Quantum Computing Inc.
For the period ended Mar 31, 2025. Filed May 15, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
QUBT$6.33+12.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001213900-24-094983
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001213900-25-044341
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 63 current paragraphs.
31 unchanged; 21 reworded; 11 added; 17 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
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.
Current report
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.
Current report
Research and development expenses for the three months ended March 31, 2025 increased 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.
Current report
Selling and marketing expenses for the three months ended March 31, 2025 increased primarily due to higher tradeshow and travel-related costs and increased marketing program costs.
Current report
General and administrative expenses for the three months ended March 31, 2025 increased compared to the comparable prior year period primarily due to higher employee- and advisor-related expenses, including stock-based compensation, payroll, bonus and travel expenses, as well as higher legal fees which can vary significantly period-over-period, offset by a decrease in severance expense recognized during the three months ended March 31, 2024, in connection with the Separation Agreement and General Release of the Company’s former CEO, Mr. Robert Liscouski.
Current report
The $25.4 million increase in other income for the three months ended March 31, 2025 compared to the comparable prior year period is primarily the result of gain in the fair value of the QPhoton Warrant liability recognized during the three months ended March 31, 2025.
Current report
Fair Value of Warrant Liabilities and Derivatives
Current report
Provision for Income Tax
Current report
The Company’s effective tax rate is 0% for income tax for the three months ended March 31, 2025 and the Company expects that its effective tax rate for the full FY25 year will be 0%. Based on the weight of available evidence, including net cumulative losses and expected future losses, the Company has determined that it is more likely than not that it U.S. federal and state deferred tax assets will not be realized and therefore a full valuation allowance has been provided on the U.S. federal and state net deferred tax assets.
Current report
In general, if the Company experiences a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change net operating loss (NOL) carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code. Generally, U.S. state laws have laws similar to Internal Revenue Code Section 382. The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforward before utilization.
Current report
The Company files U.S. federal and state income tax returns. The Company is not currently subject to any income tax examinations. The Company has net operating loss carryovers dating back to the December 2018 year (inception), which generally allows all tax years starting taxable year 2018 to remain open to income tax examinations.
Removed paragraphs (17)
Previous report
As discussed in Note 15, Restatement of Previously Issued Financial Statements, in the accompanying notes to our unaudited condensed consolidated financial statements, we have restated our previously-issued consolidated financial statements as of and for the year ended December 31, 2023; accordingly, the following has been prepared giving effect to such restatement.
Previous report
QCi is a development stage company. Our strategy is to create a range of accessible and affordable quantum machines and photonics chips for use by commercial and government markets. We have developed and continue to primarily develop quantum and photonics products for high-performance computing applications based on patented and proprietary technology. Our 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) to drive market adoption and volume of sales. Specifically, our products are designed to operate at room temperature and at very low power levels at an affordable cost.
Previous report
We believe that the practical benefits to the customer of QCi’s core offerings are:
Previous report
The Company has limited operations, has generated limited revenue based on sales of products and related services to date, and is expanding our sales and marketing efforts to support our current portfolio of commercially-available products and planned TFLN Chips.
Previous report
Despite enormous growth in the capabilities of conventional computers and silicon microprocessors, some of the world’s most important computational problems are still considered impractical to solve in a reasonable period of time. Quantum computing represents a potential alternative approach to solving those problems because quantum computers apply the properties of quantum physics to operate in a fundamentally different way. Conventional computer chips use binary bits (ones and zeros) to represent information. Quantum computers utilize qubits (quantum bits), which leverage some of the properties of quantum physics, namely superposition and entanglement, to process computations that would be intractably difficult using conventional computers. Quantum machines are intrinsically able to search very large solution spaces using these quantum effects and are thereby able to perform optimization calculations in polynomial time vs. exponential time.
Previous report
Research and development expenses for the three and nine months ended September 30, 2024 decreased compared to the comparable prior year periods primarily due to a reduction in employee-related expenses, primarily as a result of decreased bonus expenses. These decreases were partially offset by net increases in stock-based compensation as the Company sought to create long-term incentives to retain key technical, sales and administrative employees. See Note 12,Stock-based Compensation, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information.
Previous report
Selling and marketing expenses for the three and nine months ended September 30, 2024 decreased primarily due to lower employee and related compensation, reduction in the use of consultant services and decreased marketing program costs as management continued to refine the Company’s approach to product and services sales.
