QUBT Q2 10-Q: $348.8M Cash, $10.17M Quarterly Operating Loss

Q: How much cash did Quantum Computing Inc. (QUBT) have as of June 30, 2025?

The company reported $348.8 million in cash and cash equivalents as of June 30, 2025.

Q: What is QUBT's working capital position at June 30, 2025?

Working capital was reported as $346.3 million at June 30, 2025.

Q: What were the company's operating results for the quarter?

The company reported an operating loss of $10.171 million for the quarter ended June 30, 2025, versus $5.267 million in the comparable prior period.

Q: What financing activity did QUBT complete recently?

The company completed a $100 million January placement and a ~$200 million June placement (gross proceeds), and recorded warrant exercises that generated proceeds and converted derivative liability to equity.

Q: What is the value of the derivative liabilities related to QPhoton warrants?

QPhoton-related derivative liabilities were carried at $24.6 million as of June 30, 2025.

[10-Q] Quantum Computing Inc. Common Quarterly Earnings Report

Filing Impact

(Neutral)

Filing Sentiment

(Neutral)

Form Type

10-Q

Rhea-AI Filing Summary

Quantum Computing Inc. (QUBT) reported interim results showing a sizable cash position and continued operating losses. As of June 30, 2025, the company held $348.8 million in cash and cash equivalents and reported working capital of $346.3 million, which the company states is adequate to meet obligations for the next 12 months. The condensed results show an operating loss of $10.171 million for the quarter (up from $5.267 million) and a loss before income taxes driven by non-cash and mark-to-market items. The company recorded a mark-to-market loss on warrants of $28.1 million for the three months ended June 30, 2025, and derivative liabilities related to QPhoton warrants carried $24.6 million at June 30, 2025. Financing activity included equity placements and warrant exercises that produced significant gross proceeds, including a January placement ($100 million) and a June placement (~$200 million gross) and warrant exercises that reclassified $20.4 million of derivative liability to equity.

Positive

$348.8 million in cash and cash equivalents as of June 30, 2025, providing liquidity
Working capital of $346.3 million, which the company states is adequate for the next 12 months
Completed significant equity financings: $100 million January placement and ~$200 million June placement (gross proceeds)
Warrant exercises during the quarter reclassified $20.4 million of derivative liability to additional paid-in capital

Negative

Operating loss of $10.171 million for the quarter, up from $5.267 million year-over-year
Recorded a $28.1 million mark-to-market loss on QPhoton warrants in the three months ended June 30, 2025
Derivative liabilities (Level 3) remain material at $24.6 million as of June 30, 2025, creating earnings volatility tied to stock price
Accumulated deficit of $220.0 million, indicating multi-period losses carried on the balance sheet

Insights

TL;DR: Strong liquidity from recent equity placements offsets large non-cash warrant losses and ongoing operating losses.

The company shows robust liquidity with $348.8 million of cash and strong working capital following multiple equity raises, including a $100 million January placement and a ~$200 million June placement (gross). These financings and warrant exercises materially improved the balance sheet and reduced portion of derivative liability through reclassification of $20.4 million to additional paid-in capital. However, recurring operating losses (operating loss of $10.171 million for the quarter) and substantial mark-to-market volatility on Level 3 warrant liabilities (a $28.1 million mark-to-market loss this quarter) create earnings volatility and valuation sensitivity to the stock price. For investors, the key material considerations are liquidity sufficiency and the persistence of operating losses alongside derivative-driven P&L swings.

TL;DR: Recent capital raises and warrant exercises improve capital structure but create complex dilution and contingent liabilities from merger consideration.

The company completed significant financings and exercised warrants that generated material proceeds and reduced certain derivative liabilities by reclassification to equity. The QPhoton merger considerations, including unissued shares and warrants and settlement obligations (1.9 million shares to Barksdale), remain present on the balance sheet and in contingent disclosures. The company carries Level 3 warrant liabilities that depend on stock price and probability of exercise; this creates contingent capital structure changes and potential dilution. The acquisition accounting for QPhoton included issuance and valuation of shares and warrants, with $24.6 million carried as a warrant liability at June 30, 2025.

08/14/2025 - 05:23 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40615

QUANTUM COMPUTING INC.

(Exact name of registrant as specified in its charter)

Delaware		82-4533053
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5 Marine View Plaza, Suite 214, Hoboken, NJ		07030
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (703) 436-2121

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $.0001		QUBT		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 13, 2025, there were 159,883,187 shares of the registrant’s common stock outstanding.

QUANTUM COMPUTING INC.

TABLE OF CONTENTS

		Page No.
PART I.	FINANCIAL INFORMATION	F-1

Item 1.	Financial Statements (Unaudited)	F-1
	Condensed Consolidated Balance Sheets	F-1
	Condensed Consolidated Statements of Operations	F-2
	Condensed Consolidated Statements of Mezzanine and Stockholders’ Equity	F-3
	Condensed Consolidated Statements of Cash Flows	F-5
	Notes to the Unaudited Condensed Consolidated Financial Statements	F-6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4.	Controls and Procedures	7

PART II.	OTHER INFORMATION	8

Item 1.	Legal Proceedings	8
Item 1A.	Risk Factors	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3.	Defaults Upon Senior Securities	10
Item 4.	Mine Safety Disclosures	10
Item 5.	Other Information	10
Item 6.	Exhibits	11

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

QUANTUM COMPUTING INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except par value data)

	June 30, 2025			December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	348,758		$	78,945
Accounts receivable, net		96			27
Inventory		366			18
Prepaid expenses and other current assets		1,005			161
Total current assets		350,225			79,151
Property and equipment, net		10,569			8,212
Operating lease right-of-use assets		2,076			1,522
Intangible assets, net		7,510			8,972
Goodwill		55,573			55,573
Other non-current assets		131			129
Total assets	$	426,084		$	153,559

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,372		$	1,372
Accrued expenses		1,251			2,134
Deferred revenue		181			79
Other current liabilities		1,168			974
Total current liabilities		3,972			4,559
Derivative liability		24,594			40,532
Operating lease liabilities		1,536			1,181
Total liabilities		30,102			46,272
Commitments and Contingencies (see Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 1,550 shares Series A Preferred authorized; no shares issued and outstanding as June 30, 2025 and December 31, 2024, respectively; 3,080 shares of Series B Preferred Stock authorized; no shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		-			-
Common stock, $0.0001 par value, 250,000 shares authorized; 157,911 and 129,012 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		16			13
Additional paid-in capital		615,948			307,756
Accumulated deficit		(219,982	)		(200,482	)
Total shareholders’ equity		395,982			107,287
Total liabilities and shareholders’ equity	$	426,084		$	153,559

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

QUANTUM COMPUTING INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2025			2024			2025			2024
Total revenue	$	61		$	183		$	100		$	210
Cost of revenue		35			125			61			141
Gross profit		26			58			39			69
Operating expenses
Research and development		5,975			2,094			8,960			4,315
Sales and marketing		680			429			1,352			880
General and administrative		3,542			2,802			8,184			6,459
Total operating expenses		10,197			5,325			18,496			11,654
Loss from operations		(10,171	)		(5,267	)		(18,457	)		(11,585	)
Non-operating income (expense)
Interest and other income		1,843			73			3,539			110
Interest expense		(58	)		-			(116	)		(155	)
Change in fair value of derivative liability		(28,096	)		-			(4,466	)		-
Loss before income tax provision		(36,482	)		(5,194	)		(19,500	)		(11,630	)
Income tax provision		-			-			-			-
Net loss attributable to common stockholders	$	(36,482	)	$	(5,194	)	$	(19,500	)	$	(11,630	)

Loss per share:
Basic	$	(0.26	)	$	(0.06	)	$	(0.14	)	$	(0.13	)
Diluted	$	(0.26	)	$	(0.06	)	$	(0.14	)	$	(0.13	)

Weighted average shares used in computing net loss per common share:
Basic		141,401			93,550			138,326			87,185
Diluted		141,401			93,550			138,326			87,185

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

QUANTUM COMPUTING INC.

Condensed Consolidated Statements of Mezzanine and Stockholders’ Equity

(Unaudited, in thousands)

	Three Months Ended June 30, 2025
	Mezzanine		Series A Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Equity		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balances, April 1, 2025	$	-		-	$	-		137,322	$	14	$	404,313		(183,500	)	$	220,827
Issuance of shares for cash		-		-		-		14,035		1		188,005		-			188,006
Issuance of shares related to exercise of warrants		-		-		-		1,550		1		21,853		-			21,854
Stock-based compensation		-		-		-		5,004		-		1,777		-			1,177
Stock-based compensation for services		-		-		-		-		-		-		-			-
Net loss		-		-		-		-		-		-		(36,482	)		(36,482	)
Balances, June 30, 2025	$	-		-	$	-		157,911	$	16	$	615,948	$	(219,982	)	$	395,982

	Six Months Ended June 30, 2025
	Mezzanine		Series A Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Equity		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balances, January 1, 2025	$	-		-	$	-		129,012	$	13	$	307,756	$	(200,482	)	$	107,287
Issuance of shares for cash		-		-		-		22,198		2		281,640		-			281,642
Issuance of shares related to exercise of warrants		-		-		-		1,556		1		21,865		-			21,866
Stock-based compensation		-		-		-		5,145		-		4,669		-			4,669
Stock-based compensation for services		-		-		-		-		-		18		-			18
Net Loss		-		-		-		-		-		-		(19,500	)		(19,500	)
Balances, June 30, 2025	$	-		-	$	-		157,911	$	16	$	615,948	$	(219,982	)	$	395,982

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

QUANTUM COMPUTING INC.

