; (B) authorizations granted on behalf of Merlin Labs NZ Limited to its officers or representatives on the New Zealand Companies Office having been transferred to Inflection Point’s officers or representatives or otherwise revoked; and (C) bank account authorizations granted on behalf of Merlin Labs NZ Limited to its officers or representatives having been transferred to Inflection Point’s officers or representatives or otherwise revoked;
• to the extent that any Company Registered IP is subject to any form of liens, other than permitted liens, prior to the Closing Date, the applicable Target Company shall have prepared, executed, filed and recorded (and paid all costs, including legal and filing fees) as necessary to remove such unpermitted liens at or prior to the Closing Date (all such actions, the “IP Actions”). The applicable Target Company shall provide, at Inflection Point’s reasonable request, copies of all documentation and written communications concerning such IP Actions to Inflection Point prior to or at Closing;
• following the Closing Date, to the extent that any Persons (including any past or current employees, contractors, vendors, or consultants of the Target Companies) who have contributed (or may in the future contribute) to the creation, authorship, conception, or development of any product, service or material Owned Intellectual Property (including any Company Software) and who have not previously executed a valid written agreement presently assigning to the applicable Target Company all right, title, and interest therein and thereto (and all such right, title, and interest therein and thereto has not vested in the applicable Target Company by operation of appliable laws), the Target Companies shall use commercially reasonable
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efforts to obtain duly executed valid written agreements with each such Person, pursuant to which such Person (A) presently assigns to the applicable Target Company all right, title and interest therein and thereto; (B) waives all moral, economic, or similar rights therein or thereto; and (C) agrees to sufficiently protective confidentiality obligations with respect thereto;
• prior to the Redemption, (i) it will obtain an irrevocable waiver from Crown Regional Holdings Limited (“CRHL”) of any rights that CRHL or any other Person may have under or in connection with the CRHL loan to convert amounts outstanding under the CRHL loan into equity securities of Merlin or otherwise (subject only to repayment of the CRHL loan) and shall provide Inflection Point with evidence (satisfactory to Merlin) of such irrevocable waiver, and (ii) it will obtain the consents and approvals set forth on the Company Disclosure Letter;
• prior to or concurrent with the Domestication, it will file a certificate of amendment to its certificate of incorporation with the Secretary of State of Delaware changing the Merlin’s corporate name to “Merlin, Inc.” or another name mutually agreed on by Inflection Point and Merlin prior to the Domestication; and
• prior to the Closing, it will cause the Company Warrants (other than the Pre-Funded Warrants) to be amended so that they are capable of allowing for exercise on a cashless basis in connection with the transactions contemplated by the Business Combination Agreement by their terms.
Covenants of Inflection Point
Pursuant to the Business Combination Agreement, Inflection Point has agreed, among other things, to:
• during the Interim Period, it will keep current all of its public filings with the SEC (after giving effect to all applicable extension periods) and otherwise comply in all material respects with applicable securities laws and will use its commercially reasonable efforts prior to the Closing to maintain the listing of the Inflection Point Class A Ordinary Shares and the Inflection Point Public Rights on Nasdaq; provided, that (i) if Inflection Point fails to timely file any public filing with the SEC, such failure shall not be a breach of the covenants under the Business Combination Agreement provided such public filing is made before the effectiveness of the registration statement of which this proxy statement/prospectus forms a part or the earlier termination of the Business Combination Agreement (even though such filing is late) and such late filing does not have a material adverse impact on the consummation of the Business Combination and (ii) from and after the Closing, the parties intend to list on Nasdaq only the New Merlin Common Stock;
• upon satisfaction or waiver of the conditions to Closing set forth in the Business Combination Agreement and provision of notice thereof to Continental (which notice Inflection Point will provide to Continental in accordance with the terms of the Trust Agreement), (i) in accordance with and pursuant to the Trust Agreement, at the Closing, Inflection Point (a) will cause any documents, opinions and notices required to be delivered to Continental pursuant to the Trust Agreement to be delivered and (b) will use its reasonable best efforts to cause Continental to, and Continental will be obligated to (1) pay as and when due all amounts payable to the Public Shareholders pursuant to the redemption, and (2) pay all remaining amounts then available in the Trust Account to Inflection Point for immediate use, subject to the Business Combination Agreement and the Trust Agreement, and (ii) thereafter, the Trust Account will terminate, except as otherwise provided therein; and
• subject to receipt of the required shareholder approval of the Condition Precedent Proposals, at least one (1) day prior to the Closing, Inflection Point will, in accordance with applicable law, any applicable rules and regulations of the SEC and Nasdaq, and Inflection Point’s organizational documents, as applicable, cause the Domestication to become effective, including by (a) filing with the Delaware Secretary of State a Certificate of Domestication with respect to the Domestication, in form and substance reasonably acceptable to Inflection Point and Merlin, together with the Proposed Charter, in each case, in accordance with the provisions thereof and applicable law, and (b) completing, making and procuring all those filings required to be made with respect to Cayman Islands law in connection with the Domestication.
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Joint Covenants of Merlin and Inflection Point
In addition, each of Merlin and Inflection Point has agreed, among other things, as follows:
• Prior to the Closing Date, Inflection Point and Merlin will use commercially reasonable efforts to agree to a form of Incentive Plan and a form of employee stock purchase plan.
• During the Interim Period, each of Inflection Point and Merlin will not, and will cause its representatives to not, without the prior written consent of Merlin and Inflection Point, directly or indirectly, (i) solicit, assist, initiate, engage or facilitate the making, submission or announcement of, or encourage, any acquisition proposal, (ii) furnish any non-public information regarding such party or its affiliates 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 could 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 related to any acquisition proposal, (vi) release any third person from, or waive any provision of, any confidentiality agreement to which such party is a party, (vii) otherwise knowingly encourage or facilitate any such inquiries, proposals, discussions, or negotiations or any effort or attempt by any person to make an alternative transaction or (viii) agree or otherwise commit to enter into or engage in any of the foregoing.
• Each will notify the other as promptly as practicable (and in any event within two (2) business days) in writing of the receipt by such party or any of its representatives of (i) any inquiries, proposals or offers, requests for information or requests for discussions or negotiations regarding or constituting any acquisition proposal or any inquiries, proposals or offers, requests for information or requests for discussions or negotiations that could be expected to result in an acquisition proposal, and (ii) any request for non-public information relating to such party or its affiliates in connection with any acquisition proposal, specifying in each case, the material terms and conditions thereof (including a copy thereof if in writing or a written summary thereof if oral) and the identity of the party making such inquiry, proposal, offer or request for information. Additionally, each of Merlin and Inflection Point are to keep the other promptly informed of the status of any such inquiries, proposals, offers or requests for information. During the Interim Period, each of Merlin and Inflection Point will, and will cause its representatives to, immediately cease and cause to be terminated any solicitations, discussions or negotiations with any person with respect to any acquisition proposal and will, and will direct its representatives to, cease and terminate any such solicitations, discussions or negotiations.
• During the Interim Period, each will give prompt notice to the other if such party or its affiliates: (a) receives any notice or other communication in writing from any third party (including any governmental authority) alleging (i) that the consent of such third party is or may be required in connection with the transactions contemplated by the Business Combination Agreement or (ii) any non-compliance with any law by either Merlin or Inflection Point or its affiliates; (b) receives any notice or other communication from any governmental authority in connection with the transactions contemplated by the Business Combination Agreement; or (c) becomes aware of the commencement or threat, in writing, of any legal proceeding against either Merlin or Inflection Point or any of its affiliates, or any of their respective properties or assets, or, to the knowledge of such party, any officer, director, partner, member or manager, in his, her or its capacity as such, of such party or of its affiliates with respect to the consummation of the transactions contemplated by the Business Combination Agreement.
• Subject to the terms and conditions of the Business Combination Agreement, each of Merlin and Inflection Point will use its reasonable best efforts, and will cooperate with the other parties to the Business Combination Agreement, to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by the Business Combination Agreement (including the receipt of all applicable consents of governmental authorities) and to comply as promptly as practicable with all requirements of governmental authorities applicable to the transactions contemplated by the Business Combination Agreement, including making the filing required by and complying with the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
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As promptly as practicable after the execution of the Business Combination Agreement and receipt by Inflection Point of the PCAOB Financial Statements, the Updated 1H Financial Statements and any other audited or unaudited financial statements of the Target Companies that are required by applicable law to be included in the proxy statement/prospectus, (x) Merlin and Inflection Point will jointly prepare and Inflection Point will file with the SEC, mutually acceptable materials (such agreement not to be unreasonably withheld, conditioned or delayed by Inflection Point or Merlin) that shall include the proxy statement to be filed with the SEC and sent to Inflection Point’s shareholders relating to the extraordinary general meeting, and (y) Inflection Point will prepare (with Merlin’s and its representatives’ reasonable cooperation) and file with the SEC the registration statement of which this proxy statement/prospectus forms a part in connection with the registration under the Securities Act (A) the Post-Domestication Units to be issued in exchange for the Inflection Point Units (B) the Post-Domestication Rights to be issued in exchange for the Inflection Point Rights, (C) the shares of New Merlin Common Stock to be issued in exchange for (i) the issued and outstanding Inflection Point Class A Shares in the Domestication and (ii) the Post-Domestication Rights at the Effective Time, (D) shares of New Merlin Common Stock that constitute the Aggregate Consideration, (E) the shares of Domesticated Purchaser Series A Preferred Stock that constitute the Convertible Note Consideration, (F) the Domesticated Purchaser Series A Warrants that constitute the Pre-Funded Warrant Consideration, (G) the shares of New Merlin Common Stock issuable upon conversion of the Domesticated Purchaser Series A Preferred Stock that constitute the Convertible Note Consideration, (H) the shares of New Merlin Common Stock issuable upon exercise of the Domesticated Purchaser Series A Investor that constitute the Pre-Funded Warrant Consideration, (I) the shares of Domesticated Purchaser Common Stock subject to the Purchaser Options, and (J) the shares of Domesticated Purchaser Common Stock subject to the Purchaser RSUs (if any) (collectively, the “Registration Statement Securities”).
• Each of Merlin and Inflection Point will use its reasonable best efforts to cause the registration statement of which this proxy statement/prospectus forms a part to comply with the rules and regulations promulgated by the SEC, to have the registration statement declared effective under the Securities Act as promptly as practicable after such filing and to keep the registration statement effective as long as is necessary to consummate the transactions contemplated by the Business Combination Agreement.
• Each of Merlin and Inflection Point agree that for a period of six (6) years from the Closing Date, each of them will, and will cause Inflection Point, Merger Sub and the Target Companies to, maintain in effect the exculpation, indemnification and advancement of expenses provisions in favor of any individual who, at or prior to the Closing, was a director, officer, employee or agent of Inflection Point, Merger Sub or the Target Companies, as the case may be, or who, at the request of Merlin, Inflection Point, Merger Sub or the Target Companies, as the case may be, served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (collectively, with such individual’s heirs, executors or administrators, (each, together with such Person’s heirs, executors or administrators, a “D&O Indemnified Party”)), of Inflection Point’s, Merger Sub’s and the Target Companies’ respective organizational documents as in effect immediately prior to the Closing Date or in any indemnification agreements of Inflection Point and the Target Companies, on the one hand, with any D&O Indemnified Party, on the other hand, as in effect immediately prior to the Closing Date or in any indemnification agreements of the Inflection Point, Merger Sub or any of the Target Companies, on the one hand, with any D&O Indemnified Party, on the other hand, as in effect immediately prior to the Closing Date, and the Parties shall, and shall cause the Inflection Point, Merger Sub and the Target Companies to, not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any D&O Indemnified Party; provided, however, that all rights to indemnification or advancement of expenses in respect of any legal proceedings pending or asserted or any claim made within such period shall continue until the disposition of such legal proceedings or resolution of such claim. From and after the Closing Date, Inflection Point shall cause the Target Companies to honor, in accordance with their respective terms, each of the covenants contained in the Business Combination Agreement without limit as to time.
• Each of Inflection Point and Merlin will use its reasonable best efforts to satisfy the conditions of the closing obligations contained in the subscription agreements relating to the Closing PIPE Investments and consummate the transactions contemplated thereby.
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Closing Conditions
The consummation of the Business Combination Agreement 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 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 provisions of the Business Combination Agreement.
Conditions to the Obligations of Each Party
The consummation of the Business Combination is conditioned upon the satisfaction or waiver of certain customary closing conditions by each of the parties, including among other things:
• The approval of each Condition Precedent Proposal will have been obtained.
• The requisite shareholder approval of the Business Combination Agreement by the stockholders of Merlin shall have been obtained.
• No governmental authority will have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) or order that is then in effect and which has the effect of making the transactions or agreements contemplated by the Business Combination Agreement illegal or which otherwise prevents or prohibits consummation of the transactions contemplated by the Business Combination Agreement.
• The registration statement of which this proxy statement/prospectus forms a part will have been declared effective under the Securities Act by the SEC and will remain effective as of the Closing, and no stop order or similar order suspending the effectiveness of the registration statement will have been issued and be in effect with respect to the registration statement of which this proxy statement/prospectus forms a part and no proceedings for that purpose will have been initiated or threatened by the SEC and not withdrawn.
• The shares of New Merlin Common Stock to be issued in connection with the Business Combination will be conditionally approved for listing upon the Closing on Nasdaq subject to any requirement to have a sufficient number of round lot holders of the New Merlin Common Stock.
• The completion of the Domestication, and the performance of Inflection Point and Merlin, in all material respects, of their respective obligations and covenants under the Business Combination Agreement.
• All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act with respect to the transactions contemplated by the Business Combination Agreement shall have expired or been terminated, and all other consents, waivers and approvals from Governmental Authorities, if any, that are required to consummate the Business Combination, shall have expired, been terminated, been made or been obtained.
Conditions to the Obligations of Merlin
The obligations of Merlin to consummate and effect the Business Combination is subject to the satisfaction or waiver of each of the following additional conditions at or prior to the Closing, any one or more of which may be waived in writing exclusively by Merlin:
• All of the representations and warranties of Inflection Point set forth in the Business Combination Agreement and in any certificate delivered by or on behalf of Inflection Point pursuant thereto will be true and correct on and as of the date of the Business Combination Agreement and on and as of the Closing Date as if made on the Closing Date, except for (i) those representations and warranties that address matters only as of a particular date (which representations and warranties will have been accurate as of such date), and (ii) any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or Purchaser Material Adverse Effect), individually or in the aggregate, have not had and would not reasonably be expected to have a Purchaser Material Adverse Effect.
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• Inflection Point will have performed in all material respects all of its respective obligations and complied in all material respects with all of their respective agreements and covenants under the Business Combination Agreement to be performed or complied with by them on or prior to the Closing Date.
• No Purchaser Material Adverse Effect will have occurred with respect to Inflection Point since the date of the Business Combination Agreement that is continuing and uncured.
• The Domestication will have been completed as provided in the Business Combination Agreement and a time-stamped copy of the certificate issued by the Secretary of State of the State of Delaware in relation thereto will have been delivered to Merlin.
• Inflection Point will have made appropriate arrangements to have the proceeds remaining in the Trust Account (after giving effect to the Redemption) available to Inflection Point at the Closing.
• Inflection Point will have delivered to Merlin a certificate, signed by an executive officer of Inflection Point and dated as of the Closing Date, certifying as to certain matters described in the Business Combination Agreement.
• Inflection Point will have delivered to Merlin a certificate from its secretary or other executive officer certifying as to, and attaching, (A) copies of Inflection Point’s Charter upon Domestication and Bylaws upon Domestication as in effect as of the Closing Date (after giving effect to the Domestication) and (B) the resolutions of Inflection Point’s board of directors authorizing and approving the execution, delivery and performance of the Business Combination Agreement and each of the ancillary documents to which it is a party or by which it is bound, and the consummation of the transactions contemplated thereby.
• Inflection Point will have delivered, or caused to be delivered, copies of the Registration Rights Agreement and the Lock-Up Agreements, duly executed by Inflection Point and the Sponsor (as applicable).
Conditions to the Obligations of Inflection Point and Merger Sub
The obligations of Inflection Point to consummate and effect the Business Combination is subject to the satisfaction or waiver of each of the following additional conditions at or prior to the Closing, any one or more of which may be waived in writing exclusively by Inflection Point:
• All of the representations and warranties of Merlin set forth in the Business Combination Agreement and in any certificate delivered by or on behalf of Merlin pursuant thereto will be true and correct on and as of the date of the Business Combination Agreement and on and as of the Closing Date as if made on the Closing Date, except for (i) those representations and warranties that address matters only as of a particular date (which representations and warranties will have been accurate as of such date), and (ii) any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or Company Material Adverse Effect), individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
• Merlin will have performed in all material respects all of its obligations and complied in all material respects with all of the agreements and covenants under the Business Combination Agreement to be performed or complied with by it on or prior to the Closing Date.
• No Company Material Adverse Effect will have occurred with respect to the Target Companies, taken as a whole, since the date of the Business Combination Agreement that is continuing and uncured.
• Merlin will have delivered to Inflection Point a certificate, signed by an executive officer of Merlin and dated as of the Closing Date, certifying as to certain matters described in the Business Combination Agreement.
• Merlin will have delivered to Inflection Point a certificate executed by Merlin’s secretary certifying as to the validity and effectiveness of, and attaching, (A) copies of Merlin’s organizational documents as in effect as of the Closing Date (immediately prior to the Closing) and (B) the requisite resolutions of
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Merlin’s board of directors authorizing and approving the execution, delivery and performance of the Business Combination Agreement and each ancillary document to which Merlin’s is or is required to be a party or bound, and the consummation of the Business Combination.
• Merlin will have delivered to Inflection Point (A) a duly executed pay-off letter from each of the holders of closing indebtedness, in a form reasonably satisfactory to Inflection Point, certifying that all such closing indebtedness owing to such holder shall have been fully paid upon the receipt by such holder of funds pursuant to Section 3.03(c) of the Business Combination Agreement and (B) documentation evidencing to the reasonable satisfaction of Purchaser the release of all liens securing any closing indebtedness.
• Merlin will have delivered to Inflection Point: (A) A properly completed and duly executed IRS Form W-9 from the Sellers representing the requisite shareholder approval; (B) a copy of the Registration Rights Agreement, duly executed by each seller who will receive, or would receive upon exercise of the Purchaser Options or settlement of the Purchaser RSUs, at least 1.0% of the Aggregate Consideration; (C) A copy of the Seller Lock-Up Agreement, duly executed by each Seller who will receive, or would receive upon exercise of the Purchaser Options or settlement of the Purchaser RSUs, at least 1.0% of the Aggregate Consideration; (D) A certificate on behalf of Merlin in form and substance reasonably satisfactory to Inflection Point, dated no more than thirty (30) days prior to the Closing Date, prepared in a manner consistent and in accordance with the requirements of Treasury Regulations Sections 1.897-2(g), (h) and 1.1445-2(c)(3), certifying that no interest in Merlin is, or has been during the relevant period specified in Section 897(c)(1)(A)(ii) of the Code, a “U.S. real property interest” within the meaning of Section 897(c) of the Code, and a form of notice to the Internal Revenue Service prepared in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2).
• Merlin shall have obtained certain consents and approvals set forth on the Company Disclosure Letter.
• The holders of any Merlin Warrants (as defined in the Business Combination Agreement) that do not allow for automatic exercise on a cashless basis in full in accordance with their terms pursuant to Section 2.01(a) or Section 2.01(c) of the Business Combination Agreement shall have provided Inflection Point a written consent executed by each such holder agreeing that such Merlin Warrants shall otherwise be exercised in full pursuant to Section 2.01(a) or Section 2.01(c) (as applicable to such company warrants) or will be cancelled for no consideration.
Termination; Effectiveness
Merlin and Inflection Point will be able to terminate the Business Combination Agreement by mutual written consent. Additionally, either Merlin or Inflection Point would be able to terminate the Business Combination Agreement:
• by written notice if any of the conditions to the Closing set forth in the Business Combination Agreement have not been satisfied or waived by August 13, 2026 (the “Outside Date”); provided, however, the right to terminate the Business Combination Agreement will not be available to a party if the breach or violation by such party or its affiliates of any representation, warranty, covenant or obligation under the Business Combination Agreement was the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Date; provided, further, that, solely with respect to Merlin’s right to terminate the Business Combination Agreement, the Outside Date shall automatically be extended by one (1) calendar day for every calendar day after October 31, 2024 that the PCAOB Financial Statements or the Updated 1H Financial Statements are not delivered pursuant to the terms of the Business Combination Agreement including the applicable specified deadlines; and
• by written notice if a governmental authority of competent jurisdiction will have issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the Business Combination Agreement, and such order or other action has become final and non-appealable; provided, however, that the right to terminate the Business Combination Agreement will not be available to either Merlin or Inflection Point if the failure by it or its affiliates to comply with any provision of the Business Combination Agreement has been a substantial cause of, or substantially resulted in, such action by such governmental authority;
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Merlin would be able to terminate the Business Combination Agreement:
• if the Inflection Point Board modifies its recommendation that shareholders vote “FOR” each of the Condition Precedent Proposals;
• if the approval of the Condition Precedent Proposals by Inflection Point’s shareholders will not have been obtained by reason of the failure to obtain the required vote at the Inflection Point shareholders’ meeting duly convened therefor or at any adjournment or postponement thereof;
• if (i) there has been a breach by Inflection Point of any of its representations, warranties, covenants or agreements contained in the Business Combination Agreement, or if any representation or warranty of Inflection Point will have become untrue or inaccurate, in any case, which would result in a failure of certain specified conditions set forth in the Business Combination Agreement to be satisfied and (ii) the breach or inaccuracy is incapable of being cured or is not cured within the earlier of (A) twenty (20) days after written notice of such breach or inaccuracy is provided to Inflection Point or (B) the Outside Date; provided, that Merlin will not have the right to terminate the Business Combination Agreement pursuant to the Business Combination Agreement if at such time Merlin is in material uncured breach of the Business Combination Agreement; and
• if (i) all the conditions set forth in the Business Combination Agreement have been, and continue to be, satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, each of which shall be capable of being satisfied if the Closing Date were the date of such termination) (ii) Inflection Point fails to consummate the Business Combination on or prior to the day when the Closing is required to occur pursuant to the Business Combination Agreement, (iii) Merlin shall have irrevocably confirmed in writing to Inflection Point that it is ready, willing and able to consummate the Closing and (iv) Inflection Point fails to effect the Closing within five (5) business days following delivery of such confirmation.
Inflection Point would be able to terminate the Business Combination Agreement:
• if (i) there has been a breach by Merlin of any of its representations, warranties, covenants or agreements contained in the Business Combination Agreement, or if any representation or warranty of such parties will have become untrue or inaccurate, in any case, which would result in a failure of certain specified conditions set forth in the Business Combination Agreement to be satisfied (treating the Closing Date for such purposes as the date of the Business Combination Agreement or, if later, the date of such breach), and (ii) the breach or inaccuracy is incapable of being cured or is not cured within the earlier of (A) twenty (20) days after written notice of such breach or inaccuracy is provided to Merlin or (B) the Outside Date; provided, that Inflection Point will not have the right to terminate the Business Combination Agreement pursuant to the Business Combination Agreement if at such time Inflection Point is in material uncured breach of the Business Combination Agreement; and
• if (i) all the conditions set forth in the Business Combination Agreement have been, and continue to be, satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, each of which shall be capable of being satisfied if the Closing Date were the date of such termination), (ii) Merlin fails to consummate the Business Combination on or prior to the day when the Closing is required to occur pursuant to the Business Combination Agreement, (iii) Inflection Point shall have irrevocably confirmed in writing to Merlin that it is ready, willing and able to consummate the Closing and (iv) Merlin fails to effect the Closing within five (5) Business Days following delivery of such confirmation.
Waiver and Amendments
At any time prior to Closing, any party to the Business Combination Agreement may, by approval by their respective board of directors or other officers or persons duly authorized (a) extend the time for the performance of the obligations or acts of the other parties, (b) waive any inaccuracies in the representations and warranties (of the other party hereto) that are contained in the Business Combination Agreement or (c) waive compliance by the other parties hereto with any of the agreements or conditions contained in the Business Combination Agreement. The Business Combination Agreement may be amended, supplemented or modified only by execution of a written instrument signed by Inflection Point and Merlin.
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Expenses
In the event that the Business Combination Agreement is terminated by Inflection Point due to (i) Merlin’s breach of certain representation, warranties, covenants or agreements, which would result in a failure of certain closing conditions and such breach is incapable of being or is not cured within (A) twenty (20) days after written notice or (B) the Outside Date or (ii) Merlin fails to consummate the Business Combination on or prior to the day when Closing is required to occur and fails to effect the Closing within five (5) business days following the delivery of Inflection Point’s confirmation to consummate the Closing, then Merlin will pay to Inflection Point any amounts due and owing under the Convertible Promissory Note within two (2) days after the date of termination.
In addition, if Merlin fails to pay in a timely manner any amount due pursuant to such expense reimbursement, Merlin will reimburse Inflection Point for all costs and expenses incurred in the collection of overdue amounts and will pay to Inflection Point interest on the amounts payable pursuant to the Business Combination Agreement from and including the date payment of such amounts was due to but excluding the date of actual payment at a rate equal to three percent (3%) plus the prime rate set forth in The Wall Street Journal in effect on the date such payment was required to be made.
Inflection Point and Merlin agree that they are entitled to seek an injunction or restraining order to prevent breaches and to specific enforcement of the terms and provisions of the Business Combination Agreement, without the requirement to post any bond or other security or to prove that money damages would be inadequate, in addition to any other right or remedy to which any party is entitled under the Business Combination Agreement, at law or equity.
Related Agreements
Registration Rights Agreement
At the Closing, New Merlin, the Sponsor, the Merlin Stockholders, the Closing PIPE Investors and other parties thereto will enter into the Registration Rights Agreements, pursuant to which, among other things, the Sponsor, the Merlin Stockholders, the Closing PIPE Investors and other parties thereto will be granted certain customary registration rights, on the terms and subject to the conditions therein, with respect to securities of New Merlin that they will hold following the Business Combination.
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, Inflection Point entered into the Sponsor Support Agreement with the Restricted Holders, pursuant to which each Restricted Holder agreed to, among other things, (i) vote in favor of adoption of the Transaction Proposals, (ii) vote against any Alternative Transaction (as defined in the Business Combination Agreement) and any merger agreement or merger other than the Transaction Proposals, the Business Combination Agreement and the Business Combination; (iii) vote against any change in the business, management, or board of directors of Inflection Point (other than in connection with the Transaction Proposals or pursuant to the Business Combination Agreement or ancillary agreements) and (iv) vote against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Sponsor Support Agreement, the Business Combination Agreement or the Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of the Inflection Point under the Business Combination Agreement, (C) result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such Restricted Holder contained in the Sponsor Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Inflection Point. Certain current and former officers and directors of Inflection Point previously entered into a letter agreement with Inflection Point in connection with Inflection Point’s initial public offering, pursuant to which they agreed to vote any Inflection Point ordinary shares held by them in favor of the Business Combination.
Stockholder Voting and Support Agreement
Concurrently with the execution of the Business Combination Agreement, Merlin Stockholders and Merlin entered into the Stockholder Voting and Support Agreement, pursuant to which Merlin Stockholders have agreed to, among other things, vote (or act by written consent) (a) to approve the Business Combination Agreement and the consummation of the Business Combination; (b) against any Alternative Transaction or any proposal relating to an
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Alternative Transaction; (c) against any merger agreement or merger (other than the Business Combination Agreement and the Business Combination), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by Merlin; (d) against any change in the business or board of directors of Merlin (other than pursuant to the Business Combination Agreement or the Ancillary Documents (as defined in the Business Combination Agreement)); (e) against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Stockholder Voting and Support Agreement, the Business Combination Agreement or the Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of Merlin under the Business Combination Agreement, (C) result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such member contained in the Stockholder Voting and Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Merlin and (f) to convert all outstanding shares of preferred stock of Merlin into Merlin Common Stock as of immediately prior to the Effective Time, conditioned upon and subject to the closing of the Business Combination, in accordance with the organizational documents of Merlin.
Pursuant to the Stockholder Voting and Support Agreement, until the earliest of the Closing, termination of the Business Combination Agreement or the liquidation of Merlin, no Merlin Stockholder shall (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Subject Securities (as defined in the Stockholder Voting and Support Agreement), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Subject Securities without the prior written consent of Merlin and Inflection Point, unless such transfer is deemed a Permitted Transfer (as defined in the Stockholder Voting and Support Agreement).
In addition, pursuant to the Stockholder Voting and Support Agreement, each Merlin Stockholder has agreed not to commence, join in, facilitate, assist or encourage, and has agreed to take all actions necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against Inflection Point, Merlin or any of their respective successors or directors, (a) challenging the validity of, or seeking to enjoin the operation of, any provision of the Stockholder Voting and Support Agreement or (b) alleging a breach of any fiduciary duty of any person in connection with the evaluation, negotiation or entry into the Stockholder Voting and Support Agreement, the Business Combination Agreement or the Business Combination. Each Merlin Stockholder has also waived and agreed not to exercise any rights of appraisal or rights to dissent from the Business Combination that they may have in respect of the Subject Securities.
Sponsor Lock-Up Agreement
At the Closing, the Sponsor and New Merlin will enter into the Sponsor Lock-Up Agreement, pursuant to which the Sponsor and its permitted assigns will agree, with respect to the Sponsor Lock-Up Shares, prior to the date that is 90 days after the Closing Date, not to, without the prior written consent of the New Merlin Board, (i) sell, pledge, grant any option to purchase or otherwise dispose of (a), (ii) enter into any swap or other transfer arrangement in respect of the Sponsor Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Sponsor Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
Merlin Lock-Up Agreement
At the Closing, New Merlin and the Lock-Up Holders will enter into the Merlin Lock-Up Agreement, pursuant to which the Lock-Up Holders will agree not to, without the prior written consent of the New Merlin Board, prior to the date that is six months after the Closing (i) sell, pledge, grant any option to purchase or otherwise dispose of the Lock-Up Shares, (ii) enter into any swap or other transfer arrangement in respect of any Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Merlin Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
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Signing Pre-Funded PIPE Agreements
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements with Pre-Funded Investors. Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants, substantially concurrently with the execution and delivery of the Business Combination Agreement. On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into a Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA. The Convertible Note Consideration shall be a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal and accrued and unpaid interest on each Pre-Funded Convertible Note as of one day prior to the Closing, divided by (ii) $12.00 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded NPAs), as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Notes, or $10.20 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded SPA).
Series A SPA
In connection with the transactions contemplated by the Business Combination Agreement, on August 13, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into the Series A SPA. Pursuant to the Series A SPA, the Closing PIPE Investor has agreed, among other things, to purchase, at Closing, 4,901,961 shares of Series A Preferred Stock, having the rights, preferences and privileges set forth in the Certificate of Designation and a New Merlin Series A Warrant, for an aggregate purchase price of $50,000,000. Each share of Merlin Series A Preferred Stock will have the Stated Value. On November 17, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into Amendment No. 1 to the Initial Series A SPA, pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible.
The Series A SPA includes customary representations and warranties from Merlin, Inflection Point and the Closing PIPE Investor and is subject to customary closing conditions. The Series A SPA also includes customary covenants and agreements related to transfer restrictions, SEC reports, material non-public information and indemnification. New Merlin Common Stock issuable upon conversion of the Series A Preferred Stock and New Merlin Common Stock underlying any New Merlin Series A Warrants will be “Registrable Securities” under the Registration Rights Agreement.
Dividends: The Series A Preferred Stock will accrue dividends daily at the rate of 12% per annum of the Accrued Value (as defined in the Certificate of Designation) (if paid in kind), plus the amount of previously accrued dividends paid in kind, or 10% per annum of the Accrued Value (if paid in cash), plus the amount of previously accrued dividends paid in kind. Such dividends will compound semi-annually.
Liquidation Preference: Upon any liquidation or deemed liquidation event, the holders of Merlin Series A Preferred Stock will be entitled to receive out of the available proceeds, before any distribution is made to holders of common stock or any other junior securities, an amount per share equal to the greater of (i) 100% of the Accrued Value on each share of Series A Preferred Stock or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into New Merlin Common Stock immediately prior to the liquidation event. Thereafter, the holders of Series A Preferred Stock will be entitled to receive their pro-rata share, of the remaining available proceeds available for distribution to stockholders, on an as-converted to common stock basis.
Protective Provisions: For as long as 20% of the shares of Series A Preferred Stock issued as of the Closing are outstanding, New Merlin shall not, without the affirmative vote or action by written consent of the Requisite Holders, take any of the following actions: (i) liquidate, dissolve or wind up the affairs of New Merlin; (ii) amend, alter, or repeal any provision of the certificate of incorporation, bylaws, Certificate of Designation or any similar document of New Merlin in a manner adverse to the Series A Preferred Stock; (iii) create or authorize the creation of or issue any other security convertible into or exercisable for any equity security unless such security ranks junior to the Series A Preferred Stock with respect to its rights, preferences and privileges, or increase the authorized number of shares of Series A Preferred Stock; (iv) purchase or redeem or pay any cash dividend on any capital stock ranking junior to the Series A Preferred Stock prior to payment of such cash dividend on the Series A Preferred Stock or purchase or redeem
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any capital stock ranking junior to the Series A Preferred Stock, other than stock repurchased at cost from former employees and consultants in connection with the cessation of their service; (v) enter into any transaction with an affiliate, other than the issuance of equity or awards to eligible participants under New Merlin’s incentive plan, equity plan or equity-based compensation plan, or with respect to employment, consulting or award agreements with respect to executive officers of New Merlin, in each case regardless of whether such person (or such person’s affiliates) would be considered an affiliate of New Merlin; or (vi) incur or guarantee any indebtedness, other than equipment leases or trade payables incurred in the ordinary course of business; provided, however, that the Series A Preferred Stock shall not be considered indebtedness for purposes of this calculation.
Conversion: Each share of Series A Preferred Stock will be convertible into New Merlin Common Stock at any time at the option of the holder at a rate equal to the Accrued Value, divided by the then-applicable conversion price. The conversion price will initially be $12.00, subject to adjustments for stock dividends, splits, combinations and similar events and customary anti-dilution adjustments, including with respect to future issuances or sales of New Merlin Common Stock at prices less than the conversion price then in effect. In addition, if the 20-day volume-weighted average price of the New Merlin Common Stock on the twenty-first trading day following the date that is six months after Closing Date is less than the conversion price then in effect, the conversion price will be adjusted to the greater of (i) such volume weighted average price and (ii) $5.00.
Put Rights: Unless prohibited by applicable law governing distributions to stockholders, the Series A Preferred Stock shall be redeemable at the option of the Requisite Holders commencing any time after the 5th anniversary of the Closing at a price equal to the Accrued Value.
Call Rights: Unless prohibited by applicable law governing distributions to stockholders, the Series A Preferred Stock shall be redeemable at the option of New Merlin commencing any time (A) prior to the 1st anniversary of the Closing at a price equal to the 150% of the Accrued Value, (B) on or after the 1st anniversary but prior to the 2nd anniversary of the Closing at a price equal to the 140% of the Accrued Value, (C) on or after the 2nd anniversary of the Closing but prior to the 3rd anniversary of the Closing at a price equal to the 130% of the Accrued Value, (D) on or after the 3rd anniversary of the Closing but prior to the 4th anniversary of the Closing at a price equal to the 120% of the Accrued Value, (E) on or after the 4th anniversary of the Closing but prior to the 5th anniversary of the Closing at a price equal to the 110% of the Accrued Value, or (F) on or after the 5th anniversary of the Closing at a price equal to the 100% of the Accrued Value.
New Merlin Series A Warrants: At the closing of the Signing PIPE Investment, the Closing PIPE Investor will receive New Merlin Series A Warrants to purchase shares of New Merlin Common Stock. The New Merlin Series A Warrants will be immediately exercisable upon issuance at Closing and will expire five years from the date of Closing. The New Merlin Series A Warrants include customary cash and cashless exercise provisions. Each New Merlin Series A Warrant is initially exercisable at $12.00 per share of New Merlin Common Stock, subject to the same anti-dilution and other adjustments as the Series A Preferred Stock.
Voting: The Series A Preferred Stock will vote together with the New Merlin Common Stock as a single class, except as required by law and as noted above under “Protective Provisions.” Each holder of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of New Merlin Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.
Additional Series A SPAs
Also on November 17, 2025, Inflection Point and Merlin also entered into Additional Series A SPAs with the Additional Closing PIPE Investors, pursuant to which, among other things, the Additional Closing PIPE Investors agreed to purchase, and Inflection Point agreed to sell, an aggregate of 1,666,668 shares of Series A Preferred Stock and Upsized New Merlin Series A Preferred Warrants to purchase a number of shares of New Merlin Common Stock equal to 75% of the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible for $20 million.
There are no agreements, arrangements, or understandings between the Sponsor and Inflection Point, its officers, directors, or affiliates with respect to determining whether to proceed with the Business Combination or any other initial business combination.
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Transfer Restrictions
The Business Combination Agreement contemplates that, at the Closing, New Merlin and the Sponsor will enter into a Sponsor Lock-Up Agreement, and New Merlin and the Lock-Up Holders will enter into the Merlin Lock-Up Agreement (together with the Sponsor Lock-Up Agreement, the “Lock-Up Agreements”), pursuant to which the parties thereto will agree to restrictions on transfer with respect to their shares of New Merlin Common Stock. [An aggregate of 8,800,833 Sponsor Lock-Up Shares and [•] Lock-Up Shares are anticipated to be subject to such transfer restrictions, representing [•]% of the total issued and outstanding shares of New Merlin Common Stock following the Business Combination, assuming the 50% Redemption Scenario. The Lock-Up Agreements will supersede the lock-up provisions set forth in the Letter Agreement, which provisions will be of no further force or effect as of the Closing.
The transfer restrictions contained in the Lock-Up Agreements are summarized in the table below:
|
Subject Securities |
Lock-Up |
Lock-Up Period |
Exceptions to |
|||
|
8,333,833 shares of New Merlin Common Stock, to be issued to the Sponsor upon conversion of 8,333,333 Inflection Point Class A Shares the Sponsor received upon conversion of 8,333,333 Founder Shares in connection with the Closing. |
Sponsor |
Six months after the consummation of the Business Combination. |
Transfers to Permitted Transferees(1) |
|||
|
467,500 shares of New Merlin Common Stock, to be issued to the Sponsor upon the conversion of securities underlying the 425,000 Private Placement Units the Sponsor held. |
Sponsor |
90 days after the consummation of the Business Combination. |
Transfers to Permitted Transferees(1) |
|||
|
New Merlin Common Stock held immediately after the Closing (other than shares acquired in the public market after the Closing). |
Lock-Up Holders |
Six months after the consummation of the Business Combination. |
Transfers to Permitted Transferees(2) |
__________
(1) The lock-up restrictions will not apply to: (a) transfers of any securities other than the Sponsor Lock-Up Shares or any other equity security of New Merlin issued or issuable with respect to the Sponsor Lock-Up Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, spin-off, reorganization or similar transaction; (b) transfers to New Merlin’s officers or directors, any Affiliate (as defined therein) or family member of any of New Merlin’s officers or directors, any members or partners of the Sponsor or their Affiliates, any affiliates of the Sponsor, or any employees of such Affiliates; (c) in the case of an individual, transfers to any Affiliates or family members of the holder of Sponsor Lock-Up Shares; (d) transfers to any investment funds or vehicles controlled or managed by the holder of Sponsor Lock-Up Shares or any of its Affiliates; (e) transfers by gift to a trust, the beneficiary of which is a person to whom a transfer would be permitted under (c), or to a charitable organization; (f) in the case of an individual, transfers by virtue of laws of descent and distribution upon death of such individual; (g) in the case of an individual, transfers pursuant to a qualified domestic relations order; (h) in the case of an individual, transfers to a partnership, limited liability company or other entity of which the holder of the Sponsor Lock-Up Shares and/or the Affiliates or family members of the holder of Sponsor Lock-Up Shares are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (i) transfers to a nominee or custodian of a person to whom a transfer would be permitted under (c); (j) by private sales or transfers made in connection with any forward purchase agreement or similar arrangement at prices no greater than the price at which the Sponsor Lock-Up Shares were originally purchased; (k) transfers in connection with any legal, regulatory or other order; (l) in the case of an entity that is a trust, transfers to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; (m) in the case of an entity, transfers as part of a distribution to members, partners, shareholders or equityholders of the holder of the Lock-Up Shares; (n) in the case of an entity, transfers by virtue of the laws of the state of the entity’s organization and the entity’s organizational documents upon dissolution of the entity; (o) the exercise of stock options to purchase shares of New Merlin Common Stock or the vesting of stock awards relating to shares of New Merlin Common Stock and any related transfer of shares of New Merlin Common Stock in connection therewith (x) deemed to occur upon the “cashless” or “net” exercise of such options or (y) for the purpose of paying the exercise price of such options or for paying taxes due as a result of the exercise of such options, the vesting of such options or stock awards, or as a result of the vesting of such shares of New Merlin Common Stock, it being understood that all shares of New Merlin Common Stock received upon such exercise, vesting or transfer will remain subject to
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the restrictions of the Sponsor Lock-Up Agreement during the applicable lock-up period; (p) transfers to New Merlin pursuant to any contractual arrangement in effect upon the consummation of the Business Combination that provides for the repurchase by New Merlin or forfeiture of New Merlin Common Stock or other securities convertible into, or exercisable, redeemable or exchangeable for, New Merlin Common Stock in connection with the termination of the holder of the Sponsor Lock-Up Shares’ service to New Merlin; (q) the entry, by holder of the Sponsor Lock-Up Shares, at any time after the consummation of the Business Combination, of any trading plan providing for the sale of shares of New Merlin Common Stock by the holder of the Lock-Up Shares, which trading plan meets the requirements of Rule 10b5-1(c) under the Exchange Act; provided, however, that such plan does not provide for, or permit, the sale of any shares of New Merlin Common Stock during the applicable lock-up period and no public announcement or filing is voluntarily made or required regarding such plan during the applicable lock-up period; (r) transfers in the event of the completion of a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the New Merlin Stockholders having the right to exchange their shares of New Merlin Common Stock for cash, securities or other property; and (s) transfers to satisfy any U.S. federal, state, or local income tax obligations of a holder of Lock-Up Shares (or its direct or indirect owners) arising from a change in the Code, or the Regulations after the date on which the Business Combination Agreement was executed by the parties, and such change prevents the Business Combination from qualifying as a “reorganization” pursuant to Section 368 of the Code (and the Business Combination does not qualify for similar tax-free treatment pursuant to any successor or other provision of the Code or Regulations taking into account such changes), in each case solely and to the extent necessary to cover any tax liability as a direct result of the transaction.
(2) The lock-up restrictions will not apply to: (a) transfers of any securities other than (a) the Lock-Up Shares and (b) any other equity security of New Merlin issued or issuable with respect to the Lock-Up Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, spin-off, reorganization or similar transaction; (b) in the case of an individual, transfers to any Affiliates (as defined therein) or family members of the holder of Lock-Up Shares; (c) transfers to any investment funds or vehicles controlled or managed by the holder of Lock-Up Shares or any of its Affiliates; (d) transfers by gift to a trust, the beneficiary of which is a Person to whom a Transfer would be permitted under (a), or to a charitable organization; (e) in the case of an individual, transfers by virtue of laws of descent and distribution upon death of such individual; (f) in the case of an individual, transfers pursuant to a qualified domestic relations order; (g) in the case of an individual, transfers to a partnership, limited liability company or other entity of which the holder of Lock-Up Shares and/or the Affiliates or family members of the holder of Lock-Up Shares are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (h) transfers to a nominee or custodian of a person to whom a transfer would be permitted under (a); (i) transfers in connection with any legal, regulatory or other order; (j) in the case of an entity that is a trust, transfers to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; (k) in the case of an entity, transfers as part of a distribution to members, partners, shareholders or equityholders of the holder of Lock-Up Shares; (l) in the case of an entity, transfers by virtue of the laws of the state of the entity’s organization and the entity’s organizational documents upon dissolution of the entity; (m) the exercise of stock options or warrants to purchase shares of New Merlin Common Stock or the vesting of stock awards relating to shares of New Merlin Common Stock and any related transfer of shares of New Merlin Common Stock in connection therewith (x) deemed to occur upon the “cashless” or “net” exercise of such options or warrants or (y) for the purpose of paying the exercise price of such options or warrants or for paying taxes due as a result of the exercise of such options or warrants, the vesting of such options or stock awards, or as a result of the vesting of such shares of New Merlin Common Stock, it being understood that all shares of New Merlin Common Stock received upon such exercise, vesting or transfer will remain subject to the restrictions of the Merlin Lock-Up Agreement during the lock-up period; (n) transfers to the Company pursuant to any contractual arrangement in effect upon the consummation of the Business Combination that provides for the repurchase by New Merlin or forfeiture of New Merlin Common Stock or other securities convertible into, or exercisable, redeemable or exchangeable for, New Merlin Common Stock in connection with the termination of the holder of Lock-Up Shares’ service to the Company; (o) the entry, by the holder of Lock-Up Shares, at any time after the consummation of the Business Combination, of any trading plan providing for the sale of shares of New Merlin Common Stock by the holder of Lock-Up Shares, which trading plan meets the requirements of Rule 10b5-1(c) under the Exchange Act; provided, however, that such plan does not provide for, or permit, the sale of any shares of New Merlin Common Stock during the lock-up period and no public announcement or filing is voluntarily made or required regarding such plan during the lock-up period; (p) transfers in the event of the completion of a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of New Merlin’s securityholders having the right to exchange their shares of Common Stock for cash, securities or other property; and (q) transfers to satisfy any U.S. federal, state, or local income tax obligations of a holder of Lock-Up Shares (or its direct or indirect owners) arising from such holder of Lock-Up Shares’ ownership (including prior to and after the Business Combination) of the Lock-Up Shares or any interests in Merlin, in each case solely and to the extent necessary to cover any tax liability as a direct result of such ownership of the Lock-Up Shares or any interests in Merlin.
Background of the Business Combination
Inflection Point is a special purpose acquisition company incorporated on June 24, 2024 as a Cayman Islands exempted company 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. The Business Combination
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with Merlin is the result of a collaborative sourcing effort led by IPAM through its Chief Investment Officer, Michael Blitzer, and Portfolio Manager, Kevin Shannon, who, upon signing of the Letter of Intent (“LOI”), assumed the roles of Chief Executive Officer and Chief Operating Officer of Inflection Point, respectively.
Since its IPO, Inflection Point, under its prior management and the managers of the Sponsor, Andrew Gundlach and Michel Combes, evaluated numerous opportunities across industries and verticals, predominately focused on businesses in the TMT sector, as well as sectors that are being transformed via technology adoption, and entered into confidentiality agreements with multiple targets to facilitate due diligence. Inflection Point also leveraged its relationship with IPAM to source and evaluate additional opportunities, including Merlin. From the time of Inflection Point’s IPO to June 2025 when Inflection Point entered into a letter of intent with Merlin, the team reviewed more than 70 acquisition opportunities, executed approximately 30 non-disclosure agreements, and delivered seven initial draft letters of intent, including the proposal to Merlin. Inflection Point ultimately determined not to proceed with five of the other potential acquisition opportunities, either because: (a) Inflection Point did not prevail in or could not preempt a competitive process; (b) Inflection Point could not come to an agreement with the counterparty on the economic terms for a potential transaction; (c) the counterparty decided not to pursue a business combination at that time; or (d) Inflection Point concluded that the target business or the terms of a potential business combination would not be suitable for Inflection Point or its shareholders. One of these opportunities proceeded to a non-binding letter of intent, and Inflection Point subsequently entered into advanced negotiations with this target. The non-binding letter of intent expired without the parties entering into a binding agreement because the target ultimately decided not to pursue a potential business combination at that time. Further, following extensive due diligence conducted by Inflection Point’s management and its advisors, including IPAM, and following detailed discussions with Merlin Inflection Point concluded that Merlin represented a uniquely compelling opportunity for Inflection Point and its shareholders and entered into the LOI.
Merlin is a leader in developing aircraft-agnostic autonomy for national security applications, with a dual-track civil certification program that has the company on pace to be the first to certify an AI skill on an aircraft. Backed by leading strategic and financial investors, including Google Ventures and Ballie Gifford, Merlin is on its march towards delivering assured, embodied AI, and is working hand in hand with customers so that the Merlin Pilot is appropriately scoped in relation to contracts, certification packages, and customer rules. Implemented today on five dissimilar aircraft types, Merlin plans to continue to expand the Merlin Pilot’s use across large aircraft (like the current C-130J program), down to small handheld drones leveraging one unified autonomy system. Merlin has already secured a $105 million contract with the United States Special Operations Command (“USSOCOM”) to integrate the Merlin Pilot onto the C-130J. In addition to its strong technology platform and experienced management team, Merlin’s capital requirements, market opportunity, and strategic positioning aligned well with the capabilities of the Inflection Point platform, making it an attractive partner for a business combination.
The following chronology summarizes the key meetings and events that led to the signing of the LOI, Business Combination Agreement and other Transaction Documents with Merlin, but it does not purport to catalogue every conversation among representatives of Inflection Point, Merlin, and their respective advisors.
On May 20, 2025, Mr. Shannon held an introductory call with representatives of TD Securities (USA) LLC (“TD Securities”), Merlin’s financial advisor, to better understand the opportunity and the context for a potential transaction with Merlin.
On May 27, 2025, Mr. Shannon held an introductory call with the management of Merlin, including Matt George, Chief Executive Officer; Bill Bing, then Merlin’s Chief Financial Officer; and Harsha Malshe, Technical Program Manager, to gain a high-level overview of the business, its growth trajectory and capital needs.
Later on May 27, 2025, Mr. Shannon spoke with representatives of TD Securities to review details of Merlin’s prior financing rounds, including the $105 million Series B round in 2022, which valued Merlin at a $650 million post-money valuation.
Also on May 27, 2025, Inflection Point received initial access to Merlin’s data room.
On June 3, 2025, Inflection Point submitted an initial non-binding LOI to Merlin. On June 9, 2025, Inflection Point sent a revised LOI to Merlin. TD Securities returned a markup the following day, after which Messrs. Blitzer and. George spoke by phone to review key terms, including the term of the lock-up to securities purchased in a potential private placement, exclusivity provisions and the understanding that no pre-funding by Inflection Point Fund would occur prior to the execution of the Business Combination Agreement. After final revisions to the lock-up and exclusivity language, the parties reached alignment and prepared for execution.
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On June 10, 2025, the LOI was executed.
Between June 7, 2025, and August 6, 2025, representatives of Inflection Point, Merlin, Latham, White & Case, TD Securities, Cohen & Company, a division of J.V.B. Financial Group, LLC (“Cohen”), Cantor Fitzgerald & Co. (“Cantor”, together with Cohen, financial advisors to Inflection Point) and Newtyn participated in seven diligence calls covering various diligence topics, including but not limited to Merlin’s technology roadmap, investor syndicate and business development plans.
Between June 12, 2025, and July 1, 2025, Inflection Point negotiated with and entered into non-disclosure agreements with a select group of institutional accredited investors.
On June 16, 2025, the management of Merlin, including Messrs. George, Bing, and Malshe, joined Messrs. Blitzer, Shannon, Padula, Gundlach and Combes, as well as representatives of Cantor and Cohen, to present an overview of the business and strategic rationale for a transaction.
Also on June 17, 2025, representatives of Ellenoff Grossman & Schole LLP (“EGS”, then acting as co-legal counsel to Inflection Point) and White & Case, together with Messrs. Shannon, Gundlach, Blitzer and Padula, held a call to discuss, among other things, the formal transition of operational control of Inflection Point to Messrs. Blitzer and Shannon.
Between June 17, 2025, and August 11, 2025, representatives of Inflection Point met with various prospective PIPE investors to deliver investment pitches and negotiate terms of the PIPE subscription agreements.
On June 24, 2025, representatives of Inflection Point, including Messrs. Blitzer and Shannon, representatives of a prospective PIPE investor and a representative of Cohen, participated in a diligence visit to Merlin’s Rhode Island facility in Quonset for test flights and simulator demonstrations.
Between July 2, 2025, and July 22, 2025, Inflection Point, led by Kathy Savitt, chair of the Special Committee, discussed the engagement of a fairness opinion provider and negotiated the terms of engagement with four potential providers. On July 22, 2025, the Special Committee engaged Newbridge to provide a fairness opinion in connection with the proposed transaction.
On July 3, 2025, Latham provided White & Case with copies of the Pre-Funded NPAs and related documents for review.
On July 9, 2025, White & Case delivered the first draft of the Business Combination Agreement to Latham. Between July 9, 2025, and August 8, 2025, White & Case and Latham, upon their respective discussions with Inflection Point and Merlin, exchanged drafts of the Business Combination Agreement to finalize its terms. Items negotiated include, among other things, (i) the conversion and treatment of Merlin’s securities, in particular the outstanding warrants of Merlin, the Merlin Options and the Merlin RSUs, (ii) the treatment of the Closing Indebtedness (as defined in the Business Combination Agreement), (iii) the inclusion of a go-forward equity incentive plan and employee stock purchase plan, among other employment matters, (iv) a minimum cash condition, (v) indemnification of the Sponsor and other Inflection Point persons, (v) pre-Closing and post-Closing covenants regarding Merlin’s intellectual property, (vi) treatment of Merlin’s assets located in New Zealand, (vii) various tax provisions, (viii) various representations and warranties and (ix) various provisions related to the PIPE Investments.
On July 15, 2025, White & Case delivered to Latham initial drafts of the Pre-Funded SPA, the new form of Pre-Funded Convertible Note and the form of Pre-Funded Warrant.
On July 20, 2025, the model was distributed to the Inflection Point Board, Newbridge, and key prospective PIPE investors.
On July 21, 2025, White & Case delivered initial drafts of the form of Certificate of Designation and form of New Merlin Series A Warrant.
Between July 15, 2025 and August 11, 2025, White & Case and Latham, upon their respective discussions with Inflection Point and Merlin, exchanged drafts of the form of Pre-Funded SPA, the new form of Pre-Funded Convertible Note, the form of Pre-Funded Warrant, the Certificate of Designation and the New Merlin Series A Warrant. On or around August 11, 2025, the forms of the foregoing documents agreed between Inflection Point and Merlin were distributed to a select group of institutional accredited investors for review. Between August 11, 2025 and August 13, 2025, Inflection Point, Merlin,
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the investors and their respective counsels negotiated the final terms of the financing documents. Key items negotiated included: (i) the conversion price and treatment of the Pre-Funded Convertible Notes under different circumstances, (ii) whether and on what terms there would be anti-dilution and other adjustments to the conversion and exercise prices of the Pre-Funded Convertible Notes, Pre-Funded Warrants, Series A Preferred Stock and New Merlin Series A Warrants, (iii) the representations and warranties by Merlin in the Pre-Funded SPA and Series A SPA, (iv) indemnification obligations of Merlin, and (v) the covenants and events of default under the Pre-Funded Convertible Notes, including which covenants would not apply unless the Business Combination Agreement was terminated.
On July 31, 2025, Mr. George joined Messrs. Shannon, Padula, and a representative of Newbridge to discuss the Merlin’s business, technology and strategy.
Also on July 31, 2025, Mr. George and representatives of Latham joined Mr. Shannon and representatives of White & Case to review business terms for the Pre-Funded Note Purchase Agreement.
At 12 p.m. Eastern Time on August 8, 2025, the Special Committee, consisting of Ms. Savitt, and Messrs. Theysset and Samuels, met with Messrs. Gundlach, Combes, Blitzer, Folino, Shannon and Padula, as well as representatives of White & Case, Ogier (Cayman) LLP (“Ogier”), EGS and Newbridge to discuss the proposed Business Combination, the Business Combination Agreement and the other Transaction Documents. Presentation materials and proposed drafts of the definitive agreements were made available to the members of the Special Committee and the other members of the Inflection Point Board in advance of the meeting. Ogier provided an overview of the fiduciary duties applicable to the Special Committee and the Inflection Point Board. White & Case provided a summary of the findings of legal diligence conducted on Merlin. Thereafter, Messrs. Blitzer, Shannon and Padula provided their assessment of Merlin, the key terms of the Business Combination, and the due diligence that had been conducted in conjunction with the transaction. The Special Committee provided feedback to management and legal counsel and determined to hold a subsequent meeting to continue to evaluate the Business Combination and to review Newbridge’s analysis of the transaction, and in particular, the valuation ascribed to Merlin.
At 5:00 p.m. Eastern Time on August 8, 2025, the Special Committee reconvened with Messrs. Blitzer, Follino, Shannon, Combes and Padula again in attendance, also in attendance were representatives of White & Case, EGS and Newbridge. Newbridge provided a detailed overview of the process it took to evaluate the transaction, and the valuation ascribed to Merlin. The Special Committee asked numerous questions of the representative of Newbridge, to which such representative responded. Thereafter, Newbridge rendered an oral opinion (which was subsequently confirmed in writing) to the effect that, as of that date and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Newbridge as set forth in its written opinion, (i) the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement was fair, from a financial point of view, to the Inflection Point Unaffiliated Shareholders, and (ii) the Business Combination had an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at that time. The Special Committee continued its discussion after the representative of Newbridge left the meeting. Thereafter, representatives of White & Case provided an overview of the Business Combination Agreement and the other Transaction Documents, including the financing documents. After further discussion, the Special Committee unanimously resolved that the Business Combination, the Business Combination Agreement, and each Transaction Document were in the best interests of Inflection Point, and recommended that the Inflection Point Board approve the Business Combination and the entry into the Business Combination Agreement and each other Transaction Document. In light of the extensive discussions held by the Special Committee and other members of the Inflection Point Board, it was proposed that the board approval be completed via written resolutions in the coming days as definitive agreements were finalized.
On August 11, 2025, by unanimous written resolutions in lieu of a meeting, the Inflection Point Board unanimously (i) approved the Business Combination Agreement and the other Transaction Documents to be entered into by Inflection Point and the transactions contemplated thereby and (ii) determined that the Business Combination is in the best interests of Inflection Point. In approving the Business Combination, the Inflection Point Board also determined that the aggregate fair market value of the proposed Business Combination was at least 80% of the assets held in the Trust Account (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account).
On August 13, 2025, the Business Combination Agreement, the Signing Pre-Funded PIPE Agreements and the Series A SPA were fully executed, with all signatures held in escrow.
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On August 14, 2025, all signatures to the Business Combination Agreement, the Signing Pre-Funded PIPE Agreements and the Series A SPA the Signing Pre-Funded PIPE Agreements and the Series A SPA were released and the Business Combination was announced prior to market open. The PIPE financing was announced concurrently, with a substantial portion pre-funded at the announcement and the remainder structured to fund at close. Inflection Point also announced its plan to rebrand as Inflection Point Acquisition Corp. IV following the transaction announcement.
On September 15, 2025, Inflection Point filed a preliminary proxy statement for an extraordinary general meeting to consider proposals (i) to change its name to Inflection Point Acquisition Corp. IV and (ii) to amend the Cayman Constitutional Documents to allow it to consummate the redemption in connection with the commencement of the procedures to consummate a business combination if the Inflection Point Board determines it is desirable to facilitate the consummation of such business combination (collectively, the “Autumn Shareholder Proposals”). On September 26, 2025, Inflection Point called an extraordinary general meeting for purposes of considering the Autumn Shareholder Proposals for October 21, 2025, filed a definitive proxy statement for the same, and commenced mailing of the same.
In mid-September 2025, Merlin and Inflection Point began preparations to seek additional financing in connection with the Business Combination (the “PIPE Expansion”).
On October 2, 2025, Inflection Point engaged TD Securities to act as a placement agent in connection with the PIPE Expansion.
On October 21, 2025, at an extraordinary general meeting, the Inflection Point Shareholders approved the Autumn Shareholder Proposals. Accordingly, Inflection Point was renamed Inflection Point Acquisition Corp. IV, and the Cayman Constitutional Documents were amended to reflect such change and to allow Inflection Point to consummate the redemption in connection with the commencement of the procedures to consummate a business combination if the Inflection Point Board determines it is desirable to facilitate the consummation of such business combination.
Between October 2, 2025 and November 14, 2025, Inflection Point and Merlin, with the assistance of TD Securities, Cantor and Cohen, engaged in a marketing process for the PIPE Expansion. Between October 30, 2025 and November 11, 2025, draft purchase agreements, the Certificate of Designation and the form of New Merlin Series A Warrant were provided to prospective investors. On November 12, 2025, White & Case provided a draft of Amendment No. 1 to the Initial Series A SPA to the Closing PIPE Investor. On November 14, 2025, White & Case provided a draft of Amendment No. 1 to the Signing Pre-Funded SPA, the Post-Signing Pre-Funded SPA, the associated Pre-Funded Warrant, the Certificate of Designation and the form of New Merlin Series A Warrant to the Pre-Funded Investor party to the Post-Signing Pre-Funded SPA.
Between October 30, 2025 and November 14, 2025, Inflection Point and Merlin negotiated the terms of the PIPE Expansion with the Closing PIPE Investor, the Additional Closing PIPE Investors and the Pre-Funded Investor party to the Post-Signing Pre-Funded SPA. Key items negotiated included: (i) a change to the Certificate of Designation to provide that the protective provisions for the Series A Preferred Stock would remain in place for so long as at least 20% of the shares of Series A Preferred Stock issued as of Closing are outstanding and (ii) the amount of warrant coverage.
On November 12, 2025, Inflection Point formally engaged Cohen as co-placement agent for the PIPE Expansion.
On November 14, 2025, Inflection Point and Merlin formally engaged Cantor as co-placement agent for the PIPE Expansion.
On November 17, 2025, (i) Merlin and one of the Pre-Funded Investors entered into the Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million, an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA, (ii) Inflection Point and Merlin entered into Amendment No. 1 to the Initial Series A SPA, pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible, on the same terms and conditions as the Signing Series A SPA, and (iii) Inflection Point and Merlin also entered into the Additional Series A SPAs with the Additional Closing PIPE Investors, pursuant to which, among other things, the Additional Closing PIPE Investors agreed to purchase, and Inflection Point agreed to sell, an aggregate of 1,666,668 shares of Series A Preferred Stock and Upsized New Merlin Series A Warrants to purchase a number of shares of New Merlin Common Stock equal to 75% of the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible, in a private placement, on substantially the same terms as the Initial Series A SPA, for an aggregate purchase price of $20 million.
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The Special Committee’s and Inflection Point Board Reasons for the Approval of the Business Combination
On August 11, 2025, pursuant to the recommendations of the Special Committee, the Inflection Point Board, by unanimous written resolutions in lieu of a meeting, unanimously (i) approved the Business Combination Agreement and the other Transaction Documents to be entered into by Inflection Point and the Business Combination contemplated thereby and (ii) determined that the Business Combination is in the best interests of Inflection Point. The Inflection Point Board also recommended that the shareholders of Inflection Point approve and adopt the Business Combination Agreement and the transactions contemplated thereby and the other proposals to be presented at the extraordinary general meeting.
In evaluating the Business Combination, and before making these determinations and recommendations, the Inflection Point Board consulted with its management team, legal counsel and other advisors and considered a variety of factors. In light of the complexity of those factors, the Inflection Point Board did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Different individual members of the Inflection Point Board may have given different weight to different factors in their evaluation of the Business Combination. Among those factors, the Inflection Point Board reviewed the results of due diligence conducted by Inflection Point’s management, legal advisors, and third-party consultants, which included:
• Research on the autonomous flight software industry and related autonomous technology industries, which affirmed Inflection Point’s belief that there is ample opportunity for first movers in the industry, specifically within the United States, to solidify competitive positioning and capitalize on significant government funding commitments driven by a focus from the government to allocate resources to critical technologies;
• Review of certain government contracts, including a contract by and between Merlin and United States Special Operations Command (USSOCOM), valued at up to $105 million, to integrate the Merlin Pilot into the C-130J aircraft;
• Review of Merlin’s ongoing projects, including a partnership with Northrop Grumman to test, validate, and refine the Merlin’s system currently implemented on the Model 434 Vanguard aircraft developed by Scale Composites as part of the Beacon™ autonomous testbed; ongoing flight tests conducted in New Zealand to certify takeoff-to-touchdown autonomous capabilities; and a partnership with Honeywell to bring autonomy to a wider variety of aircrafts, including military fleets;
• Review of Merlin’s approved government certifications, including an active autonomy certification program with the U.S. Federal Aviation Administration and the New Zealand Civil Aviation Authority;
• Review of Merlin’s historical financial investments, including Merlin’s raising of approximately $124 million in financing by certain reputable accredited investors, including Baille Gifford, First Round Capital and Snowpoint Ventures, and certain financial forecasts as it relates to Merlin’s government contracts including revenues, margin profiles, capital expenditures, cash flow and other relevant financial and operating metrics. For more information about Merlin’s internal financial projections, see the section titled “Projected Financial Information” below. This review included thorough and robust diligence of Merlin’s near and long-term development of autonomous technology software, in house capital equipment currently owned and planned for purchase, and an understanding of the potential future competitors and competitive landscape. In recommending the Business Combination, the Inflection Point Board acknowledged Merlin’s first mover advantage in a rapidly growing domestic total addressable market, highlighted by Merlin’s existing contract with USSOCOM. The compelling longer-term vision of adapting and integrating the Merlin Pilot across multiple government aircraft platforms was noted as a key competitive advantage;
• Conference calls and in person meetings with Merlin’s management team and representatives regarding operations, company hardware and software, intellectual property, end customer markets, total addressable market and growth prospects, among other customary due diligence matters;
• Findings of third-party commercial due diligence review of Merlin’s operations and business strategy, such as its strategy to pursue an initial contract with the DoD rather than in commercial aviation;
• Review of Merlin’s historical financials and audits, current and targeted government programs and commercial end markets, intellectual property and information technology and certain other legal due diligence; and
• Multiple due diligence trips to Merlin’s facilities in Boston, Massachusetts and Quonset, Rhode Island.
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The prospectus for the IPO states that Inflection Point intended to seek businesses in the TMT sectors, as well as attractive business opportunities within sectors that are being transformed via technology adoption, with emphasis on the following favorable industry and business characteristics, including:
• strong growth prospects;
• high barriers to entry;
• opportunities for consolidation;
• strong recurring revenues;
• attractive margins; and
• the ability to accelerate value creation via continued technological advancement.
Additionally, the prospectus for the IPO states that while Inflection Point intended to utilize a wide lens in anticipating opportunities in sectors undergoing technological change, the following sub-sectors were of particular interest based on the management team’s experience, network and focus:
• Artificial Intelligence | Companies that benefit from the continued development in artificial intelligence, including workforce augmentation, natural language processing, coding, creative AI and technology underpinning autonomous vehicles.
• Business Services | Companies that utilize technological solutions to deliver more efficient solutions across a range of activities, including data processing, customer/technical support and others.
• Digital Infrastructure | Companies that create and manage towers, small cells, fiber optic networks and data centers; which benefit from growing investment in underlying digital advancement.
• Software | Companies that aim to develop and provide software on a license or subscription basis across industries and processes.
• Edtech | Companies that create technologies to facilitate and enhance the learning experience, including applications, hardware, software and online content delivery.
• Financial Services | Companies in the traditional financial services ecosystem that are in the midst of a digital transformation.
• Fintech | Companies that provide more efficient, cheaper and user-friendly financial services to customers or facilitate the infrastructure to provide such services.
• Media | Companies that control the distribution (either broadcasting or streaming) and production of media entertainment, including music, cinema, television, sports and video games.
• Retail/E-Commerce | Companies that enable both individuals and corporates to transact via new channels, including marketplaces, online auctions, travel, payment gateways, aggregators and online ticketing companies.
In particular, the prospectus for Inflection Point’s IPO identified the following high level, non-exclusive investment criteria that Inflection Point would use to screen for and evaluate target businesses. The Inflection Point Board considered these criteria in its evaluation of Merlin:
• Utilizes Inflection Point’s global network of contacts, which provides access to differentiated deal flow and significant deal-sourcing capabilities;
• Has a strong, experienced management team, or provides a platform to assemble an effective management team with a track record of driving growth and profitability;
• Provides a platform for add-on acquisitions, which Inflection Point believes will be an opportunity for the Sponsor and its members and management team to deliver incremental shareholder value post-acquisition;
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• Would benefit from Inflection Point’s Co-Founders’ experience, which can be applied to improve the operations and market position of the target;
• Has a defensible market position, with demonstrated advantages when compared to its competitors and which create barriers to entry against new competitors;
• Has a differentiated or unique product and technology offering with multiple avenues for growth and margin expansion;
• Is at an inflection point, such as requiring additional management expertise, is able to innovate through new operational techniques, or where we believe we can drive improved financial performance;
• Is a fundamentally sound company that is underperforming its potential;
• Generates stable free cash-flow or has the near-term potential to generate sustainable free cash flow;
• Exhibits unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve the company’s growth strategy, that Inflection Point believes has been misevaluated by the marketplace based on its analysis and due diligence review;
• Has a diversified customer base better positioned to endure economic downturns, changes in the industry landscape and evolving customer, supplier and competitor preferences;
• Will offer an attractive risk-adjusted return for our shareholders, potential upside from growth in the target business and an improved capital structure that will be weighed against any identified downside risks; and
• Can benefit from being a publicly traded, is prepared to be a publicly traded company, and can utilize access to broader capital markets.
Further, as a special purpose acquisition company associated with Inflection Point Fund, this acquisition is in line with prior business combinations completed by Inflection Point Fund’s previous special purpose acquisition companies, which consisted of targets working on technologies to be applied in the public sector and are viewed as critical technologies, including:
• USA Rare Earth | U.S.-based company focused on developing a fully integrated, domestic supply chain for rare earth elements, critical minerals, and battery materials. Its strategy includes mining, processing, and manufacturing rare earth magnets and related products used in clean energy, defense, and high-tech industries. The company controls the Round Top rare earth and critical minerals project in Texas, which contains significant deposits of rare earths and other critical materials, positioning it as a key player in reducing U.S. dependence on foreign supply chains.
• Intuitive Machines | U.S.-based space exploration company focused on enabling access, operations, and infrastructure in cislunar space. Founded in 2013, the company designs and builds lunar landers, provides lunar payload delivery services under NASA’s Commercial Lunar Payload Services (CLPS) program, and develops communications, navigation, and data relay systems for lunar missions. The Company also offers orbital services such as rideshare delivery and satellite logistics, as well as space products including mobility systems, power solutions, and precision landing technologies. Revenue is primarily generated through government contracts (notably with NASA), commercial payload delivery, and space infrastructure services. Intuitive Machines successfully landed the Nova-C Odysseus lander on the Moon in 2024 — the first U.S. spacecraft on the lunar surface since Apollo — and continues to build out its lunar operations center and technology capabilities to support NASA’s Artemis program and the emerging lunar economy
As detailed above, the prospectus for the IPO identified the general criteria and guidelines that Inflection Point believed would be important in evaluating prospective target businesses, although Inflection Point indicated that these criteria are not intended to be exhaustive. Any evaluation by Inflection Point relating to the merits of a particular business combination may be based on additional considerations, factors and criteria that our
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management team may deem relevant. Inflection Point may enter into a business combination with a target business that does not meet these criteria and guidelines. The Inflection Point Board considered these criteria in its evaluation of Merlin.
Strong, Experienced Management Team: Inflection Point intended to pursue companies which have strong, experienced management team, or provide a platform to assemble an effective management team with a track record of driving growth and profitability.
Inflection Point believes Merlin satisfies this criterion through the success of its management team in pioneering AI-powered, takeoff-to-touchdown autonomous flight systems and Merlin’s capabilities in both defense and civil markets. Merlin’s founder and CEO, Matt George, CTO Tim Burns and their team of nearly 100 engineers have developed and tested certifiable autonomous systems which have been applied across multiple aircraft types, supported by hundreds of successful test flights in the U.S. and New Zealand. Within the $3 billion total addressable market in defense and civil industries, Merlin’s recent USSOCOM contract provided Inflection Point with confidence in the management team’s ability to lead Merlin in capturing significant market share in both the military and commercial aviation industries. Although Merlin is still in the process of scaling its operations and expanding into additional aircraft platforms, Merlin is the world’s first approved certification basis for AI-enabled autonomy, demonstrating the technical talent of the Merlin management team.
Provides a Platform for Add-On Acquisitions: Inflection Point searched for companies which would provide a platform for add-on acquisitions, which Inflection Point believes would be an opportunity for the Sponsor and its members and Inflection Point’s management team to deliver incremental shareholder value post-acquisition.
Inflection Point believes that Merlin satisfies this criterion. The popularity of AI and autonomous technology amidst growing demand for uncrewed flight capabilities makes Merlin an attractive choice for M&A opportunities, such as its recent partnership with GE Aerospace to pursue autonomy core development. The Inflection Point team is optimistic about opportunities for Merlin to grow its business after the Business Combination by working with other companies which have complementary technologies and capabilities.
Benefit from Inflection Point’s Experience: Inflection Point targeted companies which would benefit from Inflection Point’s management team’s experience to improve its operations and market position.
Inflection Point believes that Merlin satisfies this criterion based on their willingness to consult with Inflection Point’s management team on key strategic decisions including the search process for a long-term CFO of the post-business combination entity and future capital raising strategy.
Defensible Market Position: Inflection Point sought to acquire a company with a defensible market position, with demonstrated advantages when compared to its competitors and which create barriers to entry against new competitors.
Inflection Point believes that Merlin has demonstrated significant potential for a defensible market position with their government contracts, including the production contract with USSOCOM, valued at up to $105 million, in which it was selected as the sole prime to integrate the Merlin Pilot onto the C-130J aircraft. Merlin’s already-established government contracts puts it above its competitors and creates opportunities to integrate its technology onto additional government aircraft models.
Unique Product Offering: Inflection Point searched for targets with a differentiated or unique product and technology offering with multiple avenues for growth and margin expansion.
Merlin holds the world’s first and only (as of the date of the Inflection Point Board’s approval) approved certification basis for AI-enabled, takeoff-to-touchdown onboard autonomy on a commercial aircraft. Its unique product offering has the capacity to significantly cut costs for its customers and has the potential to be implemented in both civil and military aviation. Given the demand in various markets, Inflection Point believes that Merlin’s technology offers significant potential for growth.
Inflection Point: Inflection Point intended to pursue companies that are at an inflection point, such as requiring additional management expertise, are able to innovate through new operational techniques, or where Inflection Point believes its management team can drive improved financial performance.
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Although Merlin is not yet in a position where the profit contribution from existing contracts offsets fixed costs, Inflection Point believes Merlin satisfies this criterion because its extensive flight hours and robust software infrastructure will enable Merlin to capitalize on market opportunities. Through continued development, Merlin could be among the first companies to bring autonomous flight to the defense and commercial aviation industries, which may drive a high return on capital. While Merlin is not currently generating any profits, Merlin’s intention is to self-fund after the successful integration of the Merlin Pilot into the C-130J aircraft. The growth capital provided by the Business Combination may also provide Merlin with the option to further invest in its existing technologies and to continue pursuing certification of the Merlin Pilot in commercial aviation.
Valuation: Inflection Point sought to acquire a company which is fundamentally sound but underperforming its potential, is generating stable free cash-flow or has the near-term potential to generate sustainable free cash flow, and exhibits unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve the company’s growth strategy, that Inflection Point believes has been misevaluated by the marketplace based on its analysis and due diligence review.
Inflection Point believes based on its analysis, due diligence review, and the opinion of Newbrdige, that Merlin has the near-term potential to generate sustainable free cash flow, and exhibits unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve its growth strategy.
Financial Model
Inflection Point reviewed certain of Merlin’s internal financial projections of projected capital requirements, revenue and operating costs, EBITDA and cash flow from the recent USSOCOM contract for each of the years in the 2-year period ending December 31, 2026, as further described under “Projected Financial Information” below. Inflection Point viewed the projected capital needs, projected revenues, EBITDA and cash flows as reasonable. In particular, Merlin forecasted $32 million in revenue in 2026 arising from the contract with USSOCOM. Inflection Point determined that this fact pattern supported its proposed base valuation of $800 million, as this implied a 25x multiple of projected 2026 revenue, which Inflection Point viewed as reasonable based on its review of precedent autonomous technology companies. Based on the Inflection Point Board’s extensive experience evaluating public companies, the Inflection Point Board believed that (i) the multiple reflected an attractive valuation relative to other autonomous technology and specialized technology companies and (ii) the valuation would still be favorable even if actual revenue is materially less than such projection. As projected revenue for 2026 did not take into account potential out-performance by Merlin on the USSOCOM Contract or potential revenue arising from the anticipated contract with the United States Air Force, Inflection Point determined that the proposed valuation of $800 million was appropriate and reasonable.
For more information about Merlin’s internal financial projections, see the section titled “Projected Financial Information” below.
United States Special Operations Command (USSOCOM) Contract
As discussed in more detail elsewhere in this proxy statement/prospectus, the USSOCOM Contract is structured as an Indefinite Delivery/Indefinite Quantity program, such that the Inflection Point Board considers the $800 million valuation to be justified. Given USSOCOM’s reputation as a discerning and technically demanding customer in the U.S. defense ecosystem, Inflection Point viewed the USSOCOM Contract as further evidence of the credibility of Merlin’s valuation. The Board considered that the near-term financial contribution from the USSOCOM Contract is a significant portion of Merlin’s overall projected revenue growth. The contract provides a further scalable channel for future task orders and serves as validation of Merlin’s technology and execution capabilities, thereby potentially providing significant future value to Inflection Point’s shareholders.
Opinion of Newbridge Securities Corporation
The Special Committee received an opinion from Newbridge as to (i) the fairness, as of such date, from a financial point of view, to the Inflection Point Unaffiliated Shareholders of the Total Pre-Money Consideration to be paid by Inflection Point in the Merger pursuant to the Business Combination Agreement, and (ii) whether the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement, which was based
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on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on and scope of the review undertaken by Newbridge, as set forth in such opinion, as more fully described in the subsection “The Business Combination — Opinion of Newbridge Securities Corporation”. A copy of Newbridge’s opinion is attached hereto as Annex F.
Other Alternatives: The Inflection Point Board believes, after a thorough review of other business combination opportunities reasonably available to Inflection Point, that the proposed Business Combination represents the best potential initial business combination reasonably available to Inflection Point based upon the process utilized to evaluate and assess other potential acquisition targets.
Pre-Funded Convertible Note Purchase Agreement and Series A SPA
Merlin’s management and Inflection Point pursued the Pre-Funded Note Investment and the Closing PIPE Investment in order to provide additional funds for the post-business combination entity. The Inflection Point Board viewed the substantial investments and/or investment commitments pursuant to the Signing Pre-Funded PIPE Agreements and the Initial Series A SPA as significant support from investors for the valuation of Merlin and the opportunities represented by the Business Combination. The Inflection Point Board also considered that these financings provide for additional capital for Merlin’s execution of its business plan both before and after the Business Combination is completed better positioning Merlin to deliver shareholder value.
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements with Pre-Funded Investors. Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants, substantially concurrently with the execution and delivery of the Business Combination Agreement.
Also on August 13, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into the Series A SPA. Pursuant to the Series A SPA, the Closing PIPE Investor has agreed, among other things, to purchase, at Closing, 4,901,961 shares of Series A Preferred Stock, a New Merlin Series A Preferred Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible, for an aggregate purchase price of $50,000,000.
Merlin’s Stockholders’ Retained Interest: Merlin’s Stockholders are rolling 100% of their equity, investing in additional equity in the transaction, and will own an approximately 63.53% stake in New Merlin (assuming the No Redemption Scenario and calculated based upon certain assumptions as described in the section of this proxy statement/prospectus entitled “Beneficial Ownership of Securities”), demonstrating their ongoing equity commitment to the combined company.
In the course of their deliberations, the Special Committee and the Inflection Point 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):
Limited Customer Base: Contrary to Inflection Point’s aim to effect a Business Combination with a target business with a diversified customer base, Merlin is heavily reliant on its contracts with the U.S. federal government prior to its technology being accepted and used in commercial aviation, if ever. Although a positive business relationship with a customer such as the DoD provides Merlin with a significant competitive advantage in the defense industry, its undiversified customer base may make it less resilient to economic downturns or evolving preferences. As such, if Merlin is unable to maintain its contracts with the DoD, Merlin’s business and financial condition could be adversely affected.
Technological Risk: Merlin is highly reliant on the success of its proprietary AI Technologies. Aircraft operators use Merlin Pilot service to autonomously aviate, navigate and communicate with air traffic control and aircraft and other activities that may be mission or safety critical. If errors or defects in Merlin’s technology impairs the operation of an aircraft or results in damage to an aircraft, loss of or damage to property, serious injury or death could result. Any of these events could expose Merlin to claims and significant liability, result in revocation of regulatory approvals, adversely affect its financial condition and results of operations, and imperil the ongoing operation of its business.
Regulatory Risk: Merlin is reliant on aviation regulations and certification from regulatory authorities such as the Federal Aviation Authority (FAA) and/or New Zealand Civil Aviation Authority (CAA) and Military Airworthiness authorities to certify their technology on aircraft. If Merlin fails to obtain any of the required authorizations or
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certificates, or do so in a timely manner, or any of these authorizations or certificates are modified, suspended or revoked after it obtains them, Merlin may be unable to launch its commercial service or do so on the timelines it projects and may have an adverse impact on its business, financial condition and results of operations.
Benefits Not Achieved: The risk that the potential benefits of the Business Combination or anticipated performance of Merlin OpCo may not be fully achieved, or may not be achieved within the expected timeframe and that the results of operations of New Merlin’s business may differ materially from the projections prepared by Merlin OpCo and reviewed by the Inflection Point Board.
Liquidation of Inflection Point: The risks and costs to Inflection Point if the Business Combination is not completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could result in Inflection Point being unable to effect an initial business combination within the required timeframe under the Cayman Constitutional Documents and force Inflection Point to liquidate and the Inflection Point Rights to expire and become worthless.
Shareholder Vote: The risk that the shareholders of Inflection Point may fail to approve the Business Combination.
Closing Conditions: The fact that completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within the parties’ control.
Litigation: The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination.
Fees and Expenses: The fees and expenses associated with completing the Business Combination.
Interests of Certain Persons: The Special Committee and the Inflection Point Board were aware that the Sponsor, Inflection Point Fund, and Inflection Point’s officers and directors have interests in the Business Combination that are in addition to, and that may be different from, the interests of unaffiliated Inflection Point shareholders. For instance, the Sponsor and Inflection Point Fund 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. Such interests are described in more detail under the caption “Proposal No. 1 — The Business Combination Proposal — Interests of the Sponsor, Inflection Point Fund, and Inflection Point’s Directors and Officers in the Business Combination.” The Inflection Point Board took several steps to mitigate these potential conflicts of interest, including requiring Special Committee approval of the Business Combination as a condition precedent to the Inflection Point Board’s approval of the Business Combination. The Special Committee also engaged Newbridge to render an opinion on the fairness to Inflection Point’s unaffiliated shareholders of the consideration to be paid by Inflection Point to acquire Merlin.
Public Shareholders Will Have a Minority Ownership Interest in New Merlin: The fact that current Inflection Point shareholders will experience immediate dilution as a consequence of the issuance of shares of New Merlin as consideration in the Business Combination and, as a result, such shareholders will collectively own a minority interest in New Merlin after the Closing. Having a minority ownership interest may reduce the influence that current shareholders of Inflection Point have on the management of New Merlin.