Previous report
General and administrative expenses for the three and nine months ended September 30, 2024 decreased compared to the comparable prior year period primarily due to lower employee- and advisor-related expenses, including stock-based compensation, payroll, bonus and travel expenses, as well as lower legal fees and consulting services costs driven by changes made within and by the Company’s management team, offset by increased audit fees driven by the Company retaining a new independent registered public accounting firm and such firm’s re-audit of the Company’s financial statements for the years ending December 31, 2023 and 2022.
Previous report
Net other expense for the three months ended September 30, 2024 compared to the comparable prior year period is virtually unchanged, with the approximate $62 thousand decrease in net interest expense offsetting the approximate $56 thousand decrease in interest income. The $449 thousand decrease in other expense for the nine months ended September 30, 2024 compared to the comparable prior year period is the result of the $872 thousand decrease in interest expense for the Company’s financial liabilities offset by a $384 thousand reduction in gains in the fair value of the QPhoton Warrant liability.
Previous report
Another area of critical accounting estimates involves determining the fair value of the Streeterville Derivative Liability, which involves inherent uncertainties and the application of management judgement. The Streeterville Derivative Liability will be mark-to-market adjusted on a quarterly basis and accreted as interest expense while the Streeterville Convertible Note is outstanding.
Previous report
Valuation Allowances for Deferred Taxes
Previous report
Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid. We are subject to income taxes in the United States. Significant judgments and estimates are required in determining the consolidated income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits.
Previous report
Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which are expected to result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, for all material jurisdictions, we consider all available positive and negative evidence, including scheduled reversals of deferred tax balances, projected future taxable income, tax-planning strategies and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results.
Previous report
As of September 30, 2024, we had federal and state net operating loss (“NOL”) carryforwards of approximately $60.1 million, or $15.6 million on a tax-effected basis. We believe that it is more likely than not that the benefit from these NOL carryforwards will not be realized. Accordingly, we have provided a full valuation allowance on any potential deferred tax assets relating to these NOL carryforwards. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of September 30, 2024, will be accounted for as a reduction of income tax expense.
Previous report
The calculation of our tax liabilities involves evaluating uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740,Income Taxes, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including the resolution of any related appeals or litigation processes, on the basis of the technical merits.
Previous report
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a tax payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is made available.
Previous report
We believe that none of the unrecognized tax benefits may be recognized by the end of 2024.
Reworded paragraphs (21)
Previous wording
Our longer-term product development plan is to migrate product designs based on discrete components 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 design and implementation of optical integrated circuits (“TFLN Chips”) suitable for our quantum computing and sensing products because it is crystal based and hence can have optical waveguides directly etched into the material. QCi possesses strong domain experience and intellectual property in TFLN design and chip fabrication and has completed initial production of several specialty devices such as electro-optical modulators (“EOM’s”). TFLN EOM’s have the advantages of large bandwidth, low power consumption, and small size. The Company has begun buildout of a state-of-the-art TFLN chip manufacturing facility (the “AZ Chips Facility”) in a leased space within Arizona State University’s Research Park in Tempe, Arizona. The Company’s understanding is that this could be the nation’s first dedicated optical integrated circuit manufacturing foundry using TFLN wafers to achieve quantum effects and superior optical interconnects for data centers. Our plan for the facility is to produce a range of custom lithium niobate chips for use in our own product lines as well as chips for sale in the commercial market. The Company has plans to support this initiative by applying for funding for distinct uses under both the Title 17 Clean Energy Financing Program managed by the US Department of Energy’s Loan Programs Office and also the Creating Helpful Incentives to Produce Semiconductors Act of 2022, which specifically includes $39 billion in manufacturing incentives and $13 billion to support new research and development.
Current wording
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”).
Previous wording
QCi’s core technology is Entropy Quantum Computing (“EQC”). EQC is a patent pending methodology that utilizes the environment to drive controlled energy loss in a photonic architecture. The Company believes that EQC’s small rack-mountable size and low-energy consumption provides a substantial competitive edge as compared to superconducting, cryogenic quantum systems offered by competitors that are also designed to solve optimization problems. In addition to our photonic computing platform, we have leveraged QCi’s core technology to demonstrate powerful quantum sensing use cases in LIDAR (Light Detection and Ranging), 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 important technologies are already in early stages of commercialization.
Current wording
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.
Previous wording
While quantum-based computers will not replace conventional computers in most applications, they are ideally suited to run optimization algorithms, as well as to calculate certain sensing, imaging, and cybersecurity problems that are beyond the reach of general silicon-based computing today. The Company believes that quantum solutions have the potential to bring order of magnitude advances in the fields of medicine, engineering, autonomous vehicles, and cybersecurity and that the demand for quantum computing in these market sectors will likely outpace and outperform the general-purpose computing market in the near- to mid-term and into the foreseeable future.
Current wording
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:
Previous wording
Our results of operations for the three and nine months ended September 30, 2024 and 2023 is as follows (in thousands, except percentages):
Current wording
Our results of operations for the three ended March 31, 2025 and 2024 is as follows (in thousands, except percentages, with non-meaningful percentage changes labeled as “NM”):
Previous wording
Revenues for the three months ended September 30, 2024 were $101 thousand compared to $50 thousand for the comparable prior year period, an increase of $51 thousand or 102%. Revenues for the nine months ended September 30, 2024 were $311 thousand compared to $283 thousand for the comparable prior year period, an increase of $28 thousand or 10%. The respective increases in revenues are 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.
Current wording
Revenues for the three months ended March 31, 2025 were $39 thousand compared to $27 thousand for the comparable prior year period, an increase of $12 thousand or 44%. The increase in revenues 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.
Previous wording
Cost of revenues, 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 $92 thousand for the three months ended September 30, 2024, compared to $24 thousand for the comparable prior year period, an increase of $68 thousand or 283%. Cost of revenues for the nine months ended September 30, 2024 was $233 thousand compared to $131 thousand for the comparable prior year period, an increase of $102 thousand or 78%. The respective increases are both primarily due to the increases in direct labor expenses and other direct costs required to perform on the contracts during the 2024 periods compared to the prior year periods.
Current wording
Cost of revenues, 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 $26 thousand for the three months ended March 31, 2025, compared to $16 thousand for the comparable prior year period, an increase of $10 thousand or 63%. The increase is primarily due to the increases in direct labor expenses and other direct costs required to perform on the contracts during the 2025 periods compared to the prior year periods.
Previous wording
Gross margin for the three months ended September 30, 2024 was $9 thousand and 9% compared to $26 thousand and 52% for the comparable prior year period, a decrease of $17 thousand and 43%, respectively. Gross margin for the nine months ended September 30, 2024 was $78 thousand and 25% compared to $152 thousand and 54%, a decrease of $74 thousand and 29%, respectively, compared to the comparable period of 2023. The respective changes were nearly entirely the result of a new custom hardware contract that has lower margins due to its cost of revenues being comprised of other direct component costs in addition to direct labor expenses. Our lack of a scaled and distributed base of revenue generation by product and sales channel can result in significant differences in gross margin between reporting periods.
Current wording
Gross margin for the three months ended March 31, 2025 was $13 thousand and 33% compared to $11 thousand and 41% for the comparable prior year period, a decrease of $2 thousand and 8% points. The change was nearly entirely the result of a reduction in contractual service revenue where the cost of revenues was defined under the terms of our general professional services obligation. Our lack of a scaled and distributed base of revenue generation by product and sales channel can result in significant differences in gross margin between reporting periods.
Previous wording
Information about our operating expenses for the three and nine months ended September 30, 2024 and 2023 is set forth in the below tables (in thousands, except percentages). Operating expenses for the three and nine months ended September 30, 2024 decreased by $1.2 million and $2.7 million, respectively, in each case primarily as a result of lower general and administrative expenses of approximately $900 thousand and selling and marketing expenses of approximately $200 thousand.
Current wording
Information about our operating expenses for the three months ended March 31, 2025 and 2024 is set forth in the below tables (in thousands, except percentages). Operating expenses for the three months ended March 31, 2025 increased by $2.0 million primarily as a result of higher general and administrative expenses of approximately $1.0 million and research and development expenses of approximately $800 thousand.
Previous wording
The following table summarizes our non-operating income (expense) for the three and nine months ended September 30, 2024 and 2023 (in thousands, except percentages).
Current wording
The following table summarizes our non-operating income (expense) for the three months ended March 31, 2025 and 2024 (in thousands, except percentages).