Condensed Consolidated Statements of Mezzanine and Stockholders’ Equity

(Unaudited, in thousands)

	Three Months Ended June 30, 2024
		Mezzanine			Series A Preferred Stock					Common Stock					Additional Paid-In		Accumulated			Total Stockholders’
		Equity			Shares			Amount			Shares		Amount		Capital		Deficit			Equity
Balances, April 1, 2024		$	7,740			1,407		$	-			91,345	$	9	$	205,967	$	(138,376	)	$	67,600
Issuance of shares for cash			-			-			-			3,002		-		2,427		-			2,427
Repurchase of redeemable shares			(911	)		(166	)		-			-		-		-		-			-
Stock-based compensation			-			-			-			-		-		674		-			674
Stock-based compensation for services			-			-			-			69		-		18		-			18
Net loss			-			-			-			-		-		-		(5,194	)		(5,194	)
Balances, June 30, 2024		$	6,829			1,241		$	-			94,416	$	9	$	209,086	$	(143,570	)	$	65,525

	Six Months Ended June 30, 2024
		Mezzanine			Series A Preferred Stock					Common Stock					Additional Paid-In			Accumulated			Total Stockholders’
		Equity			Shares			Amount			Shares		Amount		Capital			Deficit			Equity
Balances, January 1, 2024		$	-			1,490		$	-			77,451	$	8	$	200,635		$	(131,940	)	$	68,703
Issuance of shares for cash			-			-			-			16,605		1		14,628			-			14,629
Reclassification of Series A preferred stock to mezzanine equity			8,195			-			-			-		-		(8,195	)		-			(8,195	)
Repurchase of redeemable shares			(1,366	)		(249	)		-			-		-		-			-			-
Stock-based compensation			-			-			-			218		-		1,886			-			1,886
Stock-based compensation for services			-			-			-			142		-		132			-			132
Net loss			-			-			-			-		-		-			(11,630	)		(11,630	)
Balances, June 30, 2024		$	6,829			1,241		$	-			94,416	$	9	$	209,086		$	(143,570	)		65,525

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-4

QUANTUM COMPUTING INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	Six Months Ended
	June 30,
	2025			2024
Cash flows from operating activities:
Net income (loss)	$	(19,500	)	$	(11,630	)
Adjustments to reconcile net income (loss) to net cash used in operations
Depreciation and intangibles amortization		1,862			1,691
Amortization of issuance costs		-			138
Change in fair value of derivative liability		4,466			-
Amortization of operating lease right-of-use assets		222			128
Other recognized losses (gains)		-			16
Stock-based compensation expense		3,165			1,917
Stock-based compensation expense for services		18			19
Change in operating assets and liabilities
Accounts receivable		(69	)		9
Inventory		(348	)		(193	)
Prepaid expenses and other current assets		(844	)		(124	)
Other non-current assets		(2	)		(4	)
Accounts payable		-			210
Deferred revenue		102			104
Accrued expenses and other current liabilities		618			(11	)
Operating lease liabilities		(224	)		(132	)
Net cash used in operating activities		(10,534	)		(7,862	)

Cash flows from investing activities:
Purchase of property and equipment		(2,757	)		(2,656	)
Net cash used in investing activities		(2,757	)		(2,656	)

Cash flows from financing activities:
Payments of financial liabilities, net of interest		-			(2,063	)
Series A Preferred stock dividend payments		-			(215	)
Repurchase of Series A preferred stock		-			(1,366	)
Proceeds from stock issuance related to ATM facility		-			14,629
Proceeds from exercise of warrants		1,462			-
Proceeds from issuance of common stock		281,642			-
Net cash provided by financing activities		283,104			10,985

Net increase in cash and cash equivalents		269,813			467
Cash and cash equivalents, beginning of period		78,945			2,059
Cash and cash equivalents, end of period	$	348,758		$	2,526

Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	31
Non-cash investing and financing activities:
Leased assets obtained in exchange for new operating lease liabilities	$	776		$	-
Reclassification of Series A preferred stock to mezzanine equity	$	-		$	8,195
Fair value of derivative liability reclassed to additional paid-in capital due to exercise of warrants	$	20,404		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-5

QUANTUM COMPUTING INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Note 1. Nature of the Organization and Business

Corporate History

Quantum Computing Inc. (“QCi” or the “Company”) was formed in the State of Nevada on July 25, 2001, under its original name, Ticketcart, Inc., which was changed to Innovative Beverage Group Holdings, Inc. in 2009. The Company redomiciled to Delaware on February 22, 2018 and changed its name to Quantum Computing Inc. Effective July 20, 2018, the trading symbol for the Company’s common stock, par value $0.0001, on the OTC Market changed from “IBGH” to “QUBT”. On July 15, 2021, the Company uplisted to The Nasdaq Stock Market LLC. On June 16, 2022, the Company merged (the “QPhoton Merger”) with QPhoton, Inc. (“QPhoton”), a developer of quantum photonic systems and related technologies and applications. The QPhoton Merger enabled us to develop hardware applications integrated with the Company’s software platform, Qatalyst, that existed before the QPhoton Merger.

Nature of Business

QCi is an American company utilizing integrated photonics and non-linear quantum optics to develop and deliver machines for quantum computing, reservoir computing, and remote sensing, imaging and cybersecurity applications based on patented and proprietary photonics technology. QCi’s products are designed to operate at room temperature and at very low power levels compared to other quantum systems currently available in the market, such as superconducting, ion-trap, or annealing architectures. Our core photonics technology enables the execution of a go-to-market strategy which emphasizes scalability, accessibility and affordability. Our quantum machines, supported by professional services through our “Quantum Solutions” offering, enable subject matter experts (SMEs) and end users to deliver critical business solutions involving highly complex optimization problems.

The leading application of our quantum offerings today is our Entropy Quantum Computing (“EQC”). Our longer-term product development plan is to migrate the EQC’s current design, as well as other product designs based on discrete components, to a set of TFLN optical integrated circuits built on TFLN wafers.

Liquidity

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets, and the satisfaction of liabilities in the normal course of business. We have not achieved a level of sales adequate to support the Company’s cost structure. The Company has historically incurred losses and negative cash flows from operations. During the six months ended June 30, 2025, the Company issued 22.2 million shares of common stock for net proceeds of $281.6 million. As of June 30, 2025, the Company had cash and cash equivalents on hand of $348.8 million, an accumulated deficit of $220.0 million, and working capital of $346.3 million. As a result, the Company has adequate cash and cash equivalents on hand to meet its obligations over the next 12 months.

Note 2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation:

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (the “FASB”), including Accounting Standards Codification (“ASC”) 810, Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year end is December 31.

F-6

Furthermore, the accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any future period. The unaudited condensed consolidated balance sheet as of December 31, 2024 has been derived from audited consolidated financial statements at that date, but does not include all disclosures required by U.S. GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Reclassifications

Certain reclassifications have been made to the fiscal 2024 condensed consolidated financial statements to confirm with the fiscal 2025 presentation. The reclassifications had no impact on net loss, total assets, total liabilities, or mezzanine and stockholders’ equity.

Risk and Uncertainties

The Company is subject to certain risks and uncertainties and believes changes in any of the following areas could have a material adverse effect on the Company’s future consolidated financial position or consolidated results of operations or cash flows: new product development, including market receptivity; litigation or claims against the Company based on intellectual property, patent, product regulation or other factors; competition from other products; general economic conditions; the ability to attract and retain qualified employees; and, ultimately, to sustain profitable operations.

Use of Estimates

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include the valuation of goodwill and intangible assets, deferred tax assets, equity-based transactions and liquidity assessment. Actual results may differ from these estimates.

Cash and Cash Equivalents

Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. The Company maintains its cash in mutual funds and deposit and money market accounts with high quality financial institutions which, at times, may exceed federally insured limits. As of June 30, 2025 and December 31, 2024, the Company had $348.4 million and $78.9 million, respectively, in cash equivalents invested in mutual funds. The Company has not experienced any losses on these deposits and believes it is not exposed to significant credit risk on cash.

Operating Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets are included in right-of-use assets, net on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the other current liabilities and operating lease liabilities, respectively, on the consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, and the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. All of our leases are comprised of office space leases, and as of June 30, 2025 and December 31, 2024, the Company was not party to any finance leases.

F-7

Valuation of Goodwill

The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performs an annual impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit and can lead to potential impairment in future periods. The Company performs its annual impairment test during the fourth quarter of each fiscal year. As of June 30, 2025, we had not identified any factors that indicated there was an impairment of our goodwill and determined that no additional impairment analysis was then required.

Property and Equipment

Property and equipment are stated at cost or contributed value. Depreciation of furniture, software and equipment is calculated using the straight-line method over their estimated useful lives, and leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment. Maintenance and repair costs are expensed as incurred.

Impairment of Long-Lived Assets

The Company has long-lived assets such as tangible property and equipment, identified intangible assets consisting of acquired patents and core technology. When events or changes in circumstances occur that could indicate the carrying value of long-lived assets may not be recoverable, the Company assesses recoverability by determining whether the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. If the undiscounted cash flow is less, an impairment charge is recognized for the excess of the carrying amounts of these assets over the fair values. Fair values are determined by discounted future cash flows, appraisals or other methods.

During the three and six months ended June 30, 2025 and 2024, the Company did not record any impairment related to long-lived assets.

Fair Value of Financial Instruments

The carrying amount of certain financial instruments held by the Company, such as accounts receivable, contract assets and liabilities, accounts payable, and accrued and other current liabilities, approximate fair value due to their short maturities. The carrying amount of the liabilities for the convertible preferred stock warrants represent their fair value. The carrying amounts of the Company’s borrowings and lease liabilities approximate fair value due to the market interest rates that these obligations bear and interest rates currently available to the Company.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1

Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2

Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3

Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

F-8

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As of June 30, 2025 and December 31, 2024, the Company’s cash and cash equivalents of $348.4 million and $78.9 million, respectively, were in Level 1 assets, comprised of U.S. Government mutual funds. The Company had $24.6 million and $40.5 million as of June 30, 2025 and December 31, 2024, respectively, in Level 3 liabilities, which are comprised of derivative liabilities. See Note 9, Capital Stock – Warrants, for a full discussion of the warrant liability.

Research and Development Costs

Research and development costs include costs directly attributable to the conduct of research and development programs, including the cost of services provided by outside contractors, acquiring work-in-progress intellectual property, development, and mandatory compliance fees and contractual obligations. All costs associated with research and development are expensed as incurred.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets where, based upon the available evidence, management concludes that it is more-likely-than-not that the deferred tax assets will not be realized. AG真人官方ization of deferred tax assets is also dependent upon future earnings, if any, the timing and amount of which are uncertain.

The Company records a liability for the uncertain tax positions taken or expected to be taken on the Company’s tax return when it is more-likely-than-not that the tax position might be challenged despite the Company’s belief that the tax return positions are fully supportable, and additional taxes will be due as a result. To the extent that the assessment of such tax positions changes, for example, based on the outcome of a tax audit, the change in estimate is recorded in the period in which the determination is made. The provision for income taxes includes the impact of provisions for uncertain tax positions.

Net Loss Per Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share includes the potential dilutive effect of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the “If-Converted” method), unless the effect of such issuances would have been anti-dilutive. Because the impact of these items is generally anti-dilutive during periods of net loss, there is no difference between basic and diluted loss per common share for periods with net losses.

F-9

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share data):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Basic net loss per common share:	2025			2024			2025			2024
Numerator:

Net loss available to common stockholders	$	(36,482	)	$	(5,194	)	$	(19,500	)	$	(11,630	)

Denominator:
Weighted average outstanding shares of common share - basic		141,401			93,550			138,326			87,185
Loss per common share - basic	$	(0.26	)	$	(0.06	)	$	(0.14	)	$	(0.13	)

Diluted net loss per common share:
Numerator:
Net loss available to common stockholders	$	(36,482	)	$	(5,194	)	$	(19,500	)	$	(11,630	)

Denominator:
Weighted average common shares outstanding - basic		141,401			93,550			138,326			87,185
Effect of dilutive securities		-			-			-			-
Weighted average common shares outstanding - diluted		141,401			93,550			138,326			87,185
Loss per common share - diluted	$	(0.26	)	$	(0.06	)	$	(0.14	)	$	(0.13	)

For the three and six months ended June 30, 2025 and 2024, all outstanding warrants, options and unvested restricted common stock were not included in the dilutive net loss per common share calculation as including them would have been anti-dilutive.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

On December 14, 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Under ASU 2023-09, entities are required to uniformly classify and present greater disaggregation of information in the rate reconciliation and income taxes paid. ASU 2023-09 is intended to benefit users of the consolidated financial statements by improving transparency and decision usefulness of income tax disclosures. The new standard is effective for annual periods beginning after December 15, 2024 for public companies. The Company adopted ASU 2023-09 as of January 1, 2025. The standard did not have a material effect on the Company’s condensed consolidated financial statements.

F-10

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to provide disaggregated disclosures of certain expense captions presented on the face of the income statement into specific categories within the notes to the consolidated financial statements. ASU 2024-03 is effective for the Company’s annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The ASU may be applied either on a prospective or retrospective basis. The Company is currently evaluating the impact of the adoption of ASU 2024-03 on its consolidated financial statements and related disclosures.

On July 30, 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends ASC 326-20 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The standard is effective for annual reporting periods beginning after December 15, 2025, including interim periods, and allows for early adoption. The Company is currently evaluating the impact on its financial statements and related disclosures.

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC) and the SEC did not or are not expected to have a material effect on our consolidated financial statements.

Note 3. Segment Reporting

Our Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, our CODM uses condensed consolidated net (loss) income to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes natural expenses, such as employee wages and benefits at a consolidated level, to manage the Company’s operations and strategic growth initiatives. The following table presents segment information of revenue, significant expenses and net loss (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2025			2024			2025			2024
Revenue	$	61		$	183		$	100		$	210
Less:
Salaries and employee related costs		3,994			2,623			7,239			4,836
Stock-based compensation		1,778			651			3,182			1,936
Rent and facilities		425			187			658			349
Professional services and legal fees		985			675			2,517			1,544
Technology & IT costs		807			221			1,259			460
Other sales and marketing costs		471			149			736			336
Depreciation and amortization expense		888			847			1,862			1,691
Other operational expense		884			96			1,104			643
Operating loss		(10,171	)		(5,267	)		(18,457	)		(11,585	)
Other income (loss)
Interest and other income		1,843			73			3,539			110
Interest expense		(58	)		-			(116	)		(155	)
Change in fair value of derivative and warrant liabilities		(28,096	)		-			(4,466	)		-
Segment net (loss) income	$	(36,482	)	$	(5,194	)	$	(19,500	)	$	(11,630	)

F-11

Note 4. Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As of June 30, 2025, the Company has a valuation allowance against all of its net deferred tax assets.

The total effective tax rate was approximately 0% for each of the six months ended June 30, 2025 and 2024.

For each of the six months ended June 30, 2025 and 2024, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to the valuation allowance placed against its net deferred tax assets.

The Company did not pay any state tax during the three months and six months ended June 30, 2025 and 2024.

Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended 2018 through present.

Uncertain Tax Positions

The Company recognizes the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. The Company currently has approximately $264 thousand of uncertain tax positions as of June 30, 2025, all of which are related to R&D tax credits and are accounted as contra-deferred tax assets. The Company does not expect any significant changes to its uncertain tax positions in the coming 12 months.

Note 5. Intangible Assets, net

As a result of the QPhoton Merger, the Company has the following amounts related to intangible assets (in thousands):

	June 30, 2025							December 31, 2024
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Non-compete agreement with founder	$	3,251	$	(3,251	)	$	-	$	3,251	$	(2,800	)	$	451
Website domain name and trademark		1,009		(623	)		386		1,009		(521	)		488
Technology and licensed patents		12,731		(5,607	)		7,124		12,731		(4,698	)		8,033
Total	$	16,991	$	(9,481	)	$	7,510	$	16,991	$	(8,019	)	$	8,972

The Company recorded amortization expense of the Company’s intangible assets of $686 thousand and $776 thousand during the three months ended June 30, 2025 and 2024, respectively, and $1,462 thousand and $1,552 thousand during the six months ended June 30, 2025 and 2024, respectively. The Company expects future amortization expense to be the following (in thousands):

	Amortization
2025 (remaining six months)	$	1,010
2026		2,021
2027		1,903
2028		1,819
2029		757
Total	$	7,510

F-12

Note 6. Property and Equipment, net

The Company’s property and equipment are primarily located at the Company’s leased facilities in Hoboken, NJ and Tempe, AZ and consist of (in thousands):

	June 30, 2025			December 31, 2024
Computer and lab equipment	$	9,605		$	8,438
Network equipment		29			29
Furniture and fixtures		56			37
Software		96			77
Leasehold improvements		2,149			597
Total cost of property and equipment		11,935			9,178
Accumulated depreciation		(1,366	)		(966	)
Property and equipment, net	$	10,569		$	8,212

The Company recorded depreciation expense of $202 thousand and $71 thousand during the three months ended June 30, 2025 and 2024, respectively, and $400 thousand and $139 thousand during the six months ended June 30, 2025 and 2024, respectively, using useful lives of the Company’s long-lived assets as follows:

	Estimated Useful
	Life (Years)
Computer and lab equipment		5
Network equipment		4
Furniture and fixtures		7
Software		3
Leasehold improvements		Lesser of lease term or 5

Maintenance and repairs are charged to operations when incurred. When property and equipment are sold or otherwise disposed, the asset account and related accumulated depreciation and amortization accounts are relieved, and any gain or loss is included in other income or expense. There were no significant gains or losses in the three and six months ended June 30, 2025 or 2024.

Note 7. Operating Leases

As of June 30, 2025, the Company has use of space in three different locations, Hoboken, NJ, Tempe, AZ, and Arlington, VA, under lease or membership agreements, which expire at various dates through November 30, 2028. The Company’s leases do not provide an implicit rate, and the rates implicit in our leases are not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease assets and liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s leases all contain options to extend or renew the lease or membership term.

F-13

The table below reconciles the undiscounted future minimum lease payments under these operating leases to the total operating lease liabilities recognized on the consolidated balance sheet as of June 30, 2025 (in thousands):

The Company’s operating lease commitments as of June 30, 2025 are as follows (in thousands):

	Lease Payments
Year	Due
2025 (remaining six months)	$	396
2026		807
2027		828
2028		458
Total minimum payments		2,489
Less: imputed interest		(318	)
Present value of operating lease liabilities		2,171
Less: current portion included in other current liabilities		(635	)
Long-term operating lease liabilities	$	1,536

Other information related to operating lease liabilities consists of the following (in thousands):

	Three Months Ended						Six Months Ended
	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
Cash paid for operating lease liabilities	$	162		$	91		$	305		$	156
Weighted average remaining lease term in years		3.1			3.3			3.1			3.3
Weighted average discount rate		10	%		10	%		10	%		10	%

Note 8. Commitments and Contingencies

Indemnification Arrangements

We enter into standard indemnification arrangements in our ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties (generally our business partners or customers) in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to our products. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these agreements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal.

We have entered into indemnification agreements with our directors and officers that may require us to indemnify our directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature. These agreements also require us to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified and to make good faith determination whether or not it is practicable for us to obtain directors and officers insurance. We currently have directors and officers liability insurance.

Legal Proceedings

From time to time, we may be involved in legal proceedings arising in the ordinary course of business. In general, management believes that ordinary course of business matters will not have a material adverse effect on our condensed consolidated financial position or results of operations and are adequately covered by our liability insurance. However, it is possible that condensed consolidated cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one of more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

F-14

See Part II, Item 1, Legal Proceedings, in this Form 10-Q for additional details on the status of motions in the following proceedings.

BV Advisory v. QCi Breach Lawsuit

At the time of the QPhoton Merger in June 2022, QPhoton had an outstanding balance of principal and interest due to BV Advisory Partners LLC (“BV Advisory”) based on a note purchase agreement that QPhoton had entered into with BV Advisory on March 1, 2021 (the “BV Note Purchase Agreement”). Accordingly, the Company has recorded an estimated payable, recognized as other current liabilities on the condensed consolidated financial statements, based on best available information in the amount of $536 thousand as of June 30, 2025 and December 31, 2024, respectively.

On August 16, 2022, BV Advisory filed a complaint in the Court of Chancery of the State of Delaware naming QPhoton, the Company and certain of the Company’s directors and officers (among others) as defendants seeking, among other relief, monetary damages for an alleged breach of the BV Note Purchase Agreement. During the year ended December 31, 2024, BV Advisory’s other claims were dismissed by the Delaware Chancery Court and BV Advisory transferred its claim for breach of the BV Note Purchase Agreement to the Delaware Superior Court. On July 17, 2025, the Company, Keith Barksdale (“Barksdale” the managing member of BV Advisory), and BV Advisory entered into a settlement agreement (the “Settlement Agreement”) pursuant to which BV Advisory, dismissed its claims under the BV Note Purchase Agreement with prejudice. The terms of the settlement agreement are summarized in Note 13.

BV Advisory v. QCi Appraisal Action

BV Advisory was a shareholder of QPhoton, Inc., the predecessor in interest to QPhoton, LLC, a wholly owned subsidiary of the Company (both referred to as “QPhoton” in this Legal Proceedings discussion). BV Advisory rejected the Merger Consideration (as defined below) and on October 13, 2022 filed a petition in the Delaware Chancery Court seeking appraisal of the shares of QPhoton it owned (which shares represented 10% of the shares of QPhoton outstanding immediately prior to the Company’s acquisition of QPhoton). The Company included BV Advisory’s ownership of QPhoton in the purchase price accounting for the QPhoton Merger.

The Company’s total purchase price of QPhoton was approximately $71.0 million, or $69.9 million net of cash acquired, consisting of Company common stock, Series B Preferred Stock and the QPhoton Warrants (as defined below). While the total shares of the Company’s common stock on an as-converted basis offered in the QPhoton Merger was 36,600,823 (the “Merger Consideration”), the fair market valuation contemplated 31,299,417 of the shares, which assumed full conversion of the 2,377,028 shares of Series B Preferred Stock to common stock at the 10:1 ratio, and that only 1,726,931 of the warrants to purchase up to 7,028,337 shares of the Company’s common stock (the “QPhoton Warrants”) would eventually be exercised (specifically only the QPhoton Warrants for which the associated Company options and/or warrants had an exercise price at or below $2.27 at the time of the QPhoton Merger).

Accordingly, as of June 30, 2025 and December 31, 2024, the Company had neither issued 2,957,251 shares of the Company’s common stock on an as converted basis (the “Unissued QPhoton Shares”) nor 702,834 warrants to purchase shares of the Company’s common stock (the “Unissued QPhoton Warrants”) that were included in the Merger Consideration. The shares of common stock underlying the Unissued QPhoton Warrants are included in the condensed consolidated statement of stockholder’s equity as additional paid in capital as of June 30, 2025 and December 31, 2024, and the Unissued QPhoton Warrants have a carrying value of $24.6 million and $40.5 million, respectively, as a liability on the Company’s condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024. Pursuant to the Settlement Agreement, the Company agreed to issue to Barksdale or his designees 1.9 million shares of the Company’s common stock and BV Advisory dismissed its claims under the appraisal action with prejudice. The terms of the settlement agreement are summarized in Note 13.

Note 9. Capital Stock

Authorized Classes of Stock

As of June 30, 2025, the Company’s Board of Directors has authorized two classes of preferred stock. The Board has authorized 1,550,000 shares of preferred stock as Series A preferred stock, par value $0.0001 per share, none of which are issued and outstanding as of June 30, 2025 and December 31, 2024. The Board has also authorized 3,079,864 shares of preferred stock as Series B preferred stock, par value $0.0001 per share, none of which are issued and outstanding as of June 30, 2025 and December 31, 2024.

F-15

Series A Convertible Preferred Offering

From November 10, 2021 through November 17, 2021, the Company conducted a private placement offering (the “Private Placement”) pursuant to securities purchase agreements (the “Preferred Stock SPAs”) with 7 accredited investors (the “Series A Investors”), whereby the Series A Investors purchased from the Company an aggregate of 1,545,459 shares of the Company’s newly created Series A convertible preferred stock, par value $0.0001 per share (the “Series A Preferred Stock”) and warrants to purchase 1,545,459 shares of the Company’s common stock (the “Preferred Warrants”) for an aggregate purchase price of $8.5 million. The Private Placement was completed and closed to further investment on November 17, 2021.

The Preferred Warrants were two-year warrants to purchase shares of the Company’s common stock at an exercise price of $7.00 per share, subject to adjustment, and as of December 31, 2023, all of the Preferred Warrants had expired unexercised.

In connection with the Preferred Stock SPAs, the Company and the Series A Investors entered into a registration rights agreement pursuant to which on April 27, 2022 the Company filed a Registration Statement on Form S-3 to register the resale of the shares of common stock. The SEC declared the Form S-3 effective on June 2, 2022.

On March 19, 2024, the Company entered into a Redemption and Waiver Agreement (the “Series A Redemption Agreement”) with the current holders (the “Series A Holders”) of the Series A Preferred Stock. Accordingly, $8.195 million of additional paid in capital was reclassified from shareholders’ equity to mezzanine equity (the “Mezzanine Equity”) on the Company’s condensed consolidated balance sheet as of March 31, 2024, in accordance with Accounting Series Release No. 268, Presentation in Financial Statements of “Redeemable Preferred Stocks”. The Mezzanine Equity is valued at the date of the Private Placement issuance. Pursuant to the Series A Redemption Agreement, the Company agreed to redeem all outstanding shares of Series A Preferred Stock for an aggregate cash purchase price of $8,195,000, or $5.50 per share, at its sole discretion, in 18 monthly payments. In addition, the Series A Holders agreed to waive, on a month-by-month basis following each monthly payment, certain rights granted to them in (i) the Certificate of Designations of the Series A Preferred Stock, including for the accrual and payment of accrued and future dividends; and (ii) the Preferred Stock SPA. As of December 31, 2024 and June 30, 2025, there were no shares of Series A Preferred Stock outstanding. During the six months ended June 30, 2024, the Company redeemed 248,349 shares of Series A Preferred Stock for approximately $1.4 million, in cash paid to the Series A Holders.

At-the-Market-Facility

On October 28, 2022, the Company filed a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended, which the SEC declared effective on November 8, 2022 (the “2022 shelf”). Under the 2022 Shelf at the time of effectiveness, the Company had the ability to raise up to $100 million by selling common stock, preferred stock, debt securities, warrants and units. On December 5, 2022, the Company entered into an At-the-Market Issuance Sales Agreement (the “ATM Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”) whereby the Company may, but is not obligated to, offer and sell, from time to time, shares of its common stock (the “ATM Facility”), and incorporated the ATM Agreement into the 2022 Shelf by amendment that the SEC declared effective January 10, 2023. On August 17, 2023, the Company and Ascendiant entered into an amendment to the ATM Agreement, increasing the amount of common stock that the Company could offer and sell via the ATM Facility from $25 million to $50 million (the “ATM Upsize”). Following the ATM Upsize, the Company filed a prospectus supplement, dated August 18, 2023, with the SEC and became able to offer and sell shares of the Company’s common stock having an aggregate offering price of up to $27,362,717 via the ATM Facility.

The Company did not sell any shares through the ATM Facility for the six months ended June 30, 2025. During the six months ended June 30, 2024, the Company sold 16,604,770 shares of the Company’s common stock through the ATM Facility at an average price of $0.88, from which the Company received net proceeds of $14.6 million.

Private Placement Offering

On January 7, 2025, the Company entered into securities purchase agreements (the “January SPAs”) for a private placement offering (the “January Private Placement” to sell an aggregate of 8,163,266 shares (the “January Placement Shares”) of the Company’s common stock at a purchase price of $12.25 per share. The January Private Placement closed on January 9, 2025, and resulted in gross proceeds of $100 million before deducting placement agent commissions and other offering expenses of $6.4 million. Furthermore, the Company filed a registration statement registering the resale of the January Placement Shares on January 2, 2025, which the SEC declared effective February 3, 2025.

F-16

In conjunction with the January SPAs, the Company also entered into a placement agency agreement with Titan Partners Group LLC, a division of American Capital Partners, LLC (“Titan”), dated January 7, 2025, pursuant to which Titan acted as the exclusive placement agent for the Company in connection with the January SPAs. The Company agreed to pay Titan a cash fee of 6% of the gross proceeds from the January SPAs and to issue to the December Placement Agent (or its designees) 326,531 five-year warrants (representing 4% of the securities sold in the Offerings), which will be exercisable beginning on July 6, 2025, and have an initial exercise price per share of the Company’s common stock of $14.0875.

On June 22, 2025, the “Company entered into securities purchase agreements (the “Purchase Agreements”) pursuant to which the Company agreed to issue to the Purchasers (as defined therein), in a private placement (the “Placement”), an aggregate of 14,035,089 shares (the “Placement Shares”) of the Company’s common stock at a purchase price of $14.25 per share. The closing of the Placement occurred on June 24, 2025. The Placement resulted in gross proceeds of approximately $200 million before deducting placement agent commissions and other offering expenses of $12 million.

During the quarter ended June 30, 2025, a total of 404,000 of the Placement Agent warrants were exercised by principals of Titan Capital Partners, resulting in proceeds to the Company of $1.449 million. The warrants exercised were 304,000 at an exercise price of $2.875 and 100,000 at an exercise price of $5.75. In addition, during the quarter ended June 30, 2025 1.146 million QPhoton warrants were exercised, at an exercise price of $0.0001, resulting in proceeds to the Company of $114.60. Due to the exercise of these QPhoton warrants, $20.4 million of the derivative liability was reclassified to additional paid-in capital during the quarter ended June 30, 2025. Total shares issued due to exercise of warrants during the quarter were 1,549,951 and proceeds to the Company from all warrant exercises during the quarter were $1.449 million.

The Company was required to file a registration statement providing for the resale of the Placement Shares by July 9, 2025, and it filed the registration statement on Form S-1 on July 3, 2025, which the SEC declared effective on July 14, 2025.

Pursuant to the Purchase Agreements and the Placement Agency Agreement (as defined below), the Company has agreed not to issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any shares of its common stock or common stock equivalents, or file any registration statement or any amendment or supplement thereto, through September 7, 2025, subject to certain customary exceptions, without the consent of the Placement Agent.

Placement Agency Agreement

The Company also entered into a Placement Agency Agreement with Titan, dated June 22, 2025, pursuant to which Titan acted as the exclusive placement agent for the Company in connection with the Placement. The Company agreed to pay Titan a cash fee based on the total size of the Placement according to a formula set forth in the Placement Agency Agreement. In addition, the Company agreed to reimburse Titan for up to $100,000 of its fees and expenses in connection with the Placement.

The Placement Agency Agreement contains customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the parties, and termination provisions.

Lock-Up Agreements

Pursuant to Lock-Up Agreements with the Company, the Company’s directors and executive officers agreed for a period of 60 days after the closing date of the Placement, subject to certain exceptions, not to directly or indirectly offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position with respect to, any shares of the Company’s common stock or securities convertible, exchangeable or exercisable into common stock, that they beneficially own, hold, or thereafter acquire, or make any demand for or exercise any right or cause to be filed a registration, including any amendments thereto, with respect to the registration of any common stock or common stock equivalents or publicly disclose the intention to do any of the foregoing.

The total amount of net proceeds raised for the six months ended June 30, 2025 was $283.1 million.

F-17

Warrants

The table below summarizes the warrants outstanding at June 30, 2025 (in thousands, except exercise price data):

Issuance Date	Expiration Date	Exercise Price		Issued		Exercised			Forfeited / Cancelled			Warrants Outstanding

August 18, 2020	August 18, 2025	$	2.00		171		(156	)		-			15
June 16, 2022	May 9, 2027	$	0.0001		6,325		(1,146	)		(3,876	)		1,303
November 18, 2024	November 18, 2029	$	2.875		800		(304	)		-			496
December 12, 2024	December 12, 2029	$	5.75		500		(100	)		-			400
January 9, 2025	January 9, 2030	$	14.0875		327		-			-			327
													2,541

In connection with a restricted stock units offering in June 2020, the Company issued warrants in August 2020 to purchase 171,000 shares of the Company’s common stock, at an exercise price of $2.00 per share. Those warrants are exercisable for five years from the date of issuance.

On June 16, 2022, the Company issued 6.3 million QPhoton Warrants to purchase shares of the Company’s common stock at an exercise price of $0.0001 per share. Those warrants are exercisable when and if stock options and warrants issued by the Company and outstanding as of June 15, 2022 (the “Underlying Options”) are exercised. As of June 30, 2025, the Company expects 1.3 million (the “In-the-Money QPhoton Warrants) of the 1.3 million outstanding QPhoton Warrants are to be exercised as the exercise prices of the Underlying Options associated with the In-the-Money QPhoton Warrants are below the closing of the Company’s bid stock price of $19.17 per share as of June 30, 2025. The 6.3 million issued warrants represent a portion of the 7.0 million QPhoton Warrants, having been received by two former QPhoton shareholders. A third shareholder rejected the Merger Consideration and commenced litigation, and as of June 30, 2025 that litigation has not been resolved and the associated 702,834 warrants have not been issued, of which 457,926 would have been canceled to date due to forfeitures of Underlying Options. See Part I, Item 3, Legal Proceedings, for additional information on the status of the litigation.

As of June 30, 2025, of the 6.3 million QPhoton Warrants issued, approximately 65% have been forfeited because the corresponding Underlying Options had expired or been forfeited. Further, as discussed in Note 2, Significant Accounting Policies – Fair Value of Financial Instruments, the QPhoton Warrants are considered Level 3 liabilities for fair value measurement on the valuation hierarchy. In determining the fair market value of the QPhoton Warrants, the Company determines which underlying options and warrants are in-the-money or out-of-the-money at period end by comparing to the bid price of the Company’s common stock and then accounting for changes period-over-period by realizing a mark-to-market gain or loss for the period. Due to the difference between the exercise price and the market value of the Company’s common stock as of the balance sheet dates and the probability of the underlying options and warrants being exercised are the only significant inputs in the valuation of the warrant liability. The market value of the Company’s stock was $19.17 per share and $16.55 per share as of June 30, 2025 and December 31, 2024, respectively (the “Balance Sheet Date Stock Prices”), and the probability of exercise was determined based on whether the exercise price of the underlying options and warrants was above or below the Balance Sheet Date Stock Prices, resulting in the QPhoton Warrants being out-of-the-money or in-the-money, respectively. Accordingly, the Company recognized a mark-to-market loss of $28.1 million, and $4.5 million during the three and six months ended June 30, 2025, respectively. In addition, due to the exercise of QPhoton warrants, $20.4 million of the derivative liability was reclassified to additional paid-in capital during the quarter ended June 30, 2025. No mark-to-market gain or loss was recorded during the three and six months ended June 30, 2024. As of June 30, 2025, the QPhoton Warrants have a carrying value of $24.6 million as a liability on the Company’s condensed consolidated balance sheet.

F-18

Note 10. Stock-based Compensation

Incentive Plans

The Quantum Computing Inc. 2019 Equity and Incentive Plan, as amended in 2021 enabled the Company to grant incentive stock options or nonqualified stock options and other equity awards to employees, directors and consultants of the Company up to a total of 3.0 million shares of common stock, all of which have been issued.

On July 5, 2022, the Board of Directors adopted the Quantum Computing Inc. 2022 Equity and Incentive Plan (the “2022 Plan”), which was approved by a majority of the shareholders in September 2022. The 2022 Plan initially provided for the issuance of up to 16 million shares of the Company’s common stock and includes provisions for annual automatic evergreen increases of 1,000,000 shares of common stock. As of June 30, 2025, the total number of shares of our common stock reserved for issuance under the 2022 Plan is 19.0 million and a total of 16.6 million shares, including 6.8 million shares underlying options, were issued and outstanding under the 2022 Plan.

Options

The following table summarizes the Company’s option activity for the six months ended June 30, 2025 (in thousands, except exercise price and contractual life data):

	Number Outstanding			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)

Balance as of December 31, 2024		12,983		$	2.34		2.9
Granted		1,005			7.63		4.7
Exercised		(6,917	)		2.31		-
Forfeited		(260	)		9.26		-
Balance as of June 30, 2025		6,811		$	2.89		2.9
Vested and exercisable as of June 30, 2025		3,556		$	3.49		2.6

The following table presents the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted during the three and six months ended June 30, 2025 and 2024:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2025			2024			2025			2024
Exercise price	$	9.10 - 14.34		$	1.00 - 1.00		$	1.00 - 14.34		$	1.00 - 1.00
Risk-free interest rate		4.1 - 4.1	%		5.2 - 5.2	%		4.0 - 4.2	%		5.2 - 5.2	%

Expected volatility		131.9 - 132.9	%		93.2 - 93.2	%		130.0 - 138.0	%		93.2 - 93.2	%
Expected dividend yield		0	%		0	%		0	%		0	%
Expected life of options (in years)		5.0			5.0			5.0			5.0

F-19

The following table summarizes the exercise price range as of June 30, 2025 (in thousands, except exercise price data):

Exercise Price	Outstanding Options		Exercisable Options
$0.00 - $1.00		105		68
$1.00 - $2.00		3,857		1,202
$2.00 - $3.00		1,414		1,301
$3.00 - $6.00		158		38
$6.00 - $8.00		995		770
$8.00 - $12.00		252		177
$12.00 - $15.00		30		-
		6,811		3,556

The weighted average grant-date fair value of stock options granted during the six months ended June 30, 2025 and 2024 was $7.63 and $1.00 per share, respectively. As of June 30, 2025, total unrecognized compensation cost related to common stock options was $5.1 million, which is expected to be recognized over a period of 2.9 years.

Restricted Stock

As of June 30, 2025, there were 1.1 million shares of the Company’s common stock issued and unvested that had been awarded as stock-based compensation under the 2022 Plan. The following table summarizes the Company’s activity for restricted stock tied to vesting schedules for the six months ended June 30, 2025 (in thousands):

	Number Outstanding			Weighted Average Fair Value

Unvested as of December 31, 2024		1,264		$	1.20
Granted		-			-
Vested		(130	)		.67
Unvested as of June 30, 2025		1,134		$	1.27

Stock-based Compensation

The Company recognized stock-based compensation expense related to common stock options and restricted shares of common stock in the following expense categories of its condensed consolidated statements of operations (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Research and development	$	467	$	505	$	964	$	1,199
Selling and marketing		31		43		91		111
General and administrative		1,279		143		2,109		607
Total stock-based compensation	$	1,777	$	691	$	3,164	$	1,917

For the six months ended June 30, 2025, stock-based compensation on the condensed consolidated statements of stockholders’ equity was $1.5 million higher than expense recorded in the consolidated statement of operations, due to timing differences between award dates and the realization of stock-based compensation expense. There was no difference between stock-based compensation expense recorded for the three months ended June 30, 2025. For the three and six months ended June 30, 2024, stock-based compensation on the condensed consolidated statements of stockholders’ equity was $17 thousand and $31 thousand lower, respectively, recorded due to timing differences between award dates and the realization of stock-based compensation expense.

F-20

The Company did not issue any shares of common stock as compensation during the six months ended June 30, 2025. During the six months ended June 30, 2025 and June 30, 2024, the Company issued 25 thousand shares of common stock to former executives per their separation agreements, and during the six months ended June 30, 2024 the Company issued 218 thousand shares of common stock to former executives per their respective employment and separation agreements (the “Separation Agreement Shares”). In conjunction with the Separation Agreement Shares, the Company recognized $472 thousand and $197 thousand of stock-based compensation expense during the six months ended June 30, 2025 and 2024, respectively, and does not expect future expense related to these offerings as the Separation Agreement Shares are fully vested.

Stock-based Compensation for Services

The Company recognized stock-based compensation expense for services in lieu of cash payments to certain consultants, including expenses for both shares issued and stock option awards granted, in the following expense categories of its consolidated statements of operations (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2025		2024			2025		2024
Research and development	$	-	$	-		$	6	$	-
Selling and marketing		-		-			10		-
General and administrative		-		(40	)		2		(19	)
Total stock-based compensation	$	-	$	(40	)	$	18	$	(19	)

For the three and six months ended June 30, 2024, stock-based compensation for services on the condensed consolidated statements of stockholders’ equity was $58 thousand and $151 thousand higher, respectively, as compared to the expense recorded due to timing differences between award dates and the realization of stock-based compensation expense. No such timing differences existed for the three and six months ended June 30, 2025.

The Company did not issue any shares of the Company’s common stock as compensation for services during the six months ended June 30, 2025. For the six months ended June 30, 2024, the Company issued 142 thousand shares of common stock for services.

Note 11. Related Party Transactions

There were no related party transactions during the three and six months ended June 30, 2025 and 2024.

Note 12. License Agreement – Stevens Institute of Technology

Effective December 17, 2020, QPhoton signed a License Agreement with the Stevens Institute (the “Stevens License Agreement”). The Stevens License Agreement enables the Company to commercially use technology such as licensed patents, licensed patent applications and licensed “Know-How” and is also able to issue sublicenses for the technology under the agreement. The agreement is effective until the later of: (i) the 30-year anniversary of the effective date, or (ii) the expiration of the licensed patent or licensed patent application that is last to expire. As part of the QPhoton Merger, the Stevens License Agreement was assigned to the Company.

During the term of the Stevens License Agreement and prior to any commercialization or sublicensing of the technology by the Company, the Company is required to submit annual reports to the Stevens Institute reporting on all research, development, and efforts toward commercialization and/or sublicensing made during the year. Once any commercialization and/or sublicensing has been initiated, the Company will deliver quarterly reports to the Stevens Institute reporting on the revenue received by the Company, all sublicenses derived from the sale of licensed products, and the net sales price associated with each transaction. The Company will be responsible for reimbursing Stevens for any costs associated with the prosecution and maintenance of the licensed patents and licensed patent applications moving forward.

F-21

Consideration for the Agreement

As consideration for the license and other rights granted under the agreement, QPhoton agreed to pay the following: (i) $35 thousand within 30 days of execution of the agreement, (ii) $28 thousand within 30 days of each annual anniversary of the effective date, (iii) equity in the Company equivalent to nine percent of the outstanding equity of the Company within 30 days of the execution of the agreement, and (iv) royalties of 3.5% of the net sales price of each licensed product sold or licensed by the company during the quarter then-ended, for which it also received payment, concurrent with the delivery of the relevant quarterly report.

As of June 30, 2025, the Company has begun to commercialize some of the licensed technology, though has not recognized any related revenue and hence has not incurred any royalty expenses payable to the Stevens Institute.

Note 13. Subsequent Events

Litigation settlement

On July 17, 2025, the Company entered into a Confidential Settlement Agreement and Release (the “Settlement Agreement”) with Barksdale and BV Advisory, pursuant to which, among other things, (i) Barksdale, BV Advisory, and the Company agreed to settle all disputes between them without admissions of any kind and release all Claims, as defined therein, that they might have against each other, on the terms and conditions set forth therein, (ii) the Company agreed to pay $750,000 to BV Advisory and Barksdale, collectively, and issue 1,900,000 shares of its common stock (the “Shares”) to Barksdale or entities designated by him, and (iii) the Company agreed to file a registration statement providing for the resale of the Shares by July 31, 2025. On July 28, the Company filed such a resale registration statement on Form S-1 which the SEC declared effective on August 4, 2025. BV Advisory had been both a lender to and shareholder of QPhoton.

There are no other subsequent events that in management’s opinion are reportable.

F-22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q and other reports filed Quantum Computing, Inc. (the “Company,” “QCi,” “we,” “our,” and “us”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Business Overview

QCi is a development stage company with limited operations and revenue. The Company is developing quantum and ancillary non-quantum products for high-performance computing applications based on proprietary photonics technology. QCi’s products are designed to operate at room temperature and low power at an affordable cost in the areas of high-performance computing, sensing and imaging, and quantum cybersecurity. The Company has generated some revenue based on sales of products and related services to date and is expanding its sales and marketing efforts. The Company’s development team includes optical engineers, mathematicians, physicists, and software developers.

QCi’s proprietary core technology rests in our ability to condition, manipulate, and measure single photons (particles of light). Specifically, our integrated photonics approach exploits the non-linear capabilities of photons (our “Core Photonics Technology”). Our Entropy Quantum Computer (“EQC”) is a quantum application of our Core Photonics Technology, designed to solve complex optimization problems. EQC is based on a patent-pending methodology that utilizes the energy in the environment to drive controlled feedback through energy loss in a photonic circuit architecture. The EQC’s use of the environment as an integral part of the system is in sharp contrast to competing quantum approaches, including the aforementioned superconducting, trapped-ion, and annealing architectures, which seek to establish stable quantum states by the complete elimination of environmental effects. As a result, the EQC consumes less power than these competing methods and operates at room temperature making it compatible with an ordinary server room environment. We anticipate that our EQC will enable us to develop and produce multiple generations of quantum machines with increasing computational power, scalability, and speed.

Our longer-term product development plan is to migrate product designs based on discrete components, including EQC’s current design, to a set of optical integrated circuits built on wafers using a crystalline material called lithium niobate (“Thin Film Lithium Niobate” or “TFLN”). The Company believes that TFLN is an excellent material for optical integrated circuit design, given its advantageous optical properties (both linear and non-linear) and its compatibility with silicon-based semiconductor fabrication methods. In March 2025, the Company substantially completed the buildout of a state-of-the-art TFLN chip manufacturing facility in a leased space within Arizona State University’s Research Park in Tempe, Arizona (the “AZ Chips Facility”).

In addition to our EQC technology, we have leveraged QCi’s core photonics technology to demonstrate powerful quantum sensing use cases in LIDAR (light detection and ranging) (a technology that uses pulsed laser light to measure distances to objects by calculating the time it takes for the reflected light to return), reservoir computing (a form of neural network that can be used in machine learning applications and quantum cyber authentication (a method for highly secure communication within a network). Several of these technologies are in the early stages of commercialization and several are available to customers through our research & development offerings.

Economic Conditions, Challenges, and Risks

The markets for high-performance conventional and quantum computing and cloud-based services are dynamic and highly competitive. Our competitors are developing new computing devices, while also enhancing competing cloud-based services for businesses. Aggregate demand for our solutions, services, and devices is also correlated to global macroeconomic and geopolitical factors, which remain dynamic. We must continue to evolve and adapt over an extended time in pace with this changing environment.

The investments we are making in quantum optical chips and devices will continue to increase our operating costs and may decrease our operating margins. Components for our devices are primarily manufactured by third parties. Some of our products contain certain components for which there are very few qualified suppliers. Extended disruptions at these suppliers could impact our ability to manufacture devices on time to meet consumer demand.

Our success is highly dependent on our ability to attract and retain qualified employees. We hire a mix of university and industry talent. We compete for talented individuals by offering an exceptional working environment, an ability to work on new, ground-breaking quantum technology, the ability to grow one’s career across many different products and businesses, and competitive compensation and benefits.

Results of Operations

Our results of operations for the three and six months ended June 30, 2025 and 2024 are as follows (in thousands, except percentages, with non-meaningful percentage changes labeled as “NM”):

	Three Months Ended June 30,									Six Months Ended June 30,
	2025			2024			% Change			2025			2024			% Change
Total revenue	$	61		$	183			(67	)%	$	100		$	210			(52	)%
Cost of revenue		35			125			(72	)%		61			141			(57	)%
Gross profit		26			58			(55	)%		39			69			(43	)%
Gross profit margin		43	%		32	%		34	%		39	%		33	%		19	%
Operating expenses:
Research and development		5,975			2,094			185	%		8,960			4,315			108	%
Sales and marketing		680			429			59	%		1,352			880			54	%
General and administrative		3,542			2,802			26	%		8,184			6,459			27	%
Total operating expenses		10,197			5,325			91	%		18,496			11,654			59	%
Loss from operations		(10,171	)		(5,267	)		93	%		(18,457	)		(11,585	)		59	%
Non-operating income (expense):
Interest and other income		1,843			73			NM			3,539			110			NM
Interest expense		(58	)		-			NM			(116	)		(155	)		NM
Change in fair value of derivative liability		(28,096	)		-			NM			(4,466	)		-			NM
Total non-operating income (expense)		(26,311	)		73			NM			(1,043	)		(45	)		NM
Net loss	$	(36,482	)	$	(5,194	)		602	%	$	(19,500	)	$	(11,630	)		68	%

Revenue for the three months ended June 30, 2025 was $61 thousand compared to $183 thousand for the comparable prior year period, a decrease of $122 thousand or 67%. Revenue for the six months ended June 30, 2025 was $100 thousand compared to $210 thousand for the comparable prior year period, a decrease of $110 thousand or 52%. The respective decrease in revenue is primarily due to changes in the number of, size of and level of effort performed on active customer proof-of-concept and research and development services and custom hardware contracts.

Cost of Revenue

Cost of revenue, which consists of direct labor expenses, primarily salary costs for engineering and solutions staff delivering services, and other direct component costs for custom hardware on research and development contracts, was $35 thousand for the three months ended June 30, 2025, compared to $125 thousand for the comparable prior year period, a decrease of $90 thousand or 72%. Cost of revenue was $61 thousand for the six months ended June 30, 2025, compared to $141 thousand for the comparable prior year period, a decrease of $80 thousand or 57%. The respective decrease is primarily due to the decreases in direct labor expenses and other direct costs required to perform on the contracts during the 2025 periods compared to the prior year periods.

Gross Margin

Gross margin for the three months ended June 30, 2025 was $26 thousand and 43% of revenue compared to $58 thousand and 32% of revenue for the comparable prior year period. Gross margin for the six months ended June 30, 2025 was $39 thousand and 39% of revenue compared to $69 thousand and 33% of revenue for the comparable prior year period. The respective changes were primarily the result of changes in the mix of labor categories used to perform the active contracts.

Operating Expenses

Operating expenses for the three and six months ended June 30, 2025 increased by $4,872 thousand and $6,842 thousand, respectively compared to the six months ended June 30, 2024. These increases are primarily due to higher research and development expenses, sales and marketing costs and general and administrative expenses, as discussed below.

Research and development expenses consist primarily of labor expenses for employees that primarily engage in research and development efforts and non-labor expenses for the development of hardware products and supporting software. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities. Research and development costs were $5,975 thousand and $8,960 thousand for the three and six months ended June 30, 2025 as compared to $2,094 thousand and $4,315 thousand for the three and six months ended June 30, 2024. Research and development expenses increased $3,881 thousand and $4,645 thousand for the three and six months ended June 30, 2025, respectively, as compared to the comparable prior year period primarily due to higher headcount and related payroll costs, higher recurring lab equipment and consumables costs, as well as higher depreciation for long-lived laboratory equipment, partially offset by hosting services.

Selling and marketing expenses consist primarily of employee compensation as well as customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs. Sales and marketing expenses were $680 thousand and $1,352 thousand for the three and six months ended June 30, 2025 as compared to $429 thousand and $880 thousand for the three and six months ended June 30, 2024. Selling and marketing expenses increased 58% and 54% for the three and six months ended June 30, 2025, respectively as compared to the prior comparable period, primarily due to higher tradeshow and travel-related costs and increased marketing program costs.

General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services. General and administrative expenses were $3,542 thousand and $8,184 thousand for the three and six months ended June 30, 2025 as compared to $2,802 thousand and $6,459 thousand for the three and six months ended June 30, 2024. General and administrative expenses increased 26% for the three months ended and increased 27% for the six months ended June 30, 2025, compared to the comparable prior year period primarily due to higher employee- and advisor-related expenses.

Non-operating Income (Expense)

Other non-operating income (expense) includes interest and other income, interest expense and change in fair value of derivative liability.

Interest and other income of $1,843 thousand and $3,539 thousand for the three and six months ended June 30, 2025 consists of earned interest on loans receivable and cash and cash equivalents. Interest income increased over the prior year by $1,770 thousand and $3,429 thousand for the three and six months ended June 30, 2025, respectively. The increase is primarily due to the Company maintaining higher cash balances in mutual funds and deposit and money market accounts during the 2025 periods compared to the 2024 periods.

Interest expense of $58 thousand and $116 thousand for the three and six months ended June 30, 2025 is related to late payroll tax filings. Interest expense of $155 thousand for the six months ended June 30, 2024 consisted of interest on financial liabilities. The borrowings were paid off during the year ended December 31, 2024.

The Company recognized a loss of $28,096 thousand during the three months ended June 30, 2025 as a result of the change in fair value of the QPhoton Warrant liability. During the six months ended June 30, 2025, the Company recognized a loss of $4,466 thousand related to the change in fair value of the QPhoton Warrant liability. The change in value of the warrant liability is comprised of mark-to-market adjustments for the QPhoton Warrants. Future mark-to-market adjustments may result in losses if the Company’s stock price increases above the Company’s closing bid price of $19.17 per share at June 30, 2025. No gains or losses were recorded in the comparable periods ended June 30, 2024.

Liquidity and Capital Resources.

We have incurred net losses and experienced negative cash flows from operations since inception. During the three and six months ended June 30, 2025, the Company raised $188.0 million and $218.6 million, respectively, through the private placement of equity. The Company has no lines of credit or short-term debt obligations outstanding when excluding the remaining debt issuance costs. We expect to incur additional losses and higher operating expenses for the foreseeable future as we continue to invest in research and development and go-to-market programs. As of June 30, 2025, the Company had cash and cash equivalents of $348.8 million.

Our primary uses of cash are to fund and invest in our operations as we continue to grow our business. We will require a significant amount of cash for continued investment in our Foundry Services offering, including but not limited to any future-identified space for expansion of our AZ Chips Facility, as well as ongoing research and development for our non-linear quantum optical products and photonics chips. Until such time as we can generate significant revenue from sales or subscriptions of our hardware offerings, we expect to finance our operating and investing needs through our cash and cash equivalents and, equity and/or debt financings or other capital sources, including but not limited to U.S. government grant and loan programs. We may, however, be unable to raise sufficient funds or enter into such other arrangements, when needed, on favorable terms, or at all. In particular, uncertain and unfavorable conditions in the United States and global macroeconomic environment, including inflationary pressures, rising interest rates, bank failures, and financial and credit market fluctuations, could reduce our ability to access capital on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our product development and go-to-market efforts. There can be no assurances that the Company will be able to secure additional equity and/or debt investments or achieve an adequate sales level. We believe, however, that the Company’s existing cash and cash equivalents, together with any cash generated from operations and the proceeds from any additional equity or debt issuances will be sufficient to meet the Company’s liquidity needs for at least the next 12 months.

The following table summarizes total consolidated current assets, liabilities and working capital at June 30, 2025, compared to December 31, 2024 (in thousands):

	June 30, 2025		June 30, 2024		Change
Current assets	$	350,225	$	79,151	$	271,074
Current liabilities	$	3,972	$	4,559	$	(587	)
Working capital (deficit)	$	346,253	$	74,592	$	271,661

At June 30, 2025, we had working capital of $346.2 million as compared to working capital of $74.6 million at December 31, 2024, an increase of $271.7 million. The increase in working capital is primarily attributable to an increase in cash from the net proceeds of our sales of 22.2 million shares of common stock for an aggregate of $281.6 million during the six months ended June 30, 2025, offset by the use of cash to pay for operating expenses and capital investments in property and equipment.

Cash Flows

The following table summarizes our cash flow for the six months ended June 30, 2025 and 2024 (in thousands).

	Six Months Ended June 30,
	2025			2024
Net cash used in operating activities	$	(10,534	)	$	(7,862	)
Net cash used in investing activities		(2,757	)		(2,656	)
Net cash provided by financing activities		283,104			10,985
Net increase in cash, cash equivalents, and restricted cash	$	269,813		$	467

Net cash used in operating activities for the six months ended June 30, 2025 and 2024 was $10.5 million and $7.9 million, respectively, in each case primarily as a result of our net income (loss) in each period offset by noncash adjustments for stock-based compensation, mark-to-market valuation adjustments on financial liabilities, and depreciation and amortization.

Net cash used in investing activities for the six months ended June 30, 2025 and 2024 was $2.8 million and $2.7 million, respectively, and was attributable to our purchase of computer hardware, laboratory and TFLN Chips manufacturing equipment.

Net cash provided by financing activities was $283.1 million and $11.0 million, respectively, for the six months ended June 30, 2025 and 2024. Cash flows provided by financing activities during the six months ended June 30, 2025 were primarily attributable to proceeds from our stock issuances.

On a long-term basis, our liquidity is dependent on the continuation and expansion of operations and receipt of revenues. Demand for our products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature. As most of our revenues will be from the sales of our products and services, our business operations may be adversely affected by the actions of our competitors and prolonged recession periods.

Critical Accounting Estimates

Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our consolidated financial statements. In applying these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our consolidated financial statements.

There have been no material changes to our critical accounting estimates since our Form 10-K for the year ended December 31, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer concluded that as of June 30, 2025, our disclosure controls and procedures were not effective to provide reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (b) such information is accumulated and communicated to our management, including our Chief Executive Officer and President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Except as listed below, there is no action, suit, or proceeding by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or our subsidiaries, threatened against or affecting the Company, our common stock, our subsidiaries, or the Company’s or its subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect on the Company.

BV Advisory Partners, LLC Proceedings

BV Advisory v. QCi Appraisal Action

BV Advisory Partners, LLC (“BV Advisory”) was a shareholder of QPhoton, Inc., the predecessor in interest to the Company’s subsidiary, QPhoton, LLC (both referred to as “QPhoton” in this Legal Proceedings discussion). On October 13, 2022, BV Advisory filed a petition in the Court of Chancery of the State of Delaware (the “Delaware Chancery Court”) seeking appraisal rights on the shares of common stock of QPhoton it owned (which shares represented 10% of the shares of common stock of QPhoton outstanding immediately prior to the Company’s acquisition of QPhoton) pursuant to Section 262 of the Delaware General Corporation Law.

BV Advisory v. QCi Breach of Contract Lawsuit

On March 1, 2021, QPhoton entered into a Note Purchase Agreement with BV Advisory (the “BV Note Purchase Agreement”), pursuant to which, on March 1, 2021, March 23, 2021, and July 9, 2021, QPhoton and BV Advisory entered into convertible promissory notes for $200,592, $150,000, and $150,000, respectively, for a total of $500,592. The notes bore interest at a rate of 6% per annum and matured two years from the issuance date. On June 16, 2022, the effective date of our acquisition of QPhoton, QPhoton tendered a cashier’s check to BV Advisory in the amount of $535,684.24, representing the full principal balance of the notes and accrued interest through June 16, 2022. On July 14, 2022, BV Advisory returned the cashier’s check and disputed the calculation of the amount paid to settle the notes.

On August 16, 2022, BV Advisory filed a complaint in the Delaware Chancery Court naming the Company and certain of its directors and officers (among others) as defendants. BV Advisory sought, among other relief, monetary damages from QPhoton for an alleged breach of the BV Note Purchase Agreement. After the Delaware Chancery Court dismissed BV Advisory’s other claims against the Company and QPhoton, on October 17, 2024, the Delaware Chancery Court entered a Stipulation and Order dismissing BV Advisory’s claim for breach of the BV Note Purchase Agreement, subject to BV Advisory’s right to elect to transfer its claim to the Superior Court of the state of Delaware (the “Delaware Superior Court”). BV Advisory elected to transfer the claim for breach of the BV Note Purchase Agreement to the Delaware Superior Court. On November 12, 2024, BV Advisory filed a new complaint in the Delaware Superior Court, asserting a claim for breach of the BV Note Purchase Agreement and for breach of the implied covenant of good faith and fair dealing.

QCi v. BV Advisory Injunction Lawsuit

On January 31, 2025, the Company filed a complaint in Delaware Chancery Court against BV Advisory and Barksdale, asserting claims for defamation, breach of contract, conversion, aiding and abetting conversion, and misappropriation of trade secrets based on their unauthorized possession and dissemination of certain of the Company’s confidential and privileged documents. The Company sought, among other relief, injunctive relief and damages.

Resolution

On July 17, 2025 the Company, BV Advisory, and Barksdale entered into a settlement agreement pursuant to which, among other things, the Company agreed to issue 1.9 million shares of its common stock to Barksdale or his designees and pay $750,000 to BV Advisory and Barksdale, collectively, and the parties dismissed their claims in the above actions with prejudice.

Securities Class Action Lawsuit

On February 25, 2025, a class action lawsuit was filed against the Company and certain of its current and past officers in the New Jersey District Court, by a plaintiff seeking to represent a class of all persons who purchased the Company’s securities between March 30, 2020 and January 15, 2025, alleging violations of Section 10(b) and 20(a) of the Exchange Act. The complaint alleges that the Company made false and/or misleading statements and/or failed to disclose material information about the Company’s customers, contracts and business operations. The plaintiff seeks unspecified monetary damages plus attorney’s fees and costs. In June 2025, the New Jersey District Court designated a lead plaintiff who is required to file an amended complaint by August 26, 2025. The Company disputes the allegations in the complaint, intends to vigorously defend against the claims asserted including bringing a motion to dismiss the operative complaint, and does not believe it is necessary to accrue a litigation reserve at this time.

Shareholder Derivative Action Lawsuit

On March 31, 2025, a shareholder derivative action (the “March 2025 Derivative Action”) was filed against certain of the Company’s current and past officers and directors, purportedly on behalf of the Company , in the United States District Court for the District of New Jersey, for alleged breaches of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and violations of the Securities Exchange Act of 1934 by the named officers and directors. No pre-litigation demand was made on the Company’s board of directors. The Company and its board of directors disputes the allegations in the complaint, intend to vigorously defend against the asserted claims, and do not believe it is necessary to accrue a litigation reserve at this time.

On May 6, 2025, a shareholder derivative action (the “May 2025 Derivative Action”) was filed against certain of the Company’s current and past officers and directors, purportedly on behalf of the Company , in the United States District Court for the District of New Jersey, for alleged breaches of fiduciary duties, gross mismanagement, waste of corporate assets, unjust enrichment, aiding and abetting breaches of fiduciary duties, and violations of the Securities Exchange Act of 1934. No pre-litigation demand was made on the Company’s board of directors. The Company and its board of directors dispute the allegations in the complaint, intend to vigorously defend against the asserted claims, and do not believe it is necessary to accrue a litigation reserve at this time. Both the March 2025 Derivative Action and the May 2025 Derivative Action have been stayed pending the resolution of the Company’s motion to dismiss the Securities Class Action which the Company and named defendants in that action shall file pursuant to a scheduling order entered in that action on or before November 4, 2025.

On June 19, 2025, a shareholder derivative action (the “June 2025 Derivative Action”) was filed against certain of the Company’s current and past officers and directors, purportedly on behalf of the Company, in the United States District Court for the District of New Jersey, for alleged breaches of fiduciary duties, waste, unjust enrichment, common law fraud, and violations of the Securities Exchange Act of 1934. The Company and its board of directors dispute the allegations in the complaint, intend to vigorously defend against the asserted claims, and do not believe it is necessary to accrue a litigation reserve at this time. The parties are preparing a draft stipulation to stay the action similar to the stays entered in the March 2025 Derivative Action and the May 2025 Derivative Action.

Stock Options Arbitration

In February 2025, the Company entered into arbitrations with two former consultants regarding the forfeiture of stock options. The Company had issued stock options to the consultants in 2020 and 2021 pursuant to their respective consulting agreements. The Company terminated the former consultants’ consulting agreements in March 2024, at which time the Company informed the former consultants that any vested options had to be exercised within three months of the termination date, per the Company’s equity and incentive plans. The former consultants did not exercise their vested options, and the options were duly forfeited. In December 2024, the former consultants claimed that they still retained the right to exercise the options, which the Company has rejected. The Company disputes these claims, intends to defend itself vigorously, and does not believe it is necessary to accrue a litigation reserve at this time.

Item 1A. Risk Factors.

The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 20, 2025 (the “2024 Form 10-K”) and Part II, Item 1A of the Form 10-Q for the quarter ended March 31, 2025, filed May 15, 2025 (the “first quarter 2025 Form 10-Q”). When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. Except for the risk factors disclosed in Part II, Item 1A of the first quarter 2025 Form 10-Q, there have been no material changes to the Company’s risk factors since the 2024 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered, unreported sales of or Company repurchases of the Company’s equity securities during the three months ended June 30, 2025.

Item 3. Defaults upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None

Item 6. Exhibits.

		Incorporated by
Exhibit		Reference		Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith
10.1* #	Employment Agreement by and between Quantum Computing Inc. and Christopher Roberts, dated as of June 20, 2025	8-K	10.1	06/20/2025
10.2#	Form of Purchase Agreement, dated as of June 22, 2025, between Quantum Computing Inc. and each Purchaser (as defined therein)	8-K	10.1	06/25/2025
10.3	Placement Agency Agreement, dated June 22, 2025, between Quantum Computing Inc. and Titan Partners Group LLC, a division of American Capital Partners, LLC	8-K	10.2	06/25/2025
10.4	Form of Lock-Up Agreement dated June 22, 2025	8-K	10.3	06/25/2025
10.5	Separation Agreement and General Release by and between Quantum Computing Inc. and William McGann, dated as of April 15, 2025	8-K	10.1	04/16/2025
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.				X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.				X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350.				X
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350.				X
101.INS	Inline XBRL Instance Document				X
101.SCH	Inline XBRL Taxonomy Extension Schema Linkbase Document.				X
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document.				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.				X
101.LAB	Inline XBRL Taxonomy Label Linkbase Document.				X
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document.				X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Indicates a management contract or compensatory plan or arrangement.
#	Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request; however, the Company may request confidential treatment of omitted items.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	QUANTUM COMPUTING INC.

Dated: August 14, 2025	By:	/s/ Dr. Yuping Huang
		Dr. Yuping Huang
		Chief Executive Officer and President

	By:	/s/ Christopher Roberts
		Christopher Roberts
		Chief Financial Officer

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Source:

FAQ

How much cash did Quantum Computing Inc. (QUBT) have as of June 30, 2025?

The company reported $348.8 million in cash and cash equivalents as of June 30, 2025.

What is QUBT's working capital position at June 30, 2025?

Working capital was reported as $346.3 million at June 30, 2025.

Did the company record any significant non-cash or mark-to-market losses?

Yes. The company recorded a mark-to-market loss on warrants of $28.1 million for the three months ended June 30, 2025.

What were the company's operating results for the quarter?

The company reported an operating loss of $10.171 million for the quarter ended June 30, 2025, versus $5.267 million in the comparable prior period.

What financing activity did QUBT complete recently?

The company completed a $100 million January placement and a ~$200 million June placement (gross proceeds), and recorded warrant exercises that generated proceeds and converted derivative liability to equity.

What is the value of the derivative liabilities related to QPhoton warrants?

QPhoton-related derivative liabilities were carried at $24.6 million as of June 30, 2025.

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[10-Q] Quantum Computing Inc. Common Quarterly Earnings Report

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FAQ

How much cash did Quantum Computing Inc. (QUBT) have as of June 30, 2025?

What is QUBT's working capital position at June 30, 2025?

Did the company record any significant non-cash or mark-to-market losses?

What were the company's operating results for the quarter?

What financing activity did QUBT complete recently?

What is the value of the derivative liabilities related to QPhoton warrants?

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[10-Q] Quantum Computing Inc. Common Quarterly Earnings Report

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Securities Analyst neutral

Corporate Finance / M&A Specialist neutral

FAQ

How much cash did Quantum Computing Inc. (QUBT) have as of June 30, 2025?

What is QUBT's working capital position at June 30, 2025?

Did the company record any significant non-cash or mark-to-market losses?

What were the company's operating results for the quarter?

What financing activity did QUBT complete recently?

What is the value of the derivative liabilities related to QPhoton warrants?

NASDAQ:QUBT

QUBT Rankings

QUBT Latest News

QUBT Latest SEC Filings

QUBT Stock Data