Competition. The fact that there are a number of companies competing in the autonomous technologies space and the possibility that Merlin may be unable to enter into additional contracts to implement the Merlin Pilot, or the possibility that one of its competitors may be able to develop new technologies or business strategies that may negatively impact Merlin’s growth prospects.
Redemption. The risks and costs to Inflection Point if the Business Combination is not completed, including the risk of diverting management focus and resources from other initial business combination opportunities, which could result in Inflection Point being unable to effect an initial business combination by within the time set forth in the Cayman Constitutional Documents forcing Inflection Point to redeem the Public Shares for a pro rata portion of the funds held in the Trust Account, subject to its obligations under Cayman Islands law to provide for claims of creditors and the requirement of other applicable law, and the Inflection Point Rights to expire and become worthless.
Public Company Status. The requirements of being a public company, including compliance with the SEC’s requirements regarding internal control over financial reporting, may strain New Merlin’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses that will result from the Business Combination may be greater than New Merlin anticipates.
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Other Risks: The various other risks associated with the Business Combination, Inflection Point’s business and the businesses of Merlin described in the “Risk Factors” section of this proxy statement/prospectus.
In addition to considering the factors described above, the Inflection Point Board also recognized and considered that the Sponsor, its affiliates and the officers and directors of Inflection Point have interests in the Business Combination that are in addition to, and that may be different from, the interests of the Public Shareholders resulting in potential conflicts of interests, including those described elsewhere in this section and in the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination”. The Inflection Point Board reviewed and considered the foregoing interests during the negotiation of the Business Combination and in evaluating and unanimously approving the Business Combination Agreement and the transactions contemplated therein.
The Inflection Point Board, based on the recommendation of the Special Committee, concluded that the potential benefits that they expected Inflection Point and its shareholders to achieve as a result of the Business Combination outweighed the potential negative factors associated with the Business Combination. Accordingly, the Inflection Point Board unanimously determined that the Business Combination Agreement and the Business Combination were in the best interests of the Company and its shareholders.
Satisfaction of the 80% Test
It is a requirement under the Cayman Constitutional Documents and Nasdaq listing requirements that the target business acquired in Inflection Point’s initial business combination have a fair market value equal to at least 80% of the value of the assets held in the Trust Account (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the execution of a definitive agreement for Inflection Point’s initial business combination. As of August 13, 2025, the date of the execution of the Business Combination Agreement, the balance of funds held in the Trust Account was at least $258.3 million, and 80% thereof represents approximately $206.6 million. The Inflection Point Board considered all of the factors described above and the fact that the aggregate consideration for Inflection Point was the result of arm’s length negotiations with Merlin. As a result, the Inflection Point Board concluded that the fair market value of the business acquired was in excess of 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). In light of the financial background and experience of the members of Inflection Point’s management team and the Inflection Point Board, the Inflection Point Board believes that the members of the management team and the Inflection Point Board are qualified to determine whether the Business Combination meets the 80% test.
Interests of Certain Inflection Point Persons in the Business Combination
When you consider the recommendation of the Inflection Point Board in favor of approval of the Business Combination Proposal and the other Shareholder Proposals included herein, you should keep in mind that the Sponsor and Inflection Point’s directors and officers have interests in such proposals that are different from, in addition to and/or in conflict with, those of the Inflection Point shareholders generally. Further, Inflection Point’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 “Other Information Related to Inflection Point — 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 Inflection Point 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 Shareholder Proposals presented at the extraordinary general meeting, including the Business Combination Proposal. Inflection Point shareholders should take these interests into account in deciding whether to approve the Shareholder Proposals presented at the extraordinary general meeting, including the Business Combination Proposal. These interests include, among other things:
• Our Sponsor purchased 7,187,500 Founder Shares for $25,000, or approximately $0.004 per share, in a private placement prior to the consummation of the IPO. On October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited, resulting in the Sponsor holding 8,333,333 Founder Shares. The Sponsor is controlled by Michel Combes and
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Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 5,266,667 Founder Shares, or approximately 60.1%, of the Founder Shares held by the Sponsor. Michael Blitzer, our President, Chief Executive Officer and director, and Kevin Shannon, our Chief Operating Officer, are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Each director and officer of Inflection Point has economic interests in the Founder Shares held by the Sponsor. No other person has a direct or indirect material interest in the Sponsor. Such 8,333,333 shares of New Merlin Common Stock that the Sponsor and its permitted transferees will receive upon conversion of such Founder Shares in the Business Combination, if unrestricted and freely tradable, would have had an aggregate market value of approximately $96.2 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Our Sponsor purchased 425,000 Private Placement Units for $4,250,000, or $10.00 per Private Placement Unit, in a private placement that closed simultaneously with the IPO. The Sponsor is controlled by Michel Combes and Andrew Gundlach, the latter of which serves as Chairman of the Inflection Point Board. Inflection Point Fund has an economic interest in 425,000, or 100% of the Private Placement Units held by the Sponsor. Mr. Blitzer and Mr. Shannon are affiliates of Inflection Point Fund and have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Mr. Gundlach and/or his affiliates also have economic interests in Inflection Point Fund, including performance allocations, management fees and as limited partners. Following the Business Combination, the 467,500 shares of New Merlin Common Stock that the Sponsor will receive upon conversion of such Private Placement Units, if unrestricted and freely tradable, would have had an aggregate market value of approximately $5.4 million based on the closing price of $11.55 per Inflection Point Class A Share on Nasdaq on January 8, 2026, the most recent practicable date prior to the date of this proxy statement/prospectus. However, given such shares of New Merlin Common Stock will be subject to lock-up restrictions, we believe such shares will have less value.
• Given the differential in the purchase price that the Sponsor paid for the Founder Shares as compared to the price of the Inflection Point Class A Shares included in the Inflection Point Units sold in the IPO, the Sponsor may earn a positive rate of return on its investment even if the shares of New Merlin Common Stock trade below $10.00 per share and the Public Shareholders experience a negative rate of return following the Closing. Accordingly, the economic interests of the Sponsor diverge from the economic interests of Public Shareholders because the Sponsor 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.
• Our Sponsor, and therefore Inflection Point Fund, will lose its entire investment in us if we do not complete a business combination by November 4, 2026 (or if such date is extended at a duly called meeting of the Inflection Point shareholders, such later date). If we do not consummate a business combination by such date, as promptly as reasonably possible but not more than ten business days thereafter, we will 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 the claims of creditors and the requirements of other applicable law. In such event, the Inflection Point Rights may be worthless. In such event, the 8,758,333 Inflection Point Ordinary Shares owned by our Sponsor would be worthless because following the redemption of Public Shares, we would likely have few, if any, net assets and because the Sponsor has agreed to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete a business combination within the required period. Additionally, in such event, the 425,000 Inflection Point Rights underlying the Private Placement Units that the Sponsor paid $4,250,000 to purchase will expire and become worthless.
• Inflection Point Fund, an accredited investor that is an affiliate of Inflection Point, has an economic interest in 5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. In exchange for the Pre-Funded Convertible Note and Pre-Funded Warrant it purchased for $15.0 million, Inflection Point Fund will also receive at the Closing, (i) a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (a) the total outstanding principal and outstanding accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by (b) $12.00, as may be adjusted pursuant to the terms and
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conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date) and (ii) a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock.
• Inflection Point’s Sponsor, officers and directors, and Inflection Point Fund, have agreed not to redeem any of the Founder Shares or Inflection Point Ordinary Shares held by them in connection with a shareholder vote to approve the Business Combination.
• If the Trust Account is liquidated, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Share, or such lesser amount per Public Share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account.
• Inflection Point’s existing officers and directors will be eligible for continued indemnification and continued coverage under a directors’ and officers’ liability insurance policy for a period of six (6) years after the Business Combination.
• The Sponsor and its members (present and former), managers and affiliates and their respective present and former officers and directors (each, a “Sponsor Indemnitee”) will be eligible for continued indemnification for any Sponsor Indemnitee’s activities in connection with the affairs of Inflection Point.
• The continuation of [•], and [•], as directors of the New Merlin Board following the Closing. As such, in the future they may receive any cash fees, stock options or stock awards that the New Merlin Board determines to pay to its directors.
• In connection with the Closing, our Sponsor, officers and directors would be entitled to the repayment of any outstanding working capital loan and advances that have been made to Inflection Point. In order to finance transaction costs in connection with a business combination, the Sponsor or Inflection Point Fund or certain of Inflection Point’s officers or directors may, but are not obligated to, loan Inflection Point Working Capital Loans. In the event that a business combination does not close, Inflection Point may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $2,500,000 of such Working Capital Loans may be convertible into private placement units at $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. As of the date of this proxy statement/prospectus, no such Working Capital Loans are outstanding.
• Upon the Closing, subject to the terms and conditions of the Business Combination Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Inflection Point from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. As of the date of this proxy statement/prospectus, there are no out-of-pocket expenses to be reimbursed.
• Pursuant to the Registration Rights Agreement, Inflection Point’s officers and directors, and the Sponsor and its members will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the New Merlin Common Stock held by such parties following the consummation of 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 which were not presented to Inflection Point, and therefore
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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 Inflection Point — Conflicts of Interest.”
Compensation Received by the Sponsor, its Affiliates and Inflection Point Directors and Executive Officers
Set forth below is a summary of the amount of compensation and securities received or to be received by the Sponsor, its affiliates and Inflection Point’s directors, officers and their affiliates in connection with the Business Combination and related transactions.
|
Entity/Individual |
Amount of Compensation Received or |
Consideration |
||
|
Sponsor |
8,333,333 shares of New Merlin Common Stock upon conversion of 8,333,333 Inflection Point Class A Shares. |
$25,000. |
||
|
467,500 shares of New Merlin Common Stock upon the conversion of the Inflection Point Class A Shares and the Inflection Point Rights underlying the 425,000 Private Placement Units. |
$4,250,000. |
|||
|
Inflection Point Fund |
Number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share of (i) the total outstanding principal and accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date), and a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock. |
Exchange of Pre-Funded Convertible Note and a Pre-Funded Warrant, which Pre-Funded Convertible Note and Pre-Funded Warrant were acquired for an aggregate purchase price of $15 million. |
||
|
5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. |
$4,250,000. |
|||
|
Sponsor, Officers and Directors |
Consulting, success or finder fees in connection with the consummation of our initial business combination. |
Services in connection with identifying, investigating and completing an initial business combination. |
||
|
Salary or fee in an amount that constitutes a market standard for comparable transactions in connection with our initial business combination. |
Services in connection with identifying, investigating and completing an initial business combination. |
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Benefits and Detriments of the Business Combination
The following describe the potential benefits and detriments to certain groups of stakeholders in connection with the Business Combination.
• Inflection Point:
• Sponsor:
• Inflection Point Fund: Inflection Point Fund has an economic interest in 5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. Inflection Point Fund expects to receive substantial consideration in the Business Combination, including (a) a Pre-Funded Convertible Note entitling Inflection Point Fund to receive such number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal of $17,647,058.83 plus any accrued and unpaid interest on the Pre-Funded Convertible Note, divided by (ii) $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026; such number of shares of Series A Preferred Stock may increase prior
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to Closing due to additional accrued interest after such date), and (b) a Pre-Funded Warrant to purchase 1,720,589 New Merlin Common Stock. Initially, the average price paid or to be paid by Inflection Point Fund for the Pre-Funded Convertible Note and Pre-Funded Warrant is greater than the initial offering price of the Inflection Point Units. However, the applicable conversion prices and exercise prices of the Pre-Funded Convertible Note, Pre-Funded Warrant and Series A Preferred Stock are subject to anti-dilution and other downward adjustments. Such downward adjustments may cause the average price paid or to be paid by Inflection Point Fund per share of New Merlin Common Stock to be reduced below, and in some cases, substantially below, the initial offering price of the Inflection Point Unis. If this were to occur, it would result in material dilution to the non-redeeming Public Shareholders of Inflection Point and may allow Inflection point Fund to make a substantial profit on its investment even at a time when Public Shareholders have lost significant value. For more information, see “— Compensation Received by the Sponsor, its Affiliates and Inflection Point Directors and Executive Officers”.
• Unaffiliated Inflection Point Public Shareholders:
Opinion of Newbridge Securities Corporation
Inflection Point retained Newbridge to act as its financial advisor in connection with entering into the Business Combination Agreement. Newbridge, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Inflection Point selected Newbridge to act as its financial advisor in connection with entering into the Business Combination Agreement on the basis of Newbridge’s experience in similar transactions and its reputation in the investment community.
On August 8, 2025, at a meeting of the Board held to evaluate the Business Combination Agreement, Newbridge delivered to the Special Committee a presentation, and was confirmed by delivery of a written opinion, dated August 8, 2025, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its written opinion, each of (i) the Total Pre-Money Consideration to be paid by Inflection Point in the Business Combination is fair, from a financial point of view, to the Inflection Point Unaffiliated Shareholders (defined as Inflection Point shareholders other than (a) the Sponsor, (b) Inflection Point Fund, (c) officers, directors or affiliates of Inflection Point, the Sponsor or Inflection Point, and (d) Public Shareholders who elect to redeem their shares prior to or in connection with the Business Combination), and (ii) the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held in the Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement.
The full text of Newbridge’s written opinion to the Inflection Point Board, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex F hereto and is incorporated by reference herein in its entirety. The following summary of Newbridge’s opinion is qualified in its entirety by reference to the full text of the opinion. Capitalized terms used but not defined herein shall have the meanings set forth in the full text of the opinion. Newbridge delivered its opinion to the Inflection Point Board for the benefit and use of the Inflection Point Board (in its capacity as
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such) in connection with and for the purposes of its evaluation of the Business Combination Agreement from a financial point of view. Newbridge’s opinion also does not address the relative merits of entering the Business Combination Agreement as compared to any alternative business strategies or transactions that might exist for Inflection Point, or the underlying business decision of Inflection Point whether to proceed with those business strategies or transactions.
In connection with rendering its opinion, Newbridge, among other things:
• considered our assessment of general economic, market and financial conditions as well as our experience in connection with similar transactions, and business and securities valuations generally;
• reviewed various drafts of the Business Combination Agreement, materially the same as the final Business Combination Agreement;
• reviewed Inflection Point’s publicly available historical financial results, as well as certain publicly available information concerning the trading of, and the trading market for, the ordinary shares of Inflection Point since its initial public offering;
• reviewed publicly available financial information of Inflection Point filed with the SEC, including its Annual Reports on Form 10-K (“Annual Reports”) and Quarterly Reports on Form 10-Q (“Quarterly Reports”), and Current Reports on Form 8-K (“Current Reports”) filed between November 1, 2024 and August 7, 2025;
• conducted discussions with Inflection Point’s management team to better understand Inflection Point’s recent business history, and near-term financials;
• reviewed the draft investor presentation, dated August 2025, describing Merlin’s history, business and operations, strategy and the Business Combination;
• conducted discussions with Merlin’s management team to better understand Merlin’s recent business history;
• reviewed Merlin’s unaudited financial information for FY-2024;
• reviewed Merlin’s financial projections for 2025 and 2026 and drivers of growth;
• performed a Public Company Comparable analysis of similar companies to Merlin, that included variables such as companies trading on a U.S. stock exchange, and have businesses in the “Defense — Advanced Aircraft”, “Military Defense Software”, and “Autonomous Software” sectors to attain 2026E Enterprise Value/Revenue multiples; and
• performed an M&A transaction comparable analysis of similar companies to MLI that operate globally, and operate in the “Autonomous Hardware sector, to derive certain implied historical Enterprise Value/Revenue multiples.
In conducting its review and arriving at its opinion, Newbridge did not independently verify any of the foregoing information and Newbridge assumed and relied upon such information being accurate and complete in all material respects, and Newbridge further relied upon the assurances of management teams of both Inflection Point and Merlin that they are not aware of any facts that would make any of the information reviewed by Newbridge inaccurate, incomplete or misleading in any material respect. In addition, Newbridge has not assumed any responsibility for any independent valuation or appraisal of the assets or liabilities, including any ongoing litigation and administrative investigations, if any, of Merlin, nor has Newbridge been furnished with any such valuation or appraisal. In addition, Newbridge has not assumed any obligation to conduct, nor has it conducted any physical inspection of the properties or facilities of Merlin.
The issuance of Newbridge’s opinion was approved by an authorized internal committee of Newbridge. Newbridge’s opinion is necessarily based on economic, market and other conditions as they exist and can be evaluated on, and the information made available to it on, the date thereof. Newbridge expressed no opinion as to the underlying valuation, future performance or long-term viability of Inflection Point and its successors. Further, Newbridge expressed no opinion as to what the value of the shares of Inflection Point Ordinary Shares actually will be when the Business Combination is consummated or the prices at which shares of Inflection Point Ordinary Shares will trade at any time. It should be understood that, although subsequent developments may affect Newbridge’s opinion, Newbridge does not have any obligation to update, revise or reaffirm its opinion and has expressly disclaimed any responsibility to do so.
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The following represents a summary of the material financial analyses reviewed by the Inflection Point Board and performed by Newbridge in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by Newbridge, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by Newbridge. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Newbridge.
Financial Analyses. Newbridge employed various methods to analyze the range of Implied Equity Values of Merlin.
Comparable Public Company Analysis
To calculate the implied equity value of the operating business, Newbridge first obtained the 2026E Enterprise Value/Revenue multiples from a total of fifteen (15) comparable public companies, in three different but related industry sub-sectors, identified by Newbridge that most resembled Merlin’s business, and applied to Merlin’s 2026 Revenue estimates.
The public company comparables were selected using the following criteria: (i) listed on a major stock exchange in the United States (ii) operates in the “Defense — Advanced Aircraft”, “Military Defense Software”, or “Autonomous Software” sectors, (iii) has a commercialized product and revenue over last twelve months, and (iv) had forecasted Sales data for 2026.
• The average 2026E EV/Revenue multiple for the “Defense — Advanced Aircraft” sector was 8.6x.
• The average 2026E EV/Revenue multiple for the “Military Defense Software” sector was 30.7x.
• The average 2026E EV/Revenue multiple for the “Autonomous Sector” was 45.6x.
The average of these sector multiples (28.3x) was then multiplied by Merlin’s 2026E Revenue estimate of $32.0 million, to derive an Enterprise Value of $905.6 million.
The Net Debt (of $10.5 million) was subtracted (+22.5 million in cash and -$33.0 million in Debt) from the Enterprise Value to obtain an Implied Equity Value using this analysis of $895.1 million.
The table below summarizes certain observed historical and projected financial performance and trading multiples of the selected public companies were sourced from S&P Capital IQ data as of August 8, 2025.
|
Comparable Public |
8/8/2025 |
Stock |
Balance Sheet |
Income |
Valuation |
|||||||||||
|
Company Name |
Stock Symbol |
Market |
Enterprise |
Revenue(1) |
EV/Revenue |
|||||||||||
|
Rocket Lab Corporation |
NasdaqCM:RKLB |
$ |
44.7 |
$ |
21,422.4 |
$ |
21,232.4 |
$ |
891.1 |
23.4x |
||||||
|
AeroVironment, Inc. |
NasdaqGS:AVAV |
$ |
247.5 |
$ |
12,300.6 |
$ |
12,324.1 |
$ |
2,005.1 |
6.4x |
||||||
|
Kratos Defense & Security Solutions, Inc. |
NasdaqGS:KTOS |
$ |
63.9 |
$ |
10,782.6 |
$ |
10,288.3 |
$ |
1,548.1 |
6.2x |
||||||
|
Redwire Corporation |
NYSE:RDW |
$ |
9.0 |
$ |
1,294.9 |
$ |
1,602.7 |
$ |
583.3 |
2.8x |
||||||
|
Intuitive Machines, Inc. |
NasdaqGM:LUNR |
$ |
9.8 |
$ |
1,155.8 |
$ |
1,520.3 |
$ |
365.1 |
4.2x |
||||||
|
Defense – Advanced Aircraft |
|
|
|
|
AVERAGE |
8.6x |
||||||||||
|
Palantir Technologies Inc. |
NasdaqGS:PLTR |
$ |
187.0 |
$ |
443,533.1 |
$ |
437,867.2 |
$ |
5,607.4 |
76.5x |
||||||
|
CrowdStrike Holdings, Inc. |
NasdaqGS:CRWD |
$ |
424.5 |
$ |
105,803.4 |
$ |
102,014.7 |
$ |
4,785.4 |
21.3x |
||||||
|
Snowflake Inc. |
NYSE:SNOW |
$ |
191.7 |
$ |
63,972.2 |
$ |
62,756.2 |
$ |
4,528.8 |
14.9x |
||||||
|
BigBear.ai Holdings, Inc. |
NYSE:BBAI |
$ |
7.1 |
$ |
2,079.1 |
$ |
2,082.7 |
$ |
189.7 |
10.2x |
||||||
|
Military/Defense – Software |
|
|
|
|
AVERAGE |
30.7x |
||||||||||
|
Tesla, Inc. |
NasdaqGS:TSLA |
$ |
329.7 |
$ |
1,063,269.2 |
$ |
1,040,379.2 |
$ |
110,752.3 |
9.2x |
||||||
|
Mobileye Global Inc. |
NasdaqGS:MBLY |
$ |
13.6 |
$ |
11,000.3 |
$ |
9,347.3 |
$ |
2,023.0 |
4.8x |
||||||
|
Aurora Innovation, Inc. |
NasdaqGS:AUR |
$ |
6.2 |
$ |
11,367.2 |
$ |
10,169.2 |
$ |
67.1 |
152.7x |
||||||
|
Pony AI Inc. |
NasdaqGS:PONY |
$ |
14.7 |
$ |
5,222.8 |
$ |
4,622.4 |
$ |
110.1 |
42.7x |
||||||
|
Ares Acquisition Corporation II |
NYSE:AACT |
$ |
11.4 |
$ |
3,249.0 |
$ |
2,639.0 |
$ |
45.8 |
57.6x |
||||||
|
WeRide Inc. |
NasdaqGM:WRD |
$ |
9.2 |
$ |
2,614.8 |
$ |
1,830.6 |
$ |
276.0 |
6.6x |
||||||
|
Self-Driving/Autonomous |
|
|
|
|
AVERAGE |
45.6x |
||||||||||
|
Source: S&P Capital IQ (as of August 7th, 2025) |
|
|
|
|
||||||||||||
|
|
|
28.3x |
|
|
||||||||||||
____________
(1) In 1,000s of USD
131
Table of Contents
Precedent Transaction Company Analysis
Newbridge analyzed the last ~7 years (since March 2018) of M&A transaction data in the “Autonomous Hardware” sector to find similar transactions where the targets being acquired most resembled MLI’s business. The universe of transactions where there were similarities to MLI’s business, and where financial data was recorded for the transaction value was generally limited, as is usually the case versus Public Comparables.
The criteria used for the selected transactions were those in which the targets most resembled the MLI transaction, and included (i) targets that were in the “Autonomous Hardware” sector, (ii) no geographical limitations to where the targets had corporate headquarters, (iii) transactions wherein the EV/Revenue multiple was known.
The EV/Revenue multiple for the “Autonomous Hardware” sector was 29.1x and that was then multiplied by MLI’s 2026E Revenue estimate of $32.0 million, to derive an Enterprise Value of $931.2 million.
The Net Debt (of $10.5 million) was added (+22.5 million in cash and -$33.0 million in Debt) to the Enterprise Value to obtain an Implied Equity Value using this analysis of $920.7 million.
|
M&A Comparables Analysis (2018 – Present) | Industry: Autonomous Hardware |
|||||||||||
|
M&A |
Target/Issuer |
Transaction |
Buyers/Investors |
Implied |
Geographic Region |
||||||
|
3/13/2018 |
Paslin Digital Technology |
$ |
150.80 |
Wanfeng Jinyuan |
12.0x |
China |
|||||
|
12/24/2019 |
SuperRobotics Holdings |
$ |
7.40 |
— |
38.9x |
Asia/Pacific |
|||||
|
8/9/2021 |
Fetch Robotics, Inc. |
$ |
290.00 |
Zebra Technologies Corp. (NasdaqGS:ZBRA) |
30.5x |
US & Canada |
|||||
|
2/24/2022 |
ParaZero Technologies Ltd. |
$ |
10.60 |
Ariel Dor A.D. |
14.6x |
US/Israel/Canada/Europe |
|||||
|
3/15/2023 |
Rainbow Robotics Co. |
$ |
21.30 |
Samsung Electronics Co. |
39.6x |
Asia/Pacific |
|||||
|
5/13/2024 |
Dhaksha Unmanned Systems |
$ |
18.00 |
Coromandel Technology Limited |
46.2x |
India |
|||||
|
7/18/2024 |
Astra Space, Inc. |
$ |
86.90 |
— |
22.1x |
US & Canada |
|||||
|
Source: S&P Capital IQ (as of August 7th, 2025) |
|
Average |
29.1x |
||||||||
____________
(1) Millions of USD
Miscellaneous
The discussion set forth above is a summary of the material financial analyses presented by Newbridge to the Inflection Point Board in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Newbridge believes that its analyses summarized above must be considered as a whole. Newbridge further believes that selecting portions of its analyses and the factors considered, or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Newbridge’s analyses and opinion.
The estimates of the future performance of Inflection Point in or underlying Newbridge’s analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by Newbridge’s analyses. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the valuations resulting from, the analyses described above are inherently subject to substantial uncertainty and should not be taken to be Newbridge’s view of the actual value of Inflection Point Ordinary Shares.
Conclusion
The values derived from the different analyses that Newbridge used show a range between $895.5 million to $917.5 million, with a midpoint of those two valuation datapoints of $906.5 million. The Total Pre-Money Consideration to be received by the shareholders of MLI of $800.0 million is below the valuation range of the Analyses.
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Table of Contents
Based upon and subject to the foregoing, it is our Opinion that as of the date of August 8, 2025 (i) the Total Pre-Money Consideration to be paid by Inflection Point in the Business Combination is fair, from a financial point of view, to the Inflection Point Unaffiliated Shareholders and (ii) the Business Combination has an aggregate fair market value of at least eighty percent (80.0%) of the value of the assets held by Inflection Point in its Trust Account for the benefit of the Public Shareholders (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the Business Combination Agreement
The type and amount of consideration payable in the Business Combination Agreement was determined through arm’s-length negotiations between Inflection Point and Merlin, and was unanimously approved by the Inflection Point Board. The decision to enter into the Business Combination Agreement was solely that of the Inflection Point Board. As described above, Newbridge’s opinion and analyses were only one of many factors considered by the Inflection Point Board in its evaluation of entering into the Business Combination Agreement and should not be viewed as determinative of the views of the Inflection Point Board or Merlin’s management team with respect to entering into the Business Combination Agreement.
Fees and Expenses
As compensation for Newbridge’s services in connection with the rendering of its Opinion to the Board, BACQ agreed to pay Newbridge a fee of $75,000. $10,000 of the fee was paid as a retainer, $55,000 was paid upon delivery of the Opinion, and $10,000 was paid upon the initial filing of the Statement. No portion of Newbridge’s fee is refundable or contingent upon the conclusion reached in the Opinion.
Projected Financial Information
In connection with Inflection Point’s consideration of the potential Business Combination, Merlin provided its internally-derived forecasts for its operations to Inflection Point for use as a component of their overall evaluation of Merlin. Those forecasts included certain performance metrics for 2025 and 2026 (the “Projections”). The Projections are included in this proxy statement/prospectus because they were provided to the Inflection Point Board for its evaluation of the Business Combination.
The Projections are included in this proxy statement/prospectus solely to provide Inflection Point’s shareholders access to information made available in connection with the Inflection Point Board’s consideration of the Business Combination. The Projections should not be viewed as public guidance. Furthermore, the Projections do not take into account any circumstances or events occurring after the date on which the Projections were prepared, which was July 2025.
The Projections were prepared in good faith by Merlin’s management team and are based on Merlin management’s belief that the estimates and assumptions with respect to the expected future financial performance of Merlin were reasonable at the time the Projections were prepared and such Projections speak only as of that time. Merlin has advised Inflection Point that, as of January 14, 2026, such projections continue to represent the good-faith views of Merlin’s management and board of directors regarding Merlin’s anticipated future performance. The Projections do not take into account the costs of consummating the Business Combination and other effects on Inflection Point. The Projections do not include the expenses that have been or may be incurred by Merlin or Inflection Point in preparation for or in connection with the Business Combination, or the effect on Merlin of any business or strategic decision or action that will or may be taken by the combined company as a result of the Closing.
The Projections reflect numerous estimates and assumptions including with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Merlin’s business, all of which are difficult to predict and many of which are beyond Merlin’s and Inflection Point’s control and are subject to significant economic, competitive, and other uncertainties. As a result, there can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than the Projections. There undoubtedly will be differences between actual and projected results, and the differences may be material. The risk that these uncertainties and contingencies could cause the assumptions to fail to be reflective of actual results is further increased by the length of time over which these assumptions apply. Since the Projections cover multiple years, such information by its nature becomes less predictive with each successive year. These Projections are subjective in many respects and thus are susceptible to multiple interpretations and are subject to periodic changes based on actual experience, events and business developments, and changes in Merlin’s capital requirements and net working capital needs.
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Table of Contents
The disclosure of these financial projections should not be regarded as an indication that Merlin’s or Inflection Point’s boards of directors, or their respective affiliates, advisors or other representatives considered, or now consider, such financial projections necessarily to be predictive of actual future results or to support or fail to support any decision with respect to the Business Combination. Multiple unknown factors, as well as the known factors described herein could cause the forecasts or the underlying assumptions to be inaccurate. As a result, the Projections may not be realized, and actual results may significantly differ from the Projections. The Projections are forward-looking statements that are inherently subject to significant uncertainties and contingencies, many of which are beyond Merlin’s and Inflection Point’s control. The various risks and uncertainties include those set forth in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Merlin” and “Cautionary Note Regarding Forward-Looking Statements”
The Projections were not prepared with a view toward public disclosure or toward complying with U.S. GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The Projections were prepared by Merlin’s management in connection with the Business Combination and not for the purpose of providing such Projections publicly or at any other time. Neither the independent registered public accounting firms of Merlin or Inflection Point nor any other registered public accounting firms, have compiled, examined or performed any procedures with respect to the Projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or their accuracy or achievability, and the independent registered public accounting firms of Merlin and Inflection Point assume no responsibility for, and disclaim any association with, the Projections. The report of HORNE LLP (now BDO USA, P.C.) included in the financial statements in this proxy statement/prospectus relates to the historical financial statements of Merlin. It does not extend to the Projections and should not be read to do so.
Furthermore, the Projections do not take into account any circumstances or events occurring after the date they were prepared. Nonetheless, a summary of the Projections is provided in this proxy statement/prospectus because the Projections were made available to Inflection Point. The inclusion of the Projections in this proxy statement/prospectus should not be regarded as an indication that Inflection Point, the Inflection Point Board, or their respective affiliates, advisors or other representatives considered, or now considers, such Projections necessarily to be predictive of actual future results or to support or fail to support your decision whether to vote for or against the Business Combination Proposal. No person has made or makes any representation or warranty to any Inflection Point shareholder regarding the information included in these Projections. The Projections are not fact and are not necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue, or any, reliance on this information. The Projections should not be viewed as public guidance.
The Projections are not included in this proxy statement/prospectus in order to induce any Inflection Point shareholders to vote in favor of any of the proposals at the extraordinary general meeting. Inflection Point and Merlin urge you to review the financial statements of Merlin included in the Proxy Statement/Prospectus, as well as the financial information in the section of this Proxy Statement/Prospectus entitled “Unaudited Pro Forma Condensed Combined Financial Information” and to not rely on any single financial measure or Projections taken as a whole. The Projections are being provided for information purposes only and are not and should not be viewed as public guidance regarding the future performance of Merlin or the combined company following the consummation of the Business Combination.
Merlin uses certain financial measures in the Projections that are not prepared in accordance with U.S. GAAP as supplemental measures to evaluate operational performance. While Merlin believes that non-GAAP financial measures provide useful supplemental information, there are limitations associated with the use of non-GAAP financial measures. Non-GAAP financial measures are not prepared in accordance with U.S. GAAP, are not reported by all of Merlin’s competitors and may not be directly comparable to similarly titled measures of Merlin’s competitors. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with U.S. GAAP. Financial measures included in the Projections provided to a board of directors or financial advisor in connection with a business combination transaction are excluded from the definition of “non-GAAP financial measures” under the rules of the SEC, and therefore the Projections are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a U.S. GAAP financial measure. Accordingly, no reconciliation of the financial measures included in the Projections were prepared, and therefore none have been provided in this proxy statement/prospectus. The definitions of the non-GAAP measures included in the projections may not align with those underlying the non-GAAP measures presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Merlin.”
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Table of Contents
Below is a summary of the Projections.
|
2025E |
2026E |
|||||||
|
(USD 000’s) |
||||||||
|
Consolidated Revenue |
$ |
8,500 |
|
$ |
32,000 |
|
||
|
% Growth |
|
— |
|
|
276 |
% |
||
|
|
|
|
|
|||||
|
Gross Margin |
$ |
2,800 |
|
$ |
13,300 |
|
||
|
% Margin |
|
33 |
% |
|
42 |
% |
||
|
|
|
|
|
|||||
|
Sales and Marketing Expense |
$ |
3,200 |
|
$ |
3,900 |
|
||
|
Research and Development Expense |
$ |
27,000 |
|
$ |
30,300 |
|
||
|
General and Administrative Expense |
$ |
9,100 |
|
$ |
11,300 |
|
||
|
Operating Expense |
$ |
39,300 |
|
$ |
45,500 |
|
||
|
Operating Expense as % of Sales |
|
462 |
% |
|
142 |
% |
||
|
Research and Development Expense as % of Sales |
|
318 |
% |
|
95 |
% |
||
|
|
|
|
|
|||||
|
Operating Cash Burn |
$ |
(42,300 |
) |
$ |
(35,100 |
) |
||
|
Total Cash Burn |
$ |
(60,500 |
) |
$ |
(61,600 |
) |
||
Certain Assumption Regarding the Projections
Summary Growth and Cost Assumptions
Revenue assumptions. Revenue in the Projections is driven primarily by the following assumptions (each of which was material to the revenue forecast):
• Existing contracts. Management assumed approximately $8.5 million of 2025E revenue and $6.3 million of 2026E revenue would be derived from existing contractual arrangements as of July 2025, based on expected achievement of contract milestones and customer acceptance.
• New awards/deployments. Management assumed incremental revenue from anticipated contract awards and deployments of $0 million in 2025E and $25.7 million in 2026E, based on (i) expected award timing of additional task orders related to C-130J program (ii) expected award timing of additional contracts with identified new customers.
• Timing and gating items. The forecast assumes the timing of revenue recognition is contingent upon achievement of specified flight test milestones, customer acceptance, integration milestones and technical development of our core product occurring generally within management’s expected timeline. Delays in these gating items would shift revenue recognition later than forecast.
Gross margin assumptions. The projected gross margin increase from 33% in 2025E to 42% in 2026E is primarily based on management’s assumptions regarding:
• Program mix. A higher proportion of revenue in 2026E from higher-margin revenue types relative to 2025E.
• Pricing/pass-through. Assumptions regarding negotiated pricing and the extent to which certain direct costs are pass-through or reimbursable under customer arrangements.
Operating expense assumptions. Operating expenses were projected based on functional plans and reflect investment in research and development, sales and marketing and general and administrative expenses, both people and non-people related in order to support projected business growth.
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Table of Contents
Factors That May Affect the Assumptions and Cause Actual Results to Differ
The Projections necessarily involve forward-looking statements subject to risks and uncertainties. Material macroeconomic and company-specific factors that may cause results to differ materially from the Projections include:
• Changes in end market demand, government budget priorities and the timing or scope of customer awards.
• Timing and magnitude of integration cost savings and realization of anticipated operating expense synergies.
• Timing, outcome and conditions of required regulatory approvals, certifications and permits.
• Availability and cost of capital, including interest rate and credit market conditions.
• Supply chain availability, component pricing and logistics disruptions that impact cost of sales and delivery schedules.
• Talent recruitment and retention, and the pace of technology development relative to plan.
• Competitive dynamics, pricing pressure and changes in the regulatory environment.
EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS, (INCLUDING A REGISTRANT’S RESPONSIBILITY TO MAKE FULL AND PROMPT DISCLOSURE AS REQUIRED BY SUCH FEDERAL SECURITIES LAWS) BY INCLUDING IN THIS PROXY STATEMENT/PROSPECTUS A SUMMARY OF INTERNAL FINANCIAL PROJECTIONS, NONE OF INFLECTION POINT, MERLIN LABS OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR AFFILIATES UNDERTAKES ANY OBLIGATION TO, AND EACH EXPRESSLY DISCLAIMS ANY RESPONSIBILITY TO, UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE FINANCIAL PROJECTIONS AND THEIR PRESENTATION TO THE INFLECTION POINT BOARD, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE.
Expected Accounting Treatment of the Business Combination
The Domestication
There will be no accounting effect or change in the carrying amount of the assets and liabilities of Inflection Point as a result of the Domestication. The business, capitalization, assets and liabilities and financial statements of Inflection Point immediately following the Domestication will be the same as those immediately prior to the Domestication.
The Business Combination
The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP and not as a business combination. Under this method of accounting, Inflection Point will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Merlin issuing stock for the net assets of Inflection Point, accompanied by a recapitalization. Upon the completion of the Business Combination, substantially all of the assets and business of the combined company will be held and operated by New Merlin.
Regulatory Matters
Neither Inflection Point nor Merlin are aware of any material regulatory approvals or actions that are required for completion of the Business Combination, other than the filing required by and the waiting period under the HSR Act and the other regulatory notices and approvals discussed in “The Business Combination Proposal — Business Combination Agreement — Closing Conditions — Conditions to the Obligations of Each Party”. The filing required by the HSR Act was made on September 30, 2025. The waiting period under the HSR Act will expire on October 30, 2025. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
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Table of Contents
Vote Required for Approval
The approval of the Business Combination Proposal requires an ordinary resolution being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the Business Combination Proposal at the extraordinary general meeting. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
The Business Combination Proposal is conditioned on the approval of each of the Condition Precedent Proposals. Therefore, if each of the other Condition Precedent Proposals is not approved, the Business Combination Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as an ordinary resolution, that Inflection Point’s entry into the Business Combination Agreement, dated as of August 13, 2025, by and among Inflection Point, Merger Sub and Merlin, pursuant to which and among other things, on the terms and subject to the conditions set forth in the Business Combination Agreement, the parties will complete the Business Combination described in the accompanying proxy statement/prospectus, be approved, ratified and confirmed in all respects.”
Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.
The Inflection Point Board believes that the Business Combination Proposal to be presented at the extraordinary general meeting is in the best interests of Inflection Point’s shareholders and unanimously recommends that its shareholders vote “FOR” the approval of the Business Combination Proposal.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for a further discussion.
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Table of Contents
PROPOSAL NO. 2 — THE DOMESTICATION PROPOSAL
Overview
As discussed in this proxy statement/prospectus, subject to the approval of the other Condition Precedent Proposals, Inflection Point is asking its shareholders to approve the Domestication Proposal. Under the Business Combination Agreement, the approval of the Domestication Proposal, and completion of the Domestication, is a condition to the consummation of the Business Combination. If, however, the Domestication Proposal is approved, but the Business Combination Proposal or any of the other Condition Precedent Proposals is not approved, then neither the Domestication nor the Business Combination will be consummated.
As a condition to Closing, the Inflection Point Board has unanimously approved a change of Inflection Point’s jurisdiction of incorporation by deregistering from the Register of Companies in the Cayman Islands as a Cayman Islands exempted company as an exempted company by way of continuation out of the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. In accordance with Inflection Point’s plan of domestication, included as an exhibit to the registration statement of which this proxy statement/prospectus is a part, to effect the Domestication, Inflection Point will (a) file all applicable notices, declarations, affidavits, statements of assets and liabilities, shareholder approvals, undertakings and other documents required to be filed, pay all applicable fees required to paid, and cause the satisfaction of all other conditions to deregistration required to be satisfied, in each case, under Section 206 of the Companies Act and in accordance therewith, and (b) file the Proposed Charter and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which Inflection Point will be domesticated and continue as a Delaware corporation.
Immediately prior to the Domestication, pursuant to the Cayman Constitutional Documents and the Sponsor Support Agreement, (a) the Inflection Point Class B Shareholders will elect to convert each of the then issued and outstanding Inflection Point Class B Shares, on a one-for-one basis, into Inflection Point Class A Shares; (b) in connection with the Domestication, (i) each of the then issued and outstanding Inflection Point Class A Shares will convert automatically, on a one-for-one basis, into a share of New Merlin Common Stock; (ii) each of the then issued and outstanding Inflection Point Rights will convert automatically into a Post-Domestication Right; and (iii) each of the then issued and outstanding Inflection Point Units will convert automatically into a unit of Inflection Point (after the Domestication), consisting of one share of New Merlin Common Stock and one new Merlin Right.
The Domestication Proposal, if approved, will authorize a change of Inflection Point’s jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Accordingly, while Inflection Point is currently governed by the Companies Act, upon the Domestication, New Merlin will be governed by the DGCL. Inflection Point encourages shareholders to carefully consult the information set out below under “— Comparison of Shareholder Rights under Applicable Corporate Law Before and After Domestication”.
Reasons for the Domestication
The Inflection Point Board believes that it would be in the best interests of Inflection Point, simultaneously with the completion of the Business Combination, to effect the Domestication. Further, the Inflection Point Board believes that any direct benefit that the DGCL provides to a corporation also indirectly benefits its stockholders, who are the owners of the corporation. In addition, because New Merlin will operate within the United States following the Business Combination, it was the view of the Inflection Point Board that New Merlin should be structured as a corporation organized in the United States.
The Inflection Point Board believes that there are several reasons why a reincorporation in Delaware is in the best interests of Inflection Point 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 Merlin’s.
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• 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. Inflection Point believes such clarity would be advantageous to New Merlin, the New Merlin 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 Merlin’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 Merlin’s incorporation in Delaware may make New Merlin more attractive to future candidates for the New Merlin Board, because many such candidates are already familiar with Delaware corporate law from their past business experiences. To date, Inflection Point 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 Inflection Point Board therefore believes that providing the benefits afforded directors by Delaware law will enable New Merlin 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 our 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, Inflection Point 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, Inflection Point believes that the corporate environment afforded by Delaware will enable New Merlin to compete more effectively with other public companies in attracting and retaining new directors.
Regulatory Approvals; Third-Party Consents
Inflection Point 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 must occur simultaneously with the Business Combination, it will not occur unless the Business Combination can be completed, which will require the approvals as described under the section of this proxy statement/prospectus entitled “Proposal No. 1 — The Business Combination Proposal”. Inflection Point must comply with applicable United States federal and state securities laws in connection with the Domestication.
The Domestication will not breach any covenants or agreements binding upon Inflection Point 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.
Proposed Charter and Proposed Bylaws
Commencing with the effective time of the Domestication, the Proposed Charter and the Proposed Bylaws will govern the rights of stockholders in New Merlin.
A chart comparing your rights as a holder of Inflection Point Ordinary Shares as a Cayman Islands exempted company with your rights as a holder of New Merlin Common Stock can be found in the section of this proxy statement/prospectus entitled “Proposal No. 2 — The Domestication Proposal — Comparison of Shareholder Rights under Applicable Corporate Law Before and After Domestication”.
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Comparison of Shareholder Rights under Applicable Corporate Law Before and After Domestication
When the Domestication is completed, the rights of stockholders of New Merlin will be governed by Delaware law, including the DGCL, rather than by the laws of the Cayman Islands. Certain differences exist between the DGCL and the Companies Act that will alter certain of the rights of shareholders of Inflection Point and affect the powers of the New Merlin Board and management following the Domestication.
Shareholders should consider the following summary comparison of the laws of the Cayman Islands, on the one hand, and the DGCL, on the other. This comparison is not intended to be complete and is qualified in its entirety by reference to the DGCL and the Companies Act.
The owners of a Delaware corporation’s shares are referred to as “stockholders”. For purposes of language consistency, in certain sections of this proxy statement/prospectus, we may continue to refer to the share owners of New Merlin as “shareholders”.
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Delaware |
Cayman Islands |
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Applicable Legislation |
General Corporation Law of the State of Delaware. |
The Companies Act (As Revised) of the Cayman Islands. |
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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 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. |
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 memorandum and 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. 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 Vote Required for Combinations |
Generally, a corporation may not engage in a business combination with an interested stockholder for a period of three years after the time of the transaction in which the person became an interested stockholder, unless the corporation opts out of the statutory provision. |
No similar provision |
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Delaware |
Cayman Islands |
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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 Cayman Constitutional Documents, routine corporate matters may be approved by an ordinary resolution (being a resolution passed by a simple majority of the votes cast by or on behalf of the shareholders present in person or represented by proxy at the applicable general meeting and being entitled to vote on such matter). |
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Requirement for Quorum |
Quorum is a majority of shares entitled to vote at the meeting unless otherwise set in the constitutional documents, but cannot be less than one-third of shares entitled to vote at the meeting. |
Quorum is set in the company’s memorandum and articles of association. |
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Stockholder/Shareholder Consent to Action Without Meeting |
Unless otherwise provided in the certificate of incorporation, stockholders may act by written consent. |
Shareholder action by written resolutions (whether unanimous or otherwise) may be permitted by the articles of association. The articles of association may provide that shareholders may not act by written resolutions. |
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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 market 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 members 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 Inflection Point 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 Inflection Point except as conferred by law or authorized by the directors or by ordinary resolution of Inflection Point. |
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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. |
Inflection Point’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) Inflection Point 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; • 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 Inflection Point where the individual rights of that shareholder have been infringed or are about to be infringed. |
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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, 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 not improperly fetter the exercise of future discretion; • duty to exercise authority for the purpose for which it is conferred; • 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. |
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Delaware |
Cayman Islands |
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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 direct to creditors or shareholders in certain limited circumstances. |
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Removal of Directors |
Any director or the entire board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except as follows: (1) unless the certificate of incorporation otherwise provides, in the case of a corporation with a classified board, stockholders may effect such removal only for cause; or (2) in the case of a corporation having cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against such director’s removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board. However, because the New Merlin Board will be classified after the Closing, pursuant to the Proposed Charter, a director may be removed from office only for cause and only by the affirmative vote of at least 66 2/3% of the total voting power of the outstanding shares of capital stock of the corporation entitled to vote in any annual election of directors or class of directors, voting together as a single class. |
A company’s memorandum and articles of association may provide that a director may be removed for any or no reason and that, in addition to shareholders, boards may be granted the power to remove a director. |
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Number of Directors |
The number of directors is fixed by the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment of the certificate of incorporation. The bylaws may provide that the board may increase the size of the board and fill any vacancies. |
Subject to the memorandum and articles of association, the board may increase the size of the board and fill any vacancies. |
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Classified Boards |
Classified boards are permitted. |
Classified boards are permitted. |
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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 to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against fraud, willful neglect or willful default or the consequences of committing a crime. |
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Delaware |
Cayman Islands |
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Under Inflection Point’s Articles, every director and officer of Inflection Point, together with every former director and former officer (each an “Indemnified Person”) shall be indemnified out of the assets of Inflection Point 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 Inflection Point for any loss or damage incurred by Inflection Point 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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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 Inflection Point for any loss or damage incurred by Inflection Point 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. |
Vote Required for Approval
The approval of the Domestication Proposal requires a special resolution, being the affirmative vote of at least two thirds of the Inflection Point Class B Shareholders who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the Domestication Proposal at the extraordinary general meeting. The holders of Inflection Point Class A Shares will have no right to vote on the Domestication Proposal, in accordance with Article 48.2 of the Cayman Constitutional Documents. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
The Domestication Proposal is conditioned on the approval of each of the Condition Precedent Proposals. Therefore, if each of the other Condition Precedent Proposals is not approved, the Domestication Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
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Resolution to be Voted Upon
“RESOLVED, as a special resolution of the holders of the Inflection Point Class B Shares, that, Inflection Point be deregistered as an exempted company in the Cayman Islands and be registered by way of continuation as a corporation in the State of Delaware, the amended and restated memorandum and articles of association of Inflection Point, as currently in effect, be replaced in their entirety by the Proposed Charter in the form attached to the proxy statement/prospectus.”
Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE DOMESTICATION PROPOSAL.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 3 — THE STOCK ISSUANCE PROPOSAL
Overview
Assuming the Business Combination Proposal and the other Condition Precedent Proposals are approved, Inflection Point’s shareholders are also being asked to approve, by ordinary resolution, the Stock Issuance Proposal.
Why Inflection Point Needs Shareholder Approval
We are seeking shareholder approval in order to comply with Nasdaq Listing Rules, including 5635(a), (b) and (d). 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 such securities are not issued in a public offering for cash and (A) 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 (B) 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. Collectively, New Merlin may issue securities representing 20% or more of our outstanding common stock or 20% or more of the voting power, in each case outstanding before the issuance, pursuant to the issuance of common stock and securities convertible into or exercisable for common stock in connection with the Business Combination.
Under Nasdaq Listing Rule 5635(b), shareholder approval is required when any issuance or potential issuance will result in a “change of control” of the issuer. Although Nasdaq has not adopted any rule on what constitutes a “change of control” for purposes of Rule 5635(b), Nasdaq has previously indicated that the acquisition of, or right to acquire, by a single investor or affiliated investor group, as little as 20% of the common stock (or securities convertible into or exercisable for common stock) or voting power of an issuer could constitute a change of control.
Under Nasdaq Listing Rule 5635(d), shareholder approval is required prior to the issuance of securities in certain circumstances, including if the number of securities to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance.
Upon the consummation of the Business Combination, New Merlin expects to issue (A) up to (i) 10,288,021 shares of Series A Preferred Stock as consideration for the Pre-Funded Convertible Notes (taking into account accrued interest through March 31, 2026; such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date) and (ii) 11,470,590 shares of Series A Preferred Stock pursuant to the Series A SPAs; (B) shares of New Merlin Common Stock issuable upon conversion of shares of Series A Preferred Stock; (C) (i) New Merlin Series A Warrants to purchase up to 10,103,376 shares of New Merlin Common Stock, subject to adjustment, at an initial exercise price of $12.00 per share, subject to adjustment, as consideration for the Pre-Funded Warrants, and (ii) New Merlin Series A Warrants to purchase up to 10,103,376 shares of New Merlin Common Stock, subject to adjustment, at an initial exercise price of $12.00 per share, subject to adjustment, pursuant to the Series A SPAs; and (D) up to 78,342,430 shares of New Merlin Common Stock to the Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities). New Merlin may also issue common stock and securities convertible into or exercisable for common stock pursuant to subscription, purchase or similar agreements that Inflection Point or Merlin may enter into prior to Closing.
Accordingly, the aggregate number of shares of New Merlin Common Stock that New Merlin will issue in connection with the Business Combination and that will be issuable upon conversion of the Series A Preferred Stock and New Merlin Series A Warrants that New Merlin will issue in connection with the Pre-Funded Note Investment and Series A Preferred Stock Investment will exceed 20% of both the voting power and the shares of New Merlin Common Stock outstanding before such issuance and may result in a change of control of the registrant, and for these reasons, Inflection Point is seeking the approval of Inflection Point shareholders for the issuance of (i) the shares of Series A Preferred Stock issued as consideration for the Pre-Funded Convertible Notes and pursuant to the Series A SPAs, (ii) the shares of Common Stock issuable upon conversion of such shares of Series A Preferred Stock pursuant to the Certificate of Designation, (iii) the New Merlin Series A Warrants issued as consideration for the Pre-Funded Warrants and pursuant to the Series A SPAs, (iv) the shares of New Merlin Common Stock issuable upon exercise of the New Merlin Series
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A Warrants, (v) the shares of New Merlin Common Stock (including the shares of New Merlin Common Stock that will underly New Merlin Options) to be issued as consideration to the Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) as consideration in the Merger, and (vi) any other issuances of New Merlin Common Stock and securities convertible into or exercisable for New Merlin Common Stock pursuant to subscription, purchase or similar agreements Inflection Point and/or Merlin may enter into prior to Closing.
Vote Required for Approval
The approval of the Stock Issuance Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
The Stock Issuance Proposal is conditioned on the approval of each of the other Condition Precedent Proposals. Therefore, if each of the other Condition Precedent Proposals is not approved, the Stock Issuance Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as an ordinary resolution, that, for the purposes of complying with the applicable Nasdaq Listing Rules, the issuance of (i) the shares of Series A Preferred Stock issued as consideration for the Pre-Funded Convertible Notes and pursuant to the Series A SPAs, (ii) the shares of Common Stock issuable upon conversion of such shares of Series A Preferred Stock pursuant to the Certificate of Designation, (iii) the New Merlin Series A Warrants issued as consideration for the Pre-Funded Warrants and pursuant to the Series A SPAs, (iv) the shares of New Merlin Common Stock issuable upon exercise of the New Merlin Series A Warrants, (v) the shares of New Merlin Common Stock (including the shares of New Merlin Common Stock that will underly New Merlin Options) to be issued as consideration to the Merlin Equity Holders (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Warrants in respect of those securities) as consideration in the Merger, and (vi) any other issuances of New Merlin Common Stock and securities convertible into or exercisable for New Merlin Common Stock pursuant to subscription, purchase or similar agreements Inflection Point and/or Merlin may enter into prior to Closing, be approved in all respects.”
Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE STOCK ISSUANCE PROPOSAL.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 4 — THE ORGANIZATIONAL DOCUMENTS PROPOSAL
Overview
If the Domestication Proposal is approved and the Domestication becomes effective, Inflection Point will replace the Cayman Constitutional Documents, in each case, with the Proposed Organizational Documents of New Merlin, pursuant to the DGCL.
Inflection Point’s shareholders are asked to consider and vote upon and to adopt the Organizational Documents Proposal in connection with the replacement of the Cayman Constitutional Documents. The Organizational Documents Proposal is conditioned on the approval of the Domestication Proposal, and, therefore, also conditioned on approval of the Business Combination Proposal. Therefore, if the Business Combination Proposal and the Domestication Proposal are not approved, the Organizational Documents Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
Reasons for the Amendments
The Inflection Point Board’s reasons for proposing the Proposed Organizational Documents are set forth below. The following is a summary of the key changes effected by the Proposed Organizational Documents, but this summary is qualified in its entirety by reference to the full text of the Proposed Charter, a copy of which is included as Annex B, and by reference to the full text of the Proposed Bylaws, a copy of which is included as Annex C:
• To change the corporate name from “Inflection Point Acquisition Corp. IV” to “Merlin, Inc.”;
• To increase the total number of shares of our capital stock from (a) [•] Inflection Point Class A Shares, [•] Inflection Point Class B Shares and [•] preference shares, par value $0.0001 per share, of Inflection Point to (b) [•] shares of New Merlin capital stock which consists of (A) [•]shares of New Merlin Common Stock, and (B) [•] shares of New Merlin Preferred Stock.
• To authorize all other changes in connection with the replacement of Cayman Constitutional Documents with the Proposed Charter and Proposed Bylaws in connection with the consummation of the Business Combination (copies of which are attached to this proxy statement/prospectus as Annex B and Annex C, respectively).
Resolution to be Voted Upon
The full text of the resolutions to be passed is as follows:
“RESOLVED, as a special resolution, that the Cayman Constitutional Documents currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the Proposed Charter and Proposed Bylaws (copies of which are attached to the proxy statement/prospectus as Annex B and Annex C, respectively), with such principal changes as described in the Advisory Organizational Documents Proposals A through F with effect from the registration of Inflection Point in the State of Delaware as a corporation under the laws of the State of Delaware.”
Vote Required for Approval
The approval of the Organizational Documents Proposal requires a special resolution, being the affirmative vote of the holders of at least two-thirds of the Inflection Point Ordinary Shares who, being present and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as a vote cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal.
The Organizational Documents 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 Organizational Documents Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
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Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE ORGANIZATIONAL DOCUMENTS PROPOSAL.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “The Business Combination Proposal — Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination” for a further discussion.
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PROPOSAL NO. 5 — THE ADVISORY ORGANIZATIONAL DOCUMENTS PROPOSALS
If the Domestication Proposal is approved and the closing conditions of the Business Combination are met, Inflection Point will replace the Cayman Constitutional Documents, with the Proposed Organizational Documents of New Merlin Labs, under the DGCL.
Inflection Point’s shareholders are asked to consider and vote upon and to approve on a non-binding advisory basis by special resolution six separate proposals (collectively, the “Advisory Organizational Documents Proposals”) in connection with the replacement of the Cayman Constitutional Documents with the Proposed Organizational Documents. 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 and will be voted upon on a non-binding advisory basis. This separate vote is not otherwise required by Cayman or Delaware law, but pursuant to SEC guidance, Inflection Point 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 Inflection Point, the Inflection Point Board, Merlin or the New Merlin Board. Furthermore, the Business Combination is not conditioned on the separate approval of the Advisory Organizational Documents Proposals (separate and apart from the approval of the Organizational Documents Proposal). Accordingly, regardless of the outcome of the non-binding advisory vote on these proposals, Inflection Point intends that the Proposed Organizational Documents will take effect from the registration of Inflection Point in the State of Delaware as a corporation under the laws of the State of Delaware, assuming approval of the Business Combination Proposal, the Domestication Proposal and the Organizational Documents Proposals.
The Proposed Organizational Documents differ materially from the Cayman Constitutional Documents. The following table sets forth a summary of the principal changes proposed between the Cayman Constitutional Documents and the Proposed Organizational Documents. This summary is qualified by reference to the complete text of the Cayman Constitutional Documents of Inflection Point, the complete text of the Proposed Charter, a copy of which is attached to this proxy statement/prospectus as Annex B and the complete text of the Proposed Bylaws, a copy of which is attached to this proxy statement/prospectus as Annex C. All shareholders are encouraged to read the Proposed Organizational Documents in their entirety for a more complete description of their terms. Additionally, as the Cayman Constitutional Documents are governed by the Companies Act and the Proposed Organizational Documents will be governed by the DGCL, Inflection Point encourages shareholders to carefully consult the information set out under the section entitled “The Domestication Proposal” — Comparison of Shareholder Rights Under Applicable Corporate Law Before and After Domestication”.
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Cayman Constitutional Documents |
Proposed Organizational Documents |
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Authorized Shares |
The authorized share capital set out in the Cayman Constitutional Documents is US$55,500 divided into 500,000,000 Inflection Point Class A Shares, 50,000,000 Inflection Point Class B Shares and 5,000,000 preference shares of a par value of US$0.0001 each. |
The Proposed Organizational Documents authorize [•] shares, consisting of [•] shares of New Merlin Common Stock and [•] shares of New Merlin Preferred Stock. |
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See paragraph 5 of the current Inflection Point amended and restated memorandum of association. |
See Article IV of the Proposed Charter. |
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Exclusive Forum Provision (Advisory Organizational Documents Proposal 5B) |
The Cayman Constitutional Documents provide that unless Inflection Point consents 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 |
The Proposed Organizational Documents adopt (a) Delaware as the exclusive forum for certain stockholder litigation and (b) the federal district courts of the United States of America as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. |
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Cayman Constitutional Documents |
Proposed Organizational Documents |
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Cayman Constitutional Documents or otherwise related in any way to each shareholder’s shareholding in Inflection Point, including but not limited to: (i) any derivative action or proceeding brought on Inflection Point’s behalf; (ii) any action asserting a claim of breach of any fiduciary or other duty owed by any of Inflection Point’s current or former director, officer or other employee to Inflection Point or its shareholders; |
These provisions will not address or apply to claims that arise under the Exchange Act; however, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. See Article XI of the Proposed Charter |
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(iii) any action asserting a claim arising pursuant to any provision of the Companies Act or the Cayman Constitutional Documents; or (iv) any action asserting a claim against Inflection Point governed by the internal affairs doctrine (as such concept 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 Cayman Constitutional Documents do 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. See Article 53 of the Cayman Constitutional Documents. |
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Adoption of Supermajority Vote Requirement to Amend the Proposed Organizational Documents |
The Cayman Constitutional Documents provide that amendments may be made by a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the Inflection Point Ordinary Shares represented in person or by proxy and entitled to vote at an extraordinary general meeting and who vote at the extraordinary general meeting. See Article 18.3 of the Cayman Constitutional Documents. |
The Proposed Charter requires the affirmative vote of at least 66 ⅔% of the voting power of the outstanding shares to amend, alter, repeal or rescind Article V, Article VI, Article VIII, Article IX, Article X, Article XI and Article XII of the Proposed Charter. For amendments to other provisions of the Proposed Charter, the DGCL requires the affirmative vote of a majority of the outstanding shares entitled to vote thereon. See Article XIII of the Proposed Charter. The Proposed Charter permits the New Merlin Board to amend, alter, repeal or rescind the Proposed Bylaws without the consent or vote of the stockholders of the Company. See Article V of the Proposed Charter. |
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Cayman Constitutional Documents |
Proposed Organizational Documents |
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Removal of Directors |
The Cayman Constitutional Documents provide that prior to the closing of an initial business combination, only holders of Founder Shares are entitled to vote on the removal of any director, and that after the closing of an initial business combination, shareholders may by an ordinary resolution remove any director. See Article 30 of the Cayman Constitutional Documents. |
The Proposed Organizational Documents permit the removal of a director only for cause and only by the affirmative vote of the holders of a majority of at least 66⅔% of the total voting power of all then-outstanding shares of the Company. See Article VI, subsection (D) of the Proposed Charter. |
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Action by Written Consent of Stockholders |
The Cayman Constitutional Documents permit shareholders to approve matters by unanimous written resolution of all of the shareholders entitled to receive notice of and to attend and vote at general meetings. See Article 23.3 of the Cayman Constitutional Documents. |
The Proposed Organizational Documents require stockholders to take action at an annual or special meeting and prohibit stockholder action by written consent in lieu of a meeting; provided that any action required or permitted to be taken by the holders of New Merlin Preferred Stock, voting separately as a class or separately as a class with one or more other such series, may be taken without a meeting if signed by the holders having not less than the minimum number of votes necessary to authorize such action at a meeting at which all shares entitled to vote thereon were present and voted in compliance with the DGCL. See Article VIII subsection (A) of the Proposed Charter and Section 2.13 of the Proposed Bylaws. |
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Other Changes In Connection With Adoption of the Proposed Organizational Documents (Advisory Organizational Documents Proposal 5F) |
The Cayman Constitutional Documents include provisions related to Inflection Point’s status as a blank check company prior to the consummation of an initial business combination. See Article 50 of the Cayman Constitutional Documents. |
The Proposed Organizational Documents do not include such provisions related to Inflection Point’s status as a blank check company, which will no longer apply upon consummation of the Business Combination, as Inflection Point will cease to be a blank check company at such time. |
Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as three separate special resolutions on a non-binding and advisory basis only, that the following governance provisions contained in the Proposed Organizational Documents be and are hereby approved:
• Proposal 5A — Under the Proposed Organizational Documents, New Merlin would be authorized to issue (A) [•] shares of New Merlin Common Stock and (B) [•] shares of preferred stock, par value $0.0001 per share.
• Proposal 5B — The Proposed Organizational Documents would adopt (a) Delaware as the exclusive forum for certain stockholder litigation and (b) the federal district courts of the United States of America as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the Exchange Act.
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• Proposal 5C — The Proposed Charter would require the affirmative vote of at least two-thirds of the total voting power of all then-outstanding shares of New Merlin to amend, alter, repeal or rescind certain provisions of the Proposed Charter.
• Proposal 5D — The Proposed Charter would require the affirmative vote of at least two-thirds of the outstanding shares entitled to vote at an election of directors, voting together as a single class, to remove a director only for cause.
• Proposal 5E — The Proposed Charter would prohibit stockholder action by written consent in lieu of a meeting and require stockholders to take action at an annual or special meeting.
• Proposal 5F — The Proposed Charter would (1) change the corporate name from “Inflection Point Acquisition Corp. IV” to “Merlin, Inc.”, (2) make New Merlin’s corporate existence perpetual and (3) remove certain provisions related to Inflection Point’s status as a blank check company that will no longer be applicable upon consummation of the Business Combination.
Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE ADVISORY ORGANIZATIONAL DOCUMENTS PROPOSALS.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also 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 — Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 6 — THE DIRECTOR ELECTION PROPOSAL
Election of Directors
Pursuant to the Business Combination Agreement, Inflection Point has agreed to take all necessary action, including causing the members of the Inflection Point Board to resign, so that effective at the Closing, the entire New Merlin Board will consist of seven individuals, a majority of whom will be independent directors in accordance with the requirements of the Nasdaq. The directors will be classified into three classes, with each director holding office for a three-year term or until the next annual meeting of stockholders at which such director’s class is up for election and where his or her successor is elected and qualified.
Inflection Point 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 Merlin Board: (i) [•], [•] and [•] as Class I directors, (ii) [•] and [•] as Class II directors, and (iii) [•] and [•] as Class III directors (each as defined below).
If elected, the Class I directors will serve until the first annual meeting of stockholders of the Company to be held following the date of Closing; the Class II directors will serve until the second annual meeting of stockholders of the Company following the date of Closing; and the Class III directors will serve until the third annual meeting of stockholders of the Company to be held following the date of Closing. In addition, it is anticipated that [•] will be designated as Chairman of the New Merlin Board. Each of [•], [•] and [•] are expected to qualify as an independent director under Nasdaq listing standards.
There are no family relationships among any of the Company’s directors and executive officers.
Subject to other provisions in the Proposed Charter, the number of directors that constitutes the entire New Merlin Board will be fixed solely by resolution of the New Merlin Board, but will not exceed [•]. Each director of the Company will hold office until the expiration of the term for which he or she is elected and until his or her successor has been duly elected and qualified or until his or her earlier resignation, death, disqualification or removal.
Under the Proposed Charter, and subject to the rights of holders of New Merlin Preferred Stock with respect to the election of directors, the directors of the Company will be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III. The New Merlin Board may assign members of the New Merlin Board already in office to such classes at the time such classification becomes effective. The term of office of the initial Class I directors of Company will expire at the first regularly-scheduled annual meeting of its stockholders, the term of office of the initial Class II directors of Company will expire at the second annual meeting of its stockholders, and the term of office of the initial Class III directors of Company will expire at the third annual meeting of its stockholders. At each annual meeting of stockholders, commencing with the first regularly-scheduled annual meeting of stockholders, each of the successors elected to replace the directors of a class of director whose term will have expired at such annual meeting will be elected to hold office until the third annual meeting next succeeding his or her election and until his or her respective successor will have been duly elected and qualified.
If the number of directors is hereafter changed, any increase or decrease in directorships will be so apportioned among the classes by the New Merlin Board as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the New Merlin Board will shorten the term of any incumbent director.
Subject to the rights of holders of any series of New Merlin Preferred Stock with respect to the election of directors for so long as the New Merlin Board is classified, any director may be removed from office by the stockholders of the Company only for cause. Vacancies occurring on the New Merlin Board for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of the New Merlin Board, although less than a quorum, or by a sole remaining director, and not by stockholders of the Company. A person so elected by the New Merlin Board to fill a vacancy or newly created directorship will hold office until the next election of the class for which such director will have been chosen and until his or her successor will be duly elected and qualified.
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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 Inflection Point Ordinary Shares.
The Inflection Point 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 record date and is based in part on information furnished by the nominees and in part from the Company’s and Merlin’s records.
Information about Officers, Directors and Nominees
At the effective time of the Business Combination, in accordance with the terms of the Business Combination Agreement and assuming the election of the nominees set forth in this section, the members of the New Merlin Board and officers of the Company will be as follows:
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Position |
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[•] |
[•] |
[•] |
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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 [•], see the sections entitled “Management of the Company Following the Business Combination — Officers, Directors and Key Employees” and “Directors, Officers, Executive Compensation and Corporate Governance of Inflection Point prior to the Business Combination”.
Vote Required for Approval
The approval of the Director Election Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. If the Business Combination Proposal is not approved, the Director Election Proposal will not be presented at the extraordinary general meeting. The Director Election Proposal will only become effective if the Business Combination is completed.
Although the Cayman Constitutional Documents indicate that, prior to the Closing, holders of Public Shares shall have no right to vote on the appointment or removal of any director, the Director Election Proposal is being voted on by all holders of Inflection Point Ordinary Shares.
In the event that one or more nominees is not elected under the Director Election Proposal, the Inflection Point Board is permitted under Article 31 of the Cayman Constitutional Documents to appoint any person to be a director.
Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as an ordinary resolution, that the persons named below be elected to serve on the New Merlin Board upon the Closing of the Business Combination:
[•]”
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Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” ELECTION OF EACH OF THE DIRECTOR NOMINEES TO THE NEW MERLIN LABS BOARD.
The existence of financial and personal interests of Inflection Point’s directors may result in a conflict of interest on the part of one or more of the directors between what he, she or they may believe is in the best interests of Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also 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 — Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination” for a further discussion of these considerations.
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PROPOSAL NO. 7 — THE NEW MERLIN INCENTIVE PLAN PROPOSAL
Overview
Inflection Point is asking its shareholders to approve the New Merlin Incentive Plan and the material terms thereunder. The Inflection Point Board adopted the New Merlin Incentive Plan prior to the extraordinary general meeting, subject to shareholder approval at the extraordinary general meeting. The New Merlin Incentive Plan will become effective upon the closing of the Business Combination assuming approval of this proposal by our shareholders.
The New Merlin Incentive Plan is described in more detail below. A copy of the New Merlin Incentive Plan is attached to this proxy statement/prospectus as Annex G.
The New Merlin Incentive Plan
The purpose of the New Merlin Incentive Plan is to enhance New Merlin Labs’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to New Merlin Labs by providing these individuals with equity ownership opportunities and/or equity-linked compensatory opportunities. The Inflection Point Board believes that equity awards are necessary to remain competitive in its industry and are essential to recruiting and retaining the highly qualified employees who help us meet our goals.
Description of the Material Features of the New Merlin Incentive Plan
This section summarizes certain principal features of the New Merlin Incentive Plan. The summary is qualified in its entirety by reference to the complete text of the New Merlin Incentive Plan.
Eligibility and Administration
Employees, consultants and directors of the combined company and its subsidiaries will be eligible to receive awards under the New Merlin Incentive Plan. Following the closing of the Business Combination, the combined company is expected to have approximately [____] ([__]) employees, [____] ([__]) non-employee directors and [____] ([__]) other individual service providers who will be eligible to receive awards under the New Merlin Incentive Plan.
Following the closing of the Business Combination, the New Merlin Incentive Plan will be administered by the New Merlin Labs Board with respect to awards to non-employee directors and by our compensation committee with respect to other participants, each of which may delegate its duties and responsibilities to committees of its directors and/or officers (referred to collectively as the plan administrator below), subject to certain limitations that may be imposed under the New Merlin Incentive Plan, Section 16 of the Exchange Act, stock exchange rules and/or other applicable laws. The plan administrator will have the authority to take all actions and make all determinations under the New Merlin Incentive Plan, to interpret the New Merlin Incentive Plan and award agreements and to adopt, amend and repeal rules for the administration of the New Merlin Incentive Plan as it deems advisable. The plan administrator will also have the authority to determine which eligible service providers receive awards, grant awards and set the terms and conditions of all awards under the New Merlin Incentive Plan, including any vesting and vesting acceleration provisions, subject to the conditions and limitations in the New Merlin Incentive Plan.
Limitation on Awards and Shares Available
The initial aggregate number of shares of New Merlin Labs Common Stock that will be available for issuance under the New Merlin Incentive Plan will be equal to [__]% of the number of [fully-diluted, as-converted] shares of New Merlin Labs Common Stock outstanding as of immediately following the closing of the Business Combination. In addition, the number of shares of New Merlin Labs Common Stock available for issuance under the New Merlin Incentive Plan will be subject to an annual increase on the first day of each calendar year beginning January 1, 2027 and ending on and including January 1, 2036, equal to (i) [__]% of the [aggregate number of shares of New Merlin Labs Common Stock outstanding] on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the New Merlin Labs Board. Any shares issued pursuant to the New Merlin Incentive Plan may consist, in whole or in part, of authorized and unissued common stock, treasury common stock or common stock purchased on the open market.
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[For purposes of the New Merlin Incentive Plan, the calculation of our fully-diluted shares will include (i) outstanding shares of preferred stock and common stock, (ii) shares subject to outstanding compensatory equity awards (with stock options calculated on a “net exercise” basis, and performance-based awards calculated at the “target” level of achievement) and (iii) shares subject to other outstanding equity securities and the conversion of all convertible securities into shares of New Merlin Labs Common Stock.]
[Assuming there are no redemptions in connection with the Business Combination, the estimated number of fully-diluted shares (calculated including preferred stock on an as-converted basis) of the closing of the Business Combination will be [____]; therefore, the maximum potential initial share limit for the New Merlin Incentive Plan as of the closing of the Business Combination will be [____].] The maximum number of shares that may be issued pursuant to the exercise of incentive stock options (“ISOs”) granted under the New Merlin Incentive Plan, will be [____] (but in no event greater than the applicable aggregate share limit).
If an award under the New Merlin Incentive Plan or 2018 Plan expires, lapses or is terminated, exchanged for or settled in cash, any shares subject to such award (or portion thereof) may, to the extent of such expiration, lapse, termination or cash settlement, be used again for new grants under the New Merlin Incentive Plan. Shares delivered to us to satisfy the applicable exercise or purchase price of an award under the New Merlin Incentive Plan or 2018 Plan and/or to satisfy any applicable tax withholding obligations (including shares retained by us from the award under the New Merlin Incentive Plan or 2018 Plan being exercised or purchased, and/or creating the tax obligation) will become or again be available for award grants under the New Merlin Incentive Plan. Further, the payment of dividend equivalents in cash in conjunction with any awards under the New Merlin Incentive Plan will not reduce the shares available for grant under the New Merlin Incentive Plan. However, the following shares may not be used again for grant under the New Merlin Incentive Plan: (i) shares subject to stock appreciation rights (“SARs”) that are not issued in connection with the stock settlement of the SAR on exercise, and (ii) shares purchased on the open market with the cash proceeds from the exercise of options.
Awards granted under the New Merlin Incentive Plan upon the assumption of, or in substitution for, awards authorized or outstanding under a qualifying equity plan maintained by an entity with which we enter into a merger or similar corporate transaction will not reduce the shares available for grant under the New Merlin Incentive Plan but will count against the maximum number of shares that may be issued upon the exercise of ISOs.
The New Merlin Incentive Plan provides that the sum of any cash compensation and the aggregate grant date fair value (determined as of the date of the grant under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year, or director limit, may not exceed an amount equal to $[____] (increased to $[____] in the calendar year of a non-employee director’s initial service as a non-employee director or any calendar year during which a non-employee director serves as chairman of the New Merlin Labs Board or lead independent director), which limits will not apply to the compensation for any non-employee director who serves in any capacity in addition to that of a non-employee director for which he or she receives additional compensation or any compensation paid prior to the calendar year following the calendar year in which the New Merlin Incentive Plan becomes effective.
Awards
The New Merlin Incentive Plan provides for the grant of stock options, including ISOs, and nonqualified stock options (“NSOs”), restricted stock, dividend equivalents, restricted stock units (“RSUs”), SARs and other stock or cash based awards. Certain awards under the New Merlin Incentive Plan may constitute or provide for a payment of “nonqualified deferred compensation” under Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards. All awards under the New Merlin Incentive Plan will be evidenced by award agreements, which will detail the terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards other than cash awards generally will be settled in shares of New Merlin Labs Common Stock, but the applicable award agreement may provide for cash settlement of any award. A brief description of each award type follows.
• Stock Options and SARs. Stock options provide for the purchase of shares of our New Merlin Labs Common Stock in the future at an exercise price set on the grant date. ISOs, in contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant
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date and the exercise date. Unless otherwise determined by the New Merlin Labs Board, the exercise price of a stock option or SAR may not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). Conditions applicable to stock options and/or SARs may be based on continuing service, the attainment of performance goals and/or such other conditions as the plan administrator may determine.
• Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of New Merlin Labs Common Stock that are subject to certain vesting conditions and other restrictions. RSUs are contractual promises to deliver shares of New Merlin Labs Common Stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of New Merlin Labs Common Stock prior to the delivery of the underlying shares (i.e., dividend equivalent rights). The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the New Merlin Incentive Plan. Conditions applicable to restricted stock and RSUs may be based on continuing service, the attainment of performance goals and/or such other conditions as the plan administrator may determine.
• Other Stock or Cash Based Awards. Other stock or cash based awards are awards of cash, fully vested shares of our New Merlin Labs Common Stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our New Merlin Labs Common Stock. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled.
• Dividend Equivalents. Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of our New Merlin Labs Common Stock and may be granted alone or in tandem with awards other than stock options or SARs. Dividend equivalents are credited as of the dividend record dates during the period between the date an award is granted and the date such award vests, is exercised, is distributed or expires, as determined by the plan administrator. Dividend equivalents payable with respect to an award prior to the vesting of such award instead will be paid out to the participant only to the extent that the vesting conditions are subsequently satisfied and the award vests.
Certain Transactions
The plan administrator has broad discretion to take action under the New Merlin Incentive Plan, as well as make adjustments to the terms and conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting New Merlin Labs Common Stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations and other corporate transactions. In addition, in the event of certain non-reciprocal transactions with our stockholders known as “equity restructurings,” the plan administrator will make equitable adjustments to the New Merlin Incentive Plan and outstanding awards. In the event of a change in control (as defined in the New Merlin Incentive Plan), to the extent that the surviving entity declines to continue, convert, assume or replace outstanding awards, then all such awards will become fully vested and exercisable in connection with the transaction. Upon or in anticipation of a change of control, the plan administrator may cause any outstanding awards to terminate at a specified time in the future and give the participant the right to exercise such awards during a period of time determined by the plan administrator in its sole discretion. Individual award agreements may provide for additional accelerated vesting and payment provisions.
Repricing
The plan administrator may, without approval of the stockholders, reduce the exercise price of any stock option or SAR, or cancel any stock option or SAR in exchange for cash, other awards or stock options or SARs with an exercise price per share that is less than the exercise price per share of the original stock options or SARs.
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Foreign Participants, Claw-back Provisions, Transferability and Participant Payments
The plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. All awards will be subject to any company clawback policy as set forth in such clawback policy or the applicable award agreement. Awards under the New Merlin Incentive Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the plan administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the New Merlin Incentive Plan, the plan administrator may, in its discretion, accept cash or check, shares of New Merlin Labs Common Stock that meet specified conditions, a “market sell order” or such other consideration as it deems suitable.
Plan Amendment and Termination
The New Merlin Labs Board may amend or terminate the New Merlin Incentive Plan at any time; however, no amendment, other than an amendment that increases the number of shares available under the New Merlin Incentive Plan, may materially and adversely affect an award outstanding under the New Merlin Incentive Plan without the consent of the affected participant, and stockholder approval will be obtained for any amendment to the extent necessary to comply with applicable laws. [The New Merlin Incentive Plan will remain in effect until terminated by the plan administrator in accordance with the New Merlin Incentive Plan.] No awards may be granted under the New Merlin Incentive Plan after its termination.
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal U.S. federal income tax consequences related to awards under the New Merlin Incentive Plan. This summary deals with the general federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
• Non-Qualified Stock Options. If a participant is granted an NSO under the New Merlin Incentive Plan, the optionee should not have taxable income on the grant of the option. Generally, the participant should recognize ordinary income at the time of exercise in an amount equal to the fair market value of the shares acquired on the date of exercise, less the exercise price paid for the shares. The participant’s basis in the common stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of New Merlin Labs Common Stock on the date the participant exercises such option. Any subsequent gain or loss will be taxable as a long-term or short-term capital gain or loss. New Merlin Labs or its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
• Incentive Stock Options. A participant receiving ISOs should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value of the shares of our New Merlin Labs Common Stock received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the Code for ISOs and the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. New Merlin Labs or its subsidiaries or affiliates generally are
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not entitled to a federal income tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
• Other Awards. The current federal income tax consequences of other awards authorized under the New Merlin Incentive Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as NSOs; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant through a Section 83(b) election); RSUs, dividend equivalents and other stock or cash based awards are generally subject to tax at the time of payment. New Merlin Labs or its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
Section 409A of the Code
Certain types of awards under the New Merlin Incentive Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest, penalties and additional state taxes). To the extent applicable, the New Merlin Incentive Plan and awards granted under the New Merlin Incentive Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the plan administrator, the New Merlin Incentive Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.
New Plan Benefits
[Benefits or amounts that may be received or allocated to directors, officers and employees under the New Merlin Incentive Plan will be determined at the discretion of the plan administrator and are not currently determinable. Therefore, it is not possible at this time to determine the future benefits or amounts that may be received by participants in the New Merlin Incentive Plan.]
Vote Required for Approval
The approval of the New Merlin Incentive Plan Proposal requires an ordinary resolution being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the New Merlin Incentive Plan Proposal at the extraordinary general meeting. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
The New Merlin Incentive Plan Proposal is conditioned on the approval of each of the Condition Precedent Proposals. Therefore, if each of the other Condition Precedent Proposals is not approved, the New Merlin Incentive Plan Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as an ordinary resolution, that the New Merlin Incentive Plan, a copy of which is attached to the proxy statement/prospectus as Annex G, be adopted and approved.”
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Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE New Merlin Incentive Plan PROPOSAL.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for a further discussion.
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PROPOSAL NO. 8 — THE NEW MERLIN LABS EMPLOYEE STOCK PURCHASE PLAN PROPOSAL
Overview
Inflection Point is asking its stockholders to approve the Merlin, Inc. 2026 Employee Stock Purchase Plan (the “ESPP”) and the material terms thereunder. The Inflection Point Board adopted the ESPP, prior to the Inflection Point extraordinary general meeting, subject to stockholder approval at the Inflection Point extraordinary general meeting. The ESPP will become effective upon the closing of the Business Combination assuming approval of this proposal by our shareholders.
The ESPP, if approved, will provide employees of the combined company and its participating subsidiaries with the opportunity to purchase shares of New Merlin Labs Common Stock at a discount through accumulated payroll deductions during successive offering periods. We believe that the ESPP enhances such employees’ sense of participation in performance, aligns their interests with those of stockholders, and is a necessary and powerful incentive and retention tool that benefits stockholders. Accordingly, the Inflection Point Board believes that approval of the ESPP is in the best interests of Inflection Point and the Inflection Point Board recommends that stockholders vote for approval of the ESPP.
The ESPP is described in more detail below. A copy of the ESPP is attached to this proxy statement/prospectus as Annex H.
Description of the Material Features of the ESPP
Summary of the ESPP
This section summarizes certain principal features of the ESPP. The summary is qualified in its entirety by reference to the complete text of the ESPP.
Purpose of the ESPP
The purpose of the ESPP is to assist eligible employees of the combined company and its participating subsidiaries in acquiring a stock ownership interest in New Merlin Labs pursuant to a plan which is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.
Administration
The New Merlin Labs Board or a committee designated by the New Merlin Labs Board will have the authority to interpret the terms of the ESPP and determine eligibility of participants. The compensation committee is the administrator of the ESPP.
Eligibility
The plan administrator may designate certain of New Merlin Labs’s subsidiaries as participating “designated subsidiaries” in the ESPP and may change these designations from time to time. Employees of New Merlin Labs and its participating designated subsidiaries are eligible to participate in the ESPP if they meet the eligibility requirements under the ESPP established from time to time by the plan administrator. However, an employee may not be granted rights to purchase shares under the ESPP if such employee, immediately after the grant, would own (directly or through attribution) shares possessing 5% or more of the total combined voting power or value of all classes of common shares or other classes of shares.