Previous wording
Interest and other income consists of earned interest on loans receivable and cash and cash equivalents. See Note 2,Significant Accounting Policies – Cash and Cash Equivalents, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information on where the Company maintains its cash balances. The decreases for the three and nine months ended September 30, 2024 compared to the comparable prior year periods is primarily due to the Company maintaining lower cash balances in mutual funds and deposit and money market accounts during the 2024 periods compared to the 2023 periods.
Current wording
Interest and other income consists of earned interest on loans receivable and cash and cash equivalents. See Note 2,Significant Accounting Policies – Cash and Cash Equivalents, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information on where the Company maintains its cash balances. The increase for the three months ended March 31, 2025 compared to the comparable prior year periods 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.
Previous wording
Interest expense, net consists of interest on financial liabilities, amortization of debt issuance costs, and accretion of derivative interest. The decrease in interest expense in 2024 compared to 2023 was attributable to decreased borrowings outstanding under the Streeterville Unsecured Note which was paid-in-full as of March 1, 2024, partially offset by new borrowings under the Streeterville Convertible Note that we issued in August 2024. See Note 8,Financial Liabilities, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information.
Current wording
Interest expense, net consists of interest on financial liabilities, including payroll-related taxes, amortization of debt issuance costs, and accretion of derivative interest. The decrease in interest expense in the three months ended March 31, 2025 compared to 2024 was attributable to decreased borrowings outstanding under the Streeterville Unsecured Note which was paid-in-full as of March 1, 2024. See Note 8,Financial Liabilities, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information.
Previous wording
The gain on change in value of warrant liability is comprised of mark-to-market adjustments for the QPhoton Warrants, which have no carrying value as of September 30, 2024 and December 31, 2023. Future mark-to-market adjustments may result in losses if the Company’s stock price increases above the exercise price of the Underlying Options, as defined below. See Note 11,Capital Stock - Warrants, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information on the QPhoton Warrants*.* There was no mark-to-market for the Streeterville Derivative Liability as of September 30, 2024.
Current wording
The gain on change in value of 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 $8.00 per share, as defined below. See Note 10,Capital Stock - Warrants, in the accompanying notes to our unaudited condensed consolidated financial statements for additional information on the QPhoton Warrants*.*
Previous wording
We have incurred net losses and experienced negative cash flows from operations since inception. Through September 30, 2024, the Company has raised $68.3 million through private and public placements of equity and $12.6 million through private placements of convertible promissory notes and other debt for a total of $80.9 million. 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. We have determined that additional financing will be required to fund our operations for the next 12 months and our ability to continue as a going concern is dependent upon obtaining additional capital and financing. As of September 30, 2024, the Company had cash and cash equivalents of $3.1 million.
Current wording
We have incurred net losses and experienced negative cash flows from operations since inception. Through March 31, 2025, the Company has raised $267.8 million through private and public placements of equity and $20.1 million through private placements of convertible promissory notes and other debt for a total of $287.9 million. 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 March 31, 2025, the Company had cash and cash equivalents of $166.4 million.
Previous wording
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 AZ Chips Facility and 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 cash needs through public and/or private equity and/or debt financings or other capital sources, including but not limited to U.S. government grant and loan programs. However, we may 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. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date of the issuance of the accompanying unaudited condensed consolidated financial statements. There can be no assurances that the Company will be able to secure additional equity investments or achieve an adequate sales level.
Current wording
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.
Previous wording
At September 30, 2024, we had working capital of $1.5 million as compared to a working capital deficit of $2.2 million at December 31, 2023, an increase of $3.7 million. The increase in working capital is primarily attributable to an increase in cash proceeds from our issuance of shares of common stock using the Company’s ATM Facility and our issuance of the Streeterville Convertible Note, offset by the use of cash to pay for operating expenses and capital investments in property and equipment.
Current wording
At March 31, 2025, we had working capital of $163.5 million as compared to working capital of $74.6 million at December 31, 2024, an increase of $88.9 million. The increase in working capital is primarily attributable to an increase in cash from the net proceeds of our sales of 8.2 million shares of common stock for an aggregate of $93.6 million in January 2025, offset by the use of cash to pay for operating expenses and capital investments in property and equipment.
Previous wording
The following table summarizes our cash flow for the nine months ended September 30, 2024 and 2023 (in thousands).
Current wording
The following table summarizes our cash flow for the three months ended March 31, 2025 and 2024 (in thousands).
