Merlin, Inc.

Previous wording

The following discussion and analysis of the financial condition and results of operations of Merlin includes information that Merlin’s management believes is relevant to an assessment and understanding of Merlin’s consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements included in this Quarterly Report and our audited financial statements, unaudited pro forma financial statements and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed as Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3, respectively, to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2026 (the “Super 8-K”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Merlin’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report and the section titled “Risk Factors” in the final prospectus, dated May 13, 2026 (the “Prospectus”), filed with the Securities and Exchange Commission (the “SEC”), as updated by the factors disclosed in the section titled “Risk Factors” in our Super 8-K and in this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis of Merlin's financial condition and results of operations includes information that Merlin’s management believes is relevant to an assessment and understanding of Merlin’s consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements included in this Quarterly Report and our audited financial statements, unaudited pro forma financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed as Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3, respectively, to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2026 (the “Super 8-K”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Merlin’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report and the section titled “Risk Factors” in our other SEC filings.

Previous wording

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. 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.

Current wording

Our vision is to be at the forefront of advancing autonomous flight technology and position ourselves as the leading U.S.-based developer of autonomy solutions for fixed-wing aircraft. Our non-human pilot system, Merlin Pilot, integrates advanced hardware and software to deliver a comprehensive autonomous flight solution that spans the entire flight process, from takeoff to touchdown. By enabling an aircraft to operate 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 could translate to potential savings of millions of dollars per aircraft annually, offering substantial financial benefits to large fleet operators.

Previous wording

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.

Current wording

We believe that Merlin Pilot not only addresses the global pilot shortage but has the potential to enhance 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.

Previous wording

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 an Indefinite Delivery, Indefinite Quantity (“IDIQ”) contract with a ceiling value of up to $105 million and we have identified approximately $3.0 billion pipeline of opportunities, supporting robust growth in both military and civilian markets. Our active 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.

Current wording

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 an Indefinite Delivery, Indefinite Quantity (“IDIQ”) contract with a ceiling value of up to $105 million. Our active 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.

Previous wording

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.

Current wording

The Merlin Pilot is an advanced automation system in development 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.

Previous wording

Our go-to-market strategy is designed around mastering traditional aircraft markets and building a solid foundation of revenue and expertise. Our goal is to sell to both the military and civil sectors.

Current wording

Our go-to-market strategy is designed around mastering traditional aircraft markets and building a solid foundation of revenue and expertise. Our goal is to sell to both the military and civilian sectors.

Previous wording

We plan to deploy the first Merlin Pilot on either commercial or military aircraft within the next three years. We incurred net losses of $90,419 thousand and $12,733 thousand for the three months ended March 31, 2026 and 2025, respectively. We expect to continue to generate losses over the next few years as we continue to invest in research and development, expand our facilities and expand the technical capabilities of our engineering function. We expect that our existing cash and cash equivalents will be sufficient to meet our capital expenditure and working capital requirements for a period of at least twelve months from the issuance of this Quarterly Report.

Current wording

We plan to deploy the first Merlin Pilot on either commercial or military aircraft within the next three years. We incurred net losses of $58,427 and $16,296 for the three months ended June 30, 2026 and 2025, respectively. We incurred net losses of $148,846 and $29,029 for the six months ended June 30, 2026 and 2025, respectively. We expect to continue to generate losses over the next few years as we continue to invest in research and development, expand our facilities and expand the technical capabilities of our engineering function. We expect that our existing cash and cash equivalents will be sufficient to meet our capital expenditure and working capital requirements for a period of at least twelve months from the issuance of this Quarterly Report.

Previous wording

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:

Current wording

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 have 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:

Previous wording

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.

Current wording

Phase 2 — Integrate: During this phase, the Merlin Pilot system will be integrated onto customer platforms. We may use integration partners, which would allow us to scale our programs effectively.

Previous wording

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.

Current wording

Once we have 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.

Previous wording

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 described in the section of the Prospectus entitled*“Risk Factors*.”

Current wording

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 described below in the section of the Prospectus entitled“Risk Factors”and in our other SEC filings.

Previous wording

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 and ongoing U.S. and Israeli operations in Iran, 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.

Current wording

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 it is our single and largest customer. If the U.S. government were to stop supporting 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 and ongoing U.S. and Israeli operations in Iran, 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.

Previous wording

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.

Current wording

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 prioritizing 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.

Previous wording

Our ability to obtain and maintain regulatory approvals at federal, state and local levels

Current wording

Our ability to obtain and maintain regulatory approvals at the federal, state and local levels

Previous wording

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 of professionals who are in regular communication with the U.S. Federal Aviation Administration 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.

Current wording

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 at the 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 they relate 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 of professionals who are in regular communication with the U.S. Federal Aviation Administration 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.

Previous wording

Our ability to expand our product services offerings

Current wording

Our ability to expand our product and service offerings

Previous wording

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.

Current wording

We intend to offer customers a diversified suite of services throughout the life of the autonomous aircraft, beginning when we have successfully installed the Merlin Pilot and it begins 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.

Previous wording

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.

Current wording

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, and 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.

Previous wording

We generate revenue from long-term contracts for the delivery of our Merlin Pilot software and supporting hardware. In order to satisfy these contracts we undertake engineering for research, design, development, manufacturing, integration and sustainment of advanced auto-piloting technology.

Current wording

We generate revenue from long-term contracts for the integration, testing, and delivery of our Merlin Pilot software and supporting hardware. In order to satisfy these contracts, we undertake engineering for research, design, development, manufacturing, integration and sustainment of advanced auto-piloting technology.

Previous wording

Selling and marketing expenses consist 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.

Current wording

Selling and marketing expenses consist of personnel-related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions, allocated overhead costs, and stock-based compensation. Selling and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs. In addition, selling 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.

Previous wording

Interest income consists of interest income earned on cash and cash equivalents balances held in interest bearing time and money market accounts.

Current wording

Interest income consists of interest income earned on cash and cash equivalents balances held in interest-bearing time and money market mutual accounts.

Previous wording

Research and development expenses for the three months ended March 31, 2026, increased by $7,411 thousand, or 111.0% to $14,090 thousand compared to $6,679 thousand in the three months ended March 31, 2025, due to increasing personnel related expenses from hiring of new and highly-skilled engineering talent, outsourcing to an increased number of subject matter experts identified specifically to solve unique engineering challenges, and increased equipment and material costs. We expect our personnel related research and development expenses to increase as we continue to expand our operations.

Current wording

Research and development expenses for the three months ended June 30, 2026 increased by $9,531 thousand, or 139.0% to $16,387 thousand compared to $6,856 thousand in the three months ended June 30, 2025, due to increasing personnel related expenses from hiring of new and highly-skilled engineering talent, outsourcing to an increased number of subject matter experts identified specifically to solve unique engineering challenges, and increased equipment and material costs.

Previous wording

General and administrative expenses for the three months ended March 31, 2026, increased by $9,572 thousand, or 211.8% to $14,092 thousand compared to $4,520 thousand in the three months ended March 31, 2025. This was primarily due to an increase in legal, accounting, and other consulting expenses as a result of the Merger and operating as a public company. We expect our general and administrative expenses to increase as we hire additional personnel as we grow our business and operate as a public company.

Current wording

General and administrative expenses for the three months ended June 30, 2026 increased by $11,772 thousand, or 309.5% to $15,576 thousand compared to $3,804 thousand in the three months ended June 30, 2025. This was primarily due to an increase in legal, accounting, and other consulting and corporate expenses as a result of the Merger and operating as a public company.

Previous wording

Selling and marketing expenses for the three months ended March 31, 2026, increased by $284 thousand, or 79.1%, to $643 thousand compared to $359 thousand in the three months ended March 31, 2025. This was primarily due to increased advertising costs and increased personnel expenses.

Current wording

Selling and marketing expenses for the three months ended June 30, 2026 increased by $1,066 thousand, or 274.0%, to $1,455 thousand compared to $389 thousand in the three months ended June 30, 2025. This was primarily due to increased advertising costs and increased personnel expenses.

Previous wording

Interest income for the three months ended March 31, 2026, increased by $216 thousand, or 71.8%, to $517 thousand compared to $301 thousand in the three months ended March 31, 2025, primarily due to higher average cash and cash equivalent balances held in money market mutual funds during 2026 due to the receipt of proceeds from the Merger. Although interest rates may have fluctuated between periods, the increase in interest income was primarily driven by higher average cash balances in 2026 relative to 2025.

Current wording

Interest income for the three months ended June 30, 2026 increased by $1,316 thousand to $1,447 thousand compared to $131 thousand in the three months ended June 30, 2025, primarily due to higher average cash and cash equivalent balances held in interest bearing money market mutual funds during the three months ended June 30, 2026 due to the receipt of proceeds from the Merger on March 16, 2026 and the May 2026 PIPE.

Previous wording

Other expense for the three months ended March 31, 2026, increased by$67 thousand, or 109.8%, to$128 thousand compared to$61 thousand in the three months ended March 31, 2025, primarily driven by an increase in foreign currency losses of $64 thousand.

Current wording

Other expense for the three months ended June 30, 2026 decreased by$83 thousand, or 55.0%, to$68 thousand compared to$151 thousand in the three months ended June 30, 2025, primarily driven by a decrease in foreign currency losses and the receipt of insurance proceeds during the three months ended June 30, 2026.

Previous wording

Change in fair value of warrant liabilities for the three months ended March 31, 2026, resulted in an increased gain of $26,509 thousand to $26,555 thousand compared to $46 thousand in the three months ended March 31, 2025, primarily due to the issuance of liability classified warrants related to the Pre-PIPE Bridge, the Pre-Funded PIPE, the PIPE and the completion of the Merger on March 16, 2026.

Current wording

Change in fair value of warrant liabilities for the three months ended June 30, 2026 resulted in an increased loss of $22,219 to $26,144 thousand compared to $3,925 thousand in the three months ended June 30, 2025, primarily due to the May 2026 PIPE triggering a down round adjustment in the Company's previously issued and outstanding liability-classified warrants and the issuance of additional liability-classified warrants in the May 2026 PIPE.

Previous wording

Provision for income tax expense for the three months ended March 31, 2026, increased by$47 thousand to $48 thousand compared to $1 thousand in the three months ended March 31, 2025. This increase in provision for income taxes is primarily driven by an increase in foreign tax expenses for the Merlin Labs NZ Limited entity.

Current wording

Provision for income tax expense for the three months ended June 30, 2026 increased by $124 thousand to $125 thousand compared to the three months ended June 30, 2025. This increase in provision for income taxes is primarily driven by an increase in foreign tax expenses for the Merlin Labs NZ Limited entity.

Previous wording

Revenue for the three months ended March 31, 2026, increasedby $134 thousand, or 15.4%, to $1,002 thousand compared to $868 thousand for the three months ended March 31, 2025. This increase was primarily due to additional work completed under our USSOCOM Contract for the three months ended March 31, 2026, relative to the amount of work completed under our USSOCOM contract for the three months ended March 31, 2025. We expect the USSOCOM Contract to be a key driver of revenue growth in future periods.

Current wording

Revenue for the six months ended June 30, 2026 decreased by $780 thousand, or 19.6%, to $3,195 thousand compared to $3,975 thousand for the six months ended June 30, 2025. This decrease was primarily due to additional work being completed under our USSOCOM Contract during the six months ended June 30, 2025 and completion of a phase of that contract during the six months ended June 30, 2026.

Previous wording

Contract loss adjustments for the three months ended March 31, 2026, increased to $2,451 thousand compared to the three months ended March 31, 2025, due to our revision of the estimate of total internal and subcontractor costs to be incurred in the delivery of the USSOCOM Contract which resulted in the recognition of a favorable adjustment to the contract loss provision of $2,451 thousand for the three months ended March 31, 2026.

Current wording

Contract loss adjustments for the six months ended June 30, 2026 increased to $2,229 thousand compared to none for the six months ended June 30, 2025, due to our revision of the estimate of total internal and subcontractor costs to be incurred in the delivery of a phase of the USSOCOM Contract which resulted in the recognition of a favorable adjustment to the contract loss provision of $2,229 thousand for the six months ended June 30, 2026. The favorable contract loss adjustment for the six months ended June 30, 2026 was offset by an additional loss provision of $502 related to the Company's revised estimate of the costs to complete a separate phase of the USSOCOM Contract.