If the grant of a purchase right under the ESPP to any eligible employee who is a citizen or resident of a foreign jurisdiction would be prohibited under the laws of such foreign jurisdiction or the grant of a purchase right to such employee in compliance with the laws of such foreign jurisdiction would cause the ESPP to violate the requirements of Section 423 of the Code, as determined by the plan administrator in its sole discretion, such employee will not be permitted to participate in the ESPP.
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Eligible employees become participants in the ESPP by enrolling and authorizing payroll deductions by the deadline established by the plan administrator prior to the relevant offering date. Directors who are not employees, as well as consultants, are not eligible to participate. Employees who choose to not participate, or are not eligible to participate at the start of an offering period but who become eligible thereafter, may enroll in any subsequent offering period.
Following the Closing, the combined company is expected to have approximately [__] employees who would be eligible to participate in the ESPP.
Shares Available for Awards
The initial aggregate number of shares of New Merlin Labs Common Stock that will be available for issuance under the ESPP will be equal to [__]% of the [fully-diluted, as-converted] shares of New Merlin Labs Common Stock outstanding as immediately following the closing of the Business Combination. In addition, the number of shares of New Merlin Labs Common Stock available for issuance under the ESPP will be annually increased on the first day of each calendar year beginning January 1, 2027 and ending on and including January 1, 2036, equal to (i) [__]% of the [aggregate number of shares of New Merlin Labs Common Stock outstanding] on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the New Merlin Labs Board. In no event will more than [____] shares of New Merlin Labs Common Stock be available for issuance under the ESPP. Any shares distributed pursuant to the ESPP may consist, in whole or in part, of authorized and unissued common stock, treasury common stock or common stock purchased on the open market.
[For purposes of the ESPP, the calculation of our fully-diluted shares will include (i) outstanding shares of preferred stock and common stock, (ii) shares subject to outstanding compensatory equity awards (with stock options calculated on a “net exercise” basis, and performance-based awards calculated at the “target” level of achievement) and (iii) shares subject to other outstanding equity securities and the conversion of all convertible securities into shares of New Merlin Labs Common Stock.] [Assuming there are no redemptions in connection with the Business Combination, the estimated number of fully-diluted shares (calculated including preferred stock on an as-converted basis) of the closing of the Business Combination will be [____]; therefore, the maximum potential initial share limit for the ESPP as of the closing of the Business Combination will be [____].]
We cannot precisely predict the New Merlin Labs share usage under the ESPP as it will depend on a range of factors including the level of New Merlin Labs employee participation, the contribution rates of participants, the trading price of New Merlin Labs Common Stock and Company future hiring activity.
Participation in an Offering
• Offering Periods and Purchase Periods. We intend for the ESPP to qualify under Section 423 of the Code and stock will be offered under the ESPP during offering periods. The length of offering periods under the ESPP will be determined by the plan administrator and may be up to 27 months long. Employee payroll deductions will be used to purchase shares on each purchase date during an offering period. The number of purchase periods within, and purchase dates during, each offering period will be established by the plan administrator. Offering periods under the ESPP will commence when determined by the plan administrator. The plan administrator may, in its discretion, modify the terms of future offering periods.
• Enrollment and Contributions. The ESPP will permit participants to purchase shares through payroll deductions of up to [__]% of their eligible compensation, unless otherwise determined by the plan administrator, which generally will include a participant’s gross base compensation for services to us, [including overtime payments, and excluding sales commissions, periodic bonuses, one-time bonuses, expense reimbursements, fringe benefits and other special payments]. The plan administrator will establish a maximum number of shares that may be purchased by a participant during any offering period or purchase period, which, in the absence of a contrary designation, will be [___] shares for an offering period and/or a purchase period. In addition, no employee will be permitted to accrue the right to purchase stock under the ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of New Merlin Labs Common Stock as of the first day of the offering period).
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• Purchase Rights. On the first trading day of each offering period, each participant automatically will be granted an option to purchase shares of New Merlin Labs Common Stock. The option will be exercised on the applicable purchase date(s) during the offering period, to the extent of the payroll deductions accumulated during the applicable purchase period.
• Purchase Price. The purchase price of the shares, in the absence of a contrary determination by the plan administrator, will be 85% of the lower of the fair market value of New Merlin Labs Common Stock on the first trading day of the offering period or on the applicable purchase date, which will be the final trading day of the applicable purchase period.
• Withdrawal and Termination of Employment. Participants may voluntarily end their participation in the ESPP at any time at least two weeks prior to the end of the applicable offering period (or such longer or shorter period specified by the plan administrator), and will be paid their accrued payroll deductions that have not yet been used to purchase shares of New Merlin Labs Common Stock. Participation ends automatically upon a participant’s termination of employment.
Certain Transactions
In the event of certain transactions or events affecting New Merlin Labs Common Stock, such as any stock dividend or other distribution, change in control, reorganization, merger, consolidation or other corporate transaction, the plan administrator will make equitable adjustments to the ESPP and outstanding rights. In addition, in the event of the foregoing transactions or events or certain significant transactions, including a change in control, the plan administrator may provide for (i) either the replacement of outstanding rights with other rights or property or termination of outstanding rights in exchange for cash, (ii) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, (iii) the adjustment in the number and type of shares of stock subject to outstanding rights, (iv) the use of participants’ accumulated payroll deductions to purchase stock on a new purchase date prior to the next scheduled purchase date and termination of any rights under ongoing offering periods or (v) the termination of all outstanding rights. Under the ESPP, a change in control has the same definition as given to such term in the New Merlin Incentive Plan.
Foreign Participants
The administrator may provide special terms, establish supplements to, or amendments, restatements or alternative versions of the ESPP, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States.
Transferability
A participant may not transfer rights granted under the ESPP other than by will, the laws of descent and distribution or as otherwise provided in the ESPP.
Plan Amendment; Termination
The plan administrator may amend, suspend or terminate the ESPP at any time. However, stockholder approval of any amendment to the ESPP must be obtained for any amendment which increases the aggregate number or changes the type of shares that may be sold pursuant to rights under the ESPP in any manner that would be considered the adoption of a new plan within the meaning of Treasury regulation Section 1.423-2(c)(4), or changes the ESPP in any manner that would cause the ESPP to no longer be an employee stock purchase plan within the meaning of Section 423(b) of the Code.
Material U.S. Federal Income Tax Consequences
The material U.S. federal income tax consequences of the ESPP under current income tax law are summarized in the following discussion which deals with the general tax principles applicable to the ESPP, and is intended for general information only. The following discussion is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. Other federal taxes and foreign, state and local income taxes, and employment, estate and gift tax considerations, are not discussed, and may vary depending on individual circumstances and from locality to locality.
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The ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. Under the applicable Code provisions, no income will be taxable to a participant until the sale or other disposition of the shares purchased under the ESPP. This means that an eligible employee will not recognize taxable income on the date the employee is granted an option under the ESPP. In addition, the employee will not recognize taxable income upon the purchase of shares. Upon such sale or disposition, the participant generally will be subject to tax in an amount that depends upon the length of time such shares are held by the participant prior to disposing of them.
If the shares are sold or disposed of more than two years from the date of grant and more than one year from the date of purchase, or if the participant dies while holding the shares, the participant (or the participant’s estate) will recognize ordinary income measured as the lesser of (1) the excess of the fair market value of the shares at the time of such sale or disposition (or death) over the purchase price or (2) an amount equal to the discount (generally, 15%) from the fair market value of the shares as of the date of grant. Any additional gain will be treated as long-term capital gain. If the shares are held for the holding periods described above but are sold for a price that is less than the purchase price, there is no ordinary income and the participating employee has a long-term capital loss for the difference between the sale price and the purchase price.
If the shares are sold or otherwise disposed of before the expiration of the holding periods described above, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price and New Merlin Labs will be entitled to a tax deduction for compensation expense in the amount of ordinary income recognized by the employee. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares were held following the date they were purchased by the participant prior to disposing of them. If the shares are sold or otherwise disposed of before the expiration of the holding periods described above but are sold for a price that is less than the purchase price, the participant will recognize ordinary income equal to the excess of the fair market value of the shares on the date of purchase over the purchase price (and New Merlin Labs will be entitled to a corresponding deduction), but the participant generally will be able to report a capital loss equal to the difference between the sales price of the shares and the fair market value of the shares on the date of purchase.
New Merlin Labs or its subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an option or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares, subject to Code limitations.
New Plan Benefits
Benefits under the ESPP will depend on the employees’ enrollment and contribution elections, and the fair market value of the shares at various future dates. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the ESPP. The per share market value of Inflection Point’s common stock on [____] was $[__].
Vote Required for Approval
The approval of the New Merlin Employee Stock Purchase Plan Proposal requires an ordinary resolution being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the New Merlin Employee Stock Purchase Plan Proposal at the extraordinary general meeting. Abstentions, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal. Broker non-votes are not considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal under Cayman Islands law, assuming a valid quorum is established.
The New Merlin Employee Stock Purchase Plan Proposal is conditioned on the approval of each of the Condition Precedent Proposals. Therefore, if each of the other Condition Precedent Proposals is not approved, the New Merlin Employee Stock Purchase Plan Proposal will have no effect, even if approved by holders of Inflection Point Ordinary Shares.
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Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as an ordinary resolution, that the Merlin, Inc. 2026 Employee Stock Purchase Plan, a copy of which is attached to the proxy statement/prospectus as Annex H, be adopted and approved.”
Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT INFLECTION POINT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE New Merlin Employee Stock Purchase Plan Proposal.
The existence of financial and personal interests of one or more of Inflection Point’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 Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section of this proxy statement/prospectus entitled “The Business Combination Proposal — Interests of Certain Inflection Point Persons in the Business Combination” for a further discussion.
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PROPOSAL NO. 9 — THE ADJOURNMENT PROPOSAL
The Adjournment Proposal allows the chairman of the Inflection Point Board to submit a proposal to approve, by ordinary resolution, the adjournment of the extraordinary general meeting to a later date or dates, if necessary, or convenient, (i) to permit further solicitation and vote of proxies in the event that, based on the tabulated votes, there are not sufficient votes at the time of the extraordinary general meeting to approve the Condition Precedent Proposals, (ii) if Inflection Point determines that one or more of the conditions to Closing is not or will not be satisfied or waived or (iii) to facilitate the Domestication, the Merger or any other Transaction. The purpose of the Adjournment Proposal is to permit further solicitation of proxies and votes and to provide additional time for the Sponsor, Inflection Point and their members and shareholders, respectively, to make purchases of Inflection Point Ordinary Shares or other arrangements that would increase the likelihood of obtaining a favorable vote on the proposals to be put to the extraordinary general meeting. See “Proposal No. 1 — The Business Combination Proposal — Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination”.
Consequences if the Adjournment Proposal is Not Approved
If the Adjournment Proposal is presented to the extraordinary general meeting and is not approved by the shareholders, the chairman of the Inflection Point Board may not be able to adjourn the extraordinary general meeting to a later date in the event that, based on the tabulated votes, there are not sufficient votes at the time of the extraordinary general meeting to approve the Condition Precedent Proposals. In such events, the Business Combination would not be completed.
Vote Required for Approval
The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of the holders of a simple majority of the Inflection Point Ordinary Shares who, being present in person or by proxy and entitled to vote at the extraordinary general meeting, vote at the extraordinary general meeting. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting and otherwise will have no effect on a particular proposal.
The Adjournment Proposal is not conditioned upon any other proposal.
Resolution to be Voted Upon
The full text of the resolution to be passed is as follows:
“RESOLVED, as an ordinary resolution, that the adjournment of the extraordinary general meeting to a later date or dates, if necessary, (i) to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of one or more proposals at the extraordinary general meeting, (ii) if Inflection Point determines that one or more of the conditions to Closing is not or will not be satisfied or waived or (iii) to facilitate the Domestication, the Merger or any other transaction contemplated by the Business Combination Agreement or the related agreements, be approved.”
Recommendation of the Inflection Point Board
THE INFLECTION POINT BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
The existence of financial and personal interests of Inflection Point’s directors may result in a conflict of interest on the part of one or more of the directors between what he, she or they may believe is in the best interests of Inflection Point 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, Inflection Point Fund and Inflection Point’s officers also have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “The Business Combination Proposal — Certain Interests of Inflection Point’s Directors and Officers and Others in the Business Combination” for a further discussion of these considerations.
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U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. federal income tax considerations (a) for U.S. Holders and Non-U.S. Holders (each as defined below, and together, “Holders”) of Inflection Point Class A Shares and Inflection Point Rights (each, an “Inflection Point Security”) of the Domestication, (b) for Holders of Inflection Point Class A Shares that exercise their redemption rights in connection with the Business Combination, (c) for Holders of New Merlin Common Stock and Post-Domestication Rights (each, a “New Merlin Security”) of the Merger, (d) for Holders of Merlin Common Stock of the Merger, and (e) for Holders of New Merlin Common Stock of the ownership and disposition of New Merlin Common Stock. With respect to the ownership and disposition of New Merlin Common Stock, this discussion is limited to New Merlin Common Stock received in connection with the Domestication or the Merger. This section applies only to Holders that hold their Inflection Point Securities, New Merlin Securities and Merlin Common Stock as “capital assets” for U.S. federal income tax purposes (generally, property held for investment).
This discussion does not address the U.S. federal income tax consequences (i) to the Sponsor or its affiliates or any other sponsor, officers or directors of Inflection Point, (ii) to any person holding Founder Shares, Private Placement Units, Series A Preferred Stock, New Merlin Series A Warrants, Pre-Funded Convertible Notes, Pre-Funded Warrants or any securities issued pursuant to the PIPE Investments or (iii) to any Holder of Merlin Common Stock that acquired such securities in connection with the Merger or exercises appraisal rights in connection with the Merger. This discussion is limited to U.S. federal income tax considerations and does not address any estate, gift or other U.S. federal non-income tax considerations or considerations arising under the tax laws of any U.S. state, or local or non-U.S. jurisdiction. This discussion does not describe all of the U.S. federal income tax consequences that may be relevant to any particular investor in light of their particular circumstances, including the alternative minimum tax, the Medicare tax on certain investment income and the different consequences that may apply to investors subject to special rules under U.S. federal income tax law, such as:
• banks, financial institutions or financial services entities;
• broker-dealers;
• taxpayers that are subject to the mark-to-market accounting rules with respect to the Inflection Point Securities or New Merlin Securities;
• tax-exempt entities;
• governments or agencies or instrumentalities thereof;
• insurance companies;
• regulated investment companies or real estate investment trusts;
• partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes) or pass-through entities (including S Corporations), or persons that hold or will hold the Inflection Point Securities or New Merlin Securities through such partnerships or pass-through entities;
• U.S. expatriates or former long-term residents of the United States;
• except as specifically provided below, persons that actually or constructively own five percent or more (by vote or value) of Inflection Point Ordinary Shares, Merlin’s stock or New Merlin’s stock;
• persons that acquired their Inflection Point Securities, Merlin Common Stock or New Merlin Securities pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation;
• persons that hold or will hold their Inflection Point Securities, Merlin Common Stock or New Merlin Securities as part of a straddle, constructive sale, hedge, wash sale, conversion or other integrated or similar transaction;
• U.S. Holders whose functional currency is not the U.S. dollar; or
• “specified foreign corporations” (including “controlled foreign corporations”), “passive foreign investment companies” or corporations that accumulate earnings to avoid U.S. federal income tax.
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If a partnership (or any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Inflection Point Securities, New Merlin Securities or Merlin 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, the activities of the partnership and certain determinations made at the partner level. Partnerships holding any Inflection Point Securities, New Merlin Securities or Merlin 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 of the Domestication, the Merger, the exercise of redemption rights with respect to Inflection Point Class A Shares and the ownership and disposition of New Merlin Securities.
This discussion is based on the Code, Treasury Regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as of the date hereof. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax considerations described herein. Inflection Point has not sought, and does not intend to seek, any rulings from the IRS as to any U.S. federal income tax considerations described herein. Accordingly, there can be no assurance that the IRS will not take positions inconsistent with the considerations discussed below or that any such positions would not be sustained by a court.
THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE DOMESTICATION, THE EXERCISE OF REDEMPTION RIGHTS WITH RESPECT TO INFLECTION POINT CLASS A ORDINARY SHARES, THE MERGER AND THE OWNERSHIP AND DISPOSITION OF NEW MERLIN LABS SECURITIES. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE DOMESTICATION, THE EXERCISE OF REDEMPTION RIGHTS WITH RESPECT TO INFLECTION POINT CLASS A SHARES, THE MERGER AND THE OWNERSHIP AND DISPOSITION OF NEW MERLIN LABS SECURITIES, AS APPLICABLE, INCLUDING THE APPLICABILITY AND EFFECTS OF U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX LAWS.
For purposes of this discussion, because the components of an Inflection Point Unit are generally separable at the option of the holder, the holder of an Inflection Point Unit generally should be treated, for U.S. federal income tax purposes, as the owner of the underlying Inflection Point Class A Share and Inflection Point Right components of the Inflection Point Unit, and the discussion below with respect to actual holders of Inflection Point Class A Shares and Inflection Point Rights also should apply to holders of Inflection Point Units (as the deemed owners of the underlying Inflection Point Class A Shares and Inflection Point Rights that constitute the Inflection Point Units). Accordingly, the separation of an Inflection Point Unit into one Inflection Point Class A Share and the one-half of one Inflection Point Right underlying the Inflection Point Unit generally should not be a taxable event for U.S. federal income tax purposes. This position is not free from doubt, and no assurance can be given that the IRS would not assert, or that a court would not sustain, a contrary position. Holders of Inflection Point securities are urged to consult their tax advisors concerning the U.S. federal, state, local and any non-U.S. tax consequences of the transactions contemplated by the Domestication and the Business Combination (including the exercise of any redemption rights) with respect to any Inflection Point Class A Shares and Inflection Point Rights held through Inflection Point Units (including alternative characterizations of Inflection Point Units).
I. TAX TREATMENT OF THE DOMESTICATION
The U.S. federal income tax consequences to the Holders 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 is a “mere change in identity, form, or place of organization of one corporation, however effected” (an “F Reorganization”). Pursuant to the Domestication, Inflection Point will change its jurisdiction of incorporation from the Cayman Islands to Delaware, and, in connection with the Closing, will be renamed “Merlin, Inc.”
Whether the Domestication will qualify as an F Reorganization is not free from doubt due to the absence of direct guidance on the application of Section 368(a)(1)(F) of the Code to an entity that holds only investment-type assets. White & Case will deliver an opinion that, based on customary assumptions, representations and covenants, the Domestication should qualify as an F Reorganization, which such opinion will be filed as Exhibit 8.1 to the registration statement of which this proxy statement/prospectus forms a part. The obligations of Inflection Point to undertake the Domestication and the Business Combination are not conditioned on the receipt of an opinion regarding the Domestication’s qualification as an F Reorganization. If any of the assumptions, representations or covenants on which the opinion is based is or becomes
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incorrect, incomplete, inaccurate or is otherwise not complied with, the validity of the opinion described above may be adversely affected and the tax consequences of the Domestication could differ from those described herein. An opinion of counsel represents counsel’s legal judgment and is not binding on the IRS or any court. Inflection Point has not requested, and does not intend to request, a ruling from the IRS as to the U.S. federal income tax consequences of the Domestication. Consequently, no assurance can be given that the IRS will not assert, or that a court would not sustain, a position contrary to any of those set forth below. Accordingly, each Holder of Inflection Point Securities is urged to consult its tax advisor with respect to the particular tax consequence of the Domestication to such Holder.
Assuming the Domestication qualifies as an F Reorganization, the Domestication should be treated for U.S. federal income tax purposes as if Inflection Point (a) transferred all of its assets and liabilities to New Merlin in exchange for all of the outstanding stock and rights of New Merlin; and (b) then distributed such shares of stock and rights of New Merlin to the holders of securities of Inflection Point in liquidation of Inflection Point. The taxable year of Inflection Point will be deemed to end on the date of the Domestication.
If the Domestication fails to qualify as an F Reorganization, a Holder of Inflection Point Securities generally would be treated for U.S. federal income tax purposes as having exchanged its Inflection Point Securities for New Merlin Securities in a taxable transaction.
II. U.S. HOLDERS
As used herein, a “U.S. Holder” is a beneficial owner of an Inflection Point Security, Merlin Common Stock or a New Merlin Security, as applicable, who or that is for U.S. federal income tax purposes a “U.S. person.” A U.S. person is for U.S. federal income tax purposes:
• an individual who is a citizen or resident of the United States;
• a corporation that is created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
• an estate whose income is subject to U.S. federal income tax regardless of its source; or
• a trust if (1) a U.S. court can exercise primary supervision over the administration of such trust and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a United States person.
A. Tax Effects of the Domestication to U.S. Holders of Inflection Point Securities
1. Generally
Assuming the Domestication qualifies as an F Reorganization, U.S. Holders of Inflection Point securities generally are not expected to recognize gain or loss for U.S. federal income tax purposes in connection with the Domestication, except as provided below under the sections entitled “— 3. Effects of Section 367 to U.S. Holders of Inflection Point Class A Shares” and “— 4. PFIC Considerations”.
Subject to the discussion below under the section entitled “— 4. PFIC Considerations”, if the Domestication fails to qualify as an F Reorganization, a U.S. Holder of Inflection Point securities generally would recognize gain or loss with respect to its Inflection Point Securities in an amount equal to the difference, if any, between the fair market value of the corresponding New Merlin Securities received in the Domestication and the U.S. Holder’s adjusted tax basis in its Inflection Point Securities surrendered.
Although the redemptions of U.S. Holders that exercise redemption rights with respect to Inflection Point Class A Shares will occur prior to the Domestication, it is possible that the IRS could assert that for U.S. federal income tax purposes such redemptions should be treated as occurring after the Domestication. If such redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication, U.S. Holders exercising redemption rights would be subject to the potential tax consequences of the Domestication. All U.S. Holders considering exercising redemption rights with respect to Inflection Point Class A Shares are urged to consult with their tax advisors with respect to the potential tax consequences to them of the Domestication and exercise of redemption rights, including the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication.
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2. Basis and Holding Period Considerations
Assuming the Domestication qualifies as an F Reorganization, subject to the discussion below under the section entitled “— 4. PFIC Considerations”: (a) the tax basis of a share of New Merlin Common Stock or a Post-Domestication Right received by a U.S. Holder in the Domestication will equal the U.S. Holder’s tax basis in the Inflection Point Class A Share or Inflection Point Right 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 (b) the holding period for a share of New Merlin Common Stock or a Post-Domestication Right received by a U.S. Holder will include such U.S. Holder’s holding period for the Inflection Point Class A Share or Inflection Point Right surrendered in exchange therefor.
If the Domestication fails to qualify as an F Reorganization, the U.S. Holder’s basis in the New Merlin Common Stock and Post-Domestication Rights would be equal to the fair market value of such New Merlin Common Stock and Post-Domestication Rights on the date of the Domestication, and such U.S. Holder’s holding period for such New Merlin Common Stock and Post-Domestication Rights would begin on the day following the date of the Domestication. Holders who hold different blocks of Inflection Point Securities (generally, Inflection Point Securities purchased or acquired on different dates or at different prices) should consult their tax advisors to determine how the above rules apply to them, and the discussion above does not specifically address all of the consequences to U.S. Holders who hold different blocks of Inflection Point Securities.
3. Effects of Section 367 to U.S. Holders of Inflection Point Class A Shares
Section 367 of the Code applies to certain transactions involving foreign corporations, including a domestication of a foreign corporation in a transaction that qualifies as an F Reorganization. Subject to the discussion below under the section entitled “— 4. PFIC Considerations”, 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-deferred. Section 367(b) of the Code will generally apply to U.S. Holders on the date of the Domestication. The application of these rules to the Inflection Point Rights is uncertain and all U.S. Holders are urged to consult their tax advisors with respect to the particular tax consequences applicable to them of the attribution rules and application of the rules to the Inflection Point Rights.
As noted above, although the redemptions of U.S. Holders that exercise redemption rights with respect to Inflection Point Class A Shares will occur prior to the Domestication, it is possible that the IRS could assert that for U.S. federal income tax purposes such redemptions should be treated as occurring after the Domestication. If such redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication, U.S. Holders exercising redemption rights would be subject to the potential tax consequences of the Domestication, and the determination of whether a U.S. Holder is a 10% U.S. Shareholder (as defined below) or is otherwise subject to Section 367 of the Code would be determined as if the redemptions had not yet occurred at the time of the Domestication. U.S. Holders should consult their tax advisors regarding the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication.
a. U.S. Holders Who Own 10 Percent or More (By Vote or Value) of Inflection Point Ordinary Shares
Subject to the discussion below under the section entitled “— 4. PFIC Considerations”, a U.S. Holder who beneficially owns (directly, indirectly or constructively) ten percent (10%) or more of the total combined voting power of all classes of Inflection Point shares entitled to vote or ten percent (10%) or more of the total value of all classes of Inflection Point shares (a “10% U.S. Shareholder”) on the date of the Domestication must include in income as a deemed dividend deemed paid by Inflection Point the “all earnings and profits amount” attributable to the Inflection Point Class A Ordinary Shares it directly owns within the meaning of Treasury Regulations under Section 367 of the Code. A U.S. Holder’s ownership of Inflection Point Rights will be taken into account in determining whether such U.S. Holder is a 10% U.S. Shareholder. Complex attribution rules apply in determining whether a U.S. Holder is a 10% U.S. Shareholder and all U.S. Holders are urged to consult their tax advisors with respect to these attribution rules.
A 10% U.S. Shareholder’s “all earnings and profits amount” with respect to its Inflection Point Class A Shares is the net positive earnings and profits of Inflection Point (as determined under Treasury Regulations under Section 367 of the Code) attributable to such Inflection Point Class A Shares (as determined under Treasury Regulations under Section 367 of the Code) but without regard to any gain that would be realized on a sale or exchange of such Inflection Point Class A Shares. Treasury Regulations under Section 367 of the Code provide that the “all earnings and profits amount” attributable to a shareholder’s stock generally is determined according to the principles of Section 1248 of
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the Code. In general, Section 1248 of the Code and the Treasury Regulations thereunder provide that the amount of earnings and profits attributable to a block of stock (as defined in Treasury Regulations under Section 1248 of the Code) in a foreign corporation is the ratably allocated portion of the foreign corporation’s earnings and profits generated during the period the shareholder held the block of stock.
Inflection Point does not expect to have significant cumulative net earnings and profits on the date of the Domestication. If Inflection Point’s cumulative net earnings and profits through the date of the Domestication is less than or equal to zero, then a 10% U.S. Shareholder should not be required to include in gross income an “all earnings and profits amount” with respect to its Inflection Point Class A Shares. However, the determination of earnings and profits is complex and may be impacted by numerous factors. It is possible that the amount of Inflection Point’s cumulative net earnings and profits could be positive through the date of the Domestication, in which case a 10% U.S. Shareholder would be required to include its “all earnings and profits amount” in income as a deemed dividend deemed paid by Inflection Point under Treasury Regulations under Section 367 of the Code as a result of the Domestication.
b. U.S. Holders Who Own Less Than 10% (By Vote or Value) of Inflection Point Ordinary Shares
Subject to the discussion below under the section entitled “— 4. PFIC Considerations”, a U.S. Holder who, on the date of the Domestication, is not a 10% U.S. Shareholder and whose Inflection Point Class A Ordinary Shares have a fair market value of $50,000 or more on the date of the Domestication will recognize gain (but not loss) with respect to its Inflection Point Class A Ordinary Shares in the Domestication or, in the alternative, may elect to recognize the “all earnings and profits” amount attributable to such U.S. Holder’s Inflection Point Class A Shares as described below.
Subject to the discussion below under the section entitled “— 4. PFIC Considerations”, unless a U.S. Holder makes the “all earnings and profits election” as described below, such U.S. Holder generally must recognize gain (but not loss) with respect to New Merlin Common Stock received in the Domestication in an amount equal to the excess of the fair market value of such New Merlin Common Stock over the U.S. Holder’s adjusted tax basis in the Inflection Point Class A Shares deemed surrendered in exchange therefor. U.S. Holders who hold different blocks of Inflection Point Class A Shares (generally, Inflection Point Class A 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.
In lieu of recognizing any gain as described in the preceding paragraph, a U.S. Holder may elect to include in income as a deemed dividend deemed paid by Inflection Point the “all earnings and profits amount” attributable to its Inflection Point Class A Ordinary 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:
(i) a statement that the Domestication is a Section 367(b) exchange (within the meaning of the applicable Treasury Regulations);
(ii) a complete description of the Domestication;
(iii) a description of any stock, securities or other consideration transferred or received in the Domestication;
(iv) a statement describing the amounts required to be taken into account for U.S. federal income tax purposes;
(v) 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 Inflection Point (or New Merlin) establishing and substantiating the U.S. Holder’s “all earnings and profits amount” with respect to the U.S. Holder’s Inflection Point Class A Shares and (B) a representation that the U.S. Holder has notified Inflection Point (or New Merlin) that the U.S. Holder is making the election; and
(vi) 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.
In addition, the election must be attached by an electing U.S. Holder to such U.S. Holder’s 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 Inflection Point or New Merlin no later than the date such tax return is filed. In connection with this election, New Merlin will reasonably cooperate with U.S. Holders of Inflection Point Class A Shares, upon request, to make available to such requesting U.S. Holders information regarding Inflection Point’s earnings and profits.
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Inflection Point does not expect to have significant cumulative earnings and profits through the date of the Domestication and if that proves to be the case, U.S. Holders who make this election are not expected to have a significant income inclusion under Section 367(b) of the Code, provided that the U.S. Holder properly executes the election and complies with the applicable notice requirements. However, as noted above, if it were determined that Inflection Point had positive earnings and profits through the date of the Domestication, a U.S. Holder that makes the election described herein could have an “all earnings and profits amount” with respect to its Inflection Point Class A Shares, and thus could be required to include that amount in income as a deemed dividend deemed paid by Inflection Point under applicable Treasury Regulations as a result of the Domestication.
EACH U.S. HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE CONSEQUENCES TO IT OF MAKING AN ELECTION TO INCLUDE IN INCOME THE “ALL EARNINGS AND PROFITS AMOUNT” ATTRIBUTABLE TO ITS INFLECTION POINT CLASS A SHARES UNDER SECTION 367(b) OF THE CODE AND THE APPROPRIATE FILING REQUIREMENTS WITH RESPECT TO SUCH AN ELECTION.
A U.S. Holder who, on the date of the Domestication, is not a 10% U.S. Shareholder and whose Inflection Point Class A Shares have a fair market value of less than $50,000 on the date of the Domestication generally should not be required to recognize any gain or loss or include any part of the “all earnings and profits amount” in income under Section 367 of the Code in connection with the Domestication. However, such U.S. Holder may be subject to taxation under the PFIC rules as discussed below under the section entitled “— 4. PFIC Considerations”.
ALL U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE EFFECT OF SECTION 367 OF THE CODE TO THEIR PARTICULAR CIRCUMSTANCES.
5. PFIC Considerations
Regardless of whether the Domestication qualifies as an F Reorganization (and, if the Domestication qualifies as an F Reorganization, in addition to the discussion above under the section entitled “— 3. Effects of Section 367 to U.S. Holders of Inflection Point Class A Ordinary Shares”), the Domestication could be a taxable event to U.S. Holders under the PFIC provisions of the Code if Inflection Point is considered a PFIC.
a. Definition of a PFIC
A foreign (i.e., non-U.S.) corporation will be classified as a PFIC for U.S. federal income tax purposes if either (a) at least seventy five percent (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 twenty five percent (25%) of the shares by value, is passive income or (b) at least fifty percent (50%) of its assets in a taxable year (generally 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 twenty five percent (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 received from unrelated persons) and gains from the disposition of passive assets. The determination of whether a foreign corporation is a PFIC is made annually.
b. PFIC Status of Inflection Point
Because Inflection Point is a blank check company with no current active business prior to the Business Combination, and based upon the composition of its income and assets, and upon a review of its financial statements, Inflection Point believes that it likely has been a PFIC since its first taxable year and will likely be considered a PFIC for the taxable year which ends as a result of the Domestication. However, Inflection Point’s actual PFIC status for any taxable year will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect to Inflection Point’s status as a PFIC for the taxable year which ends as a result of the Domestication. In addition, Inflection Point’s U.S. counsel expresses no opinion with respect to Inflection Point’s PFIC status for any taxable year.
c. Effects 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 who disposes of stock of a PFIC (including for this purpose an Inflection Point Right, which may be characterized as stock itself or may be treated as stock, under a proposed Treasury
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Regulation that generally treats an “option” to acquire the stock of a PFIC as stock of the PFIC, exchanging rights of a PFIC for newly issued rights in connection with a domestication transaction) recognizes gain notwithstanding any other provision of the Code. No final Treasury Regulations are currently in effect under Section 1291(f) of the Code. However, proposed Treasury Regulations under Section 1291(f) of the Code have been promulgated with a retroactive effective date. If finalized in their current form, those proposed Treasury Regulations would require gain recognition to U.S. Holders of Inflection Point Class A Shares and Inflection Point Rights as a result of the Domestication if:
(i) Inflection Point were classified as a PFIC at any time during such U.S. Holder’s holding period in such Inflection Point Class A Shares or Inflection Point Rights; and
(ii) the U.S. Holder had not timely made (a) a QEF Election (as defined below) for the first taxable year in which the U.S. Holder owned such Inflection Point Class A Ordinary Shares or in which Inflection Point was a PFIC, whichever is later (or a QEF Election along with a purging election), or (b) an MTM Election (as defined below) with respect to such Inflection Point Class A Ordinary Shares. Under current law, neither a QEF Election nor an MTM Election can be made with respect to an option (and the Inflection Point Rights may be considered an option for such purposes).
The tax on any such recognized gain would be imposed based on a complex set of computational rules designed to offset the tax deferral with respect to the undistributed earnings of Inflection Point. Under these rules (the “excess distributions regime”):
• the U.S. Holder’s gain will be allocated ratably over the U.S. Holder’s holding period for such U.S. Holder’s Inflection Point Class A Shares or Inflection Point Rights;
• the amount of gain allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain, or to the period in the U.S. Holder’s holding period before the first day of the first taxable year in which Inflection Point was a PFIC, will be taxed as ordinary income;
• the amount of gain allocated to each other taxable year (or portion thereof) of the U.S. Holder and included in such U.S. Holder’s holding period would be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and
• an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the U.S. Holder in respect of the tax attributable to each such other taxable year or portion thereof (described in the third bullet above) of such U.S. Holder.
In addition, the proposed Treasury Regulations provide coordinating rules with Section 367(b) of the Code, whereby, if the gain recognition rule of the proposed Treasury Regulations applied to a disposition of PFIC stock that results from a transfer with respect to which Section 367(b) of the Code requires the U.S. Holder to recognize gain or include an amount in income as a deemed dividend deemed paid by Inflection Point, the gain realized on the transfer is taxable as an excess distribution under the excess distribution regime, and the excess, if any, of the amount to be included in income under Section 367(b) of the Code over the gain realized under these rules is taxable as provided under Section 367(b) of the Code. See the discussion above under the section entitled “— 3. Effects of Section 367 to U.S. Holders of Inflection Point Class A Shares”.
It is difficult to predict whether, in what form and with what effective date, final Treasury Regulations under Section 1291(f) of the Code may be adopted or how any such final Treasury Regulations would apply. Therefore, U.S. Holders of Inflection Point Class A Shares that have not made a timely and effective QEF Election (or a QEF Election along with a purging election) or an MTM Election (each as defined below) may, pursuant to the proposed Treasury Regulations, be subject to taxation under the PFIC rules on the Domestication with respect to their Inflection Point Class A Shares and Inflection Point Rights under the excess distribution regime in the manner set forth above. A U.S. Holder that made a timely and effective QEF Election (or a QEF Election along with a purging election) or an MTM Election with respect to its Inflection Point Class A Shares is referred to herein as an “Electing Shareholder” and a U.S. Holder that is not an Electing Shareholder is referred to herein as a “Non-Electing Shareholder”.
As discussed above, proposed Treasury Regulations issued under the PFIC rules generally treats an “option” (which may include an Inflection Point Right) to acquire the stock of a PFIC as stock of the PFIC, while final Treasury Regulations issued under the PFIC rules provide that neither a QEF Election nor an MTM Election (as defined below) may be made with respect to options. Therefore, subject to the potential treatment of Post-Domestication
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Rights as stock for U.S. federal income tax purposes rather than an option or other financial instrument, it is possible that the proposed Treasury Regulations issued under the PFIC rules, if finalized in their current form, would apply to cause gain recognition on the exchange of Inflection Point Rights for Post-Domestication Rights pursuant to the Domestication.
Any gain recognized by a Non-Electing Shareholder of Inflection Point Class A Ordinary Shares or a U.S. Holder of Inflection Point Rights as a result of the Domestication pursuant to PFIC rules would be taxable income to such U.S. Holder and taxed under the excess distribution regime in the manner set forth above, with no corresponding receipt of cash.
As noted above, if Inflection Point is considered a PFIC, the Domestication could be a taxable event under the PFIC rules regardless of whether the Domestication qualifies as an F Reorganization, and, absent a QEF Election (or a QEF Election along with a purging election) or an MTM Election, a U.S. Holder would be taxed under the excess distribution regime in the manner set forth above.
ALL U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE EFFECTS OF THE PFIC RULES ON THE DOMESTICATION, INCLUDING THE IMPACT OF ANY PROPOSED OR FINAL TREASURY REGULATIONS.
d. QEF Election and Mark-to-Market Election
The impact of the PFIC rules on a U.S. Holder of Inflection Point Class A Shares will depend on whether the U.S. Holder has made a timely and effective election to treat Inflection Point as a “qualified electing fund” under Section 1295 of the Code for the taxable year that is the first year in the U.S. Holder’s holding period of Inflection Point Class A Shares during which Inflection Point qualified as a PFIC (a “QEF Election”) or, if in a later taxable year, the U.S. Holder made a QEF Election along with a purging election. One type of purging election creates a deemed sale of the U.S. Holder’s Inflection Point Class A Shares at their then fair market value and requires the U.S. Holder to recognize gain pursuant to such purging election subject to the excess distribution regime described above. As a result of any such purging election, the U.S. Holder would increase the adjusted tax basis in its Inflection Point Class A Shares by the amount of the gain recognized and, solely for purposes of the PFIC rules, would have a new holding period in its Inflection Point Class A Shares. U.S. Holders are urged to consult their tax advisors as to the application of the rules governing purging elections to their particular circumstances.
A U.S. Holder’s ability to make a timely and effective QEF Election (or a QEF Election along with a purging election) with respect to its Inflection Point Class A Shares is contingent upon, among other things, the provision by Inflection Point of a “PFIC Annual Information Statement” to such U.S. Holder. New Merlin will reasonably cooperate with any requesting U.S. Holder to provide PFIC Annual Information Statements to such requesting U.S. Holder of Inflection Point Class A Shares with respect to each taxable year for which Inflection Point is determined to be a PFIC. As discussed above, a U.S. Holder is not able to make a QEF Election with respect to an option, which may include Inflection Point Rights, under current law. An Electing Shareholder generally would not be subject to the excess distribution regime discussed above with respect to their Inflection Point Class A Ordinary Shares. As a result, an Electing Shareholder generally is not expected to recognize gain or loss as a result of the Domestication except to the extent described under “— 3. Effects of Section 367 to U.S. Holders of Inflection Point Class A Ordinary Shares”, and subject to the discussion above under “— A. Tax Effects of the Domestication to U.S. Holders”, but rather would include annually in gross income its pro rata share of the ordinary earnings and net capital gain of Inflection Point, whether or not such amounts are actually distributed.
The impact of the PFIC rules on a U.S. Holder of Inflection Point Class A Shares may also depend on whether the U.S. Holder has made a mark-to-market election under Section 1296 of the Code (an “MTM Election”). U.S. Holders who hold (actually or constructively) stock of a foreign corporation that is classified as a PFIC may elect to mark such stock to its market value each taxable year if such stock is “marketable stock”, generally, stock that is regularly traded on a national securities exchange that is registered with the SEC, including Nasdaq. No assurance can be given that Inflection Point Class A Shares are considered to be marketable stock for purposes of the MTM Election for any taxable year or whether the other requirements of this election are satisfied. If such an election is available and has been made, such Electing Shareholder generally would not be subject to the excess distributions regime discussed above with respect to their Inflection Point Class A Shares in connection with the Domestication. Instead, in general, such Electing Shareholder will include as ordinary income each year the excess, if any, of the fair market value of its Inflection Point Class A Shares at the end of its taxable year over its
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adjusted tax basis in its Inflection Point Class A Shares. The Electing Shareholder also will recognize an ordinary loss in respect of the excess, if any, of its adjusted tax basis in its Inflection Point Class A Shares over the fair market value of its Inflection Point Class A Shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the MTM Election). The Electing Shareholder’s tax basis in its Inflection Point Class A Shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of its Inflection Point Class A Shares will be treated as ordinary income. However, if the MTM Election is not made by a U.S. Holder with respect to the first taxable year of its holding period for the Inflection Point Class A Shares in which Inflection Point is a PFIC, then the excess distribution regime discussed above will apply to certain dispositions of, distributions on and other amounts taxable with respect to, Inflection Point Class A Shares, including in connection with the Domestication. Under current law, an MTM Election is not available with respect to options, which may include Inflection Point Rights for such purposes.
The tax treatment of the Inflection Point Rights under the PFIC rules is uncertain and U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to their Inflection Point Rights.
THE RULES DEALING WITH PFICS ARE VERY COMPLEX AND ARE IMPACTED BY VARIOUS FACTORS IN ADDITION TO THOSE DESCRIBED ABOVE, INCLUDING THE APPLICATION OF THE RULES ADDRESSING OVERLAPS IN THE PFIC RULES AND THE SECTION 367(b) RULES AND THE RULES RELATING TO CONTROLLED FOREIGN CORPORATIONS. ALL U.S. HOLDERS OF INFLECTION POINT SECURITIES ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE CONSEQUENCES TO THEM OF THE PFIC RULES, INCLUDING, WITHOUT LIMITATION, WHETHER A QEF ELECTION (OR A QEF ELECTION ALONG WITH A PURGING ELECTION), AN MTM ELECTION OR ANY OTHER ELECTION IS AVAILABLE AND WHETHER AND HOW ANY OVERLAP RULES APPLY, AND THE CONSEQUENCES TO THEM OF ANY SUCH ELECTION OR OVERLAP RULE AND THE IMPACT OF ANY PROPOSED OR FINAL PFIC TREASURY REGULATIONS.
B. Tax Effects to U.S. Holders of Inflection Point Class A Shares of Exercising Redemption Rights
1. Generally
The U.S. federal income tax consequences to a U.S. Holder of Inflection Point Class A Shares that exercises its redemption rights with respect to its Inflection Point Class A Shares will depend on whether the redemption qualifies as a sale of shares under Section 302 of the Code. If the redemption qualifies as a sale of shares by a U.S. Holder, the tax consequences to such U.S. Holder are as described below under the section entitled “— 3. Taxation of Redemption Treated as a Sale”. If the redemption does not qualify as a sale of shares, a U.S. Holder will be treated as receiving a corporate distribution with the tax consequences to such U.S. Holder as described below under the section entitled “— 2. Taxation of Redemption Treated as a Distribution”.
Whether a redemption of shares qualifies for sale treatment will depend largely on the total number of shares of Inflection Point stock treated as held by the redeemed U.S. Holder before and after the redemption (including any shares treated as constructively owned by the U.S. Holder as a result of owning Inflection Point Rights and any shares that a U.S. Holder would directly or indirectly acquire pursuant to the Business Combination) relative to all of the stock of Inflection Point outstanding both before and after the redemption. The redemption generally will be treated as a sale of shares (rather than as a corporate distribution) if the redemption (1) is “substantially disproportionate” with respect to the U.S. Holder, (2) results in a “complete termination” of the U.S. Holder’s interest in Inflection Point or (3) is “not essentially equivalent to a dividend” with respect to the U.S. Holder. These tests are explained more fully below.
In determining whether any of the foregoing tests result in a redemption qualifying for sale treatment, a U.S. Holder takes into account not only shares actually owned by the U.S. Holder, but also shares that are constructively owned by it under certain attribution rules set forth in the Code. 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 that the holder has a right to acquire by exercise of an option, which would generally include shares which could be acquired pursuant to the conversion of Inflection Point Rights. Moreover, any shares that a U.S. Holder directly or constructively acquires pursuant to the Business Combination generally should be included in determining the U.S. federal income tax treatment of the redemption.
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In order to meet the substantially disproportionate test, the percentage of Inflection Point’s outstanding voting stock actually and constructively owned by the U.S. Holder immediately following the redemption of shares must, among other requirements, be less than eighty percent (80%) of the percentage of Inflection Point’s outstanding voting stock actually and constructively owned by the U.S. Holder immediately before the redemption (taking into account redemptions by other holders and possibly the New Merlin stock to be issued pursuant to the Business Combination). There will be a complete termination of a U.S. Holder’s interest Inflection Point if either (1) all of the shares actually and constructively owned by the U.S. Holder are redeemed or (2) all of the shares actually owned by the U.S. Holder are redeemed and the U.S. Holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the U.S. Holder does not constructively own any other shares (including any stock constructively owned by the U.S. Holder as a result of owning Inflection Point Rights). The redemption will not be essentially equivalent to a dividend if the redemption results in a “meaningful reduction” of the U.S. Holder’s proportionate interest in Inflection Point. Whether the redemption will result in a meaningful reduction in a U.S. Holder’s proportionate interest in Inflection Point 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 small minority stockholder in a publicly held corporation where such stockholder exercises no control over corporate affairs may constitute such a “meaningful reduction”.
If none of the foregoing tests is satisfied, then the redemption of shares will be treated as a corporate distribution to the redeemed U.S. Holder and the tax effects to such a U.S. Holder will be as described below under the section entitled “— 2. Taxation of Redemption Treated as a Distribution”. After the application of those rules, any remaining tax basis of the U.S. Holder in the redeemed shares will be added to the U.S. Holder’s adjusted tax basis in its remaining Inflection Point stock or, if it has none, to the U.S. Holder’s adjusted tax basis in its Inflection Point Rights or possibly in other Inflection Point stock constructively owned by it.
Redeeming U.S. Holders generally will be subject to the PFIC rules relating to the excess distribution regime, QEF Election and MTM Election described above under the section entitled “— A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations” with respect to any gain or loss recognized by the U.S. Holder on its deemed sale of its Inflection Point Class A Shares (if the redemption were treated as a sale of shares) or any corporate distributions deemed received on its Inflection Point Class A Shares (if the redemption were treated as a corporate distribution) without regard to any potential limitations or other interactions of such PFIC rules in connection with an F Reorganization or Section 367 of the Code as discussed therein.
U.S. Holders who actually or constructively own at least five percent (5%) by vote or value (or, if Inflection Point Class A Shares is not then publicly traded, at least one percent (1%) by vote or value) or more of the total outstanding Inflection Point stock may be subject to special reporting requirements with respect to a redemption of shares, and such holders should consult with their tax advisors with respect to their reporting requirements.
U.S. Holders should consult their tax advisors regarding the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication and the consequences thereof to them based on their particular circumstances.
2. Taxation of Redemption Treated as a Distribution
If the redemption of a U.S. Holder’s shares is treated as a corporate distribution, as discussed above under the section entitled “— 1. Generally”, the amount of cash received in the redemption generally will constitute a dividend for U.S. federal income tax purposes to the extent paid from Inflection Point’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Distributions in excess of Inflection Point’s current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in its shares. Any remaining excess will be treated as gain realized on the sale of shares and will be treated as described below under the section entitled “— 3. Taxation of Redemption Treated as a Sale”.
As discussed above, a redeeming U.S. Holder generally will be subject to the PFIC rules relating to the excess distribution regime, QEF Election and MTM Election described above under the section entitled “— A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations” with respect to any corporate distributions deemed received on its Inflection Point Class A Ordinary Shares (if the redemption were treated as a corporate distribution) without regard to any potential limitations or other interactions of such PFIC rules in connection with an F Reorganization or Section 367 of the Code as discussed therein.
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3. Taxation of Redemption Treated as a Sale
If the redemption of a U.S. Holder’s shares is treated as a sale, as discussed above under the section entitled “— 1. Generally”, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount of cash received in the redemption and the U.S. Holder’s adjusted tax basis in the shares redeemed. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period for the shares so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. Holders generally will be eligible to be taxed at reduced rates. It is unclear, however, whether certain redemption rights with respect to the Public Shares may suspend the running of the applicable holding period of the Public Shares for this purpose. If the running of the holding period for the Public Shares is suspended, then non-corporate U.S. Holders may not be able to satisfy the one-year holding period requirement for long-term capital gain treatment, in which case any gain on a redemption that is treated as a sale of the Public Shares would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. The deductibility of capital losses is subject to limitations.
As discussed above, a redeeming U.S. Holder generally will be subject to the PFIC rules relating to the excess distribution regime, QEF Election and MTM Election described above under the section entitled “— A. Tax Effects of the Domestication to U.S. Holders — 4. PFIC Considerations” with respect to any gain or loss recognized by the U.S. Holder on its deemed sale of its Inflection Point Class A Shares (if the redemption were treated as a sale of shares) without regard to any potential limitations or other interactions of such PFIC rules in connection with an F Reorganization or Section 367 of the Code as discussed therein.
U.S. Holders who hold different blocks of shares (including as a result of holding different blocks of Inflection Point Class A 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.
ALL U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES TO THEM OF AN EXERCISE OF REDEMPTION RIGHTS.
C. Tax Consequences of the Merger to New Merlin and U.S. Holders of New Merlin Securities
Neither Inflection Point nor any U.S. Holder of Inflection Point Class A Shares that received New Merlin Common Stock in connection with the Domestication will be subject to any material U.S. federal income tax consequences solely in connection with the Merger.
Each Post-Domestication Right converts automatically into one-tenth of a share of New Merlin Common Stock without additional consideration in connection with the Merger. No fractional shares are issued. Each New Merlin Unit is cancelled and entitles the holder to 1.1 shares of New Merlin Common Stock, with any fractional share rounded down to the nearest whole share. U.S. Holders generally should not recognize gain or loss on the conversion of rights (including Post-Domestication Rights underlying New Merlin Units) solely into New Merlin Common Stock in connection with the Merger, subject to the discussion above under the section entitled “— 4. PFIC Considerations”. The basis in New Merlin Common Stock received for Post-Domestication Rights (including Post-Domestication Rights underlying New Merlin Units) generally would equal the basis in those Post-Domestication Rights, adjusted for any income recognized. U.S. Holders are urged to consult their tax advisors regarding the holding period that would apply to New Merlin Common Stock received for Post-Domestication Rights or in connection with the conversion of New Merlin Units in connection with the Merger.
D. Tax Consequences of the Merger to U.S. Holders of Merlin Common Stock
Inflection Point and Merlin intend the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Latham & Watkins LLP intends to deliver an opinion on the basis of facts, representations and assumptions and subject to the limitations and qualifications set forth or referred to in such opinion regarding the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code. Such opinion of counsel will be based on customary assumptions and certain representations, warranties, and covenants. If any of these assumptions, representations, warranties, or covenants is or becomes incorrect, incomplete, or inaccurate, or is violated, or if there is a change in U.S. federal income tax law after the date of such opinion of counsel, the validity of such opinion of counsel may be adversely affected and the U.S. federal income tax consequences of the Merger could differ materially from those described below. In addition, such opinion of counsel is not free from doubt because there is no authority
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directly addressing the treatment of all of the particular facts of the Merger for U.S. federal income tax purposes. An opinion of counsel represents counsel’s legal judgment but is not binding on the IRS or any court. Moreover, the obligations of neither Inflection Point nor Merlin to complete the Merger are conditioned on the receipt of any such opinion, and neither Inflection Point nor Merlin intends to request a ruling from the IRS with respect to the tax treatment of the Merger, and as a result, no assurance can be given that the IRS will not challenge the treatment of the Merger described below or that a court would not sustain such a challenge. If the IRS were to successfully challenge the “reorganization” status of the Merger, Holders of Merlin Common Stock could be required to recognize gain on their exchange of their Merlin Common Stock as a result of the Merger, as described below.
Provided the Merger qualifies as a reorganization, a U.S. Holder that receives New Merlin Common Stock in exchange for shares of Merlin Common Stock 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 New Merlin Common Stock received in exchange for the Merlin Common Stock surrendered in connection with the Merger should equal the U.S. Holder’s aggregate adjusted tax basis in the shares of Merlin Common Stock exchanged therefor. A U.S. Holder’s holding period in the New Merlin Common Stock received should include the holding period for the U.S. Holder’s shares of Merlin Common Stock surrendered in exchange therefor.
If a U.S. Holder has acquired different blocks of Merlin Common Stock at different times or at different prices, then such U.S. Holder’s tax basis and holding period in shares of New Merlin Common Stock received in the Merger generally will be determined with reference to each block of Merlin Common Stock. Any such U.S. Holder of Merlin Common Stock should consult their tax advisors with respect to identifying the bases or holding periods of the shares of New Merlin Common Stock received in the Merger.
Each U.S. Holder that receives shares of New Merlin Common Stock in the Merger is required to retain permanent records pertaining to the Merger and make such records available to any authorized IRS officers and employees. Such records should specifically include information regarding the number, basis, and fair market value of the Merlin Common Stock exchanged and the number of shares of New Merlin Common Stock received in exchange therefor.
Additionally, U.S. Holders who owned immediately before the Merger at least one percent (by vote or value) of the total outstanding stock of New Merlin are required to attach a statement to their U.S. federal income tax returns for the year in which the Merger is consummated that contains the information listed in Treasury Regulation Section 1.368-3(b). Such statement must include the holder’s tax basis in its Merlin Common Stock surrendered in the Merger, the fair market value of such stock, the date of the Merger and the name and employer identification number of each of Merlin and New Merlin. Holders should consult their tax advisors regarding the application of these rules.
E. Tax Consequences of Ownership and Disposition of New Merlin Common Stock to U.S. Holders
1. Taxation of Distributions
In general, distributions of cash or other property to U.S. Holders of New Merlin Common Stock (other than certain distributions of New Merlin stock or rights to acquire New Merlin stock) generally will constitute dividends for U.S. federal income tax purposes to the extent paid from New Merlin’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in its New Merlin Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the New Merlin Common Stock and will be treated as described below under the section entitled “— 2. Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of New Merlin Common Stock”.
Dividends paid to a U.S. Holder that is treated as a taxable corporation for U.S. federal income tax purposes generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends paid to a non-corporate U.S. Holder may constitute “qualified dividend income” that will be subject to tax at reduced rates accorded to long-term capital gains.
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2. Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of New Merlin Common Stock
Upon a sale or other taxable disposition of New Merlin Common Stock (which, in general, would include a redemption of New Merlin Common Stock that is treated as a sale of such common stock), a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the New Merlin Common Stock. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period for the New Merlin Common Stock so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. Holders may be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally, the amount of gain or loss recognized by a U.S. Holder is an amount equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received in such disposition and (ii) the U.S. Holder’s adjusted tax basis in its New Merlin Common Stock so disposed of. See the section entitled “— A. Tax Effects of the Domestication to U.S. Holders” above for a discussion of a U.S. Holder’s adjusted tax basis in its New Merlin Common Stock following the Domestication. See the section entitled “— D. Tax Consequences of the Merger to U.S. Holders of Merlin Common Stock” above for a discussion of a U.S. Holder’s adjusted tax basis in its New Merlin Common Stock following the Merger. See the section entitled “— Tax Consequences of the Merger to U.S. Holders of Merlin Common Stock” above for a discussion of a U.S. Holder of Merlin Common Stock’s adjusted tax basis in its New Merlin Common Stock following the Merger.
F. Information Reporting and Backup Withholding
Payments of distributions on and the proceeds from a sale or other disposition of New Merlin Securities will be subject to information reporting to the IRS and U.S. backup withholding on such payments may be possible. 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.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability, and the U.S. 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.
III. NON-U.S. HOLDERS
As used herein, a “Non-U.S. Holder” is a beneficial owner of an Inflection Point Security, Merlin Common Stock or New Merlin Security, as applicable, who or that is for U.S. federal income tax purposes:
• a non-resident alien individual, other than certain former citizens and residents of the United States subject to U.S. tax as expatriates;
• a foreign corporation; or
• an estate or trust that is not a U.S. Holder.
A. Tax Effects of the Domestication to Non-U.S. Holders of Inflection Point Securities
The Domestication is not expected to result in any U.S. federal income tax consequences to a Non-U.S. Holder of Inflection Point Securities unless the Domestication fails to qualify as an F Reorganization and such Non-U.S. Holder holds its Inflection Point Securities in connection with a conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such Non-U.S. Holder maintains in the United States). Non-U.S. Holders will own stock and rights of a U.S. corporation, i.e., New Merlin, rather than a non-U.S. corporation, i.e., Inflection Point, after the Domestication.
Although the redemptions of Non-U.S. Holders that exercise redemption rights with respect to Inflection Point Class A Ordinary Shares will occur prior to the Domestication, it is possible that the IRS could assert that for U.S. federal income tax purposes such redemptions should be treated as occurring after the Domestication. If such redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication, Non-U.S. Holders exercising redemption rights would be subject to the potential tax consequences of the Domestication. Non-U.S. Holders should
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consult their tax advisors regarding the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication, including the U.S. federal income tax considerations to them of such treatment.
B. Tax Effects to Non-U.S. Holders of Inflection Point Class A Shares of Exercising Redemption Rights
The U.S. federal income tax consequences to a Non-U.S. Holder of Inflection Point Class A Ordinary Shares that exercises its redemption rights will depend on whether the redemption qualifies as a sale of shares redeemed, as described above under “II. U.S. Holders — B. Tax Effects to U.S. Holders of Exercising Redemption Rights — 1. Generally”. Regardless of whether it is treated as a sale of Inflection Point Class A Shares or as a corporate distribution on the Inflection Point Class A Shares for U.S. federal income tax purposes, the redemption is not expected to result in any U.S. federal income tax consequences to the Non-U.S. Holder unless such Non-U.S. Holder holds such Inflection Point Class A Shares in connection with a conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such Non-U.S. Holder maintains in the United States).
Non-U.S. Holders should consult their tax advisors regarding the possibility that the redemptions are treated for U.S. federal income tax purposes as occurring after the Domestication despite the redemptions occurring in form prior to the Domestication, including the U.S. federal income tax considerations to them of such treatment.
C. Tax Consequences of the Merger to New Merlin and Non-U.S. Holders of New Merlin Securities
Neither Inflection Point nor any Non-U.S. Holder of Inflection Point Securities that received New Merlin Securities in connection with the Domestication will be subject to any material U.S. federal income tax consequences solely in connection with the Merger.
D. Tax Consequences of the Merger to Non-U.S. Holders of Merlin Common Stock
Provided the Merger qualifies as a reorganization as discussed under “— D. Tax Consequences of the Merger to U.S. Holders of Merlin Common Stock” above, the U.S. federal income tax consequences of the Merger for Non-U.S. Holders of Merlin Common Stock should generally be similar to those described above for U.S. Holders. Non-U.S. Holders, however, may be subject to U.S. federal income tax on any gain realized if Merlin is or has been a “U.S. real property holding corporation” 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 New Merlin Common Stock, 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. Merlin believes that it is not, and has not been at any time since its formation, a United States real property holding corporation.
E. Tax Consequences of Ownership and Disposition of New Merlin Securities
1. Taxation of Distributions
In general, any distributions (including constructive distributions, but not including certain distributions of New Merlin stock or rights to acquire New Merlin stock) made to a Non-U.S. Holder of shares of New Merlin Common Stock, to the extent paid out of New Merlin’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, New Merlin will be required to withhold tax from the gross amount of the dividend at a rate of thirty percent (30%), 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). Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. Holder’s adjusted tax basis in its shares of New Merlin Common Stock and, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain realized from the sale or other disposition of the New Merlin Common Stock, which will be treated as described below under the section entitled “— 2. Sale, Taxable Exchange or Other Taxable Disposition of New Merlin Common Stock”. In addition, if New Merlin determines that it is likely to be classified as a “United States real property holding corporation” (see the section entitled “— 2. Sale, Taxable Exchange or Other Taxable Disposition of New Merlin Common Stock” below), the applicable withholding agent may withhold fifteen (15%) of any distribution that exceeds New Merlin’s current and accumulated earnings and profits.
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The withholding tax generally does not apply to dividends paid to a Non-U.S. Holder who provides an IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. federal income tax as if the Non-U.S. Holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise.
A Non-U.S. Holder that is treated as a foreign corporation for U.S. federal income tax purposes receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of thirty percent (30%) (or a lower applicable treaty rate).
2. Sale, Taxable Exchange or Other Taxable Disposition of New Merlin Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of its New Merlin Common Stock, unless:
• the gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such Non-U.S. Holder maintains in the United States);
• such Non-U.S. Holder is an individual who was present in the United States for 183 days or more in the taxable year of such disposition (as such days are calculated pursuant to Section 7701(b)(3) of the Code) and certain other requirements are met; or
• New Merlin is or has been a “United States real property holding corporation” 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 for the applicable New Merlin Common Stock being disposed of, except, in the case where shares of New Merlin Common Stock are “regularly traded” on an “established securities market” (as such terms are defined under applicable Treasury Regulations), the Non-U.S. Holder is disposing of New Merlin Common Stock and has owned, whether actually or based on the application of constructive ownership rules, five percent (5%) or less of New Merlin Common Stock at all times within the shorter of the five-year period preceding such disposition of New Merlin Common Stock or such Non-U.S. Holder’s holding period for such New Merlin Common Stock. There can be no assurance that New Merlin Common Stock will be treated as regularly traded on an established securities market for this purpose. It is unclear how the rules for determining the five percent (5%) threshold for this purpose would be applied with respect to New Merlin Common Stock, including how a Non-U.S. Holder’s ownership of Post-Domestication Rights prior to the Merger impacts the five percent (5%) threshold determination with respect to New Merlin Common Stock. Non-U.S. Holders should consult their own tax advisors regarding the application of the foregoing rules in light of their particular facts and circumstances.
Unless an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates as if the Non-U.S. Holder were a U.S. resident. Any gains described in the first bullet point above of a Non-U.S. Holder that is treated as a foreign corporation for U.S. federal income tax purposes may also be subject to an additional “branch profits tax” imposed at a thirty percent (30%) rate (or a lower applicable income tax treaty rate).
If the second bullet point applies to a Non-U.S. Holder, such Non-U.S. Holder generally will be subject to U.S. tax on such Non-U.S. Holder’s net capital gain for such year (including any gain realized in connection with the redemption) at a tax rate of thirty percent (30%) (or a lower applicable tax treaty rate).
If the third bullet point above applies to a Non-U.S. Holder, gain recognized by such holder will be subject to tax at generally applicable U.S. federal income tax rates. In addition, New Merlin may be required to withhold U.S. federal income tax at a rate of fifteen percent (15%) of the amount realized upon such disposition or redemption. New Merlin is not expected to be a United States real property holding corporation immediately after the Domestication or immediately after the Business Combination is completed. However, such determination is factual in nature and subject to change. Accordingly, no assurance can be provided as to whether New Merlin would be treated as a United States real property holding corporation in any taxable year.
Non-U.S. Holders should consult their tax advisors regarding the U.S. federal income tax consequences to them in respect of any loss recognized on a sale, taxable exchange or other taxable disposition of its New Merlin Securities.
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E. Information Reporting and Backup Withholding
Information returns will be filed with the IRS in connection with payments of distributions and the proceeds from a sale or other disposition of New Merlin Securities. A Non-U.S. Holder may have to comply with certification procedures to establish that it is not a U.S. person in order to avoid U.S. information reporting and backup withholding requirements. The certification procedures required to claim a reduced rate of withholding under a tax treaty generally will satisfy the certification requirements necessary to avoid the backup withholding as well.
Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a Non-U.S. Holder generally will be allowed as a credit against such Non-U.S. Holder’s U.S. federal income tax liability and may entitle such Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
F. Foreign Account Tax Compliance Act
Provisions commonly referred to as “FATCA” impose withholding of thirty percent (30%) on payments of dividends (including constructive dividends) on New Merlin Securities to “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied by, or an exemption applies to, the payee (typically certified as to by the delivery of a properly completed IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such withholding taxes, and a Non-U.S. Holder might be required to file a U.S. federal income tax return to claim such refunds or credits. Thirty percent (30%) withholding under FATCA was scheduled to apply to payments of gross proceeds from the sale or other disposition of property that produces U.S.-source interest or dividends beginning on January 1, 2019, but on December 13, 2018, the IRS released proposed Treasury Regulations that, if finalized in their proposed form, would eliminate the obligation to withhold on gross proceeds. Such proposed Treasury Regulations also delayed withholding on certain other payments received from other foreign financial institutions that are allocable, as provided for under final Treasury Regulations, to payments of U.S.-source dividends, and other fixed or determinable annual or periodic income. Although these proposed Treasury Regulations are not final, taxpayers generally may rely on them until final Treasury Regulations are issued. However, there can be no assurance that final Treasury Regulations will provide the same exceptions from FATCA withholding as the proposed Treasury Regulations.
Non-U.S. Holders should consult their tax advisors regarding the effects of FATCA on their ownership and disposition of New Merlin Securities.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands, except share and per share amounts)
The following unaudited pro forma condensed combined balance sheet as of September 30, 2025 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024 present the combined financial information of Inflection Point and Merlin after giving effect to the Business Combination and related adjustments described in the accompanying notes.
Inflection Point was incorporated on June 24, 2024 in the Cayman Islands and is a publicly traded special purpose acquisition company listed on the Nasdaq under the symbols “BACQU,” “BACQ,” and “BACQR.” Inflection Point was incorporated for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The Sponsor is Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Sponsor I LLC). Prior to the closing of the Business Combination, Inflection Point will domesticate as a Delaware corporation and be renamed “Merlin, Inc.”, pursuant to the terms of the Business Combination Agreement.
Merlin was incorporated on October 24, 2018 as a Delaware corporation under the name Apollo Flight Research, Inc and changed its name to Merlin Labs, Inc on October 27, 2020. Merlin Labs, Inc. is the parent company of two wholly-owned subsidiaries: Merlin Labs NZ Limited (“MLNL”), a New Zealand limited company, was incorporated on August 17, 2020 and Merlin Labs Securities Corporation (“MLSC”), a Massachusetts Securities Corporation, was incorporated on December 13, 2022 (MLNL, MLSC and Merlin Labs, Inc., collectively, “Merlin” or the “Company”).
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined balance sheet as of September 30, 2025 combines the historical unaudited condensed balance sheet of Inflection Point as of September 30, 2025 with the historical unaudited condensed consolidated balance sheet of Merlin as of September 30, 2025, giving effect to the Business Combination and related transactions as if they had been consummated on September 30, 2025. Inflection Point and Merlin have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2025 combines the historical unaudited condensed statement of operations of Inflection Point for the nine months ended September 30, 2025 with the historical unaudited condensed consolidated statement of operations of Merlin for the nine months ended September 30, 2025, giving effect to the Business Combination as if it had been consummated on January 1, 2024, the beginning of the earliest period presented. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024 combines the historical audited statement of operations of Inflection Point for the year ended December 31, 2024 with the historical audited consolidated statement of operations of Merlin for the year ended December 31, 2024, giving effect to the Business Combination as if it had been consummated on January 1, 2024, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with the audited historical financial statements of each of Merlin and Inflection Point and the related notes thereto as of and for the year ended December, 31, 2024, the unaudited historical financial statements of each of Merlin and Inflection Point as of and for the nine months ended September 30, 2025, and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Inflection Point” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Merlin”.
On August 13, 2025, Inflection Point and Merlin entered into the Business Combination Agreement, pursuant to which the following will occur: (i) at least one day prior to the closing of the Business Combination, Inflection Point will domesticate as a Delaware corporation, and (ii) on the day of the Closing, Merger Sub will merge with and into Merlin, with Merlin surviving the Merger as a wholly owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin will become a wholly-owned subsidiary of New Merlin. Following the closing of the business combination, New Merlin will be the publicly traded parent company, and its common stock is expected to be listed on Nasdaq under the proposed ticker symbol “MRLN”. The consideration payable to Merlin’s equity holders will consist entirely of shares of New Merlin Common Stock.
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Table of Contents
The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what New Merlin’s financial condition or results of operations would have been had the Business Combination occurred on the date indicated. Further, the unaudited pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of New Merlin. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.
The unaudited pro forma condensed combined information assumes that the Inflection Point shareholders approve the Business Combination. The Public Shareholders may elect to redeem their Public Shares for cash even if they approve the Business Combination. Inflection Point cannot predict how many of the Public Shareholders will exercise their right to have their Public Shares redeemed for cash. As a result, Inflection Point and Merlin have elected to provide the unaudited pro forma condensed combined financial information under the no redemption, maximum redemption, and 50% redemption scenarios. The first scenario, or “No Redemption Scenario,” assumes that none of the Public Shareholders will exercise their right to redeem their Public Shares for cash. The second scenario, or “Maximum Redemption Scenario,” assumes redemption of all 25,000,000 Public Shares for cash. The third redemption scenario, or “50% Redemption Scenario” assumes the redemption of 12,500,000 Public Shares for cash. The actual results are expected to be within the parameters described by the three scenarios. However, there can be no assurance regarding which scenario will be closest to the actual results. Under all three scenarios, Merlin is considered the accounting acquirer.
The Business Combination between Merlin and Inflection Point is expected to be accounted for as a reverse recapitalization, as Inflection Point does not meet the definition of a business under accounting principles U.S. GAAP. For financial reporting purposes, Merlin is identified as the accounting acquirer, and Inflection Point as the accounting acquiree. This determination is based on Merlin’s majority voting rights, control over board appointments, and dominance of senior management in the post-combination entity. Since Inflection Point lacks substantive inputs, processes, and outputs, the transaction does not qualify as a business combination under “Accounting Standards Codification Topic 805, Business Combinations” (“ASC 805”). For accounting purposes, the financial statements of New Merlin will represent a continuation of the financial statements of Merlin, with the Business Combination being treated as the equivalent of Merlin issuing stock for the net assets of Inflection Point, accompanied by recapitalization. The net assets of Inflection Point will be stated at historical carrying values, and no goodwill or other intangible assets will be recorded.
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Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF September 30, 2025
(in thousands, except share amounts)
|
September 30, 2025 |
No Redemption Scenario |
Maximum Redemption Scenario |
50% Redemption Scenario |
|||||||||||||||||||||||||||||||||
|
Inflection |
Merlin |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
|||||||||||||||||||||||||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Cash and cash equivalents |
$ |
1,049 |
$ |
66,757 |
$ |
356,831 |
|
3 |
(a) |
$ |
424,637 |
$ |
97,101 |
|
3 |
(a) |
$ |
164,907 |
$ |
226,966 |
|
3 |
(a) |
$ |
294,772 |
|||||||||||
|
Short-term investments |
|
— |
|
329 |
|
— |
|
|
|
329 |
|
— |
|
|
|
329 |
|
— |
|
|
|
329 |
||||||||||||||
|
Accounts receivable, net |
|
— |
|
3,420 |
|
— |
|
|
|
3,420 |
|
— |
|
|
|
3,420 |
|
— |
|
|
|
3,420 |
||||||||||||||
|
Prepaid expenses and other current assets |
|
280 |
|
2,002 |
|
— |
|
|
|
2,282 |
|
— |
|
|
|
2,282 |
|
— |
|
|
|
2,282 |
||||||||||||||
|
Capitalized transaction costs |
|
— |
|
6,365 |
|
(6,365 |
) |
3 |
(b)(1) |
|
— |
|
(6,365 |
) |
3 |
(b)(1) |
|
— |
|
(6,365 |
) |
3 |
(b)(1) |
|
— |
|||||||||||
|
Total current assets |
|
1,329 |
|
78,873 |
|
350,466 |
|
|
|
430,668 |
|
90,736 |
|
|
|
170,938 |
|
220,601 |
|
|
|
300,803 |
||||||||||||||
|
Property and equipment, net |
|
— |
|
7,695 |
|
— |
|
|
|
7,695 |
|
— |
|
|
|
7,695 |
|
— |
|
|
|
7,695 |
||||||||||||||
|
Operating lease right-of-use assets |
|
— |
|
1,138 |
|
— |
|
|
|
1,138 |
|
— |
|
|
|
1,138 |
|
— |
|
|
|
1,138 |
||||||||||||||
|
Deposits |
|
— |
|
107 |
|
— |
|
|
|
107 |
|
— |
|
|
|
107 |
|
— |
|
|
|
107 |
||||||||||||||
|
Long-term prepaid insurance |
|
15 |
|
— |
|
— |
|
|
|
15 |
|
— |
|
|
|
15 |
|
— |
|
|
|
15 |
||||||||||||||
|
Investments held in Trust Account |
|
259,730 |
|
— |
|
(259,730 |
) |
3 |
(a)(1) |
|
— |
|
(259,730 |
) |
3 |
(a)(1) |
|
— |
|
(259,730 |
) |
3 |
(a)(1) |
|
— |
|||||||||||
|
Total assets |
$ |
261,074 |
$ |
87,813 |
$ |
90,736 |
|
|
$ |
439,623 |
$ |
(168,994 |
) |
|
$ |
179,893 |
$ |
(39,129 |
) |
|
$ |
309,758 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Accounts payable |
|
— |
|
2,029 |
|
(886 |
) |
3 |
(b)(2) |
|
1,143 |
|
(886 |
) |
3 |
(b)(2) |
|
1,143 |
|
(886 |
) |
3 |
(b)(2) |
|
1,143 |
|||||||||||
|
Accrued expenses |
|
2,124 |
|
8,095 |
|
— |
|
|
|
10,219 |
|
— |
|
|
|
10,219 |
|
— |
|
|
|
10,219 |
||||||||||||||
|
Long-term debt, current portion, |
|
— |
|
14,229 |
|
— |
|
|
|
14,229 |
|
— |
|
|
|
14,229 |
|
— |
|
|
|
14,229 |
||||||||||||||
|
Convertible promissory notes |
|
— |
|
21,951 |
|
(21,951 |
) |
3 |
(c)(9) |
|
— |
|
(21,951 |
) |
3 |
(c)(9) |
|
— |
|
(21,951 |
) |
3 |
(c)(9) |
|
— |
|||||||||||
|
Cash underwriting fee payable |
|
1,000 |
|
— |
|
(1,000 |
) |
3 |
(a)(2) |
|
— |
|
(1,000 |
) |
3 |
(a)(2) |
|
— |
|
(1,000 |
) |
3 |
(a)(2) |
|
— |
|||||||||||
|
Contract loss provision |
|
— |
|
5,047 |
|
— |
|
|
|
5,047 |
|
— |
|
|
|
5,047 |
|
— |
|
|
|
5,047 |
||||||||||||||
|
Operating lease liabilities, current |
|
— |
|
702 |
|
— |
|
|
|
702 |
|
— |
|
|
|
702 |
|
— |
|
|
|
702 |
||||||||||||||
|
Total current liabilities |
|
3,124 |
|
52,053 |
|
(23,837 |
) |
|
|
31,340 |
|
(23,837 |
) |
|
|
31,340 |
|
(23,837 |
) |
|
|
31,340 |
||||||||||||||
|
Long-term debt, non-current portion, net |
|
— |
|
17,969 |
|
— |
|
|
|
17,969 |
|
— |
|
|
|
17,969 |
|
— |
|
|
|
17,969 |
||||||||||||||
|
Operating lease liabilities, non-current |
|
— |
|
449 |
|
— |
|
|
|
449 |
|
— |
|
|
|
449 |
|
— |
|
|
|
449 |
||||||||||||||
|
Warrant liabilities |
|
— |
|
72,423 |
|
(51,653 |
) |
3 |
(c)(7)(8)(9) |
|
20,770 |
|
(51,653 |
) |
3 |
(c)(7)(8)(9) |
|
20,770 |
|
(51,653 |
) |
3 |
(c)(7)(8)(9) |
|
20,770 |
|||||||||||
|
Deferred underwriting fee |
|
8,750 |
|
— |
|
(8,750 |
) |
3 |
(a)(2) |
|
— |
|
(8,750 |
) |
3 |
(a)(2) |
|
— |
|
(8,750 |
) |
3 |
(a)(2) |
|
— |
|||||||||||
|
Total liabilities |
|
11,874 |
|
142,894 |
|
(84,240 |
) |
|
|
70,528 |
|
(84,240 |
) |
|
|
70,528 |
|
(84,240 |
) |
|
|
70,528 |
||||||||||||||
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Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET — (Continued)
AS OF September 30, 2025
(in thousands, except share amounts)
|
September 30, 2025 |
No Redemption Scenario |
Maximum Redemption Scenario |
50% Redemption Scenario |
|||||||||||||||||||||||||
|
Inflection |
Merlin Labs |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
|||||||||||||||||||||
|
Commitments and contingencies |
|
|
|
|
|
|
||||||||||||||||||||||
|
Class A ordinary shares subject to possible redemption, $0.0001 par value; 500,000,000 shares authorized; 25,000,000 shares |
259,730 |
— |
(259,730 |
) |
3 |
(c)(2) |
— |
(259,730 |
) |
3 |
(c)(2) |
— |
(259,730 |
) |
3 |
(c)(2) |
— |
|||||||||||
|
Redeemable convertible preferred |
— |
476,333 |
(476,333 |
) |
3 |
(c)(5) |
— |
(476,333 |
) |
3 |
(c)(5) |
— |
(476,333 |
) |
3 |
(c)(5) |
— |
|||||||||||
|
New Merlin Series A redeemable convertible preferred stock |
— |
— |
186,934 |
|
3 |
(c)(9) |
186,934 |
186,934 |
|
3 |
(c)(9) |
186,934 |
186,934 |
|
3 |
(c)(9) |
186,934 |
|||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Stockholders’ equity (deficit): |
|
|
|
|
|
|
||||||||||||||||||||||
|
Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued or outstanding |
— |
— |
— |
|
|
— |
— |
|
|
— |
— |
|
|
— |
||||||||||||||
|
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 425,000 shares issued and outstanding (excluding 25,000,000 shares subject to possible redemption) |
— |
— |
— |
|
|
— |
— |
|
|
— |
— |
|
|
— |
||||||||||||||
|
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 8,333,333 shares issued and outstanding |
1 |
— |
(1 |
) |
3 |
(c)(3) |
— |
(1 |
) |
3 |
(c)(3) |
— |
(1 |
) |
3 |
(c)(3) |
— |
|||||||||||
|
Common Stock: $0.0001 par value; 44,705,861 and 29,500,000 shares authorized; 5,228,252 and 5,169,812 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively |
— |
1 |
(1 |
) |
3 |
(c)(6) |
— |
(1 |
) |
3 |
(c)(6) |
— |
(1 |
) |
3 |
(c)(6) |
— |
|||||||||||
188
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET — (Continued)
AS OF September 30, 2025
(in thousands, except share amounts)
|
September 30, 2025 |
No Redemption Scenario |
Maximum Redemption Scenario |
50% Redemption Scenario |
|||||||||||||||||||||||||||||||||||||
|
Inflection |
Merlin Labs |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
|||||||||||||||||||||||||||||||||
|
New Merlin Class A common |
|
— |
|
|
— |
|
|
11 |
3 |
(c)(2)(3)(4)(5)(6)(7)(8) |
|
11 |
|
|
9 |
|
3 |
(c)(2)(3)(4)(5)(6)(7)(8) |
|
9 |
|
|
10 |
|
3 |
(c)(2)(3)(4)(5)(6)(7)(8) |
|
10 |
|
|||||||||||
|
Additional paid-in capital |
|
— |
|
|
585 |
|
|
706,840 |
3 |
(c)(2)(5)(6)(10)(11) |
|
707,425 |
|
|
447,112 |
|
3 |
(c)(2)(5)(6)(10)(11) |
|
447,698 |
|
|
576,977 |
|
3 |
(c)(2)(5)(6)(10)(11) |
|
577,562 |
|
|||||||||||
|
Accumulated deficit |
|
(10,531 |
) |
|
(532,000 |
) |
|
17,256 |
3 |
(c)(9)(10)(11) |
|
(525,275 |
) |
|
17,256 |
|
3 |
(c)(9)(10)(11) |
|
(525,275 |
) |
|
17,255 |
|
3 |
(c)(9)(10)(11) |
|
(525,276 |
) |
|||||||||||
|
Total stockholders’ equity (deficit) |
|
(10,530 |
) |
|
(531,414 |
) |
|
724,105 |
|
|
182,161 |
|
|
464,377 |
|
|
|
(77,569 |
) |
|
594,240 |
|
|
|
52,296 |
|
||||||||||||||
|
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit) |
$ |
261,074 |
|
$ |
87,813 |
|
$ |
90,736 |
|
$ |
439,623 |
|
$ |
(168,994 |
) |
|
$ |
179,893 |
|
$ |
(39,129 |
) |
|
$ |
309,758 |
|
||||||||||||||
189
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED September 30, 2025
(in thousands, except share and per share amounts)
|
September 30, 2025 |
No Redemption Scenario |
Maximum Redemption Scenario |
50% Redemption Scenario |
|||||||||||||||||||||||||||||||||||
|
Inflection |
Merlin |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
|||||||||||||||||||||||||||||||
|
Revenue |
$ |
— |
|
$ |
5,899 |
|
$ |
— |
|
$ |
5,899 |
|
$ |
— |
|
$ |
5,899 |
|
$ |
— |
|
$ |
5,899 |
|
||||||||||||||
|
Cost of revenue |
|
— |
|
|
7,725 |
|
|
— |
|
|
7,725 |
|
|
— |
|
|
7,725 |
|
|
— |
|
|
7,725 |
|
||||||||||||||
|
Gross loss |
|
— |
|
|
(1,826 |
) |
|
— |
|
|
(1,826 |
) |
|
— |
|
|
(1,826 |
) |
|
— |
|
|
(1,826 |
) |
||||||||||||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Research and development |
|
— |
|
|
21,699 |
|
|
— |
|
|
21,699 |
|
|
— |
|
|
21,699 |
|
|
— |
|
|
21,699 |
|
||||||||||||||
|
General and administrative |
|
3,213 |
|
|
14,467 |
|
|
(2,242 |
) |
4(a) |
|
15,438 |
|
|
(2,242 |
) |
4(a) |
|
15,438 |
|
|
(2,242 |
) |
4(a) |
|
15,438 |
|
|||||||||||
|
Selling and marketing |
|
— |
|
|
1,029 |
|
|
— |
|
|
1,029 |
|
|
— |
|
|
1,029 |
|
|
— |
|
|
1,029 |
|
||||||||||||||
|
Total operating expenses |
|
3,213 |
|
|
37,195 |
|
|
(2,242 |
) |
|
38,166 |
|
|
(2,242 |
) |
|
38,166 |
|
|
(2,242 |
) |
|
38,166 |
|
||||||||||||||
|
Loss from operations |
|
(3,213 |
) |
|
(39,021 |
) |
|
2,242 |
|
|
(39,992 |
) |
|
2,242 |
|
|
(39,992 |
) |
|
2,242 |
|
|
(39,992 |
) |
||||||||||||||
|
Interest income |
|
8,022 |
|
|
862 |
|
|
(8,022 |
) |
4(b) |
|
862 |
|
|
(8,022 |
) |
4(b) |
|
862 |
|
|
(8,022 |
) |
4(b) |
|
862 |
|
|||||||||||
|
Interest expense |
|
— |
|
|
(2,956 |
) |
|
— |
|
|
(2,956 |
) |
|
— |
|
|
(2,956 |
) |
|
— |
|
|
(2,956 |
) |
||||||||||||||
|
Other expense |
|
— |
|
|
(193 |
) |
|
— |
|
|
(193 |
) |
|
— |
|
|
(193 |
) |
|
— |
|
|
(193 |
) |
||||||||||||||
|
Change in fair value of warrant liabilities |
|
— |
|
|
(4,562 |
) |
|
4,562 |
|
4(c)(1) |
|
— |
|
|
4,562 |
|
4(c)(1) |
|
— |
|
|
4,562 |
|
4(c)(1) |
|
— |
|
|||||||||||
|
Change in fair value of convertible promissory notes |
|
— |
|
|
(3,118) |
|
|
3,118 |
|
4(c)(2) |
|
— |
|
|
3,118 |
|
4(c)(2) |
|
— |
|
|
3,118 |
|
4(c)(2) |
|
— |
|
|||||||||||
|
Loss on exchange of warrant |
|
— |
|
|
(3,320 |
) |
|
3,320 |
|
4(c)(3) |
|
— |
|
|
3,320 |
|
4(c)(3) |
|
— |
|
|
3,320 |
|
4(c)(3) |
|
— |
|
|||||||||||
|
Loss on issuance of financial instruments |
|
— |
|
|
(585 |
) |
|
585 |
|
4(c)(4) |
|
— |
|
|
585 |
|
4(c)(4) |
|
— |
|
|
585 |
|
4(c)(4) |
|
— |
|
|||||||||||
|
Loss on extinguishment of long-term debt |
|
— |
|
|
(2,157 |
) |
|
— |
|
|
(2,157 |
) |
|
— |
|
|
(2,157 |
) |
|
— |
|
|
(2,157 |
) |
||||||||||||||
|
Change in fair value of long-term debt |
|
— |
|
|
(672 |
) |
|
— |
|
|
(672 |
) |
|
— |
|
|
(672 |
) |
|
— |
|
|
(672 |
) |
||||||||||||||
|
Total other (expense) income |
|
8,022 |
|
|
(16,701 |
) |
|
3,563 |
|
|
(5,116 |
) |
|
3,563 |
|
|
(5,116 |
) |
|
3,563 |
|
|
(5,116 |
) |
||||||||||||||
|
Loss before provision for income |
|
4,809 |
|
|
(55,722 |
) |
|
5,805 |
|
|
(45,108 |
) |
|
5,805 |
|
|
(45,108 |
) |
|
5,805 |
|
|
(45,108 |
) |
||||||||||||||
|
Provision for income taxes |
|
— |
|
|
3 |
|
|
— |
|
|
3 |
|
|
— |
|
|
3 |
|
|
— |
|
|
3 |
|
||||||||||||||
|
Net (loss) income |
|
4,809 |
|
|
(55,725 |
) |
|
5,805 |
|
|
(45,111 |
) |
|
5,805 |
|
|
(45,111 |
) |
|
5,805 |
|
|
(45,111 |
) |
||||||||||||||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
|
— |
|
|
(345,717 |
) |
|
345,717 |
|
4(d)(1) |
|
— |
|
|
345,717 |
|
4(d)(1) |
|
— |
|
|
345,717 |
|
4(d)(1) |
|
— |
|
|||||||||||
|
Cumulative Series A Preferred Stock dividends |
|
— |
|
|
— |
|
|
(20,497 |
) |
4(d)(2) |
|
(20,497 |
) |
|
(20,497 |
) |
4(d)(2) |
|
(20,497 |
) |
|
(20,497 |
) |
4(d)(2) |
|
(20,497) |
|
|||||||||||
|
Net (loss) income attributable to common stockholders |
$ |
4,809 |
|
$ |
(401,442 |
) |
$ |
331,025 |
|
$ |
(65,608 |
) |
$ |
331,025 |
|
$ |
(65,608 |
) |
$ |
331,025 |
|
$ |
(65,608 |
) |
||||||||||||||
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Basic and diluted, Class A |
$ |
0.14 |
|
$ |
(77.33 |
) |
|
|
$ |
(0.60 |
) |
|
|
$ |
(0.77 |
) |
|
|
$ |
(0.67 |
) |
|||||||||||||||||
|
Basic and diluted, Class B |
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Basic and diluted, Class A |
|
25,000,000 |
|
|
5,191,045 |
|
|
|
|
110,002,698 |
|
|
|
|
85,002,698 |
|
|
|
|
97,502,698 |
|
|||||||||||||||||
|
Basic and diluted, Class B |
|
8,333,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
190
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2024
(in thousands, except share and per share amounts)
|
December 31, 2024 |
No Redemption Scenario |
Maximum Redemption Scenario |
50% Redemption Scenario |
|||||||||||||||||||||||||||||||||||
|
Inflection |
Merlin |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
Pro Forma |
|||||||||||||||||||||||||||||||
|
Revenue |
$ |
— |
|
$ |
1,229 |
|
$ |
— |
|
$ |
1,229 |
|
$ |
— |
|
$ |
1,229 |
|
$ |
— |
|
$ |
1,229 |
|
||||||||||||||
|
Cost of revenue |
|
— |
|
|
8,500 |
|
|
— |
|
|
8,500 |
|
|
— |
|
|
8,500 |
|
|
— |
|
|
8,500 |
|
||||||||||||||
|
Gross loss |
|
— |
|
|
(7,271 |
) |
|
— |
|
|
(7,271 |
) |
|
— |
|
|
(7,271 |
) |
|
— |
|
|
(7,271 |
) |
||||||||||||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Research and development |
|
— |
|
|
27,146 |
|
|
— |
|
|
27,146 |
|
|
— |
|
|
27,146 |
|
|
— |
|
|
27,146 |
|
||||||||||||||
|
General and administrative |
|
251 |
|
|
17,864 |
|
|
3,725 |
|
4(a) |
|
21,840 |
|
|
3,725 |
|
4(a) |
|
21,840 |
|
|
3,725 |
|
4(a) |
|
21,840 |
|
|||||||||||
|
Selling and marketing |
|
— |
|
|
1,744 |
|
|
— |
|
|
1,744 |
|
|
— |
|
|
1,744 |
|
|
— |
|
|
1,744 |
|
||||||||||||||
|
Total operating expenses |
|
251 |
|
|
46,754 |
|
|
3,725 |
|
|
50,730 |
|
|
3,725 |
|
|
50,730 |
|
|
3,725 |
|
|
50,730 |
|
||||||||||||||
|
Loss from operations |
|
(251 |
) |
|
(54,025 |
) |
|
(3,725 |
) |
|
(58,001 |
) |
|
(3,725 |
) |
|
(58,001 |
) |
|
(3,725 |
) |
|
(58,001 |
) |
||||||||||||||
|
Interest income |
|
1,771 |
|
|
2,005 |
|
|
(1,771 |
) |
4(b) |
|
2,005 |
|
|
(1,771 |
) |
4(b) |
|
2,005 |
|
|
(1,771 |
) |
4(b) |
|
2,005 |
|
|||||||||||
|
Interest expense |
|
— |
|
|
(2,420 |
) |
|
— |
|
|
(2,420 |
) |
|
— |
|
|
(2,420 |
) |
|
— |
|
|
(2,420 |
) |
||||||||||||||
|
Other expense |
|
— |
|
|
(197 |
) |
|
— |
|
|
(197 |
) |
|
— |
|
|
(197 |
) |
|
— |
|
|
(197 |
) |
||||||||||||||
|
Loss on change in fair value of warrant liabilities |
|
— |
|
|
(265 |
) |
|
265 |
|
4(c)(1) |
|
— |
|
|
265 |
|
4(c)(1) |
|
— |
|
|
265 |
|
4(c)(1) |
|
— |
|
|||||||||||
|
Total other (expense) income |
|
1,771 |
|
|
(877 |
) |
|
(1,506 |
) |
|
(612 |
) |
|
(1,506 |
) |
|
(612 |
) |
|
(1,506 |
) |
|
(612 |
) |
||||||||||||||
|
Loss before provision for income |
|
1,520 |
|
|
(54,902 |
) |
|
(5,231 |
) |
|
(58,613 |
) |
|
(5,231 |
) |
|
(58,613 |
) |
|
(5,231 |
) |
|
(58,613 |
) |
||||||||||||||
|
Provision for income taxes |
|
— |
|
|
351 |
|
|
— |
|
|
351 |
|
|
— |
|
|
351 |
|
|
— |
|
|
351 |
|
||||||||||||||
|
Net (loss) income |
|
1,520 |
|
|
(55,253 |
) |
|
(5,231 |
) |
|
(58,964 |
) |
|
(5,231 |
) |
|
(58,964 |
) |
|
(5,231 |
) |
|
(58,964 |
) |
||||||||||||||
|
Cumulative Series A Preferred Stock Dividends |
|
— |
|
|
— |
|
|
(31,057 |
) |
4(d)(2) |
|
(31,057 |
) |
|
(31,057 |
) |
4(d)(2) |
|
(31,057 |
) |
|
(31,057 |
) |
4(d)(2) |
|
(31,057 |
) |
|||||||||||
|
Net (loss) income attributable to common stockholders |
$ |
1,520 |
|
$ |
(55,253 |
) |
$ |
(36,288 |
) |
$ |
(90,021 |
) |
$ |
(36,288 |
) |
$ |
(90,021 |
) |
$ |
(36,288 |
) |
$ |
(90,021 |
) |
||||||||||||||
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Basic and diluted, Class A |
$ |
0.10 |
|
$ |
(10.80 |
) |
|
|
$ |
(0.82 |
) |
|
|
$ |
(1.06 |
) |
|
|
$ |
(0.92 |
) |
|||||||||||||||||
|
Basic and diluted, Class B |
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Basic and diluted, Class A |
|
7,500,000 |
|
|
5,118,223 |
|
|
|
|
110,002,698 |
|
|
|
|
85,002,698 |
|
|
|
|
97,502,698 |
|
|||||||||||||||||
|
Basic and diluted, Class B |
|
8,289,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
191
Table of Contents
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands, except share and per share amounts)
NOTE 1. DESCRIPTION OF THE BUSINESS COMBINATION
On August 13, 2025, Inflection Point, Merlin and Merger Sub entered into the Business Combination Agreement, under the terms of which (i) at least one day prior to the closing of the Business Combination, Inflection Point will domesticate as a Delaware corporation, and (ii) on the day of the closing, Merger Sub will merge with and into Merlin, with Merlin surviving the Merger as a wholly-owned subsidiary of Inflection Point, resulting in a combined company whereby Merlin will become a wholly-owned subsidiary of New Merlin. After giving effect to the Merger, New Merlin will own, directly or indirectly, all of the issued and outstanding equity interests of Merlin and its subsidiaries.
Immediately prior to the Domestication, all outstanding Inflection Point Class B Shares will convert on a one-to-one basis to Inflection Point Class A Shares. Upon the Domestication, all outstanding Inflection Point Class A Shares will convert on a one-to-one basis into shares of New Merlin Common Stock.
Immediately prior to the Merger, all existing warrants to purchase shares of Merlin Common Stock and warrants to purchase shares of Merlin Preferred Stock (except the Pre-Funded Convertible Warrants) will be exercised on a cashless basis. Further, all shares of Merlin Preferred Stock (including shares received from exercised warrants) will convert into shares of Merlin Common Stock. As a result, immediately prior to the Merger, the only Merlin equity instruments outstanding will be shares of common stock and stock options issued to employees as compensation.
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements with Pre-Funded Investors. Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $87,704 (face value) of Pre-Funded Convertible Notes and Pre-Funded Warrants, substantially concurrently with the execution and delivery of the Business Combination Agreement.
At the Effective Time, the consideration to be paid in, or in connection with, the Merger to each holder of a Pre-Funded Convertible Note shall be a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal and accrued and unpaid interest on each Pre-Funded Convertible Note as of one day prior to the Closing, divided by (ii) $10.20 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded NPAs), as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Notes, or $12.00 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded SPAs). The consideration to be paid in, or in connection with, the Merger to a holder in respect of each Pre-Funded Warrant shall be one or more New Merlin Series A Warrants to purchase a number of shares of New Merlin Common Stock (on otherwise the same terms as applicable to the New Merlin Series A Warrants issued to the Series A Preferred Stock Investors in the Series A Preferred Stock Investment (each as defined below)) equal to the quotient of (i) the aggregate exercise price of such Pre-Funded Warrant immediately prior to the Effective Time, divided by (ii) $12.00.
Also in connection with the transactions contemplated by the Business Combination Agreement, on August 13, 2025, and November 17, 2025, Inflection Point, Merlin and certain investors entered into the Initial Series A SPA and Additional Series A SPAs. Pursuant to the Series A SPAs, the Closing PIPE Investor and Additional Closing PIPE Investors have agreed, among other things, to purchase, at Closing, an aggregate of 11,470,590 shares of Series A Preferred Stock and New Merlin Series A Warrants to purchase a number of shares of New Merlin Common Stock equal to or equal to 75% of (as applicable) the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible, for an aggregate purchase price of $120,000. In aggregate, the Pre-Funded Investors, the Closing PIPE Investor and the Additional Closing PIPE Investors (collectively, “PIPE Investors”) will receive 21,567,221 shares of Series A Preferred Stock and New Merlin Series A Warrants to purchase an aggregate of 21,157,300 shares of New Merlin Common Stock in exchange for an aggregate commitment of $207,704.
At the Effective time, holders of the Merlin Common Stock will receive shares of New Merlin Common Stock based on the Exchange Ratio. The holders of Merlin Options, issued under employee incentive plans, will receive New Merlin Options, based on the Exchange Ratio, and will be subject to the same vesting restrictions as the Merlin Options.
At the Effective Time, the Post-Domestication Rights will automatically convert ten-to-one to shares of New Merlin Common Stock. Fractional shares will be rounded down to the nearest whole share.
192
Table of Contents
The following summarizes the pro forma shares outstanding of New Merlin Common Stock and Series A Preferred Stock under the three redemption scenarios, on an as-converted basis as of the Closing Date, excluding the potential dilutive effect of warrants to purchase shares of New Merlin Common Stock and the New Merlin Options:
|
No |
50% |
Maximum |
|||||||||||||
|
Shares |
% |
Shares |
% |
Shares |
% |
||||||||||
|
Public Shareholders |
25,000,000 |
19.4 |
% |
12,500,000 |
10.7 |
% |
— |
0.0 |
% |
||||||
|
Public Rightsholders* |
2,499,999 |
1.9 |
% |
2,499,999 |
2.1 |
% |
2,499,999 |
2.4 |
% |
||||||
|
Sponsor(4) |
8,800,833 |
6.8 |
% |
8,800,833 |
7.6 |
% |
8,800,833 |
8.5 |
% |
||||||
|
Series A Holders(5) |
21,633,896 |
16.8 |
% |
21,633,896 |
18.6 |
% |
21,633,896 |
20.8 |
% |
||||||
|
Merlin Stockholders(6) |
71,124,082 |
55.1 |
% |
71,124,082 |
61.0 |
% |
71,124,082 |
68.3 |
% |
||||||
|
Total |
129,058,810 |
100.0 |
% |
116,558,810 |
100.0 |
% |
104,058,810 |
100.0 |
% |
||||||
|
Potential sources of dilution |
|
|
|
||||||||||||
|
New Merlin Warrants(7) |
21,157,300 |
16.1 |
% |
21,157,300 |
17.8 |
% |
21,157,300 |
19.9 |
% |
||||||
|
New Merlin Options(8) |
7,218,348 |
6.1 |
% |
7,218,348 |
6.7 |
% |
7,218,348 |
7.5 |
% |
||||||
____________
* Rounded to account for units held in multiples of less than ten.
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $129,865 (based on the estimated redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259,730 (based on the estimated redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of (i) 8,333,333 shares of New Merlin Common Stock issued upon conversion of Founder Shares, (ii) 425,000 shares of New Merlin Common Stock issued upon conversion of Inflection Class A Shares not subject to redemption, and (iii) 42,500 shares of New Merlin Common Stock, in exchange for 425,000 Private Placement Units.
(5) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment, (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of the 2024 LSA Warrants and the 2024 LSA Amendment Warrants issued to WTI FUND X, LLC, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs.
(6) Based on the Purchase Price, $800 million, divided by the estimated per-share Redemption Price of approximately $10.39 per share from the Trust Account based on funds in the Trust Account as of September 30, 2025. The Redemption Price is expected to continue to increase prior to Closing, which will result in the Aggregate Consideration being a reduced number of shares of New Merlin Common Stock. Excludes shares of New Merlin Common Stock that would be issuable upon exercise of the New Merlin Options that will be outstanding as a result of New Merlin’s assumption of the outstanding Merlin Options.
(7) Consists of (i) New Merlin Series A Warrants exercisable for an aggregate of 10,103,376 shares of New Merlin Common Stock issuable in exchange for Pre-Funded Warrants exercisable for 10,103,376 shares of Merlin Common Stock, (ii) New Merlin Series A Warrants exercisable for 11,053,924 shares of New Merlin Common Stock to be issued pursuant to the Series A SPA.
(8) Consists of options to purchase 7,218,348 shares of New Merlin Common Stock to be issued in exchange for 2,356,737 options to purchase Merlin Common Stock (“Merlin Options”), based on an expected Exchange Ratio of 3.0629. The New Merlin Options have a weighted-average exercise price of $[1.83], based on the weighted-average exercise price of Merlin Options divided by an expected Exchange Ratio of 3.0629. The vesting requirements of the New Merlin Options are identical to those of the exchanged Merlin Options (i.e., generally vest over a four year period and expire not more than 10 years from grant). Includes 6,011,838 New Merlin Options exercisable as of September 30, 2025, with a weighted-average exercise price of $1.50, based on the weighted-average exercise price of Merlin Options divided by an expected Exchange Ratio of 3.0629.
193
Table of Contents
The following summarizes the pro forma shares outstanding of New Merlin Common Stock on a fully diluted basis, assuming the exercise of all New Merlin Series A Warrants to purchase shares of New Merlin Common Stock and the vesting and exercise of all New Merlin Options:
|
No |
50% |
Maximum |
|||||||||||||
|
Shares |
% |
Shares |
% |
Shares |
% |
||||||||||
|
Public Shareholders |
25,000,000 |
15.9 |
% |
12,500,000 |
8.6 |
% |
— |
0.0 |
% |
||||||
|
Public Rightsholders* |
2,499,999 |
1.6 |
% |
2,499,999 |
1.7 |
% |
2,499,999 |
1.9 |
% |
||||||
|
Sponsor(4) |
8,800,833 |
5.6 |
% |
8,800,833 |
6.1 |
% |
8,800,833 |
6.6 |
% |
||||||
|
Series A Holders(5) |
42,791,196 |
27.2 |
% |
42,791,196 |
29.5 |
% |
42,791,196 |
32.3 |
% |
||||||
|
Merlin Equityholders(6) |
71,124,082 |
45.2 |
% |
71,124,082 |
49.1 |
% |
71,124,082 |
53.7 |
% |
||||||
|
Merlin Optionholders(7) |
7,218,348 |
4.6 |
% |
7,218,348 |
5.0 |
% |
7,218,348 |
5.5 |
% |
||||||
|
Total |
157,434,458 |
100.0 |
% |
144,934,458 |
100.0 |
% |
132,434,458 |
100.0 |
% |
||||||
____________
* Rounded to account for units held in multiples of less than ten.
(1) Assumes that no Public Shareholders exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account, which is a redemption scenario that could occur.
(2) Assumes that holders of 50% of the Public Shares, 12,500,000 Public Shares, will exercise their redemption rights for an aggregate payment of approximately $129,865 (based on the estimated redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(3) Assumes that holders of 100% of the Public Shares, 25,000,000 Public Shares, exercise redemption rights will exercise their redemption rights for an aggregate payment of approximately $259,730 (based on the estimated redemption price of approximately $10.39 per share) from the Trust Account based on funds in the Trust Account as of September 30, 2025, which is a redemption scenario that could occur.
(4) Consists of (i) 8,333,333 shares of New Merlin Common Stock issued upon conversion of Founder Shares, (ii) 425,000 shares of New Merlin Common Stock issued upon conversion of Inflection Class A Shares not subject to redemption, and (iii) 42,500 shares of New Merlin Common Stock, in exchange for 425,000 Private Placement Units.
(5) Consists of shares of New Merlin Common Stock issuable upon conversion on the assumed Closing Date of January 31, 2026 of (A) (i) 9,063,131 shares of Series A Preferred Stock to be issued upon conversion of Pre-Funded Convertible Notes sold in the Pre-Funded Note Investment (ii) 1,033,500 shares of Series A Preferred Stock to be issued upon conversion of the 2024 LSA Warrants and the 2024 LSA Amendment Warrants issued to WTI FUND X, LLC, and (iii) 11,470,590 shares of Series A Preferred Stock to be issued pursuant to the Series A SPAs, plus (B) (i) New Merlin Series A Warrants exercisable for an aggregate of 10,103,376 shares of New Merlin Common Stock issuable in exchange for Pre-Funded Warrants exercisable for 10,103,376 shares of Merlin Common Stock, and (ii) New Merlin Series A Warrants exercisable for 11,053,924 shares of New Merlin Common Stock to be issued pursuant to the Series A SPAs.
(6) Based on the Purchase Price, $800 million, divided by the estimated per-share Redemption Price of approximately $10.39 per share from the Trust Account based on funds in the Trust Account as of December 31, 2024. The Redemption Price is expected to continue to increase prior to Closing, which will result in the Aggregate Consideration being a reduced number of shares of New Merlin Common Stock. Excludes shares of New Merlin Common Stock that would be issuable upon exercise of the New Merlin Options that will be outstanding as a result of New Merlin’s assumption of the outstanding Merlin Options.
(7) Consists of options to purchase 7,218,348 shares of New Merlin Common Stock to be issued in exchange for 2,356,737 Merlin Options, based on an expected Exchange Ratio of 3.0629.
Expected Accounting Treatment for the Business Combination
Under all the three scenarios, the Business Combination will be accounted for as a reverse capitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. GAAP. Under this method of accounting, Inflection Point is the accounting acquiree, but does not meet the definition of a business under ASC 805. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Merlin issuing stock for the net assets of Inflection Point. The net assets of Inflection Point will be stated at historical cost, with no goodwill or other intangible assets recorded.
NOTE 2. RECLASSIFICATIONS
As part of the preparation of these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align Inflection Point’s and Merlin’s financial statement presentation. Upon consummation of the Business Combination, the management team of New Merlin (“New Merlin Management”)
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will perform a comprehensive review of Inflection Point’s and Merlin’s accounting policies. As a result of the review, New Merlin Management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of New Merlin. Based on its initial analysis, Inflection Point has identified the presentation differences that would have an impact on the unaudited pro forma condensed financial information and recorded the necessary adjustments:
Balance Sheet as of September 30, 2025
|
Amount |
Presentation in Inflection Point |
Presentation in Unaudited Pro Forma |
|||
|
$ |
1,049 |
Cash |
Cash and cash equivalents |
||
|
|
23 |
Prepaid expenses |
Prepaid expenses and other current assets |
||
|
|
257 |
Short-term prepaid insurance |
Prepaid expenses and other current assets |
||
|
|
75 |
Accrued offering costs |
Accrued expenses |
||
Statement of Operations for the Nine Months Ended September 30, 2025
|
Amount |
Presentation in Inflection Point |
Presentation in Unaudited Pro Forma |
|||
|
$ |
48 |
Interest earned on bank account |
Interest income |
||
|
|
7,974 |
Interest earned on investments held in Trust Account |
Interest income |
||
Statement of Operations for the Year Ended December 31, 2024
|
Amount |
Presentation in Inflection Point |
Presentation in Unaudited Pro Forma |
|||
|
$ |
251 |
Formation and operational costs |
General and administrative |
||
|
|
15 |
Interest earned on bank account |
Interest income |
||
|
|
1,756 |
Interest earned on investments held in Trust Account |
Interest income |
||
NOTE 3. TRANSACTION ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. No tax adjustment has been computed for the Merlin pro forma financial results, as it expects to remain in a net loss position and maintain a full valuation allowance against its U.S. deferred tax assets. The pro forma transaction adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2025 are as follows:
a Cash. Reflects the impact of the Business Combination on the cash balance of Merlin. The table below represents the sources and uses of funds as it relates to the business combination:
|
(in thousands) |
Note |
Amount |
||||
|
Inflection Point historic cash and cash equivalents balance |
(1) |
$ |
1,049 |
|
||
|
Merlin historic cash and cash equivalents balance |
|
66,757 |
|
|||
|
Total pre-adjustment cash and cash equivalents balance |
|
67,806 |
|
|||
|
Proceeds from cash, cash equivalents, and investments held in Trust Account |
(1) |
|
259,730 |
|
||
|
Payment of deferred underwriter fees |
(2) |
|
(8,750 |
) |
||
|
Payment of cash underwriter fees |
(2) |
|
(1,000 |
) |
||
|
PIPE investment, net |
(3) |
|
129,259 |
|
||
|
Payment of transaction costs |
(4) |
|
(22,408 |
) |
||
|
Cash adjustment in connection with the business combination, No Redemption Scenario |
|
356,832 |
|
|||
|
Ending cash and cash equivalents balance, No Redemption Scenario |
$ |
424,638 |
|
|||
|
Payment to redeeming Inflection Point shareholders |
(5) |
|
(259,730 |
) |
||
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Table of Contents
|
(in thousands) |
Note |
Amount |
||||
|
Cash adjustment in connection with the business combination, Maximum Redemption Scenario |
|
97,102 |
|
|||
|
Ending cash and cash equivalents balance, Maximum Redemption Scenario |
$ |
164,908 |
|
|||
|
Payment to redeeming Inflection Point shareholders |
(5) |
|
(129,865 |
) |
||
|
Cash adjustment in connection with the business combination, 50% Redemption Scenario |
|
226,967 |
|
|||
|
Ending cash and cash equivalents balance, 50% Redemption Scenario |
$ |
294,773 |
|
|||
1 Represents $1,049 and $259,730 of Inflection Point’s cash and investments cash held in the Trust Account as of September 30, 2025, respectively.
2 Represents the payment of $8,750 of deferred underwriting commissions and $1,000 of cash underwriting fees from Inflection Point’s IPO payable upon consummation of the Business Combination.
3 Represents the net proceeds of $129,259 from the issuance of Series A Preferred Stock and Series A Warrants to the PIPE Investors, based on total proceeds of $207,704 less proceeds of $78,445 already received and included in Merlin’s cash and cash equivalents as of September 30, 2025.
4 Represents the payment of $22,408 of estimated Business Combination transaction costs incurred by Inflection Point and Merlin, including an estimated $4,340 of issuance costs related to the PIPE Investment.
5 Represents $259,730 and $129,865 paid to the Public Shareholders who are assumed to have exercised redemption rights under the Maximum Redemption Scenario and 50% Redemption Scenario, respectively.
b Transaction costs. The following adjustments represent the impact of transaction costs associated with the Business Combination on prepaid expenses and other current assets, assuming the No Redemption Scenario, Maximum Redemption Scenario, and 50% Redemption Scenario by the Public Shareholders:
1 Represents the removal of $6,365 of transaction costs incurred and capitalized as of September 30, 2025.
2 Represents the removal of $886 of transaction costs incurred and payable in accounts payable as of September 30, 2025.
c Convertible notes, warrants, and equity. The following adjustments represent the impact of the Business Combination on convertible promissory notes, warrant liabilities, Series A Preferred Stock, New Merlin Common Stock, additional paid-in capital, and stockholders’ deficit, assuming the No Redemption Scenario, Maximum Redemption Scenario, and 50% Redemption Scenario by the Public Shareholders:
1 Represents the payment of $259,730 and $129,865 to the Inflection Point shareholders for the redemption of 25,000,000 and 12,500,000 Inflection Class A Shares in the Maximum Redemption Scenario and 50% Redemption Scenario, respectively.
2 Represents the reclassification of 25,000,000 Inflection Class A Shares subject to potential redemption and 425,000 Inflection Class A Shares not subject to redemption into up to 25,425,000 shares of New Merlin Common Stock and additional paid-in-capital for $259,728.
3 Represents the reclassification of 8,333,333 shares of Inflection Class B Shares into 8,333,333 shares of New Merlin Common Stock.
4 Represents the issuance of 2,542,500 shares of New Merlin Common Stock in connection with the conversion of the Inflection Point Rights.
5 Represents the conversion of 17,696,748 shares of Merlin Preferred Stock into 56,317,035 shares of New Merlin Common Stock, based on an expected Exchange Ratio of 3.1823. In connection with the conversion, there is a $476,327 increase in additional paid-in-capital.
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6 Represents the conversion of 5,230,523 shares of Merlin Common Stock into 16,645,292 shares of New Merlin Common Stock, based on an expected Exchange Ratio of 3.1823. In connection with this conversion there is a $1 decrease in additional paid-in capital.
7 Represents the cashless exercise of warrants to purchase shares of Merlin Common Stock and the conversion of the Merlin Common Stock to 19,969 shares of New Merlin Common Stock, based an expected Exchange Ratio of 3.1823.
8 Represents the cashless exercise of warrants to purchase shares of Merlin Preferred Stock, the one-to-one conversion of the Merlin Preferred Stock to Merlin Common Stock, and the conversion of Merlin Common Stock to 719,569 shares of New Merlin Common Stock, based on an expected Exchange Ratio of 3.1823.
9 Represents the aggregate issuance to the PIPE Investors of 21,567,221 shares of Series A Preferred Stock and 21,157,300 warrants to purchase New Merlin Common Stock in exchange for (i) the Pre-Funded Convertible Notes and the Pre-Funded Warrants and (ii) pursuant to the Series A SPAs, including an associated decrease of $15,929 to accumulated deficit.
The shares of $0.0001 par value Series A Preferred Stock have the following rights and preferences:
Voting Rights — On all matters subject to the authorization of the holders of common stock, the holders of Series A Preferred Stock are entitled to vote together with holders of New Merlin Common Stock on an as-converted basis.
Protective Provisions — For as long as 20% of the shares of Series A Preferred Stock issued as of the Closing are outstanding, New Merlin shall not, without the affirmative vote or action by the Requisite Holders, take any of the following actions: (i) liquidate, dissolve or wind up the affairs of New Merlin; (ii) amend, alter, or repeal any provision of the Certificate of Designation or any similar document of New Merlin in a manner adverse to the Series A Preferred Stock; (iii) create or authorize the creation of or issue any other security convertible into or exercisable for any equity security unless such security ranks junior to the Series A Preferred Stock with respect to its rights, preferences and privileges, or increase the authorized number of shares of Series A Preferred Stock; (iv) purchase or redeem or pay any cash dividend on any capital stock ranking junior to the Series A Preferred Stock, other than stock repurchased at cost from former employees and consultants in connection with the cessation of their service; (v) enter into any transaction with an affiliate, other than the issuance of equity or awards to eligible participants under New Merlin’s incentive plan, equity plan or equity-based compensation plan, or with respect to employment, consulting or award agreements with respect to executive officers of New Merlin, in each case regardless of whether such person (or such person’s affiliates) would be considered an affiliate of New Merlin; or (vi) incur or guarantee any indebtedness, other than equipment leases or trade payables incurred in the ordinary course of business, if the aggregate indebtedness of New Merlin and its subsidiaries for borrowed money following such action would exceed $5,000,000; provided, however, that the Series A Preferred Stock shall not be considered indebtedness for purposes of this calculation.
Dividends — The holders of Series A Preferred Stock are entitled to receive, on a pari passu basis and prior and in preference to holders of the New Merlin Common Stock, an annual dividend in the amount of 12% of the Accrued Value (defined as the $12 stated value per share plus any accrued and unpaid dividends). Such dividends are payable only if and when declared and are cumulative, accruing daily and compounded semi-annually. No dividends shall be declared, paid, or set aside for New Merlin Common Stock without the holder of the Series A Preferred Stock receiving the aggregate amount of accrued dividends thereon at such time. Holders of Series A Preferred Stock shall also be entitled to receive participating dividends, if and when declared on the New Merlin Common Stock, on an as-converted basis.
Liquidation — In the event of liquidation, dissolution or winding up of New Merlin or upon the occurrence of a Deemed Liquidation Event (as defined in the Business Combination Agreement), the holders of the Series A Preferred Stock shall be entitled to receive, in preference to all holders of New Merlin Common Stock, an amount per share equal to the greater of (i) 100% of the Accrued
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Value or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into New Merlin Common Stock immediately prior to the liquidation, dissolution, winding up or Deemed Liquidation Event.
Conversion — Each share of Series A Preferred Stock is convertible at the holder’s option into a fixed number of New Merlin Common Stock at a conversion rate equal to (i) the Accrued Value at the time of conversion divided by (ii) the Conversion Price, defined as an initial conversion price of $12 per share, subject to customary antidilution and down-round adjustments.
Redemption — The Series A Preferred Stock is redeemable by New Merlin on or after the Closing at a redemption price per share equal to (i) 150% of the Accrued Value if redeemed within one year, (ii) 140% of the Accrued Value if redeemed after one year but within two years, (iii) 130% of the Accrued Value if redeemed after two years but within three years, (iv) 120% of the Accrued Value if redeemed after three years but within four years, (v) 110% of the Accrued Value if redeemed after four years but within five years, and (vi) 100% of the Accrued Value if after five years.
Each share of Series A Preferred Stock is redeemable by the holder thereof at any time following the fifth anniversary of the Closing. The redemption price is equal to the Accrued Value of the Series A Preferred Stock at the time of redemption.
The Series A Preferred Stock is classified as temporary equity because it is redeemable for cash at the option of the holder. The Series A Preferred Stock is initially recognized at issuance date fair value. Since the Series A Preferred Stock becomes redeemable by the holder solely upon the passage of time, New Merlin will subsequently recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the Series A Preferred Stock to its redemption value at each reporting date as if it were redeemable at that date.
10 Represents the payment of $18,683 of legal, advisory, and other transaction costs to be capitalized in additional paid-in capital, and $3,725 of legal, advisory, and other transaction costs to be expensed in accumulated deficit.
11 Represents the reclassification of $10,531 of Inflection Point’s accumulated deficit to additional paid-in capital.
NOTE 4. TRANSACTION ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2024 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
The pro forma transaction adjustments included in the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024 are as follows:
a Transaction costs. Represents $3,725 of estimated legal, advisory, and other transaction expenses that would have been expensed during the year ended December 31, 2024, in connection with the Business Combination. This amount includes $2,242 of transaction costs already incurred and expensed during the nine months ended September 30, 2025. Transaction costs are not expected to continue beyond 12 months after the Closing.
b Interest on cash, cash equivalents, and investments held in the Trust Account and interest from bank account. Represents the elimination of an immaterial amount of interest earned on cash, cash equivalents, and $7,974 and $1,756 of interest earned on investments held in the Trust Account during the nine months ended September 30, 2025 and the year ended December 31, 2024, respectively.
c Losses on convertible promissory notes and warrants. The following adjustments represent the impact of the Business Combination on historical losses recognized related to the convertible promissory notes and warrant liabilities exchanged in the Business Combination, assuming the no redemption, maximum redemption, and 50% redemption scenarios by the Public Shareholders:
1 Represents the removal of $4,562 and $265 of losses on change in fair value of warrant liabilities recognized during the nine months ended September 30, 2025, and the year ended December 31, 2024, respectively.
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Table of Contents
2 Represents the removal of $3,118 of losses on change in fair value of convertible promissory notes recognized during the nine months ended September 30, 2025.
3 Represents the removal of $3,320 of losses on exchange of warrant liabilities recognized during the nine months ended September 30, 2025.
4 Represents the removal of $585 of losses on the issuance of financial instruments recognized during the nine months ended September 30, 2025.
d Net loss per share. The following adjustments represent the impact of the Business Combination on net loss available to common stockholders related to the deemed dividend on exchange of redeemable convertible preferred stock and the cumulative dividends on Series A Preferred Stock:
1 Represents the removal of the deemed dividend on redeemable convertible preferred stock of $345,717 during the nine months September 30, 2025.
2 Represents the cumulative dividends on New Merlin Series A Preferred stock of $20,497 and $31,057 during the nine months ended September 30, 2025 and the year ended December 31, 2024, respectively.
NOTE 5. NET LOSS PER SHARE
Basic and diluted net loss per share are calculated using the two-class method. The Series A Preferred Stock is a participating security because it entitles holders thereof to cumulative dividends. Under the two-class method, earnings are allocated between holders of New Merlin Common Stock and these participating securities based on their contractual rights and obligations.
Basic net loss per share is computed by dividing loss attributable to holders of New Merlin Common Stock by the weighted-average shares of New Merlin Common Stock outstanding. Diluted net loss per share is computed by dividing net loss attributable to common shareholders by the weighted-average number of shares of New Merlin Common Stock outstanding, after adjusting for potential dilution related to the conversion of all dilutive securities into New Merlin Common Stock. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted-average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented. If Public Shares are redeemed, this calculation is retroactively adjusted to eliminate such shares for the entire periods.
The numerator and denominator of the basic and diluted historical earnings per share for Inflection Point were calculated as follows:
|
Nine Months Ended |
Year Ended |
|||||||||||
|
Class A |
Class B |
Class A |
Class B |
|||||||||
|
Basic and diluted net income per Inflection Point Ordinary Share |
|
|
|
|
||||||||
|
Numerator: |
|
|
|
|
||||||||
|
Allocation of net income |
$ |
3,607 |
$ |
1,202 |
$ |
722 |
$ |
798 |
||||
|
Denominator: |
|
|
|
|
||||||||
|
Weighted-average shares outstanding |
|
25,000,000 |
|
8,333,333 |
|
7,500,000 |
|
8,289,473 |
||||
|
Basic and diluted net income per Inflection Point Ordinary Share |
$ |
0.14 |
$ |
0.14 |
$ |
0.10 |
$ |
0.10 |
||||
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The numerator and denominator of the basic and diluted historical net loss per share of Merlin were calculated as follows:
|
Nine Months |
Year |
|||||||
|
Numerator: |
|
|
|
|
||||
|
Net loss |
$ |
(55,725 |
) |
$ |
(55,253 |
) |
||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
|
(345,717 |
) |
|
— |
|
||
|
Net loss attributable to common stockholders |
|
(401,442 |
) |
|
(41,826 |
) |
||
|
Denominator: |
|
|
|
|
||||
|
Weighted average shares outstanding, basic and diluted |
|
5,191,045 |
|
|
5,118,223 |
|
||
|
Net loss per share, basic and diluted |
$ |
(77.33 |
) |
$ |
(10.80 |
) |
||
The numerator and denominator of the basic and diluted pro forma net loss per share of New Merlin was calculated as follows:
|
Nine Months Ended |
||||||||||||
|
Pro Forma |
||||||||||||
|
No Redemption |
50% |
Maximum |
||||||||||
|
Numerator: |
|
|
|
|
|
|
||||||
|
Net loss attributable to holders of New Merlin Common Stock |
$ |
(45,111 |
) |
$ |
(45,111 |
) |
$ |
(45,111 |
) |
|||
|
Less: cumulative Series A Preferred Stock dividends |
|
(20,497 |
) |
|
(20,497 |
) |
|
(20,497 |
) |
|||
|
Net loss attributable to holders of New Merlin Common Stock |
$ |
(65,608 |
) |
$ |
(65,608 |
) |
$ |
(65,608 |
) |
|||
|
Denominator: |
|
|
|
|
|
|
||||||
|
Weighted average shares outstanding of New Merlin Common Stock |
|
110,002,698 |
|
|
97,502,698 |
|
|
85,002,698 |
|
|||
|
Net loss per share of New Merlin Common Stock |
$ |
(0.60 |
) |
$ |
(0.67 |
) |
$ |
(0.77 |
) |
|||
|
|
|
|
|
|
|
|||||||
|
Pro forma weighted average shares outstanding – basic and diluted |
|
|
|
|
|
|
||||||
|
Public Shareholders and Rightsholders |
|
27,500,000 |
|
|
15,000,000 |
|
|
2,500,000 |
|
|||
|
Sponsor |
|
8,800,833 |
|
|
8,800,833 |
|
|
8,800,833 |
|
|||
|
Total Inflection Point |
|
36,300,833 |
|
|
23,800,833 |
|
|
11,300,833 |
|
|||
|
Merlin |
|
73,701,865 |
|
|
73,897,918 |
|
|
73,897,918 |
|
|||
|
Pro forma weighted average shares outstanding – basic and diluted |
|
110,002,698 |
|
|
97,698,751 |
|
|
85,198,751 |
|
|||
The unaudited pro forma condensed combined financial information has been prepared assuming three alternative levels of redemption related to the public shares for the nine months ended September 30, 2025. For the purposes of calculating diluted earnings per share, the following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share due to their anti-dilutive effect: (i) 21,633,896 shares of Series A Preferred Stock, (ii) warrants to purchase 21,157,300 shares of New Merlin Common Stock, and (iii) New Merlin Options exercisable for 7,218,348 shares of New Merlin Common Stock.
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Table of Contents
|
Year ended December 31, 2024 |
||||||||||||
|
Pro Forma |
||||||||||||
|
No Redemption |
50% |
Maximum |
||||||||||
|
Numerator: |
|
|
|
|
|
|
||||||
|
Net loss attributable to holders of New Merlin Common Stock |
$ |
(58,964 |
) |
$ |
(58,964 |
) |
$ |
(58,964 |
) |
|||
|
Cumulative Series A Preferred Stock dividends |
|
(31,057 |
) |
|
(31,057 |
) |
|
(31,057 |
) |
|||
|
Net loss attributable to holders of New Merlin Common Stock |
$ |
(90,021 |
) |
$ |
(90,021 |
) |
$ |
(90,021 |
) |
|||
|
Denominator: |
|
|
|
|
|
|
||||||
|
Weighted average shares outstanding of New Merlin Common Stock |
|
110,002,698 |
|
|
97,502,698 |
|
|
85,002,698 |
|
|||
|
Net loss per share of New Merlin Common Stock |
$ |
(0.82 |
) |
$ |
(0.92 |
) |
$ |
(1.06 |
) |
|||
|
|
|
|
|
|
|
|||||||
|
Pro forma weighted average shares outstanding – basic and diluted |
|
|
|
|
|
|
||||||
|
Public Shareholders and Rightsholders |
|
27,500,000 |
|
|
15,000,000 |
|
|
2,500,000 |
|
|||
|
Sponsor |
|
8,800,833 |
|
|
8,800,833 |
|
|
8,800,833 |
|
|||
|
Total Inflection Point |
|
36,300,833 |
|
|
23,800,833 |
|
|
11,300,833 |
|
|||
|
Merlin |
|
73,701,865 |
|
|
73,701,865 |
|
|
73,701,865 |
|
|||
|
Pro forma weighted average shares outstanding – basic and diluted |
|
110,002,698 |
|
|
97,502,698 |
|
|
85,002,698 |
|
|||
The unaudited pro forma condensed combined financial information has been prepared assuming three alternative levels of redemption related to the public shares for the year ended December 31, 2024. For the purposes of calculating diluted earnings per share, the following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share due to their anti-dilutive effect: (i) 21,633,896 shares of Series A Preferred Stock, (ii) warrants to purchase 21,157,300 shares of New Merlin Common Stock, and (iii) New Merlin Options exercisable for 7,218,348 shares of New Merlin Common Stock.
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INFORMATION ABOUT INFLECTION POINT
Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us” or “our” refer to Inflection Point prior to the consummation of the Business Combination.
General
Inflection Point Acquisition Corp. IV is a blank check company incorporated as a Cayman Islands exempted corporation on June 24, 2024. The Company was incorporated 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. Inflection Point has neither engaged in any operations nor generated any operating revenues to date.
Initial Public Offering
On June 25, 2024, the Sponsor made a capital contribution of $25,000, or approximately $0.004 per share, to cover certain of Inflection Point’s deferred offering costs and expenses, for which the Company issued 7,187,500 Founder Shares to the Sponsor. On October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares (up to 1,250,000 shares of which were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option is exercised), for a purchase price of approximately $0.003 per share. On November 4, 2024, the underwriters forfeited their over-allotment option to purchase up to an additional 3,750,000 units. As a result of the over-allotment option forfeiture by the underwriters, 1,250,000 Inflection Point Class B Shares were surrendered by the Sponsor in order for the Sponsor to maintain ownership of 25% of the issued and outstanding shares of the Company (excluding the Inflection Point Class A Shares underlying the Private Placement Units held by the Sponsor). Such surrendered shares were cancelled by Inflection Point.
The registration statement for the IPO was declared effective on October 31, 2024. On November 4, 2024, Inflection Point consummated the Initial Public Offering of 25,000,000 units at $10.00 per unit, generating gross proceeds of $250,000,000. Each Unit consists of one Inflection Point Class A Share and one Inflection Point Right, with each Right entitling the holder thereof to purchase one-tenth of one Inflection Point Class A Ordinary Share.
Simultaneously with the sale of the first 25,000,000 Inflection Point Units in our IPO, Inflection Point completed the private sale of an aggregate of 425,000 Private Placement Units to the Sponsor at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds of $4,250,000.
Following the closing of the IPO on November 4, 2024, an amount of $250,000,000 ($10.00 per unit) from the net proceeds of the sale of the Inflection Point Units, and a portion of the net proceeds from the sale of the Private Placement Units, was placed in the Trust Account, located in the United States, with Continental acting as trustee. Except with respect to interest earned on the funds held in the Trust Account that may be released to Inflection Point to pay its taxes, the proceeds from the IPO and the sale of the Private Placement Units will not be released from the Trust Account until the earliest of (i) the completion of an initial business combination, (ii) the redemption of the Inflection Point’s Public Shares if Inflection Point is unable to complete the initial business combination within the completion window, subject to applicable law and the Cayman Constitutional Documents, or (iii) the redemption of the Public Shares properly submitted in connection with a shareholder vote to amend the Cayman Constitutional Documents to (A) modify the substance or timing of Inflection Point’s obligation to allow redemption in connection with the initial business combination or to redeem 100% of the Public Shares if Inflection Point has not consummated an 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. The proceeds deposited in the Trust Account could become subject to the claims of Inflection Point’s creditors, if any, which could have priority over the claims of the Public Shareholders.
Inflection Point’s prospectus for its IPO and the Cayman Constitutional Documents provide that it has until November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law), to complete an initial business combination.
The net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest. As of the Record Date, there was $[•] in investments and cash held in the Trust Account.
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Name Change Proposal and Article 50.5 Amendment Proposal
On October 21, 2025, the Inflection Point Shareholders approved (i) a proposal to change the name of the name of Inflection Point from “Bleichroeder Acquisition Corp. I” to “Inflection Point Acquisition Corp. IV” and to adopt an amendment to the Articles to reflect the change of name (the “Name Change Proposal”) and (ii) a proposal to amend the Articles to allow Inflection Point to consummate the redemption of the Public Shares at an earlier time in connection with the commencement of the procedures to consummate a proposed business combination if the Inflection Point Board determines it is desirable to facilitate the consummation of such business combination (the “Article 50.5 Amendment Proposal”). An amendment to the amended and restated memorandum and articles of association of Inflection Point reflecting the changes approved by shareholders was filed with the Cayman Registrar of Companies.
Fair Market Value of Merlin’s Business
Inflection Point’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 agreement to enter into the business combination. Inflection Point 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 Inflection Point Board determined that this test was met in connection with the Business Combination.
Shareholder Approval of Business Combination
Under the Cayman Constitutional Documents, if Inflection Point seeks shareholder approval in connection with any proposed business combination, as it is doing in connection with the Business Combination, it may only complete such proposed business combination, including the Business Combination, if it receives an ordinary resolution, being the affirmative vote of the holders of a majority of the Inflection Point Ordinary Shares, who, being present in person or by proxy and entitled to vote at a general meeting, vote at such general meeting.
Voting Restrictions in Connection with Shareholder Meeting
Inflection Point’s Sponsor, directors and executive officers have entered into Letter Agreements to vote their Inflection Point Ordinary Shares in favor of the Business Combination Proposal and Inflection Point also expects them to vote their shares in favor of all other proposals being presented at the extraordinary general meeting. Further, concurrently with the execution of the Business Combination Agreement, the Sponsor entered into the Sponsor Support Agreement with Merlin, pursuant to which the Sponsor agreed to vote its shares in favor of all proposals being presented at the extraordinary general meeting.
As of the Record Date, the Sponsor owned approximately 25.9% of the total outstanding Inflection Point Ordinary Shares.
Permitted Purchases of Securities
If Inflection Point seeks shareholder approval of our initial business combination and does not conduct Redemptions in connection with our initial business combination pursuant to the tender offer rules, the Sponsor, Inflection Point’s or Merlin’s Point’s directors, officers, advisors and their affiliates may purchase Public Shares or Public Rights in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation or duty to do so. Such a purchase may include a contractual acknowledgment that such shareholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and 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. It is intended that, if Rule 10b-18 would apply to purchases by the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates, then such purchases will comply with Rule 10b-18 under the Exchange Act, to the extent it applies, which provides a safe harbor for purchases made under certain conditions, including with respect to timing, pricing and volume of purchases.
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Additionally, at any time at or prior to our initial business combination, subject to applicable securities laws (including with respect to material nonpublic information), the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and 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 our initial business combination or not redeem their Public Shares. However, 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, or Public Rights in such transactions.
The purpose of any such transactions could be to (1) increase the likelihood of obtaining Inflection Point Shareholder Approval of the Business Combination, (2) reduce the number of Public Rights outstanding and/or increase the likelihood of approval on any matters submitted to the Public Rights holders for approval in connection with our initial business combination or (3) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our securities may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
The Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates anticipate that they may identify the shareholders with whom the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates may pursue privately negotiated transactions by either the shareholders contacting us directly or by our receipt of redemption requests submitted by shareholders (in the case of Inflection Point Class A Shares) following our mailing of proxy materials in connection with our initial business combination. To the extent that the Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates enter into a private transaction, they would identify and contact only potential selling or redeeming shareholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against our initial business combination, whether or not such shareholder has already submitted a proxy with respect to our initial business combination but only if such shares have not already been voted at the general meeting related to our initial business combination. The Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates will select which shareholders to purchase shares from based on the negotiated price and number of shares and any other factors that they may deem relevant, and will be restricted from purchasing shares if such purchases do not comply with Regulation M under the Exchange Act and the other federal securities laws.
The Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates will be restricted from making purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. 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 Sponsor, Inflection Point’s or Merlin’s directors, officers, advisors and their affiliates were to purchase Public Shares or Public Rights 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:
• this proxy statement/prospectus discloses the possibility that the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates may purchase Public Shares or warrants from Public Shareholders outside the redemption process, along with the purpose of such purchases;
• if the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates were to purchase Public Shares from Public Shareholders, they would do so at a price no higher than the Redemption Price;
• this proxy statement/prospectus includes a representation that any of our securities purchased by the Sponsor, Inflection Point Fund, or Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will not be voted in favor of approving the Business Combination;
• the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates will not possess any redemption rights with respect to our securities or, if they do acquire and possess redemption rights, they would waive such rights; and
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• we will disclose in a Form 8-K, before the extraordinary general meeting, the following material items:
• the amount of securities purchased outside of the redemption offer by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates, along with the purchase price;
• the purpose of the purchases by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates;
• the impact, if any, of the purchases by the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates on the likelihood that the Business Combination will be approved;
• the identities of the security holders who sold to the Sponsor, Inflection Point Fund, Inflection Point’s or Merlin’s directors, managers, officers, advisors and 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 Sponsor, Inflection Point’s or Merlin’s directors, managers, officers, advisors and their affiliates; and
• the number of Public Shares for which Inflection Point has received redemption requests pursuant to its redemption offer.
Redemption If No Business Combination
Inflection Point has until November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law) to complete an initial business combination. If it is unable to complete its initial business combination by that date (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents), Inflection Point will as promptly as reasonably possible but not more than ten 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. In such event, the rights may be worthless.
The Sponsor and Inflection Point’s officers and directors have entered into Letter Agreements with Inflection Point, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if Inflection Point fails to complete its initial business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law). However, if the Sponsor or management team acquired, or in the future acquires, Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if Inflection Point fails to complete its initial business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents, subject to applicable law).
The Sponsor, officers and directors have agreed, pursuant to written agreements with Inflection Point, that they will not propose any amendment to the Cayman Constitutional Documents (A) to modify the substance or timing of Inflection Point’s obligation to allow redemption in connection with its initial business combination or to redeem 100% of its Public Shares if Inflection Point does not complete its 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, unless Inflection Point provides its Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share redemption price, payable in cash, equal to 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 (which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares.
Inflection Point expects that all costs and expenses associated with implementing its liquidation and dissolution, as well as payments to any creditors, will be funded from proceeds held outside the Trust Account, although Inflection Point cannot assure you 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 its liquidation and dissolution, to the extent that there is any interest accrued in the Trust Account not required to pay income taxes on interest income earned on the Trust Account balance, Inflection Point may request the trustee to release to it an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
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Without taking into account interest, if any, earned on the Trust Account, the per-share redemption amount received by Public Shareholders upon Inflection Point’s dissolution would be approximately $[•] as of the Record Date. The proceeds deposited in the Trust Account could, however, become subject to the claims of Inflection Point’s creditors who would have higher priority than the claims of Public Shareholders. Inflection Point cannot assure you that the actual per-share redemption amount received by Public Shareholders will not be substantially less than $[•]. While Inflection Point intends to pay such amounts, if any, Inflection Point cannot assure you that it will have funds sufficient to pay or provide for all creditors’ claims.
Although Inflection Point seeks, and will continue to seek, to have all vendors, service providers, prospective target businesses and other entities with which it does business execute agreements with Inflection Point waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of its 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 Inflection Point’s 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, Inflection Point 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 Inflection Point under the circumstances. Examples of possible instances where Inflection Point 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. UHY LLP, Inflection Point’s independent registered public accounting firm, and the underwriters of the IPO have not, and will not, execute agreements with Inflection Point waiving such claims to the monies held in the Trust Account. 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 Inflection Point and will not seek recourse against the Trust Account for any reason. In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to Inflection Point if and to the extent any claims by a third party for services rendered or products sold to Inflection Point, or a prospective target business with which Inflection Point 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 share due to reductions in the value of the trust assets, less taxes payable, 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 the indemnity of the underwriters of Inflection Point’s IPO against certain liabilities, including liabilities under the Securities Act. However, Inflection Point has not asked the Sponsor to reserve for such indemnification obligations, nor has it independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and Inflection Point believes that the Sponsor’s only assets are securities of Inflection Point. Therefore, Inflection Point cannot assure you that the Sponsor 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 Inflection Point’s initial business combination and redemptions could be reduced to less than $10.00 per Public Share. In such event, Inflection Point may not be able to complete its initial business combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of Inflection Point’s officers or directors will indemnify Inflection Point for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
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 the Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, Inflection Point’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While Inflection Point currently expects that its independent directors would take legal action on its behalf against the Sponsor to enforce the Sponsor’s indemnification obligations to Inflection Point, it is possible that our independent directors in exercising their business judgment 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, Inflection Point cannot assure you that due to claims of creditors the actual value of the per-share Redemption Price will not be less than $10.00 per Public Share.
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Inflection Point seeks, and will seek, to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or 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. The Sponsor will also not be liable as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. We have access to working capital 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, shareholders who received funds from our Trust Account could be liable for claims made by creditors. In the event that the offering expenses are less than our estimate of $750,000, the amount of funds available outside the Trust Account would increase by a corresponding amount.
If Inflection Point files a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against Inflection Point that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy or insolvency law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of Inflection Point’s shareholders. To the extent any bankruptcy claims deplete the Trust Account, Inflection Point cannot assure you it will be able to return $10.00 per Public Share to its Public Shareholders. Additionally, if Inflection Point files a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against Inflection Point that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy or insolvency 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 Inflection Point’s shareholders. Furthermore, the Inflection Point Board may be viewed as having breached its fiduciary duty to its creditors and/or may have acted in bad faith, and thereby exposing itself and Inflection Point to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. Inflection Point cannot assure you that claims will not be brought against it for these reasons.
Inflection Point’s Public Shareholders will be entitled to receive funds from the Trust Account only (i) in the event of the redemption of our Public Shares if we do not complete our initial business combination within the completion window, subject to applicable law and the Cayman Constitutional Documents, (ii) in connection with a shareholder vote to amend our Cayman Constitutional Documents (A) to modify the substance or timing of our obligation to allow Redemptions in connection with our initial business combination or to redeem 100% of our 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) if they redeem their respective shares for cash upon the completion of our initial business combination, subject to applicable law and any limitations (including but not limited to cash requirements) created by the terms of the proposed Business Combination. In no other circumstances will a shareholder have any right or interest of any kind to or in the Trust Account. In the event we seek shareholder approval in connection with our initial business combination, a shareholder’s voting in connection with the Business Combination alone will not result in a shareholder’s redeeming its shares to us for an applicable pro rata share of the Trust Account. Such shareholder must have also exercised its redemption rights described above. These provisions of the Cayman Constitutional Documents, like all provisions of the Cayman Constitutional Documents, may be amended with a shareholder vote.
Properties
Inflection Point’s executive offices are located at 1345 Avenue of the Americas, Floor 47, New York, NY 10105, provided by an affiliate of the Sponsor free of charge, and our telephone number is (212) 984-3835. We consider our current office space adequate for our current operations.
Employees
Inflection Point currently has three officers: Michael Blitzer, Robert Folino and Kevin Shannon. These individuals are not obligated to devote any specific number of hours to Inflection Point’s matters but they devote as much of their time as they deem necessary to Inflection Point’s affairs until it has completed its initial business combination. The amount of time they devote in any time period will vary based on whether a target business has been selected for Inflection Point’s initial business combination and the stage of the Business Combination process it is in. Inflection Point does not intend to have any full time employees prior to the completion of its initial business combination.
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Directors and Executive Officers
Inflection Point’s directors and executive officers are as follows:
|
Name |
Age |
Position |
||
|
Andrew Gundlach |
54 |
Chairman of the Board of Directors and Executive Chairman |
||
|
Michael Blitzer |
48 |
President, Chief Executive Officer and Director |
||
|
Kevin Shannon |
30 |
Chief Operating Officer |
||
|
Robert Folino |
57 |
Chief Financial Officer |
||
|
Joseph Samuels |
50 |
Director |
||
|
Antoine Theysset |
49 |
Director |
||
|
Kathy Savitt |
61 |
Director |
Andrew Gundlach, Inflection Point’s Chairman since June 26, 2024, currently serves as President and Co-Chief Executive Officer at Inflection Point, a registered investment advisor focused on ultra-high-net-worth families, a position held since 2019, where he oversees the strategic and operational aspects of the firm; he has been with Inflection Point and its predecessor firms since 2006. Since 2015 he has also headed Goldiron, a registered investment advisor focused on institutions and ultra-high-net-worth investors. He also is an Adjunct Associate Professor of Business at Columbia Business School from 2004 to the present, where he teaches courses on investing, and currently serves on the school’s board. Previously, Mr. Gundlach co-founded Artemis Advisors LLC in 1999 and served as a founding partner until 2006. His earlier career includes roles as an Associate at J.P. Morgan Chase & Co. from 1996 to 1999, and as an Analyst at Morgan Stanley from 1994 to 1996. Mr. Gundlach holds board positions as a Director at First Eagle Holdings since 2006. He served on the boards of Odyssey Acquisition SA from 2021 to 2022, and Materia, Inc. from 2014 until its acquisition by ExxonMobil in 2021. Mr. Gundlach is also a Member of the Council on Foreign Relations, where he serves on the Investment Committee. Mr. Gundlach currently serves on the Advisory Board at People.ai, a privately-held AI company, and Welltower (NYSE: WELL), a publicly-traded health care infrastructure REIT. He earned an MBA from Columbia Business School and holds both an MS and a BS in International Relations and Affairs from Georgetown University’ School of Foreign Service. We believe he is well qualified to serve on our board due to his extensive investment and advisory background.
Michael Blitzer has been the President and CEO of Inflection Point since July 2025. Mr. Blitzer has served as the Chairman and CEO of IPCX, a special purpose acquisition company which announced the signing of a definitive agreement for its initial business combination with Air Water Ventures Holdings Limited on August 25, 2025. Since September 2025, Mr. Blitzer has also served as the Chairman and Chief Executive Officer of IPEX, a special purpose acquisition company which announced the signing of a definitive agreement for its initial business combination with GOWell Technology Limited on October 14, 2025. Mr. Blitzer previously served as co-CEO and director of IPAX, a special purpose acquisition company, from February 2021 until the completion of its business combination with Intuitive Machines, LLC in February 2023. Mr. Blitzer also served as the Chairman and CEO of IPXX from March 2023 until the closing of its business combination with USARE in March 2025. He currently sits on the board of directors and audit committee of Intuitive Machines, Inc. (Nasdaq: LUNR) and is the Chairman of USA Rare Earth, Inc. (Nasdaq: USAR). Mr. Blitzer is the founder and co-CEO of Kingstown Capital Management (“Kingstown”), which he founded in 2006 and grew to a multi-billion asset manager with some of the world’s largest endowments and foundations as clients. Over 19 years, Kingstown has invested in public and private equities, SPACs, PIPEs, and derivatives. At Kingstown, Mr. Blitzer has overseen and participated in nearly all the firm’s investment decisions including countless public and private investments in disruptive growth industries. Mr. Blitzer brings an in-depth understanding of public markets and has invested in a variety of corporate transactions such as spin-offs, rights offerings, public offerings, privatizations, and mergers & acquisitions. Mr. Blitzer began his Wall Street career at J.P. Morgan Securities in 1999 advising companies globally in private debt and equity capital raises followed by work at the investment fund Gotham Asset Management, which was founded by the author and investor Joel Greenblatt. Mr. Blitzer taught courses in Investing at Columbia Business School for five years in the 2010s. He holds an M.B.A. from Columbia Business School and a B.S. from Cornell University where he received the Cornell Tradition Fellowship. Mr. Blitzer is a trustee of Greens Farms Academy in Westport, CT where he is also Treasurer and Chair of the Investment Committee. We believe Mr. Blitzer is well-qualified to serve as a director due to his extensive experience in company advisory and with special purpose acquisition companies.
Kevin Shannon has been the COO of Inflection Point since July 2025. Mr. Shannon has served as COO of IPCX, a special purpose acquisition company which announced the signing of a definitive agreement for its initial business combination with Air Water Ventures Holdings Limited on August 25, 2025. He also has served, since September 2025,
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as the COO of IPEX, a special purpose acquisition company which announced the signing of a definitive agreement for its initial business combination with GOWell Technology Limited on October 14, 2025. He previously served as Chief of Staff of IPXX from March 2023 until March 2025 and as Chief of Staff of IPAX from March 2021 to February 2023. In his role as COO of IPCX, IPDX and IPFX, and Chief of Staff for IPXX and IPAX, Mr. Shannon was an active participant in all target search, negotiation, and due diligence workstreams. Mr. Shannon is a founder and partner of Inflection Point Asset Management, which he co-founded with Michael Blitzer in 2024. Inflection Point Asset Management invests in concentrated SPAC sponsor and PIPE positions, primarily focused on backing the Inflection Point franchise of SPACs. Mr. Shannon also currently serves as Capital Markets Advisor for Intuitive Machines, Inc and as Special Advisor to USA Rare Earth, Inc. Prior to Inflection Point Asset Management, Mr. Shannon was a Principal at The Venture Collective from April of 2023 to March of 2024 helping to source and diligence later stage investments for the venture capital firm. Before that, Mr. Shannon was a Senior Analyst at Kingstown Capital from March of 2021 to March of 2023. Mr. Shannon began his career in Equity Capital Markets at Bank of America, spending time working across the Technology, Industrials, Equity-Linked, and SPAC teams within ECM. Mr. Shannon holds a B.A. from Colgate University.
Robert Folino, Inflection Point’s Chief Financial Officer since July 2025, joined Inflection Point, a registered investment advisor, as a trader in 2018 where he and Mr. Gundlach worked closely to help establish the firm. In 2019, Mr. Folino was made Chief Operating Officer and Head of Trading of Inflection Point. He is currently responsible for overseeing all aspects of accounting, tax and financial operations of the funds, the management company, and its general partner entities. Prior to joining Inflection Point, Mr. Folino worked for First Eagle Investment Management for 22 years, where he held positions of increasing responsibility. He joined Arnhold and S. Bleichroeder, the predecessor firm to First Eagle Investment Management, in 1996 as a junior arbitrage trader for the Merger Arbitrage Department. Mr. Folino holds a BA in Finance from Rider University.
Joseph Samuels, who has served as Inflection Point’s director since October 2024, is the Founder, Chief Executive Officer and Chief Operating Officer of Channel Partners, an investment firm focused on strategic transactions and opportunistic liquidity in public and private companies since 2023, and Islet Management, an investment firm focused on an opportunistic, catalyst-oriented long/short equity strategy, since 2017. Prior to founding Islet, from 2003 to 2016, Mr. Samuels was an Executive Managing Director who previously held many key roles at Sculptor Capital Management Inc. (f/k/a Och-Ziff Capital Management Group LLC), a hedge fund with peak AUM of $50 billion. During his 14 years at the fund, he served on the Portfolio Management Committee, the Risk Committee, and the Managing Director Committee, and acted as Head of U.S. Trading and as the Co-Head of the U.S. Equity Business. He worked closely with banks and other market participants to create capital solutions for individual companies/sectors and as a balance sheet partner for strategic dispositions and funding opportunities. Prior to that, from 2001 to 2003, Mr. Samuels worked at Pequot Capital Management Inc. and, prior to that, from 1997 to 2001, he worked in the Sales and Trading division at Merrill Lynch & Co. He received a BA in Economics from Rutgers College. We believe Mr. Samuels is well-qualified to serve as a director due to his extensive finance and investment experience.
Antoine Theysset, who has served as Inflection Point’s director since October 2024, has 25 years of international strategy and operations experience in the Technology, Media and Entertainment industry. Mr. Theysset has been serving as an independent director of Improbable Worlds Ltd, a technology company providing metaverse infrastructure and applications, and previously served as the director representing SoftBank. Prior to that, he was an Operating Partner with SoftBank Investment Advisers, focused on its Consumer Tech and Media investments. Mr. Theysset previously led McKinsey’s Fast Growth Tech practice development in the Consumer Tech and Media markets. He has been advising startups and VC funds on growth strategy and international expansion, both with McKinsey and as advisor/operating partner to 2 early-stage funds. Earlier in his career, he held several executive positions with News Corporation over 8 years in London and then in New York (COO of Fox Interactive Media’s international division, SVP Corporate Development, etc.), strategy and business development with Orange Mobile Group in London, strategy consulting with Cap Gemini, Universal Music Group, and Vivendi Universal Net’s Strategic Planning and Corporate Development. He graduated from NYU Stern with an MBA in Finance and Marketing, received two certificates in Entertainment, Media and Technology, and Digital Economy, and is a graduate of the double-degree program in International Business from Northeastern University and NEOMA Business School/CESEM. We believe Mr. Theysset is well-qualified to serve as a director due to his extensive international strategy and operations experience.
Kathy Savitt, who has served as Inflection Point’s director since October 2024, has extensive senior executive operating experience, as well as public and private board roles across a variety of industries. Ms. Savitt has been serving as a General Partner at Perch Partners, LLC, a growth revenue, marketing and operational excellence advisory firm since January 2025. Her professional experience includes serving as past President and Chief Business Officer of
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Boom Supersonic, a private designer of supersonic airliners, from 2020 to 2024, Chief Marketing and Media Officer at Yahoo (NYSE: AABA) from 2012 to 2015 and holding senior leadership marketing roles at Amazon (Nasdaq: AMZN) from 2002 to 2006, and American Eagle Outfitters (NYSE: AEO) from 2009 to 2012. Prior to this, she served as Founder and Chief Executive Officer of Lockerz, an international social commerce website and as Co-Founder and President at MWW/Savitt (part of the MWW Group, a public relations firm). Her board experience includes serving as Chairperson for Volta Charging (NYSE: VLTA) from 2018 to 2023 (where she served as lead independent director upon the company’s going public and then as Chairperson until its company’s sale in 2023) and as a board member for Alaska Airlines (NYSE: ALK) from 2014 to 2017, and Build-A-Bear Workshop (NYSE: BBW) from 2009 to 2011. Ms. Savitt holds a Bachelor of Arts from Cornell University. We believe Ms. Savitt is well-qualified to serve as a director due to her extensive public and private company experience across a variety of industries.
Executive and Director Compensation
None of Inflection Point’s executive officers or directors have received any cash compensation for services rendered to Inflection Point. We are not prohibited from paying any fees (including advisory fees), reimbursements or cash payments to the Sponsor, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination, including the following payments, all of which, if made prior to the completion of our initial business combination, will be paid from working capital:
• Payment of consulting, success or finder fees to the Sponsor, Co-Founders or a member of our management team, or their respective affiliates in connection with the consummation of our initial business combination;
• We may engage the Sponsor or an affiliate of the Sponsor as an advisor or otherwise in connection with our initial business combination and certain other transactions and pay such person or entity a salary or fee in an amount that constitutes a market standard for comparable transactions;
• Reimbursement for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial business combination;
• Repayment of up to $750,000 in working capital loans that may be made by Inflection Point; and
• Repayment of loans which may be made by the Sponsor or an affiliate of the Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. Up to $2,500,000 of such loans (including up to $750,000 in working capital loans that may be made by Inflection Point Fund, which has agreed to lend us up to this amount for working capital purposes) may be convertible into private placement units of the post-business combination entity at a price of $10.00 per unit at the option of the lender. Such units would be identical to the private placement units. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans.
After the completion of Inflection Point’s initial business combination, directors or members of Inflection Point’s management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to shareholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our shareholders in connection with a proposed initial 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 proposed initial 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 Inflection Point’s executive officers will be determined, or recommended to the Inflection Point Board for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on the Inflection Point Board. 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 the Business Combination, or another initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after the Business Combination, or another initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation
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of the Business Combination, or another initial business combination, will be a determining factor in our decision to proceed with the Business Combination, or another initial business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
Set forth below is a summary of the amount of compensation and securities received or to be received by the Sponsor, its affiliates and Inflection Point’s directors, officers and their affiliates in connection with the Business Combination and related transactions.
|
Entity/Individual |
Amount of Compensation Received or to be |
Consideration |
||
|
Sponsor |
8,333,333 shares of New Merlin Common Stock upon conversion of 8,333,333 Inflection Point Class A Shares. |
$25,000. |
||
|
467,500 shares of New Merlin Common Stock upon the conversion of the Inflection Point Class A Shares and the Inflection Point Rights underlying the 425,000 Private Placement Units. |
$4,250,000. |
|||
|
Inflection Point Fund |
Number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share of (i) the total outstanding principal and accrued and unpaid interest on the Pre-Funded Convertible Note as of one day prior to Closing, divided by $12.00, as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Note (approximately 1,559,549 shares of Series A Preferred Stock taking into account accrued interest through January 31, 2026); such number of shares of Series A Preferred Stock may increase prior to Closing due to additional accrued interest after such date), and a New Merlin Series A Warrant exercisable for 1,720,589 shares of New Merlin Common Stock. |
Exchange of Pre-Funded Convertible Note and a Pre-Funded Warrant, which Pre-Funded Convertible Note and Pre-Funded Warrant were acquired for an aggregate purchase price of $15 million. |
||
|
5,266,667, or approximately 60.1%, of the Founder Shares and 425,000, or 100%, of the Private Placement Units held by the Sponsor. |
$4,250,000. |
|||
|
Sponsor, Officers and Directors |
Consulting, success or finder fees in connection with the consummation of our initial business combination. |
Services in connection with identifying, investigating and completing an initial business combination. |
||
|
Salary or fee in an amount that constitutes a market standard for comparable transactions in connection with our initial business combination. |
Services in connection with identifying, investigating and completing an initial business combination. |
Number and Terms of Office of Officers and Directors
Committees of the Board of Directors
The Inflection Board has established two standing committees: an audit committee and a compensation committee. Subject to phase-in rules, 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. Each committee operates under a charter approved by our board and has the composition and responsibilities described below.
Audit Committee
The Inflection Board has established an audit committee of the Inflection Board. Ms. Savitt and Messrs. Samuel and Theysett serve as the members of our audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have three members of the audit committee, all of whom must be independent. Ms. Savitt and Messrs. Samuel and Theysett are each independent.
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Ms. Savitt serves as the chairperson of the audit committee. Each member of the audit committee is financially literate and the Inflection Point Board has determined that [•] qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
• assisting board oversight of (1) the integrity of Inflection Point’s financial statements, (2) compliance with legal and regulatory requirements, (3) Inflection Point’s independent registered public accounting firm’s qualifications and independence, and (4) the performance of Inflection Point’s 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 independent registered public accounting firm engaged by Inflection Point;
• 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 Inflection Point, and establishing pre-approval policies and procedures; reviewing and discussing with the independent registered public accounting firm all relationships the independent registered public accounting firm have with Inflection Point in order to evaluate their continued independence;
• 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 (1) the independent registered public accounting firm’s internal quality-control procedures and (2) any material issues raised by the most recent internal quality-control review, or peer review, of the independent registered public accounting 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 Inflection Point’s 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 of Inflection Point”; 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
The Inflection Point Board has established a compensation committee of the Inflection Point Board. The members of the compensation committee are Messrs. Samuels and Theysset. Mr. Theysset serves as chair of the compensation committee. Under the Nasdaq listing standards and applicable SEC rules, Inflection Point is required to have a compensation committee of at least two members, all of whom must be independent. Messrs. Samuels and Theysset are each independent. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
• reviewing and approving on an annual basis the corporate goals and objectives relevant to Inflection Point’s chief executive officer’s compensation, evaluating the chief executive officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of Inflection Point’s chief executive officer based on such evaluation;
• reviewing and making recommendations to the Inflection Point Board with respect to the compensation, and any incentive compensation and equity-based plans that are subject to board approval of all of Inflection Point’s other officers;
• reviewing executive compensation policies and plans;
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• implementing and administering incentive compensation equity-based remuneration plans;
• assisting management in complying with Inflection Point’s proxy statement and annual report disclosure requirements;
• approving all special perquisites, special cash payments and other special compensation and benefit arrangements for executive officers and employees;
• producing a report on executive compensation to be included in Inflection Point’s annual proxy statement; and
• reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, 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.
Director Nominations
Inflection Point does not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605(e)(2) of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the Inflection Point Board. The Inflection Point Board believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees are Messrs. Samuels and Theysset as well as Ms. Savitt. In accordance with Rule 5605(e)(1)(A) of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The Inflection Board will also consider director candidates recommended for nomination by our shareholders during such times as they are seeking proposed nominees to stand for appointment at the next annual general meeting (or, if applicable, an extraordinary general meeting). Our shareholders that wish to nominate a director for appointment to our board of directors should follow the procedures set forth in our Cayman Constitutional Documents.
Director Independence
Nasdaq rules require that a majority of the Inflection Point Board be independent within one year of our IPO. An “independent director” is defined generally as a person who, in the opinion of the Inflection Point 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). Inflection Point has three “independent directors” as defined in Nasdaq rules and applicable SEC rules. The Inflection Point Board determined that Messrs. Samuels, Theysset, Cetin and Weinstein as well as Ms. Savitt are “independent directors” as defined in Nasdaq listing standards and applicable SEC rules. Inflection Point’s independent directors will have regularly scheduled meetings at which only independent directors are present.
Code of Ethics
Inflection Point has adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics as an exhibit to this proxy statement/prospectus. You will be able to review this document by accessing our public filings at the SEC’s website at www.sec.gov. In addition, a copy of the Code of Ethics and the charters of the committees of our board of directors will be provided without charge upon request from us. If we make any amendments to our Code of Ethics other than technical, administrative or other non-substantive amendments, or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions requiring disclosure under applicable SEC or Nasdaq rules, we will disclose the nature of such amendment or waiver in a Current Report on Form 8-K filed with the SEC or on our website, and keep such information on the website for at least 12 months. The information included on our website is not incorporated by reference into this proxy statement/prospectus or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
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Conflicts of Interest
Under Cayman Islands law, directors and officers owe the following fiduciary duties:
(i) 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;
(ii) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose;
(iii) directors should not improperly fetter the exercise of future discretion;
(iv) duty to exercise powers fairly as between different sections of shareholders;
(v) 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
(vi) 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 at the expense of the company. 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 Cayman Constitutional Documents or alternatively by shareholder approval at general meetings. Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties to one or more other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entities. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity, subject to their fiduciary duties under Cayman Islands law. The Cayman Constitutional Documents provide that, to the fullest extent permitted by law: (i) no individual serving as a director or an officer, among other persons, 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 (a) may be a corporate opportunity for any director or officer, on the one hand, and us, on the other or (b) the presentation of which would breach an existing legal obligation of a director or officer to any other entity. As a result, the fiduciary duties or contractual obligations of our officers or directors could materially affect our ability to complete the Business Combination, or another initial business combination. Below is a table summarizing the entities to which our officers and directors currently have fiduciary duties or contractual obligations:
|
Individual |
Entity |
Entity’s Business |
Affiliation |
|||
|
Andrew Gundlach |
Bleichroeder Acquisition Corp. II |
Special purpose acquisition company |
Founder, Chairman, President and Chief Executive Officer |
|||
|
Bleichroeder LP |
Investments |
Officer |
||||
|
First Eagle Investment Management |
Investments |
Director |
||||
|
Goldiron LP |
Investments |
Officer |
||||
|
Robert Folino |
Bleichroeder Acquisition Corp. II |
Special purpose acquisition company |
Chief Financial Officer |
|||
|
Bleichroeder LP |
Investments |
Officer |
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|
Individual |
Entity |
Entity’s Business |
Affiliation |
|||
|
Joseph Samuels |
Channel Partners |
Investments |
Officer |
|||
|
Islet Management |
Investments |
Officer |
||||
|
Antoine Theysset |
Improbable Worlds, Ltd. |
Technology |
Director |
|||
|
Bleichroeder Acquisition Corp. II |
Special purpose acquisition company |
Director |
||||
|
Kathy Savitt |
Bleichroeder Acquisition Corp. II |
Special purpose acquisition company |
Director |
|||
|
EGH Acquisition Corp. |
Special purpose acquisition company |
Director |
||||
|
Curology |
Skincare |
Officer |
||||
|
Perch Partners |
Consulting |
Officer |
||||
|
Michael Blitzer |
Kingstown Capital Management, L.P. |
Asset management |
Founder and Co-Chief Investment Officer |
|||
|
Kingstown Capital Partners, LLC |
Asset management |
Managing Member |
||||
|
Kingstown Management GP LLC |
Asset management |
Managing Member |
||||
|
Kingstown Partners Master Ltd, Kingstown Partners II, L.P., Kingstown 1740 Fund, LP and Kingfishers L.P. |
Investment Funds |
Funds managed by Kingstown Capital Management, LP and Kingstown Management GP LLC |
||||
|
Inflection Point Acquisition Corp. III |
Special purpose acquisition company |
Chairman and Chief Executive Officer |
||||
|
Inflection Point Acquisition Corp. V |
Special purpose acquisition company |
Chairman and Chief Executive Officer |
||||
|
Inflection Point Acquisition Corp. VI |
Special purpose acquisition company |
Chairman |
||||
|
Inflection Point Asset Management LLC |
Asset management |
Director and Chief Investment Officer |
||||
|
Inflection Point GP I LLC |
Asset management |
Manager and Member |
||||
|
Inflection Point Fund I LP |
Investment Fund |
Fund managed by Inflection Point Asset Management LLC and Inflection Point GP I LLC |
||||
|
Intuitive Machines, Inc. |
Space exploration, infrastructure and services |
Director |
||||
|
USA Rare Earth, Inc. |
Manufacturing |
Chairman |
||||
|
Kevin Shannon |
USA Rare Earth, Inc. |
Manufacturing |
Special Advisor |
|||
|
Inflection Point Asset Management LLC |
Asset management |
Director and Portfolio Manager |
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|
Individual |
Entity |
Entity’s Business |
Affiliation |
|||
|
Inflection Point Acquisition Corp. III |
Special purpose acquisition company |
Chief Operating Officer |
||||
|
Inflection Point Acquisition Corp. V |
Special purpose acquisition company |
Chief Operating Officer |
||||
|
Inflection Point Acquisition Corp. VI |
Special purpose acquisition company |
Chief Executive Officer |
||||
|
Inflection Point Fund I LP |
Investment Fund |
Fund managed by Inflection Point Asset Management LLC and Inflection Point GP I LLC |
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against Inflection Point or any members of its management team in their capacity as such, and Inflection Point and the members of its management team have not been subject to any such proceeding in the 12 months preceding the date of this proxy statement/prospectus.
Periodic Reporting and Audited Financial Statements
Inflection Point 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, Inflection Point’s annual reports contain consolidated financial statements audited and reported on by Inflection Point’s independent registered public accounting firm.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INFLECTION POINT
The following discussion and analysis of the financial condition and results of operations of Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Acquisition Corp. I) (for purposes of this section, “Inflection Point”, “we”, “us” and “our”) should be read in conjunction with the financial statements and related notes of Inflection Point included elsewhere in this prospectus/proxy statement. 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 prospectus/proxy statement.
Overview
We are a special purpose acquisition company incorporated on June 24, 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, which we refer to throughout this prospectus as our initial business combination.
Upon the closing of the IPO, $250,000,000 was placed in the Trust Account with Continental acting as trustee. Except with respect to interest earned on the funds held in the Trust Account that may be released to Inflection Point to pay its taxes, if any, the funds held in the Trust Account will not be released from the Trust Account until the earliest of (i) the completion of an initial business combination, (ii) the redemption of Inflection Point’s Public Shares if Inflection Point is unable to complete an initial business Combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents), subject to applicable law and the Cayman Constitutional Documents, or (iii) the redemption of the Public Shares properly submitted in connection with a shareholder vote to amend Inflection Point’s Cayman Constitutional Documents to (A) modify the substance or timing of Inflection Point’s obligation to allow redemption in connection with the initial business combination or to redeem 100% of its Public Shares if Inflection Point has not consummated an initial business combination by November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents) or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity. The proceeds deposited in the Trust Account could become subject to the claims of its creditors, if any, which could have priority over the claims of Inflection Point’s Public Shareholders.
Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Units although substantially all of the net proceeds are intended to be generally applied toward consummating an initial business combination. Our initial business combination must be 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 amount of any deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that we will be able to successfully effect an initial business combination.
Inflection Point has until November 4, 2026 (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents) to complete an initial business combination. If it is unable to complete its initial business combination by that date (or such later date as its shareholders may approve in accordance with the Cayman Constitutional Documents), Inflection Point will cease all operations except for the purpose of winding up, as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds, 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 Trust Account (which interest shall be net of taxes payable and less up to $100,000 of interest to pay dissolution expenses) divided by the number of Public Shares then issued and outstanding, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any) subject to applicable law, and as promptly as reasonably possible following
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such redemption, subject to the approval of Inflection Point’s remaining shareholders and the Inflection Point Board, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. In such event, the rights may be worthless.
Liquidity and Capital Resources
In June 2024, Bleichroeder Sponsor 1 LLC, the Sponsor, paid $25,000, or approximately $0.004 per share, to cover certain of Inflection Point’s offering costs for the issuance of 7,187,500 Founder Shares. Subsequently, on October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited resulting in the Sponsor holding 8,333,333 Founder Shares.
On November 4, 2024, we consummated the IPO of 25,000,000 Inflection Point Units, at $10.000 per Inflection Point Unit. Simultaneously with the closing of the IPO, we consummated the sale of 425,000 Private Placement Units to the Sponsor at a price of $10.00 per Private Placement Unit, generating gross proceeds of $4,250,000.
Following the IPO and private placement, a total of $250,000,000 ($10.00 per Inflection Point Unit) was placed in the Trust Account. We incurred transaction costs of $11,403,592, consisting of $2,000,000 of cash underwriting fee, $8,750,000 of deferred underwriting fee, and $653,592 of other offering costs.
For the nine months ended September 30, 2025, cash used in operating activities was $1,057,906. Net income of $4,809,256 was affected by interest earned on investments held in Trust Account of $7,973,982. Changes in operating assets and liabilities provided $2,106,820 of cash for operating activities.
For the period from June 24, 2024 (inception) through September 30, 2024, cash used in operating activities was $0. Net loss of $77,427 was affected by payment of operation costs through a promissory note of $62,741 and formation cost paid by Sponsor in exchange for issuance of Founder Shares of $9,153. Changes in operating assets and liabilities provided $5,533 of cash for operating activities.
As of September 30, 2025, we had investments held in the Trust Account of $259,730,180. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete the Business Combination. To the extent that share capital or debt is used, in whole or in part, as consideration to complete the 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 growth strategies.
As of September 30, 2025, we had cash of $1,049,403 for working capital purposes. 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 a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete a business combination, we would repay such loaned amounts. In the event that a 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 our Trust Account would be used for such repayment. Up to $2,500,000 of such Working Capital Loans may be convertible into private placement units of the post-business combination entity at a price of $10.00 per unit at the option of the lender, including up to $750,000 in Working Capital Loans which may be made by Inflection Point Fund. The units would be identical to the Private Placement Units.
In connection with our assessment of going concern considerations in accordance with ASC 205-40, “Going Concern,” as of September 30, 2025, we may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could
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include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. Inflection Point cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Additionally, if a Business Combination is not consummated by the end of the completion window, currently November 6, 2026 there will be a mandatory liquidation and subsequent dissolution of Inflection Point. No adjustments have been made to the carrying amounts of assets or liabilities should Inflection Point be required to liquidate after the completion window. Our liquidity condition and mandatory liquidation within one year of the issuance of these unaudited condensed financial statements raise substantial doubt about Inflection Point’s ability to continue as a going concern. Management plans to address this uncertainty through a Business Combination. However, there can be no assurance that we will be able to consummate any Business Combination by the end of the Combination Period.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that it holds investments in the Trust Account, we may, at any time, (based on the management team’s ongoing assessment of all factors related to our potential status under the Investment Company Act) instruct the trustee to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest-bearing demand deposit account at a bank.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities since June 24, 2024 (inception) through September 30, 2025 have been (i) organizational activities and (ii) activities relating to (x) the Initial Public Offering, and (y) identifying and evaluating prospective acquisition candidates and activities in connection with the initial Business Combination. We will not generate any operating revenues until after completion of our initial Business Combination. We have generated non-operating income in the form of interest income on investments held in the Trust Account after the IPO. There has been no significant change in our financial or trading position since the date of our audited financial statements, as filed in our 2024 Annual Report on Form 10-K. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance, among other things), as well as for due diligence expenses.
For the three months ended September 30, 2025, we had a net income of $83,694, which consists of interest earned on investments held in Trust Account of $2,685,470 and interest earned on bank account of $14,040, partially offset by general and administrative expenses of $2,615,816.
For the nine months ended September 30, 2025, we had a net income of $4,809,256, which consists of interest earned on investments held in Trust Account of $7,973,982 and interest earned on bank account of $48,130, partially offset by general and administrative expenses of $3,212,856.
For the three months ended September 30, 2024, we had a net loss of $47,447, which consists of operating costs.
For the period from June 24, 2024 (inception) through September 30, 2024, we had net loss $77,427, which consist of formation and operating costs.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 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 the IPO to purchase up to an additional 3,750,000 units to cover over-allotments, if any. On November 4, 2024, the underwriters forfeited the over-allotment option to purchase the additional 3,750,000 units.
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The underwriters were entitled to a cash underwriting discount of $0.08 per Unit, or $2,000,000 in the aggregate. Of this amount, $1,000,000 was paid to the underwriters upon the closing of the IPO and $1,000,000 will be payable to the underwriters from working capital in equal amounts monthly starting on the 16th month following the closing of the IPO until the 24th month following the closing of the Initial Public Offering. On August 5, 2025, the Underwriting Agreement dated October 31, 2024, was amended to defer the commencement of the remaining $1,000,000 in payments to the underwriters until September 1, 2026. Pursuant to the amendment to the Underwriting Agreement, the remaining $1,000,000 shall be payable to the underwriters from the Company’s working capital in equal amounts monthly in the three months commencing on September 1, 2026. Any amounts not paid hereunder from working capital shall be accelerated and paid upon consummation of the initial Business Combination.
Critical Accounting Estimates and Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with U.S. GAAP 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 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 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. Management has identified the determination of the fair value of Rights Shares as a complex accounting estimate.
Offering Costs
We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering”. Offering costs consists of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Transaction costs amounted to $11,403,592, consisting of $2,000,000 of cash underwriting fee, $8,750,000 of deferred underwriting fee, and $653,592 of other offering costs.
Inflection Point Class A Shares Subject to Possible Redemption
All of the Inflection Point Class A Shares sold as part of the Inflection Point Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the initial business combination and in connection with certain amendments to our Cayman Constitutional Documents. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within our control require ordinary shares subject to redemption to be classified outside of permanent equity.
The Inflection Point Class A Shares are subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, we have the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. We recognize changes in redemption value immediately as they occur. Immediately upon the initial closing of the IPO and the over-allotment, we recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in capital.
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Net Income Per Ordinary Share
Net income per 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 1,250,000 Inflection Point Class B Shares that were subject to forfeiture if the over-allotment option was not exercised by the underwriters. At September 30, 2025 and 2024, Inflection Point did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of Inflection Point. As a result, diluted income per share is the same as basic income per share for the periods presented.
Inflation
We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.
Emerging Growth Company Status
We are an “emerging growth company”, as defined in Section 2(a) of the Securities Act, as modified by the JOBS 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 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. 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 which is either not an emerging growth company or 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.
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 unaudited condensed financial statements.
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DESCRIPTION OF new merlin securities
The following summary of the material terms of New Merlin’s securities is not intended to be a complete summary of the rights and preferences of such securities. The full text of the Proposed New Merlin Certificate of Incorporation and the Proposed New Merlin Bylaws are attached as Annex B and Annex C, respectively, to this proxy statement/prospectus. We urge you to read the Proposed New Merlin Certificate of Incorporation and the Proposed New Merlin Bylaws in their entirety for a complete description of the rights and preferences of the New Merlin Securities following the Closing. Unless the context otherwise requires, all references in this section to “we,” “us” or “our” refer to New Merlin.
Certain provisions of the Proposed Charter, Proposed Bylaws, Certificate of Designation, Warrant Agreement and Form of Warrant to be issued to each Series A Investor summarized below may be deemed to have an anti-takeover effect and may delay or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares of New Merlin Common Stock.
General
The Proposed Charter will authorize the issuance of [•] shares, consisting of:
• [•] shares of New Merlin Common Stock, par value $0.0001 per share;
• [•] shares of New Merlin Preferred Stock, par value $0.0001 per share.
Except as otherwise required by the Proposed Charter, the holders of shares of New Merlin Common Stock shall vote together as a single class (or, if any holders of shares of New Merlin Preferred Stock are entitled to vote together with the holders of New Merlin Common Stock, as a single class with such holders of New Merlin Preferred Stock) on all matters submitted to a vote of stockholders of New Merlin.
Common Stock
New Merlin Common Stock
Voting rights. Each holder of record of New Merlin Common Stock, as such, shall have one vote for each share of New Merlin Common Stock that is outstanding and held by New Merlin on all matters on which stockholders are entitled to vote generally. The holders of shares of New Merlin Common Stock do not have cumulative voting rights.
Dividend rights. Subject to applicable law and the rights, if any, of the holders of any outstanding series of New Merlin Preferred Stock or any other class or series of stock, in each case having a preference over or the right to participate with the New Merlin Common Stock with respect to the payment of dividends and other distributions in cash, property or shares of stock of New Merlin, dividends and other distributions may be declared and paid ratably on the New Merlin Common Stock out of the assets of New Merlin that are legally available for this purpose at such times and in such amounts as the New Merlin Board, in its discretion, shall determine.
The payment of future dividends on the shares of New Merlin Common Stock will depend on the financial condition of New Merlin after the completion of the Business Combination, and subject to the discretion of the New Merlin Board. There can be no guarantee that cash dividends will be declared. The ability of New Merlin to declare dividends may be limited by the terms and conditions of other financing and other agreements entered into by New Merlin or any of its subsidiaries from time to time.
Rights upon liquidation. In the event of dissolution, liquidation or winding up of New Merlin, after payment or provision for payment of the debts and other liabilities of New Merlin and subject to the rights, if any, of the holders of any outstanding series of New Merlin Preferred Stock or any class or series of stock having a preference over or the right to participate with the New Merlin Common Stock with respect to the distribution of assets of New Merlin upon such dissolution, liquidation or winding up of New Merlin, the holders of New Merlin Common Stock shall be entitled to receive the remaining assets of New Merlin available for distribution to its stockholders ratably in proportion to the number of shares held by them.
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Other rights. The holders of New Merlin Common Stock have no pre-emptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the New Merlin Common Stock. The rights, preferences and privileges of holders of the New Merlin Common Stock will be subject to those of the holders of any shares of the New Merlin Preferred Stock that New Merlin may issue in the future.
Merlin Lock-Up Agreement
At the Closing, New Merlin and the Lock-Up Holders will enter into the Merlin Lock-Up Agreement, pursuant to which the Lock-Up Holders will agree not to, without the prior written consent of the New Merlin Board, prior to the date that is six months after the Closing (i) sell, pledge, grant any option to purchase or otherwise dispose of the Lock-Up Shares, (ii) enter into any swap or other transfer arrangement in respect of any Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Merlin Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
New Merlin Preferred Stock
Up to [•] shares of New Merlin Preferred Stock, all of which will be Series A Preferred Stock, will be issued or outstanding immediately after the completion of the Business Combination. The Proposed Certificate of Incorporation will authorize the New Merlin Board to establish one or more series of New Merlin Preferred Stock. Unless required by law or any stock exchange, the authorized shares of New Merlin Preferred Stock will be available for issuance without further action by the holders of New Merlin Common Stock.
The New Merlin Board has the discretion to determine the powers, preferences and relative, participating, optional and other special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of New Merlin Preferred Stock. The issuance of New Merlin Preferred Stock may have the effect of delaying, deferring or preventing a change in control of New Merlin without further action by the stockholders. Additionally, the issuance of New Merlin Preferred Stock may adversely affect the holders of the New Merlin Common Stock by restricting dividends on the New Merlin Common Stock, diluting the voting power of the New Merlin Common Stock or subordinating the liquidation rights of the New Merlin Common Stock. As a result of these or other factors, the issuance of New Merlin Preferred Stock could have an adverse impact on the market price of the New Merlin Common Stock.
In connection with the Series A Preferred Stock Investment, the Inflection Point Board will adopt the Certificate of Designation, creating the Series A Preferred Stock.
Dividends: The Series A Preferred Stock will accrue dividends daily at the rate of 12% per annum of the Stated Value (if paid in kind), plus the amount of previously accrued dividends paid in kind, or 10% per annum of the Stated Value (if paid in cash), plus the amount of previously accrued dividends. Such dividends will compound semi-annually.
Liquidation Preference: Upon any liquidation or deemed liquidation event, the holders of Series A Preferred Stock will be entitled to receive out of the available proceeds, before any distribution is made to holders of common stock or any other junior securities, an amount per share equal to the greater of (i) 100% of the Accrued Value (as defined in the Series A Preferred Stock Certificate of Designation) or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into New Merlin Common Stock immediately prior to the liquidation event. Thereafter, the holders of Series A Preferred Stock will be entitled to receive their pro-rata share, of the remaining available proceeds available for distribution to stockholders, on an as-converted to common stock basis.
Voting: The Series A Preferred Stock will (i) vote together with the New Merlin Common Stock as a single class, except as required by law and (ii) as noted below under “Protective Provisions”. Each holder of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of New Merlin Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.
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Protective Provisions: For as long as 20% of the shares of Series A Preferred Stock issued as of the Closing are outstanding, New Merlin shall not, without the affirmative vote or action by written consent of holders of more than 80% of the issued and outstanding shares of Series A Preferred Stock (the “Requisite Holders”), take any of the following actions: (i) liquidate, dissolve or wind up the affairs of New Merlin; (ii) amend, alter, or repeal any provision of the Certificate of Designation or any similar document of New Merlin in a manner adverse to the Series A Preferred Stock; (iii) create or authorize the creation of or issue any other security convertible into or exercisable for any equity security unless such security ranks junior to the Series A Preferred Stock with respect to its rights, preferences and privileges, or increase the authorized number of shares of Series A Preferred Stock; (iv) purchase or redeem or pay any cash dividend on any capital stock ranking junior to the Series A Preferred Stock, other than stock repurchased at cost from former employees and consultants in connection with the cessation of their service; (v) enter into any transaction with an affiliate, other than the issuance of equity or awards to eligible participants under New Merlin’s incentive plan, equity plan or equity-based compensation plan, or with respect to employment, consulting or award agreements with respect to executive officers of New Merlin, in each case regardless of whether such person (or such person’s affiliates) would be considered an affiliate of New Merlin; or (vi) incur or guarantee any indebtedness, other than equipment leases or trade payables incurred in the ordinary course of business, if the aggregate indebtedness of New Merlin and its subsidiaries for borrowed money following such action would exceed $5,000,000; provided, however, that the Series A Preferred Stock shall not be considered indebtedness for purposes of this calculation.
Conversion: Each share of Series A Preferred Stock will be convertible into New Merlin Common Stock at any time at the option of the holder at a rate equal to the Accrued Value, divided by the then-applicable conversion price. The conversion price will initially be $12.00, subject to adjustments for stock dividends, splits, combinations and similar events and customary anti-dilution adjustments, including with respect to future issuances or sales of New Merlin Common Stock at prices less than $10.00 per share. In addition, if the 20-day volume-weighted average price of the New Merlin Common Stock on the twenty-first trading day following the date that is six months after Closing Date is less than the conversion price then in effect, the conversion price will be adjusted to the greater of (i) such volume weighted average price and (ii) $7.50.
Put Rights: Unless prohibited by applicable law governing distributions to stockholders, the Series A Preferred Stock shall be redeemable at the option of the Requisite Holders commencing any time after the 5th anniversary of the Closing at a price equal to the Accrued Value.
Call Rights: Unless prohibited by applicable law governing distributions to stockholders, the Series A Preferred Stock shall be redeemable at the option of New Merlin commencing any time (A) prior to the 1st anniversary of the Closing at a price equal to the 150% of the Accrued Value, (B) on or after the 1st anniversary but prior to the 2nd anniversary of the Closing at a price equal to the 140% of the Accrued Value, (C) on or after the 2nd anniversary of the Closing but prior to the 3rd anniversary of the Closing at a price equal to the 130% of the Accrued Value, (D) on or after the 3rd anniversary of the Closing but prior to the 4th anniversary of the Closing at a price equal to the 120% of the Accrued Value, (E) on or after the 4th anniversary of the Closing but prior to the 5th anniversary of the Closing at a price equal to the 110% of the Accrued Value, or (F) on or after the 5th anniversary of the Closing at a price equal to the 100% of the Accrued Value.
New Merlin Series A Warrants
The New Merlin Series A Warrants are immediately exercisable upon issuance at Closing and expire five years from the date of Closing at 5:00 p.m., New York City time (the “PIW Termination Date”). The New Merlin Series A Warrants include customary cash and cashless exercise provisions. Each New Merlin Series A Warrant is initially exercisable at $12.00 per share of New Merlin Common Stock, subject to the same anti-dilution and other adjustments as the Series A Preferred Stock.
The New Merlin Series A Warrants do not include any redemption features. The New Merlin Series A Warrants may be exercised on a cashless basis if, at any time after the six-month anniversary of the Closing Date, there is not an effective registration statement with respect to the shares of New Merlin Common Stock. On the PIW Termination Date, the New Merlin Series A Warrants will be automatically exercised on a cashless basis. To exercise on a cashless basis, the holder of the New Merlin Series A Warrants would pay the exercise price by surrendering the New Merlin Series A Warrants (or part thereof) for that number of shares of New Merlin Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of New Merlin Common Stock underlying the New Merlin Series A Warrant, multiplied by the excess of the daily volume weighted average price
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of the New Merlin Common Stock on the date specified by the New Merlin Series A Warrant less the exercise price of such New Merlin Series A Warrant by (y) the daily volume weighted average price of the New Merlin Common Stock on the date specified by the New Merlin Series A Warrant.
The holders of New Merlin Series A Warrants will not have the rights or privileges of holders of shares of New Merlin Common Stock or any voting rights in respect of the New Merlin Series A Warrants or underlying shares of New Merlin Common Stock until they exercise their New Merlin Series A Warrants and receive shares of New Merlin Common Stock. After the issuance of shares of New Merlin Common Stock upon exercise of the New Merlin Series A Warrants, each holder will be entitled to one vote for each share of New Merlin Common Stock held of record on all matters to be voted on by stockholders.
Anti-Takeover Effects of the Proposed Certificate of Incorporation, the Proposed Bylaws and Certain Provisions of Delaware Law
The Proposed Charter does not provide for cumulative voting in the election of directors. The New Merlin Board is empowered to elect a director to fill a vacancy created by the expansion of the New Merlin Board or the resignation, death, or removal of a director in certain circumstances.
Authorized New Merlin Common Stock and New Merlin Preferred Stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved New Merlin Common Stock and New Merlin Preferred Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum Provision
The Proposed Charter will provide that, unless New Merlin consents in writing to the selection of an alternative forum, (a) the Chancery Court (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for (1) any derivative action, suit or proceeding brought on behalf of New Merlin, (2) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer of New Merlin to New Merlin or to New Merlin’s stockholders, (3) any action, suit or proceeding arising pursuant to any provision of the DGCL or Proposed Charter or the Proposed Bylaws (as either may be amended from time to time) or (4) any action, suit or proceeding asserting a claim against New Merlin governed by the internal affairs doctrine; and (b) subject to the provisions of the Proposed Charter, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. If any action the subject matter of which is within the scope of clause (a) of the immediately preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of clause (a) of the immediately preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Although New Merlin believes this provision benefits New Merlin by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against New Merlin’s directors and officers, although New Merlin’s stockholders will not be deemed to have waived New Merlin’s compliance with federal securities laws and the rules and regulations thereunder.
Limitations on Liability and Indemnification of Officers and Directors
The Proposed Charter and the Proposed Bylaws provide that New Merlin will indemnify and hold harmless its directors, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended. In addition, the Proposed Charter provides that New Merlin’s directors will not be personally liable to New Merlin or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or hereafter may be amended.
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The Proposed Bylaws also permit New Merlin to purchase and maintain insurance on behalf of any person who is or was a director officer, employee or agent of New Merlin, or is or was serving at the request of New Merlin as a director, officer, employee or agent of another corporation, partnership, joint venture, trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not New Merlin could have the power to indemnify him or her against such liability under the provisions of the DGCL.
These provisions may discourage stockholders from bringing a lawsuit against New Merlin’s directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit New Merlin Labs and New Merlin’s stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
New Merlin believes that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to New Merlin’s directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
There is currently no pending material litigation or proceeding involving any of Inflection Point’s directors, officers or employees for which indemnification is sought.
Transfer Agent and Registrar
The Transfer Agent and registrar for the shares of New Merlin Common Stock will be Continental.
Listing
Inflection Point intends to apply to list the New Merlin Common Stock on Nasdaq under the symbol “MRLN”, following the Business Combination.
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MARKET PRICE AND DIVIDENDS OF SECURITIES
Market Price of Inflection Point Units, Inflection Point Ordinary Shares and Inflection Point Rights
Market Price and Ticker Symbol
Inflection Point’s Units, Public Shares and Inflection Point Rights are currently listed on Nasdaq under the symbols “BACQU,” “BACQ,” and BACQW,” respectively.
The closing price of Inflection Point’s Units, Public Shares and Inflection Point Rights on August 12, 2025, the last trading day before announcement of the execution of the Business Combination Agreement, was $10.59, $10.30 and $0.55, respectively. As of [•], the Record Date for the extraordinary general meeting, the closing price for each Inflection Point Unit, Public Share and Inflection Point Right $[•], $[•] and $[•], respectively.
Holders
As of the Record Date, there were [•] holder(s) of record of Inflection Point Units, [•] holder(s) of record of Public Shares, [•] holder(s) of record of Founder Shares, and [•] holder(s) of record of Inflection Point Rights. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Inflection Point Units, Public Shares and Inflection Point Rights are held of record by banks, brokers and other financial institutions.
Dividends of Inflection Point Securities
Inflection Point has not paid any cash dividends on the Inflection Point Ordinary Shares to date and does not intend to pay cash dividends prior to the completion of an initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of an initial business combination. The payment of any cash dividends subsequent to an initial business combination will be within the discretion of our board of directors at such time. If we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Merlin
Market Price of Merlin’s Securities
Market price information regarding Merlin is not provided because there is no public market for Merlin’s securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Merlin — Liquidity and Capital Resources”.
Dividend Policy of the Company Following the Business Combination
New Merlin does not intend to pay cash dividends after the completion of the Business Combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of the Business Combination. The payment of any cash dividends subsequent to the Business Combination will be within the discretion of our board of directors at such time. If we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Recent Sales of Unregistered Securities of Merlin
The following description sets forth information regarding all securities of Merlin that were sold during the three years prior to the date of this proxy statement/prospectus without registration under the Securities Act. The descriptions below reflect private placements effected by Merlin in connection with and prior to the Business Combination:
• On July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements, respectively, with certain Pre-Funded Investors pursuant to which Merlin issued and sold an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants.
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• On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into a Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA.
Merlin used or intends to use the net proceeds from the foregoing unregistered offerings for general corporate purposes, including, among other things, research and development activities, working capital, and transaction-related expenses, as further described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Merlin” in this proxy statement/prospectus. No underwriters participated in the foregoing transactions, and no underwriting discounts or commissions were paid in connection therewith.
For the avoidance of doubt, the Series A Preferred Stock and related warrants described in the Initial Series A SPA (initially entered into on August 13, 2025 and subsequently amended) and the Additional Series A SPAs dated November 17, 2025 are expected to be issued by New Merlin at Closing and, accordingly, do not constitute historical unregistered sales of Merlin’s securities prior to the Business Combination for purposes of this Item 701 disclosure of the target’s recent sales; summary information regarding such arrangements is provided elsewhere in this proxy statement/prospectus under “The Business Combination Proposal — Related Agreements”.
Use of Proceeds from Previously Registered Securities
Merlin has not conducted any public offering of its securities pursuant to an effective registration statement under the Securities Act during the three years prior to the date of this proxy statement/prospectus and, therefore, has no proceeds from such offerings to report.
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BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information known to Inflection Point regarding (i) the beneficial ownership of Inflection Point Ordinary Shares as of January 9, 2026 (pre-Business Combination) and (ii) the expected beneficial ownership following the consummation of the Business Combination (post-Business Combination) of New Merlin Common Stock (assuming a No Redemption Scenario and a Maximum Redemption Scenario as described below) by:
• each of Inflection Point’s current executive officers and directors, and all executive officers and directors of Inflection Point as a group, in each case pre-Business Combination;
• each person who will become a named executive officer or director of New Merlin, and all executive officers and directors of New Merlin as a group, in each case post-Business Combination;
• each person who is known to be the beneficial owner of more than 5% of a class of Inflection Point Ordinary Shares pre-Business Combination; and
• each person who is expected to be the beneficial owner of more than 5% of a class of New Merlin 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 and warrants that are currently exercisable or exercisable within 60 days. Unless otherwise indicated, Inflection Point believes that all persons named in the table below have sole voting and investment power with respect to the voting securities beneficially owned by them.
The beneficial ownership of Inflection Point Ordinary Shares pre-Business Combination is based on 25,425,000 Inflection Point Class A Shares and 8,333,333 Founder Shares issued and outstanding as of January 9, 2026.
The expected beneficial ownership of New Merlin Common Stock post-Business Combination assumes two scenarios: (i) no Public Shares are redeemed and, (ii) the maximum number of 25,000,000 Public Shares are redeemed. Based on the foregoing assumptions, we have estimated that there would be 129,058,810 shares of New Merlin Common Stock issued and outstanding in the No Redemption Scenario and 104,058,810 shares of New Merlin
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Common Stock issued and outstanding in the Maximum Redemption Scenario. We have estimated that there will be 21,633,896 shares of Series A Preferred Stock outstanding, taking into account accrued interest through January 31, 2026. If the actual facts are different from the foregoing assumptions, ownership figures in the combined company and the columns under Post-Business Combination in the table that follows will be different.
|
Name and Address of Beneficial Owner |
Inflection Point |
New Merlin Common Stock Post-Business Combination |
||||||||||||||||||||||
|
No Redemption Scenario |
Maximum Redemptions Scenario |
|||||||||||||||||||||||
|
Number of |
% |
New Merlin |
% |
12.0% |
% |
New Merlin |
% |
12.0% |
% |
|||||||||||||||
|
Directors and Executive Officers |
|
|
|
|
||||||||||||||||||||
|
Andrew Gundlach(2)(3) |
8,758,333 |
25.9 |
8,800,833 |
8.2 |
% |
— |
— |
|
8,800,833 |
10.7 |
% |
— |
— |
|
||||||||||
|
Michael Blitzer(3)(4) |
— |
— |
3,280,138 |
3.0 |
% |
1,559,549 |
7.2 |
% |
3,280,138 |
% |
|
1,559,549 |
7.2 |
% |
||||||||||
|
Robert Folino |
— |
— |
— |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
Kevin Shannon |
— |
— |
— |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
Joseph Samuels |
— |
— |
— |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
Antoine Theysset |
— |
— |
— |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
Kathy Savitt |
— |
— |
— |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
All directors and executive |
8,758,333 |
25.9 |
8,800,833 |
6.8 |
% |
1,559,549 |
7.2 |
% |
8,800,833 |
8.5 |
% |
1,559,549 |
7.2 |
% |
||||||||||
|
Five Percent Holders of Inflection Point |
|
|
|
|
||||||||||||||||||||
|
Bleichroeder Sponsor 1 |
8,758,333 |
25.9 |
8,800,833 |
6.8 |
% |
— |
— |
|
8,800,833 |
8.5 |
% |
— |
— |
|
||||||||||
|
First Trust Capital Management L.P.(5) |
4,230,654 |
12.5 |
4,230,654 |
3.3 |
% |
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
Merus Global Investments, LLC(6) |
2,226,028 |
6.6 |
2,226,028 |
1.7 |
% |
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
AQR Parties(7) |
1,918,600 |
5.7 |
1,918,600 |
1.5 |
% |
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
Directors and Executive Officers |
|
|
|
|
||||||||||||||||||||
|
Matt George |
— |
— |
15,194,959 |
13.9 |
% |
— |
— |
|
15,194,959 |
18.0 |
% |
— |
— |
|
||||||||||
|
Tim Burns |
— |
— |
— |
— |
|
— |
— |
|
— |
— |
|
— |
— |
|
||||||||||
|
All directors and executive |
— |
— |
15,194,959 |
13.9 |
% |
— |
— |
|
15,194,959 |
18.0 |
% |
— |
— |
|
||||||||||
|
Five Percent Holders of |
|
|
|
|
||||||||||||||||||||
|
Bling Capital(9) |
— |
— |
7,336,570 |
6.7 |
% |
213,779 |
1.9 |
% |
7,336,570 |
8.7 |
% |
213,779 |
1.9 |
% |
||||||||||
|
First Round Capital(10) |
— |
— |
12,503,557 |
11.4 |
% |
268,629 |
2.4 |
% |
12,503,557 |
14.8 |
% |
268,629 |
2.4 |
% |
||||||||||
|
Quiet Venture(11) |
— |
— |
12,877,692 |
11.8 |
% |
458,423 |
4.1 |
% |
12,877,692 |
15.2 |
% |
458,423 |
4.1 |
% |
||||||||||
|
SnowPoint Ventures(12) |
— |
— |
6,773,190 |
6.2 |
% |
785,019 |
7.0 |
% |
6,772,190 |
8.0 |
% |
785,019 |
7.0 |
% |
||||||||||
|
WTI(13) |
— |
— |
4,892,780 |
4.5 |
% |
1,137,494 |
10.2 |
% |
4,892,780 |
5.8 |
% |
1,137,494 |
10.2 |
% |
||||||||||
|
Inflection Point Fund I, LP(3)(4) |
— |
— |
3,280,138 |
3.0 |
% |
1,559,549 |
7.2 |
% |
3,280,138 |
% |
|
1,559,549 |
7.2 |
% |
||||||||||
____________
(1) The business address of each beneficial owner is c/o Inflection Point Acquisition Corp. IV, 1345 Avenue of the Americas, Fl 47, New York, NY 10105.
(2) The Sponsor is the record holder of such shares. MC Advisory L.L.C-FZ, an entity formed in Dubai (of which Michel Combes, one of Inflection Point’s Co-Founders, is the manager), as well as Andrew Gundlach, Inflection Point’s Chairman, are the managing members of Bleichroeder Sponsor 1 LLC and hold voting and investment discretion with respect to the Inflection Point Ordinary Shares held of record by the Sponsor. Mr. Combes and Mr. Gundlach disclaim any beneficial ownership of the securities held by the Sponsor other than to the extent of any pecuniary interest they may have therein, directly or indirectly. Mr. Combes and Mr. Gundlach, through their affiliates and controlled entities, own direct and indirect
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interests in the membership interests of the Sponsor, which includes an indirect interest in 1,505,833 Founder Shares each. Inflection Point’s Chief Financial Officer and independent directors will receive an indirect interest in an aggregate of 55,000 Founder Shares through membership interests in the Sponsor. Each such party’s membership interests in the Sponsor tracks Inflection Point’s underlying securities on a 1:1 basis. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly.
(3) Inflection Point Fund I LP has an indirect interest, through its non-managing membership interests in the Sponsor, an aggregate of 5,266,667 Founder Shares held by the Sponsor. Inflection Point is not granted any shareholder or other rights in addition to those afforded to Inflection Point’s other public shareholders, and only has membership interests in the Sponsor, with no right to control the Sponsor or vote or dispose of any securities held by the Sponsor. In addition, Inflection Point Fund I LP has no right to vote the Founder Shares, Private Placement Units or securities underlying the Private Placement Units that it holds indirectly through its holdings of membership units of the Sponsor.
(4) Consists of (i) 1,559,549 shares of Series A Preferred Stock estimated to be issued to Inflection Point Fund in exchange for the Pre-Funded Convertible Note it holds (taking into account accrued and unpaid interest through January 31, 2026; such number of shares of Series A Preferred Stock will may increase prior to Closing due to additional accrued interest), (ii) 1,559,549 shares of New Merlin Common Stock initially issuable upon conversion of such shares of Series A Preferred Stock at the initial conversion price, and (iii) 1,720,589 shares of New Merlin Common Stock issuable upon exercise of the New Merlin Series A Warrant to be issued to Inflection Point Fund in exchange for the Pre-Funded Warrant held by it, at the initial exercise price.
(5) Based solely on a Schedule 13G/A filed on August 14, 2025 by (i) First Trust Merger Arbitrage Fund (“VARBX”), (ii) First Trust Capital Management L.P. (“FTCM”), (iii) First Trust Capital Solutions L.P. (“FTCS”) and (iv) FTCS Sub GP LLC. The principal business address of FTCM, FTCS and Sub GP is 225 W. Wacker Drive, 21st Floor, Chicago, IL 60606. The principal business address of VARBX is 235 West Galena Street, Milwaukee, WI 53212.
(6) Based solely on a Schedule 13G filed on October 14, 2025 by Merus Global Investments, LLC. The business address of the reporting person is 3 Park Ave, Suite 2900, New York, NY 10016.
(7) Based solely on a Schedule 13G filed on February 13, 2025 by (i) AQR Capital Management, LLC, (ii) AQR Capital Management Holdings, LLC, and (iii) AQR Arbitrage, LLC. The business address of each of the reporting persons is One Greenwich Plaza, Suite 130, Greenwich, Connecticut 06830.
(8) The business address of each beneficial owner is c/o Merlin Labs, Inc., 129 South Street, Boston, MA 02111.
(9) The business address of Bling Capital is 135 Palm Avenue; Miami Beach FL 33139.
(10) The business address of First Round Capital is 2400 Market Street, Suite 237; Philadelphia PA 19103.
(11) The business address of Quiet Venture is 113 Cherry Street PMB 27167; Seattle WA 98104.
(12) The business address of SnowPoint Ventures is 700 S. Rosemary Ave, Suite 204; West Palm Beach, FL 33401.
(13) The business address of WTI is 104 La Mesa Dr, Suite 102; Portola Valley, CA 94028.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Inflection Point Related Person Transactions
Founder Shares
In June 2024, Bleichroeder Sponsor 1 LLC, the Sponsor, paid $25,000, or approximately $0.004 per share, to cover certain of Inflection Point’s offering costs for the issuance of 7,187,500 Founder Shares. Subsequently, on October 2, 2024, Inflection Point capitalized $239.58 standing to the credit of Inflection Point’s share premium account and issued an additional 2,395,833 Founder Shares to the Sponsor, resulting in the Sponsor holding an aggregate of 9,583,333 Founder Shares. As a result of the underwriters’ election not to exercise their over-allotment option, 1,250,000 Founder Shares were forfeited resulting in the Sponsor holding 8,333,333 Founder Shares.
Pursuant to the Letter Agreement, the Sponsor and Inflection Point’s officers and directors have agreed not to transfer, assign or sell any of their Founder Shares and any Inflection Point Class A Shares issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of the initial business combination, or (ii) the date on which Inflection Point completes a liquidation, merger, share exchange or other similar transaction after the initial business combination that results in all of Inflection Point’s shareholders having the right to exchange their Inflection Point Class A Shares for cash, securities or other property; except to certain permitted transferees and under certain circumstances (the lock-up). Notwithstanding the foregoing, if (1) the closing price of Inflection Point Class A Shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination or (2) if Inflection Point consummates a transaction after the initial business combination which results in Inflection Point’s shareholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the lock-up. However, in connection with the Business Combination, this provision of the Letter Agreement will be superseded by the Sponsor Lock-Up Agreement, pursuant to which the Sponsor and its permitted assigns will agree not to, without the prior consent of the New Merlin Board, transfer the shares of New Merlin Common Stock received upon conversion of the Founder Shares prior to the date that is six months after the Closing Date.
Private Placement Units
The Sponsor purchased an aggregate of 425,000 Private Placement Units, simultaneously with the initial closing of the IPO, at a price of $10.00 per Private Placement Unit, or $4,250,000 in the aggregate. The Private Placement Units are identical to the units sold in Inflection Point’s IPO except that, so long as they are held by our Sponsor or its permitted transferees, the Private Placement Units (including their component securities) (i) may not (including the Class A ordinary shares issuable upon conversion of the underlying rights), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of our initial business combination and (ii) will be entitled to registration rights. Pursuant to the Sponsor Lock-Up Agreement to be entered in connection with the Closing, the Sponsor and its permitted assigns will agree not to, without the prior consent of the New Merlin Board, transfer the shares of New Merlin Common Stock received upon conversion of the Private Placement Units prior to the date that is 90 days after the Closing Date.
Pre-Funded NPAs
Pursuant to the Pre-Funded NPAs, Inflection Point Fund agreed to purchase a Pre-Funded Convertible Note and a Pre-Funded Warrant to purchase 1,720,589 shares of New Merlin Common Stock.
Inflection Point’s Policy for Approval of Related Party Transactions
The audit committee of the Inflection Point Board has adopted a policy setting forth the policies and procedures for its review and approval or ratification of “related party transactions.” A “related party transaction” is any consummated or proposed transaction or series of transactions: (i) in which Inflection Point was or is to be a participant; (ii) the amount of which exceeds (or is reasonably expected to exceed) the lesser of $120,000 or 1% of the average of the company’s total assets at year end for the prior two completed fiscal years in the aggregate over the duration of the transaction (without regard to profit or loss); and (iii) in which a “related party” had, has or will have a direct or indirect material interest. “Related parties” under this policy will include: (i) Inflection Point’s directors, officers or any person who has
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served in such roles since the beginning of the most recent fiscal year, even if he or she does not currently serve in that role; (ii) any record or beneficial owner of more than 5% of any class of Inflection Point’s voting securities; (iii) any immediate family member of any of the foregoing if the foregoing person is a natural person; and (iv) any other person who maybe a “related person” pursuant to Item 404 of Regulation S-K under the Exchange Act. Pursuant to the policy, the audit committee will consider (i) the relevant facts and circumstances of each related party transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party, (ii) the extent of the related party’s interest in the transaction, (iii) whether the transaction contravenes Inflection Point’s code of ethics or other policies, (iv) whether the audit committee believes the relationships underlying the transaction to be in the best interests of the company and its shareholders and (v) if the related party is a director or an immediate family member of a director, the effect that the transaction may have on a director’s status as an independent member of the board and on his or her eligibility to serve on the Inflection Point Board’s committees. Management will present to the audit committee each proposed related party transaction, including all relevant facts and circumstances relating thereto. Under the policy, Inflection Point may consummate related party transactions only if the audit committee approves or ratifies the transaction in accordance with the guidelines set forth in the policy. The policy will not permit any director or officer to participate in the discussion of, or decision concerning, a related person transaction in which he or she is the related party.
Merlin Related Person Transactions
Amended and Restated Investors’ Rights Agreement
On March 10, 2022, Merlin entered into an Amended and Restated Investors’ Rights Agreement (the “Investor Rights Agreement”) with certain significant stockholders (including First Round Capital, Bling Capital, Quiet Ventures, SnowPoint Ventures and others) and with Matt George. The Investor Rights Agreement provides, among other things, demand and piggyback registration rights, information and inspection rights, a right of first offer on future issuances, transfer restrictions and market stand-off provisions, and certain company covenants and protective provisions requiring approval of at least two preferred directors; it also provides that Merlin is the indemnitor of first resort for investor directors’ indemnification expenses. Under the agreement, Merlin will bear certain registration expenses, and these rights may facilitate resales of shares by the participating holders and could constrain certain corporate actions absent the required investor director approvals, which may affect the timing and manner of Merlin’s future financings and corporate transactions. The agreement terminates certain covenants upon specified events, including an initial public offering.
Amended and Restated Voting Agreement
On March 10, 2022, Merlin entered into an Amended and Restated Voting Agreement (the “Voting Agreement”) with certain investors and key holders, including Matt George. The Voting Agreement provides these related parties, along with certain institutional investors such as First Round Capital and SnowPoint Ventures, with rights to designate members of Merlin’s board of directors, as well as certain rights regarding the voting and transfer of shares, and participation in company sale transactions. The terms of the Voting Agreement may affect the ability of other shareholders to influence the election of directors and the outcome of certain corporate actions, potentially resulting in the concentration of voting power among these related parties and investors.
Quiet Venture Management Rights Agreement
On May 13, 2022, Merlin entered into a Management Rights Agreement with certain funds affiliate with Quiet Venture under which they are entitled to consult with management, inspect books and records, and receive certain information, subject to confidentiality obligations under the Investors’ Rights Agreement.
First Round Capital Management Rights Agreement
On October 24, 2018, Merlin entered into a Management Rights Agreement with First Round Capital, a significant investor in the Company. Pursuant to this agreement, First Round Capital was granted certain contractual rights, including consultation and advisory rights with management, inspection rights, board observer rights, and access to specified financial and operational information of Merlin.
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Post-Business Combination Arrangements
In connection with the Business Combination, certain agreements were entered into or will be entered into pursuant to the Business Combination Agreement. The agreements described in this section, or forms of such agreements as they will be in effect substantially concurrently with the completion of the Business Combination, are filed as exhibits to the registration statement of which this prospectus forms a part, and the following descriptions are qualified by reference thereto. These agreements include:
Registration Rights Agreement
At the Closing, New Merlin, the Sponsor, the Merlin Stockholders, the Closing PIPE Investors and other parties thereto will enter into the Registration Rights Agreement, pursuant to which, among other things, the Sponsor, the Merlin Stockholders, the Closing PIPE Investors and other parties thereto will be granted certain customary registration rights, on the terms and subject to the conditions therein, with respect to securities of New Merlin that they will hold following the Business Combination.
Sponsor Support Agreement
Concurrently with the execution of the Business Combination Agreement, Inflection Point entered into the Sponsor Support Agreement with the Restricted Holders, pursuant to which each Restricted Holder agreed to, among other things, (i) vote in favor of adoption of the Transaction Proposals, (ii) vote against any Alternative Transaction (as defined in the Business Combination Agreement) and any merger agreement or merger other than the Transaction Proposals, the Business Combination Agreement and the Business Combination; (iii) vote against any change in the business, management, or board of directors of Inflection Point (other than in connection with the Transaction Proposals or pursuant to the Business Combination Agreement or ancillary agreements) and (iv) vote against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Sponsor Support Agreement, the Business Combination Agreement or the Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of the Inflection Point under the Business Combination Agreement, (C) result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such Restricted Holder contained in the Sponsor Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Inflection Point. Certain current and former officers and directors of Inflection Point previously entered into a letter agreement with Inflection Point in connection with Inflection Point’s initial public offering, pursuant to which they agreed to vote any Inflection Point ordinary shares held by them in favor of the Business Combination.
Stockholder Voting and Support Agreement
Concurrently with the execution of the Business Combination Agreement, Merlin Stockholders and Merlin entered into the Stockholder Voting and Support Agreement, pursuant to which Merlin Stockholders have agreed to, among other things, vote (or act by written consent) (a) to approve the Business Combination Agreement and the consummation of the Business Combination; (b) against any Alternative Transaction or any proposal relating to an Alternative Transaction; (c) against any merger agreement or merger (other than the Business Combination Agreement and the Business Combination), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by Merlin; (d) against any change in the business or board of directors of Merlin (other than pursuant to the Business Combination Agreement or the Ancillary Documents (as defined in the Business Combination Agreement)); (e) against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Stockholder Voting and Support Agreement, the Business Combination Agreement or the Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of Merlin under the Business Combination Agreement, (C) result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such member contained in the Stockholder Voting and Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Merlin and (f) to convert all outstanding shares of preferred stock of Merlin into Merlin Common Stock as of immediately prior to the Effective Time, conditioned upon and subject to the closing of the Business Combination, in accordance with the organizational documents of Merlin.
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Sponsor Lock-Up Agreement
At the Closing, the Sponsor and New Merlin will enter into the Sponsor Lock-Up Agreement, pursuant to which the Sponsor and its permitted assigns will agree, (x) with respect to the Sponsor Lock-Up Founder Shares, prior to the date that is six months after the Closing Date, or (y) with respect to the Sponsor Lock-Up Unit Shares, prior to the date that is 90 days after the Closing Date, not to, without the prior written consent of the New Merlin Board, (i) sell, pledge, grant any option to purchase or otherwise dispose of (a), (ii) enter into any swap or other transfer arrangement in respect of the Sponsor Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Sponsor Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
Merlin Lock-Up Agreement
At the Closing, New Merlin, the Lock-Up Holders will enter into the Merlin Lock-Up Agreement, pursuant to which the Lock-Up Holders will agree not to, without the prior written consent of the New Merlin Board, prior to the date that is six months after the Closing (i) sell, pledge, grant any option to purchase or otherwise dispose of the Lock-Up Shares, (ii) enter into any swap or other transfer arrangement in respect of any Lock-Up Shares or (iii) take any action in furtherance of any of the matters described in the foregoing clauses (i) or (ii). The Merlin Lock-Up Agreement provides for certain permitted transfers, including but not limited to, transfers to certain affiliates or family members, transfers of shares acquired on the open market after the consummation of the Business Combination, subject to certain conditions, or the exercise of certain stock options.
Signing Pre-Funded PIPE Agreements
In connection with the transactions contemplated by the Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin entered into the Signing Pre-Funded PIPE Agreements with Pre-Funded Investors. Pursuant to the Signing Pre-Funded PIPE Agreements, the Pre-Funded Investors agreed, among other things, to purchase, and Merlin issued and sold, an aggregate of approximately $78 million of Pre-Funded Convertible Notes and Pre-Funded Warrants, substantially concurrently with the execution and delivery of the Business Combination Agreement. On November 17, 2025, Merlin and one of the Pre-Funded Investors entered into a Post-Signing Pre-Funded SPA, pursuant to which such Pre-Funded Investor purchased for approximately $9.3 million an additional Pre-Funded Convertible Note with a principal amount of approximately $10.9 million and a Pre-Funded Warrant, on the same terms and conditions as the Signing Pre-Funded SPA. The Convertible Note Consideration shall be a number of shares of Series A Preferred Stock equal to the quotient, rounded up to the nearest whole share, of (i) the total outstanding principal and accrued and unpaid interest on each Pre-Funded Convertible Note as of one day prior to the Closing, divided by (ii) $12.00 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded NPAs), as may be adjusted pursuant to the terms and conditions of such Pre-Funded Convertible Notes, or $10.20 (with respect to the Pre-Funded Convertible Notes sold pursuant to the Pre-Funded SPA).
Series A SPA
In connection with the transactions contemplated by the Business Combination Agreement, on August 13, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into the Series A SPA. Pursuant to the Series A SPA, the Closing PIPE Investor has agreed, among other things, to purchase, at Closing, 4,901,961 shares of Series A Preferred Stock, having the rights, preferences and privileges set forth in the Certificate of Designation and a New Merlin Series A Warrant, for an aggregate purchase price of $50,000,000. Each share of Merlin Series A Preferred Stock will have the Stated Value. On November 17, 2025, Inflection Point, Merlin and the Closing PIPE Investor entered into Amendment No. 1 to the Initial Series A SPA, pursuant to which the Closing PIPE Investor agreed to increase its investment to $100 million, for which it will receive 9,803,922 shares of Series A Preferred Stock and a New Merlin Series A Warrant to purchase a number of shares of New Merlin Common Stock equal to the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible.
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The Series A SPA includes customary representations and warranties from Merlin, Inflection Point and the Closing PIPE Investor and is subject to customary closing conditions. The Series A SPA also includes customary covenants and agreements related to transfer restrictions, SEC reports, material non-public information and indemnification. New Merlin Common Stock issuable upon conversion of the Series A Preferred Stock and New Merlin Common Stock underlying any New Merlin Series A Warrants will be “Registrable Securities” under the Registration Rights Agreement.
Additional Series A SPA
On November 17, 2025, Inflection Point and Merlin also entered into Additional Series A SPAs with the Additional Closing PIPE Investors, pursuant to which, among other things, the Additional Closing PIPE Investors agreed to purchase, and Inflection Point agreed to sell, an aggregate of 1,666,668 shares of Series A Preferred Stock and Upsized New Merlin Series A Preferred Warrants to purchase a number of shares of New Merlin Common Stock equal to 75% of the number of New Merlin Common Stock into which such shares of Series A Preferred Stock are initially convertible for $20 million.
The Additional Series A SPAs includes customary representations and warranties from Merlin, Inflection Point and the Additional Closing PIPE Investors and is subject to customary closing conditions. The Additional Series A SPAs also include customary covenants and agreements related to transfer restrictions, SEC reports, material non-public information and indemnification. New Merlin Common Stock issuable upon conversion of the Series A Preferred Stock and New Merlin Common Stock underlying any New Merlin Series A Warrants will be “Registrable Securities” under the Registration Rights Agreement.
Statement of Policy Regarding Transactions with Related Persons
The Company will adopt a formal written policy that will be effective upon the Closing providing that the Company’s officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of the Company’s capital stock, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with the Company without the approval of the Company’s nominating and corporate governance committee, subject to certain exceptions. For more information, see the section entitled “Management of the Company Following the Business Combination — Related Person Policy of the Company”.
Indemnification of Directors and Officers
The Proposed Bylaws will provide that the Company will be required to indemnify our directors and officers to the fullest extent permitted by DGCL. In addition, the Proposed Charter will provide that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL.
There is no pending litigation or proceeding naming any of Inflection Point’s or Merlin’s respective directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
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INFORMATION ABOUT MERLIN LABS
Unless the context otherwise requires, all references in this section to “we,” “us” or “our” refer to Merlin and its subsidiaries prior to the consummation of the Business Combination.
Overview
Our vision is to be at the forefront of advancing autonomous flight technology and positioning ourselves as the leading U.S.-based developer of autonomy solutions for fixed-wing aircraft. Our non-human pilot system, Merlin Pilot, integrates cutting-edge hardware and software to deliver a comprehensive autonomous flight solution that spans the entire flight process — from takeoff to touchdown. We believe that Merlin Pilot will be able to significantly reduce operational costs, potentially saving customers millions of dollars per aircraft annually, by enabling reduced crew or uncrewed flights.
We believe that Merlin Pilot not only addresses the global pilot shortage but also enhances flight safety, offering a compelling economic model with diverse revenue streams, including hardware integration and recurring, high-margin software support. Our extensive portfolio of proprietary intellectual property combines artificial intelligence with traditional high-assurance flight controls, positioning us to capitalize on the growing trends of autonomous systems and next-generation aviation.
Our team comprises nearly 100 engineers with deep expertise in autonomy and certified software for both military and civilian applications. We are a prime contractor with over $100 million in total contract value and we have identified a $3 billion pipeline of opportunities, supporting robust growth in both military and civilian markets.
Our mature certification program includes an issued certification basis and a certification-conformed system with approved military airworthiness plans, underscoring our commitment to delivering reliable and safe autonomous flight solutions.
Merlin Pilot
Merlin Pilot is an advanced automation system designed to enable full autonomous flight from takeoff to touchdown. It utilizes a comprehensive array of sensor technologies to assess the aircraft’s state and its surrounding environment, allowing it to navigate effectively and recommend trajectory adjustments as necessary. Merlin Pilot’s communication capabilities are enhanced by natural language processing algorithms, facilitating communication with air traffic control. By operating with reduced crew or autonomously, we believe Merlin Pilot can significantly enhance flight efficiency, enabling more flights per day or optimized routes, thereby reducing operational costs. This translates to potential savings of millions of dollars per aircraft annually, offering substantial financial benefits to large fleet operators.
Merlin Pilot integrates a deterministic core with automation. Merlin Pilot’s deterministic core is a rule-based control system that incorporates critical fail-safes to prevent unsafe maneuvers or system failures, ensuring consistent and explainable behavior for safe, predictable autonomous flight. Above this core lies the automation layer, which governs flight autonomy, including takeoff, navigation, and landing, and mission autonomy, encompassing communications and operations. All automation functions are routed through the deterministic core, ensuring safety and compliance throughout the flight process.
Aircraft Platforms
Our go-to-market strategy is designed around mastering traditional aircraft markets and building a solid foundation of revenue and expertise. Our near-term focus is the military sector, with a goal to transition into the civilian space over the next fifteen years. We are currently focused on the following aircraft platforms:
• C-130J: The C-130J is one of the most widely used military transport aircraft globally. We have been chosen as the sole prime contractor for a $105 million Indefinite Delivery, Indefinite Quantity (“IDIQ”) production contract to integrate flight autonomy capabilities into the C-130J for the United States Special Operations Command (“USSOCOM”). This contract covers the initial adaptation of the platform and can be extended to both low-rate and full-rate production for all Air Force Special Operations Command (“AFSOC”) fixed-wing aircraft.
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• Tactical Autonomy: We are developing tactical autonomy applications in four main areas. First, we are focusing on mobility and refueling systems to improve staffing and surge capabilities, while supporting diverse future fleets. Second, we work on automating older aircraft quickly to provide highly effective, optionally-crewed tactical systems, demonstrating the flexibility of our Merlin Pilot system in tough conditions, through fully automated surveillance and strike capabilities. Third, we create unique flight autonomy behaviors that work independently of specific aircraft designs, aiming to contribute to advanced collaborative aircraft projects. Lastly, we focus on expendable systems, offering adaptable software solutions that work across different platforms. Tactical autonomy is a key growth area for us as we continue to enhance our technology and applications.
USSOCOM Contract
The U.S. government frequently uses IDIQ contracts to obtain contractual commitments to provide products or services over a period of time pursuant to established general terms and conditions. At the time of the award of an IDIQ contract, the U.S. Government generally commits to purchase only a minimal amount of products or services from the contractor to whom such contract is awarded. After award of an IDIQ contract, the U.S. Government may issue task orders for specific services or products it needs utilizing a variety of contract types, including cost, cost-plus-fixed-fee, firm fixed-price, and cost-sharing. IDIQ contracts typically have multi-year terms and unfunded ceiling amounts which enable, but do not commit, the U.S. government to purchase substantial amounts of products and services.
We are the sole prime contractor on an IDIQ contract to support testing, production, integration, demonstration, and sustainment for USSOCOM’s Automated Crew and Workload program to integrate autonomous capabilities into the C-130J (the “USSOCOM Contract”). The scope of work under the USSOCOM Contract structures performance into seven stages:
• Stage 1 — Preliminary Design Review: Preliminary integration design, test plans (autonomy and survey flights), airworthiness planning, autonomy architecture (including human override, trustworthiness, safety, counter-AI, cyber survivability, and supply chain risk management), and initial risk mitigations.
• Stage 2 — Critical Design Review: Finalize integration design and airworthiness plan for system-in-control flight.
• Stage 3 — Ground Test: Demonstrate physical authority over flight controls, run simulations, perform engine runs, prepare reports with test points and video and demonstrate emergency disconnect procedures.
• Stage 4 — Flight Test: First shadowing a pilot, then system-in-control during enroute flight with a standard crew on board.
• Stage 5 — Takeoff & Landing: Demonstrate takeoff and landing with Merlin Pilot in control; initial role delineation between Merlin Pilot and human pilot.
• Stage 6 — High-Value Mission Autonomy: Demonstrate advanced autonomy features relevant to contested airspace and emerging strategic needs.
• Stage 7 — Additional Platforms: Potential integrations across additional fixed-wing aircraft as warranted by performance and funding.
Technical requirements, deliverables, and acceptance criteria are defined at the task order level. The ordering period on the USSOCOM Contract is five years, ending in 2029 unless amended or terminated, with a current maximum order ceiling of $105 million. As of the date of this proxy statement/prospectus, we have received two task orders related to the completion of Stages 1 and 2, reflecting a variety of cost, cost-plus-fixed-fee, and cost-share contract types. Task Order 1 funded a minimal amount for initial travel. The total value of Task Order 2 is currently $22,303,189, with Merlin assuming a cost share responsibility of $6,347,411, resulting in a current total government obligation of $15,955,778. Stages 3-7 are not currently funded. Should we continue to effectively progress through Stage 2, management believes there is potential for additional task orders; however, future funding and task orders are at the government’s sole discretion.
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The USSOCOM Contract includes a standard termination for convenience clause that allows the government to terminate the USSOCOM Contract for any reason, as well as standard provisions for termination upon default. Upon a termination for convenience, we are entitled to recover allowable costs and fees where applicable. Intellectual property rights under the USSOCOM Contract are governed by applicable Small Business Innovation Research data rights provisions; the government receives specified license rights, which may include government purpose or unlimited rights in certain circumstances.
Strategic Partnerships
We believe that our strategic relationships provide us with another point of competitive differentiation. Across each of the important activities of testing, validating, and refining our autonomous flight systems, we have established strong collaborations and relationships with Northrop Grumman and GE Aerospace to help to de-risk our commercial strategy.
• We have a Memorandum of Agreement (the “NGSC MOU”) with Northrop Grumman Systems Corporation (“NGSC”) that establishes a framework for providing Merlin’s mission autonomy software in support of NGSC’s Beacon project, an open-access autonomous testbed ecosystem designed to rapidly develop, test, and deploy new autonomous mission capabilities for military aircraft. Pursuant to the agreement, NGSC will provide Merlin with a Mission Autonomy Software Development Kit (“SDK”) and other proprietary information to guide the integration of software into their virtual test environment, and Merlin will deliver combat air patrol mission autonomy software, documentation, interface descriptions, dependencies, and proof of intended function and integrate the software into the Mission Autonomy SDK. Each party will retain ownership of pre-existing intellectual property and any intellectual property it solely develops. The NGSC MOU has a term of 24 months and, unless extended by amendment, or earlier terminated by either party, will terminate in July 2027.
• We have a Teaming Agreement (the “Teaming Agreement”) with GE Aerospace (“GEAS”) that creates an exclusive collaboration to pursue, develop, and manufacture demonstrator, prototype and production systems comprised of Merlin software applications and products combined with GEAS software applications and products for the KC-135 center console refresh program (as well as for future programs identified by either party, unless the other party declines to participate), with a program-by-program designation of a prime party to lead proposals. Each party will retain ownership of preexisting intellectual property and any intellectual property it solely develops. Joint ownership of intellectual property is allocated depending on whether the joint intellectual property is developed or derived from either party’s background intellectual property. The Teaming Agreement has a term of 36 months and, unless extended by amendment, or earlier terminated by either party, will terminate in 2028.
The Emerging Autonomous Flight Market
We believe we are well positioned in the middle of two major growing trends: autonomous systems and next generation aviation. We are focused on fixed-wing autonomy, a sector with immediate use cases, limited infrastructure constraints, and ease of adaptability onto dissimilar aircraft types.
Rising Geopolitical Tensions
Increasing geopolitical challenges are prompting militaries to invest in autonomous aviation to enhance operational reach and resilience. Autonomous systems enable aircraft to cover vast, remote areas and operate safely in contested environments, facilitating rapid and precise mission execution while minimizing personnel risk. As defense priorities evolve to address complex threats, autonomy is becoming essential for maintaining strategic advantage.
Global Air Power Projection Needs
Efficient and resilient refueling operations are crucial for extending fighter reach and mission endurance. Autonomous systems offer the potential to optimize the operational utilization of tankers and other aircraft, providing flexible and persistent support in contested environments where traditional crewed logistics face heightened risks. By integrating autonomy into critical support roles, militaries can sustain air operations and enhance supply chain resilience across distant and hostile regions.
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Global Pilot Shortage
The global pilot shortage is affecting both commercial and military aviation, making it increasingly challenging to meet demands for military, cargo, and passenger pilots. Autonomous systems present practical solutions by enabling reduced crew or uncrewed operations across transport, refueling, and surveillance aircraft, thereby freeing up limited pilot resources for higher-priority missions. These technologies allow both commercial and military markets to scale missions, optimize fleet utilization, and maintain reliability without being constrained by crew availability.
Budgetary Constraints and Technological Innovation
Despite increased defense budgets, the U.S. Department of Defense (“DoD”) faces pressure to achieve more with less, driving demand for innovative technologies that deliver enhanced capabilities at lower or comparable costs. The DoD places emphasis on delivering asymmetric advantages, extending the life of existing programs and reducing long-term sustainment costs. Consequently, there is a growing focus on adaptable, cost-effective technologies that enhance capability and readiness without necessitating large, expensive developments or fleet replacements. Disruptive technologies offer a clear path to modernization within existing budget constraints, ensuring a competitive edge.
Our Business Strategy
We are pursuing several key growth strategies to capitalize on our position in the autonomous flight sector:
Leveraging First-Mover Advantage
We aim to capitalize on our first-mover advantage as a catalyst for growth as we seek to develop a unique technology in a disruptive sector. We believe this early lead will provide us with a compelling opportunity to capture market share as the competitive landscape evolves. In the aerospace sector, where regulatory and certification standards are crucial, we believe our role as an early, disruptive player gives us a significant edge.
Expanding Military Programs
We believe a major growth opportunity lies in broadening our reach across various military platforms. Building on our initial success with the C-130J, our adaptable and cost-effective architecture allows for rapid deployment across diverse aircraft. We believe this scalability within the defense ecosystem opens doors to a wide array of program opportunities, enabling us to deepen our presence within the DoD and support long-term revenue visibility.
Pursuing Commercial Applications
Our goal is to extend the commercialization of Merlin Pilot beyond the defense market. We believe the commercial aviation sector offers significant potential for future growth, with numerous opportunities across various markets. We plan to enter the civilian market through the global freight network in partnership with lessors and operators, leveraging our government and military successes to develop the industry relationships necessary for the next phase of growth.
Phased Implementation Strategy
Our strategy is structured around a phased implementation approach to ensure efficient deployment and scalability:
• Phase 1 — Adapt: During this phase, our engineers tailor the core Merlin Pilot system to specific platforms and mission profiles. This phase involves non-recurring engineering funding for each aircraft type with a scalable engineering process over time.
• Phase 2 — Integrate: During this phase, the Merlin Pilot system will be integrated onto customer platforms through our integration partners, including Sierra Nevada and Lockheed Martin. This phase involves a one-time integration charge, allowing us to leverage subcontractors to scale effectively.
• Phase 3 — License: During this phase, we will offer “Autonomy as a Service” to our installed base of aircraft at a pre-negotiated annual rate, which includes software updates and ongoing support for the Merlin software.
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We believe our structured, multi-phase business model — anchored by contracts and recurring revenue components — provides high visibility into future cash flows, supported by a robust and well-defined pipeline.
Assured Autonomy by Design
Assured autonomy is a key aspect of our technology, combining advanced technology with certification-focused processes. Our system architecture integrates runtime assurance, formal methods, and safety monitors to support AI-driven flight operations in order to meet certification standards. It features a rule-based deterministic core that operates independently of AI, incorporating safeguards to help prevent errors and ensure consistent operations. The automation layer sits above this deterministic core to maintain safety and compliance. This approach is designed to meet the needs of military buyers and regulators, offering an alternative to systems that rely entirely on AI.
Modular Autonomy Stack
Our technology stack is designed to be modular and adaptable to various types of aircraft. Its flexible architecture allows it to be quickly adjusted for use in different commercial and military aircraft with minimal hardware modifications. This adaptability supports scalability and deployment without requiring extensive redesigns or customizations for specific missions. Our technology can be integrated into existing aircraft systems with relatively low cost and risk, aiming to minimize operational disruptions and facilitate wider adoption.
Human-Machine Teaming
Our technology is built to integrate seamlessly with human supervisory control, enabling progressive deployment of autonomy across different aircraft platforms with operator confidence.
Data-Driven Learning within a Certified Framework
We capture flight data to enable continuous performance monitoring and analysis, iteratively improving performance while maintaining certification rigor.
Certification-First Mindset
Our technology development aligns directly with FAA and EASA certification pathways, de-risking customer adoption.
Proven Flight Programs
Merlin Pilot has experience executing complex, multi-stakeholder programs with military and commercial partners, successfully bridging experimental systems to operational use.
Strategic Regulatory Partnerships
As a first mover, we seek to actively shape the regulatory landscape for autonomous flight in order to create long-term competitive advantages.
Dual-Use Market Focus
Designed to meet stringent military and commercial aviation safety requirements, we believe our technology has diverse applications across sectors.
Proactive Risk Management
We are proactively addressing the inherent risks associated with introducing autonomous flight systems through a phased deployment approach, human-centric design, advanced learning techniques, strategic partnerships, and cross-platform collaborative capabilities. Our step-by-step approach aims to eventually achieve fully autonomous solutions across various platforms. Our go-to-market strategy involves rigorous testing and certification with regulators like the FAA and New Zealand’s CAA, resulting in a mature certification program with approved military airworthiness plans. Initially, we focus on reducing pilot crews from “2 to 1” before progressing to fully uncrewed aircraft.
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Human-Centric Design and Advanced Learning
The Merlin Pilot system complements human pilots with software that uses advanced learning techniques for weather navigation. We employ imitation learning to teach our systems how experienced pilots navigate complex weather conditions, enabling real-time, human-like decision-making. The Merlin Pilot system can operate without ground communications and GPS navigation, which is advantageous in combat situations where signals may be jammed.
Strategic Partnerships for Integration
We outsource the integration of our software to strategic partners like Sierra Nevada and Lockheed Martin, allowing us to focus on the higher-margin adaptation and licensing phases of software development.
Our Competition
Competition in our addressable market includes Anduril, AeroVironment, Reliable Robotics, Xwing, Skyryse, Shield AI as well as traditional primes like Lockheed Martin, Northrop Grumman, General Dynamics, etc.
Our Operations
Research & Development: Research and development activities are integral to our business and we follow a disciplined approach to investing our resources to create new technologies and solutions. A fundamental part of this approach is a well-defined screening process that helps us identify commercial opportunities that support current desired technological capabilities in the autonomous flight space. Our research includes the expansion of Merlin Pilot’s capabilities across a range of missions and aircraft.
Our Employees
Merlin has over 125 employees consisting primarily of engineering and flight test expertise (pilots, aircraft maintenance and flight test engineers), quality and technology professionals, program management and business development resources, as well as general and administrative functions including finance, human resources, and supply chain.
Our Facilities
Merlin is headquartered in Boston, Massachusetts with a leased office space comprised of over 8,100 square feet of office and engineering lab space. Merlin also leases an office space located at 1200 17th Street, Office No. 26-155, in Denver, Colorado.
Merlin also leases a hangar and office spaces at the Quonset State Airport in North Kingston, Rhode Island where frequent test flights are held. There is also a dedicated test environment to support further development and certification in Merlin’s facility in the Bay of Islands, KeriKeri, New Zealand. Merlin intends to design, develop and operate a leased hanger and office space at the Laurence G. Hanscom Field Airport in Bedford, Massachusetts.
Intellectual Property
Our success depends in part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary rights, we rely on a combination of intellectual-property rights (e.g., patents, trademarks, copyrights, and trade secrets including know-how and expertise) and contracts (e.g., license agreements, confidentiality and non-disclosure agreements with third parties, and employee and contractor disclosure and invention assignment agreements).
We own or have exclusive rights to patents, trademarks, copyrights, trade secrets, and/or other intellectual property rights in the United States and abroad that support us and the respective brands, products and services we deliver. We have 21 issued patents worldwide (of which 14 are U.S. patents). Without accounting for any potential patent term adjustments (including terminal disclaimers) or extensions or other forms of exclusivity with respect to our issued patents, they will expire between October 2041 and January 2044.
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Of the above referenced patents, approximately 8 of the issued U.S. patents are related to natural language processing of air traffic control communications. We also have 1 U.S. trademark registration and 6 pending U.S. trademark applications. We regularly file for patent and trademark protection, and we may also acquire intellectual property by way of corporate acquisition.
We believe that our differentiated and balanced portfolio of intellectual property rights in the autonomous flight space and our brand reputation provide us with a competitive advantage.
In the future, we intend to continue to seek intellectual property protection for our new products, technologies and designs, and exercise our rights to exclusively use these valuable assets.
Government Regulation
We are subject to various local, state, federal and international laws and regulations relating to the development, manufacturing, sale and distribution of our products, systems and services, and it is our policy to comply with the applicable laws in each jurisdiction in which we conduct business. Regulations include but are not limited to those related to import and export controls, corruption, bribery, environment, government procurement, wireless communications, competition, product safety, workplace health and safety, employment, labor and data privacy.
The commercialization of new aircraft and the operation of an aerial mobility service require certain regulatory authorizations and certifications, including Type Certification, Production Certification and an air carrier certificate issued by the FAA under Part 119 with Part 135 operations specifications.
Furthermore, our non-U.S. operations are subject to the laws and regulations of foreign jurisdictions, which may include regulations that are more stringent than those imposed by the U.S. government on our U.S. operations.
Government Contracting Process
We sell the significant majority of system products and services as the prime contractor under contracts with the U.S. government. Certain important aspects of our government contracts are described below.
Proposal Process
Most of our current government contracts were awarded through a competitive proposal process. The U.S. government awards competitive contracts based on solicitations that describe the procuring agency’s needs and establish proposal evaluation and source selection criteria. Each interested supplier prepares a proposal in response to the agency’s solicitation. Proposals usually must be prepared in a short time period in response to a deadline identified in the solicitation, and the proposal effort requires extensive involvement of numerous technical and administrative personnel. Following award announcements, unsuccessful offerors may challenge the agency’s award decision in a proceeding known as a “bid protest.”
Funding
The funding of U.S. government programs is subject to congressional appropriations. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis, even though a program may continue for many years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.
The U.S. military funds its contracts for autonomous flight systems either through operational need statements or as programs of record. Operational need statements require allocations of discretionary spending or reallocations of funding from other government programs. We define a program of record as a program that, after undergoing extensive DoD review and product testing, is included in the five-year government budget cycle, meaning that funding is allocated for purchases under these contracts during the five-year cycle, absent affirmative action by the customer or Congress to change the budgeted amount. Despite being included in the five-year budget cycle, funding for these programs is subject to annual approval.
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Material Government Contract Clauses
All contracts with the U.S. government contain clauses, and are subject to laws and regulations, that give the government rights and remedies not typically found in commercial contracts. Examples of said rights bestowed to the government may include:
• terminate existing contracts for convenience, in whole or in part, when it is in the interest of the government to do so;
• terminate contracts for default upon the occurrence of certain enumerated events;
• unilaterally modify contracts with regard to certain performance requirements;
• terminate contracts (including multi-year contracts) and related orders if funds for contract performance become unavailable;
• obtain rights in, or potentially ownership of, intellectual property developed or delivered by a contractor as a result of its performance of the contract;
• adjust contract costs and fees on the basis of audits completed by its agencies;
• suspend or debar a contractor from doing business with the U.S. government; and
• control or prohibit the export of certain items.
Generally, government contracts are subject to oversight audits by government representatives. Compensation, if any, in the event of a termination for default is limited to payment for work completed at the time of termination. In the event of a termination for convenience, the contractor may receive the contract price for completed work, as well as its costs of performance of terminated work including an allowance for profit and reasonable termination settlement costs.
Legal Proceedings
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MERLIN
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this in this prospectus. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs, involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Unless the context otherwise requires, all references in this report to “Merlin,” the “Company,” “we,” “our,” “us,” or similar terms refer to Merlin Labs, Inc. and its subsidiaries.
Overview
Our vision is to be at the forefront of advancing autonomous flight technology and positioning ourself as the leading U.S.-based developer of autonomy solutions for fixed-wing aircraft. Our non-human pilot system, Merlin Pilot, integrates cutting-edge hardware and software to deliver a comprehensive autonomous flight solution that spans the entire flight process, from takeoff to touchdown. By operating with reduced crew or autonomously, we believe Merlin Pilot can significantly enhance flight efficiency, enabling more flights per day or optimized routes, thereby reducing operational costs. This translates to potential savings of millions of dollars per aircraft annually, offering substantial financial benefits to large fleet operators.
We believe that Merlin Pilot not only addresses the global pilot shortage but also enhances flight safety, offering a compelling economic model with diverse revenue streams, including hardware integration and recurring, high-margin software support. Our extensive portfolio of proprietary intellectual property combines artificial intelligence with traditional high-assurance flight controls, positioning us to capitalize on the growing trends of autonomous systems and next-generation aviation.
We are currently growing our team of engineers with deep expertise in autonomy and certified software for both military and civilian applications. We are a prime contractor on a $105 million contract and we have identified approximately $3.0 billion pipeline of opportunities, supporting robust growth in both military and civilian markets. Our mature certification program includes an issued certification basis and a certification-conformed system with approved military airworthiness plans, underscoring our commitment to delivering reliable and safe autonomous flight solutions.
The Merlin Pilot is an advanced automation system designed to enable full autonomous flight from takeoff to touchdown. It utilizes a comprehensive array of sensor technologies to assess the aircraft’s state and its surrounding environment, allowing it to navigate effectively and recommend trajectory adjustments as necessary.
Our go-to-market strategy is designed around mastering traditional aircraft markets and building a solid foundation of revenue and expertise. Our short-term focus is to sell primarily to the military sector, with a goal to transition into the civilian sector in the long-term once our technology and solutions have been widely adopted and deployed in the military sector.
We have been chosen as the sole prime contractor for a $105 million Indefinite Delivery, Indefinite Quantity (“IDIQ”) contract to integrate autonomous capabilities into the C-130J for the U.S. Air Force, which is the most widely used military transport aircraft globally. This contract covers the initial adaptation of the platform and can be extended to both low-rate and full-rate production for all Air Force Special Operations Command fixed-wing aircraft.
We plan to deploy the first Merlin Pilot on either commercial or military aircraft within the next three years. We incurred net losses of $55,253 thousand and $36,463 thousand for the fiscal years ended December 31, 2024 and 2023, respectively, and $55,725 thousand and $41,826 thousand for the nine months ended September 30, 2025 and 2024, respectively. We expect to continue to generate losses over the next year as we continue to invest in research
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and development, expand our facilities and expand the technical capabilities of our engineering function. We expect that our existing cash and cash equivalents, including the net proceeds from this Merger, will be sufficient to meet our capital expenditure and working capital requirements for a period of at least twelve months from the date of this prospectus/proxy statement.
Our Business Model
We intend to deploy a hybrid hardware installation and software integration business model whereby we expect to generate revenue from the sale and installation of Merlin Pilot to flight operators necessary for autonomous flight and from the fees associated with providing software support to such operators. We also expect to generate additional revenue from the sale of ancillary services related to operating a fleet of autonomous aircraft. Below is a summary of each of these revenue streams:
• Merlin Pilot Sale and Installation Fees: The revenue stream from sale and installation of Merlin Pilot includes licensing or technology fees for the installation and implementation of our technology on an aircraft. This type of revenue is incurred a single time and is non-recurring and varies based on the aircraft type. Over time, we expect to be able to scale our engineering and technical installation and deployment abilities to reduce costs and increase our margins on this type of revenue.
• Software Support Fees: The revenue stream from software support includes fees generated from providing ongoing technical and operational support to the Merlin Pilot. Under our business model, software license agreements typically include a lifetime right of use and do not provide for any support or maintenance to be provided by the Company for the term of the agreement. However, we offer these services to our customers for additional fees, which we intend to invoice either monthly or annually, depending on the agreement reached with each customer. As such, revenue incurred from support and maintenance is categorized separately from the revenue originally incurred in selling and implementing the Merlin Pilot on each aircraft.
• Ancillary Fees: We also intend to offer ancillary services designed to meet the needs of our customers. In doing so, we intend to take advantage of the insights we’re able to generate from the deployment of our technology to generate additional income with minimal incremental cost. The ancillary services we currently intend to offer include software upgrades and support, which are designed to enhance the autopilot experience, enhanced customer assistance and trainings and data insights which can further optimize routes and individual aircraft performance. We will continue to analyze the possibility of offering additional services as we scale, and the pricing of such services will be dependent on their wide scale acceptability, regulatory approvals and the costs associated with offering such services.
While we expect to generate revenues from each of the three revenue streams discussed above, we do not expect to generate revenues from all three simultaneously until we’ve achieved scale in our business. Rather, our growth strategy is structured around a phased implementation approach to ensure efficient deployment and scalability of our business model:
Phase 1 — Adapt: During this phase, our engineers are tailoring the core Merlin Pilot system to specific platforms and mission profiles. This phase involves non-recurring engineering funding for each aircraft type with a scalable engineering process over time.
Phase 2 — Integrate: During this phase, the Merlin Pilot system will be integrated onto customer platforms. We may include the use of integration partners which allows us to scale our programs effectively.
Phase 3 — License: During this phase, we will offer “Autonomy as a Service” to our installed base of aircraft at a pre-negotiated annual rate, which includes software updates and ongoing support for the Merlin software.
Once we’ve achieved scale, we expect to generate concurrent revenue from all three of the revenue streams listed above as we deploy our technology across both military and civilian sectors, including both in the United States and globally.
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Key Factors Affecting Our Performance
We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business, but also pose risks and challenges, including those discussed below and in the section of this prospectus entitled “Risk Factors.”
Our ability to commence and expand commercial operations
We are a development stage company with no commercial operations to date. As such, our business model is dependent on our commencing and expanding commercial operations. We currently anticipate initial customer deliveries within the next year pursuant to the IDIQ production contract to integrate autonomous capabilities into the C-130J for the U.S. Air Force. This, in turn, is dependent upon successfully testing and finalizing the Merlin Pilot for integration on the C-130J aircraft. Our team of engineers, developers and other staff is highly motivated and committed to accomplishing these challenges ahead. Failure to test and finalize the Merlin Pilot in a timely manner could result in us being unable to commercialize our technology on our anticipated timeframe.
We are developing a pipeline of potential customers and partners that we expect will play an integral role in bringing our technology to market. We currently depend on the U.S. government for funding given that they’re our single and largest customer. If the U.S. government were to stop the support of the initial development of our technology for military aircraft, our ability to commence and expand commercial operations, including across the civilian sector, would be significantly impaired. Additionally, global conflicts, such as the Russia-Ukraine conflict, have created and may continue to create significant global economic uncertainty. While this uncertainty has resulted in a greater need for our technology in the military sector, it may ultimately impact the deployment of our technology across the civilian sector, particularly if it results in a decrease in global travel and airfare. See “Risk Factors.”
Widespread acceptance of autonomous flight
Our growth and future success are dependent on public support for autonomous, non-human flight in the United States and other countries where we intend to market and sell our technology. Over time, we expect autonomous flight solutions to gain widespread acceptance and become an integral part of the aviation and travel industries worldwide. However, today it is an unproven and nascent technology. As a result, consumers’ demand for, and willingness to accept, autonomous flight will significantly impact our financial performance. We believe that our leadership status in autonomous flight positions us to continue to set the standard for advanced autonomous solutions and will help us benefit from increasing consumer confidence in, and demand for, autonomous technology over time.
Our ability to capitalize on government expenditures in military defense
Our future growth is largely dependent on our ability to continue to capitalize on increased government support and corporate investment in military technology, including autonomous aircraft. Military technological advancements are garnering significant bipartisan support from U.S. government initiatives, including as evidenced by our IDIQ award. Government expenditures and private sector investments have fueled our growth in recent years, which has resulted in our continued ability to secure increasingly valuable contracts for products and services.
Over time, we expect political support for military innovation and technology to increase, particularly as the military adopts cutting edge technologies such as autonomous flight. If political support for the prioritization of the development of military technology decreases, including due to policy changes by current or future administrations and changing congressional funding priorities, we may be unable to secure continued government funding, which would adversely affect our business, development timeline, and financial condition.
Our ability to obtain and maintain regulatory approvals at federal, state and local levels
Our capacity for continued growth and ability to achieve and maintain profitability depends in large part on our ability to operate effectively in multiple jurisdictions, including on an international, federal and local level. The federal government, along with each local jurisdiction (such as states, counties and townships) in which we operate, has unique regulatory dynamics. These include laws and regulations that can directly or indirectly affect our ability to operate across various jurisdictions, particularly as it relates to autonomous commercial aircraft, as well as matters related to insurance requirements and community support. We believe that we have an industry-leading licensing team
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of professionals who are in regular communication with the U.S. Federal Aviation Authority and other regulators, and our success will depend on our licensing team’s ability to continue to obtain and maintain regulatory approvals in the ordinary course of business.
Our ability to expand our product services offerings
We intend to offer customers a diversified suite of services throughout the life of the autonomous aircraft, beginning at the time in which we’ve successfully installed the Merlin Pilot and it starts to be deployed by our customers. Our suite of services is envisioned to include multifaceted offerings, whereby we intend to provide customers with critical services related to the deployment of our technology across the life of the aircraft. We expect that, as we refine our services offering as it is deployed by the U.S. Air Force, the number of services we offer and the percentage of revenue we generate from our service offerings will continue to grow. We anticipate that our service offering will have high penetration rates across our future clients and will provide consistent, recurring revenues throughout the expected life of an aircraft. If we are unable to expand our product services offerings, it would adversely affect our business, development timeline, and financial condition.
Our ability to obtain additional capital
We expect to continue to incur operating losses for the foreseeable future as we continue to expand and develop, and we may need to raise additional capital within the next twelve to twenty-four months. If we are unable to raise additional capital, we may have to significantly delay, scale back or discontinue one or more of our research and development programs. We may be required to cease operations or seek partners for Merlin Pilot at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available. In the absence of additional capital, we may also be required to relinquish, license or otherwise dispose of rights to technologies or products that we would otherwise seek to develop or commercialize on terms that are less favorable than might otherwise be available. If we are unable to secure additional capital, we may be required to take additional measures to reduce costs to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures may significantly alter our business plan and could cause significant delays in the development of our products and ultimately our financial condition and ability to operate as a going concern.
Macroeconomic considerations
Macroeconomic conditions, such as high inflation and elevated interest rates, continue to be sources of volatility and uncertainty for global economic activity, and may affect our project costs and operations, as well as demand for the Merlin Pilot. Ongoing geopolitical conflicts in Ukraine, the Middle East, and tensions in United States-China relations may drive further economic instability and inflationary pressures, as well as increase risks for commercial and military aircraft. In the case of the military sector, these geopolitical conflicts have and may continue to impact the need for technological advances to keep the U.S. military at the forefront of the industrial world, which are generally beneficial for our business. However, such conflicts could also significantly impact commercial airline operations, which could negatively impact us in the future.
Components of Our Results of Operations
Revenue
We generate revenue from long-term contracts for the delivery of our Merlin Pilot software and related hardware. In order to satisfy these contracts we undertake engineering for research, design, development, manufacturing, integration and sustainment of advanced auto-piloting technology.
Cost of Revenue
Our cost of revenue consists primarily of labor, materials, travel, subcontracts and other costs directly related to the execution of a specific contract.
We expect that cost of revenue will increase in absolute dollars as our revenue grows and will vary from period to period as a percentage of revenue.
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Research and Development
Research and development expense consists primarily of personnel-related costs for our development team, including salaries, benefits, bonuses allocated overhead costs, and stock-based compensation expenses. Research and development expenses also include contractor or professional services fees, and third-party cloud infrastructure expenses incurred in developing our product offerings. In the near term, we expect that our research and development expenses will increase in absolute dollars but may fluctuate as a percentage of our revenue over time.
Selling and Marketing
Selling and marketing expense consists primarily of personnel-related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions, allocated overhead costs, and stock-based compensation. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs. In addition, sales and marketing expenses consist of travel-related expenses, software services dedicated for use by our sales and marketing organizations and outside services contracted for sales and marketing purposes. We expect that our sales and marketing expenses will increase in absolute dollars as we grow our business. Our sales and marketing expenses may fluctuate as a percentage of our revenue over time.
General and Administrative
General and administrative expense consists primarily of personnel-related costs associated with our finance, legal, human resources and administrative personnel, including salaries, benefits, bonuses, allocated overhead costs, and stock-based compensation. General and administrative expenses also include external legal, accounting and other professional services fees, software services dedicated for use by our general and administrative functions, insurance and other corporate expenses. In the near term, we expect that our general and administrative expenses will remain relatively consistent in absolute dollars but may fluctuate as a percentage of total revenue from period to period.
Interest Income
Interest income consists of interest income earned on cash and cash equivalents held in balances interest bearing time and money market accounts.
Interest Expense
Interest expense consists of interest on our borrowings and convertible notes and amortization of debt issuance costs.
Other Expense
Other expense consists of loss on disposal of assets and gains and losses from foreign currency transactions and remeasurements of foreign currency-denominated monetary assets and liabilities to the U.S. dollar.
Change In Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of gains and losses resulting from a change in fair value of our warrant liabilities.
Change In Fair Value of Convertible Promissory Notes
Change in fair value of convertible promissory notes consists of gains and losses resulting from a change in fair value of our convertible promissory notes.
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Provision for Income Taxes
Provision for income taxes consist primarily of income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be utilized.
Results of Operations
The following tables set forth our results of operations for the fiscal periods presented and express the relationship of certain line items as a percentage of net revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
|
Year Ended December 31, |
Nine Months Ended |
|||||||||||||||
|
($ in thousands) |
2024 |
2023 |
2025 |
2024 |
||||||||||||
|
Revenue |
$ |
1,229 |
|
$ |
1,003 |
|
$ |
5,899 |
|
$ |
367 |
|
||||
|
Cost of revenue |
|
8,500 |
|
|
735 |
|
|
7,725 |
|
|
6,690 |
|
||||
|
Gross (loss) profit |
|
(7,271 |
) |
|
268 |
|
|
(1,826 |
) |
|
(6,323 |
) |
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
|
Research and development |
|
27,146 |
|
|
24,669 |
|
|
21,699 |
|
|
20,904 |
|
||||
|
General and administrative |
|
17,864 |
|
|
12,855 |
|
|
14,467 |
|
|
13,158 |
|
||||
|
Selling and marketing |
|
1,744 |
|
|
1,180 |
|
|
1,029 |
|
|
1,328 |
|
||||
|
Total operating expenses |
|
46,754 |
|
|
38,704 |
|
|
37,195 |
|
|
35,390 |
|
||||
|
Loss from operations |
|
(54,025 |
) |
|
(38,436 |
) |
|
(39,021 |
) |
|
(41,713 |
) |
||||
|
Other (expense) income: |
|
|
|
|
|
|
|
|
||||||||
|
Interest income |
|
2,005 |
|
|
3,252 |
|
|
862 |
|
|
1,547 |
|
||||
|
Interest expense |
|
(2,420 |
) |
|
(304 |
) |
|
(2,956 |
) |
|
(1,197 |
) |
||||
|
Other expense |
|
(197 |
) |
|
(214 |
) |
|
(193 |
) |
|
(136 |
) |
||||
|
Change in fair value of warrant liabilities |
|
(265 |
) |
|
(55 |
) |
|
(4,562 |
) |
|
(314 |
) |
||||
|
Change in fair value of convertible promissory notes |
|
— |
|
|
— |
|
|
(3,118 |
) |
|
— |
|
||||
|
Loss on exchange of warrant liabilities |
|
— |
|
|
— |
|
|
(3,320 |
) |
|
— |
|
||||
|
Loss on issuance of financial instruments |
|
— |
|
|
— |
|
|
(585 |
) |
|
— |
|
||||
|
Loss on extinguishment of long-term debt |
|
— |
|
|
— |
|
|
(2,157 |
) |
|
— |
|
||||
|
Change in fair value of long-term debt |
|
— |
|
|
— |
|
|
(672 |
) |
|
— |
|
||||
|
Total other (expense) income |
|
(877 |
) |
|
2,679 |
|
|
(16,701 |
) |
|
(100 |
) |
||||
|
Loss before provision for income taxes |
|
(54,902 |
) |
|
(35,757 |
) |
|
(55,722 |
) |
|
(41,813 |
) |
||||
|
Provision for income taxes |
|
351 |
|
|
706 |
|
|
3 |
|
|
13 |
|
||||
|
Net loss |
$ |
(55,253 |
) |
$ |
(36,463 |
) |
$ |
(55,725 |
) |
$ |
(41,826 |
) |
||||
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The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue:
|
Year Ended December 31, |
Nine Months Ended September 30, |
|||||||||||
|
2024 |
2023 |
2025 |
2024 |
|||||||||
|
Revenue |
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
||||
|
Cost of revenue |
N/M |
|
73.3 |
% |
131.0 |
% |
N/M |
|
||||
|
Gross (loss) profit |
N/M |
|
26.7 |
% |
(31.0 |
)% |
N/M |
|
||||
|
|
|
|
|
|||||||||
|
Operating expenses: |
|
|
|
|
||||||||
|
Research and development |
N/M |
|
N/M |
|
367.8 |
% |
N/M |
|
||||
|
General and administrative |
N/M |
|
N/M |
|
245.2 |
% |
N/M |
|
||||
|
Selling and marketing |
141.9 |
% |
117.6 |
% |
17.4 |
% |
361.9 |
% |
||||
|
Total operating expenses |
N/M |
|
N/M |
|
N/M |
|
N/M |
|
||||
|
Loss from operations |
N/M |
|
N/M |
|
N/M |
|
N/M |
|
||||
|
Other (expense) income: |
|
|
|
|
||||||||
|
Interest income |
163.1 |
% |
324.2 |
% |
14.6 |
% |
421.5 |
% |
||||
|
Interest expense |
(196.9 |
)% |
(30.3 |
)% |
(50.1 |
)% |
(326.2 |
)% |
||||
|
Other expense |
(16.0 |
)% |
(21.3 |
)% |
(3.3 |
)% |
(37.1 |
)% |
||||
|
Change in fair value of warrant liabilities |
(21.6 |
)% |
(5.5 |
)% |
(77.3 |
)% |
(85.6 |
)% |
||||
|
Change in fair value of convertible promissory notes |
— |
% |
— |
% |
(52.9 |
)% |
— |
% |
||||
|
Loss on exchange of warrant liabilities |
— |
% |
— |
% |
(56.3 |
)% |
— |
% |
||||
|
Loss on issuance of financial instruments |
— |
% |
— |
% |
(9.9 |
)% |
— |
% |
||||
|
Loss on extinguishment of long-term debt |
— |
% |
— |
% |
(36.6 |
)% |
— |
% |
||||
|
Change in fair value of long-term debt |
— |
% |
— |
% |
(11.4 |
)% |
— |
% |
||||
|
Total other (expense) income |
(71.4 |
)% |
267.1 |
% |
(283.1 |
)% |
(27.2 |
)% |
||||
|
Loss before provision for income taxes |
N/M |
|
N/M |
|
N/M |
|
N/M |
|
||||
|
Provision for income taxes |
28.6 |
% |
70.4 |
% |
0.1 |
% |
3.5 |
% |
||||
|
Net loss |
N/M |
|
N/M |
|
N/M |
|
N/M |
|
||||
____________
N/M — Not Meaningful
Comparison of the Nine Months Ended September 30, 2025 and 2024
Revenue
|
Nine Months Ended |
||||||||||||
|
($ in thousands) |
2025 |
2024 |
Change |
% Change |
||||||||
|
U.S. government agencies |
$ |
5,776 |
$ |
318 |
$ |
5,458 |
1,716.4 |
% |
||||
|
Commercial and non-U.S. government customers |
|
123 |
|
49 |
|
74 |
151.0 |
% |
||||
|
Total |
$ |
5,899 |
$ |
367 |
$ |
5,532 |
1,507.4 |
% |
||||
Revenue for the nine months ended September 30, 2025, increased by $5,532 thousand, or 1,507.4%, to $5,899 thousand compared to $367 thousand for the nine months ended September 30, 2024. This increase was primarily due to the ramp-up of our USSOCOM Contract, which commenced in Fiscal Year 2024. We expect it to be a key driver of revenue growth in future periods.
Cost of Revenue
|
Nine Months Ended |
||||||||||||
|
($ in thousands) |
2025 |
2024 |
Change |
% Change |
||||||||
|
Cost of revenue |
$ |
7,725 |
$ |
6,690 |
$ |
1,035 |
15.5 |
% |
||||
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Cost of revenue for the nine months ended September 30, 2025, increased by $1,035 thousand, or 15.5%, to 7,725 compared to $6,690 thousand for the nine months ended September 30, 2024. This increase was primarily the result of contractor costs incurred, as well as other direct charges to cost of revenue associated with the USSOCOM Contract initiated in Fiscal Year 2024.
Operating Expenses
Research and Development
|
($ in thousands) |
Nine Months Ended |
|||||||||||
|
2025 |
2024 |
Change |
% Change |
|||||||||
|
Research and development |
$ |
21,699 |
$ |
20,904 |
$ |
795 |
3.8 |
% |
||||
Research and development expenses for the nine months ended September 30, 2025, increased by $795 thousand, or 3.8% to $21,699 thousand compared to $20,904 thousand in the nine months ended September 30, 2024, due to increasing personnel related expenses from hiring of new and highly-skilled engineering talent as well as outsourcing of subject matter experts identified specifically to solve unique engineering challenges. We expect our personnel related research and development expenses to increase as we continue to expand our operations.
General and Administrative
|
($ in thousands) |
Nine Months Ended |
|||||||||||
|
2025 |
2024 |
Change |
% Change |
|||||||||
|
General and administrative |
$ |
14,467 |
$ |
13,158 |
$ |
1,309 |
9.9 |
% |
||||
General and administrative expenses for the nine months ended September 30, 2025, increased by $1,309 thousand, or 9.9% to $14,467 thousand compared to $13,158 thousand in the nine months ended September 30, 2024. This was primarily due to an increase in legal and accounting and other consulting expenses in preparation for a potential transaction that was not capitalized. We expect our general and administrative expenses to increase in absolute dollars due to the additional legal, accounting, and compliance costs as we grow our business and continue to operate as a public company.
Selling and Marketing
|
($ in thousands) |
Nine Months Ended |
||||||||||||
|
2025 |
2024 |
Change |
% Change |
||||||||||
|
Selling and marketing |
$ |
1,029 |
$ |
1,328 |
$ |
(299 |
) |
(22.5 |
)% |
||||
Selling and marketing expenses for the nine months ended September 30, 2025, decreased by $299 thousand, or 22.5%, to $1,029 thousand compared to $1,328 thousand in the nine months ended September 30, 2024. This was primarily due to a decrease in personnel and digital marketing related expenses of approximately $250 thousand.
Interest Income
|
($ in thousands) |
Nine Months Ended |
||||||||||||
|
2025 |
2024 |
Change |
% Change |
||||||||||
|
Interest income |
$ |
862 |
$ |
1,547 |
$ |
(685 |
) |
(44.3 |
)% |
||||
Interest income for the nine months ended September 30, 2025, decreased by $685 thousand, or 44.3%, to $862 thousand compared to $1,547 thousand in the nine months ended September 30, 2024, due to decreased investment balances held in bank accounts as the cash was used to fund operating expenses.
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Interest Expense
|
($ in thousands) |
Nine Months Ended |
||||||||||||||
|
2025 |
2024 |
Change |
% Change |
||||||||||||
|
Interest expense |
$ |
(2,956 |
) |
$ |
(1,197 |
) |
$ |
(1,759 |
) |
147.0 |
% |
||||
Interest expense for the nine months ended September 30, 2025, increased by $1,759 thousand, or 147.0%, to $2,956 thousand compared to $1,197 thousand in the nine months ended September 30, 2024, related to our various loans being outstanding for the nine months ended September 30, 2025, compared to in the nine months ended September 30, 2024.
Other Expense
|
($ in thousands) |
Nine Months Ended |
||||||||||||||
|
2025 |
2024 |
Change |
% Change |
||||||||||||
|
Other expense |
$ |
(193 |
) |
$ |
(136 |
) |
$ |
(57 |
) |
41.9 |
% |
||||
Other expense for the nine months ended September 30, 2025, increased by $57 thousand, or 41.9%, to a $193 thousand compared to $136 thousand in the nine months ended September 30, 2024, driven by changes in foreign currency translation between the New Zealand Dollar and US Dollar of approximately $60 thousand.
Change In Fair Value of Warrant Liabilities
|
($ in thousands) |
Nine Months Ended |
||||||||||||||
|
2025 |
2024 |
Change |
% Change |
||||||||||||
|
Change in fair value of warrant liabilities |
$ |
(4,562 |
) |
$ |
(314 |
) |
$ |
(4,248 |
) |
1,352.9 |
% |
||||
Change in fair value of warrant liabilities for the nine months ended September 30, 2025, resulted in an increased loss of $4,248 thousand, or 1,352.9%, to $4,562 thousand compared to $314 thousand in the nine months ended September 30, 2024, due to the increase in the value of the Company’s stock and the issuance of liability classified warrants related to the Pre-PIPE Bridge and the Pre-Funded PIPE.
Change In Fair Value of Convertible Promissory Notes
|
($ in thousands) |
Nine Months Ended |
|||||||||||||
|
2025 |
2024 |
Change |
% Change |
|||||||||||
|
Change in fair value of convertible promissory notes |
$ |
(3,118 |
) |
$ |
— |
$ |
(3,118 |
) |
— |
% |
||||
Change in fair value of convertible promissory notes for the nine months ended September 30, 2025, resulted in a loss of $3,118 thousand compared to no loss in the nine months ended September 30, 2024, due to the issuance of convertible promissory notes in the third quarter of 2025.
Loss On Exchange of Warrant Liabilities
|
($ in thousands) |
Nine Months Ended |
|||||||||||||
|
2025 |
2024 |
Change |
% Change |
|||||||||||
|
Loss on exchange of warrant liabilities |
$ |
(3,320 |
) |
$ |
— |
$ |
(3,320 |
) |
— |
% |
||||
Loss on exchange of warrant liabilities for the nine months ended September 30, 2025, increased by $3,320 thousand, compared to no loss in the nine months ended September 30, 2024, due to the exchange of 2024 LSA Warrants for Pre-PIPE Bridge Notes in August 2025.
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Loss On Issuance of Financial Instruments
|
Nine Months Ended |
||||||||||||||
|
($ in thousands) |
2025 |
2024 |
Change |
% Change |
||||||||||
|
Loss on issuance of financial instruments |
$ |
(585 |
) |
$ |
— |
$ |
(585 |
) |
— |
% |
||||
Loss on issuance of financial instruments for the nine months ended September 30, 2025, increased to $585 thousand compared to no loss in the nine months ended September 30, 2024, due to the contingent issuance of warrants related to a purchaser right with respect to the Pre-PIPE bridge Agreement.
Loss On Extinguishment of Long-term Debt
|
Nine Months Ended |
||||||||||||||
|
($ in thousands) |
2025 |
2024 |
Change |
% Change |
||||||||||
|
Loss on extinguishment of long-term debt |
$ |
(2,157 |
) |
$ |
— |
$ |
(2,157 |
) |
— |
% |
||||
Loss on extinguishment of long-term debt for the nine months ended September 30, 2025, increased to $2,157 thousand compared to no loss in the nine months ended September 30, 2024, related to our term loans (2024 LSA).
Change In Fair Value of Long-term Debt
|
Nine Months Ended |
||||||||||||||
|
($ in thousands) |
2025 |
2024 |
Change |
% Change |
||||||||||
|
Change in fair value of long-term debt |
$ |
(672 |
) |
$ |
— |
$ |
(672 |
) |
— |
% |
||||
Loss on change in fair value of long-term debt for the nine months ended September 30, 2025, increased to $672 thousand compared to no loss in the nine months ended September 30, 2024, due to the election of the fair value option for the amended 2024 LSA.
Provision For Income Taxes
|
($ in thousands) |
Nine Months Ended |
||||||||||||
|
2025 |
2024 |
Change |
% Change |
||||||||||
|
Provision for income taxes |
$ |
3 |
$ |
13 |
$ |
(10 |
) |
(76.9 |
)% |
||||
Provision for income tax expense for the nine months ended September 30, 2025, decreased by $10 thousand, or 76.9%, to $13 thousand compared to $3 thousand in the nine months ended September 30, 2024.
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Comparison of the Years Ended December 31, 2024 and 2023
Revenue
|
Year Ended December 31, |
2024 vs. 2023 |
|||||||||||
|
($ in thousands) |
2024 |
2023 |
Change |
% Change |
||||||||
|
U.S. government agencies |
$ |
1,145 |
$ |
969 |
$ |
176 |
18.2 |
% |
||||
|
Commercial and non-U.S. government customers |
|
84 |
|
34 |
|
50 |
147.1 |
% |
||||
|
Total |
$ |
1,229 |
$ |
1,003 |
$ |
226 |
22.5 |
% |
||||
Revenue for Fiscal Year 2024 increased by $226 thousand, or 22.5%, to $1,229 thousand compared to $1,003 thousand for Fiscal Year 2023. This increase was primarily due to the commencement of our USSOCOM Contract in Fiscal Year 2024.
Cost of Revenue
|
($ in thousands) |
Year Ended December 31, |
|||||||||||
|
2024 |
2023 |
Change |
% Change |
|||||||||
|
Cost of revenue |
$ |
8,500 |
$ |
735 |
$ |
7,765 |
1,056.5 |
% |
||||
Cost of revenue for Fiscal Year 2024 increased by $7,765 thousand, or 1056.5%, to $8,500 thousand compared to $735 thousand for Fiscal Year 2023. This increase was primarily the result of the establishment of a $6.4 million loss contract reserve, $1.6 million of contractor costs incurred, as well as other direct charges to cost of revenue associated with the USSOCOM Contract initiated in Fiscal Year 2024.
Operating Expenses
Research and Development
|
($ in thousands) |
Year Ended December 31, |
|||||||||||
|
2024 |
2023 |
Change |
% Change |
|||||||||
|
Research and development |
$ |
27,146 |
$ |
24,669 |
$ |
2,477 |
10.0 |
% |
||||
Research and development expenses for Fiscal Year 2024 increased by $2,477 thousand, or 10.0%, to $27,146 thousand compared to $24,669 thousand in Fiscal Year 2023 due to increasing personnel related expenses from hiring of new and highly-skilled engineering talent as well as outsourcing of subject matter experts identified specifically to solve unique engineering challenges. We expect our personnel related research and development expenses to increase as we continue to expand our operations.
General and Administrative
|
($ in thousands) |
Year Ended December 31, |
|||||||||||
|
2024 |
2023 |
Change |
% Change |
|||||||||
|
General and administrative |
$ |
17,864 |
$ |
12,855 |
$ |
5,009 |
39.0 |
% |
||||
General and administrative expenses for Fiscal Year 2024 increased by $5,009 thousand, or 39.0%, to $17,864 thousand compared to $12,855 thousand in Fiscal Year 2023. This was primarily due to an increase in personnel related expenses of $3,840 thousand, an increase in consulting expenses of $482 thousand, and an increase in audit and legal services fees of $400 thousand in preparation for a potential transaction and an increase of $231 thousand related to insurance. We expect our general and administrative expenses to increase in absolute dollars due to the additional legal, accounting, and compliance costs as we grow our business and continue to operate as a public company.
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Selling and Marketing
|
($ in thousands) |
Year Ended December 31, |
|||||||||||
|
2024 |
2023 |
Change |
% Change |
|||||||||
|
Selling and marketing |
$ |
1,744 |
$ |
1,180 |
$ |
564 |
47.8 |
% |
||||
Selling and marketing expenses for Fiscal Year 2024 increased by $564 thousand, or 47.8%, to $1,744 thousand compared to $1,180 thousand in Fiscal Year 2023. This was primarily due to an increase in trade shows and conference expenses of $272 thousand and an increase in personnel related expenses of $256 thousand as we increased our brand awareness and customer acquisition efforts.
Interest Income
|
($ in thousands) |
Year Ended December 31, |
||||||||||||
|
2024 |
2023 |
Change |
% Change |
||||||||||
|
Interest income |
$ |
2,005 |
$ |
3,252 |
$ |
(1,247 |
) |
(38.3 |
)% |
||||
Interest income for Fiscal Year 2024 decreased by $1,247 thousand, or 38.3%, to $2,005 thousand compared to $3,252 thousand in Fiscal Year 2023 due to decreased investment balances held in bank accounts as the cash was used to fund operating expenses.
Interest Expense
|
($ in thousands) |
Year Ended December 31, |
||||||||||||||
|
2024 |
2023 |
Change |
% Change |
||||||||||||
|
Interest expense |
$ |
(2,420 |
) |
$ |
(304 |
) |
$ |
(2,116 |
) |
696.1 |
% |
||||
Interest expense for Fiscal Year 2024 increased by $2,116 thousand, or 696.1%, to $2,420 thousand compared to $304 thousand in Fiscal Year 2023 associated with the contractually agreed-to increase in the interest rate for our term loans (2024 LSA) in 2024.
Other Expense
|
($ in thousands) |
Year Ended December 31, |
|||||||||||||
|
2024 |
2023 |
Change |
% Change |
|||||||||||
|
Other expense |
$ |
(197 |
) |
$ |
(214 |
) |
$ |
17 |
(7.9 |
)% |
||||
Other expense for Fiscal Year 2024 decreased by $17 thousand, or 7.9%, to a $197 thousand compared to $214 thousand in Fiscal Year 2023 driven by changes in foreign currency translation between the New Zealand Dollar and US Dollar of $62 thousand.
Change In Fair Value of Warrant Liabilities
|
($ in thousands) |
Year Ended December 31, |
||||||||||||||
|
2024 |
2023 |
Change |
% Change |
||||||||||||
|
Change in fair value of warrant liabilities |
$ |
(265 |
) |
$ |
(55 |
) |
$ |
(210 |
) |
381.8 |
% |
||||
Change in fair value of warrant liabilities for Fiscal Year 2024 resulted in an increased loss of $210 thousand, or 381.8%, to $265 thousand compared to $55 thousand in Fiscal Year 2023.
Provision For Income Taxes
|
($ in thousands) |
Year Ended December 31, |
||||||||||||
|
2024 |
2023 |
Change |
% Change |
||||||||||
|
Provision for income taxes |
$ |
351 |
$ |
706 |
$ |
(355 |
) |
(50.3 |
)% |
||||
Provision for income tax expense for Fiscal Year 2024 decreased by $355 thousand, or 50.3%, to $351 thousand compared to $706 thousand in Fiscal Year 2023. This decrease in income taxes for the Merlin Labs NZ Limited entity of $560 thousand, which was primarily caused by decreased foreign tax expenses.
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Table of Contents
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. GAAP, we believe that EBITDA and Adjusted EBITDA, non-GAAP financial measures, provides investors with additional useful information in evaluating our performance. We define EBITDA as net loss before interest expense or income, income tax expense or benefit, and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for stock-based compensation and other one-time, non-recurring items, as determined by management.
We believe that each of these non-GAAP financial measures provide additional metrics to evaluate our operations and, when considered with both our U.S. GAAP results and the reconciliation to the closest comparable U.S. GAAP measures, provide a more complete understanding of our business than could be obtained absent this disclosure. We use the non-GAAP financial measures, together with U.S. GAAP financial measures, such as net revenue, gross profit margins and cash flow from operations, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance, and to compare our performance to that of our peers and competitors.
The non-GAAP financial measures are presented here because we believe they are useful to investors in assessing the operating performance of our business without the effect of non-cash items, and other items as detailed below. The non-GAAP financial measures should not be considered in isolation or as alternatives to net income (loss), income (loss) from operations or any other measure of financial performance calculated and prescribed in accordance with U.S. GAAP. Our non-GAAP financial measures may not be comparable to similarly titled measures in other organizations because other organizations may not calculate non-GAAP financial measures in the same manner as we do.
The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, the most directly comparable financial measure presented in accordance with U.S. GAAP.
|
Year Ended December 31, |
Nine Months Ended September 30, |
|||||||||||||||
|
($ in thousands) |
2024 |
2023 |
2025 |
2024 |
||||||||||||
|
Net loss |
$ |
(55,253 |
) |
$ |
(36,463 |
) |
$ |
(55,725 |
) |
$ |
(41,826 |
) |
||||
|
Depreciation |
|
1,466 |
|
|
1,140 |
|
|
1,145 |
|
|
1,085 |
|
||||
|
Amortization of right-of-use assets |
|
575 |
|
|
657 |
|
|
549 |
|
|
384 |
|
||||
|
Interest income |
|
(2,005 |
) |
|
(3,252 |
) |
|
(862 |
) |
|
(1,547 |
) |
||||
|
Interest expense |
|
2,420 |
|
|
304 |
|
|
2,956 |
|
|
1,197 |
|
||||
|
Provision for income taxes |
|
351 |
|
|
706 |
|
|
3 |
|
|
13 |
|
||||
|
EBITDA |
|
(52,446 |
) |
|
(36,908 |
) |
|
(51,934 |
) |
|
(40,694 |
) |
||||
|
Stock-based compensation |
|
1,739 |
|
|
1,806 |
|
|
1,472 |
|
|
1,281 |
|
||||
|
Change in fair value of warrant liabilities |
|
265 |
|
|
55 |
|
|
4,562 |
|
|
314 |
|
||||
|
Transaction costs(a) |
|
— |
|
|
— |
|
|
1,927 |
|
|
— |
|
||||
|
Adjusted EBITDA |
$ |
(50,442 |
) |
$ |
(35,047 |
) |
$ |
(43,973 |
) |
$ |
(39,099 |
) |
||||
____________
(a) Transaction costs include certain legal, accounting and consulting costs incurred for public company readiness not eligible for capitalization.
Liquidity and Capital Resources
We have incurred operating losses and negative cash flows, primarily from the production of our proprietary Merlin Pilot technology. Certain contracts have become loss-making due to variable consideration constraints and contract costs exceeding the contract price. Concurrently, our general and administrative expenses have risen due to business growth, increased headcount, expanded corporate functions, higher proposal activity, and increased fees for professional services. These conditions raise substantial doubt about our ability to continue as a going concern.
Our ability to fund our operations and meet our obligations depends on achieving anticipated revenue and cash flow levels, managing costs, and successfully managing working capital. Our ability to generate cash is also subject to economic, financial, competitive, legislative, regulatory, and other factors beyond our control. We cannot guarantee that our business will generate sufficient cash flow to meet our liquidity needs.
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Table of Contents
To meet these capital requirements, we expect to rely on our current borrowing capacity and access to debt and equity markets. However, our ability to obtain additional funding is subject to market conditions, our operating performance, market perception of our growth, and compliance with financial covenants under our existing debt agreements. Our capital needs may also vary materially from current plans if, for example, revenues do not meet expectations, or we incur unforeseen expenditures.
Should our current and future liquidity sources prove insufficient, we may need to seek additional equity or debt financing, which could involve shareholder dilution or restrictive operational covenants. There can be no assurance that we will be able to raise additional capital. An inability to do so would adversely affect our ability to achieve our business objectives.
The following table summarizes our cash flows for the periods indicated:
|
($ in thousands) |
Year Ended December 31, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2025 |
2024 |
|||||||||||||
|
Net cash (used in) provided by: |
|
|
|
|
|
|
|
|
||||||||
|
Operating activities |
$ |
(45,537 |
) |
$ |
(31,696 |
) |
$ |
(43,013 |
) |
$ |
(32,515 |
) |
||||
|
Investing activities |
|
(1,693 |
) |
|
(4,868 |
) |
|
(236 |
) |
|
(1,475 |
) |
||||
|
Financing activities |
|
33,940 |
|
|
(2,506 |
) |
|
72,811 |
|
|
24,360 |
|
||||
|
Net (decrease) increase in cash and cash equivalents |
$ |
(13,290 |
) |
$ |
(39,070 |
) |
$ |
29,562 |
|
$ |
(9,630 |
) |
||||
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2025, was $43,013 thousand, an increase of $10,498 thousand from net cash used in operating activities of $32,515 thousand for the nine months ended September 30, 2024. The change in cash flow used in operations was primarily due to an increase in net loss of $13,899 thousand, an increase in non-cash interest expense of $496 thousand related to additional issuance of our convertible notes, an increased loss on change in fair value of warrant liabilities of $4,248 thousand, a loss on issuance of warrant liabilities of $585 thousand, a loss on extinguishment of long-term debt of $2,157 thousand, and a loss on exchange of warrant liabilities of $3,320 thousand.
Net cash used in operating activities for the year ended December 31, 2024, was $45,537 thousand, an increase of $13,841 thousand from net cash used in operating activities of $31,696 thousand for the year ended December 31, 2023. The change in cash flow used in operations was primarily due to an increase in net loss of $18,790 thousand and an increase in non-cash interest expense of $104 thousand related to additional issuance of our convertible notes offset by change in operating lease right-of-use assets which decreased $82 thousand primarily related to the termination of a lease which resulted in a $650 thousand reduction of ROU asset.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2025, was $236 thousand, a decrease of $1,239 thousand from net cash used in investing activities of $1,475 thousand for the nine months ended September 30, 2024. The change in cash used in investing activities was primarily related to a decrease in acquired property and equipment of $1,284 thousand.
Net cash used in investing activities for the year ended December 31, 2024, was $1,693 thousand, a decrease of $3,175 thousand from net cash used in investing activities of $4,868 thousand for the year ended December 31, 2023. The change in cash used in investing activities was primarily related to a decrease in acquired property and equipment of $2,940 thousand.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2025, was $72,811 thousand, a change of $24,360 from net cash used in financing activities of $48,451 thousand for the nine months ended September 30, 2024. The change in cash flows was primarily related to issuance of warrants of $60,247 thousand, partially offset by a reduction in long-term debt of $24,555 thousand.
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Table of Contents
Net cash provided by financing activities for the year ended December 31, 2024, was $33,940 thousand, a change of $36,446 thousand from net cash used in financing activities of $2,506 thousand for the year ended December 31, 2023. The change in cash flows was primarily related to additional issuance of our convertible notes, net of issuance costs in Fiscal Year 2024 of $34,378 thousand.
Contractual Obligations and Commitments
As of September 30, 2025, our debt obligations are comprised of our 7.47% Convertible Loan due in 2032 (the “PFG Loan”) with a principal amount outstanding of $669 thousand and our Loan (LSA 2024) with principal amount outstanding of $31,528 thousand. As of September 30, 2025, we paid off the principal amount outstanding of our Term Loan (LSA 2021).
As of December 31, 2024, our debt obligations are comprised of our PFG Loan. As of December 31, 2024, we have $500 thousand principal amount outstanding under our Term Loan (LSA 2021) that matures in July 2025, $35,000 thousand principal amount outstanding under our Term Loan (LSA 2024) that matures on January 31, 2027, and $660 thousand aggregate principal amount outstanding of our Convertible Loan mature in July 2032. In Fiscal Year 2024, we repaid $1,143 thousand principal amount of our Term Loan.
As of September 30, 2025, and December 31, 2024, our non-cancelable operating lease commitments are $1,138 thousand and $1,348 thousand, respectively, of which $702 thousand and $709 thousand, respectively are due in less than one year. Our operating leases relate to our office space and airport hangar space.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts in the consolidated financial statements and related footnote disclosures. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We re-evaluate our estimates on an on-going basis.
The accounting estimates we use in the preparation of our consolidated financial statements will change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in our reported results of operations and, if material, the effects of changes in estimates are disclosed in the notes to our financial statements. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.
Revenue Recognition
We recognize revenue from our contracts in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”). The majority of our revenue is generated from cost-plus-fixed-fee, fixed-price, and cost-share arrangements for designing and integrating autonomous flight technologies.
Revenue is recognized over time based on the extent of progress towards completion. This process requires significant judgment around the following:
Measuring Progress: We use a cost-incurred input method to measure progress. This method relies on our ability to reliably estimate the total costs required to complete our long-term contracts.
These estimates are critical in determining the amount and timing of revenue recognized and are monitored and updated as our projects progress.
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Table of Contents
Warrants
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and, if not whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment, which requires the use of professional judgment, and the assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance and are measured to fair value at each balance sheet date thereafter.
Valuations of instruments convertible to our Common Stock and Preferred Stock
Our preferred stock are classified as temporary equity, as they include liquidation provisions that are outside our control.
The fair value of our common stock was determined by our board of directors, after considering contemporaneous third-party valuations and input from management. In the absence of a public trading market, our board of directors, with input from management, exercised significant judgment and considered various objective and subjective factors to determine the fair value of our equity including the following factors:
• Probability of an IPO scenario (including de SPAC transaction);
• Probability of other liquidation events;
• Expected time to liquidation; and
• Expected return on equity.
The resulting equity value was then allocated to each share class based on differences in liquidation preferences of the various share classes using an Option Pricing Model (“OPM”) through the use of a series of call options and a Monte Carlo simulation. The OPM is appropriate to use when the range of possible future outcomes is difficult to predict. For the IPO scenario (including de SPAC transaction) we utilized a probability-weighted expected return method (“PWERM”) to allocate value among the various share classes. The PWERM involves the estimation of the value of our company under multiple future potential outcomes and estimates the probability of each potential outcome. After the value of each applicable class of shares was determined, a discount for lack of marketability (“DLOM”) was applied to arrive at the fair value of the ordinary shares on a non-marketable basis. A DLOM is applied in order to reflect the lack of a recognized market for a closely held interest and the fact that a non-controlling equity interest may not be readily transferable. A market participant purchasing this share would recognize this illiquidity associated with the shares, which would reduce the overall fair market value.
The fair value of the warrants for the purchase of preferred stock was calculated using the OPM as part of the allocation of the equity value to the various share classes (as described above). The critical accounting estimates for the valuation of those warrants include (a) the fair value of the underlying preferred stock, as mentioned above (b) expected financing amount, (c) expected financing date, (d) expected liquidity event, (e) risk-free rate and (f) volatility — based on peer companies’ volatility.
The fair value of convertible notes was calculated using PWERM, which considers both a Non-SPAC and a SPAC scenario and probabilities. The fair value of the notes was estimated using Discounted Cash Flow (“DCF”).
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Table of Contents
Stock-based Compensation
We recognize stock-based compensation expense by estimating the fair value of stock options on the grant date using the Black-Scholes option-pricing model. The grant-date fair value is recognized on a straight-line basis over the service period.
This model requires subjective assumptions, which involve significant judgment. Our key assumptions are:
• Fair Value of Common Stock: As our stock is not publicly traded, the fair value is determined by our board of directors, considering factors such as contemporaneous third-party valuations, company performance, and industry outlook.
• Expected Volatility: Derived from the historical volatility of comparable public companies, as our shares have no trading history.
• Expected Term: Calculated using the simplified method.
• Risk-Free Interest Rate: Based on the U.S. Treasury yield curve.
• Expected Dividend: Assumed to be zero, as we have no plans to pay dividends.
Because these assumptions are subjective, particularly the fair value of our common stock, our stock-based compensation expense could be materially different if we used different assumptions.
Emerging Growth Status Company
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 an election to opt out is irrevocable. Merlin 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, Merlin, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time Merlin is no longer considered to be an emerging growth company. At times, Merlin may elect to early adopt a new or revised standard.
In addition, Merlin intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, Merlin intends to rely on such exemptions, Merlin. is not required to, among other things: (a) provide an auditor’s attestation report on Merlin system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
Merlin will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of Merlin first fiscal year following the fifth anniversary of the offering, (b) the last date of Merlin’s fiscal year in which Merlin has total annual gross revenue of at least $1.235 billion, (c) the date on which Merlin is deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which Merlin has issued more than $1.0 billion in non-convertible debt securities during the previous three years.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies of the notes to our consolidated financial statements in the section titled “Recently Issued Accounting Pronouncements” included elsewhere in this prospectus — for a discussion about new accounting pronouncements adopted and not yet adopted as of the date of this report.
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EXECUTIVE AND DIRECTOR COMPENSATION OF MERLIN LABS
In this section, “we,” “us” and “our” generally refer to Merlin in the present tense or New Merlin from and after the Business Combination.
This section discusses the material components of the executive compensation program for our executive officers who are named in the “2025 Summary Compensation Table” below. In 2025, our “named executive officers” and their positions were as follows:
• Matt George, Founder and Chief Executive Officer;
• [•]; and
• [•].
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the Business Combination may differ materially from the currently planned programs summarized in this discussion.
2025 Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers for the year ended December 31, 2025.
|
Name and Principal Position |
Year |
Salary |
Bonus |
Option |
All Other |
Total |
||||||
|
Matthew George |
2025 |
[•] |
[•] |
[•] |
[•] |
[•] |
||||||
|
Founder and Chief Executive Officer |
||||||||||||
|
[•] |
2025 |
[•] |
[•] |
[•] |
[•] |
[•] |
||||||
|
[•] |
||||||||||||
|
[•] |
2025 |
[•] |
[•] |
[•] |
[•] |
[•] |
||||||
|
[•] |
Narrative to Summary Compensation Table
2025 Base Salaries
The named executive officers receive a base salary to compensate them for services rendered to Merlin. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.
The 2025 annual base salaries for our named executive officers were $[•] for Mr. George, $[•] for [•], and $[•] for[•]. The “Salary” column of the 2025 Summary Compensation Table above shows the actual base salaries earned by each named executive officer in 2025.
Equity Compensation
2018 Equity Incentive Plan
We currently maintain the Merlin Labs, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) in order to provide our service providers the opportunity to acquire a proprietary interest in our success. Historically we offered awards of stock options to purchase shares of our common stock to eligible service providers, including certain of our named executive officers, pursuant to the 2018 Plan. Options typically vest and become exercisable over a four-year period, subject to the grantee’s continued employment through the applicable vesting date, as follows: (i) 25% of the shares underlying the option vest on the first annual anniversary of the vesting commencement date and (ii) 75% of the shares underlying the option vest in 36 substantially equal installments on each monthly anniversary of the vesting
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commencement date thereafter. For additional information about the 2018 Plan, please see the section titled “— 2018 Equity Incentive Plan” below. As mentioned below, in connection with the completion of the Business Combination and the adoption of the New Merlin Incentive Plan, no further awards will be granted under the 2018 Plan.
2026 Incentive Award Plan
In connection with the Business Combination, Inflection Point’s board of directors intends to adopt, and its shareholders will be asked to approve, the 2026 Incentive Award Plan, referred to in this proxy statement/prospectus as the New Merlin Incentive Plan, in order to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of Merlin and certain of our affiliates and to enable us to obtain and retain services of these individuals, which is essential to our long-term success. The New Merlin Plan will become effective on the date on which it is approved by Inflection Point’s shareholders. For additional information about the New Merlin Plan, please see “The New Merlin Incentive Plan Proposal” in this proxy statement/prospectus.
Other Elements of Compensation
Retirement Plans
We currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. Currently, we match contributions made by participants in the 401(k) plan up to 1% of each employee’s eligible compensation, and these matching contributions are fully vested as of the date on which the contribution is made. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan, and making matching contributions, adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.
Health and Welfare Benefits
In 2025, the named executive officers also participated in standard health and welfare plans maintained by Merlin including medical, dental and vision benefits; short-term and long-term disability insurance; life insurance; and an employee assistance plan.
No Tax Gross-Ups
We do not make gross-up payments to cover our named executive officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by Merlin.
Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the number of shares of Merlin Common Stock underlying outstanding Merlin Options held by each named executive officer as of December 31, 2025.
|
Option Awards |
||||||||||
|
Name |
Grant |
Number of |
Number of |
Option |
Option |
|||||
|
Matthew George |
[•] |
[•] |
[•] |
[•] |
[•] |
|||||
|
[•] |
[•] |
[•] |
[•] |
[•] |
[•] |
|||||
|
[•] |
[•] |
[•] |
[•] |
[•] |
[•] |
|||||
____________
(1) Each option vests and becomes exercisable [•].
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For a description of the treatment of outstanding Merlin Options in connection with the Business Combination, please see the section entitled, “Interests of Directors and Executive Officers in the Business Combination,” below.
Executive Compensation Arrangements
Certain of our named executive officers are party to offer letters with Merlin that provide for at-will employment that will continue until terminated at any time by either party. Pursuant to their offer letters, such executive officers are eligible to participate in the benefit plan and programs maintained by us for the benefit of our employees. None of the offer letters provide for severance payments on termination of employment.
Certain of our named executive officers also entered into Merlin’s standard form of non-disclosure and non-solicitation agreement.
Non-Employee Director Compensation
We provide a $[•] cash retainer, paid [•], to certain directors for their service on our board.
In addition, we also from time to time provide equity compensation to certain directors for their service on our board.
|
Name |
Fees earned or |
Option |
Total |
|||
|
David Greenbaum |
[•] |
[•] |
[•] |
|||
|
Doug Philippone |
[•] |
[•] |
[•] |
As of December 31, 2025, [•] Merlin Options held by [•] were unvested.
In connection with the Business Combination, we intend to approve and implement a compensation program for our non-employee directors that consists of annual cash retainer fees and long-term equity awards. The details of this program have not yet been determined, but compensation under the program will be subject to the annual limits on non-employee director compensation set forth in the New Merlin Incentive Plan.
Equity Incentive Plans
2018 Equity Incentive Plan
We maintain the 2018 Plan, which was most recently amended on July 1, 2020. The material terms of the 2018 Plan are summarized below.
Termination
Following the effectiveness of the New Merlin Incentive Plan, the 2018 Plan will terminate and we will not make any further awards under the 2018 Plan. However, any outstanding awards granted under the 2018 Plan will remain outstanding, subject to the terms of the 2018 Plan and applicable award agreements. [Shares of our common stock subject to awards granted under the 2018 Plan that expire unexercised or are cancelled, terminated, or forfeited in any manner without issuance of shares thereunder following the effective date of the New Merlin Incentive Plan will not become available for issuance under the New Merlin Incentive Plan.]
Eligibility and Administration
Our employees, consultants, and non-employee directors are eligible to be granted awards of ISOs, NSOs, restricted stock, restricted stock units, and other stock-based awards under the 2018 Plan, subject to the limitations described therein. Subject to the provisions of the 2018 Plan, the plan administrator shall have the authority to take all actions and make all determinations contemplated by the 2018 Plan and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the 2018 Plan as it shall deem advisable.
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Limitations on Awards and Shares Available
An aggregate of 2,976,579 shares of our common stock have been authorized for issuance under the 2018 Plan. The shares of our common stock issued under the 2018 Plan may consist in whole or in part of authorized but unissued shares, shares purchased on the open market or treasury shares. In the event that an outstanding award expires or is cancelled for any reason, or if shares subject to an award are withheld to satisfy exercise or purchase price or tax withholding obligations, then the shares allocable to the unexercised or otherwise canceled portion of such award, or the shares withheld to satisfy the exercise or purchase price or tax withholding obligation, are currently added back to the common stock available for issuance under the 2018 Plan.
Awards
The 2018 Plan provides for the grant of ISOs, NSOs, restricted stock, restricted stock units, and other stock-based awards. All outstanding awards under the 2018 Plan are set forth in award agreements, which detail the terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows:
• Stock Options. Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, in contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). Conditions applicable to stock options may be based on continuing service, the attainment of performance goals and/or such other conditions as the plan administrator may determine.
• Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of common stock that are subject to certain vesting conditions and other restrictions. RSUs are contractual promises to deliver shares of common stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of common stock prior to the delivery of the underlying shares (i.e., dividend equivalent rights). The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant.
• Other Stock-Based Awards. Other stock-based awards are awards of fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. Other stock-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled.
Certain Transactions
In the event of certain changes in our capitalization, the plan administrator may make equitable adjustments to the 2018 Plan and outstanding awards thereunder. In the event of such transaction (including without limitation any “change in control”), the plan administrator has the discretion to provide (i) for the cancellation of any such awards in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of the award or realization of the participant’s rights under the vested portion of such award, (ii) that such award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, (iii) that such awards be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, as determined by the administrator, (iv) to make adjustments to the number and type of shares of common stock subject to outstanding awards, and/or to the terms and conditions of, outstanding awards which may be granted in the future, (v) to replace such awards with other rights or property selected by the plan administrator, and/or (vi) to provide that the award will terminated and cannot vest, be exercised or become payable after the applicable event.
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Interests of Directors and Executive Officers in the Business Combination
Merlin’s directors and executive officers have interests in the Business Combination that are different from, or in addition to, those of Inflection Point’s stockholders generally. These interests include, among other things, the interests listed below:
Treatment of Equity Awards in Business Combination
As described further below, certain of Merlin’s directors and executive officers hold outstanding Merlin Options under the 2018 Plan. The Merger Agreement provides that each Merlin Option that is outstanding as of immediately prior to the Effective Time, whether vested or unvested, will be assumed by Inflection Point and converted into a comparable option to purchase shares of New Merlin Common Stock (each, a “Converted Option”), based upon the Exchange Ratio. Each Converted Option will otherwise be subject to the same terms and conditions as applied to the underlying Merlin Option immediately prior to the Effective Time. None of Merlin’s directors or executive officers hold outstanding Merlin RSUs.
Option Awards Under the 2018 Plan
The following table sets forth, for each of Merlin’s directors and executive officers, the number of shares of common stock subject to vested and unvested Merlin Options held by the director or executive officer as of [•], the latest practicable date to determine such amounts before the filing of this proxy statement/prospectus. Depending on when the Closing date occurs, certain Merlin Options shown in the table may vest prior to the Closing date.
|
Name |
Vested Merlin Options |
Unvested Merlin Options |
||
|
Executive Officers |
||||
|
Matthew George |
[•] |
[•] |
||
|
Tim Burns |
[•] |
[•] |
||
|
Non-Employee Directors |
||||
|
Doug Philippone |
[•] |
[•] |
||
|
David Greenbaum |
[•] |
[•] |
Post-Closing Director Compensation
As described above, in connection with the Business Combination, we intend to approve and implement a compensation program for our non-employee directors that consists of annual cash retainer fees and long-term equity awards. The details of this program have not yet been determined, but compensation under the program will be subject to the annual limits on non-employee director compensation set forth in the New Merlin Incentive Plan.
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MANAGEMENT OF THE COMPANY FOLLOWING THE BUSINESS COMBINATION
The Business Combination Agreement provides that the New Merlin Board will initially be comprised of seven directors, of whom the following have been identified:
Each director will hold office until his or her term expires at the next annual meeting of stockholders for such director’s class (if applicable) or until his or her death, resignation, removal or the earlier termination of his or her term of office.
The following sets forth certain information, as of the Record Date, concerning the persons who are expected to serve as directors, officers and significant employees following the completion of the Business Combination and assuming the election of the director nominees at the extraordinary general meeting as set forth in “Proposal No. 6 — The Director Election Proposal”.
|
Name |
Age |
Position |
||
|
Matt George |
35 |
Chief Executive Officer |
||
|
Ryan Carrithers |
41 |
Chief Financial Officer and Treasurer |
||
|
Leslie Ravenstein |
51 |
Chief Legal Officer and Secretary |
____________
(1) Member of the audit committee
(2) Member of the compensation committee
(3) Member of the nominating and corporate governance committee
The officers of New Merlin and the New Merlin Board following the Business Combination are well qualified as leaders. In their prior positions they have gained experience in core management skills, such as strategic and financial planning, financial reporting, compliance, risk management, and leadership development. Several of New Merlin’s officers and directors following the Business Combination also have experience serving on boards of directors and board committees of other public companies and private companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies. Further, certain officers and directors have other experience that makes them valuable, such as prior experience in mergers and acquisitions, in financial services, managing and investing in assets.
Inflection Point believes that the above-mentioned attributes, along with the leadership skills and other experiences of the officers and board members described below, will provide New Merlin with a diverse range of perspectives and judgment necessary to facilitate the goals of New Merlin and be good stewards of capital.
Officers, Directors and Key Employees
For more information about the compensation of the members of the Inflection Point Board and the officers of Inflection Point prior to the Closing, see the section entitled “Directors, Officers, Executive Compensation and Corporate Governance of Inflection Point prior to the Business Combination”. For more information about the anticipated members of the New Merlin Board and the officers of New Merlin following the Closing, see the section entitled “The Director Election Proposal — Information about Officers, Directors and Nominees”.
Matt George. At Closing, Mr. George will serve as Chief Executive Officer of New Merlin. Mr. George is the founder of Merlin, where he has served as Chief Executive Officer since November of 2018. Prior to founding Merlin in 2018, Mr. George founded and served as Chief Executive Officer of Bridj, a technology company and booking and fleet management platform. Mr. George served as CEO of Bridj from August 2013 and departed in December 2017 after the company was acquired. Prior to founding Bridj, Mr. George worked in the Executive Office of the President at the White House. Mr. George holds a Bachelor of Arts degree from Middlebury College.
Ryan Carrithers. At Closing, Mr. Carrithers will serve as Chief Financial Officer. Mr. Carrithers has served as the Chief Financial Officer of Merlin Labs, Inc. since October 14th, 2025. Mr. Carrithers has over 18 years of experience leading finance, treasury, investor relations, and operational functions across public and private companies, with significant experience supporting public-company transactions, capital markets activity, and large-scale restructuring initiatives. Prior to joining Merlin, Mr. Carrithers served as Vice President of Strategic Finance and Treasury at Ginkgo Bioworks, Inc. (NYSE: DNA), where he led company-wide financial planning, budgeting, restructuring initiatives, and capital allocation, including management of a substantial investment portfolio and the financial integration of Zymergen following its acquisition. Previously, he served as Vice President of Strategic Finance, Treasury, and Investor Relations
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at Astra Space, Inc. (NASDAQ: ASTR), where he helped lead the company’s business combination with Holicity Inc., resulting in Astra’s public listing and the raising of approximately $454 million in gross proceeds, including a PIPE investment, and oversaw investor relations and capital markets strategy. Earlier in his career, Mr. Carrithers held senior finance leadership roles at KUKA AG, including Chief Financial Officer for the Americas and Chief Financial Officer for South America, where he oversaw finance, accounting, tax, and operational functions across multi-billion-dollar revenue businesses. Mr. Carrithers began his career at Robert Bosch LLC and holds a Bachelor of Science degree in Management with a dual concentration on Accounting and Economics from Kettering University.
Leslie Ravenstein. At closing, Ms. Ravenstein will serve as Chief Legal Officer and Secretary. Ms. Ravestein has served as the Chief Legal Officer and Secretary of Merlin Labs, Inc. since November 12, 2025. Ms. Ravestein has a range of experience counseling boards and executives on corporate governance, compliance, securities, finance, and transactional matters across several industries. Before joining Merlin, Ms. Ravestein served as Associate General Counsel, Securities & Corporate Governance of Textron, Inc., a multi-industry company known for its global network of aircraft, defense, industrial, and finance businesses, from July 2023 through March 2025. Prior to her time with Textron, Ms. Ravestein served as Senior Vice President and Associate General Counsel of Factor Systems, Inc. (dba Billtrust) from August 2022 until March 2023 and Vice President and Associate General Counsel of Veoneer, Inc. from July 2018 until August 2022. Over the course of her career, Ms. Ravestein also held various positions at Semtech Corporation, Aerovironment, Inc., Stubbs Alderton & Markiles, LLP and Fulbright & Jaworski LLP (now Norton Rose Fulbright). Ms. Ravestein holds a juris doctor degree from Boston University School of Law and a bachelor’s degree from McGill University.
Corporate Governance
Composition of the New Merlin Board
Our business and affairs will be managed under the direction of the New Merlin Board. The New Merlin Board will be chaired by [•], and includes [•], [•] and [•], [•] of whom qualify as independent. Subject to the terms of the Business Combination Agreement, our charter and our bylaws, the number of directors will be fixed by the New Merlin Board.
When considering whether directors and director nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the New Merlin Board to satisfy its oversight responsibilities effectively in light of its business and structure, the New Merlin Board expects to focus primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above in order to provide an appropriate mix of experience and skills relevant to the size and nature of its business.
In connection with the Business Combination, Inflection Point was granted the right to designate two directors for election to the New Merlin Board, one of which must meet the applicable independence requirements under Nasdaq and SEC rules.
Director Independence
Under our Corporate Governance Guidelines and the Nasdaq rules, a director is not independent unless the Board of Directors affirmatively determines that s/he does not have a direct or indirect material relationship with New Merlin or any of its subsidiaries. In addition, the director must not be precluded from qualifying as independent under the per se bars set forth by the Nasdaq rules.
The New Merlin Board will undertake a review of its composition, the composition of its committees and the independence of its directors and consider whether any director has a material relationship with New Merlin that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, the New Merlin Board is expected to determine that [•], [•] and [•] of New Merlin’s directors, do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors qualifies as “independent” as that term is defined under the Nasdaq rules. In making these determinations, the New Merlin Board will consider the relationships that each non-employee director has with New Merlin and all other facts and circumstances the New Merlin Board deemed relevant in determining their independence, including the director’s beneficial ownership of New Merlin’s common stock.
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Committees of the New Merlin Board
The New Merlin Board will direct the management of its business and affairs, as provided by Delaware law, and conducts its business through meetings of the New Merlin Board and standing committees. The New Merlin Board will have a standing audit committee, compensation committee and nominating and corporate governance committee, each of which will operate under a written charter.
In addition, from time to time, special committees may be established under the direction of the New Merlin Board when the New Merlin Board deems it necessary or advisable to address specific issues. Copies of New Merlin’s committee charters will be posted on New Merlin’s website, www.[•], as required by applicable SEC and Nasdaq rules. The information contained on, or that may be accessed through, Inflection Point’s, Merlin’s and New Merlin’s website is not part of, and is not incorporated into, this proxy statement/prospectus or the registration statement of which it forms a part.
Audit Committee
New Merlin’s audit committee will be responsible for, among other things:
• overseeing New Merlin’s accounting and financial reporting process;
• appointing, compensating, retaining and overseeing the work of our independent registered public accounting firm and any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for us;
• discussing with our independent registered public accounting firm any audit problems or difficulties and management’s response;
• pre-approving all audit and non-audit services provided to us by our independent registered public accounting firm (other than those provided pursuant to appropriate preapproval policies established by the audit committee or exempt from such requirement under the rules of the SEC);
• reviewing and discussing our annual and quarterly financial statements with management and our independent registered public accounting firm;
• discussing our risk management policies;
• reviewing and approving or ratifying any related person transactions;
• establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and for the confidential and anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and
• preparing the audit committee report required by SEC rules.
Our audit committee is expected to consist of [•], with [•] serving as chair. All members of our audit committee will meet the requirements for financial literacy under the applicable Nasdaq rules and regulations. The New Merlin Board expects to affirmatively determine that each member of the audit committee qualifies as “independent” under Nasdaq’s additional standards applicable to audit committee members and Rule 10A-3 of the Exchange Act applicable to audit committee members. In addition, the New Merlin Board expects to determine that [•] qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
Compensation Committee
Our compensation committee will be responsible for, among other things:
• reviewing and approving corporate goals and objectives with respect to the compensation of our Chief Executive Officer, evaluating our Chief Executive Officer’s performance in light of these goals and objectives and setting our Chief Executive Officer’s compensation;
• reviewing and setting or making recommendations to the New Merlin Board regarding the compensation of our other executive officers;
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• reviewing and making recommendations to the New Merlin Board regarding director compensation;
• reviewing and approving or making recommendations to the New Merlin Board regarding our incentive compensation and equity-based plans and arrangements;
• appointing and overseeing any compensation consultants;
• reviewing and discussing annually with management our “Compensation Discussion and Analysis,” to the extent required; and
• preparing the annual compensation committee report required by SEC rules, to the extent required.
Our compensation committee is expected to consist of [•], with [•] serving as chair. The New Merlin Board expects to determine that [•] qualifies as “independent” under Nasdaq’s additional standards applicable to compensation committee members and each member of the compensation committee is a “non-employee director” as defined in Section 16b-3 of the Exchange Act.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee will be responsible for, among other things:
• identifying individuals qualified to become members of the New Merlin Board and ensure the New Merlin Board has the requisite expertise and consists of persons with sufficiently diverse and independent backgrounds;
• recommending to the New Merlin Board the persons to be nominated for election as directors and to each committee of the New Merlin Board;
• developing and recommending to the New Merlin Board corporate governance guidelines, and reviewing and recommending to the New Merlin Board proposed changes to our corporate governance guidelines from time to time; and
• overseeing the annual evaluations of the New Merlin Board, its committees and management.
Our nominating and corporate governance committee is expected to consist of [•], with [•] serving as chair.
The New Merlin Board may from time to time establish other committees.
Code of Ethics
In connection with the Closing, New Merlin will adopt a code of ethics that applies to all of our executive officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The code of ethics is available on our website, www.[•].
We intend to make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our website rather than by filing a Current Report on Form 8-K.
Compensation Committee Interlocks and Insider Participation
No anticipated member of the compensation committee was at any time during the fiscal year 2024, or at any other time, one of our officers or employees. None of our executive officers has served as a director or member of a compensation committee (or other committee serving an equivalent function) of any entity, one of whose executive officers served as a director of our board of directors or member of our compensation committee. We are not aware of any compensation committee interlocks.
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SECURITIES ACT RESTRICTIONS ON RESALE OF THE COMPANY’S SECURITIES
Pursuant to Rule 144 under the Securities Act (“Rule 144”), a person who has beneficially owned restricted New Merlin Common Stock for at least six months would be entitled to sell their securities, provided that (a) such person is not deemed to have been an affiliate of the Company at the time of, or at any time during the three months preceding, a sale and (b) the Company is subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the twelve months (or such shorter period as the Company was required to file reports) preceding the sale.
Persons who have beneficially owned restricted New Merlin Common Stock for at least six months but who are affiliates of the Company 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 New Merlin Common Stock then outstanding (as of the date of this proxy statement/prospectus, Inflection Point has 33,758,333 Inflection Point Ordinary Shares outstanding); or
• the average weekly reported trading volume of the New Merlin 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 the Company under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about the Company.
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 twelve 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 current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
As a result, the Sponsor will be able to sell its Founder Shares pursuant to Rule 144 without registration one year after the Closing.
Inflection Point anticipates that following the Closing, the Company will no longer be a shell company, and so, once the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of the above noted restricted securities.
Registration Rights
See the section entitled “Description of Inflection Point’s and the Company’s Securities — Investor Registration Rights”
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SHAREHOLDER PROPOSALS AND NOMINATIONS
Stockholder Proposals
The Proposed Bylaws establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders. The Proposed Bylaws provide that the only business that may be conducted at an annual meeting of stockholders is business that is (a) specified in the notice of such meeting (or any supplement or amendment thereto) given by or at the direction of the New Merlin Board or any authorized committee of the New Merlin Board, (b) otherwise properly brought before such meeting by or at the direction of the New Merlin Board or the chairperson of the New Merlin Labs Board, or (c) otherwise properly brought before such meeting by a stockholder present in person who (A) (1) was a record owner of New Merlin Common Stock at the time of giving the notice, (2) is entitled to vote at such meeting, and (3) has complied with notice procedures specified in the Proposed Bylaws in all applicable respects or (B) properly made such proposal in accordance with Rule 14a-8 under the Exchange Act. To be timely for the Company’s annual meeting of stockholders, a stockholder’s notice must be delivered to the Company’s secretary at the Company’s principal executive offices:
• not later than the 90th day; and
• not earlier than the 120th day,
prior to the first anniversary of the preceding year’s annual meeting.
In the event that no annual meeting was held in the previous year or the Company holds its annual meeting of stockholders more than 30 days before or more than 60 days after the one-year anniversary of a preceding year’s annual meeting, to be timely, notice of a stockholder proposal must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the 90th day prior to such annual meeting or, the 10th day following the day on which public disclosure of the date of such annual meeting was first made.
We currently anticipate the 2026 annual meeting of stockholders of the Company will be held on , 2026. Notice of a nomination or proposal must be delivered to the Company no later than the 10th day following the earlier of the day on which such notice of the date of such meeting was mailed and the day the public disclosure of the date of the 2026 annual meeting is made. Nominations and proposals also must satisfy other requirements set forth in the Proposed Bylaws.
Under Rule 14a-8 of the Exchange Act, a stockholder proposal (other than nominations) to be included in the proxy statement and proxy card for the 2026 annual extraordinary general meeting pursuant to Rule 14a-8 must be received at the Company’s principal office at a reasonable time before the Company begins to print and send its proxy materials and must comply with Rule 14a-8.
A stockholder will update and supplement its notice to the Company’s secretary, if necessary, so that the information provided or required to be provided in such notice as described above will be true and correct as of the record date for notice of the annual meeting and as of the date that is 15 business days prior to the annual meeting or any adjournment or postponement thereof, and such update and supplement will be delivered to, or mailed and received by, the Company’s secretary not later than 5 days after the record date for notice of the extraordinary general meeting(in the case of the update and supplement required to be made as of such record date), and not later than 10 days prior to the date for the extraordinary general meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the extraordinary general meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of 15 business days prior to the extraordinary general meeting or any adjournment or postponement thereof).
Stockholder Director Nominees
The Proposed Bylaws permit stockholders to nominate directors for election at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) of stockholders, subject to the provisions of the Proposed Charter. To nominate a director, the stockholder must provide the information required by the Proposed Bylaws. In addition, the stockholder must give timely notice to the Company’s secretary in accordance with the Proposed Bylaws, which, in general, require that the notice be received by the Company’s secretary within the time periods described above under the section of this proxy statement/prospectus entitled “— Stockholder Proposals”.
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SHAREHOLDER COMMUNICATIONS
Shareholders and interested parties may communicate with the Inflection Point Board, any committee chairperson or the non-management directors as a group by writing to the Inflection Point Board or committee chairperson in care of Inflection Point Acquisition Corp. IV, 1345 Avenue of the Americas, Fl 47, New York, New York 10105. Following the Closing, such communications should be sent to New Merlin Labs, 129 South Street, Boston, MA 02111. Each communication will be forwarded, depending on the subject matter, to the New Merlin Board, the appropriate committee chairperson or all non-management directors.
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LEGAL MATTERS
White & Case LLP will pass upon the validity of the securities of the Company to be issued in connection with the Domestication and upon certain U.S. federal income tax consequences to Inflection Point’s shareholders as a result of the Business Combination and the Domestication.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Inflection Point Board does not know of any matters that will be presented for consideration at the extraordinary general meeting other than as described in this proxy statement/prospectus. If any other matters properly come before the extraordinary general meeting, 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 Inflection Point Acquisition Corp. IV, as of December 31, 2024, and for the period from June 24, 2024 (inception) through December 31, 2024, included in this proxy statement/prospectus have been audited by WithumSmith+Brown PC, independent registered public accounting firm, as stated in their report thereon appearing elsewhere in this proxy statement/prospectus, and are included in reliance on such report given on the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Merlin Labs, Inc. and its subsidiaries as of December 31, 2024 and 2023 and for each of the years then ended, included in this proxy statement/prospectus and in the Registration Statement have been audited by HORNE LLP (now BDO USA, P.C.), an independent registered public accounting firm given on the authority of said firm as experts in auditing and accounting. The report on the consolidated financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the two most recent fiscal years and the subsequent interim period through the date of this proxy statement/prospectus, Merlin Labs, Inc. has not dismissed or engaged any independent registered public accounting firm, and has had no disagreements with its independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure that, if not resolved to the satisfaction of such accounting firm, would have caused it to make reference to the subject matter of the disagreement in connection with its report on Merlin’s financial statements. Merlin’s consolidated financial statements as of and for the years ended December 31, 2024 and 2023 included in this proxy statement/prospectus have been audited HORNE LLP (now BDO USA, P.C.), an independent registered public accounting firm, as stated in its report included elsewhere herein.
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DELIVERY OF DOCUMENTS TO SHAREHOLDERS
Pursuant to the rules of the SEC, Inflection Point and 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 Inflection Point’s annual report to shareholders and Inflection Point’s proxy statement. Upon written or oral request, Inflection Point 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 Inflection Point deliver single copies of such documents in the future. Shareholders receiving multiple copies of such documents may request that Inflection Point deliver single copies of such documents in the future. Shareholders may notify Inflection Point of their requests by calling or writing Inflection Point at its principal executive offices at 1345 Avenue of the Americas, Fl 47, New York, New York 10105 or (212) 984-3835.
ENFORCEABILITY OF CIVIL LIABILITY
Inflection Point is a Cayman Islands exempted company. If Inflection Point does not change its jurisdiction of incorporation from the Cayman Islands to Delaware by effecting the Domestication, you may have difficulty serving legal process within the United States upon Inflection Point. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against Inflection Point in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws. Furthermore, there is doubt that the courts of the Cayman Islands would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws. However, Inflection Point may be served with process in the United States with respect to actions against Inflection Point arising out of or in connection with violation of U.S. federal securities laws relating to offers and sales of Inflection Point’s securities by serving Inflection Point’s U.S. agent irrevocably appointed for that purpose.
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WHERE YOU CAN FIND MORE INFORMATION
Inflection Point 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.
Inflection Point files reports, proxy statements and other information with the SEC as required by the Exchange Act. You may access information on Inflection Point 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 Inflection Point has been supplied by Inflection Point, and all such information relating to Merlin has been supplied by Merlin, respectively. Information provided by one another does not constitute any representation, estimate or projection of the other.
This document is a proxy statement/prospectus of Inflection Point for the extraordinary general meeting. Inflection Point has not authorized anyone to give any information or make any representation about the Business Combination, Inflection Point or Merlin 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.
If you would like additional copies of this proxy statement/prospectus, or if you have questions about the business combination, you should contact via phone or in writing:
Inflection Point Acquisition Corp. IV
1345 Avenue of the Americas, Fl 47
New York, NY 10105
212-984-3835
If you are a shareholder of Inflection Point and would like to request documents, please do so no later than five business days before the extraordinary general meeting in order to receive them before the extraordinary general meeting. If you request any documents from Inflection Point, Inflection Point 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 filings made with the SEC.
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INDEX TO FINANCIAL STATEMENTS
INFLECTION POINT ACQUISITION CORP. IV UNAUDITED FINANCIAL STATEMENTS
|
Page |
||
|
Condensed Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024 |
F-2 |
|
|
Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2025 and for the Period from June 24, 2024 (Inception) through September 30, 2024 (Unaudited) |
F-3 |
|
|
Condensed Statements of Changes in Shareholders’ Deficit for the Three and Nine Months Ended September 30, 2025 and for the Period from June 24, 2024 (Inception) through September 30, 2024 (Unaudited) |
F-4 |
|
|
Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2025 and for the Period from June 24, 2024 (Inception) through September 30, 2024 (Unaudited) |
F-5 |
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited) |
F-6 |
BLEICHROEDER ACQUISITION CORP. I AUDITED FINANCIAL STATEMENTS
|
Report of Independent Registered Public Accounting Firm (PCAOB ID 100) |
F-27 |
|
|
Financial Statements: |
||
|
Balance Sheet |
F-28 |
|
|
Statement of Operations |
F-29 |
|
|
Statements of Changes in Shareholders’ Deficit |
F-30 |
|
|
Statement of Cash Flows |
F-31 |
|
|
Notes to Financial Statements |
F-32 |
MERLIN LABS, INC. UNAUDITED FINANCIAL STATEMENTS
|
Consolidated Balance Sheets |
F-45 |
|
|
Consolidated Statements of Operations |
F-46 |
|
|
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit |
F-47 |
|
|
Consolidated Statements of Cash Flows |
F-48 |
|
|
Notes to Consolidated Financial Statements |
F-50 |
MERLIN LABS, INC. AUDITED FINANCIAL STATEMENTS
|
Report of Independent Registered Public Accounting Firm |
F-79 |
|
|
Consolidated Balance Sheets |
F-80 |
|
|
Consolidated Statements of Operations |
F-81 |
|
|
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit |
F-82 |
|
|
Consolidated Statements of Cash Flows |
F-83 |
|
|
Notes to Consolidated Financial Statements |
F-84 |
F-1
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
CONDENSED CONSOLIDATED BALANCE SHEETS
|
September 30, |
December 31, |
|||||||
|
ASSETS |
|
|
|
|
||||
|
Current assets |
|
|
|
|
||||
|
Cash |
$ |
|
|
$ |
|
|
||
|
Prepaid expenses |
|
|
|
|
|
|
||
|
Short-term prepaid insurance |
|
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|
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||
|
Total current assets |
|
|
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||
|
Long-term prepaid insurance |
|
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|
|
|
|
||
|
Investments held in Trust Account |
|
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|
|
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||
|
TOTAL ASSETS |
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|||||
|
LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
|
|
|
|
||||
|
Current liabilities |
|
|
|
|
||||
|
Accrued expenses |
$ |
|
|
$ |
|
|
||
|
Accrued offering costs |
|
|
|
|
|
|
||
|
Cash underwriting fee payable |
|
|
|
|
|
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||
|
Total current liabilities |
|
|
|
|
|
|
||
|
Deferred underwriting fee payable |
|
|
|
|
|
|
||
|
TOTAL LIABILITIES |
|
|
|
|
|
|
||
|
|
|
|
|
|||||
|
COMMITMENTS AND CONTINGENCIES (Note 6) |
|
|
|
|
||||
|
|
|
|
|
|||||
| Class A ordinary shares subject to possible redemption, $ |
|
|
|
|
|
|
||
|
|
|
|
|
|||||
|
SHAREHOLDERS’ DEFICIT |
|
|
|
|
||||
|
|
|
|
|
|||||
| Preferred shares, $ |
|
|
|
|
||||
| Class A Ordinary Shares, $ |
|
|
|
|
|
|
||
| Class B Ordinary Shares, $ |
|
|
|
|
|
|
||
|
Additional paid-in capital |
|
|
|
|
||||
|
Accumulated deficit |
|
( |
) |
|
( |
) |
||
|
TOTAL SHAREHOLDERS’ DEFICIT |
|
( |
) |
|
( |
) |
||
|
TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
$ |
|
|
$ |
|
|
||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-2
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
For the |
For the |
||||||||||||||
|
2025 |
2024 |
|||||||||||||||
|
General and administrative expenses |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
Loss from operations |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
OTHER INCOME |
|
|
|
|
|
|
|
|
||||||||
|
Interest earned on bank account |
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest earned on investments held in Trust Account |
|
|
|
|
|
|
|
|
|
|
||||||
|
Total other income |
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
NET INCOME (LOSS) |
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
( |
) |
||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Weighted average shares outstanding of Class A ordinary shares |
|
|
|
|
|
|
|
|
|
|
||||||
|
Basic and diluted net income (loss) per ordinary share, Class A ordinary shares |
$ |
|
|
$ |
|
$ |
|
|
$ |
|
||||||
|
Weighted average shares outstanding of Class B ordinary shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic and diluted net income (loss) per ordinary share, Class B ordinary shares |
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
( |
) |
||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-3
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025
|
|
Class B |
Additional |
Accumulated |
Total |
|||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||
|
Balance – January 1, 2025 |
|
$ |
|
|
$ |
|
$ |
$ |
( |
) |
$ |
( |
) |
||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
|
Accretion for Class A ordinary shares to redemption amount |
— |
|
|
|
|
( |
) |
|
( |
) |
|||||||||||
|
Net income |
— |
|
— |
|
|
|
|
|
|
|
|
||||||||||
|
Balance – March 31, 2025 (unaudited) |
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
|
Accretion for Class A ordinary shares to redemption amount |
— |
|
— |
|
|
|
( |
) |
|
( |
) |
||||||||||
|
Net income |
— |
|
— |
|
|
— |
|
|
|
|
|
|
|||||||||
|
Balance – June 30, 2025 (unaudited) |
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
|
Accretion for Class A ordinary shares to redemption amount |
— |
|
— |
|
|
|
( |
) |
|
( |
) |
||||||||||
|
Net income |
— |
|
— |
|
|
|
|
|
|
|
|
||||||||||
|
Balance – September 30, 2025 (unaudited) |
|
$ |
|
|
$ |
|
$ |
$ |
( |
) |
$ |
( |
) |
||||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND
FOR THE PERIOD FROM JUNE 24, 2024 (INCEPTION) THROUGH SEPTEMBER 30, 2024
|
Class A |
Class B |
Additional |
Accumulated |
Total |
|||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||
|
Balance – June 24, 2024 (Inception) |
$ |
$ |
$ |
$ |
|
$ |
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
|
Class B ordinary shares issued to Sponsor |
— |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net loss |
— |
|
— |
|
|
|
( |
) |
|
( |
) |
||||||||||
|
Balance – June 30, 2024 |
— |
|
|
|
|
|
|
|
( |
) |
|
( |
) |
||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net loss |
— |
|
— |
|
|
|
( |
) |
|
( |
) |
||||||||||
|
Balance – September 30, 2024 (unaudited) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
|||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-4
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
Cash flows from operating activities: |
For the |
For the |
||||||
|
Net income (loss) |
$ |
|
|
$ |
( |
) |
||
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
||||
|
Formation costs paid by Sponsor in exchange for issuance of Class B ordinary shares |
|
|
|
|
|
|||
|
Interest earned on marketable securities held in Trust Account |
|
( |
) |
|
|
|||
|
Payment of expenses through promissory note – related party |
|
|
|
|
|
|||
|
Changes in operating assets and liabilities: |
|
|
|
|
||||
|
Prepaid expenses |
|
( |
) |
|
|
|||
|
Prepaid Insurance |
|
|
|
|
|
|||
|
Accrued expenses |
|
|
|
|
|
|
||
|
Net cash used in operating activities |
|
( |
) |
|
|
|||
|
|
|
|
|
|||||
|
Net change in cash |
|
( |
) |
|
|
|||
|
Cash – beginning of period |
|
|
|
|
|
|||
|
Cash – end of period |
$ |
|
|
$ |
|
|||
|
|
|
|
|
|||||
|
Non-Cash investing and financing activities: |
|
|
|
|
||||
|
Deferred offering costs included in accrued offering costs |
$ |
|
$ |
|
|
|||
|
Deferred offering costs paid through promissory note – related party |
$ |
|
$ |
|
|
|||
|
Deferred offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares |
$ |
|
$ |
|
|
|||
|
Prepaid services paid by Sponsor through the promissory note – related party |
$ |
|
$ |
|
|
|||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-5
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Inflection Point Acquisition Corp. IV (f/k/a Bleichroeder Acquisition Corp. I, the “Company”) is a blank check company incorporated as a Cayman Islands exempted corporation on
On August 13, 2025 (the “Signing Date”), the Company entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the “Merlin Labs Business Combination Agreement”), by and among the Company, IPDX Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Inflection Point (“Merger Sub”), and Merlin Labs, Inc., a Delaware corporation (“Merlin Labs”), pursuant to which, among other things and subject to the terms and conditions therein, Merger Sub will merge with and into Merlin Labs, with Merlin Labs continuing as the surviving company (the “Merger”). The transactions contemplated by the Merlin Labs Business Combination Agreement are referred to herein as the “Merlin Labs Business Combination.”
Merger Sub was incorporated on August 8, 2025 for the sole purposes of effecting the Merlin Labs Business Combination.
As of September 30, 2025, the Company had not commenced any operations. All activity for the period from June 24, 2024 (inception) through September 30, 2025 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below, and the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on investments from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on October 31, 2024. On November 4, 2024, the Company consummated the Initial Public Offering of
Transaction costs amounted to $
On November 21, 2024, the Company announced that, commencing on December 2, 2024, the holders of the Units, each Unit consisting of
The Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
if the post-Business Combination company owns or acquires
Following the closing of the Initial Public Offering on November 4, 2024, an amount of $
The Company will provide the Company’s public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a general meeting called to approve the initial Business Combination or (ii) without a shareholder vote by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public shareholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (less taxes payable), divided by the number of then outstanding public shares, subject to the limitations.
The ordinary shares subject to redemption were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” In such case, if the Company seeks shareholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
The Company will have only the duration of the Completion Window to complete the initial Business Combination. However, if the Company is unable to complete its initial Business Combination within the Completion Window, the Company will 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 the amount of taxes payable and up to $
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to their Founder Shares, private placement shares and public shares in connection with the completion of the initial Business Combination; (ii) waive their redemption rights with respect to their Founder Shares, private placement shares and public shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association; (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares and private placement shares if the Company fails to complete the initial Business Combination within the Completion Window, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete the initial Business Combination within the Completion Window and to liquidating distributions from assets outside the Trust Account; and (iv) vote any Founder Shares or private placement shares held by them and any public shares purchased during or after the Initial Public Offering (including in open market and privately-negotiated transactions, aside from shares they may purchase in compliance with the requirements of Rule 14e-5 under the Exchange Act, which would not be voted in favor of approving the Business Combination) in favor of the initial Business Combination.
The Company’s Sponsor 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 a prospective target business with which the Company 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) $
Management Changes
Effective July 10, 2025, (i) Marcello Padula resigned as Chief Financial Officer, (ii) Michael Blitzer, Robert Folino and Kevin Shannon were appointed as President and Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, respectively, (iii) Nazim Cetin and Pierre Weinstein resigned from the Company’s board of directors (the “Board”) and the Audit Committee of the Board and (iv) the Board appointed incumbent directors Joseph Samuels and Antoine Theysset to the Audit Committee. Mr. Blitzer was also appointed to the Board. In connection with their appointments, each of Mr. Blitzer, Mr. Folino and Mr. Shannon signed a joinder to that certain letter agreement dated as of October 31, 2024, by and among the Company, its officers, its directors and the Sponsor, pursuant to which,
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
among other things, the signatories agreed to waive certain redemption rights and to vote any ordinary shares of Company they hold in favor of an initial Business Combination. Each of Mr. Blitzer, Mr. Folino and Mr. Shannon also entered into a standard indemnity agreement with the Company.
Mr. Blitzer and Mr. Shannon are affiliates of Inflection Point Fund I LP, which is a member of the Company’s Sponsor.
Merlin Labs Business Combination
On the Signing Date, the Company entered into the Merlin Labs Business Combination Agreement, by and among the Company, Merger Sub, and Merlin Labs, pursuant to which, among other things and subject to the terms and conditions therein, Merger Sub will merge with and into Merlin Labs, with Merlin Labs continuing as the surviving company. The combined company’s business will continue to operate through Merlin Labs and its subsidiaries. In connection with the closing of the Merlin Labs Business Combination (the “Closing”), the Company will change its name to Merlin Labs, Inc. (such company after the closing of the Merlin Labs Business Combination, “New Merlin Labs”).
The Domestication
The Company will, subject to obtaining the required shareholder approvals change its jurisdiction of incorporation by deregistering from the Register of Companies in the Cayman Islands as a Cayman Islands exempted company by way of continuation out of the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”, and Inflection Point after the Domestication, “Post-Domestication Inflection Point”). In connection with the completion of the Merlin Labs Business Combination, the Company will provide the holders of its Public Shares (the “Public Shareholders”) the opportunity to redeem their Public Shares on the terms and conditions set forth in the Merlin Labs Business Combination Agreement and the Company’s governing documents. The Company will complete the Redemption of properly tendered Public Shares at least one day prior to the Domestication.
Subject to the satisfaction or waiver of the conditions of the Merlin Labs Business Combination Agreement, including approval of the Company’s shareholders, (a) immediately prior to the Domestication, pursuant to that certain Sponsor Support Agreement, dated as of August 13, 2025 (the “Sponsor Support Agreement”), by and among the Company, Merlin Labs, the Sponsor, and Inflection Point Fund I, LP, a Delaware limited partnership (“Inflection Point Fund”), the holders of the Founder Shares (such holders, the “Class B Shareholders”), will elect to convert each Founder Share, on a one-for-one basis, into a Class A Ordinary Share (the “Sponsor Share Conversion”); (b) in connection with the Domestication, (i) each of the then issued and outstanding Class A Ordinary Shares will convert automatically, on a one-for-one basis, into a share of common stock, par value $
The Merger and Consideration
Upon the terms and subject to the satisfaction or waiver of the conditions of the Merlin Labs Business Combination Agreement, immediately prior to the effective time of the Merger (the “Effective Time”):
(1) each convertible security of Merlin Labs (other than the Pre-Funded Convertible Notes (as defined below)) that is outstanding immediately prior to the Effective Time, to the extent applicable, will automatically convert in full into shares of preferred stock or common stock of Merlin Labs (“Merlin Labs Common Stock”), in accordance with the terms thereof;
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
(2) each warrant of Merlin Labs exercisable for the preferred stock of Merlin Labs that is outstanding and unexercised immediately prior to the Effective Time will automatically be exercised on a cashless basis in full in accordance with its terms or otherwise exercised in full;
(3) immediately after giving effect to the conversions and exercises set forth in clauses (1) and (2) above, each issued and outstanding share of preferred stock of Merlin Labs (including each share of preferred stock issued upon the conversions and exercises described in clauses (1) and (2) above) will automatically convert into such number of shares of Merlin Labs Common Stock into which such shares of preferred stock of Merlin Labs, as applicable, are convertible in connection with the Merger pursuant to the organizational documents of Merlin Labs; and
(4) each warrant of Merlin Labs (other than the Pre-Funded Convertible Series A Preferred Stock Investor Warrants (as defined below)) exercisable for Merlin Labs Common Stock that is outstanding and unexercised immediately prior to the Effective Time shall automatically be exercised on a cashless basis in full in accordance with its terms or otherwise exercised in full.
In connection with the transactions contemplated by the Merlin Labs Business Combination Agreement, on July 2, 2025, and on August 13, 2025, Merlin Labs entered into certain convertible note purchase agreements (the “Pre-PIPE Note Purchase Agreements”) and securities purchase agreement (the “Pre-PIPE Securities Purchase Agreements” and together with the Pre-PIPE Note Purchase Agreements, the “Pre-PIPE Investment Agreements”), respectively, with certain accredited investors named therein (collectively, the “Pre-PIPE Investors”). Pursuant to the Pre-PIPE Investment Agreements, the Pre-PIPE Investors agreed, among other things, to purchase, and Merlin Labs issued and sold, an aggregate of approximately $
Pursuant to the Merlin Labs Business Combination Agreement, the aggregate consideration (the “Aggregate Consideration”) to be paid to the holders of securities of Merlin Labs (the “Merlin Labs Equity Holders”) (other than the holders of the Pre-Funded Convertible Notes and the Pre-Funded Convertible Note Investor Warrants in respect of those securities) in, or in connection with, the Merger shall be the number of shares of New Merlin Labs Common Stock equal to the quotient of: (a) $
The consideration to be paid in, or in connection with, the Merger to each holder of a Pre-Funded Convertible Note (the “Convertible Note Consideration”) shall be a number of shares of New Merlin Labs’
The consideration to be paid in, or in connection with, the Merger to each holder of a Pre-Funded Convertible Note Investor Warrant (the “Pre-Funded Convertible Note Investor Warrant Consideration”) shall be one or more warrants to purchase a number of shares of New Merlin Labs Common Stock (“New Merlin Labs Series A Investor Warrants”) equal to the quotient of (i) the aggregate exercise price of such Pre-Funded Convertible Note Investor Warrant immediately prior to the Effective Time, divided by (ii) $12.00.
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Upon the terms and subject to the satisfaction or waiver of the conditions of the Merlin Labs Business Combination Agreement, at the Effective Time:
(1) each share of Merlin Labs Common Stock that is owned by the Company, Merger Sub, or Merlin Labs immediately prior to the Effective Time (each, an “Excluded Share”) will be canceled and shall cease to exist and no consideration will be delivered in exchange therefor;
(2) each share of Merlin Labs Common Stock that is issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) will be canceled and converted into the right to receive a number of shares of New Merlin Labs Common Stock equal to the Aggregate Consideration divided by the fully diluted capital of Merlin Labs, which is the sum (without duplication) of the aggregate number of shares of Merlin Labs Common Stock that are (i) issued and outstanding immediately prior to the Effective Time (including those issued upon conversion of all issued and outstanding preferred stock of Merlin Labs, as applicable, and excluding securities underlying the Pre-Funded Convertible Notes or Pre-Funded Convertible Note Investor Warrant), (ii) issuable upon full exercise of all issued and outstanding options of Merlin Labs, and (iii) issuable upon full settlement of all issued and outstanding Merlin Labs RSU (as defined below) (such conversion ratio, the “Exchange Ratio”);
(3) each option to purchase equity securities of Merlin Labs (“Merlin Labs Option”) will automatically cease to represent an option to purchase Merlin Labs Common Stock and be assumed and converted on the same terms and conditions as were applicable as of the Effective Time, into an option to acquire that number of New Merlin Labs Common Stock (rounded down to the nearest whole share) equal to the product of (A) the number of shares of Merlin Labs Common Stock subject to such Merlin Labs Option and (B) the Exchange Ratio, at an exercise price per share of Merlin Labs Common Stock (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (x) the exercise price per share of Merlin Labs Common Stock of such Merlin Labs Option by (y) the Exchange Ratio;
(4) each restricted stock unit in respect of equity securities of Merlin Labs, granted pursuant to the 2018 Equity Incentive Plan of Merlin Labs after the date of the Business Combination Agreement and prior to the Effective Time (“Merlin Labs RSU”), will cease to represent a right to acquire shares of Merlin Labs Common Stock and be assumed and converted on the same terms and conditions as were applicable as of the Effective Time, into a restricted stock unit representing the right to acquire that number of New Merlin Labs Common Stock (rounded down to the nearest whole share) equal to the product of (A) the number of shares of Merlin Labs Common Stock subject to such Merlin Labs RSU and (B) the Exchange Ratio;
(5) each Pre-Funded Convertible Note that is outstanding immediately prior to the Effective Time will automatically be canceled and converted into the right to receive the Convertible Note Consideration;
(6) each Pre-Funded Convertible Note Investor Warrant that is outstanding and unexercised immediately prior to the Effective Time will automatically be canceled and converted into the right to receive the Pre-Funded Convertible Note Investor Warrant Consideration; and
(7) (x) each then issued and outstanding Post-Domestication Right shall convert automatically into one-tenth of one share of New Merlin Labs Common Stock, pursuant to that certain Rights Agreement, dated as of October 31, 2024, by and between Inflection Point and the right agent with any fractional shares of New Merlin Labs Common Stock to be issued in connection with such conversion rounded down to the nearest whole share; and (y) each then issued and outstanding Post-Domestication Unit shall be canceled and will thereafter entitle the holder thereof to one and one-tenth (1.1) shares of New Merlin Labs Common Stock, with any fractional shares of New Merlin Labs Common Stock to be issued in connection with such separation rounded down to the nearest whole share.
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Closing Conditions
The obligations of the Company and Merlin Labs to consummate the Merlin Labs Business Combination are subject to the satisfaction or waiver of other customary closing conditions, including without limitation: (i) the adoption and/or approval, as applicable, by the Company’s shareholders of (A) the Merlin Labs Business Combination Agreement and Merlin Labs Business Combination in accordance with applicable law and exchange rules and regulations, (B) the Domestication, (C) the proposed charter and the bylaws of New Merlin Labs upon Domestication, including any separate or unbundled advisory proposals as are required to implement the foregoing, (D) the issuance of shares of New Merlin Labs Common Stock, Series A Preferred Stock and Series A Preferred Investor Warrants, as required by Nasdaq Listing Rule 5635, (E) the equity incentive plan and employee stock purchase plan of New Merlin Labs as described in the Merlin Labs Business Combination Agreement, (F) the appointment of director nominees in accordance with the terms in the Merlin Labs Business Combination Agreement, (G) any other proposals as the SEC (or staff member thereof) may indicate are necessary, (H) any other proposals as reasonably agreed to by the parties to the Merlin Labs Business Combination Agreement to be necessary or appropriate in connection with the Merlin Labs Business Combination, and (I) adjournment of the extraordinary general meeting (as defined below) to a later date or dates, if necessary or convenient, in the reasonable determination of the chairman of the Company, to (x) permit further solicitation and vote of proxies in the event that there are insufficient votes for any of the foregoing, (y) if the Company determines that one or more of the conditions to Closing is not or will not be satisfied or waived or (z) to facilitate the Domestication, the Merger or any other transactions contemplated by the Merlin Labs Business Combination Agreement and ancillary documents (such proposals in (A) through (I), together, the “Transaction Proposals”), (ii) the approval of the Merlin Labs Business Combination Agreement and the Merlin Labs Business Combination (including the Merger) by the affirmative vote or written consent of the stockholders of Merlin Labs, pursuant to the terms and in accordance with satisfaction of the conditions of the organizational documents of Merlin Labs and applicable law, (iii) no adverse law or order, (iv) the registration statement covering the becoming effective, (v) approval of the listing of the New Merlin Labs Common Stock on the Nasdaq Stock Market LLC, subject to satisfaction of the round lot holders requirement for initial listing, (vi) the accuracy of the representations and warranties and the performance of the covenants and agreements of each of the parties to the Merlin Labs Business Combination Agreement, in each case subject to certain qualifiers, (vii) the expiration of all waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act with respect to the Merlin Labs Business Combination, (viii) the completion of the Domestication, and (ix) duly executed pay-off letters certifying certain indebtedness of Merlin Labs and its subsidiaries, as specified in the Merlin Labs Business Combination Agreement, shall have been paid off, to the extent it is paid off pursuant to the Merlin Labs Business Combination Agreement.
Sponsor Support Agreement
Concurrently with the execution of the Merlin Labs Business Combination Agreement, the Company entered into the Sponsor Support Agreement (the “Sponsor Support Agreement”) with Merlin Labs, the Sponsor and Inflection Point Fund (each a “Restricted Holder” and together, the “Restricted Holders”), pursuant to which each Restricted Holder agreed to, among other things, (i) vote in favor of adoption of the Transaction Proposals, (ii) vote against any Alternative Transaction (as defined in the Merlin Labs Business Combination Agreement) and any merger agreement or merger other than the Transaction Proposals, the Merlin Labs Business Combination Agreement and the Merlin Labs Business Combination; (iii) vote against any change in the business, management, or board of directors of Inflection Point (other than in connection with the Transaction Proposals or pursuant to the Merlin Labs Business Combination Agreement or ancillary agreements) and (iv) vote against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Sponsor Support Agreement, the Merlin Labs Business Combination Agreement or the Merlin Labs Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of the Company under the Merlin Labs Business Combination Agreement, (C) result in any of the closing conditions of the Merlin Labs Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such Restricted Holder contained in the Sponsor Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, the
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Company. In addition, pursuant to the Sponsor Support Agreement, each Restricted Holder, severally, agreed to waive, subject to the consummation of the Merlin Labs Business Combination, any and all anti-dilution rights with respect to the rate that the Class B Ordinary Shares convert into the Class A Ordinary Shares in connection with the transactions contemplated by the Merlin Labs Business Combination Agreement.
Stockholder Voting and Support Agreement
Concurrently with the execution of the Merlin Labs Business Combination Agreement, the holders of equity securities of Merlin Labs (the “Merlin Labs Stockholders”) and Merlin Labs entered into the Voting and Support Agreement (the “Stockholder Voting and Support Agreement”), pursuant to which Merlin Labs Stockholders have agreed to, among other things, vote (or act by written consent) (a) to approve and adopt the Merlin Labs Business Combination Agreement and the consummation of the Merlin Labs Business Combination; (b) against any Alternative Transaction or any proposal relating to an Alternative Transaction; (c) against any merger agreement or merger (other than the Merlin Labs Business Combination Agreement and the Merlin Labs Business Combination), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by Merlin Labs; (d) against any change in the business or board of directors of Merlin Labs (other than pursuant to the Merlin Labs Business Combination Agreement or the Ancillary Documents (as defined in the Merlin Labs Business Combination Agreement)); (e) against any proposal, action or agreement that would (A) impede, interfere, frustrate, prevent or nullify any provision of the Stockholder Voting and Support Agreement, the Merlin Labs Business Combination Agreement or the Merlin Labs Business Combination, (B) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of Merlin Labs under the Merlin Labs Business Combination Agreement, (C) result in any of the closing conditions of the Merlin Labs Business Combination Agreement not being fulfilled, (D) result in a breach of any covenant, representation or warranty or other obligation or agreement of such Merlin Labs Stockholder contained in the Stockholder Voting and Support Agreement or (E) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, Merlin Labs and (f) to convert all outstanding shares of preferred stock of Merlin Labs into Merlin Labs Common Stock as of immediately prior to the Effective Time, conditioned upon and subject to the closing of the Merlin Labs Business Combination, in accordance with the organizational documents of Merlin Labs.
Pursuant to the Stockholder Voting and Support Agreement, until the earliest of the Closing, termination of the Merlin Labs Business Combination Agreement or the liquidation of Merlin Labs, no Merlin Labs Stockholder shall (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Subject Securities (as defined in the Stockholder Voting and Support Agreement), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Subject Securities without the prior written consent of Merlin Labs and the Company, unless such transfer is deemed a Permitted Transfer (as defined in the Stockholder Voting and Support Agreement).
In addition, pursuant to the Stockholder Voting and Support Agreement, each Merlin Labs Stockholder has agreed not to commence, join in, facilitate, assist or encourage, and has agreed to take all actions necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against the Company, Merlin Labs or any of their respective successors or directors, (a) challenging the validity of, or seeking to enjoin the operation of, any provision of the Stockholder Voting and Support Agreement or (b) alleging a breach of any fiduciary duty of any person in connection with the evaluation, negotiation or entry into the Stockholder Voting and Support Agreement, the Merlin Labs Business Combination Agreement or the Merlin Labs Business Combination. Each Merlin Labs Stockholder has also waived and agreed not to exercise any rights of appraisal or rights to dissent from the Merlin Labs Business Combination that they may have in respect of the Subject Securities.
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
Series A Preferred Stock Investment
In connection with the transactions contemplated by the Merlin Labs Business Combination Agreement, on the Signing Date, the Company, Merlin Labs and the accredited investor named therein, (the “Series A Preferred Stock Investor”) entered into a Securities Purchase Agreement (the “Series A SPA”). Pursuant to the Series A SPA, the Series A Preferred Stock Investor has agreed, among other things, to purchase, at Closing,
The Series A SPA includes customary representations and warranties from Merlin Labs, the Company and the Series A Preferred Stock Investor and is subject to customary closing conditions. The Series A SPA also includes customary covenants and agreements related to transfer restrictions, SEC reports, material non-public information and indemnification. New Merlin Labs Common Stock issuable upon conversion of the New Merlin Labs Series A Preferred Stock and New Merlin Labs Common Stock underlying any New Merlin Labs Series A Investor Warrant will be “Registrable Securities” under a registration rights agreement.
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 unaudited condensed consolidated 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. 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 December 31, 2024 Annual Report on Form 10-K as filed with the SEC on March 10, 2025. The interim results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any future periods.
Liquidity, Capital Resources and Going Concern
As of September 30, 2025, the Company had $
In connection with the Company’s assessment of going concern considerations in accordance with ASC 205-40, “Going Concern,” as of September 30, 2025, the Company may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Additionally, if a Business Combination is not consummated by the end of the Combination Period, currently November 6, 2026, there will be a mandatory liquidation and subsequent dissolution of the Company. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Combination Period. The Company’s liquidity condition and mandatory liquidation within one year of the issuance of these unaudited condensed financial statements raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to address this uncertainty through a Business Combination. However, there can be no assurance that the Company will be able to consummate any Business Combination by the end of the Combination Period.
The Company’s liquidity condition and mandatory liquidation within one year raises substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the accompanying condensed financial statements are issued. Management plans to address this uncertainty through a Business Combination. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Combination Period. The Company intends to complete the initial Business Combination before the end of the Combination Period. However, there can be no assurance that the Company will be able to consummate any Business Combination by the end of the Combination Period.
Principles of Consolidation
On August 8, 2025, Merger Sub was incorporated.
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
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 independent registered public accounting firm 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 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 an emerging growth 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 an 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
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INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
the Company’s unaudited condensed consolidated 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.
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 $
Investments Held in Trust Account
As of September 30, 2025 and December 31, 2024, the assets held in the Trust Account, amounting to $
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 coverage limit of $
Offering Costs
The Company complies with the requirements of the 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 related to the Initial Public Offering. 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 Initial Public Offering proceeds from the Units between Class A ordinary shares and Public Rights, using the residual method by allocating Initial Public Offering proceeds first to assigned value of the Public Rights and then to the Class A ordinary shares. Offering costs allocated to the Class A ordinary share subject to possible redemption were charged to temporary equity and offering costs allocated to the Public Rights and Private Placement Units were charged to shareholders’ deficit as the Public Rights and Private Placement Units, after management’s evaluation, were accounted for under equity treatment.
F-16
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(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 FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed consolidated balance sheets, primarily due to their short-term nature.
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the unaudited condensed consolidated financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the unaudited condensed consolidated financial statements recognition and measurement of tax positions 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’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2025 and December 31, 2024, there were unrecognized tax benefits and no amounts accrued for interest and penalties. 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 is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction 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 zero for the periods presented.
Rights
The Company accounts for the Public Rights and Private Placement Rights 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 rights under equity treatment at their assigned values.
The Public Rights have been classified within shareholders’ deficit and will not require remeasurement after issuance.
|
November 4, |
||||
|
Underlying share price |
$ |
|
|
|
|
Pre-adjusted value per share right |
$ |
|
|
|
|
Market adjustment(1) |
|
|
% |
|
|
Fair value per share right |
$ |
|
|
|
____________
(1)
F-17
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 redemption outside of permanent deficit as the redemption provisions are not solely within the control of the Company. The Company recognizes 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, the Company 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 accumulated deficit. Accordingly, as of September 30, 2025 and December 31, 2024, 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.
|
Gross proceeds |
$ |
|
|
|
|
Less: |
|
|
||
|
Proceeds allocated to Public Rights |
|
( |
) |
|
|
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: |
|
|
||
|
Remeasurement of carrying value to redemption value |
|
|
|
|
|
Class A ordinary shares subject to possible redemption, March 31, 2025 |
|
|
|
|
|
Plus: |
|
|
||
|
Remeasurement of carrying value to redemption value |
|
|
|
|
|
Class A ordinary shares subject to possible redemption, June 30, 2025 |
|
|
|
|
|
Plus: |
|
|
||
|
Remeasurement of carrying value to redemption value |
|
|
|
|
|
Class A ordinary shares subject to possible redemption, September 30, 2025 |
$ |
|
|
Net Income (Loss) per Ordinary Share
The Company complies 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 ordinary shares outstanding for the period. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from income 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 Rights issued in connection with the (i) IPO, and (ii) the private placement since the exercise of the Rights is contingent upon the occurrence of future events. The Rights are exercisable to purchase
F-18
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
The following table reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
For the Three Months Ended |
For the Nine Months |
For the Period from |
||||||||||||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||||||||||||
|
Class A |
Class B |
Class A |
Class B |
Class A |
Class B |
Class A |
Class B |
|||||||||||||||||||
|
Basic and diluted net income (loss) per ordinary share |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Allocation of net income (loss) |
$ |
|
$ |
|
$ |
$ |
( |
) |
$ |
|
$ |
|
$ |
$ |
( |
) |
||||||||||
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Basic and diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Basic and diluted net income (loss) per ordinary share |
$ |
|
$ |
|
$ |
$ |
( |
) |
$ |
|
$ |
|
$ |
$ |
( |
) |
||||||||||
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 at inception and the amendments will be applied retrospectively to all prior periods presented in the accompanying condensed consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
In the Initial Public Offering closed on November 4, 2024, the Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
F-19
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 4. PRIVATE PLACEMENT (cont.)
Sponsor issued membership interests at a nominal purchase price to Inflection Point reflecting interests in an aggregate of
The Private Placement Units are identical to the public Units sold in the Initial Public Offering except that, so long as they are held by the Sponsor or their permitted transferees, the Private Placement Units (including their component securities) (i) may not (including the Class A ordinary shares issuable upon conversion of these Private Placement Rights), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination and (ii) are entitled to registration rights.
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial Business Combination; (ii) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On June 25, 2024, the Sponsor made a capital contribution of $
The Company’s initial shareholders have agreed not to transfer, assign or sell any of their founder shares and any Class A ordinary shares issued upon conversion thereof until the earlier to occur of (i)
F-20
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS (cont.)
will be subject to the same restrictions and other agreements of the Company’s initial shareholders with respect to any founder shares (the “Lock-up”). Notwithstanding the foregoing, if (1) the closing price of the Class A ordinary shares equals or exceeds $
On August 12, 2025 and September 22, 2025, the sponsor transferred
Promissory Note — Related Party
The Sponsor had agreed to loan the Company an aggregate of up to $
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
The Company’s ability to complete an initial Business Combination may be adversely affected by various factors, many of which are beyond the Company’s control. The Company’s ability to consummate an initial Business Combination could be impacted by, among other things, changes in laws or regulations, downturns in the financial markets or in economic conditions, inflation, fluctuations in interest rates, increases in tariffs, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. The Company cannot at this time predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact the Company’s ability to complete an initial Business Combination.
F-21
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 6. COMMITMENTS AND CONTINGENCIES (cont.)
Registration Rights
The holders of the founder shares, Private Placement Units and the Class A ordinary shares underlying such Private Placement Units and Private Placement Rights and units that may be issued upon conversion of the Working Capital Loans have registration rights to require the Company to register a sale of any of the Company’s securities held by them and any other securities of the Company acquired by them prior to the consummation of the initial Business Combination pursuant to a registration rights agreement signed on October 31, 2024. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain piggyback registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters had a
The underwriters were entitled to a cash underwriting discount of $
Additionally, the underwriters are entitled to a deferred underwriting discount of $
On August 5, 2025, the Underwriting Agreement dated October 31, 2024, was amended to defer the commencement of the remaining $
Business Combination Agreement
On August 13, 2025 (the “Signing Date”), the Company (which was renamed Inflection Point Acquisition Corp. IV and which shall transfer by way of continuation out of the Cayman Islands and domesticate as a Delaware corporation prior to the Closing) (“Inflection Point”), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the “Business Combination Agreement”), by and among Inflection Point, IPDX Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Inflection Point (“Merger Sub”), and Merlin Labs, Inc., a Delaware corporation (“Merlin Labs”), pursuant to which, among other things and subject to the terms and conditions therein, Merger Sub will merge with and into Merlin Labs, with Merlin Labs continuing as the surviving company (the “Merger”). The transactions contemplated by the Business Combination Agreement are referred to herein as the “Business Combination.” Inflection Point and Merlin Labs are individually referred to herein as a “Party” and, collectively, the “Parties.” In connection with the closing of the Business Combination (the “Closing”), Inflection Point will change its name to “Merlin Labs, Inc.” (such company after the Closing, “New Merlin Labs”).
The Business Combination Agreement and the transactions contemplated thereby were approved by the boards of directors of each of Inflection Point and Merlin Labs.
F-22
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 7. SHAREHOLDERS’ DEFICIT
Preferred Shares — The Company is authorized to issue a total of
Class A Ordinary Shares — The Company is authorized to issue a total of
Class B Ordinary Shares — The Company is authorized to issue a total of
The founder shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination or earlier at the option of the holder on a one-for-one basis, subject to adjustment for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares, or any other equity-linked securities, are issued or deemed issued in excess of the amounts sold in this offering and related to or in connection with the closing of the initial Business Combination, the ratio at which Class B ordinary shares convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding Class B ordinary shares agree to waive such 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,
Holders of record of the Company’s Class A ordinary shares and Class B ordinary shares are entitled to
There is no cumulative voting with respect to the appointment of directors, meaning, following the Company’s initial Business Combination, the holders of more than
F-23
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 7. SHAREHOLDERS’ DEFICIT (cont.)
the amended and restated memorandum and articles of association may only be amended if approved by a special resolution passed by the affirmative vote of at least
Rights — Except in cases where the Company is not the surviving company in a Business Combination, each holder of a right, of which there are
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 on a recurring basis as of September 30, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
|
Level |
September 30, |
December 31, |
||||||
|
Asset: |
|
|
||||||
|
Investments held in Trust Account – U.S. Treasury Securities |
1 |
$ |
|
$ |
|
|||
F-24
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 9. SEGMENT REPORTING
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, 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 or loss that also is reported on the statements of operations as net income or loss. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.
|
September 30, |
December 31, |
|||||
|
Investments held in Trust Account |
$ |
|
$ |
|
||
|
Cash |
$ |
|
$ |
|
||
|
For The |
For The |
For The |
For The Period |
|||||||||
|
General and administrative expenses |
$ |
|
$ |
|
$ |
|
$ |
|
||||
|
Interest earned on investments held in |
$ |
|
$ |
$ |
|
$ |
||||||
The CODM reviews interest earned on the 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 expenses 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 Business Combination 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 costs, 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 or loss are reported on the statements of operations and described within their respective disclosures.
F-25
Table of Contents
INFLECTION POINT ACQUISITION CORP. IV
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(UNAUDITED)
NOTE 10. 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, besides the below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
Amendments to our Amended and Restated Memorandum
On October 21, 2025, with the requisite approvals of the shareholders of the Company, the Amended and Restated Memorandum were amended to (i) change the name of the Company from “Bleichroeder Acquisition Corp. I” to “Inflection Point Acquisition Corp. IV” and (ii) to permit the Company to consummate the redemption of Public Shares at an earlier time in connection with the commencement of the procedures to consummate a proposed Business Combination, as opposed to upon consummation of the proposed Business Combination, if the board of directors determines it is desirable to facilitate the consummation of such Business Combination.
F-26
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Bleichroeder Acquisition Corp. I
Opinion on the Financial Statement
We have audited the accompanying balance sheet of Bleichroeder Acquisition Corp. I (the “Company”) as of December 31, 2024, and the related statements of operations, changes in shareholders’ deficit, and cash flows for the period from June 24, 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, 2024, and the results of its operations and its cash flows for period from June 24, 2024 (inception) through December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement based on our audit. 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 the Company 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 audit 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 statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, 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 audit included performing procedures to assess the risks of material misstatement of the financial statement, 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 statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Company’s auditor since 2024.
/s/ WithumSmith+Brown, PC
WithumSmith+Brown, PC
New York, New York
March 10, 2025
PCAOB ID Number 100
F-27
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
BALANCE SHEET
DECEMBER 31, 2024
|
Assets |
|
|
||
|
Current assets |
|
|
||
|
Cash |
$ |
|
|
|
|
Prepaid expenses |
|
|
|
|
|
Short-term prepaid insurance |
|
|
|
|
|
Total current assets |
|
|
|
|
|
Long-term prepaid insurance |
|
|
|
|
|
Investments held in Trust Account |
|
|
|
|
|
Total Assets |
$ |
|
|
|
|
|
|
|||
|
Liabilities, Class A Ordinary Shares Subject to Possible Redemption, and Shareholders’ Deficit |
|
|
||
|
Current liabilities |
|
|
||
|
Accrued expenses |
$ |
|
|
|
|
Accrued offering costs |
|
|
|
|
|
Cash underwriting fee payable |
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
Deferred underwriting fee |
|
|
|
|
|
Total Liabilities |
|
|
|
|
|
|
|
|||
|
Commitments and Contingencies (Note 6) |
|
|
||
| Class A ordinary shares subject to possible redemption, $ |
|
|
|
|
|
|
|
|||
|
Shareholders’ Deficit |
|
|
||
| Preference shares, $ |
|
|
||
| Class A ordinary shares, $ |
|
|
|
|
| Class B ordinary shares, $ |
|
|
|
|
|
Additional paid-in capital |
|
|
||
|
Accumulated deficit |
|
( |
) |
|
|
Total Shareholders’ Deficit |
|
( |
) |
|
|
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption, and Shareholders’ Deficit |
$ |
|
|
The accompanying notes are an integral part of these financial statements.
F-28
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 24, 2024 (INCEPTION) THROUGH DECEMBER 31, 2024
|
Formation and operational costs |
$ |
|
|
|
|
Loss from operations |
|
( |
) |
|
|
|
|
|||
|
Other income: |
|
|
||
|
Interest earned on bank account |
|
|
|
|
|
Interest earned on investments held in Trust Account |
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|||
|
Net income |
$ |
|
|
|
|
Weighted average shares outstanding of Class A ordinary shares |
|
|
|
|
|
Basic and diluted net income per ordinary share, Class A ordinary shares |
$ |
|
|
|
|
Weighted average shares outstanding of Class B ordinary shares |
|
|
|
|
|
Basic and diluted net income per ordinary share, Class B ordinary shares |
$ |
|
|
The accompanying notes are an integral part of these financial statements.
F-29
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE PERIOD FROM JUNE 24, 2024 (INCEPTION) THROUGH DECEMBER 31, 2024
|
Class A |
Class B |
Additional |
Accumulated |
Total |
||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||
|
Balance – June 24, 2024 (inception) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||
|
Issuance of Class B ordinary shares to Sponsor |
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
|
Sale of Private Placement units |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Accretion for Class A ordinary shares to redemption amount |
— |
|
— |
|
|
|
|
( |
) |
|
( |
) |
|
( |
) |
|||||||||
|
Fair value of public warrants at issuance |
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Allocated value of transaction costs to Class A shares |
— |
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
||||||||||
|
Forfeiture of founder shares |
— |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
||||||||||
|
Net income |
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance – December 31, 2024 |
|
$ |
|
|
|
$ |
|
|
$ |
|
$ |
( |
) |
$ |
( |
) |
||||||||
The accompanying notes are an integral part of these financial statements.
F-30
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 24, 2024 (INCEPTION) THROUGH DECEMBER 31, 2024
|
Cash Flows from Operating Activities: |
|
|
||
|
Net income |
$ |
|
|
|
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
||
|
Formation cost paid by Sponsor in exchange for issuance of Class B ordinary shares |
|
|
|
|
|
Payment of operation costs through promissory note – related party |
|
|
|
|
|
Interest earned on marketable securities held in Trust Account |
|
( |
) |
|
|
Changes in operating assets and liabilities: |
|
|
||
|
Prepaid expenses and other current assets |
|
( |
) |
|
|
Prepaid insurance |
|
( |
) |
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
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 sale of Units, net of underwriting discounts paid |
|
|
|
|
|
Proceeds from sale of Private Placements Units |
|
|
|
|
|
Repayment of promissory note – related party |
|
( |
) |
|
|
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 offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares |
$ |
|
|
|
|
Deferred offering costs paid through promissory note – related party |
$ |
|
|
|
|
Deferred underwriting fee payable |
$ |
|
|
The accompanying notes are an integral part of these financial statements.
F-31
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Bleichroeder Acquisition Corp. I (the “Company”) is a blank check company incorporated as a Cayman Islands exempted corporation on
As of December 31, 2024, the Company had not commenced any operations. All activity for the period from June 24, 2024 (inception) through December 31, 2024 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on investments from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on October 31, 2024. On November 4, 2024, the Company consummated the Initial Public Offering of
Transaction costs amounted to $
The Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least
Following the closing of the Initial Public Offering on November 4, 2024, an amount of $
F-32
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the proceeds from the Initial Public Offering and the sale of the Private Placement Units will not be released from the Trust Account until the earliest of (i) the completion of the Company’s initial Business Combination, (ii) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 24 months from the closing of the Initial Public Offering or by such earlier liquidation date as the Company’s board of directors may approve (the “Completion Window”), subject to applicable law, or (iii) the redemption of the Company’s public shares properly submitted in connection with a shareholder vote to amend the Company’s amended and restated memorandum and articles of association to (A) modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or to redeem
The Company will provide the Company’s public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a general meeting called to approve the initial Business Combination or (ii) without a shareholder vote by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public shareholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (less taxes payable), divided by the number of then outstanding public shares, subject to the limitations.
The ordinary shares subject to redemption were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” In such case, if the Company seeks shareholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
The Company will have only the duration of the Completion Window to complete the initial Business Combination. However, if the Company is unable to complete its initial Business Combination within the Completion Window, the Company will 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 the amount of taxes payable and up to $
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial Business Combination; (ii) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association; (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares and private placement shares if the Company fails to complete the initial Business Combination within the Completion Window, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete the initial Business Combination within the Completion Window and to liquidating distributions from assets outside the Trust Account; and (iv) vote any founder shares or private
F-33
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
placement shares held by them and any public shares purchased during or after the Initial Public Offering (including in open market and privately-negotiated transactions, aside from shares they may purchase in compliance with the requirements of Rule 14e-5 under the Exchange Act, which would not be voted in favor of approving the Business Combination) in favor of the initial Business Combination.
The Company’s Sponsor 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 a prospective target business with which the Company 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) $
On November 21, 2024, the Company announced that, commencing on December 2, 2024, the holders of the Units, each Unit consisting of one Class A ordinary share of the Company, and one right to receive one-tenth (1/10) of one Class A Ordinary Share upon the consummation of the Company’s initial Business Combination, may elect to separately trade the Class A ordinary shares and the rights included in the Units. Any Units not separated will continue to trade on the Nasdaq Global Market under the symbol “BACQU.” The Class A Ordinary shares and the rights trade on the Nasdaq Global Market under the symbols “BACQ” and “BACQR,” respectively. Holders of Units need to have their brokers contact Continental Stock Transfer & Trust Company, the Company’s transfer agent, in order to separate the Units into Class A ordinary shares and rights.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying 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”).
Liquidity and Capital Resources
As of December 31, 2024, the Company had $
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the initial Business Combination.
F-34
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 independent registered public accounting firm 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 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 an emerging growth 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 an 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 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 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 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, 2024, the assets held in the Trust Account, amounting to $
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 coverage limit of $
F-35
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Offering Costs
The Company complies with the requirements of the ASC 340-10-S99 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering.” Offering costs consist principally of professional and registration fees that are related to the Initial Public Offering. 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 Initial Public Offering proceeds from the Units between Class A ordinary shares and Public Rights, using the residual method by allocating Initial Public Offering proceeds first to assigned value of the Public Rights and then to the Class A ordinary shares. Offering costs allocated to the Class A ordinary shares were charged to temporary equity and offering costs allocated to the Public Rights and Private Placement Rights were charged to shareholders’ deficit as the Public Rights and Private Placement Rights, 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 FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statements recognition and measurement of tax positions 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’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2024, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. 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 is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction 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 zero for the period presented.
Rights
The Company accounts for the Public Rights and Private Placement Rights 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 rights under equity treatment at their assigned values.
F-36
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The Public Rights have been classified within shareholders’ deficit and will not require remeasurement after issuance.
|
November 4, |
||||
|
Underlying share price |
$ |
|
|
|
|
Pre-adjusted value per share right |
$ |
|
|
|
|
Market adjustment(1) |
|
|
% |
|
|
Fair value per share right |
$ |
|
|
|
____________
(1)
Class A Redeemable Share Classification
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 redemption outside of permanent deficit as the redemption provisions are not solely within the control of the Company. The Company recognizes 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, the Company 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 accumulated deficit. Accordingly, as of December 31, 2024, 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 balance sheet.
|
Gross proceeds |
$ |
|
|
|
|
Less: |
|
|
||
|
Proceeds allocated to Public Rights |
|
( |
) |
|
|
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 |
$ |
|
|
Net Income per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from income per ordinary share as the redemption value approximates fair value.
The calculation of diluted income per ordinary share does not consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase
F-37
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The following table reflects the calculation of basic and diluted net income per ordinary share (in dollars, except per share amounts):
|
For The Period from |
||||||
|
Class A |
Class B |
|||||
|
Basic and diluted net income per share of common stock: |
|
|
||||
|
Numerator: |
|
|
||||
|
Allocation of net income |
$ |
|
$ |
|
||
|
Denominator: |
|
|
||||
|
Weighted-average shares outstanding |
|
|
|
|
||
|
Basic and diluted net income per common stock |
$ |
|
$ |
|
||
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
In the Initial Public Offering closed on November 4, 2024, the Company sold
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
The Private Placement Units are identical to the public Units sold in the Initial Public Offering except that, so long as they are held by the Sponsor or their permitted transferees, the Private Placement Units (including their component securities) (i) may not (including the Class A ordinary shares issuable upon conversion of these Private Placement Rights), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination and (ii) are entitled to registration rights.
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial Business Combination; (ii) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial
F-38
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 4 — PRIVATE PLACEMENT (cont.)
Business Combination or to redeem
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On June 25, 2024, the Sponsor made a capital contribution of $
The Company’s initial shareholders have agreed not to transfer, assign or sell any of their founder shares and any Class A ordinary shares issued upon conversion thereof until the earlier to occur of (i)
Promissory Note — Related Party
The Sponsor had agreed to loan the Company an aggregate of up to $
F-39
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 5 — RELATED PARTY TRANSACTIONS (cont.)
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Risk and Uncertainties
The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the ongoing Russia-Ukraine conflict and the recent escalation of the Israel-Hamas conflict. 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 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 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 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 escalation of the Israel-Hamas conflict and subsequent sanctions or related actions, 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.
Registration Rights
The holders of the founder shares, Private Placement Units and the Class A ordinary shares underlying such Private Placement Units and Private Placement Rights and units that may be issued upon conversion of the Working Capital Loans have registration rights to require the Company to register a sale of any of the Company’s securities held by them and any other securities of the Company acquired by them prior to the consummation of the initial Business Combination pursuant to a registration rights agreement signed on October 31, 2024. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain piggyback registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
F-40
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 6 — COMMITMENTS AND CONTINGENCIES (cont.)
Underwriting Agreement
The underwriters had a
The underwriters were entitled to a cash underwriting discount of $
NOTE 7 — SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue a total of
Class A Ordinary Shares — The Company is authorized to issue a total of
Class B Ordinary Shares — The Company is authorized to issue a total of
The founder shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination or earlier at the option of the holder on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares, or any other equity-linked securities, are issued or deemed issued in excess of the amounts sold in this offering and related to or in connection with the closing of the initial Business Combination, the ratio at which Class B ordinary shares convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding Class B ordinary shares agree to waive such 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,
Holders of record of the Company’s Class A ordinary shares and Class B ordinary shares are entitled to one vote for each share held on all matters to be voted on by shareholders. Unless specified in the amended and restated memorandum and articles of association or as required by the Companies Act or stock exchange rules, an ordinary resolution under Cayman Islands law and the amended and restated memorandum and articles of association, which requires the affirmative vote of at least a majority of the votes cast by such shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the applicable general meeting of the company is generally required
F-41
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 7 — SHAREHOLDERS’ DEFICIT (cont.)
to approve any matter voted on by the Company’s shareholders. Approval of certain actions requires a special resolution under Cayman Islands law, which (except as specified below) requires the affirmative vote of at least two-thirds of the votes cast by such shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the applicable general meeting, and pursuant to the Company’s amended and restated memorandum and articles of association, such actions include amending the amended and restated memorandum and articles of association and approving a statutory merger or consolidation with another company. There is no cumulative voting with respect to the appointment of directors, meaning, following the Company’s initial Business Combination, the holders of more than
Rights — Except in cases where the Company is not the surviving company in a Business Combination, each holder of a right will automatically receive one-tenth (1/10) of one ordinary share upon consummation of the initial Business Combination. The Company will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of Cayman law. In the event the Company is not the surviving company upon completion of the initial, each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the one-tenth (1/10) of one ordinary share underlying each right upon consummation of the Business Combination. If the Company is unable to complete the initial Business Combination within the required time period and the Company will redeem the public shares for the funds held in the Trust Account, holders of rights will not receive any of such funds for their rights and the rights will expire worthless.
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. |
F-42
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 8 — FAIR VALUE MEASUREMENTS (cont.)
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2024 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
|
Level |
December 31, |
||||
|
Asset: |
|
||||
|
Investments held in Trust Account – U.S. Treasury Securities |
1 |
$ |
|
||
NOTE 9 — SEGMENT REPORTING
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, or group, in deciding how to allocate resources and assess performance.
The Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews the assets, operating results, and financial metrics for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that there is only one reportable segment.
The CODM assesses performance for the single segment and decides how to allocate resources based on net income or loss that also is reported on the statement of operations as net income or loss. The measure of segment assets is reported on the balance sheet as total assets.
|
December 31, |
|||
|
Trust Account |
$ |
|
|
|
Cash |
$ |
|
|
|
For the |
|||
|
General and administrative expenses |
$ |
|
|
|
Interest earned on the Trust Account |
$ |
|
|
The CODM reviews interest earned on the 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 expenses 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 Business Combination 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 costs, as reported on the statement of operations, are the significant segment expenses provided to the CODM on a regular basis.
F-43
Table of Contents
BLEICHROEDER ACQUISITION CORP. I
NOTES TO FINANCIAL STATEMENTS
NOTE 9 — SEGMENT REPORTING (cont.)
All other segment items included in net income or loss are reported on the statement 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 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 financial statements.
F-44
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share amounts)
|
As of: |
||||||||
|
September 30, |
December 31, |
|||||||
|
ASSETS |
|
|
|
|
||||
|
Current assets: |
|
|
|
|
||||
|
Cash and cash equivalents |
$ |
66,757 |
|
$ |
37,195 |
|
||
|
Short-term investments |
|
329 |
|
|
377 |
|
||
|
Accounts receivable, net |
|
3,420 |
|
|
536 |
|
||
|
Prepaid expenses and other current assets |
|
2,002 |
|
|
1,040 |
|
||
|
Capitalized transaction costs |
|
6,365 |
|
|
— |
|
||
|
Total current assets |
|
78,873 |
|
|
39,148 |
|
||
|
Property and equipment, net |
|
7,695 |
|
|
8,589 |
|
||
|
Operating lease right-of-use assets, net |
|
1,138 |
|
|
1,348 |
|
||
|
Deposits |
|
107 |
|
|
109 |
|
||
|
Total assets |
$ |
87,813 |
|
$ |
49,194 |
|
||
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
||||
|
Current liabilities: |
|
|
|
|
||||
|
Accounts payable |
|
2,029 |
|
|
1,294 |
|
||
|
Accrued expenses |
|
8,095 |
|
|
2,683 |
|
||
|
Long-term debt, current portion, net ($14,133 at fair value and $96 at amortized cost, net as of September 30, 2025 and $0 at fair value and $14,224 at amortized cost, net as of December 31, 2024) |
|
14,229 |
|
|
14,224 |
|
||
|
Convertible promissory notes |
|
21,951 |
|
|
— |
|
||
|
Deferred revenue |
|
— |
|
|
112 |
|
||
|
Contract loss provision |
|
5,047 |
|
|
5,166 |
|
||
|
Operating lease liabilities, current |
|
702 |
|
|
709 |
|
||
|
Total current liabilities |
|
52,053 |
|
|
24,188 |
|
||
|
Long-term debt, non-current portion, net ($17,395 at fair value and $574 at amortized cost, net as of September 30, 2025 and $0 at fair value and $21,673 at amortized cost, net as of December 31, 2024) |
|
17,969 |
|
|
21,673 |
|
||
|
Operating lease liabilities, non-current |
|
449 |
|
|
653 |
|
||
|
Warrant liabilities |
|
72,423 |
|
|
3,586 |
|
||
|
Total liabilities |
|
142,894 |
|
|
50,100 |
|
||
|
Commitments and contingencies (Note 14) |
|
|
|
|
||||
|
Redeemable convertible preferred stock |
|
476,333 |
|
|
130,616 |
|
||
|
Stockholders’ deficit: |
|
|
|
|
||||
|
Common Stock: $0.0001 par value; 44,705,861 and 29,500,000 shares authorized; 5,230,523 and 5,169,812 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively |
|
1 |
|
|
1 |
|
||
|
Additional paid-in capital |
|
585 |
|
|
4,009 |
|
||
|
Accumulated deficit |
|
(532,000 |
) |
|
(135,532 |
) |
||
|
Total stockholders’ deficit |
|
(531,414 |
) |
|
(131,522 |
) |
||
|
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit |
$ |
87,813 |
|
$ |
49,194 |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
F-45
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)
|
Nine Months Ended |
||||||||
|
2025 |
2024 |
|||||||
|
Revenue |
$ |
5,899 |
|
$ |
367 |
|
||
|
Cost of revenue |
|
7,725 |
|
|
6,690 |
|
||
|
Gross loss |
|
(1,826 |
) |
|
(6,323 |
) |
||
|
Operating expenses: |
|
|
|
|
||||
|
Research and development |
|
21,699 |
|
|
20,904 |
|
||
|
General and administrative |
|
14,467 |
|
|
13,158 |
|
||
|
Selling and marketing |
|
1,029 |
|
|
1,328 |
|
||
|
Total operating expenses |
|
37,195 |
|
|
35,390 |
|
||
|
Loss from operations |
|
(39,021 |
) |
|
(41,713 |
) |
||
|
Other (expense) income: |
|
|
|
|
||||
|
Interest income |
|
862 |
|
|
1,547 |
|
||
|
Interest expense |
|
(2,956 |
) |
|
(1,197 |
) |
||
|
Other expense |
|
(193 |
) |
|
(136 |
) |
||
|
Change in fair value of warrant liabilities |
|
(4,562 |
) |
|
(314 |
) |
||
|
Change in fair value of convertible promissory notes |
|
(3,118 |
) |
|
— |
|
||
|
Loss on exchange of warrant liabilities |
|
(3,320 |
) |
|
— |
|
||
|
Loss on issuance of financial instruments |
|
(585 |
) |
|
— |
|
||
|
Loss on extinguishment of long-term debt |
|
(2,157 |
) |
|
— |
|
||
|
Change in fair value of long-term debt |
|
(672 |
) |
|
— |
|
||
|
Total other expense |
|
(16,701 |
) |
|
(100 |
) |
||
|
Loss before provision for income taxes |
|
(55,722 |
) |
|
(41,813 |
) |
||
|
Provision for income taxes |
|
3 |
|
|
13 |
|
||
|
Net loss |
|
(55,725 |
) |
|
(41,826 |
) |
||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
|
(345,717 |
) |
|
— |
|
||
|
Net loss attributable to common stockholders |
$ |
(401,442 |
) |
$ |
(41,826 |
) |
||
|
Net loss per share: |
|
|
|
|
||||
|
Basic and diluted |
$ |
(77.33 |
) |
$ |
(8.20 |
) |
||
|
Weighted-average shares outstanding: |
|
|
|
|
||||
|
Basic and diluted |
|
5,191,045 |
|
|
5,103,003 |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
F-46
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (UNAUDITED)
(in thousands, except share and per share amounts)
|
Redeemable Convertible |
Common Stock |
Additional |
Accumulated |
Total |
||||||||||||||||||
|
Number of |
Amount |
Number of |
Amount |
|||||||||||||||||||
|
Balances at December 31, 2024 |
17,696,748 |
$ |
130,616 |
5,169,812 |
$ |
1 |
$ |
4,009 |
|
$ |
(135,532 |
) |
$ |
(131,522 |
) |
|||||||
|
Exercise of common stock options |
— |
|
— |
60,711 |
|
— |
|
78 |
|
|
— |
|
|
78 |
|
|||||||
|
Stock-based compensation |
— |
|
— |
— |
|
— |
|
1,472 |
|
|
— |
|
|
1,472 |
|
|||||||
|
Deemed dividend on exchange of redeemable convertible preferred |
— |
|
345,717 |
— |
|
— |
|
(4,974 |
) |
|
(340,743 |
) |
|
(345,717 |
) |
|||||||
|
Net loss |
— |
|
— |
— |
|
— |
|
— |
|
|
(55,725 |
) |
|
(55,725 |
) |
|||||||
|
Balances as of September 30, 2025 |
17,696,748 |
$ |
476,333 |
5,230,523 |
$ |
1 |
$ |
585 |
|
$ |
(532,000 |
) |
$ |
(531,414 |
) |
|||||||
|
Redeemable Convertible |
Common Stock |
Additional |
Accumulated |
Total |
|||||||||||||||||
|
Number of |
Amount |
Number of |
Amount |
||||||||||||||||||
|
Balances at December 31, 2023 |
17,696,748 |
$ |
130,616 |
4,882,717 |
$ |
1 |
$ |
2,204 |
$ |
(80,279 |
) |
$ |
(78,074 |
) |
|||||||
|
Vesting of restricted common stock |
— |
|
— |
206,250 |
|
— |
|
— |
|
— |
|
|
— |
|
|||||||
|
Exercise of common stock options |
— |
|
— |
72,443 |
|
— |
|
59 |
|
— |
|
|
59 |
|
|||||||
|
Stock-based compensation |
— |
|
— |
— |
|
— |
|
1,281 |
|
— |
|
|
1,281 |
|
|||||||
|
Net loss |
— |
|
— |
— |
|
— |
|
— |
|
(41,826 |
) |
|
(41,826 |
) |
|||||||
|
Balances as of September 30, 2024 |
17,696,748 |
$ |
130,616 |
5,161,410 |
$ |
1 |
$ |
3,544 |
$ |
(122,105 |
) |
$ |
(118,560 |
) |
|||||||
See accompanying notes to unaudited condensed consolidated financial statements.
F-47
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
Nine Months Ended |
||||||||
|
2025 |
2024 |
|||||||
|
Cash flows from operating activities |
|
|
|
|
||||
|
Net loss |
$ |
(55,725 |
) |
$ |
(41,826 |
) |
||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
||||
|
Depreciation |
|
1,145 |
|
|
1,085 |
|
||
|
Stock-based compensation |
|
1,472 |
|
|
1,281 |
|
||
|
Amortization of right-of-use assets |
|
549 |
|
|
384 |
|
||
|
Non-cash interest expense |
|
583 |
|
|
87 |
|
||
|
Gain on disposal of property and equipment |
|
(2 |
) |
|
— |
|
||
|
Change in fair value of warrant liabilities |
|
4,562 |
|
|
314 |
|
||
|
Change in fair value of convertible promissory notes |
|
3,118 |
|
|
— |
|
||
|
Loss on foreign currency exchange rate |
|
196 |
|
|
136 |
|
||
|
Contract loss expense accrual |
|
1,451 |
|
|
6,347 |
|
||
|
Loss on exchange of warrant liabilities |
|
3,320 |
|
|
— |
|
||
|
Loss on issuance of financial instruments |
|
585 |
|
|
— |
|
||
|
Loss on extinguishment of long-term debt |
|
2,157 |
|
|
— |
|
||
|
Change in fair value of long-term debt |
|
(21 |
) |
|
— |
|
||
|
Change in operating assets and liabilities: |
|
|
|
|
||||
|
Accounts receivable |
|
(2,884 |
) |
|
(326 |
) |
||
|
Prepaid expenses and other current assets |
|
(967 |
) |
|
(67 |
) |
||
|
Capitalized transaction costs |
|
(6,365 |
) |
|
— |
|
||
|
Deposits |
|
2 |
|
|
— |
|
||
|
Accounts payable |
|
727 |
|
|
198 |
|
||
|
Accrued expenses |
|
5,327 |
|
|
566 |
|
||
|
Deferred revenue |
|
(112 |
) |
|
29 |
|
||
|
Contract loss provision |
|
(1,570 |
) |
|
(323 |
) |
||
|
Operating lease liabilities |
|
(561 |
) |
|
(400 |
) |
||
|
Net cash used in operating activities |
$ |
(43,013 |
) |
$ |
(32,515 |
) |
||
|
|
|
|
|
|||||
|
Cash flows from investing activities |
|
|
|
|
||||
|
Additions of property and equipment |
$ |
(286 |
) |
$ |
(1,570 |
) |
||
|
Proceeds from sales of property and equipment |
|
15 |
|
|
— |
|
||
|
Maturities of short-term investments |
|
35 |
|
|
95 |
|
||
|
Target Bridge Notes principal originated |
|
— |
|
|
(2,250 |
) |
||
|
Repayment of Target Bridge Notes |
|
— |
|
|
2,250 |
|
||
|
Net cash used in investing activities |
$ |
(236 |
) |
$ |
(1,475 |
) |
||
|
|
|
|
|
|||||
|
Cash flows from financing activities |
|
|
|
|
||||
|
Proceeds from issuance of long-term debt |
$ |
— |
|
$ |
24,555 |
|
||
|
Proceeds from issuance of warrants |
|
60,743 |
|
|
496 |
|
||
|
Proceeds from issuance of convertible promissory notes |
|
17,702 |
|
|
— |
|
||
|
Repayments of long-term debt |
|
(5,712 |
) |
|
(750 |
) |
||
|
Proceeds from exercise of common stock options |
|
78 |
|
|
59 |
|
||
|
Net cash provided by financing activities |
$ |
72,811 |
|
$ |
24,360 |
|
||
|
|
|
|
|
|||||
|
Net increase (decrease) in cash and cash equivalents |
$ |
29,562 |
|
$ |
(9,630 |
) |
||
|
Cash, and cash equivalents at beginning of period |
|
37,195 |
|
|
50,485 |
|
||
|
Cash, and cash equivalents at end of period |
$ |
66,757 |
|
$ |
40,855 |
|
||
F-48
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) — (Continued)
(in thousands)
|
Nine Months Ended |
||||||
|
2025 |
2024 |
|||||
|
Supplemental disclosure of cash flow information |
|
|
||||
|
Cash paid during the year for: |
|
|
||||
|
Interest |
$ |
3,342 |
$ |
537 |
||
|
Taxes |
$ |
69 |
$ |
221 |
||
|
Operating lease right-of-use assets obtained in exchange for operating lease liabilities |
$ |
345 |
$ |
— |
||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
$ |
345,717 |
$ |
— |
||
See accompanying notes to unaudited condensed consolidated financial statements.
F-49
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
1. Organization and Description of Business
Merlin Labs, Inc. was incorporated on October 24, 2018 as a Delaware corporation under the name Apollo Flight Research, Inc and changed its name to Merlin Labs, Inc on October 27, 2020. Merlin Labs, Inc. is the parent company of two wholly-owned subsidiaries: Merlin Labs NZ Limited (“MLNL”), a New Zealand limited company, was incorporated on August 17, 2020 and Merlin Labs Securities Corporation (“MLSC”), a Massachusetts Securities Corporation, was incorporated on December 13, 2022. Merlin Labs, Inc, together with its subsidiaries are herein referred to as “Merlin,” the “Company,” “we,” or “our”.
The Company develops sophisticated software that fulfill the functions of a human pilot in self-flying aircraft to enable both reduced crew and unmanned flight. This technology is designed to be scalable and adaptable across different aircraft types for a growing range of aircraft platforms. The Company’s aircraft-agnostic, AI-powered software is purpose-built for military and civil programs, and is powering an expanding range of missions and aircraft, proven through hundreds of autonomous flights from test facilities across the globe.
On August 13, 2025, the Company entered into a Business Combination Agreement (the “Business Combination Agreement” or “BCA”) with Bleichroeder Acquisition Corp. I, a Cayman Islands exempted company and Nasdaq-listed special purpose acquisition company (a “SPAC” and the “Purchaser”), and IPDX Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Purchaser (“Merger Sub”). On October 21, 2025, the Purchaser changed its name to Inflection Point Acquisition Corp. IV. Under the terms of the BCA, the Purchaser will domesticate as a Delaware corporation (the “Domestication”), and Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of the Purchaser (the “Merger”).
Prior to the Domestication, the Company will file a certificate of amendment to its certificate of incorporation with the Secretary of State of the State of Delaware to change its name to Merlin Labs Operations, Inc. Following the Domestication, the Company and Merger Sub will file a certificate of merger to consummate the Merger. Upon completion of the Merger, the combined company is expected to be publicly listed on the Nasdaq Stock Exchange, subject to regulatory approvals and customary closing conditions.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements include the accounts of Merlin Labs, Inc., and its consolidated subsidiaries, MLNL and MLSC. All intercompany balances and transactions have been eliminated in consolidation.
The unaudited condensed consolidated balance sheet as of December 31, 2024 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including certain notes required by U.S. GAAP on an annual reporting basis. In management’s opinion, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets and statements of operations, redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2024, which were issued October 1, 2025.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Risk and Uncertainties
The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP assuming that the Company will continue as a going concern over the next twelve months. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business, including having sufficient liquidity in the future to meet, among other things, the Company’s obligations under its borrowing arrangements (refer to Note 8. Debt).
Since its inception, the Company has primarily operated in the pre-commercialization stage and funded historical losses through debt and equity financings. The Company expects to incur additional net losses while it continues to advance its commercialization efforts and pursue profit-generating revenue contracts with customers, namely, the United States (“U.S.”) government.
During the nine months ended September 30, 2025 and 2024, the Company incurred net losses in the amounts of $55,725 and $41,826, respectively, and generated negative cash flows from operations in the amounts of $43,013 and $32,515, respectively. Additionally, as of September 30, 2025, the Company has an accumulated deficit in the amount of $532,000 and cash and cash equivalents of $66,757. Based on the Company’s liquidity position as of September 30, 2025, the Company’s current forecast of operating results and cash flows, and the Company’s outstanding debt obligations, management determined that there is substantial doubt about the Company’s ability to continue as a going concern over the twelve months following the date these condensed consolidated financial statements are issued. As a result, the Company may require additional liquidity to continue its operations over the next twelve months.
The ability of the Company to satisfy its obligations and recover its costs will be primarily dependent upon the future financial and operating performance of the Company and the Company is evaluating strategies to finance its future obligations. These strategies include, but are not limited to, effecting a reverse recapitalization with a special purpose acquisition company (a “De-SPAC” transaction), obtaining financing via issuances of debt and equity-linked instruments in additional private investment in public equity (“PIPE”) transactions in connection with a potential De-SPAC transaction (refer to Note 8. Debt and Note 9. Warrants), and obtaining profit-producing revenue contracts with customers including the U.S. government. The Company may not be able to access additional debt or equity financings under acceptable terms, may not be successful in effectuating a De-SPAC transaction, and may not be able to grow its revenue base.
The unaudited condensed consolidated financial statements do not include any adjustments to recorded amounts or the classification of assets and liabilities related to these uncertainties. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of assets and liabilities, and the reported amounts of income and expenses, may be required and material.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, and the reported amounts of revenue and expenses during the reporting periods.
Significant estimates and assumptions made in the accompanying unaudited condensed consolidated financial statements include, but are not limited to, the estimation of anticipated costs to complete a contract, the valuation and recognition of stock-based compensation awards, the valuation of warrant liabilities, the valuation of convertible promissory notes, and the valuation of redeemable convertible preferred stock.
Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the Company’s consolidated financial position and results of operations.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM, who is the Chief Executive Officer, reviews financial information on a consolidated basis to make operating decisions, assess performance, and make resource allocation decisions, leading to decisions related to resource allocations in relation to profit and loss. Accordingly, the Company has determined that it has one reportable segment.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents, which includes money market mutual funds. The Company has a cash management program, which provides for the investment of excess cash balances primarily in money market mutual funds.
Investments
Management determines the appropriate classification of investments in certificates of deposit at the time of purchase based upon management’s intent and ability with regard to such investments. For the periods presented, all investments have been classified as held to maturity.
The Company classifies investments as short-term when they have remaining contractual maturities of one year or less from the balance sheet date, and as long-term when the investments have remaining contractual maturities of more than one year from the balance sheet date. Investments are recorded at fair value, which approximates cost.
Accounts Receivable
Accounts receivable are recorded at the original invoiced amount less an allowance for credit losses. An allowance for credit losses is determined based on historical loss experience, current conditions, and future expectations. Receivables are written off when deemed uncollectible. The Company uses the aging method to determine lifetime expected credit losses on accounts receivable, relying on historical loss experience adjusted for current conditions and future forecasts. Adjustments consider factors such as past due receivables, customer creditworthiness, changes in receivable terms, and external factors like competition and regulatory requirements. The Company pools receivables with similar risk characteristics for estimating expected credit losses and evaluates these pooling decisions periodically as risk characteristics change. For receivables not sharing similar risk characteristics, individual measurement is applied.
As of September 30, 2025 and December 31, 2024, the allowance for credit losses is immaterial to the unaudited condensed consolidated financial statements.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with accredited financial institutions in amounts which at times exceed federally insured limits. The Company monitors the credit standing of such financial institutions in order to limit credit risk. The Company has not experienced any losses on its cash and cash equivalents and believes it is not exposed to any significant losses due to credit risk on cash and cash equivalents.
During the nine months ended September 30, 2025 and 2024, the Company generated $5,899 and $367 in revenue, with a significant amount (> 95%) of this revenue coming from the U.S. government. As of September 30, 2025 and December 31, 2024, accounts receivable from the U.S. government totaled $3,349 and $535, respectively.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Fair Value Measurements
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1 — Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 — Inputs to the valuation methodology include:
• Quoted prices for similar assets or liabilities in active markets;
• Quoted prices for identical or similar assets or liabilities in inactive markets;
• Inputs other than quoted prices that are observable for the asset or liability; and
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Property and Equipment, net
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, as follows:
|
Property and Equipment, net |
Estimated Useful Life |
|
|
Aircraft |
11-15 years |
|
|
Aircraft equipment |
3-8 years |
|
|
Computer equipment |
2-3 years |
|
|
Leasehold improvements |
Lesser of the useful life or life of lease |
|
|
Office furniture & equipment |
3-13 years |
|
|
Motor vehicles |
3-4 years |
Leases
The Company determines if an arrangement is, or contains, a lease at inception. An arrangement qualifies as a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is established if the Company has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
At the commencement date, the date on which the lessor makes the underlying asset available for use, leases are classified as either operating or finance leases based on their economic substance. Operating leases are presented in the condensed consolidated balance sheets within operating lease right-of-use assets, net, operating lease liabilities, current, and operating lease liabilities, non-current. Finance leases, which are immaterial to the Company’s financial statements, are presented in the condensed consolidated balance sheets within property and equipment, net and accrued expenses.
The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when determining its incremental borrowing rates.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
For short-term leases, defined as leases with a term of twelve months or less, the Company elected the practical expedient to not recognize an associated lease liability and right-of-use asset. Lease payments for short-term leases are expensed on a straight-line basis over the lease term.
The Company has elected the policy to not separate lease and nonlease components for all classes of underlying assets. Lease right-of-use assets also include any lease payments made at or before commencement date, net of lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.
The Company leases office space, aircraft, motor vehicles, and airport hangar space in the United States and New Zealand.
Impairment of Long-Lived Assets
All long-lived assets are reviewed by the Company for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures recoverability of assets to be held and used by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of September 30, 2025 and December 31, 2024, the Company determined that there have been no significant events or changes in circumstances that would cause the impairment of any of the Company’s long-lived assets.
Term Debt
The Company has elected to apply the fair value method of accounting in accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825”), for certain of its term debt instruments. The Company initially records term debt accounted for under the fair value option at fair value and subsequently remeasures such instruments to fair value on each balance sheet date thereafter. The change in fair value of term debt accounted for at fair value, together with interest accrued thereon, is recorded in change in fair value of long-term debt in the condensed consolidated statements of operations.
For term debt instruments not accounted for under the fair value method of accounting, the Company records such term debt obligations at amortized cost, net of any debt issuance costs, discounts, and premiums. Upon issuance, the Company evaluates whether identified embedded derivatives should be bifurcated and accounted for as a derivative at fair value under ASC 815, Derivatives and Hedging (“ASC 815”). Any embedded derivatives that meet the criteria for bifurcation and separate accounting are accounted for as a compound derivative recorded at fair value on the date of issuance and on each balance sheet date thereafter, with changes in fair value recorded in the condensed consolidated statements of operations.
Convertible Debt
The Company has elected to apply the fair value method of accounting in accordance with ASC 825 for certain of its convertible debt instruments. The Company records convertible debt accounted for under the fair value option at fair value upon the date of issuance and subsequently remeasures such instruments to fair value on each balance sheet date thereafter. The change in fair value of convertible debt accounted for at fair value, together with interest accrued thereon, is recorded in change in fair value of convertible promissory notes in the condensed consolidated statements of operations.
For convertible debt instruments not accounted for under the fair value method of accounting, the Company first assesses the balance sheet classification of its convertible debt instruments to determine whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). If convertible debt is not classified as a liability under ASC 480, the Company accounts for convertible debt in accordance with
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
ASC 470-20, Debt with Conversion and Other Options, and ASC 815. Upon issuance, the Company evaluates whether the embedded conversion feature, as well as other identified embedded derivatives, should be bifurcated and accounted for as a derivative at fair value under ASC 815, and if not, whether any substantial premium must be recognized in additional paid-in capital. Any embedded derivatives that meet the criteria for bifurcation and separate accounting are accounted for as a compound derivative recorded at fair value on the date of issuance and on each balance sheet date thereafter, with changes in fair value recorded in the condensed consolidated statements of operations.
Debt Issuance Costs
Costs incurred in connection with the issuance of debt instruments accounted for under the fair value method of accounting under ASC 825 are expensed as incurred.
Costs incurred in connection with the issuance of debt instruments accounted for at amortized cost are recorded as a direct deduction against the associated debt liability, consistent with debt discounts. These costs are included in long-term debt, current portion, net and long-term debt, non-current, net in the Company’s condensed consolidated balance sheet and are amortized over the life of the associated debt as a component of interest expense using the effective interest method.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance included in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments (if they were issued with another instrument) pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and if not, whether the warrants meet the requirements for equity classification under ASC 815. This assessment requires the use of professional judgment and is conducted at issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Warrants that meet all of the criteria for equity classification are recorded at fair value as a component of additional paid-in capital at the time of issuance and are not subsequently remeasured. Warrants that do not meet all the criteria for equity classification are recorded at fair value on the date of issuance and on each balance sheet date thereafter as a component of warrant liabilities in the Company’s condensed consolidated balance sheets. Changes in the estimated fair value of the warrants are non-cash gains or losses recognized in change in fair value of warrant liabilities in the condensed consolidated statements of operations.
Redeemable Convertible Preferred Stock
The Company evaluates its redeemable convertible preferred stock under ASC 480 to evaluate the classification of the redeemable convertible preferred stock. The Company’s redeemable convertible preferred stock does not require liability classification under ASC 480 and is classified in mezzanine equity as all classes may be subject to redemption upon the occurrence of an event that is not solely within the control of the Company. Upon issuance, the Company evaluates whether identified embedded derivatives should be bifurcated and accounted for as a derivative at fair value under ASC 815. The redeemable convertible preferred stock is initially recognized at the proceeds received, net of issuance costs and the fair value of any bifurcated derivatives, and is only subsequently remeasured to the extent it becomes currently redeemable or probable of becoming redeemable. Any embedded derivatives that meet the criteria for bifurcation and separate accounting are accounted for as a compound derivative recorded at fair value on the date of issuance and on each balance sheet date thereafter, with changes in fair value recorded in the condensed consolidated statements of operations.
Revenue Recognition
The Company recognizes revenue under its contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers. The Company derives its revenues primarily through its engineering and autonomy development programs with U.S. government agencies, including the Federal Aviation Administration, U.S. Special
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Operations Command, and the U.S. Air Force. These contracts focus on the design, demonstration, and integration of autonomous flight technologies. The Company also engages in limited commercial activities with foreign and private sector customers, including aviation advisory services in New Zealand.
The Company performs under various contract types, including firm-fixed-price, cost-plus-fixed-fee, and cost-share arrangements. These contracts are structured to support research and development efforts, prototype demonstrations, and system integration activities.
Revenue is recognized when control of the goods and services provided is transferred to the Company’s customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services using the following steps: 1) identification of the contract or contracts with a customer, 2) identification of performance obligations in the contract, 3) determination of the transaction price, 4) allocation of the transaction price to the performance obligations in the contract and 5) recognition of revenue when or as the Company satisfies the performance obligations.
The Company’s performance obligation consists of comprehensive engineering and development programs rather than distinct deliverables. Supporting activities such as system engineering, airworthiness certification, and technical data packages are not considered separate performance obligations as they are highly interrelated and collectively contribute to the overarching deliverable. The Company provides engineering data and insights that inform the customer’s broader autonomy initiatives.
Contracts with U.S. government entities are governed by the Federal Acquisition Regulation, which defines allowable costs and pricing methodologies. Each contract is individually negotiated and variable consideration may arise in cost-share arrangements, where the Company is reimbursed for a portion of actual costs incurred, subject to a contractual ceiling. The Company includes variable consideration in the transaction price only when it is probable that a significant revenue reversal will not occur. Pricing for non-government customers, including commercial and foreign entities, is determined through direct negotiation. The Company’s contracts generally do not contain significant financing components, and taxes collected are excluded from the transaction price.
The Company recognizes revenue on its engineering and development contracts with the U.S. government primarily over time, as control of the services is continuously transferred throughout the performance period. This continuous transfer is supported by standard U.S. government contract clauses, including the right to terminate for convenience and the obligation to reimburse the contractor for costs incurred plus reasonable compensation. These provisions, along with the customer’s ability to benefit from the work-in-progress through monthly deliverables and technical reports, support over-time revenue recognition. The Company bills its customers on a monthly basis as services are provided throughout the contract. For these contracts, the Company generally uses a method that measures the extent of progress towards completion of the performance obligation, principally using a cost incurred input method. Under this method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion. A management reserve may be applied to estimated costs to account for uncertainty and prevent premature revenue recognition. Anticipated losses on cost-share contracts are recognized in accordance with ASC 605-35 when total estimated costs are expected to exceed consideration.
In the case of a contract for which the total estimated costs is expected to exceed the total estimated revenue, a loss arises, and a provision for the entire loss is recorded in the period that it becomes evident. The unrecoverable costs on a loss contract that are expected to be incurred are recorded as expense in cost of revenue in the condensed consolidated statements of operations and a provision is recorded in contract loss provision in the condensed consolidated balance sheets. As costs related to the loss contract are incurred, the contract loss provision in the condensed consolidated balance sheets is reduced. The Company recorded net losses related to contracts with customers of $1,451 and $6,347 for the nine months ended September 30, 2025 and 2024, respectively.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Contract Assets and Liabilities
The timing of revenue recognition, customer billings and cash collections for each contract results in a net contract asset or deferred revenue liability at the end of each reporting period.
Contract assets consist of unbilled receivables, which is the amount of revenue recognized that exceeds the amount billed to the customer. Contract liabilities consist of deferred revenue, which represents cash advances received prior to performance for programs and billings in excess of revenue recognized.
Research and Development Costs
Research and development expenses consist primarily of personnel-related costs for the Company’s development team, including salaries, benefits, bonuses, stock-based compensation expenses and allocated overhead costs. Research and development expenses also include contractor or professional service fees and software services dedicated for use by the Company’s research and development organization.
The Company will enter into research and development agreements with third-parties where the Company will be paid for research and development activities. The amounts received under these agreements are recorded as a reduction to research and development expense in the condensed consolidated statements of operations. The Company recorded $300 and $0 as a reduction to research and development expense during the nine months ended September 30, 2025 and 2024, respectively.
Advertising Costs
The Company expenses advertising costs as incurred. During the nine months ended September 30, 2025 and 2024, the Company incurred advertising expense in the amounts of $1,113 and $1,031, respectively.
Stock-Based Compensation
The Company recognizes stock-based compensation on awards granted under the Merlin Labs 2018 Equity Incentive Plan (“the Plan”). These awards include incentive stock options (“ISOs”) granted to employees as well as nonqualified stock options (“NSOs”) or restricted stock awards (“RSUs”) granted to directors, consultants, employees, and officers of the Company. In addition to the Plan, the Company has historically issued common stock warrants to a vendor as compensation for services provided to the Company.
Stock-based compensation expense is recorded for awards issued to employees and nonemployees using the fair value method with a corresponding increase in additional paid-in capital in the condensed consolidated balance sheets. The Company recognizes forfeitures as they occur.
Under the Plan, these awards generally vest over a four-year period, subject to the terms set forth in individual grant agreements and the discretion of the Plan administrator. Stock-based compensation awards are measured at the grant date fair value with compensation expense recognized on a straight-line basis over the requisite vesting period of the award.
Capitalized Transaction Costs
Capitalized transaction costs primarily consist of legal and accounting costs incurred that are direct and incremental to the Company’s planned Merger. Upon the completion of the planned Merger, capitalized transaction costs will be netted against the proceeds from the Merger and recorded as an offset to stockholders’ deficit. During the nine months ended September 30, 2025, the Company capitalized $6,365 of transaction costs in capitalized transaction costs on the unaudited condensed consolidated balance sheet. In the event the planned Merger is terminated, the capitalized transaction costs will be expensed.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Income Taxes
The Company estimates its current tax expense together with assessing temporary differences resulting from differing treatment of items not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities on the Company’s condensed consolidated balance sheets, which are estimated based upon the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates that will be in effect when these differences reverse. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s condensed consolidated statements of operations become deductible expenses under applicable income tax laws or loss or credit carryforwards are utilized. Accordingly, the realization of the Company’s deferred tax assets is dependent on future taxable income against which these deductions, losses, and credits can be utilized.
The Company evaluates the realizability of its deferred tax assets on a quarterly basis. The Company records a valuation allowance when, based on the weight of available evidence, it expects future taxable income is not likely to support the use of a deduction or credit in that jurisdiction. If certain factors change and the Company determines that the deferred tax assets are realizable at a more-likely-than not level, it will adjust the valuation allowance in the period the determination is made. Changes in the valuation allowance, when recorded, would be included in the Company’s condensed consolidated statements of operations. Management’s judgment is required in determining the Company’s valuation allowance recorded against its net deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions, if any, in its provision for income taxes. The Company is subject to the Global Intangible Low Taxed Income (“GILTI”) tax in the U.S. and has elected to treat taxes on future GILTI inclusions as current period expense if and when incurred.
Net Loss per Share
The Company calculates basic and diluted net loss per share using the two-class method. Under the two-class method, earnings are allocated to common stock and participating securities according to their participation rights in dividends and undistributed earnings. The Company’s net loss is fully attributable to its common stockholders for the periods presented.
Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share attributable to common stockholders adjusts basic earnings (loss) per share for the potentially dilutive impact of redeemable convertible preferred stock, restricted stock, stock options, common stock warrants, preferred stock warrants, and debt conversion features. As the Company has reported losses for all periods presented and all potentially dilutive securities are anti-dilutive, basic net loss per share equaled diluted net loss per share.
Determination of Fair Value of Common Stock
Since there has been no public market for our common stock, the estimated fair value of our common stock has been determined by the Board of Directors through the use of an annual valuation report prepared by an independent third-party specialist, supplemented by the Board’s and management’s assessments of any material changes between the valuation date and the date of each option grant approval.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
The Company uses a hybrid method that is a combination of the probability-weighted expected return and option-pricing method when determining the fair value of the common stock. The hybrid method incorporates the weighted probability of multiple liquidity scenarios based on the probability of the scenario’s occurrence, while also utilizing the option-pricing method to estimate the allocation of value in one or more of the scenarios. Key inputs include volatility, a discount rate, a discount for lack of marketability, and the liquidity event scenario probability.
In addition to considering the results of the independent third-party valuations, our Board of Directors considers various objective and subjective factors when determining if the fair value of the common stock has changed between the valuation date and grant date including actual operating performance and financial results, current business conditions and projections, the market performance of comparable publicly traded companies, and the U.S. and global capital market conditions and may adjust the valuation accordingly.
Foreign Currency
The Company’s foreign operations related to MLNL are remeasured from New Zealand Dollars (“NZD”) into U.S. dollars. The remeasurement is based on the determination that the U.S. dollar is the functional currency of MLNL. Monetary assets and liabilities of MLNL’s foreign operations are remeasured into U.S. dollars at period-end exchange rates and nonmonetary assets, liabilities and equity accounts are remeasured using historical exchange rates. Income statement accounts are remeasured at the weighted average exchange rate prevailing during the period. During the nine months ended September 30, 2025 and 2024, the Company recognized foreign currency exchange losses of $196 and $136, respectively.
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options and Derivatives and Hedging — Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. We adopted this standard effective on January 1, 2024, the beginning of the fiscal year ended December 31, 2024, and adoption did not have a material effect on our consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required in an entity’s income tax rate reconciliation table and requires disclosure of income taxes paid in both U.S. and foreign jurisdictions. The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. These requirements will impact our income tax disclosures and we are currently evaluating the impact of adoption.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures, which requires the disclosure of additional information about specific expense categories in the notes to the consolidated financial statements on an annual and interim basis. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027 on either a prospective or retrospective basis, with early adoption permitted. The Company is currently evaluating the impacts of the new standard on its consolidated financial statements.
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MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
3. Revenue Recognition from Contracts with Customers
Disaggregation of Revenue
The Company disaggregates revenues by customer-type. These categories represent how the nature, timing and uncertainty of revenues and cash flows are affected.
Disaggregated revenues by customer-type were as follows:
|
Nine Months Ended |
||||||
|
2025 |
2024 |
|||||
|
U.S. government agencies |
$ |
5,776 |
$ |
318 |
||
|
Commercial and non-U.S. government customers |
|
123 |
|
49 |
||
|
Total |
$ |
5,899 |
$ |
367 |
||
Revenues from New Zealand during the nine months ended September 30, 2025 and 2024 amounted to $123 and $49, respectively.
No revenue recognized during nine months ended September 30, 2025 and 2024 was related to performance obligations satisfied in prior periods
Remaining performance obligations
As of September 30, 2025, the aggregate amount of the transaction price allocated to the remaining performance obligations was $8,925, all of which will be recognized over the next 12 months. Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals, or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations, and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate.
Contract balances
The following table presents contract balances:
|
Contract Balances |
|||
|
Accounts receivable, net |
|
||
|
Balance – January 1 |
$ |
536 |
|
|
Balance – September 30 |
$ |
3,420 |
|
|
Unbilled receivables: |
|
||
|
Balance – January 1 |
$ |
— |
|
|
Balance – September 30 |
$ |
659 |
|
|
Deferred revenue: |
|
||
|
Balance – January 1 |
$ |
112 |
|
|
Balance – September 30 |
$ |
— |
|
|
Contract loss provision |
|
||
|
Balance – January 1 |
$ |
5,166 |
|
|
Balance – September 30 |
$ |
5,047 |
|
Revenue recognized during the nine months ended September 30, 2025 from amounts included in deferred revenue at the beginning of the period was $112.
F-60
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
4. Fair Value Measurements
The following table presents assets and liabilities measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation as follows:
|
As of September 30, 2025 |
||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||
|
Assets: |
|
|
|
|
||||||||
|
Cash equivalents: |
|
|
|
|
||||||||
|
Money market mutual funds |
$ |
64,224 |
$ |
— |
$ |
— |
$ |
64,224 |
||||
|
Total Assets |
$ |
64,224 |
$ |
— |
$ |
— |
$ |
64,224 |
||||
|
Liabilities: |
|
|
|
|
||||||||
|
Current liabilities: |
|
|
|
|
||||||||
|
2024 LSA Loans, current portion |
$ |
— |
$ |
— |
$ |
14,133 |
$ |
14,133 |
||||
|
Convertible promissory notes |
|
— |
|
— |
|
21,951 |
|
21,951 |
||||
|
Non-current liabilities: |
|
|
|
|
||||||||
|
2024 LSA Loans, non-current portion |
|
— |
|
— |
|
17,395 |
|
17,395 |
||||
|
Warrant liabilities |
|
— |
|
— |
|
72,423 |
|
72,423 |
||||
|
Total Liabilities |
$ |
— |
$ |
— |
$ |
125,902 |
$ |
125,902 |
||||
|
As of December 31, 2024 |
||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||
|
Assets: |
|
|
|
|
||||||||
|
Cash equivalents: |
|
|
|
|
||||||||
|
Money market mutual funds |
$ |
29,773 |
$ |
— |
$ |
— |
$ |
29,773 |
||||
|
Total Assets |
$ |
29,773 |
$ |
— |
$ |
— |
$ |
29,773 |
||||
|
Liabilities: |
|
|
|
|
||||||||
|
Warrant liabilities |
$ |
— |
$ |
— |
$ |
3,586 |
$ |
3,586 |
||||
|
Total Liabilities |
$ |
— |
$ |
— |
$ |
3,586 |
$ |
3,586 |
||||
Fair value measurements for cash equivalents are based on quoted market prices in active markets. There have been no changes in the fair value methodologies used for the nine months ended September 30, 2025 and 2024.
Fair value measurements for certificates of deposit do not have quoted market prices in an active market, however their fair value can typically be determined based on observable inputs, which include interest rates, yields and maturity schedules.
For all periods prior to December 31, 2024, fair value measurements for preferred stock warrant liabilities were estimated using an option pricing approach embedded within a Monte Carlo simulation using Level 3 inputs. The Monte Carlo simulation simulates the Company’s equity value from each respective valuation date to the expected financing event date, incorporating breakpoints at which various equity classes participate in distributions.
The following relevant assumptions were used in determining the fair value of the preferred stock warrant liabilities (refer to Note 9. Warrants) as of December 31, 2024:
|
December 31, |
||||
|
Equity value |
$ |
309,613 |
|
|
|
Expected financing amount |
$ |
100,000 |
|
|
|
Expected financing date |
|
5/31/2025 |
|
|
|
Expected liquidity event |
|
12/31/2026 |
|
|
|
Equity volatility |
|
50.0 – 60.0 |
% |
|
|
Risk-free rate |
|
4.20 – 4.24 |
% |
|
F-61
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
4. Fair Value Measurements (cont.)
For all periods after December 31, 2024, and in contemplation of the anticipated Merger, fair value measurements for warrant liabilities and convertible promissory notes (refer to Note 8. Debt and Note 9. Warrants) were estimated using a probability-weighted expected return method, considering scenarios in which the Merger does or does not occur.
In the scenario in which the Merger does not occur, the fair value of the 2019 LSA Warrants, 2021 LSA Warrants, and 2024 LSA Warrants were estimated using an option pricing approach embedded within a Monte Carlo simulation. The Monte Carlo simulation simulates the Company’s equity value from each respective valuation date to the expected financing event date, incorporating breakpoints at which various equity classes participate in distributions. In the scenario in which the Merger occurs, the fair value of the 2019 LSA Warrants, 2021 LSA Warrants, and 2024 LSA Warrants were estimated using a common stock equivalent method which incorporates the expected capital structure and distribution of proceeds in a public company context and allocated value among the Company’s equity classes assuming the Company successfully completes the Merger.
In both scenarios, the fair value of the 2024 LSA Amendment Warrants were estimated using a discounted cash flow method, calculating the present value of future cash flows based on the contractual terms thereof at the calibrated discount rate.
In both scenarios, the fair value of the Pre-PIPE Bridge Notes and Pre-Funded PIPE Notes were estimated using a discounted cash flow method, calculating the present value of future cash flows based on the contractual terms of such instruments at the calibrated discount rate.
In the scenario in which the Merger does not occur, the fair value of the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were estimated using an option pricing approach embedded within a lattice model. The lattice model simulates the Company’s equity value from each respective valuation date to the expected financing event date, incorporating breakpoints at which various equity classes participate in distributions. In the scenario in which the Merger occurs, the fair value of the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were estimated using the Black-Scholes option pricing formula.
The following relevant assumptions were used in determining the fair value of the warrant liabilities and convertible promissory notes as of September 30, 2025:
|
September 30, |
|||
|
Non-Merger scenario – Equity value |
$ |
647,000 |
|
|
Non-Merger scenario – Expected financing amount |
$ |
150,000 |
|
|
Non-Merger scenario – Expected financing date |
|
3/30/2026 |
|
|
Non-Merger scenario – Expected liquidity event |
|
9/30/2028 |
|
|
Non-Merger scenario – Equity volatility |
|
67.5% – 75.0% |
|
|
Merger scenario – Expected Merger date |
|
3/30/2026 |
|
|
Merger scenario – Stock price |
$ |
10.40 |
|
|
Merger scenario – Equity volatility |
|
70.0% |
|
|
Calibrated discount rate |
|
285.0% |
|
|
Risk-free rate |
|
3.57% – 4.67% |
|
F-62
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
4. Fair Value Measurements (cont.)
Fair value measurements for the 2024 LSA Loans (refer to Note 8. Debt) were estimated using a discounted cash flow method and a lattice model. The lattice model was used to estimate the fair value measurement impact of various share- and cash-settled redemption features which only apply to a portion of the outstanding principal amount of 2024 LSA Loans and the discounted cash flow method was used to estimate the fair value measurement impact of the principal amount of 2024 LSA Loans not subject to such redemption features.
The following relevant assumptions were used in determining the fair value of the 2024 LSA Loans as of September 30, 2025:
|
September 30, |
||||
|
Fair value of Series B Prime redeemable convertible preferred stock |
$ |
28.02 |
|
|
|
Equity volatility |
|
75.0 |
% |
|
|
Credit rating |
|
CCC- |
|
|
|
Discount rate |
|
18.2 |
% |
|
The Company’s fair value measurement activity, using unobservable inputs and associated unrealized losses (gains) with respect to warrant liabilities outstanding as of September 30, 2025 and September 30, 2024 were as follows:
|
Amount |
|||
|
Fair value as of December 31, 2023 |
$ |
2,825 |
|
|
Issuance of warrants |
|
496 |
|
|
Change in fair value of warrants |
|
314 |
|
|
Fair value as of September 30, 2024 |
$ |
3,635 |
|
|
Amount |
||||
|
Fair value as of December 31, 2024 |
$ |
3,586 |
|
|
|
Issuance of warrants |
|
66,044 |
|
|
|
Exchange of warrants |
|
(1,769 |
) |
|
|
Change in fair value of warrants |
|
4,562 |
|
|
|
Fair value as of September 30, 2025 |
$ |
72,423 |
|
|
The Company’s fair value measurement activity, using unobservable inputs and associated unrealized losses (gains) with respect to convertible promissory notes outstanding as of September 30, 2025 were as follows:
|
Amount |
|||
|
Fair value as of December 31, 2024 |
$ |
— |
|
|
Issuance of convertible promissory notes |
|
18,833 |
|
|
Change in fair value of convertible promissory notes |
|
3,118 |
|
|
Fair value as of September 30, 2025 |
$ |
21,951 |
|
The Company’s fair value measurement activity, using unobservable inputs and associated unrealized losses (gains) with respect to 2024 LSA Loans outstanding as of September 30, 2025 were as follows:
|
Amount |
||||
|
Fair value as of December 31, 2024 |
$ |
— |
|
|
|
Recognition at fair value at extinguishment date |
|
31,549 |
|
|
|
Non-cash change in fair value of 2024 LSA Loans |
|
(21 |
) |
|
|
Fair value as of September 30, 2025 |
$ |
31,528 |
|
|
F-63
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
5. Target Bridge Notes
On June 7, 2024, the Company and a third party target entity executed a term sheet which established the general terms of a potential acquisition of the target by the Company, including the establishment of a binding 60-day exclusivity period during which period the target was prohibited from negotiating, discussing, or entering into any other alternative transaction. In connection with the signing of the term sheet and to finance the target’s ongoing operations prior to the consummation of the potential acquisition, the Company extended a bridge financing facility with an aggregate commitment amount of $3,000 to the target.
Between June 2024 and July 2024, the Company originated $2,250 of aggregate principal amount of bridge notes to the target (“Target Bridge Notes”). The Target Bridge Notes accrued interest at a rate equal to the higher of (a) 6.0% and (b) the then-current Applicable Federal Rate. The Target Bridge Notes were scheduled to mature upon the earlier of (a) 30 days following the end of the exclusivity period and (b) the closing of the proposed acquisition. At the maturity thereof, the Target Bridge Notes would be settled as a dollar-for-dollar reduction in the closing purchase price in the proposed acquisition. Additionally, if the proposed acquisition did not close, the Target Bridge Notes remained outstanding, and the target consummated any sale or other exit event, the Company would be entitled to receive two times the sum of Target Bridge Notes principal amount outstanding plus accrued unpaid interest thereon.
On July 31, 2024, the target notified the Company that it was no longer pursuing an acquisition by the Company. In August 2024, the Company became aware that the former target violated the binding terms outlined in the term sheet and other agreements entered into therefrom. As a result, the former target repaid the outstanding principal amount of Target Bridge Notes of $2,250, plus accrued interest thereon, on September 3, 2024. The Company did not pursue litigation against the former target and did not receive any termination fees or penalty payments in connection with the breach of terms.
6. Property and Equipment, net
Property and equipment consisted of the following:
|
As of: |
||||||
|
September 30, |
December 31, |
|||||
|
Aircraft equipment |
$ |
6,338 |
$ |
6,194 |
||
|
Aircraft |
|
4,717 |
|
4,681 |
||
|
Computer equipment |
|
528 |
|
515 |
||
|
Leasehold improvements |
|
425 |
|
394 |
||
|
Office furniture & equipment |
|
346 |
|
315 |
||
|
Motor vehicles |
|
85 |
|
85 |
||
|
Total property and equipment |
|
12,439 |
|
12,184 |
||
|
Less: Accumulated depreciation |
|
4,744 |
|
3,595 |
||
|
Total property and equipment, net |
$ |
7,695 |
$ |
8,589 |
||
Depreciation expense for the nine months ended September 30, 2025 and 2024 amounted to $1,145 and $1,085, respectively.
7. Leases
The Company leases office space, aircraft, and airport hangar space under noncancelable operating lease agreements, which require escalating monthly rental payments plus related operating costs and expire on various dates through 2033. These leases contain no provisions for renewal other than a certain New Zealand lease, which contains one renewal option for five years. The Company is not reasonably certain to elect the renewal option and has excluded it in the related right-of-use (“ROU”) asset.
F-64
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
7. Leases (cont.)
Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized for these leases on a straight-line basis over the lease term.
The components of lease expense for the years ended were as follows:
|
Nine Months Ended |
||||||
|
Component |
2025 |
2024 |
||||
|
Operating lease expense |
$ |
671 |
$ |
500 |
||
|
Short-term lease expense |
|
84 |
|
181 |
||
|
Variable lease expense |
|
2 |
|
9 |
||
|
Total lease expense |
$ |
757 |
$ |
690 |
||
The weighted average remaining lease term and discount rate for operating leases were as follows:
|
As of: |
||||||
|
September 30, |
December 31, |
|||||
|
Weighted average remaining lease term (in years) |
3.10 |
|
3.30 |
|
||
|
Weighted average discount rate |
13.05 |
% |
12.40 |
% |
||
Future minimum operating lease payments as of September 30, 2025 are as follows:
|
Year Ending December 31, |
Amount |
||
|
2025 |
$ |
229 |
|
|
2026 |
|
703 |
|
|
2027 |
|
79 |
|
|
2028 |
|
79 |
|
|
2029 |
|
79 |
|
|
Thereafter |
|
251 |
|
|
Total future minimum lease payments |
|
1,420 |
|
|
Less imputed interest |
|
269 |
|
|
Present value of operating liabilities |
|
1,151 |
|
|
Less operating lease liabilities, current |
|
702 |
|
|
Operating lease liabilities, non-current |
$ |
449 |
|
On September 4, 2025, the Company entered into a lease agreement that has not commenced for hangar and corporate office space in Bedford, MA and thus no right-of-use asset or lease liability has been recorded. When the lease commences the lease arrangement will have estimated total future payments of approximately $34,247 through September 2035. The lease is expected to commence in 2027. Also on September 4, 2025, the Company entered into a side letter agreement with the landlord permitting the Company to install a temporary airplane hangar on land subject to the lease agreement until the subject premises are made available. As of September 30, 2025, the premises and the land for the temporary hangar have not yet been made available to the Company.
8. Debt
2021 LSA
During September 2021, the Company entered into a loan and security agreement (“2021 LSA”) with the lender thereto which provided for term loan commitments with a maximum potential borrowing amount of $10,000. The aggregate commitments under the 2021 LSA included (a) a term loan facility in an aggregate principal amount of $3,000 (the “2021 LSA First Tranche”), (b) a delayed draw term loan facility in an aggregate principal amount of $1,000 (the “2021 LSA Second Tranche”), and (c) the lender’s commitment to reserve $6,000 for future funding of loans (the “2021 LSA Reserve”).
F-65
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
8. Debt (cont.)
Pursuant to the terms of the 2021 LSA, term loans under 2021 LSA First Tranche were required to be drawn down within five business days following the execution of the 2021 LSA. As a condition precedent to issue term loans under the 2021 LSA Second Tranche, the Company was required to achieve certain operational milestones and the 2021 LSA Second Tranche expired unused in March 2022. Further, the Company had no enforceable right to issue term loans under the 2021 LSA Reserve as any binding commitment thereto was subject to the Company and lender agreeing to enter into a binding commitment to provide funding following the Company’s next equity financing round. No amounts were drawn under the 2021 LSA Reserve. In connection with the execution of the 2021 LSA, the Company issued the lender thereunder warrants to purchase the Company’s redeemable convertible preferred stock (refer to Note 9. Warrants for further information).
During September 2021, the Company entered into a term loan in an aggregate principal amount of $3,000 under the 2021 LSA First Tranche (“2021 LSA Loan”). The 2021 LSA Loan bore interest at 11% per annum. Pursuant to the terms of the 2021 LSA, the Company was required to make interest-only payments through June 2022, and subsequently, the aggregate principal amount of the 2021 LSA Loan was amortized and paid down in equal monthly installments, together with interest thereon, over the following by 36 months until the final maturity of the 2021 LSA Loan on July 1, 2025. All outstanding principal, plus interest accrued thereon, was repaid in accordance with the contractual terms of the 2021 LSA in July 2025.
In connection with the 2021 LSA and issuance of the 2021 LSA Loan, the Company incurred $29 in debt issuance costs and a debt discount of $74. Deferred financing costs related to the 2021 LSA Loan of $103 were amortized to interest expense over the life of the 2021 LSA Loans using the effective interest method. The effective interest rate of the 2021 LSA Loan was 12.6%.
All warrants to purchase the Company’s redeemable convertible preferred stock remain outstanding as of September 30, 2025.
New Zealand Provincial Growth Fund (“PGF”) Loan
In July 2022, MLNL entered into the 2022 PGF Agreement with the New Zealand Ministry of Business, Innovation and Employment, securing a convertible loan commitment with an aggregate principal amount of NZD 1,000. Under this agreement, MLNL received NZD 1,000 ($660 USD at issuance) in convertible debt, referred to as the “2022 PGF Loan.” The 2022 PGF Loan bears interest at a fixed rate of 7.47%. Pursuant to the terms of the 2022 PGF Agreement, interest accrued on the 2022 PGF Loan prior to the third anniversary of the issuance thereof shall be paid in-kind on each anniversary of the issuance date. On each subsequent anniversary date until the maturity date of July 21, 2032, the Company shall make annual payments comprised of (a) equal amortizing payments of 2022 PGF Loan principal and (b) interest accrued during the anniversary year. All amounts due but not yet paid, including all interest paid in-kind, shall become payable on the maturity date.
The 2022 PGF Loan is collateralized by a security interest in certain assets of the Company and is subject to certain customary covenants, with which the Company was in compliance as of September 30, 2025.
MLNL has optional redemption rights of the 2022 PGF Loan. Additionally, the repayment of principal and accrued interest of the 2022 PGF Loan may be accelerated upon the occurrence of certain events, including events of default and receipt of insurance proceeds related to the operating assets of MLNL. Upon the occurrence of a qualifying equity financing round of the Company, the Ministry retains the right to convert the unpaid principal amount, together with unpaid interest thereon, into shares of common stock of the Company at a 15.0% discount to the issuance price of the Company’s equity in the financing round.
The Company did not incur any debt issuance costs in connection with the 2022 PGF Agreement. The Company accounts for the 2022 PGF Loan using the effective interest method. The effective interest rate of the 2022 PGF Loan is 7.5%.
As of September 30, 2025 and December 31, 2024, the fair value of the 2022 PGF Loan was $734 and $677, respectively. The fair value of the 2022 PGF Loan was estimated using Level 3 inputs in a discounted cash flow model.
F-66
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
8. Debt (cont.)
2024 LSA
On February 22, 2024, the Company entered into a loan and security agreement (“2024 LSA”) with the lender thereto, which provided for delayed draw term loan commitments in an aggregate principal amount of $35,000. The aggregate commitments under the 2024 LSA included (a) a delayed draw term loan facility in an aggregate principal amount of $12,500 (the “2024 LSA First Tranche”), (b) a delayed draw term loan tranche in an aggregate principal amount of $12,500 (the “2024 LSA Second Tranche”), and (c) a delayed draw term loan facility tranche in an aggregate principal amount of $10,000 (the “2024 LSA Third Tranche”). As a condition precedent to issue term loans under the 2024 LSA Third Tranche, the Company achieved certain operational milestones as defined in the 2024 LSA. In connection with the entrance into the 2024 LSA, the Company issued the lender thereto warrants to purchase the Company’s redeemable convertible preferred stock (refer to Note 9. Warrants for further information).
On May 28, 2024, August 30, 2024, and October 23, 2024, the Company entered into term loans under the 2024 LSA First, Second, and Third Tranches, in aggregate principal amounts of $12,500, $12,500, and $10,000, respectively (collectively, the “2024 LSA Loans”). The 2024 LSA Loans accrue interest at a fixed rate per annum, compounded monthly, equal to the Prime Rate as of the issuance date thereof plus 5.0%. In addition to the fixed cash interest, the outstanding principal balance of the 2024 LSA Loans accrues interest paid in-kind at 1.5% per annum, compounded monthly. Inclusive of both cash interest and interest paid in-kind, the total nominal interest rate of the 2024 LSA Loans issued under the 2024 LSA First, Second, and Third Tranches was 15%.
Prior to the 2024 LSA Amendment (as defined below), the Company was required to make interest-only payments at the cash interest rate through February 2025, and subsequently, the aggregate principal amount of the 2024 LSA Loans would be amortized and paid down in equal monthly installments, together with cash interest thereon, over the following 24 months until final maturity on January 31, 2027. On the maturity date, all unpaid principal of 2024 LSA Loans, together with cash interest and all interest paid-in kind, was set to become due and payable.
In connection with the 2024 LSA Loans, the Company recorded a debt discount of $622, related to the payment of lender fees and the issuance of preferred stock warrant liabilities, which is amortized to interest expense over the life of the 2024 LSA Loans using the effective interest method. Prior to the 2024 LSA Amendment (as defined below), the effective interest rates of the 2024 LSA Loans for the First, Second, and Third Tranches was 14.5%, 14.7%, and 14.9%, respectively.
On July 1, 2025, the Company and the lender thereto entered into an amendment to the 2024 LSA (“2024 LSA Amendment”). Pursuant to the 2024 LSA Amendment, the maturity date of the 2024 LSA Loans was extended to June 1, 2027, with amortizing principal payments beginning on January 1, 2026 and continuing until the final maturity date. No other terms of the 2024 LSA Loans were modified pursuant to the 2024 LSA Amendment. In connection with the 2024 LSA Amendment and to induce the lender into making such amendment, the Company issued warrants to purchase the Company’s redeemable convertible preferred stock with a fair value of $759 (“2024 LSA Amendment Warrants,” refer to Note 9. Warrants).
The 2024 LSA Amendment was accounted for as an extinguishment under ASC 470-50, Modifications and Extinguishments, and accordingly, the Company recognized a loss on extinguishment of long-term debt of $2,157 which is comprised of the fair value of the 2024 LSA Amendment Warrants issued and the difference between the fair value of the amended 2024 LSA Loans and the existing carrying amount of the 2024 LSA Loans. In accordance with ASC 825 and following the 2024 LSA Amendment, the Company elected to account for the 2024 LSA Loans under the fair value option. The Company elected to record the 2024 LSA Loans under the fair value option to simplify the recordkeeping on an ongoing basis.
The Company has optional redemption rights of the 2024 LSA Loans, subject to an in-kind interest make whole premium plus a prepayment premium of 100% of future foregone cash interest payments, which reduces to 85% and 75% after December 31, 2025 and December 31, 2026, respectively. Additionally, the repayment of principal and accrued interest of the 2024 LSA Loans may be accelerated upon the occurrence of certain events, including events of default. The lender also retains the right to convert up to $5,000 of the outstanding loan balance into shares of the Company’s Series B Prime redeemable convertible preferred stock at any time through June 30, 2027 (the “2024 LSA Conversion Feature”).
F-67
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
8. Debt (cont.)
Borrowings under the 2024 LSA are collateralized by substantially all of the Company’s assets and are subject to certain customary covenants, with which the Company was in compliance as of September 30, 2025.
Pre-PIPE Bridge
On July 2, 2025, the Company entered into a convertible note purchase agreement (“Pre-PIPE Bridge Agreement”) with the purchasers thereto, pursuant to which the Company may issue up to $23,445 in aggregate principal amount of unsecured convertible promissory notes (“Pre-PIPE Bridge Notes”). Additionally, pursuant to the Pre-PIPE Bridge Agreement, the Company issued common stock warrants (“Pre-PIPE Bridge Warrants”) to the purchasers thereto and, accordingly, the proceeds received in connection with each issuance were allocated between the Pre-PIPE Bridge Notes and Warrants (refer to Note 9. Warrants).
The Company entered into a series of Pre-PIPE Bridge Notes in aggregate principal amount of $23,445 between July and August 2025. The Company accounts for the Pre-PIPE Bridge Notes under the fair value option and, accordingly, all issuance costs incurred in connection with the entrance into the Pre-PIPE Bridge Agreement and the issuance of Pre-PIPE Bridge Notes thereunder were expensed as incurred. The purchase price received by the Company for the first closing of the Pre-PIPE Bridge approximated the aggregate fair value of the Pre-PIPE Bridge Notes and Warrants issued and, therefore, no gain or loss on issuance was recognized. The purchase price received by the Company for the second closing of the Pre-PIPE Bridge was below the aggregate fair value of the Pre-PIPE Bridge Notes and Warrants issued and, therefore, the Company recognized a loss of $585 as a component of loss on issuance of financial instruments in the condensed consolidated statements of operations. The Company elected to record the Pre-PIPE Bridge Notes under the fair value option based on the short-term maturity of the Pre-PIPE Bridge Notes.
Prior to the Pre-PIPE Bridge Amendment (as defined below), the Pre-PIPE Bridge Notes accrued interest at a fixed rate of 12.0% per annum, compounded annually. All principal and accrued interest thereon was set to become due and payable upon demand by the purchasers thereof on or after July 2, 2026, unless earlier converted or repaid.
On August 13, 2025, and in connection with the Pre-Funded PIPE transaction (as defined below), the Company and the holders of the Pre-PIPE Bridge Notes amended the terms of the Pre-PIPE Bridge Notes to more closely align with those of the Pre-Funded PIPE Notes (“Pre-PIPE Bridge Amendment”). As the Pre-PIPE Bridge Notes are accounted for under the fair value option, all amendment costs were expensed as incurred.
Following the Pre-PIPE Bridge Amendment, the Pre-PIPE Bridge Notes accrue interest at 12.0% per annum, compounded semi-annually, until the principal amount of Pre-PIPE Bridge Notes and all interest accrued thereon is repaid or converted. The Pre-PIPE Bridge Amendment did not change the maturity date of the Pre-PIPE Bridge Notes. At the maturity date thereof, the principal amount of Pre-PIPE Bridge Notes and all accrued unpaid interest thereon shall be due and payable on demand or converted, at the holders’ discretion, into a new senior series of the Company’s redeemable convertible preferred stock at a conversion price per share of $23.3634, subject to certain customary adjustments.
Pursuant to the Pre-PIPE Bridge Amendment, on the day prior to the closing of the Merger, the unpaid principal amount of Pre-PIPE Bridge Notes, together with accrued unpaid interest thereon, shall automatically convert into shares of 12.0% Series A cumulative convertible preferred stock of the SPAC (“PubCo Series A”) at a conversion price of $10.20, which represents a 15% discount to the original issue price of such PubCo Series A shares.
In the event that the BCA is terminated without the Merger having closed, and the Company effectuates a Qualified Financing (as defined in the Pre-PIPE Bridge Amendment) prior to repayment or conversion of the Pre-PIPE Bridge Notes, the unpaid principal amount of Pre-PIPE Bridge Notes, together with accrued unpaid interest thereon, shall automatically convert into shares of capital stock of the Company sold in such Qualified Financing at a conversion price equal to 85% of the lowest price paid in cash by the purchasers thereof in the Qualified Financing.
In the event that the BCA is terminated without the Merger having closed, and the Company effectuates a Change of Control (as defined in the Pre-PIPE Bridge Amendment), the unpaid principal amount of Pre-PIPE Bridge Notes, together with accrued unpaid interest thereon, shall automatically convert into shares of common stock of the Company immediately
F-68
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
8. Debt (cont.)
prior to the Change of Control. As an alternative to conversion into common stock, the Company retains the option to either (i) deem the outstanding Pre-PIPE Bridge Notes as converted, entitling the holders thereof to receive the consideration it would have otherwise received as a common shareholder in the Change of Control or (ii) redeem the Pre-PIPE Bridge Notes in an amount equal to two times the outstanding principal amount thereof, plus accrued unpaid interest thereon.
The Company does not retain any optional redemption rights with respect to the Pre-PIPE Bridge Notes. The Pre-PIPE Bridge Notes may be accelerated upon the occurrence of certain events, including events of default. The Pre-PIPE Bridge Notes are subordinated to the Company’s senior debt obligations under the 2024 LSA and are subject to customary covenants, with which the Company was in compliance as of September 30, 2025.
Pre-Funded PIPE
On August 13, 2025, the Company entered into a securities purchase agreement (“Pre-Funded PIPE Agreement”) with the purchasers thereto, pursuant to which the Company agreed to sell, and the purchasers agreed to purchase, unsecured convertible promissory notes and common stock warrants (refer to Note 9. Warrants).
Pursuant to the Pre-Funded PIPE Agreement, the Company issued $64,706 in aggregate principal amount of unsecured convertible promissory notes (“Pre-Funded PIPE Notes”) and common stock warrants (“Pre-Funded PIPE Warrants”) for total proceeds of $55,000 which were allocated between the Pre-Funded PIPE Notes and Warrants. The Company accounts for the Pre-Funded PIPE Notes under the fair value option and, accordingly, all issuance costs incurred in connection with the entrance into the Pre-Funded PIPE Agreement and the issuance of Pre-Funded PIPE Notes thereunder were expensed as incurred. The purchase price received by the Company approximated the aggregate fair value of the Pre-Funded PIPE Notes and Warrants issued and, therefore, no gain or loss on issuance was recognized. The Company elected to record the Pre-Funded PIPE Notes under the fair value option based on the short-term maturity of the Pre-Funded PIPE Notes.
Additionally, the Pre-Funded PIPE Agreement contains a provision that provides a purchaser thereunder, who is an affiliate of the SPAC, the right (“Purchaser Right”) to require the Company to issue and sell up to approximately $29,412 in aggregate principal amount of additional Pre-Funded PIPE Notes and accompanying Pre-Funded PIPE Warrants (“Purchaser Right Notes”). The Purchaser Right may be exercised any time prior to December 31, 2025 so long as the BCA is not terminated. The Purchaser Right is a written call option accounted for initially and subsequently at fair value, with changes in fair value recognized in the condensed consolidated statements of operations. The Purchaser Right has a de minimis fair value as of the execution of the Pre-Funded PIPE Agreement and as of September 30, 2025.
The Pre-Funded PIPE Notes accrue interest at a fixed rate of 12.0% per annum, compounded semi-annually, until the principal amount of Pre-Funded PIPE Notes and all interest accrued thereon is repaid or converted. The Pre-Funded PIPE Notes are scheduled to mature on August 13, 2026. At the maturity date thereof, the principal amount of Pre-Funded PIPE Notes and all accrued unpaid interest thereon shall be due and payable on demand or converted, at the holders’ discretion, into a new senior series of the Company’s redeemable convertible preferred stock at a conversion price per share of $27.4863.
On the day prior to the closing of the Merger, the unpaid principal amount of Pre-Funded PIPE Notes, together with accrued unpaid interest thereon, shall automatically convert into shares of PubCo Series A preferred stock at a conversion price of $12.00, which represents the original issue price of such PubCo Series A shares.
In the event that the BCA is terminated without the Merger having closed, and the Company effectuates a Qualified Financing (as defined in the Pre-Funded PIPE Agreement) prior to repayment or conversion of the Pre-Funded PIPE Notes, the unpaid principal amount of Pre-Funded PIPE Notes, together with accrued unpaid interest thereon, shall, at the holders’ option, convert into shares of capital stock of the Company sold in such Qualified Financing at a conversion price equal to the lowest price paid in cash by the purchasers thereof in the Qualified Financing.
In the event that the BCA is terminated without the Merger having closed, and the Company effectuates a Change of Control (as defined in the Pre-Funded PIPE Agreement), the unpaid principal amount of Pre-Funded PIPE Notes, together with accrued unpaid interest thereon, shall automatically convert into shares of common stock of the Company immediately
F-69
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
8. Debt (cont.)
prior to the Change of Control. As an alternative to conversion into common stock, the Company retains the option to either (i) deem the outstanding Pre-Funded PIPE Notes as converted, entitling the holders thereof to receive the consideration it would have otherwise received as a common shareholder in the Change of Control or (ii) redeem the Pre-Funded PIPE Notes in an amount equal to two times the outstanding principal amount thereof, plus accrued unpaid interest thereon.
The Company does not retain any optional redemption rights with respect to the Pre-Funded PIPE Notes. The Pre-Funded PIPE Notes may be accelerated upon the occurrence of certain events, including events of default. The Pre-Funded PIPE Notes are subordinated to the Company’s senior debt obligations under the 2024 LSA and are subject to customary covenants, with which the Company was in compliance as of September 30, 2025.
The following table summarizes the Company’s outstanding long-term debt as of September 30, 2025 and December 31, 2024:
|
As of: |
||||||
|
September 30, |
December 31, |
|||||
|
2021 LSA Loan |
$ |
— |
$ |
500 |
||
|
2022 PGF Loan |
|
670 |
|
654 |
||
|
2024 LSA Loans |
|
31,528 |
|
35,192 |
||
|
Total long-term debt |
|
32,198 |
|
36,346 |
||
|
Less current maturities of long-term debt |
|
14,229 |
|
14,157 |
||
|
Less unamortized deferred financing costs |
|
— |
|
516 |
||
|
Total long-term debt, net |
$ |
17,969 |
$ |
21,673 |
||
Maturities of long-term debt outstanding, in principal amounts, as of September 30, 2025 are as follows:
|
Year Ending December 31, |
Amount |
||
|
2025 |
$ |
— |
|
|
2026 |
|
19,271 |
|
|
2027 |
|
10,708 |
|
|
2028 |
|
96 |
|
|
2029 |
|
96 |
|
|
Thereafter |
|
287 |
|
|
Total |
$ |
30,457 |
|
9. Warrants
The warrants issued in connection with the 2019 loan and security agreement (“LSA”), 2021 LSA, and 2024 LSA (the “2019 LSA Warrants”, “2021 LSA Warrants”, and “2024 LSA Warrants,” respectively) were determined to meet the criteria for liability classification pursuant to ASC 480 as the underlying warrant shares, the Company’s redeemable convertible preferred stock, are redeemable outside the control of the Company and are accordingly classified as mezzanine equity (refer to Note 10. Redeemable Convertible Preferred Stock and Stockholders’ Deficit for further information). The 2019 LSA Warrants, 2021 LSA Warrants, and 2024 LSA Warrants are therefore required to be initially and subsequently measured at fair value with changes in fair value presented in the condensed consolidated statements of operations.
The 2024 LSA Amendment Warrants were determined to meet the criteria for liability classification pursuant to ASC 480 as the terms thereof permit the holder to exchange the 2024 LSA Amendment Warrants for instruments issued in any bridge financing occurring after the issuance date thereof, which includes the issuance of convertible debt instruments. The 2024 LSA Amendment Warrants are therefore required to be initially and subsequently measured at fair value with changes in fair value presented in the condensed consolidated statements of operations.
F-70
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
9. Warrants (cont.)
The Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were determined to meet the criteria for liability classification pursuant to ASC 815 because certain settlement adjustments prevent them from meeting the fixed-for-fixed equity classification criteria. The Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants are therefore required to be initially and subsequently measured at fair value with changes in fair value presented in the condensed consolidated statements of operations.
In August 2025 and in accordance with the terms thereof, the holder of 2024 LSA Warrants elected to exchange all of the 2024 LSA Warrants with a fair value of $1,769 for Pre-PIPE Bridge Notes and accompanying Pre-PIPE Bridge Warrants with fair values of $1,131 and $3,957, respectively. The loss of $3,320 was recognized in loss on exchange of warrant liabilities in the condensed consolidated statements of operations.
During the nine months ended September 30, 2025 and 2024, the Company recorded a loss on the change in fair value of warrant liabilities of $4,562 and $314, respectively. Refer to Note 4. Fair Value Measurements for further information.
As of September 30, 2025, the outstanding warrants to purchase the Company’s redeemable convertible preferred stock and common stock were as follows:
|
Shares |
Class of Underlying Warrant Shares |
Exercise |
Expiration Date |
||||||
|
2019 LSA Warrants(1) |
144,926 |
Series Seed Prime or Series A Prime |
$ |
1.035 |
January 31, 2030 |
||||
|
2021 LSA Warrants |
81,188 |
Series B Prime |
$ |
4.927 |
March 31, 2037 |
||||
|
2024 LSA Amendment Warrants(2) |
— |
Series Next or Series Subsequent |
$ |
— |
November 1, 2039 |
||||
|
Pre-PIPE Bridge Warrants(3) |
3,063,248 |
Common Stock |
$ |
12.000 |
— |
||||
|
Pre-Funded PIPE Warrants(3) |
5,642,160 |
Common Stock |
$ |
12.000 |
— |
||||
____________
(1) The number of shares underlying the 2019 LSA Warrants assumes that the holders choose to exercise their warrants into shares of Series Seed Prime redeemable convertible preferred stock, as this exercise scenario is most beneficial to the warrant holders.
(2) The number of shares underlying the 2024 LSA Amendment Warrants and their exercise price per share cannot currently be determined because the warrants are not exercisable and remain contingent upon the pricing of the next round of preferred stock financing or any subsequent round.
(3) The Pre-PIPE Bridge and Pre-Funded PIPE Warrants only become exercisable upon the termination of the BCA and expire on the fifth anniversary of the termination of the BCA.
All warrants issued by the Company may be exercised, at the holders’ option, via the delivery of cash or on a cashless basis.
10. Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Common Stock
As of September 30, 2025, the Company has 44,705,861 shares of $0.0001 par value common stock authorized. The voting, dividend and liquidation rights of the common stockholders are subject to, and qualified by, the rights, powers and preferences of the preferred stockholders and as designated by resolution of the Board of Directors. The holders of the common stock are entitled to one vote for each share of common stock held.
As of September 30, 2025, 39,475,338 shares of common stock are reserved for the conversion of redeemable convertible preferred stock and the exercise of stock options and warrants.
Redeemable Convertible Preferred Stock
On July 2, 2025 and in connection with the Pre-PIPE Bridge Agreement, the Company entered into exchange agreements (“Exchange Agreements”) with the holders of the redeemable convertible preferred stock to effectuate a recapitalization of the Series Seed, Series A, Series A-1, Series B, and Series B-1 redeemable convertible preferred stock (collectively, “Legacy Preferred Stock”) into shares of Series Seed Prime, Series A Prime, Series A-1 Prime, Series B Prime, and Series B-1 Prime redeemable convertible preferred stock, respectively (collectively, “Prime Preferred Stock”).
F-71
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
10. Redeemable Convertible Preferred Stock and Stockholders’ Deficit (cont.)
To effectuate the conversions contemplated by the Exchange Agreements, the Company amended and restated its Certificate of Incorporation to add a contingent mandatory conversion feature to its redeemable convertible preferred stock (“Special Mandatory Conversion”) whereby if a holder of redeemable convertible preferred stock failed to purchase a minimum investment amount of Pre-PIPE Bridge Notes and Warrants, such redeemable convertible preferred stock held by the non-participating investor would automatically convert, on a ten-to-one basis, into shares of the Company’s common stock; otherwise, if the holder of redeemable convertible preferred stock satisfied its applicable minimum investment threshold contemplated by the Pre-PIPE Bridge Agreement, shares of redeemable convertible preferred stock held by such holder would be exchanged for shares of Prime Preferred Stock, as described below.
All holders of Legacy Preferred Stock participating in the Pre-PIPE Bridge satisfied the minimum investment requirements under the Pre-PIPE Bridge Agreement and, therefore, pursuant to the Exchange Agreements, every ten shares of Legacy Preferred Stock held by the holders of Legacy Preferred Stock were converted into one share of the Company’s common stock and then converted on a one-to-ten basis into corresponding shares of Prime Preferred Stock. The exchange of Legacy Preferred Stock for Prime Preferred Stock was accounted for as an extinguishment, resulting in a deemed dividend of $345,717 being recognized.
Other than the Special Mandatory Conversion feature, the rights and preferences of the Legacy Preferred Stock are substantially similar to those of the Prime Preferred Stock.
As of September 30, 2025, the Company has authorized the following shares of $0.0001 par value redeemable convertible preferred stock:
|
Shares |
||
|
Series Seed Prime redeemable convertible preferred stock |
3,357,483 |
|
|
Series A Prime redeemable convertible preferred stock |
8,034,960 |
|
|
Series A-1 Prime redeemable convertible preferred stock |
928,217 |
|
|
Series B Prime redeemable convertible preferred stock |
6,420,288 |
|
|
Series B-1 Prime redeemable convertible preferred stock |
1,028,819 |
|
|
Total redeemable convertible preferred stock |
19,769,767 |
The redeemable convertible preferred stock has the following rights and preferences:
Voting Rights
On all matters subject to the authorization of the holders of common stock, the holders of redeemable convertible preferred stock are entitled to vote together with holders of common stock on an as-converted basis.
Dividends
The holders of redeemable convertible preferred stock are entitled to receive, on a pari passu basis and prior and in preference to holders of the Company’s common stock, an annual dividend in the amount of 8% of the applicable original issuance price. Such dividends are payable only if and when declared and are noncumulative. Holders of redeemable convertible preferred stock shall also be entitled to receive participating dividends, if and when declared on the Company’s common stock, on an as-converted basis. No dividends have been declared as of September 30, 2025.
Liquidation
In the event of liquidation, dissolution or winding up of the Company or upon the occurrence of a Deemed Liquidation Event (as defined in the Company’s Amended and Restated Certificate of Incorporation), the holders of the redeemable convertible preferred stock shall be entitled to receive, in preference to all common stockholders, an amount equal to the greater of (i) the applicable original issue price plus any declared but unpaid dividends thereon and (ii) the amount that would have been payable to the holder had all shares of redeemable convertible preferred stock been converted into
F-72
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
10. Redeemable Convertible Preferred Stock and Stockholders’ Deficit (cont.)
common stock prior to such event. After payment has been made to the holders of the redeemable convertible preferred stock, the remaining assets available for distribution shall be distributed solely among the common stockholders on a pro rata basis based upon the number of shares held by each common stockholder.
Conversion
Each share of redeemable convertible preferred stock is convertible, at the holder’s option or mandatorily upon the occurrence of certain events (including qualifying public offerings, direct listings, and De-SPAC transactions, and upon the request of the majority holders of the redeemable convertible preferred stock voting together on an as-converted basis) into a fixed number of common stock at a conversion rate equal to (i) the applicable original issue price divided by (ii) the conversion price then in effect. The conversion price is subject to customary antidilution and down-round adjustments.
Redemption
The redeemable convertible preferred stock is not redeemable except upon the occurrence of the liquidation, dissolution or winding up of the Company or upon the occurrence of a Deemed Liquidation Event.
11. Net Loss Per Share
The Company uses the two-class method to calculate basic and diluted net loss per share. Unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends during the vesting term. Under the two-class method, earnings of the Company are allocated between common stockholders and these participating securities based on the weighted-average number of shares of common stock and participating securities outstanding during the relevant period. The participating securities do not have a contractual obligation to share in the losses of the Company. Therefore, net loss is fully attributable to the Company’s common stockholders for the nine months ended September 30, 2025 and 2024.
Basic net loss per share is computed by dividing net loss attributable to the Company’s common stockholders by the weighted-average number of shares outstanding during the period. As of periods beginning after March 31, 2024, the Company no longer had participating securities other than common stock, as all outstanding restricted stock had fully vested.
Diluted net loss per share is computed by dividing net loss attributable to the Company’s common stockholders by the weighted-average number of shares after adjusting for potential dilution related to the conversion of all dilutive securities into common stock.
The numerators and denominators of the basic and diluted net loss per share computations for the Company’s common stock were calculated as follows:
|
Nine Months Ended |
||||||||
|
2025 |
2024 |
|||||||
|
Numerator: |
|
|
|
|
||||
|
Net loss |
$ |
(55,725 |
) |
$ |
(41,826 |
) |
||
|
Deemed dividend on exchange of redeemable convertible preferred stock |
|
(345,717 |
) |
|
— |
|
||
|
Net loss attributable to common stockholders |
$ |
(401,442 |
) |
$ |
(41,826 |
) |
||
|
|
|
|
|
|||||
|
Denominator: |
|
|
|
|
||||
|
Weighted average shares outstanding, basic and diluted |
|
5,191,045 |
|
|
5,103,003 |
|
||
|
|
|
|
|
|||||
|
Net loss per share, basic and diluted |
$ |
(77.33 |
) |
$ |
(8.20 |
) |
||
F-73
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
11. Net Loss Per Share (cont.)
The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share for the periods presented due to their anti-dilutive effect (in shares):
|
Nine Months Ended |
||||
|
2025 |
2024 |
|||
|
Redeemable convertible preferred stock |
17,696,748 |
17,696,748 |
||
|
Stock options |
2,518,101 |
2,603,199 |
||
|
Common stock warrants |
8,119 |
6,597 |
||
|
2019 LSA Warrants |
144,926 |
144,926 |
||
|
2021 LSA Warrants |
81,188 |
81,188 |
||
|
2024 LSA Warrants |
— |
224,710 |
||
|
2024 LSA Conversion Feature |
214,010 |
214,010 |
||
|
Pre-PIPE Bridge Notes |
1,127,531 |
— |
||
|
Pre-Funded PIPE Notes |
2,645,082 |
— |
||
|
Purchaser Right Notes |
1,202,310 |
— |
||
|
Total |
25,638,015 |
20,971,378 |
||
12. Stock-Based Compensation
On October 24, 2018, the Board of Directors adopted the Plan. Under the terms of the Plan, incentive stock options (“ISOs”) may be granted to employees of the Company and nonqualified stock options or restricted stock awards may be granted to directors, consultants, employees and officers of the Company.
Restricted Stock
On October 10, 2018, the Company entered into a Restricted Stock Purchase Agreement (“Restricted Stock Agreement”) with its CEO, pursuant to which the Company granted its CEO the right to purchase 5,000,000 shares of $0.0001 par value restricted stock at a purchase price of $0.001 per share. As part of the Restricted Stock Agreement, the CEO also agreed to assign certain proprietary information and inventions to the Company. The restricted stock has all of the rights of Common Stock, including voting and dividend rights.
Pursuant to the Restricted Stock Agreement, 25% of the shares vested on January 1, 2019. Thereafter, 104,166 shares of restricted stock vested each month, such that the restricted stock became fully vested on January 1, 2022. The monthly vesting of restricted stock was contingent upon the CEO’s continued employment, consulting, advisor, director, or officer relationship with the Company at that date.
On March 10, 2022, in connection with the issuance of the Series B redeemable convertible preferred stock, the Company entered into Amendment No. 1 to the Restricted Stock Agreement (“Amendment No. 1”) to amend the vesting schedule for the restricted stock. Pursuant to Amendment No. 1, 3,350,000 shares of restricted stock were vested as of March 10, 2022, and thereafter, 68,750 shares of Restricted Stock vested each month. Amendment No. 1 did not modify the service requirements for the vesting of restricted stock. As of September 30, 2025 and December 31, 2024 there was no Restricted Stock outstanding, as the Restricted Stock fully vested during the year ended December 31, 2024.
During the nine months ended September 30, 2025 and 2024, the Company did not recognize stock-based compensation expense related to the restricted stock, as the expense measured at the grant date was fully recognized over the original vesting period and there was no incremental fair value as a result of Amendment No. 1.
F-74
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
12. Stock-Based Compensation (cont.)
Stock Options
The exercise price of ISOs cannot be less than the fair value of the Company’s common stock on the date of grant or less than 110% of the fair value in the case of employees holding 10% or more of the voting stock of the Company. The options vest over a period determined by the Board of Directors, generally four years, and expire not more than 10 years from the date of grant.
As of September 30, 2025, the Company’s authorized common stock includes 3,348,975 shares of common stock reserved for the issuance of options under the Plan, of which 600,351 shares are available for future grants.
Stock option activity under the Plan during the nine months ended September 30, 2025 was as follows:
|
Number of |
Weighted |
Weighted- |
Aggregate |
|||||||
|
Outstanding at December 31, 2024 |
2,904,261 |
|
$ |
5.19 |
7,083 |
|||||
|
Granted |
227,193 |
|
|
12.88 |
||||||
|
Exercised |
(60,711 |
) |
|
1.31 |
827 |
|||||
|
Expired |
(273,047 |
) |
|
4.54 |
||||||
|
Forfeited |
(279,595 |
) |
|
7.32 |
|
|
||||
|
Outstanding at September 30, 2025 |
2,518,101 |
|
|
5.81 |
6 |
41,237 |
||||
|
Exercisable at September 30, 2025 |
1,889,126 |
|
$ |
4.75 |
5 |
32,947 |
||||
The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2025 and 2024 amounted to $6.17 and $3.72, respectively.
During the nine months ended September 30, 2025 and 2024, option holders of the Company exercised 60,711 and 72,443 common stock options, respectively, in exchange for cash proceeds of $78 and $59, respectively.
The total intrinsic value of options exercised during the nine months ended September 30, 2025 and 2024 amounted to $827 and $480, respectively.
During the nine months ended September 30, 2025 and 2024, stock-based compensation expense amounted to approximately $1,472 and $1,281, respectively, which is included in the unaudited condensed consolidated statements of operations.
As of September 30, 2025, there is approximately $2,742 of unrecognized compensation expense related to unvested stock-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.25 years.
The Company uses the Black-Scholes option-pricing model to value option grants on the date of grant and to determine the related compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimations. The Company bases its expected volatility on the volatilities of certain publicly-traded peer companies. The Company is a privately-held company and therefore lacks company-specific historical and implied volatility information. The Company intends to continue to consistently use the same group of publicly traded peer companies to determine volatility in the future until such time that sufficient information regarding the volatility of the Company’s share price becomes available or that the selected companies are no longer suitable for this purpose. The risk-free interest rate used for each grant is equal to the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected life.
F-75
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
12. Stock-Based Compensation (cont.)
The expected term of options granted is determined based on the average of the vesting term and the contractual lives of all options awarded. The expected dividend yield assumption is based on the Company’s history and expectation of dividend payouts.
In determining the exercise prices for options granted, the Company has considered the fair value of the common stock as of the measurement date. The fair value of the common stock has been determined by management with consideration to a third-party valuation, which contemplates a broad range of factors, including the illiquid nature of the investment in the Company’s common stock, the Company’s historical financial performance and financial position, the Company’s future prospects and opportunity for liquidity events and recent sale and offer prices of common and redeemable convertible preferred stock, if any, in private transactions negotiated at arm’s length.
The following table provides the assumptions used in determining the fair value of the stock-based awards:
|
Nine Months Ended |
||||
|
2025 |
2024 |
|||
|
Risk-free interest rate |
3.69% – 4.06% |
4.31% – 4.65% |
||
|
Expected dividend yield |
—% |
—% |
||
|
Expected volatility |
41.76% – 47.48% |
45.79% – 46.34% |
||
|
Expected life in years |
5.12 – 6.06 |
5.48 – 6.06 |
||
|
Fair value of Common Stock |
$3.60 – $11.05 |
$3.61 – $3.76 |
||
Expense related to stock-based compensation is recognized over the vesting period of the options. The Company has elected to recognize forfeitures as they occur.
Total stock-based compensation expense as presented within the condensed consolidated statements of operations was as follows:
|
Nine Months Ended |
||||||
|
2025 |
2024 |
|||||
|
Cost of revenue |
$ |
335 |
$ |
45 |
||
|
Research and development |
|
913 |
|
968 |
||
|
General and administrative |
|
212 |
|
240 |
||
|
Selling and marketing |
|
12 |
|
28 |
||
|
Total |
$ |
1,472 |
$ |
1,281 |
||
13. Income Taxes
The Company recorded a provision for income taxes of $3 and $13 for the nine months ended September 30, 2025 and 2024, respectively, yielding effective tax rates of (0.01)% and (0.03)%, respectively. The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which it conducts business. The Company’s effective tax rates for the nine months ended September 30, 2025 and 2024 differs from the U.S. statutory rate primarily due to the effect of the valuation allowance recorded against the Company’s net operating losses.
As of September 30, 2025 and December 31, 2024, the Company has not recognized any liabilities for uncertain tax positions in its unaudited condensed consolidated financial statements. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates.
F-76
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
13. Income Taxes (cont.)
In the normal course of business, the Company is subject to examination by federal and state authorities, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from 2022 to the present. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial statements. The Company is subject to the Global Intangible Low Taxed Income (“GILTI”) tax in the U.S. and has elected to treat taxes on future GILTI inclusions as current period expense if and when incurred.
On July 4, 2025, Public Law No. 119-21, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), was enacted. The OBBBA contains a broad range of changes to U.S. federal income tax laws. These changes include, among others, permanently restoring an EBITDA-based business interest deduction limitation, permanently restoring 100% bonus depreciation for certain property, permanently restoring immediate expensing for certain domestic research and experimental expenditures. The effects of changes in tax laws are recognized in the condensed consolidated financial statements during the period of enactment. The effects of the OBBBA are not expected to have a material impact on the Company’s condensed consolidated financial statements.
14. Commitments, Contingencies, and Indemnification
Liabilities for loss contingencies arising from claims, disputes, legal proceedings, fines and penalties, and other sources are recorded when it is probable that a liability has been or will be incurred and the amount of the liability can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of such legal costs from insurance policies are recorded as an offset to legal expenses in the period they are received.
In the ordinary course of business, the Company enters into various agreements containing standard indemnification provisions. The Company’s indemnification obligations under such provisions are typically in effect from the date of execution of the applicable agreement through the end of the applicable statute of limitations. The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain. As of September 30, 2025 and December 31, 2024, no amounts have been accrued related to such indemnification provisions.
15. Segment and Geographic Information
The Company operates as a single operating and reportable segment. The CODM uses consolidated net loss to evaluate performance, allocate resources, set incentive compensation targets, and plan for future periods. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.
The following table presents the significant segment expenses, which were regularly provided to the CODM:
|
Nine Months Ended |
||||||||
|
2025 |
2024 |
|||||||
|
Revenue |
$ |
5,899 |
|
$ |
367 |
|
||
|
Significant segment expense: |
|
|
|
|
||||
|
Personnel |
|
(21,484 |
) |
|
(19,050 |
) |
||
|
Travel and entertainment |
|
(1,795 |
) |
|
(1,773 |
) |
||
|
Consulting and professional services |
|
(14,166 |
) |
|
(9,326 |
) |
||
|
Aircraft expense |
|
(1,456 |
) |
|
(874 |
) |
||
|
Software |
|
(2,044 |
) |
|
(1,363 |
) |
||
|
Facilities |
|
(1,377 |
) |
|
(1,053 |
) |
||
|
Other expenses |
|
(1,872 |
) |
|
(2,390 |
) |
||
|
Depreciation |
|
(1,145 |
) |
|
(1,085 |
) |
||
|
Contract loss provision |
|
(1,451 |
) |
|
(6,347 |
) |
||
|
Benefit from contract loss provision |
|
1,570 |
|
|
1,181 |
|
||
|
Benefit from research and development agreement |
|
300 |
|
|
— |
|
||
|
Total significant segment expenses |
|
(44,920 |
) |
|
(42,080 |
) |
||
F-77
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per share amounts)
15. Segment and Geographic Information (cont.)
|
Nine Months Ended |
||||||||
|
2025 |
2024 |
|||||||
|
Other segment expenses: |
|
|
|
|
||||
|
Interest income |
|
862 |
|
|
1,547 |
|
||
|
Interest expense |
|
(2,956 |
) |
|
(1,197 |
) |
||
|
Other expense |
|
(193 |
) |
|
(136 |
) |
||
|
Change in fair value of warrant liabilities |
|
(4,562 |
) |
|
(314 |
) |
||
|
Change in fair value of convertible promissory notes |
|
(3,118 |
) |
|
— |
|
||
|
Loss on exchange of warrant liabilities |
|
(3,320 |
) |
|
— |
|
||
|
Loss on issuance of financial instruments |
|
(585 |
) |
|
— |
|
||
|
Loss on extinguishment of long-term debt |
|
(2,157 |
) |
|
— |
|
||
|
Change in fair value of long-term debt |
|
(672 |
) |
|
— |
|
||
|
Total other segment expenses |
|
(16,701 |
) |
|
(100 |
) |
||
|
Loss before provision for income taxes |
|
(55,722 |
) |
|
(41,813 |
) |
||
|
Provision from income taxes |
|
3 |
|
|
13 |
|
||
|
Net loss |
$ |
(55,725 |
) |
$ |
(41,826 |
) |
||
Property and equipment, net and operating lease right-of-use assets, net by geographic area were as follows:
|
As of: |
||||||
|
September 30, |
December 31, |
|||||
|
United States |
$ |
5,346 |
$ |
6,231 |
||
|
New Zealand |
|
3,487 |
|
3,706 |
||
|
Total |
$ |
8,833 |
$ |
9,937 |
||
16. Defined Contribution Plan
The Company sponsors a defined contribution plan covering substantially all of its employees who meet certain eligibility requirements. The Company, at the discretion of the Board of Directors, may make contributions to the plan. During the nine months ended September 30, 2025 and 2024, the Company made contributions to the plan in the amounts of $159 and $129, respectively.
17. Subsequent Events
The Company evaluated subsequent events through January 14, 2026, the date the unaudited condensed consolidated financial statements were available to be issued. Other than as disclosed below, the Company is not aware of any subsequent events which would require recognition or disclosure in the unaudited condensed consolidated financial statements.
On October 1, 2025, the federal government shutdown and subsequently reopened on November 13, 2025. During this time, the work being performed under the Company’s development contracts with the U.S. government was paused but has subsequently resumed. The Company does not currently anticipate any long-term negative impact from the government shutdown.
On November 19, 2025, the Company and a Pre-Funded PIPE investor agreed to increase such investor’s investment in the Pre-Funded PIPE where the Pre-Funded PIPE investor purchased additional warrants and debt with a principal balance of $10,893 for total proceeds of $9,259. Additionally, the Company received commitments from various investors in the amount of $120,000 to fund the PIPE, which is contingent on, and will be funded upon, the close of the Merger.
On December 31, 2025, the Purchaser Right with respect to the Pre-Funded PIPE Agreement which provided an affiliate of the SPAC the right to purchase up to $29,412 of additional Pre-Funded PIPE Notes and Warrants expired unexercised.
F-78
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Merlin Labs, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Merlin Labs, Inc. and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, convertible preferred stock and stockholders’ deficit, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, 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, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. 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 Company’s management. Our responsibility is to express an opinion on the Company’s 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 the Company in accordance with 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 and in accordance with auditing standards generally accepted in the United States of America. 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. The Company 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 Company’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/ HORNE LLP
We have served as the Company’s auditor since 2025.
Ridgeland, Mississippi
October 1, 2025
F-79
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|
As of December 31, |
||||||||
|
2024 |
2023 |
|||||||
|
ASSETS |
|
|
|
|
||||
|
Current assets: |
|
|
|
|
||||
|
Cash and cash equivalents |
$ |
37,195 |
|
$ |
50,485 |
|
||
|
Short-term investments |
|
377 |
|
|
548 |
|
||
|
Accounts receivable, net |
|
536 |
|
|
21 |
|
||
|
Prepaid expenses and other current assets |
|
1,040 |
|
|
1,599 |
|
||
|
Total current assets |
|
39,148 |
|
|
52,653 |
|
||
|
Property and equipment, net |
|
8,589 |
|
|
8,170 |
|
||
|
Operating lease right-of-use assets |
|
1,348 |
|
|
1,458 |
|
||
|
Deposits |
|
109 |
|
|
134 |
|
||
|
Total assets |
$ |
49,194 |
|
$ |
62,415 |
|
||
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
||||
|
Current liabilities: |
|
|
|
|
||||
|
Accounts payable |
|
1,294 |
|
|
1,396 |
|
||
|
Accrued expenses |
|
2,683 |
|
|
1,840 |
|
||
|
Long-term debt, current portion, net |
|
14,224 |
|
|
1,000 |
|
||
|
Deferred revenue |
|
112 |
|
|
— |
|
||
|
Contract loss provision |
|
5,166 |
|
|
— |
|
||
|
Operating lease liabilities, current |
|
709 |
|
|
532 |
|
||
|
Total current liabilities |
|
24,188 |
|
|
4,768 |
|
||
|
Long-term debt, non-current portion, net |
|
21,673 |
|
|
1,282 |
|
||
|
Operating lease liabilities, non-current |
|
653 |
|
|
998 |
|
||
|
Warrant liabilities |
|
3,586 |
|
|
2,825 |
|
||
|
Total liabilities |
|
50,100 |
|
|
9,873 |
|
||
|
Commitments and contingencies (Note 14) |
|
|
|
|
||||
|
Redeemable convertible preferred stock (Note 10) |
|
130,616 |
|
|
130,616 |
|
||
|
Stockholders’ deficit: |
|
|
|
|
||||
|
Common stock: $0.0001 par value; 29,500,000 shares authorized; 5,169,812 and 4,882,717 shares issued and outstanding as of December 31, 2024 and 2023, respectively |
|
1 |
|
|
1 |
|
||
|
Additional paid-in capital |
|
4,009 |
|
|
2,204 |
|
||
|
Accumulated deficit |
|
(135,532 |
) |
|
(80,279 |
) |
||
|
Total stockholders’ deficit |
|
(131,522 |
) |
|
(78,074 |
) |
||
|
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit |
$ |
49,194 |
|
$ |
62,415 |
|
||
See accompanying notes to consolidated financial statements.
F-80
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
|
Year Ended December 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Revenue |
$ |
1,229 |
|
$ |
1,003 |
|
||
|
Cost of revenue |
|
8,500 |
|
|
735 |
|
||
|
Gross (loss) profit |
|
(7,271 |
) |
|
268 |
|
||
|
Operating expenses: |
|
|
|
|
||||
|
Research and development |
|
27,146 |
|
|
24,669 |
|
||
|
General and administrative |
|
17,864 |
|
|
12,855 |
|
||
|
Selling and marketing |
|
1,744 |
|
|
1,180 |
|
||
|
Total operating expenses |
|
46,754 |
|
|
38,704 |
|
||
|
Loss from operations |
|
(54,025 |
) |
|
(38,436 |
) |
||
|
Other (expense) income: |
|
|
|
|
||||
|
Interest income |
|
2,005 |
|
|
3,252 |
|
||
|
Interest expense |
|
(2,420 |
) |
|
(304 |
) |
||
|
Other expense |
|
(197 |
) |
|
(214 |
) |
||
|
Loss on change in fair value of warrant liabilities |
|
(265 |
) |
|
(55 |
) |
||
|
Total other (expense) income |
|
(877 |
) |
|
2,679 |
|
||
|
Loss before provision for income taxes |
|
(54,902 |
) |
|
(35,757 |
) |
||
|
Provision for income taxes |
|
351 |
|
|
706 |
|
||
|
Net loss |
$ |
(55,253 |
) |
$ |
(36,463 |
) |
||
|
Net loss per share: |
|
|
|
|
||||
|
Basic and diluted |
$ |
(10.80 |
) |
$ |
(8.14 |
) |
||
|
Weighted-average shares outstanding: |
|
|
|
|
||||
|
Basic and diluted |
|
5,118,223 |
|
|
4,476,824 |
|
||
See accompanying notes to consolidated financial statements.
F-81
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(in thousands, except share and per share amounts)
|
Redeemable Convertible |
Common Stock |
Additional |
Accumulated |
Total |
|||||||||||||||||
|
Number of |
Amount |
Number of |
Amount |
||||||||||||||||||
|
Balances at December 31, 2022 |
17,696,748 |
$ |
130,616 |
4,042,143 |
$ |
1 |
$ |
377 |
$ |
(43,816 |
) |
$ |
(43,438 |
) |
|||||||
|
Vesting of restricted common stock |
— |
|
— |
825,000 |
|
— |
|
— |
|
— |
|
|
— |
|
|||||||
|
Exercise of common stock options |
— |
|
— |
15,574 |
|
— |
|
21 |
|
— |
|
|
21 |
|
|||||||
|
Stock-based compensation |
— |
|
— |
— |
|
— |
|
1,806 |
|
— |
|
|
1,806 |
|
|||||||
|
Net loss |
— |
|
— |
— |
|
— |
|
— |
|
(36,463 |
) |
|
(36,463 |
) |
|||||||
|
Balances as of December 31, 2023 |
17,696,748 |
|
130,616 |
4,882,717 |
|
1 |
|
2,204 |
|
(80,279 |
) |
|
(78,074 |
) |
|||||||
|
Vesting of restricted common stock |
— |
|
— |
206,250 |
|
— |
|
— |
|
— |
|
|
— |
|
|||||||
|
Exercise of common stock options |
— |
|
— |
80,845 |
|
— |
|
66 |
|
— |
|
|
66 |
|
|||||||
|
Stock-based compensation |
— |
|
— |
— |
|
— |
|
1,739 |
|
— |
|
|
1,739 |
|
|||||||
|
Net loss |
— |
|
— |
— |
|
— |
|
— |
|
(55,253 |
) |
|
(55,253 |
) |
|||||||
|
Balances as of December 31, 2024 |
17,696,748 |
$ |
130,616 |
5,169,812 |
$ |
1 |
$ |
4,009 |
$ |
(135,532 |
) |
$ |
(131,522 |
) |
|||||||
See accompanying notes to consolidated financial statements.
F-82
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
Year Ended December 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Cash flows from operating activities |
|
|
|
|
||||
|
Net loss |
$ |
(55,253 |
) |
$ |
(36,463 |
) |
||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
||||
|
Depreciation |
|
1,466 |
|
|
1,140 |
|
||
|
Stock-based compensation |
|
1,739 |
|
|
1,806 |
|
||
|
Amortization of right-of-use assets |
|
575 |
|
|
657 |
|
||
|
Non-cash interest expense |
|
207 |
|
|
103 |
|
||
|
Loss on disposal of property and equipment |
|
— |
|
|
16 |
|
||
|
Loss on change in fair value of warrant liabilities |
|
265 |
|
|
55 |
|
||
|
Loss on foreign currency exchange rate |
|
(197 |
) |
|
(199 |
) |
||
|
(Gain) loss on early lease termination |
|
(1 |
) |
|
20 |
|
||
|
Accrual for contract loss provision |
|
6,347 |
|
|
— |
|
||
|
Change in operating assets and liabilities: |
|
|
|
|
||||
|
Accounts receivable |
|
(511 |
) |
|
(17 |
) |
||
|
Prepaid expenses and other current assets |
|
687 |
|
|
(326 |
) |
||
|
Deposits |
|
25 |
|
|
55 |
|
||
|
Accounts payable |
|
(98 |
) |
|
2,338 |
|
||
|
Accrued expenses |
|
893 |
|
|
(211 |
) |
||
|
Deferred revenue |
|
112 |
|
|
— |
|
||
|
Contract loss provision |
|
(1,181 |
) |
|
— |
|
||
|
Operating lease liabilities |
|
(612 |
) |
|
(670 |
) |
||
|
Net cash used in operating activities |
$ |
(45,537 |
) |
$ |
(31,696 |
) |
||
|
|
|
|
|
|||||
|
Cash flows from investing activities |
|
|
|
|
||||
|
Cash paid to acquire property and equipment |
$ |
(1,904 |
) |
$ |
(4,844 |
) |
||
|
Proceeds from sales of property and equipment |
|
— |
|
|
10 |
|
||
|
Withdrawal (purchase) of short-term investments |
|
211 |
|
|
(34 |
) |
||
|
Target Bridge Notes principal originated |
|
2,250 |
|
|
— |
|
||
|
Repayment of Target Bridge Notes |
|
(2,250 |
) |
|
— |
|
||
|
Net cash used in investing activities |
$ |
(1,693 |
) |
$ |
(4,868 |
) |
||
|
|
|
|
|
|||||
|
Cash flows from financing activities |
|
|
|
|
||||
|
Proceeds from issuance of long-term debt |
$ |
34,378 |
|
$ |
— |
|
||
|
Proceeds from issuance of warrants |
|
496 |
|
|
— |
|
||
|
Repayments of long-term debt |
|
(1,000 |
) |
|
(1,017 |
) |
||
|
Proceeds from exercise of common stock options |
|
66 |
|
|
21 |
|
||
|
Payment of preferred stock issuance costs |
|
— |
|
|
(1,510 |
) |
||
|
Net cash provided by (used in) financing activities |
|
33,940 |
|
|
(2,506 |
) |
||
|
|
|
|
|
|||||
|
Net decrease in cash and cash equivalents |
$ |
(13,290 |
) |
$ |
(39,070 |
) |
||
|
Cash and cash equivalents at beginning of year |
|
50,485 |
|
|
89,555 |
|
||
|
Cash and cash equivalents at end of year |
$ |
37,195 |
|
$ |
50,485 |
|
||
|
|
|
|
|
|||||
|
Supplemental disclosure of cash flow information |
|
|
|
|
||||
|
Cash paid during the year for: |
|
|
|
|
||||
|
Interest |
$ |
1,586 |
|
$ |
236 |
|
||
|
Taxes |
$ |
237 |
|
$ |
132 |
|
||
|
Operating lease right-of-use assets obtained in exchange for operating lease liabilities |
$ |
842 |
|
$ |
589 |
|
||
See accompanying notes to consolidated financial statements.
F-83
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
1. Organization and Description of Business
Merlin Labs, Inc. was incorporated on October 24, 2018 as a Delaware corporation under the name Apollo Flight Research, Inc and changed its name to Merlin Labs, Inc on October 27, 2020. Merlin Labs, Inc. is the parent company of two wholly-owned subsidiaries: Merlin Labs NZ Limited (“MLNL”), a New Zealand limited company, was incorporated on August 17, 2020 and Merlin Labs Securities Corporation (“MLSC”), a Massachusetts Securities Corporation, was incorporated on December 13, 2022. Merlin Labs, Inc, together with its subsidiaries are herein referred to as “Merlin,” the “Company,” “we,” or “our”.
The Company develops sophisticated software that fulfill the functions of a human pilot in self-flying aircraft to enable both reduced crew and unmanned flight. This technology is designed to be scalable and adaptable across different aircraft types for a growing range of aircraft platforms. The Company’s aircraft-agnostic, AI-powered software is purpose-built for military and civil programs and is powering an expanding range of missions and aircraft, proven through hundreds of autonomous flights from test facilities across the globe.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of Merlin Labs, Inc., and its consolidated subsidiaries, MLNL and MLSC. All intercompany balances and transactions have been eliminated in consolidation.
Risk and Uncertainties
The consolidated financial statements have been prepared in accordance with U.S. GAAP assuming that the Company will continue as a going concern over the next twelve months. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business, including having sufficient liquidity in the future to meet, among other things, the Company’s obligations under its borrowing arrangements (refer to Note 8. Debt) and debt instruments issued pursuant to the Private Investment in Public Equity (“PIPE”) Bridge and Pre-PIPE transactions (refer to Note 17. Subsequent Events).
Since its inception, the Company has primarily operated in the pre-commercialization stage and funded historical losses through debt and equity financings. The Company expects to incur additional net losses while it continues to advance its commercialization efforts and pursue profit-generating revenue contracts with customers, namely, the United States (“U.S.”) government.
During the years ended December 31, 2024 and 2023, the Company incurred net losses in the amounts of $55,253 and $36,463, respectively, and generated negative cash flows from operations in the amounts of $45,537 and $31,696, respectively. Additionally, as of December 31, 2024, the Company has an accumulated deficit in the amount of $135,532 and cash and cash equivalents of $37,195. Based on the Company’s liquidity position as of December 31, 2024, the Company’s current forecast of operating results and cash flows, combined with the effect of the financing transactions discussed above and in Note 17. Subsequent Events which created additional debt liabilities of $88,151, management determined that there is substantial doubt about the Company’s ability to continue as a going concern over the twelve months following the date these financial statements are issued. As a result, the Company may require additional liquidity to continue its operations over the next twelve months.
The ability of the Company to satisfy its obligations and recover its costs will be primarily dependent upon the future financial and operating performance of the Company and the Company is evaluating strategies to finance its future obligations. These strategies include, but are not limited to, obtaining additional financing via additional PIPE financing transactions, effecting a reverse recapitalization with a special purpose acquisition company, and obtaining profit-producing revenue contracts with customers including the U.S. government. The Company may not be able to access additional debt or equity financings under acceptable terms, may not be successful in effectuating a reverse recapitalization with a special purpose acquisition company, and may not be able to grow its revenue base.
F-84
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
The consolidated financial statements do not include any adjustments to recorded amounts or the classification of assets and liabilities related to these uncertainties. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of assets and liabilities, and the reported amounts of income and expenses, may be required and material.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, and the reported amounts of revenue and expenses during the reporting periods.
Significant estimates and assumptions made in the accompanying consolidated financial statements include, but are not limited to, the identification of performance obligations in customer contracts, the valuation of anticipated contract costs, the valuation of deferred tax assets and liabilities, valuation and useful lives of property, plant, and equipment, the valuation and recognition of stock-based compensation awards, and the valuation of warrant liabilities.
Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the Company’s consolidated financial position and results of operations.
Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM, who is the Chief Executive Officer, reviews financial information on a consolidated basis to make operating decisions, assess performance, and make resource allocation decisions, leading to decisions related to resource allocations in relation to profit and loss. Accordingly, the Company has determined that it has one reportable segment.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents, which includes money market mutual funds. The Company has a cash management program, which provides for the investment of excess cash balances primarily in money market mutual funds.
Investments
Management determines the appropriate classification of investments in certificates of deposit at the time of purchase based upon management’s intent with regard to such investments. All investments in the periods presented have been classified as held to maturity.
The Company classifies investments as short-term when they have remaining contractual maturities of one year or less from the balance sheet date, and as long-term when the investments have remaining contractual maturities of more than one year from the balance sheet date. Investments are recorded at fair value, which approximates cost.
Accounts Receivable
Accounts receivable are recorded at the original invoiced amount less an allowance for credit losses. An allowance for credit losses is determined based on historical loss experience, current conditions, and future expectations. Receivables are written off when deemed uncollectible. The Company uses the aging method to determine lifetime expected credit losses on accounts receivable, relying on historical loss experience adjusted for current conditions and future forecasts.
F-85
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Adjustments consider factors such as past due receivables, customer creditworthiness, changes in receivable terms, and external factors like competition and regulatory requirements. The Company pools receivables with similar risk characteristics for estimating expected credit losses and evaluates these pooling decisions periodically as risk characteristics change. For receivables not sharing similar risk characteristics, individual measurement is applied. Receivables from the U.S. government are assumed to have zero credit loss.
As of December 31, 2024 and 2023, the allowance for credit losses is immaterial to the consolidated financial statements.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with accredited financial institutions in amounts which at times exceed federally insured limits. The Company monitors the credit standing of such financial institutions in order to limit credit risk. The Company has not experienced any losses on its deposits of cash and cash equivalents and believes it is not exposed to any significant losses due to credit risk on cash and cash equivalents. Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable.
During the years ended December 31, 2024 and 2023, the Company generated $1,229 and $1,003 in revenue, with a significant amount (> 90%) of this revenue coming from the U.S. government.
Fair Value Measurements
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1 — Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 — Inputs to the valuation methodology include:
• Quoted prices for similar assets or liabilities in active markets;
• Quoted prices for identical or similar assets or liabilities in inactive markets;
• Inputs other than quoted prices that are observable for the asset or liability; and
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
F-86
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, as follows:
|
Property and Equipment |
Estimated Useful Life |
|
|
Aircraft |
11-15 years |
|
|
Aircraft equipment |
3-8 years |
|
|
Computer equipment |
2-3 years |
|
|
Leasehold improvements |
Lesser of the useful life or life of lease |
|
|
Office furniture & equipment |
3-13 years |
|
|
Motor vehicles |
3-4 years |
Impairment of Long-Lived Assets
All long-lived assets are reviewed by the Company for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures recoverability of assets to be held and used by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2024 and 2023, the Company determined that there have been no significant events or changes in circumstances that would cause the impairment of any of the Company’s long-lived assets.
Leases
The Company determines if an arrangement is, or contains, a lease at inception. An arrangement qualifies as a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is established if the Company has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
At the commencement date, the date on which the lessor makes the underlying asset available for use, leases are classified as either operating or finance leases based on their economic substance. Operating leases are presented in the consolidated balance sheets within operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current. Finance leases, which are immaterial to the Company’s financial statements, are presented in the consolidated balance sheets within property and equipment, net and accrued expenses.
The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when determining its incremental borrowing rates.
For short-term leases, defined as leases with a term of twelve months or less, the Company elected the practical expedient to not recognize an associated lease liability and right-of-use asset. Lease payments for short-term leases are expensed on a straight-line basis over the lease term.
The Company has elected the policy to not separate lease and non-lease components for all classes of underlying assets. Lease right-of-use assets also include any lease payments made at or before commencement date, net of lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.
The Company leases office space, aircraft, automobiles, and airport hangar space in the United States and New Zealand.
F-87
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Term Debt
The Company’s debt obligations are recorded at amortized cost, net of any debt issuance costs, discounts, and premiums. Upon issuance, the Company evaluates whether identified embedded derivatives should be bifurcated and accounted for as a derivative at fair value under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). Any embedded derivatives that meet the criteria for bifurcation and separate accounting are accounted for as a compound derivative recorded at fair value on the date of issuance and on each balance sheet date thereafter, with changes in fair value recorded in net loss.
Convertible Debt
The Company first assesses the balance sheet classification of its convertible debt instruments to determine whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). If convertible debt is not classified as a liability under ASC 480, the Company accounts for convertible debt in accordance with ASC 470-20, Debt with Conversion and Other Options, and ASC 815. Upon issuance, the Company evaluates whether the embedded conversion feature, as well as other identified embedded derivatives, should be bifurcated and accounted for as a derivative at fair value under ASC 815, and if not, whether any substantial premium must be recognized in additional paid-in capital. Any embedded derivatives that meet the criteria for bifurcation and separate accounting are accounted for as a compound derivative recorded at fair value on the date of issuance and on each balance sheet date thereafter, with changes in fair value recorded in net loss.
Debt Issuance Costs
Costs incurred in connection with the issuance of the Company’s term and convertible debt instruments are recorded as a direct deduction against the associated debt liability, consistent with debt discounts. These costs are included in long-term debt, non-current, net and long-term debt, current portion, net in the Company’s consolidated balance sheet and are amortized over the life of the associated debt as a component of interest expense using the effective interest method.
Redeemable Convertible Preferred Stock
The Company’s evaluates its redeemable convertible preferred stock under ASC 480 to evaluate the classification of the redeemable convertible preferred stock. The Company’s redeemable convertible preferred stock does not require liability classification under ASC 480 and is classified in temporary equity as all classes may be subject to redemption upon the occurrence of an event that is not solely within the control of the Company. Upon issuance, the Company evaluates whether identified embedded derivatives should be bifurcated and accounted for as a derivative at fair value under ASC 815. The redeemable convertible preferred stock is initially recognized at the proceeds received, net of issuance costs and the fair value of any bifurcated derivatives, and is only subsequently remeasured to the extent it becomes currently redeemable or probable of becoming redeemable. Any embedded derivatives that meet the criteria for bifurcation and separate accounting are accounted for as a compound derivative recorded at fair value on the date of issuance and on each balance sheet date thereafter, with changes in fair value recorded in net loss.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance included in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments (if they were issued with another instrument) pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and if not, whether the warrants meet the requirements for equity classification under ASC 815. This assessment requires the use of professional judgment and is conducted at issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
F-88
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Warrants that meet all of the criteria for equity classification are recorded at fair value as a component of additional paid-in capital at the time of issuance and are not subsequently remeasured. Warrants that do not meet all the criteria for equity classification are recorded at fair value on the date of issuance and on each balance sheet date thereafter as a component of warrant liabilities in the Company’s consolidated balance sheets. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in loss on change in fair value of warrant liabilities in the consolidated statements of operations.
Revenue Recognition
The Company recognizes revenue under its contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers. The Company derives its revenues primarily through its engineering and autonomy development programs which involve various U.S. government agencies, including the Federal Aviation Administration, U.S. Special Operations Command, and the U.S. Air Force. These contracts focus on the design, demonstration, and integration of autonomous flight technologies. The Company also engages in limited commercial activities with foreign and private sector customers, including aviation advisory services in New Zealand.
The Company performs under various contract types, including firm-fixed-price, cost-plus-fixed-fee, and cost-share arrangements. These contracts are structured to support research and development efforts, prototype demonstrations, and system integration activities.
Revenue is recognized when control of the goods and services provided is transferred to the Company’s customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services using the following steps: 1) identification of the contract or contracts with a customer, 2) identification of performance obligations in the contract, 3) determination of the transaction price, 4) allocation of the transaction price to the performance obligations in the contract and 5) recognition of revenue when or as the Company satisfies the performance obligations.
The Company’s performance obligation consists of comprehensive engineering and development programs rather than distinct deliverables. Supporting activities such as system engineering, airworthiness certification, and technical data packages are not considered separate performance obligations, as they are highly interrelated and collectively contribute to the overarching deliverable. The Company provides engineering data and insights that inform the customer’s broader autonomy initiatives.
Contracts with U.S. government entities are governed by the Federal Acquisition Regulation, which defines allowable costs and pricing methodologies. Each contract is individually negotiated and variable consideration may arise in cost-share arrangements, where the Company is reimbursed for a portion of actual costs incurred, subject to a contractual ceiling. The Company includes variable consideration in the transaction price only when it is probable that a significant revenue reversal will not occur. Pricing for non-government customers, including commercial and foreign entities, is determined through direct negotiation. The Company’s contracts generally do not contain significant financing components, and taxes collected are excluded from the transaction price.
The Company recognizes revenue on its engineering and development contracts with the U.S. government primarily over time, as control of the services is continuously transferred throughout the performance period. This continuous transfer is supported by standard U.S. government contract clauses, including the right to terminate for convenience and the obligation to reimburse the contractor for costs incurred plus reasonable compensation. These provisions, along with the customer’s ability to benefit from the work-in-progress through monthly deliverables and technical reports, support over-time revenue recognition. The Company bills its customers on a monthly basis as services are provided throughout the contract. For these contracts, the Company generally uses a method that measures the extent of progress towards completion of the performance obligation, principally using a cost incurred input method. Under this method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion. A management reserve may be applied to estimated costs to account for uncertainty and prevent premature revenue recognition.
F-89
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Loss provisions on contracts are recognized to the extent that estimated contract costs exceed the estimated consideration contemplated under the contractual arrangement. For new commitments, we generally record loss provisions at contract signing. For existing commitments, anticipated losses on contractual agreements are recognized in the period in which the losses become evident. The Company recorded a net loss related to contracts with customers of $6,347 for the year ended December 31, 2024, of which $1,181 of associated expense had been incurred in the year ended December 31, 2024.
Contract Assets and Liabilities
The timing of revenue recognition, customer billings and cash collections for each contract results in a net contract asset or deferred revenue liability at the end of each reporting period.
Contract assets consist of unbilled receivables, which is the amount of revenue recognized that exceeds the amount billed to the customer. Contract liabilities consist of deferred revenue, which represents cash advances received prior to performance for programs and billings in excess of revenue recognized. As of December 31, 2024, the Company’s contract liabilities were $112. The Company’s contract liabilities as of December 31, 2023, were immaterial.
Cost of Revenue
Cost of revenue primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing operations, and professional services, as well as subcontractor expenses, field-service representatives, hardware costs, travel costs, allocated overhead, and other direct costs. Cost of revenue also includes provisions for loss contracts.
Research and Development Costs
Company-sponsored research and development costs, including those related to the Company’s portion in connection with cost-sharing arrangements, are charged to expense as incurred and recovery on these cost-sharing arrangements is recorded as a reduction to research and development expense as earned. Customer-sponsored research and development projects performed under contracts with customers are accounted for as contract costs and reported as cost of revenues. Research and development costs consist primarily of personnel-related expenses for the Company’s engineering and program office teams, including salaries, benefits, bonuses, stock-based compensation expenses and allocated overhead costs. Research and development expenses also include contractor or professional service fees and software services dedicated for use by the Company’s engineering organization.
Sales and Marketing Costs
Sales and marketing expenses consist primarily of personnel-related costs for the Company’s sales and marketing staff, including salaries, benefits, bonuses, commissions, stock-based compensation, and allocated overhead costs. Sales and marketing expenses also include advertising costs and other expenses associated with the Company’s marketing and business development programs.
Advertising Costs
The Company expenses advertising costs as incurred. During the years ended December 31, 2024 and 2023, the Company incurred advertising expense in the amounts of $1,328 and $758, respectively.
General and Administrative Costs
General and administrative expenses consist of personnel-related costs associated with the Company’s finance, legal, human resources and administrative personnel, including salaries, benefits, bonuses, stock-based compensation and allocated overhead costs. General and administrative expenses also include external legal, accounting, professional services fees, software services dedicated for use by the Company’s general and administrative functions, insurance, and other corporate expenses.
F-90
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Stock-Based Compensation
The Company recognizes stock-based compensation on awards granted under the Merlin Labs 2018 Equity Incentive Plan (“the Plan”). These awards include incentive stock options (“ISOs”) granted to employees as well as nonqualified stock options (“NSOs”) or restricted stock awards (“RSUs”) granted to directors, consultants, employees, and officers of the Company. In addition to the Plan, the Company has historically issued common stock warrants to a vendor as compensation for services provided to the Company.
Stock-based compensation expense is recorded for awards issued to employees and nonemployees using the fair value method with a corresponding increase in additional paid-in capital in the consolidated balance sheets. The Company recognizes forfeitures as they occur.
Under the Plan, these awards generally vest over a four-year period, subject to the terms set forth in individual grant agreements and the discretion of the Plan administrator. Stock-based compensation awards are measured at the grant date fair value with compensation expense recognized on a straight-line basis over the requisite vesting period of the award.
Income Taxes
The Company estimates its current tax expense together with assessing temporary differences resulting from differing treatment of items not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities on the Company’s consolidated balance sheets, which are estimated based upon the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates that will be in effect when these differences reverse. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s consolidated statements of operations become deductible expenses under applicable income tax laws or loss or credit carryforwards are utilized. Accordingly, the realization of the Company’s deferred tax assets is dependent on future taxable income against which these deductions, losses, and credits can be utilized.
The Company evaluates the realizability of its deferred tax assets on an annual basis. The Company records a valuation allowance when, based on the weight of available evidence, it expects future taxable income is not likely to support the use of a deduction or credit in that jurisdiction. If certain factors change and the Company determines that the deferred tax assets are realizable at a more-likely-than not level, it will adjust the valuation allowance in the period the determination is made. Changes in the valuation allowance, when recorded, would be included in the Company’s consolidated statements of operations. Management’s judgment is required in determining the Company’s valuation allowance recorded against its net deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions, if any, in its provision for income taxes. No such interest or penalties were recognized during the periods presented and the Company had no accruals for interest and penalties as of December 31, 2024 and 2023. The Company is subject to the Global Intangible Low Taxed Income (“GILTI”) tax in the U.S. and has elected to treat taxes on future GILTI inclusions as current period expense if and when incurred.
Net Loss per Share
The Company calculates basic and diluted net loss per share using the two-class method. Under the two-class method, earnings are allocated to common stock and participating securities (unvested restricted stock) according to their participation rights in dividends and undistributed earnings. As the Company has reported losses for all periods presented and unvested restricted stock is not contractually obligated to share in the losses of the Company, the Company’s net loss is fully attributable to its common stockholders for the periods presented.
F-91
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (cont.)
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of redeemable convertible preferred stock, restricted stock, stock options, common stock warrants, preferred stock warrants, and convertible note features. As the Company has reported losses for all periods presented, all potentially dilutive securities are anti-dilutive, and accordingly, basic net loss per share equaled diluted net loss per share.
Determination of Fair Value of Common Stock
Since there has been no public market for our common stock, the estimated fair value of our common stock has been determined by the Board of Directors through the use of an annual valuation report prepared by an independent third-party specialist, supplemented by the Board’s and management’s assessments of any material changes between the valuation date and the date of each option grant approval.
Foreign Currency
The Company’s foreign operations related to MLNL are remeasured from New Zealand Dollars (“NZD”) into U.S. dollars. The remeasurement is based on the determination that the U.S. dollar is the functional currency of MLNL. Monetary assets and liabilities of MLNL’s foreign operations are remeasured into U.S. dollars at year-end exchange rates and nonmonetary assets, liabilities and equity accounts are remeasured using historical exchange rates. Income statement accounts are remeasured at the weighted average exchange rate prevailing during the year. During the years ended December 31, 2024 and 2023, the Company recognized foreign currency exchange losses of $197 and $199, respectively.
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (“Topic 280”): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company adopted the guidance during the year ended December 31, 2024, and applied it retrospectively to the periods presented. Refer to Note 15. Segment and Geographic Information for more information.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes — Improvements to Income Tax Disclosures, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company is currently evaluating the impacts of the new standard on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures, which requires the disclosure of additional information about specific expense categories in the notes to the consolidated financial statements on an annual and interim basis. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027 on either a prospective or retrospective basis, with early adoption permitted. The Company is currently evaluating the impacts of the new standard on its consolidated financial statements.
F-92
Table of Contents
MERLIN LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
3. Revenue Recognition from Contracts with Customers
Disaggregation of Revenue
The Company disaggregates revenues by customer-type. These categories represent how the nature, timing and uncertainty of revenues and cash flows are affected.
Disaggregated revenues by customer-type were as follows:
|
As of December 31, |
||||||
|
2024 |
2023 |
|||||
|
U.S. government agencies |
$ |
1,145 |
$ |
969 |
||
|
Commercial and non-U.S. government customers |
|
84 |
|
34 |
||
|
Total |
$ |
1,229 |
$ |
1,003 |
||
Remaining performance obligations
As of December 31, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations was $5,508, all of which will be recognized over the next 18 months. Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals, or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations, and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate.
4. Fair Value Measurements
The following table presents assets and liabilities measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation as follows:
|
December 31, 2024 |
||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||
|
Assets: |
|
|
|
|
||||||||
|
Cash equivalents: |
|
|
|
|
||||||||
|
Money market mutual funds |
$ |
29,773 |
$ |
— |
$ |
— |
$ |
29,773 |
||||
|
Short-term Investments: |
|
|
|
|
||||||||
|
Certificates of deposit |
|
— |
|
377 |
|
— |
|
377 |
||||
|
Total Assets |
$ |
29,773 |
$ |
377 |
$ |
— |
$ |
30,150 |
||||
|
Liabilities: |
|
|
|
|
||||||||
|
Warrant liabilities |
|
— |
|
— |
|
3,586 |
|
3,586 |
||||
|
Total Liabilities |
$ |
— |
$ |
— |
$ |
3,586 |
$ |
3,586 |
||||
|
December 31, 2023 |
||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||
|
Assets: |
|
|
|
|
||||||||
|
Cash equivalents: |
|
|
|
|
||||||||
|
Money market mutual funds |
$ |
43,680 |
$ |
⚠️ Filing Content TruncatedThis filing was too large to display in its entirety (original size: 18.54 MB). The content has been truncated to fit within database limits. To view the complete filing, please visit the original source: View Complete Filing on SEC Website
Filing: S-4 - INFLECTION POINT ACQUISITION CORP. IV (BACQ) | ||||||||
FAQ
What transaction does Inflection Point Acquisition Corp. IV (BACQ) propose in this S-4 filing?
The S-4 describes a Business Combination Agreement under which Inflection Point will domesticate from the Cayman Islands to Delaware and merge its wholly owned Merger Sub into Merlin Labs, Inc., with Merlin surviving as a wholly owned subsidiary. After closing, the combined company will be renamed “Merlin, Inc.”, and substantially all operations will be conducted through Merlin OpCo and its subsidiaries.
What securities are being registered in connection with the Merlin Labs merger?
The proxy statement/prospectus covers 163,582,614 shares of New Merlin Common Stock, up to 10,288,021 shares of Series A Preferred Stock, New Merlin Series A Warrants initially exercisable for up to 10,103,376 shares of common stock, 25,425,000 Post-Domestication Rights and 653,821 Post-Domestication Units. These securities relate to merger consideration, conversions of Pre-Funded Convertible Notes and Warrants, and the SPAC’s existing Public Rights and Units.
How is Merlin Labs valued in the Inflection Point (BACQ) business combination?
Under the Business Combination Agreement, the aggregate consideration to Merlin equity holders (excluding holders of Pre-Funded Convertible Notes and Pre-Funded Warrants for those specific securities) is a number of New Merlin Common Shares equal to $800,000,000, defined as the Purchase Price, divided by the per-share redemption price of the SPAC’s Public Shares. This equity-based Purchase Price is then allocated across Merlin’s fully diluted capitalization through an Exchange Ratio.
What additional financings support the Merlin, Inc. transaction beyond the trust account?
Merlin entered into Pre-Funded PIPE Agreements, issuing approximately
What redemption rights do Inflection Point (BACQ) Public Shareholders have in this deal?
Holders of Public Shares may request to redeem all or a portion of their shares for cash if the Business Combination is consummated. To redeem, a Public Shareholder must submit a written request to Continental Stock Transfer & Trust Company and deliver the Public Shares (physically or via DTC’s DWAC system) by 5:00 p.m. Eastern Time two business days before the extraordinary general meeting. The Redemption Price equals the cash in the Trust Account (including interest, net of taxes) divided by the number of issued Public Shares. Redemptions are limited to an aggregate of 15% of the Public Shares per holder or group acting together.
Will New Merlin stock be listed, and under what ticker, if the merger closes?
The parties intend for New Merlin Common Stock to be listed on the Nasdaq Stock Market under the proposed symbol “MRLN”, and conditional Nasdaq listing approval is a closing condition. However, the filing notes there is no assurance this condition will be met and that the parties may waive it, in which case the Business Combination could close even if New Merlin Common Stock is not listed on any nationally recognized securities exchange.
What potential conflicts of interest are disclosed for the Inflection Point (BACQ) Sponsor and management?
The document explains that the Sponsor, Inflection Point Fund and Inflection Point’s directors and officers have interests that may differ from those of unaffiliated Public Shareholders. These include large equity positions that become valuable only if a business combination closes, receipt of 8,333,333 Founder Shares and 467,500 shares from Private Placement Units, and significant Series A Preferred Stock and warrant holdings for Inflection Point Fund. The filing notes that these incentives could influence decisions to proceed with the Business Combination rather than liquidate the SPAC.