Previous wording
Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $12.4 million and $13.3 million, respectively, in each case primarily as a result of our net loss in each period offset by noncash adjustments for stock-based compensation, mark-to-market valuation adjustments on financial liabilities, and depreciation and amortization.
Current wording
Net cash used in operating activities for the three months ended March 31, 2025 and 2024 was $4.4 million and $3.9 million, respectively, in each case primarily as a result of our net loss in each period offset by noncash adjustments for stock-based compensation, mark-to-market valuation adjustments on financial liabilities, and depreciation and amortization.
Previous wording
Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was $3.2 million and $2.7 million, respectively, and was attributable to our purchase of computer hardware, laboratory and TFLN Chips manufacturing equipment. The increase in investment in the 2024 period is primarily due to the purchase of additional equipment in connection with establishing the Company’s AZ Chip Facility.
Current wording
Net cash used in investing activities for the three months ended March 31, 2025 and 2024 was $1.7 million and $1.6 million, respectively, and was attributable to our purchase of computer hardware, laboratory and TFLN Chips manufacturing equipment. The increase in investment in the 2025 period is primarily due to the purchase of additional equipment in connection with establishing the Company’s AZ Chip Facility.
Previous wording
Net cash provided by financing activities was $16.6 million and $18.1 million, respectively, for the nine months ended September 30, 2024 and 2023. Cash flows provided by financing activities during the nine months ended September 30, 2024 were attributable to proceeds from our sale of shares of common stock pursuant to the ATM Facility and our issuance of the Streeterville Convertible Note, partially offset by repayments on the Streeterville Unsecured Note and redemptions of shares of Series A Preferred Stock. Cash flows provided by financing activities during the period ended September 30, 2023 were attributable to proceeds from our sale of shares of common stock pursuant to the ATM Facility, partially offset by repayments on the Streeterville Unsecured Note.
Current wording
Net cash provided by financing activities was $93.6 million and $9.5 million, respectively, for the three months ended March 31, 2025 and 2024. Cash flows provided by financing activities during the three months ended March 31, 2025 were primarily attributable to proceeds from our stock issuances in January 2025.
Previous wording
Another area of critical accounting estimates involves 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, then accounts for changes period-over-period by realizing a mark-to-market gain or loss for the period.
Current wording
Determining the fair market value of the QPhoton Warrants, which were included in the merger consideration paid to the stockholders of QPhoton (the “QPhoton Merger Consideration”), is a critical accounting estimate. The QPhoton Warrants are comprised of warrants to purchase up to 7,028,337 shares of the Company’s common stock at an exercise price of $0.0001 per share (the “QPhoton Warrants”) and are exercisable when and if stock options and warrants issued by the Company and outstanding as of June 15, 2022 are exercised. The Merger Consideration for shareholders Yuping Huang and The Trustees of the Stevens Institute of Technology was issued in 2022. A third alleged shareholder, BV Advisory, rejected the Merger Consideration and commenced litigation in Delaware Chancery Court (see Note 9, Contingencies – Legal Proceedings, in this Form 10-Q for additional information and Item 1, Legal Proceedings, in this Form 10-Q for a full discussion), and to date that litigation has not been resolved. Accordingly, as of March 31, 2025 and 2024, we had only issued 6,325,503 of the QPhoton Warrants. 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, then accounts for changes period-over-period by realizing a mark-to-market gain or loss for the period.
Previous wording
Determining the fair market value and useful life of the intangible assets acquired by the Company through the merger with QPhoton is another critical accounting estimate. In the absence of market pricing for the intangible assets, the Company relied on independent third-party appraisal experts and comparison with similar transactions to arrive at estimates of value as well as useful life. The Company will perform periodic assessments of the intangible assets for impairment, but if any of the initial estimates are incorrect, that could result in a calculation of amortization expense that is too high or too low.
Current wording
Determining the fair market value and useful life of the intangible assets acquired by the Company through the QPhoton Merger is another critical accounting estimate. In the absence of market pricing for the intangible assets, the Company relied on independent third-party appraisal experts and comparison with similar transactions to arrive at estimates of value as well as useful life. The Company will perform periodic assessments of the intangible assets for impairment, but if any of the initial estimates are incorrect, that could result in a calculation of amortization expense that is too high or too low.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Our core technology offers practical, cost-effective solutions that materially advance the adoption of quantum machines across several market segments including: