Quantum Computing Inc.

The High-Performance Computing Landscape

There is a large and growing demand for ever-increasing computational performance in information processing and data storage. The recent emergence of artificial intelligence, large language models, and machine learning algorithms has added to the need for efficient processing of vast volumes of data. Classical computers that use silicon microprocessors are understood to have performance limitations in solving certain classes of computational problems, in particular, optimization problems. Solving large optimization problems requires complex calculations that cannot currently be performed in a reasonable amount of time using classical computing systems for problem sizes relevant to many industrial and real-world applications.

There is a growing belief among computer science experts that quantum computing, which uses quantum mechanics to solve problems faster than traditional computers, may offer a potential solution to the hard limits now being approached by classical computers. In addition to new computational methodologies using quantum mechanics, there is a corresponding emergence of new materials in microprocessors that may be able to overcome some of the limitations of the silicon based processors used in classical computers. One promising area is in the use of photonics, which uses particles of light for computation. We believe that these emerging approaches will create an opportunity for new materials and methods that can meet the growing demand for scalable performance and power efficiency. While it is difficult to determine the date that quantum computers will begin to have practical relevance, we believe that quantum computers with gradually increasing performance will be introduced by multiple vendors over the next five years.

The Company

Quantum Computing Inc. 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. Our vision is to lead the revolution in photonics and quantum computing with scalable, accessible, and affordable solutions for real-world problems. 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 acquisition of QPhoton, Inc. (the “QPhoton Merger”) in June 2022, enabled us to offer the aforementioned products, integrated with the Company’s software platform, Qatalyst, that existed before the QPhoton Merger.

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. The Company is completing 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.

Our Strategy

QCi’s strategy is to provide a range of accessible and affordable quantum machines to commercial and government markets, supported by professional services through our “Quantum Solutions” offering. Our proprietary technology is central to our strategy because we believe that it enables us to leverage the advantages of size, weight, power, and cost over competing cryogenic products. We further differentiate ourselves in the market by offering, in addition to cloud-based access to our quantum computers, on-premises installation of our EQC product, which is rack-mountable and compatible with standard server room infrastructure and requires no special cooling, shielding, or power considerations.

Further, our EQC development plan to gradually replace discrete optical components with photonic integrated circuits will provide us the ability to fabricate and sell a range of custom lithium niobate chips for use in our own product lines as well as TFLN Optical Chips, as defined below, for sale into existing commercial markets for optical devices.

Market Opportunity

The Company believes that quantum solutions have the potential to bring significant and increasing advances in the fields of medicine, engineering, autonomous vehicles, energy management, and cybersecurity and that the demand for quantum computing in these market sectors will likely outpace and outperform the general-purpose universal computing market in the near- to mid-term and into the foreseeable future. We believe that our core photonics technology applications offer practical, cost-effective solutions that can materially advance the adoption of quantum machines across several market segments including:

While the current quantum computing market comprises a fraction of the broader high-performance computing market, we anticipate that quantum computers will unlock new applications that are unlikely to be addressable by existing high-performance computers comprised of leveraging classical processing units. Estimates of the size of the global high-performance computing industry vary, but according to Grand View Research, the high-performance computing market was valued at $39.1 billion in 2019 and is expected to reach a value of $53.6 billion by 2027, seeGrand View Research - High Performance Computing Market Size Worth $53.6 Billion By 2027, https://www.grandviewresearch.com/press-release/global-high-performance-computing-hpc-market According to a report from Allied Market Research, the global enterprise quantum computing market size was valued at $1.3 billion in 2020 and is projected to reach $18.3 billion by 2030, growing at a compound annual growth rate of 29.7% from 2021 to 2030, according to a published report on the enterprise quantum computing market at https://www.alliedmarketresearch.com/enterprise-quantum-computing-market (Information contained on, or that can be accessed through, these websites is not incorporated by reference in this Annual Report, and you should not consider information on these websites to be part of this Annual Report).

As an early participant in this rapidly growing market, we believe we are well-positioned to capture a meaningful amount of this growth. We also believe that there is further potential upside from quantum computing and technology more broadly opening new markets not included in traditional high-performance computing market size estimates.

Additionally, we believe that our foundry services offering will address the growing TFLN market and photonic integrated circuit markets. A recentMarket Research Reports: Document ID: LPI08232779; Published August 8, 2023“Thin Film Lithium Niobate Market Forecast 2023 – 2029,” indicates a significant potential market growth for TFLN devices. The study covers use applications and segments that forecast the global TFLN electro-optical modulator market, valued at $190.4 million in 2022, to grow an estimated $1,931.3 million by 2029 - a compound annual growth rate of 39 percent. The report further describes how such increase in demand is expected to be principally driven by the material advantages described above. Specifically, TFLN electro-optical modulators have the advantages of large bandwidth, low power consumption, and small size. Further, Mordor Intelligence published a market report, “Photonic Integrated Circuit Market Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029)” forecasts that the photonic integrated circuit (PIC) market, currently valued at $15.1 billion, will grow at a compound annual growth rate of 20.5% to $38.4 billion in 2029. We believe that this suggests significant potential demand for QCi’s products and services.

Products and Products in Development* *

The Company believes it is well-positioned in the marketplace due to its Core Photonics Technology in integrated photonics that allows QCi to offer a suite of quantum machines to the market today with a robust technology roadmap for the future. The QPhoton Merger substantially broadened the Company’s technology portfolio and enabled us to develop a group of closely related products to EQC, based on our underlying Core Photonics Technology.

TFLN Optical Chips

We believe that TFLN optical integrated circuits (“TFLN Optical Chips”) will ultimately provide the greatest scalability and performance advantages for quantum information processing, sensing, and imaging applications. While the Company is developing proprietary chip designs to for TFLN Optical Chips for exclusive use in our products for the aforementioned applications, the Company’s foundry services offering at our AZ Chips Facility will make available a range of custom TFLN chips (custom single photon detectors) for sale into existing commercial markets, including optical devices such as electro-optical modulators, periodically poled devices for frequency conversion and micro ring resonator cavities.

Entropy Quantum Computer

QCi launched a new EQC device during the first quarter of 2024 (Dirac-3) and plans to release a series of additional EQC products in the coming years that build and expand upon the same analog architecture. This planned evolution of technology and product enhancements will involve improving the size and capacity of the EQC machines, as well as speed, scalability, and performance fidelity. The EQC is available both as a cloud-based subscription service, similar to other quantum machines, as well as an affordable on-premises solution.

EQC is a full-stack system, incorporating QCi’s custom user interface software Qatalyst, which allows users to avoid the complexity of software development kits (“SDKs”) at the circuit level and has evolved from QCi’s primary SaaS offering to the software that powers our offerings. Operating on EQC, Qatalyst enables developers to create and execute quantum-ready applications using application programming interfaces. Users can then use these same interfaces on conventional computers to achieve optimization performance advantages using our cloud-based solution.

Reservoir Computer

Launched in June 2023, QCi’s first reservoir computing product is an edge device that used an integrated circuit that can be reprogrammed after manufacturing and optimized for recurrent neural network applications. An “edge device” allows the user to process, measure, and analyze data locally (at the user’s device) as opposed to over a network where data must be sent over the internet or through some cloud service. QCi’s Reservoir Computer (“RC”) is a standalone device that can be plugged into a local computer or server without having to connect over the internet. We believe that the RC’s hardware-based approach to reservoir computing has advantages over more traditional software approaches, including significantly faster processing speeds, 80% - 95% less energy consumption, portability (size of power bank), affordability, and requiring significantly shorter training time. Our benchmarking analyses further show that the RC is capable of delivering superior performance in time-dependent tasks, such as chaotic time series prediction, unstructured financial model prediction, natural language processing, and weather forecasting. To date, the market for reservoir computing has been limited due to computing cost and technical implementation complexities, which we designed the RC to address. We anticipate that future generations of the RC will introduce greater speed of performance and scalability, which will enable the RC to participate in large language model training and other applications. While technology challenges remain in scaling this technology, this is one of our focus areas to gain a significant share in the artificial intelligence / machine learning hardware market.

LiDAR and Quantum Photonic Vibrometer

QCi’s LiDAR uses patented methodologies that leverage the selective use of spatial-temporal modes to maximize the signal-to-noise ratio of weak information signals in a high-noise background. This technology allows QCi machines to see through dense fog and provide image fidelity at great distances with very high resolution in difficult environments such as snow, ice, and water. The practical benefits on payload and signal-to-noise enhancement can be used to produce LiDAR machines that are greatly enhanced in their ability to measure at improved resolution and distances from aircraft, drones, and even satellites.

Launched July 2023, QCi’s Quantum Photonic Vibrometer is a proprietary, powerful instrument for remote vibration detection, sensing, and inspection. We believe that this device offers significant advancements in sensitivity, speed, and resolution, capable of discerning for the first time, highly obscured and non-line-of-sight objects. The Quantum Photonic Vibrometer measures the vibration frequency of a remote target by utilizing fast-gated single photon counting to directly detect returning photons whose wavefunctions are dynamically modulated as they are reflected off the target. By counting photons at a megahertz rate, important properties such as material composition and mechanical integrity can be determined within seconds and, depending on detection distance, with microwatt to milliwatt optical power. Working at an eye-safe wavelength, the system can accurately characterize the vibration spectra of solid or liquid targets with vibration amplitude as small as 100 nanometers.

Quantum Networks and Quantum Authentication

QCi has developed a prototype system to address one of the major challenges in cybersecurity, the authentication of users on a network, which is currently facilitated by the distribution of “private keys” by a trusted third party. This approach is inherently insecure as keys are bundled and travel with the encrypted data, making it susceptible to harvest-and-decrypt-later vulnerability. QCi has developed a quantum authentication technology and methodology that eliminates the need for trust in third-party involvement in key distribution. Our approach uses a combination of a high-powered laser, and a patented detection methodology deeply rooted in the fundamental principles of quantum mechanics, resulting in what we believe will be an unbreakable basis for private network communication.

Competition

The quantum computing industry is highly competitive and rapidly evolving and will likely remain so for the foreseeable future. As this industry continues to grow and mature, we expect a continued influx of new competitors, products, hardware advances, and concepts to emerge that can dramatically transform the industry and our business. Due to the high price point of quantum computing hardware today, novel business models may emerge to adapt to customer preferences in the high-performance computing industry. Our ability to evolve and adapt rapidly over an extended period of time will be critical in remaining competitive. We perform a broad range of research and development efforts to identify and position for the changing demands of future customers and users, industry trends, and competitive forces.

According to research conducted by The Quantum Insider, there are over 700 companies and approximately 400 university academic groups working in various aspects of quantum technology, with approximately 400 of these having a pure-play focus on quantum computing.

These entities range in size from diversified global companies with significant research and development resources such as IBM, Google, Intel, Microsoft, Quantinuum (formerly Honeywell) and Amazon to recent market entrants such as D-Wave Quantum, Rigetti Computing, IonQ, PsiQuantum, Xanadu and Infleqtion (formerly ColdQuanta), as well as smaller privately funded development stage companies whose narrower product focuses may allow them to be more effective in deploying resources towards a specific industry demand. In addition, we face competition from large research organizations funded by sovereign nations such as China, Russia, Canada, Australia, and the United Kingdom, as well as the European Union, and we believe that additional countries will invest in quantum computing in the future. We will continue to face competition from the existing high-performance computing industry using classical (non-quantum) computers.

We believe that competition in this market segment will intensify. Many of our competitors may have longer operating histories, significantly greater financial, technical, product development, and marketing resources, and greater name recognition than we do. Our competitors could use these resources to market or develop products or services that are more effective or less costly than any or all of our products or services.

Intellectual Property

Our intellectual property consists of patents, trademarks, and trade secrets. Our trade secrets consist of product formulas, research and development, and unpatentable know-how, all of which we seek to protect, in part, by confidentiality agreements. To protect our intellectual property, we rely on a combination of laws and regulations, as well as contractual restrictions. Federal trademark law protects our registered trademarks. We also rely on the protection of laws regarding unregistered copyrights for certain content we create and trade secret laws to protect our proprietary technology. To further protect our intellectual property, we enter into confidentiality agreements with our executive officers, employees, consultants and directors.

1 Seskir, Z.C., Korkmaz, R. & Aydinoglu, A.U.,The landscape of the quantum start-up ecosystem, EPJ Quantum Technol. 9, 27 (2022), at https://doi.org/10.1140/epjqt/s40507-022-00146-x

Trademarks

The Company has three registered trademarks, “QPhoton,” “QGraph” and “Qatalyst.” The Company has no pending trademark applications.

Patents

The Company has two granted United States patents.

Exclusive License Agreement

QCi has an exclusive license to seven patents issued to the Stevens Institute of Technology, pursuant to the license agreement dated December 17, 2020 by and among QPhoton and The Trustees of The Stevens Institute of Technology (the “Licensor”). QPhoton agreed to reimburse the Licensor for patent prosecution expenses in the amount of $125,041 and deliver to the Licensor an annual report and quarterly report pursuant to the terms of the license agreement. As consideration for the license and other rights granted under the license agreement, QPhoton agreed to pay the Licensor (i) $35,000 upon full execution of the license agreement, (ii) $28,000 each annual anniversary of the effective date of the license agreement, (iii) 9% of the membership units of QPhoton and (iv) a royalty of 3.5% of the net sales price of each licensed product sold or license by QPhoton and any affiliate and sublicensee. On June 15, 2022, the Licensor agreed to assign the license agreement to QCi upon consummation of the QPhoton Merger.

Government Regulation and Incentives

Export Regulation

The U.S. government issued regulations in 2024 placing some restrictions on exporting quantum computing products under the Export Administration Act. Those exports will now require a license. We are reviewing the new regulations but do not believe they will have a substantial adverse impact on the Company. The U.S. government has also placed some export restrictions on certain types of cryogenic quantum computing equipment as well as some optical materials. At this time, however, we do not expect there to be significant export limitations on the Company’s products.

Incentives

The Creating Helpful Incentives to Produce Semiconductors Act of 2022 (the “CHIPS Act”) was designed to address the global computer chip shortage and attract chip manufacturing, and innovation to the United States. The CHIPS Act is a $280 billion spending package aimed at encouraging the growth of the US-based semiconductor industry. To assist in securing the domestic chip supply, the CHIPS Act provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development. The Company is pursuing opportunities under the CHIPS Act but there is no guarantee that it will actually receive any funding thereunder.

Corporate Information

Our executive offices are located at 5 Marine View Plaza, Suite 214, Hoboken, NJ 07030, and our telephone number is (703) 436-2121. Our corporate website is www.quantumcomputinginc.com. Information appearing on our website is not part of this Annual Report.

Employees

As of December 31, 2024, the Company had 41 full-time employees and nine part-time contract staff, 34 of whom are focused on product development. Our employees are not part of a collective bargaining agreement and we believe that our relationships with our employees and contract workers are good. The Company offers a health and welfare benefit plan to current full-time employees that provides medical, dental, vision, life, and disability benefits. The Company also offers a 401(k) retirement savings plan and participation in the stock option plan to all full-time employees. There are no unpaid liabilities under the Company’s benefit plans, and the Company has no obligation to pay for post-retirement health and medical costs of retired employees.