Previous wording

Interest expense for the three months ended March 31, 2026, decreased by $1,605 thousand, or 99.4%, to $9 thousand compared to $1,614 thousand in the three months ended March 31, 2025, related to the Company’s election to recognize our term loans (2024 LSA) and related interest costs under the fair value option starting in July 2025. As a result, $956 thousand of cash interest expense related to the 2024 LSA was recognized as a change in fair value of long-term debt rather than in interest expense.

Current wording

Interest expense for the six months ended June 30, 2026 decreased by $2,948 thousand, or 99.7%, to $9 thousand compared to $2,957 thousand in the six months ended June 30, 2025, primarily related to the Company’s election to recognize our term loans (2024 LSA) and related interest costs under the fair value option starting in July 2025. As a result, $956 thousand of cash interest expense related to the 2024 LSA was recognized as a change in fair value of long-term debt rather than in interest expense during the six months ended June 30, 2026.

Previous wording

Change in fair value of convertible promissory notes for the three months ended March 31, 2026, increased to $87,824 thousand compared to the three months ended March 31, 2025, due to the issuance of convertible promissory notes related to the Pre-PIPE Bridge and the Pre-Funded PIPE and the completion of the Merger on March 16, 2026.

Current wording

Change in fair value of convertible promissory notes for the six months ended June 30, 2026 increased to $87,824 thousand compared to the six months ended June 30, 2025, due to the issuance of convertible promissory notes related to the Pre-PIPE Bridge and the Pre-Funded PIPE and the completion of the Merger on March 16, 2026.

Previous wording

Loss on change in fair value of long-term debt for the three months ended March 31, 2026, increased to $2,470 thousand compared to the three months ended March 31, 2025, due to the election of the fair value option for our amended term loans (2024 LSA).

Current wording

Loss on change in fair value of long-term debt for the six months ended June 30, 2026, increased to $2,470 thousand compared to the six months ended June 30, 2025, due to the election of the fair value option for our amended term loans (2024 LSA) in July 2025. The increase in the loss on change in fair value of long-term debt is driven by remeasurement of our 2024 LSA Loans, together with interest accrued thereon.

Previous wording

In addition to our results determined in accordance with U.S. GAAP, we believe that EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide 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, equity-based compensation to non-employees, changes in fair value of warrant liabilities, changes in fair value of financial instruments accounted for at fair value, transaction and merger-related costs, and other non-cash items. Changes in fair value of warrant liabilities reflect periodic mark-to-market adjustments that will recur each reporting period as long as warrants remain outstanding and are excluded because they are non-cash and not reflective of our core operating performance. Changes in fair value of convertible promissory notes and long-term debt relate to instruments settled in connection with the Merger are excluded because they are not expected to recur in future periods.

Current wording

In addition to our results determined in accordance with U.S. GAAP, we believe that EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide 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 (i) stock-based compensation expense, (ii) equity-based compensation expense for non-employees, (iii) changes in fair value of warrant liabilities, (iv) changes in fair valueof financial instruments accounted for at fair value, and (v) transaction and merger-related costs. We exclude stock-based compensation expense and equity-based payments to non-employees because they are non-cash charges that can vary significantly based on the timing and size of equity awards. Changes in fair value of warrant liabilities reflect periodic non-cash mark-to-market adjustments that will recur each reporting period as long as warrants remain outstanding and are excluded because they are not reflective of our core operating performance. Changes in fair value of convertible promissory notes and long-term debt relate to instruments that were settled in connection with the Merger and are excluded because they are non-cash and are not expected to recur in future periods. Transaction and merger-related costs are excluded because they relate to specific non-recurring corporate events and are not indicative of our ongoing operating performance.

Previous wording

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.

Current wording

We believe that each of these non-GAAP financial measures provides useful supplemental information to management and investors in evaluating our operations and, when considered with both our U.S. GAAP results and the reconciliation to net loss, the most directly comparable U.S. GAAP financial measure, provides a more complete understanding of our business than could be obtained absent this disclosure. We use these non-GAAP financial measures, together with U.S. GAAP financial measures, such as 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.

Previous wording

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.

Current wording

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 above. However, these 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 presented in accordance with U.S. GAAP. Our non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies because other companies may not calculate such measures in the same manner as we do.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026, was $23,644 thousand, an increase of $10,563 thousand from net cash used in operating activities of $13,081 thousand for the three months ended March 31, 2025. The change in cash used in operations was primarily due to an increase in net loss of $77,686 thousand, a change in non-cash interest expense of $360 thousand, a decrease in change in fair value of warrant liabilities of $26,509 thousand, a change in accounts receivable of $942 thousand, a change in prepaid expenses and other current assets of $1,738 thousand, and an increase in contract loss provision amortization of $2,763 thousand. These changes are offset by an increase in change in fair value of convertible promissory notes of $87,824 thousand, and changes in accounts payable and accrued expenses of $4,035 thousand and $3,253 thousand, respectively.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026, was $(50,896) thousand, an increase of $(25,676) thousand from net cash used in operating activities of $(25,220) thousand for the six months ended June 30, 2025. The change in cash used in operations was primarily due to an increase in net loss of $119,817 thousand, a change in non-cash interest expense of $610 thousand, a decrease in change in fair value of warrant liabilities of $4,289 thousand, a change in accounts receivable of $2 thousand, a change in prepaid expenses and other current assets of $712 thousand, and an increase in contract loss provision amortization of $3,345 thousand. These changes are offset by an increase in change in fair value of convertible promissory notes of $87,824 thousand, and changes in accounts payable and accrued expenses of $1,690 thousand and $4,452 thousand, respectively.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2026, was$2,159 thousand, an increase of$2,080 thousand from net cash used in investing activities of$79 thousand for the three months ended March 31, 2025. The change in cash used in investing activities was primarily due to an increase in acquired property and equipment of $2,065 thousand.

Current wording

Net cash used in investing activities for the six months ended June 30, 2026, was $(3,820) thousand, an increase of $(3,724) thousand from net cash used in investing activities of $(96) thousand for the six months ended June 30, 2025. The change in cash used in investing activities was primarily due to an increase in acquired property and equipment of $3,709 thousand.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2026, was$91,806 thousand, an increase of$93,353 thousand from net cash used in financing activities of$1,547 thousand for the three months ended March 31, 2025. The change in cash flows provided by financing activities was primarily due to an increase in proceeds from issuance of warrants of $48,195 thousand, proceeds from issuance of Series A Preferred stock in connection with the PIPE of $71,805 thousand, and proceeds from issuance of common stock in connection with the Merger of $26,290 thousand. These changes are offset by an increase in repayments of long-term debt of $32,082 thousand, payment of transaction costs related to the issuance of Series A Preferred Stock in connection with the PIPE of $10,482 thousand, payment of transaction costs related to issuance of common stock in connection with the Merger of $8,528 thousand, and payment of costs directly attributable to the Merger of $2,061 thousand.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2026, was $181,493 thousand, an increase of $187,186 thousand from net cash used in financing activities of $(5,693) thousand for the six months ended June 30, 2025. The change in cash flows provided by financing activities was primarily due to an increase in proceeds from issuance of warrants of $48,195 thousand, proceeds from issuance of Series A Preferred stock in connection with the PIPE of $71,805 thousand, and proceeds from issuance of common stock in connection with the Merger of $26,290 thousand. These changes are offset by an increase in repayments of long-term debt of $27,927 thousand, payment of transaction costs related to the issuance of Series A Preferred Stock in connection with the PIPE of $10,482 thousand, payment of transaction costs related to issuance of common stock in connection with the Merger of $8,528 thousand, and payment of costs directly attributable to the Merger of $2,061 thousand.

Previous wording

As of March 31, 2026, we have no debt obligations, as we paid off the principal amount outstanding of our PGF Loan, our Term Loan (LSA 2021), and our Term Loan (LSA 2024). As of March 31, 2026, restricted cash of $2,569 thousand consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements.

Current wording

As of June 30, 2026, we have no debt obligations, as we paid off the principal amount outstanding of our PGF Loan, our Term Loan (LSA 2021), and our Term Loan (LSA 2024). As of June 30, 2026, restricted cash of $2,570 thousand consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements.