Merlin, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT (UNAUDITED)

*The shares of the Company's common stock and mezzanine equity have been retrospectively recast to reflect the change in the capital structure as a result of the Merger as described in Note 3. Reverse Recapitalization.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

1. Organization and Description of Business

Merlin, Inc. (formerly known as Inflection Point Acquisition Corp. IV or "Inflection Point"), collectively with its subsidiaries (the "Company" or "Merlin"), develops software that fulfills 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.

The Company was a special purpose acquisition company incorporated as a Cayman Islands exempted corporation on June 24, 2024 as "Bleichroeder Acquisition Corp. I" and subsequently changed its name to Inflection Point Acquisition Corp. IV on October 21, 2025. 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.

Following the closing of the Merger (as defined below), shares of Merlin common stock began trading on Nasdaq Stock Market LLC under the symbol "MRLN."

Business Combination

On August 13, 2025, the Company entered into a Business Combination Agreement (the “Business Combination Agreement” or “BCA”) with IPDX Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Merlin Labs, Inc., a Delaware corporation ("Legacy Merlin"). Pursuant to the Business Combination Agreement, Merger Sub merged with and into Legacy Merlin, with Legacy Merlin surviving the transaction as a wholly-owned subsidiary of the Company (the "Merger").

Legacy Merlin was incorporated on October 10, 2018, as a Delaware corporation under the name Apollo Flight Research, Inc., and changed its name to Merlin Labs, Inc. on October 27, 2020. Legacy Merlin is the parent company oftwo wholly-owned subsidiaries: Merlin Labs NZ Limited ("MLNL"), a New Zealand Limited Company, and Merlin Labs Securities Corporation ("MLSC"), a Massachusetts Securities Corporation.

On March 13, 2026, as contemplated by the Business Combination Agreement, Inflection Point filed a notice of deregistration with the Cayman Islands Registrar of Companies and filed a certificate of incorporation and certificate of corporate domestication with the Secretary of State of the State of Delaware, pursuant to which Inflection Point was domesticated and continues as a Delaware corporation, changing its name to "Merlin, Inc." (the "Domestication"). Immediately prior to the Domestication, the holders of the Class B ordinary shares of Inflection Point, par value $0.0001 per share, elected to convert such shares on aone-for-one basis into Class A ordinary shares of Inflection Point, par value $0.0001 per share ("Inflection Point Class A Shares"). In connection with the Domestication, (i) each of the then issued and outstanding Inflection Point Class A Shares converted automatically, on aone-for-one basis, into a share of post-Domestication Inflection Point, (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") converted automatically into a right to receive one-tenth (1/10) of one post-Domestication Inflection Point Class A Share, and (iii) each of the then issued and outstanding units of Inflection Point containingone Inflection Point Class A Share andone Inflection Point Right ("Inflection Point Units") converted automatically into a unit of post-Domestication Inflection Point containingone post-Domestication Inflection Point Class A Share andone post-Domestication Inflection Point Right.

On March 16, 2026 (the "Closing" or the "Closing Date"), the Company consummated the previously announced Merger and related transactions contemplated by the Business Combination Agreement and Legacy Merlin became a wholly-owned subsidiary of the Company (after the Merger, "Merlin OpCo").

As a result of the Merger, the Company is a holding company in which all of its assets are held by Merlin OpCo and its subsidiaries and the business continues to operate through Merlin OpCo and its subsidiaries. The Merger is accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Under this method of accounting, Inflection Point is treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Merger is treated as the equivalent of Legacy Merlin issuing stock for the net assets of Inflection Point, accompanied by recapitalization. Legacy Merlin has been determined to be the accounting predecessor to the combined Company.

Unless otherwise noted or the context otherwise requires, references to the "Company," "Merlin," "we," "us", or "our" refer to the business of Legacy Merlin and its subsidiaries prior to the Closing and to the business of the Company and its subsidiaries, including Merlin OpCo, MLNL, and MLSC, following the Closing.

Refer to Note 3. Reverse Recapitalization for further information.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The accompanying unaudited condensed consolidated financial statements include the accounts of Merlin, Inc., and its consolidated subsidiaries, Merlin OpCo, MLNL, and MLSC. All intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated balance sheet as of December 31, 2025 included herein was derived from the audited consolidated financial statements of Legacy Merlin 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 unaudited condensed consolidated balance sheets and statements of operations, mezzanine equity 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.

As a result of the Merger, prior period share and per share amounts presented in the unaudited condensed consolidated financial statements and these related notes have been retroactively recast in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Legacy Merlin as of and for the years ended December 31, 2025 and 2024 contained in a Form 8-K dated and filed with the SEC on March 20, 2026.

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 the Company's obligations.

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 three months ended June 30, 2026 and 2025, the Company incurred net losses in the amounts of $58,427 and $16,296, respectively. During the six months ended June 30, 2026 and 2025, the Company incurred net losses in the amounts of $148,846 and $29,029, respectively, and generated negative cash flows from operations in the amounts of $50,896 and $25,220, respectively. Additionally, as of June 30, 2026, the Company has an accumulated deficit in the amount of $699,899 and cash and cash equivalents of $183,550.

On March 16, 2026, the Company completed its planned Merger (refer to Note 3. Reverse Recapitalization). In connection with the Merger, the Company issued preferred stock and equity-linked instruments in an additional private investment in public equity ("PIPE") transaction for $120,000 in gross proceeds and the Company's outstanding convertible promissory notes converted into preferred stock and warrants to purchase common stock of the Company (refer to Note 8. Debt and Note 9. Warrants).

On May 1, 2026, the Company issued 8,000,000 shares of common stock and warrants to purchase 4,000,000 shares of common stock in a PIPE transaction (the "May 2026 PIPE") for $80,000 in gross proceeds (refer to Note 9. Warrants). The warrants issued in connection with the May 2026 PIPE are hereinafter referred to as the "May 2026 PIPE Warrants."

Based on the Company’s liquidity position as of August 13, 2026, the Company's net cash proceeds and debt conversion from the Merger, the Company's proceeds from the May 2026 PIPE, the Company’s current forecast of operating results and cash flows, and the Company's outstanding obligations, the Company determined that its financial condition is sufficient to fund its planned operations, commitments, and contractual obligations for a period of at least one year following the date that these condensed consolidated financial statements are issued.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

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.

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 hasone reportable segment.

Significant Accounting Policies

The Company’s significant accounting policies are described in the Company’s consolidated financial statements for the years ended December 31, 2025 and 2024 filed with the Company's Current Report on Form 8-K filed March 20, 2026. There have been no significant changes to these policies that have had a material impact on the Company’s condensed consolidated financial statements and related notes for the six months ended June 30, 2026.

Restricted Cash

Restricted cash consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements. Restricted cash that is expected to be used within one year of the balance sheet date is classified as a current asset, whereas restricted cash expected to be used more than one year from the balance sheet date is classified as a non-current asset. As of June 30, 2026, all restricted cash is non-current.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash at the end of each respective period as shown in the Company’s condensed consolidated balance sheets:

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 three months ended June 30, 2026 and 2025, the Company generated $2,194 and $3,107, respectively, in revenue and $3,195 and $3,975 during the six months ended June 30, 2026 and 2025, respectively, with a significant amount (>90%) of this revenue coming from the U.S. government (refer to Note 4. Revenue Recognition from Contracts with Customers for further information). As of June 30, 2026 and December 31, 2025, accounts receivable from the U.S. government totaled $1,730 and $368, respectively.

Impairment of Long-Lived Assets

All long-lived assets are reviewed by the Company for possible impairment 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 June 30, 2026 and December 31, 2025, 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.

Convertible Debt

The Company has elected to apply the fair value method of accounting in accordance with ASC 825, Financial Instruments ("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 ASC 470-20, Debt with Conversion and Other Options, and ASC 815, Derivatives and Hedging ("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.

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.

Preferred Stock

The Company evaluates its preferred stock under the classification guidance of ASC 480. The Company’s preferred stock does not require liability classification under ASC 480 and is classified in mezzanine equity as it 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. Preferred stock classified in mezzanine equity is initially recognized at the proceeds received, net of issuance costs and the fair value of any bifurcated derivatives. 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. For preferred stock recognized in mezzanine equity that is probable of becoming redeemable, the Company accretes changes in the redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

Research and Development Costs

The Company enters into research and development agreements with third-parties where the Company is 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 $150 and $— as a reduction to research and development expense during the three months ended June 30, 2026 and 2025, respectively, and $300 and $150 during the six months ended June 30, 2026 and 2025, respectively.

Advertising Costs

The Company expenses advertising costs as incurred. During the three months ended June 30, 2026 and 2025, the Company incurred advertising expense in the amounts of $618 and $226, respectively. During the six months ended June 30, 2026 and 2025, the Company incurred advertising expense in the amounts of $1,172 and $498, respectively.

Capitalized Transaction Costs

Capitalized transaction costs primarily consist of legal and accounting costs incurred that were direct and incremental to the Merger. During the six months ended June 30, 2026, the Company capit alized $2,061 of transaction costs incapitalized transaction costs on the condensed consolidated balance sheets. Upon the completion of the Merger, capitalized transaction costs were netted against the proceeds from the Merger and recorded as an offset to stockholders' deficit.

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. Net loss attributable to common stockholders is determined by adjusting net loss for the Series A Preferred Stock dividends and accretion, as well as any deemed dividends on the Series A Preferred Stock (refer to Note 11. Net Loss Per Share for further information).

Diluted earnings per share attributable to common stockholders adjusts basic loss per share for the potentially dilutive impact of preferred 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 is equal to diluted net loss per share.

Recently Adopted Accounting Pronouncements

In May 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-03, to improve consistency in determining the accounting acquirer in certain business combinations involving variable interest entities. The amendments are effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard as of January 1, 2026, and used this new standard when analyzing the Merger.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires 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 for 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 impact of the new standard on its consolidated financial statements.

In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in Kind Dividends on Equity-Classified Preferred Stock, which clarifies the initial measurement of paid-in-kind dividends on equity-classified preferred stock. The standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

3. Reverse Recapitalization

As discussed in Note 1. Organization and Description of Business, Inflection Point, Merger Sub, and Legacy Merlin entered into the Business Combination Agreement on August 13, 2025. In connection with the entrance into the Business Combination and the anticipated Merger, the following transactions occurred prior to the Closing Date:

•In July and August 2025, Legacy Merlin and certain investors entered into the Pre-PIPE Bridge and Pre-Funded PIPE Agreements, pursuant to which Legacy Merlin issued the investors Pre-PIPE Bridge and Pre-Funded PIPE Notes and Warrants. The Pre-PIPE Bridge and Pre-Funded PIPE Notes and Warrants were funded and issued between July and November 2025. Refer to Note 8. Debt and Note 9. Warrants for further information.

•In November 2025, Inflection Point, Legacy Merlin, and certain investors entered into securities purchase agreements ("Series A SPAs") pursuant to which, on the Closing Date, the Company would issue shares of its 12.0% Series A Cumulative Convertible Preferred Stock ("Series A Preferred Stock") and common stock purchase warrants ("PIPE Warrants") in a private investment in public equity ("PIPE") transaction for aggregate gross proceeds of $120,000 (the "Closing PIPE"). The Closing PIPE was funded, and the Series A Preferred Stock and PIPE Warrants were issued, at the Closing. Refer to Note 9. Warrants and Note 10. Mezzanine Equity and Stockholders' Deficit for further information.

In connection with and in contemplation of the Merger, the following events occurred immediately prior to the Closing:

(1)Each convertible security of Legacy Merlin (other than the Pre-PIPE Bridge Notes and Pre-Funded PIPE Notes) automatically converted into full shares of redeemable convertible preferred stock or common stock, as applicable, of Legacy Merlin;

(2)Each of Legacy Merlin's outstanding and unexercised preferred stock warrant liabilities were automatically exercised on a cashless basis or were exchanged for securities issued in the Closing PIPE, based on the applicable terms thereof (refer to Note 9. Warrants);

(3)After giving effect to the conversions and exercises described at (1) and (2) above, each issued and outstanding share of Legacy Merlin's redeemable convertible preferred stock automatically converted into shares of Legacy Merlin common stock; and

(4)Each of Legacy Merlin's outstanding and unexercised common stock warrants (other than the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants) were automatically exercised on a cashless basis.

At the effective time of the Merger, and pursuant to the terms of the Business Combination Agreement:

(1)Each share of Legacy Merlin common stock held by Legacy Merlin, Merger Sub, or the Company was canceled without consideration exchanged therefor;

(2)Each other issued and outstanding share of Legacy Merlin common stock was canceled and converted into the right to receive shares of the common stock at an exchange ratio of approximately 3.102;

(3)Each option to purchase equity securities of Legacy Merlin was converted into an option to acquire common stock at an exchange ratio of approximately 3.102;

(4)Each Pre-PIPE Bridge Note and Pre-Funded PIPE Note was converted into shares of Series A Preferred Stock, par value $0.0001 per share; and

(5)Each Pre-PIPE Bridge Warrant and Pre-Funded PIPE Warrant was converted into a PIPE Warrant.

The following table summarizes the net proceeds from the Merger:

The following table summarizes the impact of the Merger on the Company's common stock:

4. 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:

Revenues from New Zealand during the three months ended June 30, 2026 and 2025 amounted to $60 and $33, respectively, and $112 and $64 during the six months ended June 30, 2026 and 2025, respectively.

No revenue recognized during the six months ended June 30, 2026 and 2025 was related to performance obligations satisfied in prior periods.

Remaining performance obligations

As of June 30, 2026, the aggregate amount of the transaction price allocated to the remaining performance obligations was $593, 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:

There wasno revenue recognized during the six months ended June 30, 2026 from amounts included in deferred revenue at the beginning of the period. Revenue recognized during the six months ended June 30, 2025 from amounts included in deferred revenue at the beginning of the period was $112. The decrease in unbilled receivables from December 31, 2025 to June 30, 2026 represents revenue that was previously earned and recognized but was not invoiced until the six months ended June 30, 2026.

During the three months ended March 31, 2026, the Company revised the estimate of total costs to be incurred to deliver the Air Force Special Operations Command contract. The Company reduced the remaining contract loss provision liability to $738 on the condensed consolidated balance sheet as of March 31, 2026 and recognized a favorable adjustment to the contract loss provision of $2,451 on the condensed consolidated statement of operations during the three months ended March 31, 2026. During the three months ended June 30, 2026, the Company recognized a $502 contract loss provision related to a revised estimate of total costs to be incurred to deliver the Air Force Special Operations Command contract.

The Company amortized $961 and $156 during the three months ended June 30, 2026 and 2025, respectively, and $1,945 and $828 during the six months ended June 30, 2026 and 2025, respectively, of the previously recognized contract loss provision as a reduction to cost of revenue.

As of June 30, 2026 and December 31, 2025, the allowance for credit losses is immaterial to the unaudited condensed consolidated financial statements.

5. 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:

Fair value measurements for cash equivalents are based on quoted market prices in active markets.

Prior to and in contemplation of the anticipated Merger, fair value measurements for warrant liabilities and convertible promissory notes were estimated using a probability-weighted expected return method, considering scenarios in which the Merger does or does not occur. As of the Closing Date, the probability assigned to the scenario in which the Merger occurred was 100%, compared to 85% as of December 31, 2025. In all scenarios, the fair value of Pre-PIPE Bridge and Pre-Funded PIPE Notes and Warrants were determined by calibrating the aggregate fair value of instruments issued, as implied by the probability-weighted expected return method, to the proceeds received in each issuance therefrom in accordance with ASC 825, resulting in a calibrated discount rate of 500.0%.

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.

As of and prior to December 31, 2025, 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 was estimated using the Black-Scholes option pricing formula. As of the Closing Date, fair value measurements for the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were estimated using a Monte Carlo simulation, modeling the future stock price of the Company's common stock to simulate payoff scenarios for the PIPE Warrants that the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were contractually required to be exchanged for, discounted at the term-matched risk-free rate. The fair value measurements of the Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were calculated as the average present value of all future modeled payoff scenarios.

The following relevant assumptions were used in determining the fair value of the warrant liabilities and convertible promissory notes as of December 31, 2025:

As of and prior to December 31, 2025, 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. As of the Closing Date, fair value measurements for the 2024 LSA Loans were estimated based on the contractual redemption amount as of the Closing Date.

The following relevant assumptions were used in determining the fair value of the 2024 LSA Loans as of December 31, 2025:

Fair value measurements for the PIPE Warrants and May 2026 PIPE Warrants are estimated using a Monte Carlo simulation, modeling the future stock price of the Company's common stock to simulate payoff scenarios for the PIPE Warrants and May 2026 PIPE Warrants, discounted at the term-matched risk-free rate. The fair value measurements of the PIPE Warrants and May 2026 PIPE Warrants are calculated as the average present value of all future modeled payoff scenarios.

The following relevant assumptions were used in determining the fair value of the PIPE Warrants and May 2026 PIPE Warrants as of June 30, 2026:

The Company's fair value measurement activity, using unobservable inputs and associated unrealized gains and losses with respect to warrant liabilities outstanding during the six months ended June 30, 2026 and 2025 was as follows:

The convertible promissory notes were converted in connection with the Merger during the three months ended March 31, 2026. The Company's fair value measurement activity, using unobservable inputs and associated unrealized losses with respect to convertible promissory notes outstanding during the three months ended March 31, 2026 was as follows:

The 2024 LSA Loans were extinguished in connection with the Merger during the three months ended March 31, 2026. The Company's fair value measurement activity, using unobservable inputs and associated unrealized losses with respect to 2024 LSA Loans outstanding during the three months ended March 31, 2026 was as follows:

6. Property and Equipment, net

Property and equipment, net consisted of the following:

Depreciation expense for the three months ended June 30, 2026 and 2025 amounted to $712 and $390, respectively. Depreciation expense for the six months ended June 30, 2026 and 2025 amounted to $1,129 and $770, 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 renewal provisions other than a certain New Zealand lease, which containsone renewal option forfive years. The Company is not reasonably certain to elect the renewal option and has excluded it in the related right-of-use asset.

On September 4, 2025, the Company entered into a lease agreement for airport hangar and corporate office space in Bedford, MA that has not commenced, therefore 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 $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 June 30, 2026, the premises and the land for the temporary hangar had not yet been made available to the Company.

In February 2026, the Company entered into a lease agreement to lease office space in Boston, MA. The lease commencement date was March 23, 2026 and the lease term expires on January 31, 2029. The Company has the right to terminate the lease, effective on the second anniversary of the lease commencement date, upon providing no less than nine months prior written notice and paying a termination penalty of $150. The early lease termination option is reasonably certain of being exercised and was therefore included in the computation of the operating lease right-of-use asset and corresponding operating lease liability. The lease is accounted for as an operating lease, and the Company recognized an operating lease right-of-use asset and lease liability of $1,632 at the lease commencement date.

The components of lease expense for the three and six months ended June 30, 2026 and 2025 were as follows:

The weighted average remaining lease term and discount rate for operating leases were as follows:

Future minimum operating lease payments as of June 30, 2026 are as follows:

8. Debt

The following table summarizes the Company's outstanding long-term debt as of December 31, 2025:

Following the redemption of the 2022 PGF Loan, the redemption of the 2024 LSA Loans, and the conversions of the Pre-PIPE Bridge and Pre-Funded PIPE Notes in connection with the Merger, the Company didnot have any outstanding debt as of June 30, 2026.

2021 LSA

In September 2021, the Company entered into a loan and security agreement with the lender thereto ("2021 LSA") 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"). 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 issuing 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 obtain term loans under the 2021 LSA Reserve as any binding commitment thereto was subject to the Company and the 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 warrants to purchase the Company's redeemable convertible preferred stock to the lender thereunder ("2021 LSA Warrants").

In September 2021, the Company entered into a term loan in an aggregate principal amount of $3,000 under the 2021 LSA First Tranche (the "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, after which 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 36 months until the final maturity of the 2021 LSA Loan on July 1, 2025. In July 2025, all outstanding principal, plus accrued interest thereon, was repaid in accordance with the contractual terms of the 2021 LSA.

New Zealand Provincial Growth Fund ("PGF") Loan

In July 2022, MLNL entered into a loan agreement ("2022 PGF Agreement") with the New Zealand Ministry of Business, Innovation and Employment (the "Ministry"), securing a convertible loan commitment in an aggregate principal amount of NZD 1,000 ($660 USD at issuance). Under the 2022 PGF Agreement, MLNL received NZD 1,000 ($660 USD at issuance) in aggregate principal amount of convertible debt, referred to as the "2022 PGF Loan". The 2022 PGF Loan bore 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 its issuance was required to 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 was required to 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, was set to become due and payable on the maturity date.

The Company didnot incur any debt issuance costs in connection with the 2022 PGF Agreement. The Company accounted for the 2022 PGF Loan using the effective interest method. The effective interest rate of the 2022 PGF Loan was 7.5%.

On February 24, 2026, and in anticipation of the Merger, the Company exercised its unilateral right to prepay the aggregate outstanding principal amount of the 2022 PGF Loan and all accrued unpaid interest thereon. The redemption price of $782 equaled the current carrying amount associated with the 2022 PGF Loan.

2024 LSA

On February 22, 2024, the Company entered into a loan and security agreement (the "2024 LSA") with the lender party 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 facility in an aggregate principal amount of $12,500 (the "2024 LSA Second Tranche"), and (c) a delayed-draw term loan facility 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 entry into the 2024 LSA, the Company issued warrants to the lender thereunder to purchase the Company's redeemable convertible preferred stock (the "2024 LSA Warrants").

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 accrued interest at a fixed rate per annum, compounded monthly, equal to the Prime Rate as of the issuance date of each loan plus 5.0%. In addition to the fixed cash interest, the outstanding principal balance of the 2024 LSA Loans accrued 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, after which the aggregate principal amount of the 2024 LSA Loans was to 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 the 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, the Company recorded a debt discount of $622, related to the payment of lender fees and the issuance of preferred stock warrant liabilities, which was amortized to interest expense over the life of the 2024 LSA

Loans using the effective interest method. The effective interest rates of the 2024 LSA Loans for the First, Second, and Third Tranches were 14.5%,14.7%, and 14.9%, respectively.

On July 1, 2025, the Company and the lender thereunder entered into an amendment to the 2024 LSA (the "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 to enter into such amendment, the Company issued warrants to purchase the Company's redeemable convertible preferred stock with a fair value of $759 (the "2024 LSA Amendment Warrants").

The 2024 LSA Amendment was accounted for as an extinguishment under ASC 470-50, Modifications and Extinguishments. 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 ongoing recordkeeping. Prior to the repayment of the 2024 LSA Loans as described below, the lender retained 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").

On the Closing Date and using proceeds generated by the Merger, the Company exercised its unilateral right to prepay the 2024 LSA Loans in full at a contractual redemption price of $28,334 which included the aggregate outstanding principal amount, accrued unpaid interest, and make-whole premiums. The fair value of the 2024 LSA Loans as of the redemption date was $28,334.

Pre-PIPE Bridge

On July 2, 2025, the Company entered into a convertible note purchase agreement (the “Pre-PIPE Bridge Agreement”) with the purchasers party thereto, pursuant to which the Company could issue up to $23,445 in aggregate principal amount of unsecured convertible promissory notes (the “Pre-PIPE Bridge Notes”). Additionally, pursuant to the Pre-PIPE Bridge Agreement, the Company issued common stock warrants (the "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 Pre-PIPE Bridge Warrants (refer to Note 9. Warrants).

The Company entered into a series of Pre-PIPE Bridge Notes in an aggregate principal amount of $23,445 between July and August 2025. The Company accounted for the Pre-PIPE Bridge Notes under the fair value option and, accordingly, all issuance costs incurred in connection with the entry into the Pre-PIPE Bridge Agreement and the issuance of the Pre-PIPE Bridge Notes thereunder were expensed as incurred. 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"). Because the Pre-PIPE Bridge Notes were 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 accrued interest at 12.0% per annum, compounded semi-annually, until the principal amount of the Pre-PIPE Bridge Notes and all interest accrued thereon were repaid or converted. The Pre-PIPE Bridge Amendment did not change the maturity date of the Pre-PIPE Bridge Notes.

Pursuant to the Pre-PIPE Bridge Amendment and the terms of the Business Combination Agreement, in connection with the Closing of the Merger, the unpaid principal amount of Pre-PIPE Bridge Notes, together with accrued unpaid interest thereon, automatically converted into shares of Series A Preferred Stock. Refer to Note 3. Reverse Recapitalization for further information.

Pre-Funded PIPE

On August 13, 2025, the Company entered into a securities purchase agreement (“Pre-Funded PIPE Agreement”) with the purchasers party thereto, pursuant to which the Company agreed to sell, and the purchasers agreed to purchase, unsecured convertible promissory notes and common stock warrants.

Pursuant to the Pre-Funded PIPE Agreement, the Company issued $64,706 in aggregate principal amount of unsecured convertible promissory notes (the "Pre-Funded PIPE Notes") and common stock warrants (the "Pre-Funded PIPE Warrants") for total proceeds of $55,000, which were allocated between the Pre-Funded PIPE Notes and the Pre-Funded PIPE Warrants. The Company accounted for the Pre-Funded PIPE Notes under the fair value option and, accordingly, all issuance costs incurred in connection with the entry into the Pre-Funded PIPE Agreement and the issuance of the Pre-Funded PIPE Notes thereunder were expensed as incurred. 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 contained a provision that gave a purchaser thereunder, who was an affiliate of Inflection Point, the right ("Purchaser Right") to require the Company to issue and sell up to $29,412 in aggregate principal amount of additional Pre-Funded PIPE Notes and accompanying Pre-Funded PIPE Warrants ("Purchaser Right Notes"). The Purchaser Right was exercisable at any time prior to December 31, 2025, so long as the BCA was not terminated, and expired unexercised on December 31, 2025. The Purchaser Right was 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 had a de minimis fair value as of the execution of the Pre-Funded PIPE Agreement and at its expiration on December 31, 2025.

On November 17, 2025, the Pre-Funded PIPE Agreement was amended to permit the issuance of incremental Pre-Funded PIPE Notes and Pre-Funded PIPE Warrants under the original terms of the Pre-Funded PIPE Agreement (the "Pre-Funded PIPE Amendment"). No terms of the issued and outstanding Pre-Funded PIPE Notes and Pre-Funded PIPE Warrants were modified in connection with the Pre-Funded PIPE Amendment. On November 18, 2025, pursuant to the Pre-Funded PIPE Amendment, the Company issued incremental Pre-Funded PIPE Notes to an existing holder of Pre-Funded PIPE securities in an aggregate principal amount of $10,893, together with accompanying Pre-Funded PIPE Warrants, for total proceeds of $9,259 which were allocated between the Pre-Funded PIPE Notes and the Pre-Funded PIPE Warrants. The Company accounted for the incremental Pre-Funded PIPE Notes under the fair value option and, accordingly, all amendment costs were expensed as incurred. The Company elected to record the incremental Pre-Funded PIPE Notes under the fair value option based on the short-term maturity of the Pre-Funded PIPE Notes.

The Pre-Funded PIPE Notes accrued 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 were repaid or converted. All principal and accrued interest thereon were set to become due and payable upon demand by the purchasers thereof on or after August 13, 2026, unless earlier converted or repaid.

Pursuant to the Pre-Funded PIPE Agreement and the terms of the Business Combination Agreement, in connection with the Closing of the Merger, the unpaid principal amount of Pre-Funded PIPE Notes, together with accrued unpaid interest thereon, automatically converted into shares of Series A Preferred Stock.

9. Warrants

The warrants issued in connection with the 2019 loan and security agreement (the "2019 LSA Warrants"), the 2021 LSA Warrants, and the 2024 LSA Warrants were determined to meet the criteria for liability classification pursuant to ASC 480 because the underlying warrant shares, the Company's redeemable convertible preferred stock, were redeemable outside the control of the Company and were accordingly classified as mezzanine equity. The 2019 LSA Warrants, 2021 LSA Warrants, and 2024 LSA Warrants were 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, in accordance with their terms, the holder of the 2024 LSA Warrants elected to exchange all of the 2024 LSA Warrants for Pre-PIPE Bridge Notes and accompanying Pre-PIPE Bridge Warrants. Therefore, none of the 2024 LSA Warrants were issued and outstanding immediately prior to the consummation of the Merger.

The 2024 LSA Amendment Warrants were determined to meet the criteria for liability classification pursuant to ASC 480 as the terms permitted the holder to exchange the 2024 LSA Amendment Warrants for instruments issued in any bridge financing occurring after their issuance date, which included the issuance of convertible debt instruments. The 2024 LSA Amendment Warrants were 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 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 prevented them from meeting the fixed-for-fixed equity classification criteria. The Pre-PIPE Bridge Warrants and Pre-Funded PIPE Warrants were therefore required to be initially and subsequently measured at fair value with changes in fair value presented in the condensed consolidated statements of operations.

Pursuant to the terms of the Business Combination Agreement and immediately prior to the Merger, the 2019 LSA Warrants and 2021 LSA Warrants were automatically exercised on a cashless basis pursuant to their applicable terms for shares of the Company's Series Seed Prime redeemable convertible preferred stock and Series B Prime redeemable convertible preferred stock, respectively. In accordance with the terms thereof, the 2024 LSA Amendment Warrants were not exercised prior to the Merger and were exchanged for shares of Series A Preferred Stock and PIPE Warrants in connection with the Merger.

Pursuant to the terms of the Business Combination Agreement and the applicable terms thereof, the Pre-PIPE Bridge Warrants and the Pre-Funded PIPE Warrants were converted into PIPE Warrants to purchase shares of the Company's common stock in connection with the Merger. Additionally, PIPE Warrants were issued for cash in connection with the Closing PIPE.

The PIPE Warrants and the May 2026 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 PIPE Warrants and the May 2026 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.

The following table summarizes the warrants to purchase common stock as of June 30, 2026:

(1) If on the twenty-first (21 st) trading day following the date that issix months after the Closing Date, the 20-day volume-weighted average price of common stock is less than the exercise price then in effect, the exercise price shall be reduced to the greater of (i) such volume-weighted average price and (ii) $5.00. The exercise price of PIPE Warrants and May 2026 PIPE Warrants is also subject to certain customary adjustments for stock dividends and splits, dilutive issuances of common stock, subsequent rights offerings, pro rata distributions, and fundamental transactions.

(2) In connection with the May 2026 PIPE, a down round feature of the PIPE Warrants was triggered, reducing the per share strike price from $12.00 to $6.67.

During the three months ended June 30, 2026 and 2025, the Company recorded a loss on the change in fair value of warrant liabilities of $26,144 and $3,925, respectively. During the six months ended June 30, 2026 and 2025, the Company recorded a gain of $410 and a loss of $3,879 on the change in fair value of warrant liabilities, respectively. Refer to Note 5. Fair Value Measurements for further information.

10. Mezzanine Equity and Stockholders' Deficit

Reverse Recapitalization

All issued and outstanding shares of Legacy Merlin's redeemable convertible preferred stock automatically converted, on aone-to-one basis, into shares of Legacy Merlin common stock immediately prior to the consummation of the Merger. Upon the Closing of the Merger, all issued and outstanding shares of Legacy Merlin's common stock were exchanged for common stock at an exchange ratio of approximately 3.102.

The following table presents the impact of the exchange ratio on Legacy Merlin's redeemable convertible preferred stock, after the exercise of Legacy Merlin warrants to acquire its redeemable convertible preferred stock (refer to Note 9. Warrants), and the issuance of common stock following conversion of the redeemable convertible preferred stock:

Common Stock

As of June 30, 2026, the Company had 800,000,000 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 toone vote for each share of common stock held.

As of June 30, 2026,699,407,840 shares of common stock are reserved for the conversion of Series A Preferred Stock, vesting of restricted stock units, and exercise of stock options, PIPE Warrants, and May 2026 PIPE Warrants.

Series A Preferred Stock

As of June 30, 2026, the Company had authorized 50,000,000 shares of Series A Preferred Stock, $0.0001 par value, each with a stated value of $12.00 ("Stated Value"). As described below, the sum of (i) the Stated Value, (ii) any dividends paid in-kind, and (iii) any cash dividends not yet paid shall be referred to herein as the "Accrued Value."

The Company's Series A Preferred Stock were issued in connection with the Closing PIPE (refer to Note 3. Reverse Recapitalization), the exchange of 2024 LSA Amendment Warrants (refer to Note 9. Warrants), and the conversion of Pre-PIPE Bridge and Pre-Funded PIPE Notes issued and outstanding as of the Closing Date (refer to Note 8. Debt).

For the six months ended June 30, 2026, certain holders of Series A Preferred Stock converted 3,065,884 shares of Series A Preferred Stock into 5,273,120 shares of common stock. As of June 30, 2026,18,649,567 shares of Series A Preferred Stock remained outstanding.

In connection with the May 2026 PIPE, a down round feature of the Series A Preferred Stock was triggered, reducing the per share conversion price from $12.00 to $6.67 and the Company accordingly recognized a deemed dividend of $60,848. Because the Company has an accumulated deficit, the deemed dividend recognized in connection with the triggering of the down round feature does not affect the carrying amounts of the Company's mezzanine equity and stockholders' deficit as the increase in additional paid-in capital is offset with a corresponding decrease in additional paid-in capital, rather than a decrease in accumulated deficit.

As described below, the Series A Preferred Stock is redeemable outside the control of the Company and is accordingly classified in mezzanine equity. The Company accretes changes in the redemption amount from the Closing Date to the earliest redemption date, which isfive years from the Closing Date, using the effective interest method.

The Series A 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 Series A Preferred Stock are entitled to vote together with holders of common stock on an as-converted basis. Further, so long as at least 20% of the Series A Preferred Stock issued as of the Closing Date remain outstanding, the holders of Series A Preferred Stock are granted certain customary protective rights.

Dividends

The Series A Preferred Stock accrue cumulative, semi-annually compounding dividends, and are accrued whether or not earned or declared and whether or not there are any earnings, profits, surplus, or other funds or assets available for payment thereof ("Series A Accrued Dividends"). Series A Accrued Dividends accrue on the Accrued Value of each share of Series A Preferred Stock, at the Company's election, (i) at 10.0% if paid in cash or (ii) at 12.0% if paid in-kind. The Company shall not make any dividends on any common stock unless the holders of Series A Preferred Stock also receive (i) all Series A Accrued Dividends and (ii) participating dividends on an as-converted basis.

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 Certificate of Designation), the holders of Series A Preferred Stock shall be entitled to receive, prior to any payments to holders of common stock, the greater of (i) the Accrued Value and (ii) the amount that would have been payable to holders of Series A Preferred Stock as if such shares converted to common stock immediately prior to such event. After such preferential payments are made, the remaining assets of the Company are to be distributed amongst the holders of Series A Preferred Stock and common stock pro rata, on an as-converted basis. The total amount payable to holders of Series A Preferred Stock is hereinafter referred to as the "Liquidation Amount."

Conversion

Each share of Series A Preferred Stock is convertible at any time, at the option of the holder, into a whole number of shares of Company Stock determined by dividing (i) the Accrued Value by (ii) the then-applicable conversion price. The conversion price was initially $12.00, subject to customary adjustments for stock dividends and splits, dilutive issuances of common stock, subsequent rights offerings, pro rata distributions, and fundamental transactions. Additionally, if on the twenty-first (21 st) trading day following the date that issix months after the Closing Date, the 20-day volume-weighted average price of common stock is less than the conversion price then in effect, the conversion price shall be reduced to the greater of (i) such volume-weighted average price and (ii) $5.00.

As noted above, the conversion price was reduced to $6.67 in connection with the May 2026 PIPE.

Put Rights

Unless prohibited by applicable laws, the Series A Preferred Stock is redeemable at the option of the holder commencing after the fifth anniversary of the Closing Date at a redemption price equal to the Accrued Value.

Call Rights

Unless prohibited by applicable laws, the Company shall retain the option to redeem the Series A Preferred Stock at any time, as follows:

•Prior to the first anniversary of the Closing Date, at a redemption price equal to 150% of the Accrued Value;

•On or after the first anniversary of the Closing Date, but before the second anniversary, at a redemption price equal to 140% of the Accrued Value;

•On or after the second anniversary of the Closing Date, but before the third anniversary, at a redemption price equal to 130% of the Accrued Value;

•On or after the third anniversary of the Closing Date, but before the fourth anniversary, at a redemption price equal to 120% of the Accrued Value;

•On or after the fourth anniversary of the Closing Date, but before the fifth anniversary, at a redemption price equal to 110% of the Accrued Value;

•On or after the fifth anniversary of the Closing Date, at a redemption price equal to 100% of the Accrued Value.

11. Net Loss Per Share

The Company's Series A Preferred Stock is considered a participating security because it entitles holders to participate in dividends to common stockholders, on an as-converted basis. 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 three and six months ended June 30, 2026 and 2025.

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. 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 computations for the Company's common stock were calculated as follows:

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:

12. Stock-Based Compensation

On October 24, 2018, the Board of Directors adopted the Merlin Labs 2018 Equity Incentive Plan (the "2018 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. As of March 16, 2026, the Company stopped issuing awards under the 2018 Plan.

On March 16, 2026, the Board of Directors adopted the 2026 Incentive Award Plan (the "Plan" and together with the 2018 Plan, the "Plans"). Under the terms of the Plan, stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash based awards may be granted to directors, consultants, employees, and officers of the Company. Incentive stock options ("ISOs") may only be granted to employees and officers employed by the Company. Additionally on March 16, 2026, the Board of Directors adopted the 2026 Employee Stock Purchase Plan (the "ESPP") pursuant to which eligible employees are granted the right to purchase common stock of the Company.

As of June 30, 2026, the Company's authorized common stock includes 42,546,878 shares of common stock reserved for the issuance of awards under the Plans and the ESPP, of which 30,508,129 shares are available for future grants.

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.

Stock option activity under the Plan during the six months ended June 30, 2026 was as follows:

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2026 and 2025 amounted to $3.80 and $3.69, respectively.

During the six months ended June 30, 2026 and 2025, option holders of the Company exercised 1,121,023 and 77,423 common stock options, respectively, in exchange for cash proceeds of $1,460 and $19, respectively.

The total intrinsic value of options exercised during the six months ended June 30, 2026 and 2025 amounted to $7,268 and $171, respectively.

As of June 30, 2026, there is $10,749 of unrecognized compensation expense related to unvested stock option arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 1.07 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. Prior to the Merger, the Company based its expected volatility on the volatilities of certain publicly-traded peer companies as it was a privately-held company and therefore lacked company-specific historical and implied volatility information. After the Merger, 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.

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. Prior to the Merger, the fair value of the common stock had 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 option awards:

Restricted Stock Units

Each restricted stock unit ("RSU") represents the right to receiveone share of the Company's common stock upon vesting. RSUs awarded under the Plan vest in accordance with the vesting schedule set forth in the applicable Grant Notice and are generally subject to forfeiture in the event of termination of employment prior to vesting dates. The Company recognizes stock-based compensation expense for the RSUs equal to the grant date fair value of the awards on a straight-line basis over the requisite service period and recognizes forfeitures as they occur. The fair value of RSUs granted by the Company is equal to the Company's closing stock price on the date of the grant.

RSU activity under the Plan during the six months ended June 30, 2026 was as follows:

As of June 30, 2026, there is $24,581 of unrecognized compensation expense related to unvested RSU arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 1.22 years.

During the six months ended June 30, 2026 and 2025, stock-based compensation expense amounted to $5,903 and $946, respectively, which is included in the condensed consolidated statements of operations.

Total stock-based compensation expense as presented within the condensed consolidated statements of operations was as follows:

During the six months ended June 30, 2026, the Company granted and issued 100,000 shares of common stock to non-employees, which were valued on the grant date based on the opening price of MRLN.

13. Income Taxes

The Company recorded a provision for income taxes of $125 and $1 for the three months ended June 30, 2026 and 2025, respectively, yielding effective tax rates of (0.21)% and (0.01)%, respectively.

The Company recorded a provision for income taxes of $173 and $1 for the six months ended June 30, 2026 and 2025, respectively, yielding effective tax rates of (0.12)% and—%, 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 six months ended June 30, 2026 and 2025 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 June 30, 2026 and December 31, 2025, the Company had 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.

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 June 30, 2026 and December 31, 2025, 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 condensed consolidated balance sheets as total consolidated assets.

The following table presents the significant segment expenses, which were regularly provided to the CODM:

Property and equipment, net and operating lease right-of-use assets, net by geographic area were as follows:

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 three months ended June 30, 2026 and 2025, the Company made contributions to the plan in the amounts of $12 and $54, respectively. During the six months ended June 30, 2026 and 2025, the Company made contributions to the plan in the amounts of $71 and $107, respectively.